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Decision No. 15,491

Appeal of LAWRENCE LOMBARDO from action of the Board of Education of the Lynbrook Union Free School District regarding a capital reserve fund.

Decision No. 15,491

(November 30, 2006)

Ehrlich, Frazer & Feldman, attorneys for respondent, Kevin G. McMorrow, Esq., of counsel

MILLS, Commissioner.--Petitioner challenges certain actions of the Board of Education of the Lynbrook Union Free School District (“respondent”) relating to a capital reserve fund.  The appeal must be dismissed.

On May 15, 2001, district voters approved a proposition to establish a capital reserve fund (the “reserve fund”), pursuant to Education Law §3651, for “district wide improvements.”  The proposition stated that the reserve fund “shall be capitalized in an amount not to exceed five million dollars, plus interest.”  The term of the reserve fund was five years, expiring on June 30, 2006.

Respondent treated the reserve fund as a “rolling reserve”, periodically depositing funds into it and making expenditures from it.  Although the cumulative deposits over time totaled $8,345,855.23, by making periodic expenditures totaling $3,938,013, the balance in the reserve fund never exceeded $5 million at any given time.

In September 2005, the district’s business administrator contacted the district’s independent auditors regarding the reserve fund.  As a result, the board learned that the cumulative total of deposits into the reserve fund could not exceed the five million dollar limit approved by the voters.  Auditors and district business administration determined that the fund had been overcapitalized by $3,345,855.23 – the difference between the $5 million voter approved limit and the $8,345,855.23 total deposits.  At its January 11 and February 8, 2006 meetings, respondent informed district residents of the overfunding of the reserve fund. 

Respondent decided to seek voter approval to extend the reserve fund five more years and increase its limit to $12 million.  At the time, the reserve fund balance was $4,407,824,23.  On February 15, 2006, respondent authorized a transfer of $3,345,855.23 from the reserve fund to the general fund’s unappropriated fund balance.  Respondent left $1,061,987 in the reserve fund – the difference between the $5 million fund limit and $3,938,013 total expenditures at that point.  On March 8, 2006, respondent resolved to seek voter approval to extend the reserve fund to June 30, 2011 and increase its limit to $12 million at its annual district meeting on May 16, 2006.  Respondent further resolved that, if voters approved the proposition, it would transfer the $3,345,855.23 to the new reserve fund; if voters did not approve the proposition, the money would be applied to reduce the 2006-2007 tax levy.

On March 9, 2006, petitioner commenced this appeal challenging respondent’s management of the reserve fund and seeking a State takeover of the district.  He claims that respondent improperly overcapitalized the original reserve fund and should not have been permitted to seek voter approval to extend the fund and increase its limit.  Petitioner requested that “a freeze be put” on the fund and that respondent be prohibited from placing the proposition before voters on May 16, 2006 “until a complete audit is conducted.”  He also requested that any excess funds over $5 million that had been in the reserve fund be returned to voters, plus interest, “in the form of a check....”  On March 28, 2006, petitioner’s request for a stay of the vote was denied and, on May 16, 2006, the proposition was approved.

Respondent contends that the appeal is untimely, that monetary compensation is not available as relief in an appeal to the Commissioner, that petitioner’s claim regarding overcapitalization of the reserve fund is moot, and that its actions relating to the reserve fund and May 16, 2006 voter proposition were in all respects proper.

I must first address the scope of the reply submitted by petitioner.  The purpose of a reply is to respond to new material or affirmative defenses set forth in an answer (8 NYCRR §§275.3 and 275.14).  A reply is not meant to buttress allegations in the petition or to belatedly add assertions that should have been in the petition (Appeal of Schildhorn, 44 Ed Dept Rep 212, Decision No. 15,152; Appeal of Kirschenbaum, 43 id. 366, Decision No. 15,020; Appeal of Hollister, 39 id. 109, Decision No. 14,188).  Therefore, while I have reviewed the reply, I have not considered those portions containing new allegations or exhibits that are not responsive to new material or affirmative defenses set forth in the answer.

Petitioner asserts that he brings this appeal “on behalf of the taxpayers.”  Although petitioner, as a district resident and taxpayer, has standing to maintain the appeal, he may not do so on behalf of other taxpayers (seeAppeal of Hempstead Parents/Community United, 45 Ed Dept Rep 381, Decision No. 15,357). 

The appeal must be dismissed, in part, as untimely.  An appeal to the Commissioner must be commenced within 30 days from the making of the decision or the performance of the act complained of, unless any delay is excused by the Commissioner for good cause shown (8 NYCRR §275.16; Appeal of O’Brien, 44 Ed Dept Rep 43, Decision No. 15,092; Appeal of Spina, 43 id. 354, Decision No. 15,016).

Petitioner commenced his appeal on March 9, 2006.  To the extent petitioner challenges respondent’s action relating to the reserve fund that occurred prior to February 7, 2006, the appeal is untimely.  However, with respect to respondent’s February 15, 2006 transfer of money to the general fund’s unappropriated fund balance and its March 8, 2006 determination to seek voter approval of a proposition to extend and increase the reserve fund, the appeal was commenced within 30 days thereof and, thus, is timely.

The appeal must also be dismissed, in part, as moot.  The Commissioner will only decide matters in actual controversy and will not render a decision on a state of facts which no longer exist or which subsequent events have laid to rest (Appeal of B.K. and R.K., 44 Ed Dept Rep 195, Decision No. 15,146; Appeal of V.L., 44 id. 160, Decision No. 15,132; Appeal of Garvin, 44 id. 30, Decision No. 15,087). 

To the extent petitioner seeks an order prohibiting respondent from transferring excess money from the reserve fund to the general fund and from placing the proposition to extend and increase the reserve fund before the voters on May 16, 2006, the appeal is moot.  On May 16, 2006, the voters approved the proposition regarding the reserve fund.  In accordance with respondent’s February 15, 2006 resolution, the $3,345,855.23 previously transferred to the general fund’s unappropriated fund balance presumably was transferred into the new reserve fund.  Thus, any stay of the transfer is academic.  However, to the extent petitioner seeks an order freezing funds in the current reserve fund, and directing respondent to distribute excess funds to taxpayers, the matter is not moot. 

The facts presented in this appeal are almost identical to those in Appeal of Golden, 45 Ed Dept Rep 407, Decision No. 15,366.  In that instance, as here, upon discovering excess money in a reserve fund, the board transferred the excess to its general fund’s unappropriated fund balance, sought voter approval to extend and increase the reserve fund and, upon approval, transferred the subject funds into the new reserve fund.  In Golden, the board also resolved to apply excess money to reduce the upcoming school year’s tax levy if the voters failed to approve the new reserve fund.  In dismissing the appeal, the transfer of excess money from the reserve fund to the general fund and determination to seek voter approval of an extended reserve fund was held to be proper.  The board’s response to the excess funding of the reserve fund was upheld as appropriate.  The appeal before me is indistinguishable and, similarly, must be dismissed.  In view of the above disposition, I need not address the parties’ remaining claims.

THE APPEAL IS DISMISSED.

END OF FILE