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In a authorized dispute between the New York Metropolis and state schooling departments over a constitution faculty lease reimbursement, an Albany Supreme Court docket choose sided with town final week.
The struggle centered on a state legislation requiring town to supply constitution faculties house or reimburse them for the price of lease. Town Schooling Division sued the state over its interpretation of the legislation after it authorized a reimbursement request from Hellenic Classical Constitution Colleges.
The college rented property on Staten Island then turned over the lease to a gaggle affiliated with the college. That affiliated group then sub-leased the property again to the college at thrice its unique worth, permitting the college to hunt extra reimbursement from town. The additional prices had been meant to subsidize the development of a brand new constructing for the constitution faculty on the identical plot of land, in line with courtroom paperwork.
Town refused to pay the upper price, which it later known as “artificially inflated.” Hellenic appealed to state Schooling Commissioner Betty Rosa, who dominated in favor of the constitution community. Rosa argued that whereas Hellenic’s association was “regarding,” asking town to subsidize new development was “merely an exaggerated instance of the objective of the rental help program: the general public financing of New York Metropolis constitution faculties.”
However in a determination issued final week in a metropolis lawsuit over Rosa’s order, Choose Julian Schreibman disagreed with Rosa’s studying of the legislation, annulling her determination and directing her to rethink the case. The legislation specifies that town solely has to reimburse charters for “the precise rental value,” which suggests it may well reject requests that don’t go towards that function, Schreibman mentioned.
“The studying reached by this Court docket permits [the New York City Education Department] to be vigilant not merely for expenditures that may profit the Faculty however aren’t lease, however for expenditures characterised as ‘lease’ that don’t profit the Faculty in any respect — one thing the Commissioner’s determination wouldn’t permit,” Schreibman wrote.
A spokesperson for the state Schooling Division mentioned Rosa would discover choices to attraction Schreibman’s ruling. If she is required to rethink her preliminary determination, Rosa will “evaluate the complete report earlier than deciding which social gathering is entitled to reduction.”
Metropolis officers didn’t reply to a request for remark. A lawyer representing Hellenic didn’t reply to questions concerning the ruling, however beforehand informed Chalkbeat that sub-leasing house from affiliated teams was a typical follow for constitution faculties and town had no proper to second guess charters’ rental prices.
It’s nonetheless unclear how Rosa will finally rule, or whether or not the judicial determination may have implications past this case, however the ruling might bolster town’s capability to scrutinize constitution reimbursement requests. A Regulation Division spokesperson beforehand informed Chalkbeat that is the primary time town has sued the state over a constitution rental reimbursement dispute.
In an Aug. 2024 doc outlining its coverage for reviewing lease reimbursement requests, town Schooling Division says it received’t reimburse for prices “for buildings not occupied by…college students, or different prices that aren’t straight and essentially ensuing from the rental of house.”
Issues over lease reimbursement prices
The 2014 rental reimbursement legislation, which is the one laws of its sort within the state, was backed by then Gov. Andrew Cuomo to shore up protections for constitution faculties towards former Mayor Invoice de Blasio, who was seen as extra hostile to the publicly funded however privately run establishments.
The legislation caps rental reimbursement at 30% of the bottom tuition town pays charters for fundamental working bills. Town paid about $75 million for constitution rental reimbursements in fiscal 12 months 2023, after factoring within the state’s portion of the funds, in line with town’s Impartial Finances Workplace.
Some lawmakers have pushed for the legislation to go even additional by extending rental reimbursement to extra charters. However advocates and lawmakers important of constitution faculties have raised issues concerning the prices for town Schooling Division.
A 2021 report from the advocacy group Class Dimension Issues spotlighted a number of situations of colleges renting house in buildings owned by associated teams the place lease jumped considerably, “elevating questions on whether or not the rents had been pretty assessed and whether or not there could also be proof of self dealing by the constitution faculties.”
In Hellenic’s case, the college signed a lease to lease a constructing and adjoining land from a Greek Orthodox Church that may have value about $660,000 for the 2021-2022 faculty 12 months. However the faculty turned over its lease to an entity known as “Pals of Hellenic Classical Constitution Colleges, Inc,” which shares a chairperson with the college, and sub-leased the property again to the college for greater than $2 million for the 12 months, in line with courtroom information.
The lease enhance was meant to account for the added prices of developing a brand new constructing on the identical plot of land, in line with authorized paperwork.
The New York Metropolis Constitution Faculty Middle, an umbrella group that lobbies on behalf of charters and filed a authorized temporary in assist of Hellenic, argues that’s a wholly acceptable use of town funding.
“Simply as the general public supplies funding for developing public faculties, we consider that constitution faculties ought to be allowed to make use of rental help for a similar function,” mentioned Constitution Middle CEO James Merriman.
However legally, a very powerful query is whether or not Hellenic’s expenditures depend as “precise rental value” beneath state legislation. Schreibman didn’t explicitly weigh in on that query, however famous there have been “a number of pink flags” in Hellenic’s request, together with “the truth that the ‘lease’ had immediately elevated exponentially following a associated social gathering transaction,” and the revelation that “the related-party landlord can be utilizing a lot of the ‘lease’ to fund different initiatives on behalf of the Faculty.”
Michael Elsen-Rooney is a reporter for Chalkbeat New York, protecting NYC public faculties. Contact Michael at melsen-rooney@chalkbeat.org.