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In a authorized dispute between the New York Metropolis and state training departments over a constitution faculty hire reimbursement, an Albany Supreme Court docket decide sided with town final week.
The battle centered on a state legislation requiring town to supply constitution colleges house or reimburse them for the price of hire. The town Training Division sued the state over its interpretation of the legislation after it accepted a reimbursement request from Hellenic Classical Constitution Faculties.
The college rented property on Staten Island then turned over the lease to a bunch affiliated with the college. That affiliated group then sub-leased the property again to the college at thrice its authentic value, 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 accordance with courtroom paperwork.
The town refused to pay the upper charge, which it later referred to as “artificially inflated.” Hellenic appealed to state Training 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 purpose of the rental help program: the general public financing of New York Metropolis constitution colleges.”
However in a resolution issued final week in a metropolis lawsuit over Rosa’s order, Decide Julian Schreibman disagreed with Rosa’s studying of the legislation, annulling her resolution and directing her to rethink the case. The legislation specifies that town solely has to reimburse charters for “the precise rental price,” which implies it may well reject requests that don’t go towards that function, Schreibman stated.
“The studying reached by this Court docket permits [the New York City Education Department] to be vigilant not merely for expenditures which may profit the Faculty however will not be hire, however for expenditures characterised as ‘hire’ that don’t profit the Faculty in any respect — one thing the Commissioner’s resolution wouldn’t enable,” Schreibman wrote.
A spokesperson for the state Training Division stated Rosa would discover choices to enchantment Schreibman’s ruling. If she is required to rethink her preliminary resolution, Rosa will “overview the whole file 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 in regards to the ruling, however beforehand informed Chalkbeat that sub-leasing house from affiliated teams was a typical apply for constitution colleges 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 resolution could have implications past this case, however the ruling might bolster town’s potential 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 hire reimbursement requests, town Training Division says it received’t reimburse for prices “for buildings not occupied by…college students, or different prices that aren’t immediately and essentially ensuing from the rental of house.”
Considerations over hire reimbursement prices
The 2014 rental reimbursement legislation, which is the one laws of its variety within the state, was backed by then Gov. Andrew Cuomo to shore up protections for constitution colleges in opposition to 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. The town paid about $75 million for constitution rental reimbursements in fiscal yr 2023, after factoring within the state’s portion of the funds, in accordance 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 crucial of constitution colleges have raised issues in regards to the prices for town Training Division.
A 2021 report from the advocacy group Class Dimension Issues spotlighted a number of cases of colleges renting house in buildings owned by associated teams the place hire 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 colleges.”
In Hellenic’s case, the college signed a lease to hire a constructing and adjoining land from a Greek Orthodox Church that may have price about $660,000 for the 2021-2022 faculty yr. However the faculty turned over its lease to an entity referred to as “Associates of Hellenic Classical Constitution Faculties, Inc,” which shares a chairperson with the college, and sub-leased the property again to the college for greater than $2 million for the yr, in accordance with courtroom data.
The hire enhance was meant to account for the added prices of setting up a brand new constructing on the identical plot of land, in accordance with authorized paperwork.
The New York Metropolis Constitution Faculty Heart, an umbrella group that lobbies on behalf of charters and filed a authorized transient in help of Hellenic, argues that’s a completely acceptable use of town funding.
“Simply as the general public offers funding for setting up public colleges, we imagine that constitution colleges ought to be allowed to make use of rental help for a similar function,” stated Constitution Heart CEO James Merriman.
However legally, an important query is whether or not Hellenic’s expenditures rely as “precise rental price” underneath 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 ‘hire’ had all of a sudden elevated exponentially following a associated social gathering transaction,” and the revelation that “the related-party landlord could be utilizing many of the ‘hire’ to fund different tasks on behalf of the Faculty.”
Michael Elsen-Rooney is a reporter for Chalkbeat New York, overlaying NYC public colleges. Contact Michael at [email protected].
