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Judge orders School District to pay charters

Photo: North County Charter Elementary School

In another rebuke to the School Board, which is getting in the habit of losing its court cases, Circuit Court Judge Paul Kanarek ruled the School District owes its five public charter schools millions in withheld tax revenue. 

“The court finds that the plain language of the statue supports the plaintiffs’ position,” his June 13 order states.

The charters are due about $2.55 million in withheld tax revenue, along with other money.

State law allows districts to be charged penalty “interest at a rate of 1 percent per month calculated on a daily basis on the unpaid balance,” which comes to about $723,000 in the charters’ case. In addition, the district will have to pay the charter schools’ lawyer, Shawn Arnold, who said his fee was “well north of $100,000.”

“I am not inclined to give up the interest,” North County Charter’s Business and Financial Director Ken Miller said.

The money the district unfairly shorted the charters came from a four-year property tax that began July 1, 2013, and ends June 30, 2017. It is a 0.6-mil levy that takes 60 cents for every $1,000 assessed property value.

The charters claimed and judge agreed they should have received a percentage of the tax revenue equal to the percentage of district students attending charter schools, not the flat 5 percent the district paid them.

The charters’ student population was a little less than 12 percent of the district total the first year of the tax, a little over 12 percent the second year, 12.7 percent the third year and 13 percent the last year, according to district budget reports.

“It took me a year into the tax to discover something wasn’t right,” Miller said.

District reports didn’t reveal the total amount collected, so Miller called the tax collector to get those figures and then calculated the per-student share for his school. He told the other charters – Indian River Charter High School, Imagine School at South Vero, Sebastian Charter Junior High School and St. Peter’s Academy – to do the same. All of them came up short.

According to the Indian River County Tax Collector’s Office, the district took in $7.8 million the first year, nearly $8.2 million the second year, nearly $8.8 million the third year and about $9.3 million this year. 

The charters were given $1.7 million of the $34.1 million collected and are owed about $2.55 million principal.

Before going to court, charter school leaders tried to negotiate with the School Board and district staff to get a settlement and were stonewalled. Then, as all district-sponsored charter contracts require, they sought mediation.

“Mediation was a waste of time,” Miller said. “We told the mediator we would consider not charging interest [if they settled] and the district came back with: ‘We’re offering you nothing.’”

The charters next took their case to the Department of Administrative Hearings, but the administrative judge determined she did not have the authority to interpret state law governing distribution of tax revenue to charter schools. 

The charters then filed the case in circuit court and Judge Paul Kanarek was assigned. 

The district was represented by Vivian Cocotas of Garganese, Weiss & D’Agresta of Orlando, who is no longer with the firm.  She had a two-part argument.

The first part was contractual. She said the charters were “put on notice” they were only getting 5 percent of the tax revenue at a June 28, 2012, town hall held by the Taxpayers Association of Indian River County.

Some charter school administrators attended and then-Superintendent Fran Adams and Assistant Superintendent of Finance Carter Morrison revealed charters would get 5 percent of the new tax proceeds, according to Cocotas. Since charter officials knowingly acquiesced to the 5 percent share, they were not now entitled to complain, she argued.

However, during court hearings, charter witnesses denied they were informed of the 5 percent share, insisting they were told they would get a per-student share. 

Cocotas also argued charter schools are due a per-student share of tax money only if it’s part of the per-student funding stream contributed to by the state. The state contributes about half of that funding stream and the district is required to contribute the other half to maintain a statewide per-student funding level. Since the 0.6 levy is not part of the per-student allocation determined by the state, Cocotas said the district can withhold it from charter schools “as a matter of right.”

Shawn Arnold, of Arnold Law Firm in Jacksonville, represented the charters. He pared down the case to a strict reading of a state law that lists the tax levies that must be shared equally with charters, including operating levies. The district’s 0.6 levy is an operating levy.

Judge Kanarek agreed with Arnold’s argument because of “the plain language of the statute,” and disagreed with Cocotas’ interpretation of state law. He didn’t address her contractual argument, since valid contracts don’t violate the law.

Arnold said this is the first time a Florida court has ruled on a school district’s disbursement of tax money to charters, meaning the ruling sets a precedent other charter schools can cite when seeking equal funding from similar property taxes.

“It took a special set of circumstances. None of the charters individually would have had the money to pursue it,” Arnold said. “Five charters banded together.”

If the district had disbursed a fair share of the 0.6 mil levy, Sebastian Charter Junior High School President and Board Chairperson Amy Banov said her school probably would have had sufficient computers, which they did not have with the 5 percent share.

The tax money also could have saved the library. “We have no media specialist and we turned the media center into a classroom,” Banov said.

“We could have had an ESE (Exceptional Student Education) resource teacher sooner,” said Miller, of North County Charter, adding that because of a lack of funds, “we have 370 students and no assistant principal.”

The School Board will go into closed session at the end of the Tuesday, June 27, meeting  to decide whether to appeal Kanarek’s decision.

“To appeal Judge Kanarek’s decision would be throwing good money after bad ... Let’s fund classrooms, not courtrooms,” said Shawn Frost, the only School Board member who responded to a request for comment on the ruling.

District administrators so far have not revealed the cost of the litigation, despite public records requests they are required by law to honor.