New Square's Purchase of Public School Blocked by State Education Commissioner

From Journal News:

The ruling by the state education commissioner nullifying the bargain-basement sale of Hillcrest Elementary School to a local yeshiva gives force to criticism that the transaction was tantamount to a charade and that the East Ramapo school board failed to discharge its fiduciary duty to taxpayers . The findings also raise troubling questions about a key appraisal the board maintains helped justify its decision; the commissioner found no clear evidence that the appraisal was even authorized by the trustees until after the bid from Congregation Yeshiva Avir Yakov of New Square was accepted.

In setting aside the sale this week, Education Commissioner David Steiner concluded that the board had "abused its discretion by hastily approving the sale" and ordered the board to do what it clearly failed to do when it pushed through the transaction last July — "take reasonable steps ... to secure the best price obtainable for Hillcrest." The 10-page ruling leaves much for school board members to explain, including how they could so thoroughly disregard their obligations to taxpayers. Steiner makes plain that the trustees came up woefully short — not the first time such criticism has been heard.

The board, whose majority comes from the ultra-Orthodox and Hasidic communities, has been accused of favoring members of the bloc-voting religious communities — where children attend private yeshivas — at the expense of the public schools. The closing of Hillcrest, and its fast-track sale to the yeshiva — for an apparent bargain-basement price — fits that narrative. School closures, like Hillcrest and Colton elementary before, have been justified by the district as enrollment numbers dwindled and the district's limited finances worsened. That a yeshiva would be interested in purchasing the property makes sense in a region with a burgeoning religious population.

Steiner did not address the accusations of favoritism — and he supported the district's right to sell the property without a public vote. The commissioner made plain, however, that the school board failed taxpayers: "... (A) board of education has a fiduciary duty to secure the best price obtainable" on behalf of its taxpayers. There was noting in the record to show that the trustees took even modest steps to ensure taxpayers were treated fairly.

When and why

Key to Steiner's ruling were property appraisals secured by the school board. The trustees voted to close the school in April of 2010. The 12-acre property was then appraised at $5.9 million. At the same time, Clarkstown listed the property's assessed value at $10.2 million. In July, Yeshiva Avir Yakov offered $3.1 million for the school; the district subsequently ordered a second appraisal, which came in at $3.2 million — significantly less than the first. On July 28, the board OK'd the sale to Yeshiva Avir Yakov.

Steiner faulted the board's documentation of key facts surrounding the second appraisal. While board members said they ordered and accepted that appraisal before signing off on the sale, Steiner found no documentation to support this contention. Meeting minutes don't mention the second appraisal until Aug. 4, after the sale was completed. Wrote Steiner: "While the board contends that it directed its attorney to obtain the appraisal on July 13, 2010, there is no evidence that this actually occurred." The trustees should take time to explain to taxpayers what they could not adequately clear up with the education chief.

Steiner also questioned the board's "circular" reasoning for so easily disregarding the higher first appraisal. The school board said that appraisal didn't reflect current market conditions. But the board failed to take the steps outlined in the appraisal: aggressive marketing of the property and listing it broadly for approximately a year. Instead, they marketed the property for less than a month and treated it to limited advertising: mention on the school district's website and a legal notice in The Journal News. That hardly evinces a good faith effort to secure the best price.

While a school board has broad discretion in determining the best method for a sale, Steiner noted that "a board of education may not act arbitrarily, and it must exercise its judgment and discretion in good faith. ... this includes taking reasonable steps to ascertain the value of a property and/or to utilize a method of sale which is apt to bring in the best price." He added: "The record before me ... calls into question the reasonableness of the board's action under the totality of circumstances."

Steiner's ruling won't preclude the eventual sale of Hillcrest, just this ill-advised one.

The school could even end up being sold to Yeshiva Avir Yakov, or another religious school that has a growing student body.

The ruling, however, sets forth what a proper sale should look like — and how these trustees failed taxpayers.