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Lansing school officials responded Monday to accusations in a New York State Comptroller's audit and local reporting that it had collected too much tax money over a three year period.   District officials went on the offensive, defending their budget planning and spending against what they characterized as an impossible situation created by the State in which there is no accepted way of insuring against catastrophic revenue loss.  Teachers and administrators spoke Monday in support of budget decisions to keep more than the allowed 4% of actual expenditures.  District officials accused auditors of ignoring special circumstances imposed because of the ongoing uncertainty about the fate of the District's biggest taxpayer coupled with reductions in state aid.

"As long as we have no legal recourse to the liability presented by this $1.3 million PILOT payment, we will continue to ask our taxpayers if they trust us to hold onto the dollars we end the year with (through efficient operations) so that we can apply these dollars if and when we know the future of the power plant," reads the district's official response to the audit.  It adds, "In short, the Comptroller's analysis of budget variations fell short of anything that could be considered thorough.  Instead the audit makes sweeping generalizations, indicating that the budget-building process must be flawed, or worse, a calculated exaggeration of projected costs, which is simply not true."

To explain it simply, the State has a formula for determining legal and responsible revenue collection and spending for school districts.  While many accept this formula as a good template for responsible fiscal management, Lansing school officials say it doesn't account for special circumstances such as the prolonged uncertainty about whether it's largest single income source will disappear.  To protect school programs from cuts, and taxpayers from a major tax rise if the plant closes, the District has been under-spending its budget for the past several years, and keeping the money as a hedge against the worst case scenario.  The auditors said that the consistent under-spending was a pattern of over-estimating how much the district would need each year.  The district says it is prudent spending.


School District Business Administrator Mary June King says the underspending was due to responsible spending practices that led to extra funds that have helped keep taxes down.  She says holding on to the money amounts to an insurance policy against the possible closing of the Cayuga Power Plant, which could cost district property taxpayers an additional $1.3 million annually.  Superintendent Chris Pettograsso says the prolonged uncertainty over the fate of the district's largest taxpayer, the Cayuga Power Plant, has forced the schools to retain money saved by under-spending the budget each year, which has resulted in large end-of-year fund balances.

While it was not done on the State's timetable, much of the unspent money was eventually placed into reserves, where it can be legally kept with the caveat that it must be spent down.  Other monies have remained in the fund balance despite the fact that it is more than the State allows.  King also says that in order to continue necessary capital repairs and improvements with 'no additional tax impact' the district has to have money in capital reserves.

"We haven't spent any of these reserves down, because they are a safety net," King says.  "The best possible news would have to be that the power plant is not going to go away in the next 20 or 30 years at least.  If we really heard that we're not going to lose that taxpayer forever, my recommendation would be that we probably don't raise taxes, but we need to fund a Capital Reserve.  Our 2015 Building Conditions Survey is being completed right now.  We're going to see another $15 million or more of infrastructure needs in the district.  If you have to pay 35 cents on the dollar for those needs then you need to have a third of that $15 million saved, or every time we make that investment we're going to increase your taxes, not to mention an increase for the next year's annual program."

The Comptroller's audit found the District may have over-taxed, kept more money in reserves without spending the reserves down, and overestimating appropriations when deciding on the budget and setting the tax levy.  District officials say that while the numbers are factually correct, that they have been responsible in squirreling away monies because having those funds available will prevent a draconian tax rise if the Cayuga Power Plant is shut down, offsetting what could amount to an additional $1.3 million on the backs of Lansing property owners.

The New York State Public Service Commission (PSC) began considering whether to repower the coal-fueled plant with natural gas or to close the plant in January of 2013.  Three years later, after multiple extensions and delays, there has still been no decision.  This uncertainty has forced Pettograsso, King and the School Board to project multiple scenarios for each year's budget.

"We thought we were going to hear from the PSC," King says.  "We didn't.  We thought perhaps in December we were going to hear from the PSC.  We haven't.  The Board did talk about what we might do with that $936,000 in excess of the 4% in the current year.  I always recommend the Capital Reserve, but again, at the time we were discussing it we thought that we might hear from the PSC and have a better understanding of what's going on with the power plant.  We knew we were waiting for the PSC to come up with a decision on the power plant.  We didn't know if that was going to impact us immediately or when or how.  We didn't have a legal way to save that money for if the power plant goes away.  There is no legal reserve at our disposal.  As far as I'm concerned the Board's intent is to appropriately manage that money by the end of the year."


King noted that if the PILOT (Payment In Lieu Of taxes, a legal agreement between power plant owners and Tompkins County on the value of the plant) is eliminated, it means a big decrease in PILOT revenues, but the plant goes back into the general taxpayer pool, increasing the tax cap and the assessed value of all properties.  Reductions in the plant's value have already cost the district $2 million in revenue since the 2010-11 school year, which has had to be made up either by reserve funds, fund balance, or property taxpayers.  She said that might take some pressure off the school board and taxpayers alike.  But School Board member Julie boles noted that if the plant withdraws from the PILOT and goes back onto the regular tax rolls its value could be further depleted than the $60 million the PILOT currently sets it at.

"For this budget year we are looking to operate in those first two columns (of the chart shown above)," King told the board.  "Do you want to go over the property tax cap, or do you want us to bring the budget in under the property tax cap, in which case we continue to look at any reductions I can make in those budget projections.  I don't think the plant is going to go anywhere this year."

At Monday's Board Of Education meeting School Superintendent Chris Pettograsso noted that district officials have been completely transparent in their budget planning process, posting videos of school board meetings, presentations, and budget documents on the district Web site, disclosing budget decisions in the annual budget mailing to district taxpayers, and in annual budget hearings.  Stakeholders including district officials, School Board President Christine Iacobucci, teacher's union President Stacey Kropp, and Director of Special Services Kathy Rourke representing the Lansing Administrator and Supervisor Organization all lauded district budget decisions.

"In no way do we think that our Superintendent, Board Of Education or Business Administrator have been intentionally withholding money from the community in a misguided or disingenuous manner,"  Kropp said.  "The teachers are thankful," she concluded, "that our district had the foresight to plan ahead in an attempt to save educational programming for its students, jobs for the many Lansing community members employed at the district and protect its taxpayers from an incredible tax hike should the plant go under."

"School districts such as ours, that have potential impending revenue depletion, such as the loss of the power plant, are faced with the consequences of severe financial stress," School Board President Christine Iacobucci said.  "Or they plan ahead to insure our taxpayers will not suffer a huge and devastating tax hike.  On behalf of the Board Of Education I support our district officials' planning to help us face difficult financial decisions."

During the course of the audit King learned that Mexico, New York's school district received a legislative dispensation years ago to create a special reserve to cushion the tax impact if a nearby nuclear power plant closes.  The plant is being closed now, but the reserve has been built for years, preparing the community for the tax revenue loss that represents.  King says Lansing wants to establish a similar reserve.

"Our intention is for our advocacy group to get involved in working with our state legislators to get them -- it's got to be a legislative action -- to give us special dispensation to create a reserve relative to this power plant," King says.  "If we can get it done in time, great.  If we can't, we may continue to exist in excess of the 4% if that's the Board's decision.  Certainly some of that money should go into a Capital Reserve.  That would be an appropriate thing to do."

Even if the plant stays open Pettograsso said the district wants to consider the special reserve because the value of the plant has changed so often.  She said she reached out to New York State Senator Mike Nozzolio and Assemblywoman Barbara Lifton Monday, and community members, to drum up support for the idea.
 
"Because we do need access to possibly $1.3 million if the plant does close," she said.  "We want to have what happened in 2009 not happen again.  It did effect our programming, especially in the middle and high schools.  So whatever the PSC decides, hopefully we will push forward with this Tax Stabilization Reserve Fund that will allow us to put money aside for that purpose."

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