FILE PHOTO
In this 2017 photo, tax board members Judy Szewczyk, Sam Pollastro and Ray Bowers review a proposed city budget.
DERBY — UPDATE: Derby officials clarified and offered new information at a tax board meeting May 24. Click this link to read the more recent story.
During the past two fiscal years the City of Derby mistakenly withheld about $2 million in state education grants that were earmarked for school reform programs within Derby Public Schools, according to statements made during a tax board meeting last week.
Paying the school district back immediately could result in a tax rate increase of 5 or 6 mills, officials warned repeatedly.
No one wants to take that route, so city officials are exploring options.
“We want to make it square, obviously. We have to do that. But we want to do that in a way that is least stressful to our citizens. A 6 mill increase is not going to be pleasant,” Judy Szewczyk, the chairwoman of the city’s tax board, said during a meeting May 14.
Members of the Derby Board of Apportionment and Taxation are scheduled to meet 7 p.m. Tuesday May 21 to further discuss the quandary.
The grant money is from the state education department’s “alliance district” funds. It is extra state aid targeted toward under-performing schools.
Apparently the city had been categorizing the alliance district as revenue, but not including the grants as a separate line item on the expenditure side of the budget.
In the last two budgets the city did not realize they were withholding the alliance money, thinking the money was included as an allocation within the school district’s overall operating budget.
“This is where I think we’ve gone astray in the past. We’ve mixed operating budget money with non-operating budget money until at some point we’re not sure what’s a and what’s b and c,” Szewczyk said.
In general, state rules governing alliance district money says municipalities cannot replace local dollars with alliance district money. It’s extra state aid on top of whatever cities dole out for education.
“Basically what was happening was — the funds were being used by the city that were truly ours, that we had not spent,” said Mark Izzo, the school district’s business manager.
The mistake is not impacting the classroom — yet.
The education reform efforts being supported by alliance district money are still happening, in part, because the school has been use new money to pay old bills.
But that can’t go on forever.
The situation has impacted bookkeeping. School officials described a situation in which they call the city every two weeks asking for money to cover payroll.
The way the school district and the city handle grant money was recently identified as a problem in an annual audit of Derby finances.
Both entities have been instructed to create separate line items for grants. The school district was advised to stop co-mingling grant money with money for operations.
An audit showed the city’s fund balance showed a negative balance of about $2 million at the close of the last fiscal year, according to Derby City Treasurer Keith McLiverty.
Several members of the tax board were surprised the city owed the school district money — even though the tax board sets Derby’s budget each year.
Tax board Christopher Carloni questioned the school superintendent about the situation during the tax board meeting May 14.
“Going back to last year, you were shorted $1.1 million?” Carloni asked.
“Yes, correct,” Conway said.
“And nobody complained to us?” Carloni asked.
“We did. Every two weeks we complained. We can’t make payroll every two weeks because of this,” Conway said.
“But you did (make payroll),” Carloni said.
“No, we did because every two weeks somebody sends us money that the city has somewhere. You’re still way behind on your bill. That’s the problem. We’re paying in arrears,” Conway said.
The superintendent, Izzo and McLiverty said the tax board was warned about how to record alliance district money.
“We didn’t wait two years to say you owe me. Every two weeks we were saying you have to send us money so we can pay our bills,” Conway said.
In an email Friday, Szewczyk said the situation remains unclear.
“I can confirm that the Bd of Ed says we still owe them some or all of the Alliance (grant) funds from previous years — two, I think,” she said. “I can also confirm that we won’t be adopting a budget until this is resolved to our satisfaction and to the Bd of Ed’s satisfaction as well. Finally, I can confirm that we will give the Bd of Ed what is due them. We just need to verify what that amount is.”
