Butting heads in Lisbon

LISBON

The difference in opinion of the town’s school department and municipal government officials — and their attorneys — regarding the proposed use of bond proceeds to cover debt service for the track and gym projects at Lisbon High School was evident during a recent town council meeting.

After a $15.1 million school budget was rejected in June by voters, most who indicated they thought the budget was too low, the council held a public hearing on the school committee’s proposed $15.47 million budget on Tuesday. The council reduced the overall Lisbon School Department spending plan to $15,052,845 for 2015-16. While a $114,306 increase from the 2014-15 budget, these proposed school expenditures would lower the amount of money raised through taxes by $177,763. Superintendent Richard Green estimated another approximately $417,000 in additional cuts will be needed if voters approve the council’s adopted budget at the Aug. 11 referendum.

There was much discussion about proposed use of bond pro- ceeds in the school budget Tuesday. The debate about bond proceeds and how they can be spent is a complex one, and given that the Internal Revenue Service code contains gray area, Lisbon Finance Director Ed Karass said there are often varying legal opinions among bond counsels — attorneys who review and give opinions regarding bond issuance, sale, tax exempt status and compliance.

After a more than 30- minute presentation Tuesday by Karass regarding the use of bond proceeds, the council amended the last two school budget articles to do away with the use of bond proceeds in the 2015-16 budget to make debt payments on either the completed track project or ongoing gym project — $255,742 and $48,809, respectively.

Karass said the school department should have obtained independent bond counsel instead of relying on opinions from its legal firm, Drummond and Woodsum. The firm expressed uncertainty about the impact on the tax exempt status of the bond but opined using the bond proceeds for debt payments should be OK.

Green told residents Tuesday there was probably currently close to $410,000 left over from the gym and track projects and said the project would be done by the time debt payments made. The gym should be 80 to 85 percent complete in August.

Karass said he’s looking to make sure Lisbon complies with the laws, IRS code and the customary procedures on how bond proceeds at the end are handled. He said if the town is borrowing more money that it needs for actual construction of the gym, it could lose the tax exempt status on the bond.

“The fact that we have such a high percentage left over could be a problem for us,” Karass said. “The manner in which we’re trying to apply the bond proceeds in the budget, in fact, isn’t even the appropriate way.”

Any money leftover at the end of the project will be placed in escrow, and used to pay down debt service once the gym is complete, said Karass.

The town hired Eaton and Peabody as its bond counsel, which Karass said concluded that, “Yes, it is premature to be talking about how proceeds that have not yet materialized — even though the project is on track and will be completed let’s say under budget — to pledge them for any other purpose other than the purpose for which they are intended, and that is the project.”

Seemingly counter to this argument, some residents were upset that Karass went on to recommend the $48,895 in interest from the completed track project be applied toward the school department’s wireless network project. That would mean about $13,000 that would come out of the capital reserve rather than $61,000 for the wireless project.

“We’ve been able to save money through the different (bid) alternatives … and get more bang for our buck really, but it’s their perception that because we haven’t spent all of our bond money, we are flooding the bonds and that’s the furthest from the truth,” Green said Wednesday. “We can legitimately use those funds in that manner,” as proposed by the school committee.

Karass said there is no mention in the bond resolution or referendum language townspeople voted on that any amount of money would be applied to debt service at the conclusion of construction. School officials, however, argued it was discussed during public meetings and informational sessions.

Right now, there are dueling attorneys, Karass said, at a cost that he said “is totally unnecessary if in fact, and I’ll say it right out, Mr. Green and the school committee would comply with those things that they need to comply with regarding administration of the bond. The school department and the school committee have no legal authority in a municipal school setting to issue bonds in their own name,” or to raise money, he said.

Karass went on to say he has been barred from the gym construction progress meetings, which Green said the school department agreed would be private as a result of the town’s litigation with the construction company. An opinion from Assistant Attorney General Brenda Kielty advises the construction meetings aren’t school committee meetings and not required to be open to the public.

“At this time, unless there are some changes in behavior, and whether Mr. Green likes me and whether I like Mr. Green, does not matter. We may really detest each other and that is probably the case given the tenor of the emails that I get,” Karass said, adding it’s no secret the two have had their differences. But he has ultimate responsibility for those bonds, Karass said, and should not be barred from construction meetings.

Town Council Chairman Dillon Pesce said the council supports town administration not signing any more checks for the gym construction until the school department complies with the issues regarding administration of the bond.

Residents asked for a tally on legal fees spent on the bond proceeds issue, which officials couldn’t provide Tuesday but Green did say it is expensive.

Share this: