Judge finds school district overcharged West Bath by $1.9 million but doesn’t order repayment

Judge Andrew Horton
Troy R. Bennett | BDN
Judge Andrew Horton
By Seth Koenig, BDN Staff
Posted June 23, 2014, at 2:25 p.m.

WEST BATH, Maine — West Bath town officials declared a key legal victory as a Sagadahoc County Superior Court justice ruled that the Bath-area regional school system overcharged the member town by more than $1.9 million over a four-year period.

But in a multifaceted ruling issued last week, Justice Andrew Horton stopped short of awarding West Bath repayment for the overcharges, leaving that issue and a number of others to be decided at trial.

West Bath sued Regional School Unit 1 — along with its fellow school district members of Bath, Woolwich and Arrowsic — in 2012 after town officials came to believe the RSU had used the wrong-cost sharing formula since 2008. Phippsburg is also a member of RSU 1, but was not named in the suit.

In his decision last week, Horton acknowledged that the cost-sharing mistake resulted in larger education bills for West Bath and smaller ones for the district’s other three communities.

An attorney representing the city of Bath said Monday that, cost-sharing mistake or not, he is confident the court still won’t force the regional school district or Bath to repay West Bath the overcharged amount.

“[Horton] denied almost all of the defendants’ motions for summary judgment and even went so far as to grant a declaratory judgment in favor of the town of West Bath that it was inappropriately overcharged a total of almost $2 million for its share of the RSU annual budgets for the 2008-09, 2009-10, 2010-11 and 2011-12 fiscal years,” said West Bath Town Administrator Jonathan Davis in a statement. “Unless settled, the matter is now set for trial against that factual determination.

“The town is pleased with the Superior Court’s decision as it largely vindicates the town’s positions, both factually and legally; however, it is still regrettable that the town has had to sue the board and its members to force them to do what is obviously the right thing,” he continued.

Timothy Harkins, chairman of the RSU 1 board, said on Monday morning he is waiting to discuss the latest developments in the case with the district’s attorney.

“There were a number of counts, some were ruled in [West Bath's] favor, some were not in their favor,” Harkins said. “Once I have a better understanding of what it means, I’ll be in a better position to comment.”

The case is rooted in the 2008 decision by those who created the regional school district to use a standard state cost-sharing formula for determining its member communities’ shares of all district expenses recognized by the state as so-called essential programs and services — about 90 percent of the RSU’s annual budget.

That standard state cost-sharing formula is based on the percentage of pupils in the district from each member community.

However, West Bath argued in its lawsuit that the RSU should have applied a local cost-sharing formula that equally weighed member communities’ overall populations, property valuations and student numbers when dividing up EPS costs among the four municipalities.

That local formula was included in LD 910, a law passed by the Maine Legislature specifically for the formation of RSU 1. Attorney William Stockmeyer, who helped the RSU draft the language of LD 910, also later urged district administrators in a letter to stick with the three-pronged cost-sharing plan outlined in LD 910, according to court documents.

However, Horton wrote that the RSU instead used the state cost-sharing formula for the EPS costs, apparently following the advice of the city of Bath’s attorney.

The justice declared last week that the RSU sided with the wrong attorney in the case.

“Although the other defendants have not formally conceded RSU 1’s error and West Bath’s overpayment, the summary judgment record fully supports West Bath’s contention that the wrong formula was applied, and that West Bath was assessed and paid $1,919,380 more than it should have been assessed and should have paid over four fiscal years,” Horton wrote, in part.

While West Bath officials said that declaratory judgment will provide them significant leverage in any forthcoming trial, Horton did not decide on whether the RSU should be forced to repay the town.

Attorney David Ray, representing the city of Bath in the case, acknowledged his client is “a little concerned” by the declaratory judgment.

But he pointed out that Horton also ruled in Bath’s favor on the point that West Bath filed its lawsuit beyond the 30-day limit to challenge government actions, such as the assessment of education costs, although the justice did not use that finding to completely disqualify West Bath’s complaint.

Ray also noted that the issue of whether the RSU and city of Bath will be forced to repay West Bath remain unresolved. He said the school budgets — and their cost allocations — were approved annually by a board that included representatives of West Bath, as well as in public votes in which West Bath taxpayers weighed in.

“There were at least two lawyers who looked at that statute and reached different conclusions,” Ray said. “We think the statute itself lacked clarity, which is part of why we believe there is no basis for relief.

“You have a number of governmental elected officials and employees all in good faith doing their jobs. Whether it’s a mistake or not a mistake, we don’t believe there is any basis for relief,” he continued. “West Bath will not be able to argue that anyone was hiding the ball on them. This was all done out in the open. This is a case of someone saying, ‘We played ball with you for four years, and now, all of a sudden, we want to change the rules.’”

The justice also issued a series of summary judgments in favor of the towns of Woolwich and Arrowsic, essentially finding that because, in part, officials from those towns were unaware of the cost-sharing mistake, they can’t be found guilty of unjust enrichment or made to pay what they underpaid at West Bath’s expense.

Arrowsic underpaid by $183,526 over the four-year period while Woolwich underpaid by $117,156, according to court documents.

Horton found that the city of Bath, which underpaid by $1,633,917, and the larger RSU were aware of the decision to use what would ultimately be considered the wrong formula, however, and is allowing West Bath to seek restitution from those two parties.

 

http://bangordailynews.com/2014/06/23/news/midcoast/judge-finds-that-school-district-overcharged-west-bath-by-1-9-million-but-doesnt-order-repayment/ printed on July 31, 2014