Nov. 2, 2011—Schalmont is headed back to court for the third time in a decade over tax certiorari claims filed by General Electric.

The multinational company is challenging property value tax assessments in the Town of Rotterdam over a five year period beginning in 2007. If the court rules in their favor, Schalmont will be legally required to refund nearly $13 million in tax payments.

The Town of Rotterdam and Schenectady County will also be required to make refunds.

Even though the back payment of taxes is usually a one-time expense, large reductions in property tax assessments have a permanent impact. Lowered assessments reduce the district’s tax base, which results in all taxpayers having to make up the difference in the next school year’s tax levy.

“This could not have come at a worse time,” said Superintendent Dr. Valerie Kelsey. “This has the potential to drastically impact our schools and educational program.”

Last year, the school board made nearly $2 million in budget reductions, which were achieved through a combination of school closures and personnel reductions affecting 24 full-time equivalent teaching, support staff and administrative positions.
This came after the third consecutive year of reduced state aid for education. In addition, state leaders enacted a law this summer that places new restrictions on how school districts may increase their tax levies.

Tax certioraris are yet another factor influencing the school board’s annual budget proposal.

Although the legal proceedings are currently in the beginning stages, this particular case is expected to be resolved during the 2012-13 school year. Schenectady County Supreme Court Judge Reilly recently set a series of deadlines throughout the 2011-12 school year with the goal of establishing a trial date next summer.

“We hope the Town of Rotterdam comes to a resolution that will not place too much of a burden on the district’s taxpayers or threaten the quality of our educational program,” said Kelsey.

Planning ahead
General Electric has filed a number of tax certiorari claims against the district in recent years. Per court order, the district refunded $1.1 million to GE in 2008 and approximately $11.6 million in 2002, which it continues to pay off through debt service.

Tax certiorari cases can go on for years, so each year the district puts money in a Tax Certiorari Reserve Fund in preparation for a possible verdict against the district. The fund was established after the case in 2002.

One benefit of this strategy is that it lowers the amount of money that the district could potentially have to borrow—and pay interest on—to cover any future settlements. There is not currently enough money in the account to cover the full amount of this claim. To meet its certiorari obligation, the district would have to make up the difference by borrowing money, which, when bonded, would ultimately result in program cuts because of the new property tax cap legislation.

Stay tuned to the district website and other communications as more information becomes available.

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