An Update to New York’s Projected Budget Deficit...

By David M. Rothman

Readers may recall our July 27, 2016 posting on the NYMuniBlog regarding the Office of the New York State Comptroller report projecting a potential budget gap of nearly $5 billion annually starting in state fiscal year 2017-18. That report noted lower than expected personal income tax receipts to date as a driver of the projected New York state budget deficit.

Governor Cuomo’s office this month has issued its first quarterly update to the adopted budget.  That update confirms the projected budget gaps noted by the Office of State Comptroller starting in the state’s fiscal year 2018. As cited by the Comptroller’s report, the lower than expected personal income tax receipts are among the main reasons for the projected budget deficit along with the upcoming reduction in the top marginal tax rate in 2018, as well as decreased settlement payments to the state. The first quarterly report also noted economic growth was 0.2 percent lower than the enacted budget and a slowing of consumer spending in 2016 as compared to 2015.

A 2018 New York state budget deficit of $3.2 billion is currently projected; however, the application of fund balance and other, unspecified reductions including potential reductions or delays in payments to local governments, and delays in capital maintenance and construction, brings the net deficit to $207 million.

Insights for School Districts Negotiating APPR Agreements...

By Howard Goldsmith

For New York state school districts negotiating APPR agreements, the pressure on them to finalize these agreements is mounting. School districts must have approved Annual Professional Performance Review (APPR) plans in place by the end of 2016, or they risk losing the state aid increases that were included in the past two New York state budgets. I recently had the opportunity to contribute to the New York State School Boards Association APPR report, titled “Building Trust at the Table: Lessons for Successfully Negotiating APPR Agreements.”

In the report, we provide insights into five key areas for New York state school districts to consider as they finalize their APPR agreements, which are currently governed by Section 3012-d of the state’s Education Law.

New York Supreme Court Upholds the Notice of Claim in Narrowing of Suit Against City...

By Andrew Orenstein

A recent decision from Justice Lynn Kotler (New York County), following First Department precedent, has upheld the purpose of the Notice of Claim.  In Flowers v. City of New York, the plaintiff brought a lawsuit against the City of New York and six individual police officers arising out of his arrest on November 20, 2008.  Before commencing the lawsuit, the plaintiff filed a Notice of Claim that named, however, only the City of New York and the New York City Police Department.  The individually-named police officers moved to dismiss the complaint because they were not named in the Notice of Claim, in violation of GML § 50-e.  The plaintiff argued he was not required to do so under the Fourth Department’s decision in Goodwin v. Pretorius (105 AD3d 107 [4th Dept 2013]).  Applying the First Department’s decision in Alvarez v. City of New York (134 AD3d 599 [1st Dept 2015]), Justice Kotler wrote she was “bound to follow appellate precedent,” which required dismissal of all claims against all the individually-named police officers because they were not named in the Notice of Claim.

The New York Law Journal has published an article on the Flowers v. City of New York decision in which Harris Beach Associate Bradley Wanner was quoted. In explaining a Notice of Claim, Wanner stated that a Notice of Claim “is supposed to give the city and the municipalities an idea of what the claim is, who is involved in the claim, how the claim came to be”.  We therefore anticipate that the split in the departments will be resolved in favor of requiring claimants to identify officers when they file notices of claim.

Second Circuit Court of Appeals Extinguishes Municipality’s Tax Lien...

By Wendy A. Kinsella and Brian D. Roy

The Second Circuit Court of Appeals issued a decision in August 2015 that may affect a municipality’s tax lien on property that is subject to a bankruptcy proceeding. In City of Concord, N.H. v. New Eng. Tel. Operations LLC (In re N. New Eng. Tel Operations LLC), 795 F.3d 343 (2d Cir. 2015), Northern New England Telephone Operations, LLC (NNETO) owned several parcels of property in Concord, New Hampshire. The City of Concord (the City) would bill NNETO for property taxes on a quarterly basis. At the time of NNETO’s filing in October 2009, the City had already issued property tax bills for Quarters 1 and 2 (Q1 and Q2, respectively). The City filed timely proofs of claim for Q1 and Q2 property taxes, which had been billed pre-petition, but did not file proofs of claim with respect to Quarters 3 and 4 (Q3 and Q4, respectively) property taxes. A single lien secured payment of the entire tax burden, including Q3 and Q4 property taxes.

The bankruptcy court allowed the City’s claims for Q1 and Q2 tax bills, after reducing certain amounts. With respect to the Q3 and Q4 property taxes, the City filed a Motion two years after plan confirmation for Allowance and Payment of Tax Claims that were not filed. The Bankruptcy Court held that the now-confirmed Chapter 11 plan extinguished the lien, citing the plan provision that “all property of NNETO be free and clear of creditor’s interests.” The district court affirmed the ruling of the bankruptcy court.

While the general rule is that liens pass through bankruptcy unaffected, see Dewsnup v. Timm, 502 U.S. 410, 417 (1992), the Second Circuit held that a lien is extinguished by a Chapter 11 reorganization plan pursuant to § 1141(c) if four factors are met:

  • The text of the plan does not preserve the lien;
  • The plan is confirmed;
  • The property subject to the lien is “dealt with” under the terms of the plan; and
  • The lienholder participates in the bankruptcy proceedings.

The City conceded factors (1) and (2), but argued that the property subject to the lien was not “dealt with” under the terms of the plan, and that the City did not adequately participate in the bankruptcy proceedings. In regards to factor (3) the City argued that the property subject to the lien was not “dealt with” because the language used by NNETO in the confirmed Chapter 11 plan was not specific enough. The Second Circuit held that the property was adequately “dealt with” in the plan through the language that “all property” of the Debtor would vest in the reorganized debtor free and clear of creditor’s interests.  The court found the City’s argument without merit.

The City then argued, in relation to factor (4), that their participation in the bankruptcy proceeding was not of a kind that would allow its lien to be extinguished by the plan. The court held that the City, as lienholder, did sufficiently participate in the bankruptcy proceedings, and reasoned that although the City did not file proofs of claim for the Q3 and Q4 tax bills, the City did file proofs of claim for the Q1 and Q2 property tax bills with respect to the same six parcels of real property at issue. The court went further and noted that “[a]n inference of sufficient participation follows the fact that a single lien secured payment of tax bills as to which the City participated and tax bills as to which the City stayed silent.”

Notably, the NNETO case and its rationale was cited by a bankruptcy court in the Northern District of Texas in a decision denying a school district’s request for more than $130,000 in property tax penalties and fees. That decision was affirmed by the Fifth Circuit Court of Appeals on August 8, 2016.

Is New York State Facing an Annual $5 Billion Budget Gap?...

By David M. Rothman

NYMuniBlog has been following the financial difficulties of municipalities nationwide. Recently, the Office of the New York State Comptroller issued a report projecting a potential budget gap of nearly $5 billion annually starting in state fiscal year 2017-18.  The report also notes lower than expected personal income tax receipts to date.

New York School Districts Required to Test Drinking Water...

By Douglas E. Gerhardt and Anne M. McGinnis, Ph.D.

As is always the case at the end of the New York State Legislative session, a flurry of bills are passed. One of particular note to school districts picks up on guidance Harris Beach provided just a month ago in “Testing Water in School District Buildings is a Best Practice and Worthy Investment” and follows many issues of concern related to testing drinking water in school buildings.

Senate Bill 8158/Assembly Bill 10740 passed both houses on June 17 and will be sent to Governor Cuomo for signature. The bill will mandate water testing for lead in all school buildings in the state. The legislation also allows school districts to be reimbursed for the costs of these tests. This bill is set apart from other traditionally unfunded mandates, as it enables schools to recoup costs associated with water testing and other requirements under the law. While some have been critical of the reimbursement mechanism this is much better than no funding at all.

Under what will soon be a new law, school districts are required to take action including conducting “periodic testing for lead contamination” in their drinking water in accordance with regulations from the Department of Health. Further, schools must provide parents and guardians written notice of all test results and post results on the school district’s website.

To read Harris Beach’s full legal alert, please visit our Insights page


Municipalities Encouraged to Apply for RESTORE NY Communities Initiative Funds...

By The Editorial Team

New York State Governor Andrew Cuomo announced that municipalities will be able to apply for $50 million from the RESTORE NY Communities Initiative. The funds are available to revitalize and stabilize downtowns and neighborhoods.

Empire State Development Corporation will conduct informational meetings for municipalities interested in submitting applications on the following dates and locations:

Hempstead/Hofstra University Student Center
June 27 at 1:00 p.m.

Schenectady/Proctors GE Theater
June 28 at 10:00 a.m.

Rochester/Monroe Community College/Warshof Conference Center, Empire Room
June 29 at 1:00 p.m.

For those not able to attend one of these meetings, ESD will conduct a webinar at 10:00 a.m. on June 28. Registration for the webinar can be done at

Handling Ransomware: Join Us for a Complimentary Webinar...

By The Editorial Team

The consulting subsidiary of Harris Beach PLLC, HB Solutions LLC, is holding a complimentary webinar June 28 on avoiding and managing the threats of ransomware attacks, a significant disruptor to any organization’s operations and a situation that poses major data breach concerns. The HB Solutions Data Privacy and Cybersecurity Team is presenting this program in conjunction with Access Advisory Group, leaders in cyber protection technology.

Click here for more information. Please RSVP to


HB Solutions Cybersecurity Webinar Ad_Cybersecurity Legal Summit

2016 New York State Legislative Session at a Glance: The Stalled-Out Legislation...

By Joseph V. Frateschi

Zombie Home Legislation

We have discussed the numerous issues associated with “zombie homes” in past articles, including “Bills on Zombie Properties Held Up Again In New York State Legislature,” The New York State Legislature considered the “Abandoned Property Neighborhood Relief Act of 2016,” which attempts to abate the problems caused by “zombie homes.” While the New York State Assembly passed the bill, the bill did not pass the New York State Senate.  Governor Andrew Cuomo recently announced a $100 million initiative for first time homebuyers to obtain funds to buy zombie homes.


Expansion of Prevailing Wage Legislation

We have also discussed recent legislative changes to general industrial development agency practices, including “Update on the New York State Public Authorities Law Requirements Affecting Industrial Development Agencies (IDA) and Land Banks,” and  “Summary of 2015 Reform Legislation for Industrial Development Agencies (IDAs).” During the 2016 Legislative Session, a bill was introduced to expand the state’s prevailing wage law to include projects financed by industrial development agencies. While some suspected that the bill would pass this session, the bill did not gain enough muster. Thus, prevailing wage requirements will not be applied to industrial development agency projects.

Uber Legislation

Uber, the Internet ride sharing service, lobbied for an amendment to the New York State Insurance Law allowing for favorable group insurance policies for its drivers. We have discussed both the pros and cons of ride sharing services in recent articles, including “Uber – Balancing New Service and Old Revenue” and “2015: A Year in Review.” The legislation was held up in both the Assembly and the Senate due to disagreements over minimum insurance requirements.

New York Court of Appeals Clarifies that School Districts Must be Served with Timely Notice in Tax Certiorari Proceedings...

By The Hon. Victoria A. Graffeo

On June 9, 2016 an important opinion dealing with tax reimbursements was issued by the New York Court of Appeals, the state’s highest court. With 733 school districts in our state, any pronouncement by the Court regarding the interpretation of tax certiorari statutes can have an effect on district budgeting and reserve accounts. In Matter of Westchester Joint Water Works v Assessor of City of Rye, the Court was asked to decide whether a taxpayer can be given an additional six months after a court dismisses a tax certiorari petition because the taxpayer failed to send a school district the required notice and petition within 10 days of serving the municipal assessment authority and there was no good cause for the oversight. Recognizing the importance of school districts receiving proper notification so that districts can decide whether to participate in the court proceedings and if monies should be placed in reserve funds, the Court rejected the taxpayer’s argument that it was entitled to an extension of time after the expiration of the statute of limitations to recommence the proceeding.

The facts of this case were not in dispute. The petitioner/taxpayer owned a water supply and pipe system in Westchester County and challenged its tax assessments for years 2002-2010 by commencing nine tax certiorari proceedings against the City of Rye Assessor. In addition to serving the municipality, Real Property Tax Law (RPTL) 708 (3) further requires, with certain exceptions, that within 10 days of the service upon the municipality, a copy of the notice of petition and the petition in a tax certiorari proceeding must be mailed to the superintendent of any school district in which a portion of the real property subject to the contested assessment is situated.  In this case, one parcel was located within the Rye City School District and one fell within the boundaries of the Rye Neck Union Free School District.

The Rye City school district received timely notice but the Rye Neck school district was not notified. In the process of settling the contested assessments regarding the other parcel, petitioner’s lawyer realized the oversight regarding the Rye Neck school district and advised the superintendent of the mistake. The school district sought to intervene in the proceeding, and after the trial court granted the Rye Neck school district intervenor status, it requested the dismissal of the proceeding under RPTL 708 (3). The city also similarly moved to dismiss the proceeding. This prompted the taxpayer to ask the court for leave to recommence the proceeding, relying on a six-month grace period provided under CPLR 205 (a) for dismissed actions which are not terminated on the merits but the statute of limitations has expired. The trial court dismissed the proceeding with respect to the parcel at issue for failure to comply with RPTL 708 (3) and declined to permit the extended time under CPLR 205 (a) to start a new proceeding.  It also held the city lacked standing to move for dismissal of that petition since it was properly served with notice. On appeal, the Appellate Division, Second Department, determined that the city had standing to contest the proceeding and dismissed the petitions involving the Rye Neck parcel against both the city and the Rye Neck school district. The intermediate appellate court further upheld the denial of the taxpayer’s request to take advantage of CPLR 205 (a).

The New York Court of Appeals accepted the taxpayer’s appeal and had to determine whether noncompliance with the RPTL 708 (3) notification requirement can be corrected through the use of the extension of time to recommence provided by CPLR 205 (a). The unanimous answer was no. Its analysis began with a review of the legislative history underlying the enactment of RPTL 708 (3) in 1996, noting that the state Legislature was concerned that school districts needed to be assured of an opportunity to participate in tax certiorari proceedings. To accomplish these objectives, the Legislature adopted several amendments, of which two were pertinent. First, a requirement that a petitioner in a tax certiorari proceeding send the notice of petition and the petition to the affected school district(s) within 10 days of the date of service upon the municipality. Equally important, new language was added to RPTL 708 (3) providing that a failure to comply with such requirement “shall result in the dismissal of the petition, unless excused for good cause shown.”  Since the courts below had not found good cause for the error, the taxpayer sought to resurrect its assessment challenge by using the additional time provision found in CPLR 205 (a).

In considering the interplay between the two statutes, the Court discussed the different treatment of CPLR 205 (a) in earlier appellate precedent and concluded that precluding recommencement under CPLR 205 (a) was the better rule because the statutory construction “reflects an intent to permit a petitioner who has ignored the subject mailing requirement to proceed only where the error is found to be excusable.” Since RPTL 708 (3) expressly addresses the failure to comply, there was no need to resort to the CPLR. The Court noted that to do as the taxpayer requested would essentially write out the specific dismissal provision of the statute.

From a policy perspective, the Court emphasized that the Legislature recognized the importance of a school district receiving notice in a tax certiorari case, thereby enabling a district to consider whether to participate in a proceeding and whether it should place monies in reserve, as permitted by Education Law section 3651 (1-a), in the event that it has to satisfy a judgment awarded a taxpayer. Since some judgments in these tax certiorari cases can be quite substantial, the outcome of a tax certiorari proceeding can create a budget deficit or other fiscal problems for school districts. School districts should be alert to determine if timely notice has been received, and if not, the courts will now be required to dismiss the proceeding against the school district if there was no good cause for the failure to serve notice.

Please note: Harris Beach represented the Assessor of City of Rye in this matter in which the Court of Appeals upheld the Appellate Division, Second Department’s earlier decision in favor of the City of Rye, as well as the Rye Neck School District, dismissing nine years of tax certiorari proceedings and denying petitioner’s request to refile under CPLR 205 (a).

Pension Systems Continue to Concern Municipalities...

By David M. Rothman

NY MuniBlog has been following the financial difficulties of municipalities nationwide. Among those difficulties are pension systems, which continue to be a major concern for municipalities.

As readers may recall, the Illinois State Legislature authorization for an overhaul of Chicago’s pension system so as to afford Chicago some financial flexibility were found to be in violation of the State Constitution. In that decision, the Illinois Supreme Court found that an overhaul of the pension system, agreed to by the Legislature, was in violation of the State Constitution as the overhaul would have been a diminishment or impairment of the pension system for public employees. As in Illinois, the New York State Constitution (Article 5 Section 7) states after July 1, 1940, “membership in any pension or retirement system of the state or of a civil division thereof shall be a contractual relationship, the benefits of which shall not be diminished or impaired.” Therefore, a New York municipality facing the pressure of bankruptcy would presumably be denied the ability to overhaul its pension as occurred in Chicago.

In November 2015, the Chicago City Council adopted its 2016 budget containing both cuts in services and increased taxes and fees so as to address an expected $750 million budget shortfall. At the time, NY MuniBlog noted that the reassessment of the city resulted in property tax increases ranging from nearly nine percent to just over 20 percent among the six townships comprising the city of Chicago.

On Memorial Day, the Illinois Legislature overrode the governor’s veto of a bill which aimed to extend the city’s pension obligations to the state for its police and fire pensions. According to reports, the bill amends a 2010 state law mandating Chicago increase pension payments so as to reach 90 percent funding of those pensions by 2040. Currently, according to published reports, the police system is 26 percent funded and the fire system 23 percent funded. According to the city, this law would have increased contributions from $290.4 million to $834 million. The amendment reduces that amount to $619 million and provides smaller increases through 2020.  The amendment also extends the deadline for Chicago to reach 90 percent funding by 15 years.

This short-term budget relief will likely add to the city’s pension funding gap. Illinois Governor Bruce Rauner’s office has stated the measure will cost Chicago taxpayers $18.6 billion over time.

Testing Drinking Water in School District Buildings is a Best Practice and Worthy Investment...

By Douglas E. Gerhardt and Gene Kelly

The increased focus on potability of drinking water and particularly the water provided in schools raises questions about the legal and practical obligations imposed on schools regarding testing drinking water. While legally not yet mandated (legislation is likely to be introduced soon to mandate it), school districts would do well to conduct routine testing of drinking water.

School districts must ensure a safe and healthy learning environment for students, and regular, proper testing of drinking water should be seen as an integral part of fulfilling that obligation. Ensuring water does not contain potential contaminants is a measure which, even if not required by law, is recommended best practice.

In terms of legal requirements, state and federal laws imposed obligations on owner/operators of water systems, namely the municipalities which provide the source water. The Safe Drinking Water Act (42 USC § 300g-6) (SDWA), a federal law enacted in 1974, is implemented and monitored by the U. S. Environmental Protection Agency. The SDWA requires public notice by owner/operators of public water systems depending upon the action level reached when testing for certain contaminants, such as lead and copper. The 1986 amendments to the SDWA required EPA to set standards limiting the concentration of lead. EPA issued an initial lead and copper regulation in 1991, and in 2011 Congress provided additional standards for what can be considered “lead free” plumbing.

New York also requires testing by owner/operators of water systems. Test results provide the foundation for notification requirements, again, by owners and operators of water systems that exceed lead action levels. A water system is defined as “a community, non-community or non-transient non-community water system which provides water to the public for human consumption through pipes or other constructed conveyances, if such system has at least five service connections or regularly serves an average of at least 25 individuals daily at least 60 days out of the year” (10 NYCRR §5-1.1).  The same regulation requires owner/operators of “a water system that exceeds the lead action level based on first-draw lead tap samples” to provide notice to the public. (10 NYCRR §5-1.44)

School districts generally are not water system operators under these definitions so they are not required to test. But as a best practice it is recommended that they should. And, if they derive their water for a particular building from a well source on site, they become subject to water system regulations and must test. Testing becomes a proactive endeavor which can help ensure good water is provided for cooking and drinking. Even without mandatory testing, checks will demonstrate a proactive approach toward the health and safety of all who work in and use schools. Communities have come to expect that school districts not meet the bare minimum requirements.  When it comes to student and staff safety issues, communities expect the district to go “above and beyond” what is minimally required. Doing so may even ward off lawsuits. See NY Muni Blog article “Municipal Alert: Lead in Drinking Water,” published March 24, 2016.

Once a school district determines it will test its water, it is wise to ensure this is done correctly. School districts are advised not to go at it alone. The recommended protocols and procedures for proper water sample collection are defined in the EPA’s 3Ts for Reducing Lead in Drinking Water in Schools. The protocol requires the collection of two separate samples at each water source location. The first is identified as the “first draw” and is representative of the water contained in the faucet/fixture. The “second draw” sample is intended to represent water contained in the fixture’s immediate plumbing system. The samples are collected following routine use of the fixtures/locations 8-18 hours before the sampling event. Ideally, the water should be allowed to sit in the pipes/fixtures unused for this period. This could mean over a weekend.

In addition to the sampling procedure in the EPA guidance document, specific additional sampling from a representative percentage of the source locations can further pinpoint problem areas during the initial base testing event further eliminating repeat sampling and lost time. Again, knowing how and where to conduct these tests is critical to obtaining accurate and reliable samples. Deviations from the recommended sampling protocol or procedures can result in a loss of data integrity and result in costly resampling. Performance of the testing should be completed by an objective professional firm, experienced in the sampling and versed in the ability to interpret the resulting data. While this could be seen as an additional cost to a school district (as opposed to using staff) it is a cost well worth making. Schools might want to consider the testing cost an investment in its buildings and those who use them.

The authors would like to thank Scott Norstrand and John Rigge at the environmental engineering firm Barton & Loguidice for their expertise and assistance in the development of this article.

Affordable Care Act: IRS Reporting Requirements Presentation...

By The Editorial Team

Harris Beach Partner and NY Muni Blog Contributor Joshua D. Steele gave a presentation on the Affordable Care Act and its IRS Reporting Requirements during the annual meeting of the County Attorneys’ Association of the State of New York held at the Otesaga Resort and Hotel in Cooperstown, May 16-17, 2016.  He discussed the ACA’s Employer Mandate, the 2015 IRS reporting requirements and associated common issues, and the 2016 IRS compliance issues.  Please click here to view the presentation.

U.S. Departments of Justice and Education Issue Sweeping and Forceful Guidance on Transgender Student Issues in Latest Dear Colleague Letter...

By James E. Beyer

Today, May 13, 2016, the federal government distributed a letter to public schools across the country directing schools to permit transgender students to use facilities and to participate in activities, among other things, that match their gender identity.  This Dear Colleague letter (the Letter), issued jointly by the U.S. Department of Justice and U.S. Department of Education, is the latest guidance addressing transgender student issues in public education in a week where transgender issues have reached a fever pitch with the federal government and the State of North Carolina suing one another over North Carolina’s bathroom access law.

As the government has maintained in prior guidance, the Letter reiterates that the prohibition against sex discrimination in educational programs under Title IX of the Education Amendments of 1972 encompasses discrimination based on a student’s gender identity, including discrimination based on a student’s transgender status.  When a student or the student’s parent or guardian, as appropriate, notifies the school administration that the student will assert a gender identity that differs from previous representations or records, the Letter notes the school must begin treating the student consistent with the student’s gender identity. Under Title IX, there is no medical diagnosis or treatment requirement that students must meet as a prerequisite to being treated consistent with their gender identity.

The Letter focuses on four overarching areas of concern:

  1. Safe and Nondiscriminatory Environment
    In general, schools are required to provide a safe and nondiscriminatory environment for all students, including those who identify as transgender.  When students are faced with harassment based on sex, including gender identity, transgender status, or gender transition, a school must take prompt and effective steps to end the harassment, prevent its recurrence, and remedy its effects. A school’s failure to take such steps, and any other failure to treat students consistent with their gender identity, may create or contribute to a hostile environment in violation of Title IX.
  2. Identification Documents, Names, and Pronouns

    The Letter confirms that, under Title IX, schools must treat students consistent with their gender identity even if their education records or identification documents indicate a different sex.

  3. Sex-Segregated Activities and Facilities

    While Title IX permits schools to provide sex-segregated restrooms, locker rooms, shower facilities, housing, and athletic teams, the Letter makes clear that transgender students must be allowed to participate in such activities and access such facilities consistent with their gender identity.  Specifically related to restrooms and locker rooms, the Letter provides that schools may not require transgender students to use facilities inconsistent with their gender identity or to use individual-user facilities when other students are not required to do so, but they may make individual-user options available to all students who voluntarily seek additional privacy.  This Letter likewise addresses rules for sex-segregation in the context of athletics, single-sex classes, single-sex schools, social fraternities and sororities, housing and overnight accommodations, and sex-specific activities and school rules and policies that may implicate stereotypical notions of masculinity or femininity.

  4. Privacy and Education Records

    The Letter provides that a school might violate Title IX when it limits students’ educational rights or opportunities by failing to take reasonable steps to protect students’ privacy related to their transgender status, including their birth name or sex assigned at birth.  While schools may maintain records with a transgender student’s birth name or sex assigned at birth, such records should be kept confidential, and any nonconsensual disclosure of such personally identifiable information may violate the Family Educational Rights and Privacy Act (FERPA).  Crucially, in this section of the Letter, the government makes clear that even when a student has disclosed his or her transgender status to some members of the school community, a school may not rely on exceptions to FERPA in order to disclose a student’s personally identifiable information to other school personnel if those staff members do not have a legitimate educational interest in the information. Additionally, school officials may not designate students’ sex, including transgender status, as directory information because doing so could be harmful or an invasion of privacy.

    Notably, this Dear Colleague letter does not have the force of law, but makes it clear that the federal government is carving out its position that any violation of Title IX may carry with it the loss of federal aid as the threat of potential legal action.  Courts to date, including those in New York, have not definitely settled whether the prohibition against sex discrimination under Title IX includes discrimination based on one’s transgender status.  We have previously reported on one recent court decision from the Fourth Circuit Court of Appeals in Virginia, finding in favor of a transgender male student whose school had prohibited him from using the restroom that matched his gender identity.  In conjunction with this Letter, districts should continue to look to the New York State Education Department’s July 2015 guidance, which provides similar and consistent guidance in many of the areas of focus addressed above.

    Additionally, accompanying this Letter is a separate document from the government entitled Examples of Policies and Emerging Practices for Supporting Transgender Students. This document, which can be accessed here, includes policies that school districts, state education agencies, and high school athletics associations around the country have adopted to help ensure that transgender students enjoy a supportive and nondiscriminatory school environment.  While these policies and emerging practices are certainly helpful when thinking about how school personnel should address difficult transgender student issues, districts should confer with counsel prior to implementing any such policy.  In New York, for example, a district’s Dignity for All Students Act policy often will appropriately express a district’s obligation to create a safe and supportive environment for all students, including transgender students, as well as its obligation to respond to allegations of harassment, discrimination, and bullying.

New York State Property Tax Cap Upheld in Challenge by Teachers Union...

By The Editorial Team

The New York State Appellate Division for the Third Department recently ruled against the New York State United Teachers union that has been trying to throw out the New York State property tax cap law.  The union argued that the tax cap infringes on the rights of schools to raise tax revenue to pay for programs and staff.   Approved in 2014, the rebate program provides checks to homeowners whose schools and municipalities stay under the tax cap.  In its 4-1 decision, the Appellate Division ruled the tax cap is constitutional.  The union told Gannett’s Albany Bureau that it may likely take their case to the New York State Court of Appeals.

School Districts Continue to Grapple with Addressing Transgender Student Restroom and Locker Room Use...

By James E. Beyer

As transgender bathroom bills around the country garner attention in the national media, a recent judicial decision from the Court of Appeals for the Fourth Circuit in Virginia deserves a closer look. On April 19, 2016, the Fourth Circuit ruled in G.G. v. Gloucester County School Board in favor of a transgender male student whose school had prohibited him from using the boys’ restroom—the restroom that aligned with his gender identity.

As of May 5, 2016, the Gloucester County School Board has sought rehearing by all 15 judges on the Fourth Circuit Court of Appeals.  In accordance with the Federal Rules of Appellate Procedure, the Fourth Circuit issued a stay of the enforcement of the panel’s April 2016 decision remanding the case to District Court.  While it is unclear whether the court will grant the petition for a rehearing, such a procedure could result in further law and guidance on this highly contentious subject.

Previously, a lower court in the Eastern District of Virginia dismissed the student’s claims, which sought “to overturn a long tradition of segregating bathrooms based on biological differences between the sexes,” instead favoring the school board’s interest in protecting an interest in “bodily privacy.” On appeal to the Fourth Circuit—the highest court to date to consider a discrimination claim made by a transgender student—the court vacated the lower court’s decision and directed the court to revisit the student’s request for interim relief to be able to use the bathroom that corresponds with his gender identity.

The court found the Title IX regulations at issue ambiguous with respect to transgender students.  Per the regulations, separate toilet, locker room, and shower facilities on the basis of sex may be provided, but such facilities provided for students of one sex must be comparable to such facilities for students of the other sex. The court noted that the regulation is silent as to how a school should determine whether a transgender student is a male or female for the purpose of access to sex-segregated restrooms. Most importantly, the court deferred to the Department of Education Office of Civil Rights’ (OCR) January 7, 2015 Dear Colleague Letter interpreting the above Title IX regulation, providing that a school generally must treat transgender students consistent with their gender identity when a school separates students or treats them differently on the basis of sex.

Because school districts in New York are located within the jurisdiction of the Court of Appeals for the Second Circuit, the Fourth Circuit’s decision is not binding on New York schools. It could, however, be cited as persuasive law in any future New York case involving transgender student restroom or locker room use. Between federal and state guidance, OCR resolution agreements, court cases, and recent highly-publicized state laws, what is clear is that there are few clear-cut rules for school districts given the absence of black-letter law in New York addressing transgender student issues.

With no New York cases on point, school districts should look first to the New York State Education Department’s July 2015 guidance, which provides SED’s recommendations on how districts should treat transgender and gender-nonconforming students in issues ranging from locker room and restroom use, name and pronoun use, privacy and confidentiality of student records, and other practical topics. The trend is unmistakably toward accommodating transgender students to use the restroom and locker room that corresponds with their gender identity rather than their gender assigned at birth. We will continue to keep districts apprised of any future guidance from SED and any judicial decisions within the jurisdiction of the Second Circuit Court of Appeals.

In the meantime, below are some links for our education readers to peruse for additional information on this hot topic:

New York Conference of Mayors Presents Local Government Achievement Award to City of Yonkers...

By The Editorial Team

The New York Conference of Mayors recognized the City of Yonkers during its annual meeting May 1-3 for its successful consolidation of city and Yonkers Board of Education services. Yonkers Mayor Mike Spano was presented with the NYCOM Local Government Achievement Award by Executive Director Peter Baynes.

“This award is the culmination of two years of collaborative work among our governor, state delegation, city council, board of education trustees, superintendent and labor union leaders,” said Mayor Spano in a press release. “As a result of our consolidation, we prevented drastic cuts to the schools and the city and, now, Yonkers serves as a state model for other cities in New York on how to become a more efficient and effective government.”

Mayor Spano determined a consolidation of services between the Yonkers School District and the City of Yonkers was the most effective way to manage the district’s overestimation of revenues of $55 million that was discovered in 2014.  A first-of-its-kind intermunicipal agreement was passed to merge a duplication of non–academic functions such as finance, legal, communications, human resources and IT, ultimately saving the board of education $9 million and hundreds of jobs.

Foreclosures and its Impacts

By David M. Rothman

On several occasions we have commented on foreclosures and its impacts, as well as zombie homes and potential changes to legislation aimed at addressing the dilapidated state of some such homes. In our post,“Number of Zombie Properties Decreased in 2015,”we noted a RealtyTrac study which concluded a nationwide decrease in zombie homes but noted that New York remained the second highest host of zombie properties (behind only New Jersey).

Recently, the New York State Comptroller issued a report on New York foreclosures. While this report covered the foreclosure process and the time needed to comply with various court initiatives, there are several specific points worth highlighting.

Point 1: Approximately 31 percent of upstate homes in foreclosure started to become or later became vacant during foreclosure.

As we previously noted, the New York State Attorney General has proposed legislation which would, among other things, require the maintenance of properties during foreclosure or face fines.

Point 2: Approximately eight percent of downstate homes in foreclosure started to become or later became vacant during foreclosure.

A recent article noted that Westchester County, in the Lower Hudson Valley, has seen a decrease of almost 27 percent in foreclosure filings but an increase in judgements of foreclosures of eight percent.  Perhaps this is due to rising real property values which may allow for refinancing by the homeowner, perhaps the effects of the “Great Recession” are wearing off resulting in fewer loan delinquencies. Rising home values may also explain the discrepancy in the percentage of vacant homes as a home which is not “under water” may remain unaffordable to the owner but the cost of finding another property or family with which to live may be financially more difficult.

Point 3: Local governments may not fully recover costs associated with foreclosures, including code enforcement and delinquent taxes as well as special district charges.   

While many municipalities have “tacked on” such costs to tax bills, the recovery of those fees may still take more than one year between being incurred by local government and ultimately added to a tax bill, presuming of course the tax bill is paid by a lender. Those properties which have owners who have fallen on hard times but aren’t in the foreclosure process will take at least 21 months for recovery under the In Rem foreclosure process.

Point 4: Foreclosures result in lower values of surrounding properties due to, among other things, a lack of maintenance which results in lower property values. According to one study, a foreclosure depresses neighboring home values by one percent for each nearby property.

Point 5: Lower values, and/or lower resale values, in turn may lead to additional shrinking tax bases. For example, the property tax base shrank in the Mid-Hudson region and Long Island for the period 2008 through 2013.

Point 6: While the cost of servicing performing loans is low, the cost of servicing a non-performing loan is, on average, 15 times higher with costs continuing to rise.

Point 7: Some studies note a higher crime rate in neighborhoods with high foreclosure rates, versus similar neighborhoods of perhaps as much as 6.7 percent greater criminal activity. 

U.S. Supreme Court Ruling Expands Public Employers’ Liability under the First Amendment...

By Daniel J. Moore and Kyle W. Sturgess

A recent decision by the U. S. Supreme Court in the case of a police officer, who was demoted for what his superiors mistakenly thought was a free-speech exercise, may expand public employers’ liability under the First Amendment—by focusing on the motivations behind an employer’s actions toward its employees, rather than on whether employees have actually exercised their First Amendment rights.

In Heffernan v. City of Paterson (decision text here), the Supreme Court was confronted with an unusual question: whether a public employee could sue his employer over First Amendment rights that he had not actually exercised. The plaintiff, Jeffrey Heffernan, was a police officer for the city of Paterson, New Jersey during a 2005 mayoral election between incumbent mayor Jose Torres, and challenger Lawrence Spagnola.  Paterson’s chief of police was a Torres appointee, as was Heffernan’s immediate supervisor. Heffernan, meanwhile, was a friend of the challenger, Spagnola.

At some point during the campaign, Heffernan stopped at a Spagnola campaign office, to pick up a large campaign lawn sign for his mother. While picking up the sign, he had a conversation with some Spagnola campaign staff. Fellow police officers who saw Heffernan at the campaign office (campaign sign in hand) spread word to Heffernan’s supervisor and the chief of police, who demoted Heffernan the next day from detective to patrol officer—for what they thought was his “overt involvement” in the Spagnola campaign.

Heffernan sued the city for what he claimed was a violation of his First Amendment rights to freedom of speech and freedom of association. However, both the federal district court that heard his case, and the federal Circuit Court of Appeals that reviewed Heffernan’s appeal, found that when Heffernan picked up the campaign sign for his mother and made small talk with some Spagnola campaign officials, he had had no intention of communicating a political message, or “associating” himself with the Spagnola campaign; he was simply doing a favor for his mother. As a result, Heffernan had not actually exercised his First Amendment rights—even though Heffernan’s superiors thought he had, and demoted him for it. In short, what would have been a viable claim for First Amendment retaliation against the city was dismissed, because the courts believed such a claim depended on Heffernan’s actions, not his employer’s motivation.

The Supreme Court overturned the Circuit Court of Appeals’ decision. In its opinion, the court examined whether a First Amendment retaliation claim required a public employee to actually exercise his or her rights, or whether it was enough that an employer believed he or she had done so. After reviewing its own First Amendment cases, the court concluded that: “the government’s reasons for demoting Heffernan is what counts here. When an employer demotes an employee out of a desire to prevent the employee from engaging in political activity that the First Amendment protects, the employee is entitled to challenge that unlawful action…even if, as here, the employer makes a factual mistake about the employee’s behavior.”

The case reaffirms the need for public employers to use caution when disciplining employees and ensures that—if their motivations are, in fact, retaliatory—these employers will not be able to fall back on the defense that an employee did not actually engage in First Amendment-protected behavior. (New York’s private-sector employees do not enjoy First Amendment protections, but private-sector employers in New York should consider whether the state’s “recreational activities” law—which, among other things, protects an employee’s right to participate in “political activities”—might have the same effect as the Heffernan decision.)

Non-Hotel Rentals in New York are Surging...

By David M. Rothman

We have commented previously on the surge of AirBnB and other non-hotel rental service providers in New York state: “Municipalities Wrestle with the Challenges of Non-Hotel Rentals” and “Hotel Tax, Non-Hotel Rentals and the Emergence of the Sharing Company.” Those posts included stories of some municipalities suing Airbnb for unpaid hotel taxes as well as ordinances aimed at regulating this market. A recent report from AirBnB noted that nearly 100,000 visitors came to the Lower Hudson Valley and booked their stays through AirBnB.

According to the report, the average stay was just over one week (7.7 days) generating $2 million for the hosts in Westchester County. While AirBnB states this money allows for additional local spending – potentially additional money for the traveler to spend in local stores or for the host to spend improving or maintaining their property – others in the hotel industry believe it is a disruption to the market and yet others such as local governments may see fewer hotel taxes collected. As 28 percent of local revenue comes from sales tax including hotel occupancy charges, $2 million of hotel occupancy charges if otherwise uncollected by the host or AirBnB may add up quickly in lost revenue to the municipalities of the Lower Hudson Valley.

Given the proximity to New York City this trend will likely continue in the Lower Hudson Valley. Other tourist destinations and/or areas surrounding major population centers within the state may also see continued increases in the use of AirBnB, and its competitors potentially resulting in continued declines in hotel occupancy receipts.

© 2011-2016 Harris Beach PLLC. Attorney Advertising. Prior results do not guarantee a similar outcome.