New Cybersecurity Regulations Proposed for the Banking and Insurance Industries...

By John Forbush

Concerns over protecting the technology and computer networks that are critical to the U.S. economy and national security are ever-present in the minds of government officials and other policymakers. However, as many of these networks are privately owned and operated, government mandates to protect these networks have been the exception – until now. New cybersecurity regulations for the banking and insurance industries have been proposed by the New York State Department of Financial Services (DFS), entitled Cybersecurity Requirements for Financial Services Companies.

These proposed regulations, which would become effective January 1, 2017 and are explained in our in-depth Legal Alert, require covered financial institutions to implement specified cybersecurity programs and practices aimed at protecting confidential information, as well as information technology systems themselves, from cyberattacks. Beginning on September 28, the proposed regulations will be open for a 45-day public comment period.

These regulations, along with the recent appointment of a Chief Privacy Officer for New York’s school system, points to the increasing focus on cybersecurity in New York, as well as the increasing role government may play in fostering cybersecurity best-practices in the private sector.

Wyandanch Rising Helps Revitalize One of Long Island’s Poorest Communities...

By Thomas J. Garry

Wyandanch, part of the Town of Babylon on Long Island, had long struggled with generating economic growth and development. Wyandanch was known as one of Long Island’s poorest communities, even being identified by a Suffolk County Planning Department report as the most economically distressed community on Long Island.

“Wyandanch Rising” began in 2003, and brought the Town of Babylon together with other local community organizations and citizens to develop solutions to the various economic problems facing Wyandanch. The Town of Babylon adopted the Wyandanch Rising plan in 2004, and the revitalization efforts began immediately.

Today, the Wyandanch Rising project has become a $500 million redevelopment effort, which is focused on transit-oriented development. Harris Beach is proud to have helped make Wyandanch Rising a reality by serving as counsel to the Town of Babylon on the project, and we continue to do so today. Wyandanch Rising involves a unique use of development corporations, the adoption of a form-based zoning code, issuance of tax-exempt bonds and low income housing tax credits (LIHTC), as well as agreements between the Town and Long Island Railroad (LIRR/MTA) concerning the swap of municipal and MTA-owned land in compliance with PAAA and PARA.

The project was recently featured on WLIW21 as part of a special report on Long Island Business.

 

School Water Outlets May Need to be Immediately Tested for Lead...

By Douglas Gerhardt

The new mandate requiring that all school water outlets in New York undergo lead contamination testing was signed into law by Governor Cuomo in early September. These new lead testing requirements were also accompanied by emergency regulations, in which schools may need to test water outlets for lead contamination as soon as September 30. There are also specific reporting requirements which schools and school districts will need to follow.

To help schools and school districts understand these new lead testing regulations, Harris Beach has released an in-depth Legal Alert on the issue. We have also been following this issue closely on the NYMuniblog, and will keep you informed of any new developments, as we expect more information to be released as the testing deadline nears.

Drone Licensing Sees the Light of Day

By David M. Rothman

Here at the NYMuniBlog we have frequently commented on the regulatory and legal issues confronting the use of drones.  Recently published articles in various newspapers have highlighted the continuing uses of drones for both the private sector as well as public sector (police capabilities) uses. In addition, newly released Federal Aviation Administration (FAA) drone licensing regulations have many industry insiders’ predicting an increase in the commercial use of drones.

 

Private Use

It was  reported that over 3,000 people signed up to take the first drone pilot test which was given at the end of August, with the FAA estimating that the number of drone operators could exceed the 171,000 private pilots within the first year.  Demand for the license is so intense that reportedly the University of the District of Columbia Community College set aside 100 slots for drone testing as compared to the slots set aside for the four people who take an FAA exam there every month.

Licensed operators will be allowed to fly drones on a for-hire basis during daylight hours at altitudes under 400 feet and only when the drone is operated within eyesight of the licensed operator, in addition to other restrictions and rules included in the FAA’s Part 107 regulations.  Hobbyists who operate a drone for personal enjoyment are not subject to these restrictions.

Among the early applicants for licensing are expected to be media companies, telecommunications companies, as well as construction, agriculture producers and electrical power companies.

 

Public Use

It is not only commercial users and citizens who continue to explore the use of drones but also municipalities and public entities, who are evaluating drone technology for crowd control, photographing traffic accidents, hostage situations and firefighting.  Municipalities throughout New York state are reported to have purchased, or budgeted to purchase drones while others are researching uses and considering acquiring drones for municipal use.

For municipalities considering drone technology, the FAA advises that municipalities follow the existing small unmanned aircraft system rule, or there is a “Certificate of Waiver or Authorization” for government entities seeking to fly a drone.  Examples of such uses include law enforcement, search and rescue, and disaster relief.

Texas Judge Enjoins and Prohibits Enforcement of Obama Administration’s Transgender Bathroom Guidelines...

By James Beyer

Last week, U.S. District Judge Reed O’Connor from the Northern District of Texas issued a preliminary injunction temporarily blocking the Obama administration’s guidelines directing public schools to permit transgender students to use bathrooms and locker rooms consistent with the gender with which they identify.  The Texas Attorney General, who initiated the lawsuit, was joined by twelve other states and two school districts seeking to halt the transgender guidelines that made headlines back in May.  Those guidelines, contained in a joint Department of Education and Department of Justice Dear Colleague Letter, were previously discussed on the NYMuniblog.

Judge O’Connor wrote in his ruling that not granting an injunction would put states “in the position of either maintaining their current policies in the face of the federal government’s view that they are violating the law, or changing them to comply with the guidelines and cede their authority over this issue.”  The injunction therefore effectively stops the federal government from enforcing the guidelines on a purportedly nationwide basis.  In granting the injunction, the court determined that the government bypassed the notice and comment process required for issuing guidelines and directives like those contained in the Dear Colleague Letter because the guidelines are, in practice, actual legislative rules which set clear legal standards.  The court likewise determined that the plain meaning of the term “sex” within Title IX of the Education Amendments of 1972 and its corresponding regulations means “the biological and anatomical differences between male and female students as determined at their birth.” The government’s attempt to interpret the term “sex” differently from the way it has been interpreted since the law and regulations’ enactment causes more confusion for educational institutions, and therefore is not entitled to deference.

Regarding the purported nationwide injunction, there is at least some precedent, cited by the court, standing for the proposition that the scope of injunctive relief is dictated by the extent of the violation established rather than by the geographical extent of the plaintiff class.  The violation is arguably nationwide, so the injunction arguably applies nationwide.  However, the court noted that the Title IX regulations providing for separate facilities are permissive, so states that authorize schools to define sex to include gender identity for purposes of providing separate restroom, locker room, showers, and other intimate facilities will not be impacted by it.  Those states that do not want to be covered by the injunction can avoid being covered by it by state law that recognizes the permissive nature of the regulations.  The injunction therefore only applies to those states whose laws direct separate restrooms, locker rooms, and the like.  In those states, the government is enjoined from enforcing the federal transgender guidelines, and from initiating, continuing, or concluding any investigation based on the government’s interpretation that the definition of sex includes gender identity in Title IX’s prohibition against discrimination on the basis of sex.

As the NYMuniblog has mentioned in a prior post when the federal guidelines were released in May, those guidelines—and now the preliminary injunction—do little in terms of affecting New York school districts.  Districts should continue to look to the State Education Department’s July 2015 guidance, which provides similar and consistent guidance in many of the areas discussed in the federal guidance.  Schools that do not have a transgender accommodation policy still have the responsibility to create a safe and supportive environment for transgender students—and all students—as well as a responsibility to respond to allegations of harassment, discrimination and bullying pursuant to the Dignity for All Students Act.

School Districts Need to be Proactive in Testing for Lead in Water Outlets...

By Jim Beyer

On August 29, 2016, the State Education Department (“SED”) and State Department of Health (“DOH”) jointly released a field memorandum discussing required testing, reporting, and remediating lead in drinking water in schools.  The purpose of the field memo is to notify school districts that they need to be proactive in testing for lead in water outlets, and that they should prepare to immediately test all potable water outlets at schools buildings that are, or could be, used for drinking water, unless the building’s plumbing and outlets have been determined to be lead-free in accordance with federal standards.

The New York State Legislature recently passed a bill, A.10740/S. 8158, that would require all school districts and BOCES to test all potable water outlets for lead contamination, to remediate contamination where found, and to notify parents of children—as well as the public—of the lead test results.  While the bill remains unsigned, the DOH, in consultation with SED, is anticipating the law’s enactment by preparing to publish and implement regulations corresponding to the new law, which would cover issues related to monitoring by schools and their subsequent response to lead contamination issues, public notification, reporting, and waivers that may be granted in certain circumstances.

Schools should proactively begin testing in accordance with federal standards, which were previously discussed in our lead testing legal alert.  If lead contamination is detected, SED and DOH suggest that schools should be prepared to immediately discontinue the use of that water outlet, make arrangements to secure water from an alternative source, remediate the water outlet, and notify parents and the public of the lead contamination and the steps the school has taken to resolve the issue.  The full field memorandum on lead testing of water in New York state schools can be accessed here.

New York State Education Department Appoints Chief Privacy Officer...

By Susan E. Fine

On August 24, 2016, New York State Education Department (SED) announced the appointment of Temitope Akinyemi as its Chief Privacy Officer (CPO), pointing to the likelihood that new privacy mandates and guidelines for both school districts and BOCES will be announced during this school year. The Chief Privacy Officer position has been vacant since its creation pursuant to Education Law § 2-d(2) in 2014. According to the Department, Ms. Akinyemi previously served as the privacy officer for the state’s Office of Information Technology Services.  Her appointment is effective September 22, 2016.

Education Law § 2-d(2) governs student, teacher and principal data privacy and security, and encompasses a broad range of policies and practices SED and school districts need to implement to prevent the unauthorized release of information.  The law was enacted in response to the controversy over the State’s planned data dashboard and the role of InBloom.  The Chief Privacy Officer is responsible to promote the implementation of sound practices for the privacy and security of student, teacher and principal data, assist the Commissioner and educational agencies in meeting their obligations in this regard, and establish protocols for possible data breaches.

Many of the provisions of the statute were not carried out over the last two years because no CPO had been appointed.  Most critically, the statute provides for development of implementing regulations regarding the following: the Parents’ Bill of Rights for Data Privacy and Security (Parents’ Bill of Rights); standards for school policies on data security and privacy; and enforcement of standards with regard to third-party contractors.

Presently, the Parents’ Bill of Rights must state that:

  1. A student’s personally identifiable information cannot be sold or released for any commercial purposes;
  2. Parents have the right to inspect and review their child’s education records;
  3. State and federal laws protect the confidentiality of personally identifiable information, and safeguards in accord with industry standards such as encryption, firewalls, and password protection, must be in place when data is transferred or stored;
  4. A complete list of student data elements collected by the State is available for public review, and must include the website and/or mailing address where a complete list of student data elements collected by the State is available; and
  5. Parents have the right to have complaints about possible breaches of student data addressed, and the contact information of the official to whom complaints may be directed.

Regulations on the Parents’ Bill of Rights will likely add additional elements, which would in turn require school districts to update their own documents.

Additionally, policies on data security and privacy are mandated by the statute, and will have to be developed by all school districts once new regulations become effective.  The policies must cover, at minimum, data privacy and security protections and application of these requirements to third-party contractors.  While the CPO will be involved in developing model policies, school districts need to ensure that their policies meet their own unique needs while complying with the law.

In addition, when school districts contract with a third party who will receive student data or teacher or principal data, the Parents’ Bill of Rights must be supplemented with additional information for each such contract.  That information includes, among other things, the purposes for which the data will be used, what happens to the data when the contract expires, and what security measures will be taken to protect the data.  Contractors are also expected to sign a copy of the District’s Parents’ Bill of Rights.  The statute also gives SED the authority to penalize third party contractors for the unauthorized release of student, teacher or principal data.

Due to some ambiguity in the statute, many school districts delayed effectuating this component of the law until implementing regulations are adopted specifying additional elements to the Parents’ Bill of Rights and elaborating on data privacy and security requirements.  In any case, third party contracts with providers who receive student, teacher or principal data will need to be reviewed once new regulations are adopted, either to comply with the law for those school districts that delayed doing so or to ensure continued compliance with the eventual regulatory mandates.  There is no way to be certain how long it will take after the CPO assumes her duties before regulations are drafted and implemented.

Regulations will also address a new mandated notice regarding parents’ right to request student data, ensuring the security of student data when it is transmitted, and the time period within which school districts must respond to such requests.

The appointment of SED’s CPO will ultimately complete, both for SED and educational agencies around the state, the implementation of the privacy and security requirements under the Education Law.  How SED, the Board of Regents and the CPO deal with the implementation of this challenging statutory mandate, that stemmed not from any new educational need, but rather from the backlash over data that was to have been received by InBloom, will be interesting to see.  We will continue to follow the developments in the weeks and months ahead, as these data and privacy requirements will impact many aspects of school district operations.

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 RestoreNY@esd.ny.gov.

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 rsvp@hbsolutions.com

 

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.

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