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CENTRAL DAUPHIN SCHOOL DISTRICT v. COMMONWEALTH PENNSYLVANIA (12/02/81)

decided: December 2, 1981.

CENTRAL DAUPHIN SCHOOL DISTRICT, PETITIONER
v.
COMMONWEALTH OF PENNSYLVANIA, DEPARTMENT OF EDUCATION, RESPONDENT



Appeal from the Order of the Department of Education in case of Central Dauphin School District v. Commonwealth of Pennsylvania, Department of Education, dated October 9, 1980.

COUNSEL

Edward E. Knauss, III, Metzger, Wickersham, Knauss & Erb, for petitioner.

Phillip A. Ayers, Counsel, with him Michael A. Davis, Chief Counsel, for respondent.

Judges Rogers, Williams, Jr. and Palladino, sitting as a panel of three. Opinion by Judge Williams, Jr.

Author: Williams

[ 63 Pa. Commw. Page 49]

This is an appeal by petitioner Central Dauphin School District from an order of the Department of Education dismissing petitioner's complaint.

[ 63 Pa. Commw. Page 50]

During the spring and early summer months of 1979, the School District contemplated a proposed refunding of a major portion of its bonded indebtedness. In connection with the proposed refunding, the School District retained the firm of L. F. Rothschild, Unterberg, and Towbin (Rothschild) as its investment broker and financial adviser. On June 21, 1979 Robert Fowler (Fowler), an agent and employee of Rothschild, and acting for and on behalf of the School District, visited Harold E. Gaughan (Gaughan), an employee of the Department of Education. During this meeting, Fowler requested approval of Rothschild's method of calculating the percentage of reimbursement which the School District would receive from the Commonwealth on the refunding bond issue (hereinafter referred to as the "Rothschild proposal"). At that time, Gaughan indicated to Fowler that the calculations were subject to review and final approval by Gaughan's immediate supervisor, Thomas R. Heslep (Heslep), Chief of the Division of Physical Plant and Construction in the Bureau of Support Services of the Department of Education.

During the afternoon of June 21, 1979, Gaughan contacted Fowler and indicated that the Department would employ the method of calculating the reimbursement percentage reflected in the Rothschild proposal.*fn1 In the evening of the same day, the Board of Directors of the School District contracted with Rothschild for the underwriting of the refunding bonds. Pursuant to the contract, Rothschild was to purchase the bonds in an amount reflecting the calculations submitted to the Department by Fowler.

[ 63 Pa. Commw. Page 51]

On June 22, 1979 the Board of Directors adopted the School District's budget for the ensuing fiscal year, which commenced July 1, 1979. The budget reflected, in part, the amount of debt service required under the Rothschild proposal.

Subsequent to June 22, 1979, Heslep reviewed the Rothschild proposal and determined that the proposal violated School Building Standard 349.20(c),*fn2 in that the fiscal commitment of the Commonwealth was thereby increased.*fn3 In accordance with this determination, Gaughan advised Fowler that, in order to comply with the mandates of 349.20(c), an alternative method of calculating the percentage of reimbursement would be employed by the Department. By letter dated August 1, 1979, Heslep advised the School District of the reimbursement percentage which would be applicable to the refunding bond issue. On August 2, 1979 settlement on the refunding bonds occurred between the School ...


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