decided: April 2, 1982.
IN RE: PETITION OF THE BOARD OF SCHOOL DIRECTORS OF THE FORT CHERRY SCHOOL DISTRICT, WASHINGTON COUNTY, PA. FOR AUTHORITY TO LEVY TAX RATES ETC. BOARD OF SCHOOL DIRECTORS OF THE FORT CHERRY SCHOOL DISTRICT, APPELLANT
Appeal from the Order of the Court of Common Pleas of Washington County in case of In Re: Petition of the Board of School Directors of the Fort Cherry School District, Washington County, Pa., for authority to levy tax rates in accord with those prescribed by 72 P.S. § 5453.602 and/or authority to fund unfunded debt in the sum of $250,000.00, No. 52 June Term, 1981 A.D.
Robert T. Crothers, with him Mary Drake Korsmeyer, Peacock, Keller, Yohe, Day & Ecker, for appellant.
No appearance for appellee.
Judges Craig, MacPhail and Doyle, sitting as a panel of three. Opinion by Judge Craig.
[ 65 Pa. Commw. Page 604]
The Board of School Directors of the Fort Cherry School District (district) appeals a Washington County Common Pleas Court decision denying its petition for authorization to issue general obligation bonds or notes based upon the "unfunded debt" provisions of the Local Government Unit Debt Act.*fn1 We affirm.
[ 65 Pa. Commw. Page 605]
Although the district's petition originally alleged that it had a projected unfunded debt for the 1980-81 school year of $171,000 for "current operating expenses then due and owing," the district business manager testified at the June 26, 1981 hearing on its petition that the projected fund deficit had reached $190,378.*fn2
In view of the district's practice of preparing certain annual budget control reports on a cash basis while having its general financial reports prepared on an accrual basis, Judge Rodgers, of the common pleas court, held that the district had "been operating on cash rather than an accrual basis [of accounting]*fn3 at the time of passing its relevant annual budgets and setting its tax levies."
[ 65 Pa. Commw. Page 606]
After summarizing the district's presentation of evidence,*fn4 Judge Rodgers reviewed our decision in
[ 65 Pa. Commw. Page 607]
earned and owing for the school year 1980-81, in an amount in excess of Two Hundred Thousand Dollars ($200,000.00), (T. 101), but this amount was not due until July and August of 1981.
The Local Government Unit Debt Act specifically requires that the obligation not only be owing but be due or be a judgment. . . . The teachers earned their salary during the nine (9) month period from about September 1, 1980 through May, 1981, but their salaries were paid over a twelve (12) month period, ending in August, 1981. Thus, it is clear that the unpaid teachers' salaries owing for 1980-81 fiscal year, which comprise the major claim of unfunded debt, were not due on June 30, 1981. (Emphasis in original.)
62 Wash. Ct. Rep. No. 5, page 28 at 30, 34 (October 1, 1981).
We must agree with Judge Rodgers that the teachers' summer salary amount could not be considered due and owing at the determinative time. Although the teachers had an option to call for payment of their summer-month salary in June, the district did not prove how many teachers, if any, exercised that option, but merely treated the whole amount as an accrued obligation.
Although the common pleas court went on to consider whether the district met the additional requirements for issuance of bonds,*fn5 our affirmance here is
[ 65 Pa. Commw. Page 609]
based upon those terms of 53 P.S. § 6780-209 which establish the first requirement that there must be proof of "obligations" which are "due and owing," Borough of Aliquippa.
With respect to the elements of a debt, a determination of whether it is due and owing on a certain date in a legal sense is necessarily independent of the accounting methods used by a particular local government unit. A uniform application of the Act would be precluded were the accounting basis of the particular petitioner to control eligibility for unfunded debt status. The statute does not provide for the funding of a negative net worth or any other accounting concept of a deficit. It does not deal with accounting concepts at all, but with the legal concept of an "obligation" (or judgment) which is "due and owing."
Because the district here, unlike the borough in the Borough of Aliquippa Appeal, has failed to particularize each "lawful obligation" which makes up the negative fund balance asserted to be an unfunded debt, we cannot determine to what extent the elements of the $190,378 are in fact legally due and owing. See note 4 above. General reference in the record to unpaid obligations to district suppliers, along with the sum for teachers' salaries, are insufficient to sustain a detailed inquiry -- such as we performed in the
[ 65 Pa. Commw. Page 610]
Aliquipa case -- into qualification for unfunded debt status.
Because the district failed to establish the first prerequisite for authority to issue bonds under the Act -- that "the obligations or judgments are indeed unfunded debt," Borough of Aliquippa Appeal, 58 Pa. Commonwealth Ct. at 223, 427 A.2d at 698 -- the common pleas court's denial of the district's petition was proper.
Now, April 2, 1982, the order of the Court of Common Pleas of Washington County, No. 52 June Term, 1981, dated September 8, 1981, is affirmed.