On appeal from a final decision of the Commissioner of Education, Board of Review.
The opinion of the court was delivered by: Winkelstein, P.J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Before Judges Winkelstein, Fuentes and Chambers.
On May 10, 2007, the Borough of Oradell filed a petition for authorization to conduct a referendum to withdraw from the River Dell Regional School District (the District) in Bergen County. The District consists of two municipalities, Oradell and the Borough of River Edge. Petitioner's withdrawal would dissolve the District.
Petitioner premised its withdrawal on the creation of mutual "send-receive" agreements. River Edge, the River Edge Board of Education and the District each objected to petitioner's request. A Board of Review (the Board) voted to deny the petition on October 16, 2007. In January 2008, the Board amplified its decision. The Board's determination was primarily informed by its finding that dissolution of the District would produce an excessive debt burden for the constituent school districts. Petitioner appeals, and we affirm substantially for the reasons expressed by the Board. In doing so, we conclude that a school district's excessive debt burden may be determined by factors in addition to a district's borrowing margin.
The District was formed in 1956. Each municipality has a board of education that provides for the education of children in kindergarten through sixth grade (K-6). River Dell Middle School (the middle school), located in River Edge, educates children in the District in grades seven and eight; and River Dell High School (the high school), located in Oradell, educates students in the District in grades nine through twelve. In 2003, voters in the two municipalities passed a referendum to renovate the high school at a cost of $22 million, to be repaid over twenty years. In 2005, River Edge approved an $18.8 million renovation to its two elementary schools.
Petitioner has fewer students in the District than does River Edge. Nevertheless, because costs for the District are apportioned between the municipalities according to the equalized value of real estate in each municipality, and because petitioner has a higher equalized value of real estate than River Edge, petitioner pays a higher percentage of the District's expenses. Apportioning tax levies on a per-pupil basis, for the 2007-2008 school year River Edge paid roughly $12,200 per student while petitioner paid $17,800 per student.
At petitioner's behest, in December 2006, Statistical Forecasting, LLC (Statistical) and James L. Kirtland, CPA, prepared a feasibility study (the feasibility study) to determine the educational and financial ramifications of petitioner's withdrawal from the District. The feasibility study concluded that dissolution was feasible and that petitioner was paying a disproportionate share of the District's costs. For example, the feasibility study found that for fiscal year 2005, the equalized value of real estate for petitioner was $1.7 billion and for River Edge it was $1.6 billion. As such, petitioner was paying 52% of the costs of the District while River Edge was paying only 48%.
The feasibility study called for elimination of the District with the two municipalities' boards of education assuming responsibility for education of all students. This could only be accomplished if the municipalities entered into mutual "send-receive" agreements. Under such agreements, the seventh and eighth graders from Oradell would be sent to the middle school in River Edge, and the high school students from River Edge would be educated in Oradell, thus providing a K-12 education for the children of both municipalities. According to this plan, the children and teachers in both municipalities would remain in the same schools. River Edge would become a K-8 district, while petitioner would become a K-6/9-12 district. The feasibility study concluded that the dissolution of the District would result in a savings to petitioner of more than $2 million per year.
In April 2007, Dr. Aaron Graham, the Bergen County Superintendent of Schools (the Superintendent), issued a report listing four advantages and eight disadvantages of petitioner's withdrawing from the District. The Superintendent pointed out that N.J.S.A. 18A:13-23.3 provides a statutory mechanism for changing the apportionment of costs, which could provide a solution to petitioner's problem. He also expressed that the equalized value of real estate in the two municipalities was nearly equivalent and that petitioner's cost per pupil was higher because the District had fewer students residing in Oradell than in River Edge. He concluded that withdrawal would be disruptive to students and costly to taxpayers.
In response to a Board request for additional information regarding the debt burden that would result from dissolution, as well as the ability of the two school districts to maintain efficient school systems, River Edge submitted two additional reports. The first report, prepared by Vincent D. Yaniro of VDY Consulting, LLC, discussed the financial aspects of petitioner's withdrawal from the District. Although Yaniro's figures were virtually the same as those contained in petitioner's feasibility study, his conclusions were different. He found that dissolution would present an excessive debt burden to River Edge because petitioner would inherit a completely renovated high school, whereas River Edge would inherit a middle school that had not been renovated since 1968 and required major repairs. Yaniro opined that River Edge would not have the borrowing capacity to fund the estimated $24 million in repairs to the middle school. He based his conclusions on a long range facility plan (LRFP), created in 2005, which detailed the repairs necessary in the middle school.
The second report, prepared by Dr. Karen Lake, a school superintendent and former school principal, discussed the educational impact of dissolution of the District. Dr. Lake concluded that the dissolution would create staffing shortages and would require formation of a new high school administration because petitioner had never administered a high school. Moreover, because River Edge had refused to enter into a "send-receive" relationship with petitioner, Dr. ...