Heaven Forfend!

Auditors probe KJ school financing plan
Cite cost, conflict of interest
By Chris Mckenna
Times Herald-Record
KIRYAS JOEL — State auditors are questioning the decision by the Kiryas Joel School District to lease its new school from a landholding arm of the community's religious school system rather than build it itself.

The lease arrangement could inflate the total cost for taxpayers, and it posed a potential conflict of interest for two school board members who are also officers of the lease-holding organization, the state Comptroller's Office concluded in a report released late Tuesday.

Superintendent Joel Petlin strongly disputes the findings, saying the deal made good financial sense and raised no potential conflicts.

"We were able to build a building that we could afford to move into, without having a big tax increase every year," Petlin said.

At issue is a 44,000-square-foot school built on Bakertown Road to replace a smaller building the district had used since 1989, when it was created to serve handicapped children in the Hasidic community. Some 250 kids go there for classes and therapy, including part-timers and about 40 tuition-paying students from other districts, Petlin said.

Administrators say they initially planned to bond for the new building, but changed course when the cost estimate exceeded $16 million. In 2006, voters approved a 30-year lease that put construction in the landowner's hands.

State auditors estimated that rent, which rises each year with inflation, could total $38 million over 30 years, or about $3 million more than bonding might have cost. And they pointed out the district won't own the building when the lease expires.

Petlin replies that those calculations ignore the $7 million taxpayers could save over the first 14 years, when rent is expected to cost less than bond payments would have. They may also exaggerate the total cost, since inflation so far has been low, he said.

The conflict issue was raised in connection with Harry Polatsek and Simon Kepecs, the president and vice president of Kiryas Joel's board.

Auditors argue the two men should have provided a written disclosure of their interest in UTA of KJ SC Inc., the organization that signed a lease with the district before the new school opened in May 2008. That entity lists Polatsek as president and Kepecs as treasurer.

Petlin contends that no conflict existed because a different organization owned the property when board members chose to pursue a lease in 2006. The land later changed hands.