Court Decision Annulling the Repeal of the “County Guarantee”



By email dated February 27, 2013, we advised you of the Appellate Division, Second Department’s February 27, 2013 decision annulling, as unconstitutional, Nassau County’s attempt to repeal the County Guarantee through its enactment of Local Law 18. That Law became effective with the Tax Rolls certified by Nassau County on April 2, 2012. It made you potentially liable for tax refunds granted in tax certiorari proceedings challenging the 2012-2013 school taxes.

This memo explores both the legal effects of the Appellate Division’s decision, as well as its budgetary implications for the 2013-2014 school year.

Does the Appellate Division’s decision fully and finally determine the County Guarantee Litigation?

No, the Appellate Division decision does not constitute a final determination of the litigation because, although the County does not have an appeal as of right to the New York State Court of Appeals, it may petition both the Appellate Division and the Court of Appeals for permission to have its appeal heard by the Court of Appeals. The County has until April 4, 2013 to do so. If leave is granted, then the Court of Appeals will determine the County’s appeal and affirm, reverse or modify the Appellate Division’s decision, thus ending the litigation. The Court of Appeals only hears 7% to 8% of the cases presented to it. If the County fails to seek leave to appeal by April 4, or if leave to appeal is ultimately denied, then the Appellate Division decision will become final and binding.

What is the effect of the Appellate Division’s Decision while the County seeks Court of Appeals review?

The Decision is enforceable unless the County is able to convince the Appellate Division or Court of Appeals to maintain the status quo as it existed before the Appellate Division ruled through the issuance of a stay. This would allow the County to charge back refunds awarded in tax certiorari proceedings during the pendency of the appeal. We believe that there is little chance that the County will be successful in procuring a stay pending appeal if it tries to do so.

If a stay of the Appellate Division’s Decision is not granted, can you establish or continue to maintain a Tax Certiorari Reserve Fund for liabilities rising from 2012-2013 and 2013- 2014 tax certiorari petitions?

Yes. Education Law 3651 (1-a) authorizes the establishment by a school district of a reserve which “might reasonably be deemed necessary to meet anticipated judgments and claims” arising from tax certiorari proceedings. Prior to the enactment of Local Law 18, Nassau County School Districts were not permitted to establish Tax Certiorari Reserve Funds because the County Guarantee made it unreasonable to believe that it would be necessary to reserve for anticipated tax certiorari judgment and claims. With the enactment of Local Law 18, and beginning with the 2012-2013 school taxes, Nassau County School Districts were subject to the County’s charge back and, thus, reasonably deem it necessary to establish Tax Certiorari Reserve Funds to meet anticipated tax certiorari judgments and claims.

All indications are that Nassau County will seek leave to appeal the Appellate Division’s decision to the Court of Appeals. Thus, the possibility exists that the decision could be reversed and you could be liable for tax certiorari refunds beginning with petitions filed for the 2012-2013 school year. In light of this continuing potential liabilit¡ we believe that the establishment and continuance of Tax Certiorari Reserve Funds are reasonably necessary to protect the public fisc. A School District may prudently determine that the risk of not having sufficient funds available to fund tax certiorari refunds in the event of a reversal by the Court of Appeals warrants the use of Tax Certiorari Reserve Funds. Prudence would likewise dictate that 2013-2014 budgetary planning in some way take into account the possibility of the Court of Appeals reinstating the County Guarantee Repeal provisions of Local Law 18.


In conclusion, we recommend that you proceed as follows:

Wait to see if the County seeks leave to appeal to the Court of Appeals by the April 4, 2013 deadline. If, as anticipated, the County does so, we recommend that you continue to take budgetary precautions such as establishing or continuing Tax Certiorari Reserve Funds for the 2012-2013 and 2013-2014 tax years. If the County does not seek leave to appeal in a timely manner, or there comes a time when the County’s application for leave to appeal has been finally denied, then the Appellate Division’s decision becomes final and you may proceed as you did prior to the enactment of Local Law 18 with the full protection of the County Guarantee. Monies reserved for tax certiorari purposes should then be transferred to the general fund.

We will continue to keep you fully apprised of developments in this litigation. If you have any questions about this memorandum or related issues, please do not hesitate to contact us.


© Lamb & Barnosky, LLP, 2013