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Ex-W. Chicago school officials may face suit
By Robert Sanchez | Daily Herald Staff
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Published: 6/15/2009 4:10 PM | Updated: 6/15/2009 4:52 PM

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Former West Chicago school board members could be sued for millions of dollars now that a state appellate court has ruled the district improperly transferred roughly $3.8 million more than a decade ago.

The 2nd District Court of Appeals recently sided with a group of property owners who filed a lawsuit against Elementary District 33 after learning the money was spent on a building project.

School districts have the ability to sell bonds to raise money for their working cash funds, which help make up for shortfalls that may occur while paying day-to-day expenses. Voters don't need to approve such a bond sale unless someone mounts a successful petition drive to put the question on a ballot.

However, school districts usually need voter permission to borrow money for construction work.

The appellate court ruled District 33 violated state law in 1998 when it borrowed about $3.8 million for its working cash fund and then, almost immediately, transferred the money to its operation and maintenance fund.

"The district's practice here is not contemplated by statute and is condemned by this court," the appellate court's ruling reads. "The district's actions are clearly an attempt to circumvent limits on the amounts to be levied for O&M."

James Rooney, the Chicago attorney representing 214 taxpayers who sued District 33, said the money was used for building improvements.

"It was something they wanted to do," Rooney said. "But it was something they didn't want to use bonding power where they had to go to referendum because they might lose."

But Heidi Katz, the lawyer who represents District 33, said the school board wasn't trying to circumvent voters.

"They were trying to meet some fairly painful needs in their district," she said.

Until the appellate court issued its ruling, Katz said, it wasn't clear the kind of transfer District 33 made was improper.

"This is an issue of construing a rather complicated statute that could be read in different ways," she said. "The court didn't agree with our reading."

Since interpretation of the law previously was unclear, District 33 - along with other districts across the state - thought it was legal to use money from the working cash fund to pay for building upgrades.

At the time the $3.8 million was spent, Katz said District 33's schools were in desperate need of building upgrades and life-safety improvements.

"We're talking about building classroom additions so you don't have 40 kids in a classroom," she said. "That's how this money got spent."

While the appellate court clarified the law, it didn't decide whether the property owners who sued District 33 are entitled to tax refunds from the district. A DuPage County judge will make that decision.

And in what could be a legal longshot, Rooney says he wants to see the $3.8 million repaid to District 33's working cash fund.

To reclaim that money, he's asking the DuPage judge for permission to sue the former school board members who approved the fund transfer. If approved, the existing lawsuit would be amended to also include anyone who advised the school board, including a former superintendent and bond counsel.

"The amended complaint asks for relief against the people who unlawfully diverted the money," Rooney said. "It doesn't mean they are really bad people. I just think they got terrible advice."

Whether the judge agrees remains to be seen. District 33's attorneys have until early July to file arguments against the amendment. Katz said the district plans to "strenuously" oppose Rooney's request.

Katz said she also believes District 33 has a strong argument against the roughly $309,000 in property tax refunds Rooney is seeking for his clients.

Rooney said his hope for the case is that it will deter other school districts from making improper budget transfers. "It will teach them a lesson not to do it," he said.