Bath may pay West Bath $1.2M to settle RSU 1 budget lawsuit

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WEST BATH — Five months after a Superior Court justice ruled that the town overpaid its share of the Regional School Unit 1 budget by $1.9 million over four years, the Bath City Council will consider whether to approve settling the civil suit for $1.2 million.

The Bath City Council will meet Dec. 3 to vote on the proposed settlement, which was presented to Sagadahoc County Superior Court Justice Andrew Horton on Monday, less than two weeks before the lawsuit was scheduled for trial.

Bath City Manager Bill Giroux confirmed the proposed settlement amount on Wednesday. As a result of West Bath’s overpayment to the district, Bath underpaid the district $1.6 million during the same four years, Giroux said. The settlement would require the city to pay $1.2 million to West Bath.

“What we shot for was a fair deal for both sides,” he said. “Once Judge Horton ruled earlier this year that the RSU had improperly applied the funding formula and that West Bath had overpaid by about $1.9 million, it made sense for us to explore a settlement, especially with a pending court case where it essentially was going to be ‘winner take all.’ It also seemed like the fair thing to do.”

West Bath Town Administrator Adam Garland declined to discuss the proposed settlement on Tuesday. A phone call to RSU 1 Superintendent Patrick Manuel on Tuesday was not returned.

On Monday, attorneys for the three parties presented Horton with “the key terms of the proposed settlement,” which is recommended by Bath city administration and legal counsel, according to court documents.

The suit was scheduled for trial on Dec. 1 in Bath Superior Court, and was expected to last five days.

On Monday, Horton postponed the trial, noting in a court filing that if the settlement is not approved by Bath’s elected officials, the trial would likely be rescheduled for January or February.

In 2012, West Bath sued RSU 1 – along with school district members Bath, Woolwich and Arrowsic – after town officials said the RSU had used the wrong cost-sharing formula since 2008. Phippsburg, also a member of RSU 1, was not named in the suit.

Horton ruled in June that the Bath-area regional school system overcharged West Bath by more than $1.9 million over a four-year period.

But Horton stopped short of awarding West Bath repayment, and left that and other issues to be decided at a trial.

In July, Horton ruled that West Bath could not recover funds directly from the towns of Arrowsic or Woolwich.

The parties then participated in court-ordered mediation, which was unsuccessful.

Under the terms of the proposed settlement, the insurance company for RSU 1 would pay $50,000, Giroux said, in part, because the RSU is entirely funded by the five municipalities and could only raise funds by charging the towns.

The case is rooted in the 2008 decision by those who created the regional school district to use a standard state cost-sharing formula for determining its member communities’ shares of all district expenses recognized by the state as so-called essential programs and services – about 90 percent of the regional school district’s annual budget.

That standard state cost-sharing formula is based on the percentage of pupils in the district from each member community.

However, West Bath argued in its lawsuit that the RSU should have applied a local cost-sharing formula that equally weighed member communities’ overall populations, property valuations and student numbers when dividing up EPS costs among the four municipalities.

That local formula was included in LD 910, a law passed by the state Legislature specifically for the formation of RSU 1. Attorney William Stockmeyer, who helped the RSU draft the language of LD 910, also later urged district administrators in a letter to stick with the three-pronged cost-sharing plan outlined in LD 910, according to court documents.

However, Horton wrote that the RSU instead used the state cost-sharing formula for the EPS costs, apparently following the advice of the city of Bath’s attorney.

The justice declared in June that the RSU sided with the wrong attorney in the case.

Giroux said that if Bath city councilors vote to approve the settlement, they would then decide each year how to pay it back. The city’s fund balance is currently $11 million, Giroux said.

The proposed settlement will be considered just before the residents of West Bath go to the polls in January to decide whether to withdraw from Regional School Unit 1.

West Bath residents voted 185-64 in January to initiate the process of withdrawing from RSU 1. In September, the state education commissioner agreed to a withdrawal agreement approved unanimously by the RSU 1 board. Residents are slated to vote on the withdrawal on Jan. 13.

Giroux said Wednesday that regardless of West Bath’s decision on withdrawal, the city would propose to change the make-up of the School Board.

“The fact that the makeup of the RSU 1 board is such that nobody represents (just) one community is something Bath didn’t feel comfortable with out of the gate,” he said.

BDN staff reporter Seth Koenig contributed to this report.