North Little Rock School District officials are considering their options in paying nearly $900,000 to Pulaski County Special schools after an insurance claim submitted to cover the payments was rejected.
The school district, already cutting services and personnel to accommodate construction bonds and a loss in state desegregation money, has been on the hook for about $1.1 million after it erroneously received that amount through incorrect property tax bills. The error occurred after the Pulaski County assessor's office placed about 400 homes and businesses in the wrong school tax district.
That amount of money is what the Pulaski County Special School District should have received that instead went to the North Little Rock School District from 2009-13.
North Little Rock has a higher millage rate for schools, made even higher in 2012 after voters approved an increase for the district to pay for bonds to rebuild all of its schools. A mill is one-tenth of 1 cent. Millage rates vary depending on the area of each county. To determine how much is collected in tax dollars, 20 percent of a property's assessed value is multiplied by that area's millage rate. The North Little Rock School District millage is now 48.3, and the Pulaski County Special district's is 40.7.
Denise Drennan, chief financial officer in the North Little Rock School District, said the district has already entered an agreement with Pulaski County Special schools to pay annual installments every Dec. 1 for the next five years. If the district pays the full $1.1 million, it will be done with cuts at the same time district officials are reducing the budget by as much as $7.6 million for the loss in desegregation money by 2018 and $8.3 million in operating costs to pay its bonds in the coming years.
The North Little Rock School District paid Pulaski County Special School District $128,000 on Dec. 1 for the first of its annual payments. That same month, the district sent a demand letter to Pulaski County, asking county officials to submit an insurance claim to cover the cost of the error to the county's risk management agency, Central Arkansas Risk Management Agency.
Pulaski County Attorney Amanda Mitchell forwarded the demand letter to the agency, but in January, the agency's attorney argued that it was not an insurance company, and that errors and omissions coverage did not exist.
"Through insurance, you are transferring your risk to another company," said Timothy Miles, administrator for Central Arkansas Risk Management Agency. He said the agency was more of a "risk-sharing pool" for the government entities that pay into it for coverage that spreads costs and risks in the event of a major accident or disaster.
"I understand the position that CARMA has taken ... but that is not the way the county has represented it," said Steve Jones, attorney for the North Little Rock School District. He said the district is considering taking legal action to get a determination on whether the agency is an insurance agency and what its relationship is with Pulaski County.
"Of course they don't want to cover it," Jones said. "The truth of the matter is most insurance companies want to get premiums, not pay claims. You don't make money by paying claims."
Miles said the agency doesn't aim to make a profit and that it doesn't have agents selling coverage, either.
Pulaski County Assessor Janet Troutman Ward said she told the school district that the assessor's office had coverage with Central Arkansas Risk Management Agency and that she had always believed it was insurance.
"I thought that's what we were paying [for]," she said. "If I was wrong, I was wrong."
The assessor's office is to pay $17,308 in 2015 for "risk management," more than most other departments except for public works, which is to pay $130,000.
Troutman Ward said the payments have been made in the event of lawsuits against county agencies, for example, that the Central Arkansas Risk Management Agency would handle. She said she believed the county's coverage would extend to situations like the tax error, too.
"In my heart I hoped there was something we could do to help them," Troutman Ward said. "I hope it comes to a good resolution that everyone can live with."
NW News on 02/16/2015