Recent Developments Recent Developments Affecting Non-Traditional Affecting Non-Traditional

Revenue Sources for Schools Revenue Sources for Schools

presented bypresented by

Michael L. Dodd, Esq.Michael L. Dodd, Esq.Ferrara, Fiorenza, Larrison, Barrett & Reitz, P.C.Ferrara, Fiorenza, Larrison, Barrett & Reitz, P.C.

East Syracuse, New YorkEast Syracuse, New YorkOctober 5, 2002October 5, 2002

National School Boards Association

Overview

• How Exclusive Vending Contracts are Faring

• Community/Parent Protests

• Developments Related to Other Revenue Sources (Naming Rights, etc.)

• Guidance

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Exclusive Vending Contracts

• Legal Challenges in New York (Commissioner of Education) – Numerous challenges across the state• Parents and would-be contractors

– 11 recently consolidated in 2 cases before Commissioner• Built upon earlier Citizens decision (Nov. 2000)

– All contracts were upheld (with warnings)

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• Legal Claims Asserted– Board lacks enumerated authority to enter into

an exclusive vending contract• Ed. Law grants specific authority

– regulates when soft drinks can be sold– grants specific authority to provide cafeteria and restaurant

services

– Illegal gift of taxpayer property• Proper school purpose (Ed. Law authority)• Fair and adequate consideration (bidding procedures)

Exclusive Vending Contracts

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• Legal Claims Asserted– Selling to non-student groups after school

hours violates State Constitution (use of public property for private gain)• No standing but schools warned not to engage in

this activity or distribution of free products• School personnel cannot participate in solicitation

of orders, distribution of advertising materials or collection of charges for sale of products during school hours

Exclusive Vending Contracts

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• Legal Claims Asserted– Cash advances constitute loans in violation of

State Finance Law• No absolute requirement of repayment at time of

signing

– Board cannot bind future Boards • Annual review and 120-day notice sufficient flexibility

– Large cash advances have a coercive effect on future Boards (to have to repay)• Spread out over 10 years = OK but exercise care

Exclusive Vending Contracts

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• Legal Claims Asserted– Violated bidding requirements in New York

General Municipal Law• No purchase of anything (much less $10,000)

• But must negotiate “fair and reasonable” deal

Exclusive Vending Contracts

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• Legal Claims Asserted BUT Undecided– Constitutional right to engage in free

competition• Does an exclusive contract, procured through

public competitive bidding process, create a limited public forum from the sale of products in school?

• May competitors assert constitutional right to equal access to the rewards obtained by highest bidder?

Exclusive Vending Contracts

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• Recent Trends in Vending Contracts Nationally– Revenue guarantees are lower • approx. $3-6/per student vs. approx. $10-12/per student

– Commission rates are slightly higher• approx. 35-40% vs. approx. 25-30%

– Willingness to share proceeds vs. fees for exclusivity• downturn in economy, protests, restrictions, etc.

Exclusive Vending Contracts

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• Other developments– Districts looking into “District Vending

Operations” as part of food service operations (distributor)• Expenses of district-sponsored operations are

relatively low and profit margins are still high

– Districts adopting “equal nutrition” policies– Coca-Cola appears to be discouraging use of

consultants

Exclusive Vending Contracts

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• Center for Analysis of Commercialism in Education (University of Wisconsin-Milwaukee)

• Citizens’ Campaign for Commercial-Free Schools (Seattle)

• Reclaim Democracy (Boulder)

• Los Angeles protests resulted in vote to ban soft drinks in schools

Community/Parent Protests

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• Sale of “Naming Rights” for School Properties– Rapid Increase• Vernon Hills High School (Ill. - Rust-Oleum)

– $100,000 on $1.8M stadium– $80,000 scoreboard by computer company

• Naperville - Under Armour = “Official Sponsor” of high school team (announced each game) in exchange for $7,580 worth of game towels, wrist bands, t-shirts and shorts

• Colorado - $2M for stadium by telephone co.

• New Jersey - $100,000 for elementary school gym

Other Revenue Sources

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• Sale of “Naming Rights” for School Properties– Considerations• Policy - encourage donation, discourage abuse and

embarrassment

• Law - does your state allow it?

– Protections • Adequate Consideration

• Duration - right to cancel (bankruptcy, scandal)

• Scope - signage, outside promotions

• Assignability?

Other Revenue Sources

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• Endorsements by Schools - Guidance from Attorneys General Report (1999)– Consumer (Parents/Students) Perceptions• High level of trust in schools = preferred product

• Belief that products marketed in association with schools are endorsed by schools

• Belief that products endorsed by trusted entity are superior

• Unaware of exclusive relationship

Guidance

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• Endorsements by Schools - Guidance from Attorneys General Report (1999)– Common Sense Legal Guidance Principles• Reserve right to review use of name and logo

• Make clear in promotional materials that:– there is no endorsement by school

– corporate sponsor paid for use of name and logo

– relationship with corporate sponsor is exclusive

Guidance

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Recent Developments Recent Developments Affecting Non-Traditional Affecting Non-Traditional

Revenue Sources for Schools Revenue Sources for Schools

presented bypresented by

Michael L. Dodd, Esq.Michael L. Dodd, Esq.Ferrara, Fiorenza, Larrison, Barrett & Reitz, P.C.Ferrara, Fiorenza, Larrison, Barrett & Reitz, P.C.

East Syracuse, New YorkEast Syracuse, New YorkOctober 5, 2002October 5, 2002

National School Boards Association