Egg Harbor City’s school district has almost $650,000 in local-taxpayer funded dollars sitting in escrow with the state Schools Development Authority.

More than two years after the new middle school opened in December 2010, however, the district is still unable to recoup those unspent funds because of uncorrected problems with the building.

As a result, school Superintendent John Gilly had to tell one teacher and two part-time aides that he must let them go in June to balance the budget for 2013-14, despite a property-tax increase.

“I had to sit with these people and tell them they were losing their jobs knowing that it might not have had to happen,” Gilly said.

The escrowed funds are the local taxpayers’ share of money left from the construction of the $22 million Community School, which came in at less than the originally estimated $24 million, leaving a surplus for the district.

Joseph Smurlo, the school district’s business administrator, said he asked the SDA whether the district could get $100,000 of the funds to apply to debt service for next year since the proposed repairs already have been budgeted and are not projected to cost the district all of the funds being held. He said the SDA said no, because no one knows whether there might be additional issues that come up during the repairs, and the district could have to pay one-third of those costs.

SDA spokeswoman Edye Maier confirmed the district has the funds in an escrow account. But, she said, that money cannot be returned to the district until all expenses covered in the local-share agreement have been paid, the project is completed and the district receives a certificate of occupancy.

The school has been operating under a temporary certificate of occupancy since it opened while the SDA works through the problems.

Those problems include drainage basins that don’t drain properly — including one that overflows onto Duerer Street; an air handler that sounds like a jet engine in the fourth- and fifth-grade hallway, a temperamental HVAC system that dripped water onto Gilly’s computer over the summer and shut down during the winter, and filters in the ceiling of the gym that are treacherous to replace because a catwalk was never installed.

School board member Jeanne Williams, who was at the school last week, said that despite the problems, everyone is extremely proud of the new building.

“The community really uses it,” she said. “But after two years, why can’t we get these things fixed?”

Greater Egg Harbor Regional also had drainage problems with its new Cedar Creek High School in Egg Harbor City, which opened in September 2010. Superintendent Steven Ciccariello said the major repairs were done during the past couple of months.

Charles Caramanna, operations manager at Greyhawk, the project manager for the Egg Harbor City school, said that while drainage problems can linger, the Egg Harbor City school problems have stretched the envelope. He said Greyhawk’s management contract ended when the building was completed, so the firm has not been involved in the remediation issues.

Gilly said Greyhawk has still been helpful, but there has been lots of finger-pointing over the cause of the problems and numerous delays. School officials have been told they were not operating the HVAC system properly, but problems continue. The school was designed by the Vaugh Collaborative and built by Tamburro Bros. Construction in Millville.

Gilly said he understands new buildings have glitches. He said that, overall, the school is fabulous and a blessing to the community. His issue is that far more money is being held than will be needed, and he could use that money to save jobs rather than having to turn to local taxpayers.

Maier said the only money the district can access from the account is any interest that has been earned.

Smurlo said the interest has been tapped in the past. But now that interest rates are low, and most of the bond has been spent, less interest is being earned. As of Feb. 28, $6,586.92 in interest was available, SDA data show.

Gilly said the issue is compounded by the SDA now charging school districts for what were supposed to be grants to help cover the cost of the school. The district actively promoted the SDA grant when it pushed for a new school in 2007, since the state would pay two-thirds of the low-income district’s costs. But while the state changed contract terms for its benefit, the SDA has refused to consider an exception that could help the district.

The revised contract amount for the middle school project is $22,076,722, with the district paying $7,353,756 and the rest coming from the state grant.

In 2011, the state budget included a provision to begin recouping from school districts 15 percent of the debt service cost on those grants. That will cost Egg Harbor City almost $196,000 in 2013-14, or $69,000 more than this year.

Since the district can’t use any of the leftover local bond funds, the local property-tax levy will increase almost $97,000, or 3.4 percent, to $2.9 million for 2013-14.

The district’s dilemma demonstrates the complex math used to determine school aid and how easily it can be manipulated.

When the Department of Education first announced state school aid for 2013-14, it appeared the district would get almost $5.2 million, an additional $112,000 over 2012-13.

But then the district lost about $36,300 in state preschool aid and was assessed the extra $69,000 in debt service. The net increase in state funds for the district became $5,260.

The school board made cuts, but with higher costs for employee benefits, and the SDA assessment, taxpayers still face an increase of about $57 per year in property taxes for a home assessed at the city average of $142,667.

“If I could use some of that (SDA) money, there would be zero increase in taxes,” Smurlo said.

In addition to the three jobs, the district will cut funding for books, extracurricular activities, maintenance projects and middle school sports. One retiring teacher will not be replaced, and preschool will be reduced from four classrooms to three. However, exceeding the maximum allowed class size of 18 students would force them to restore the class.

Gilly is retiring in January. The school board plans to have the next chief school administrator serve as both superintendent and principal to save money. In total, five jobs will be lost.

Meanwhile, the remaining money of the $8.8 million bond referendum voters approved in December 2007 sits out of reach in Trenton while the list of projects remains unfinished. The bond also covered upgrades to the Charles Spragg School that were completed with no problems.

Gilly said he is also concerned about the long-term impact of the HVAC problems.

“It was so humid in the building over the summer the books were starting to swell,” said Gilly, who shows how the pages of his 2011-12 budget curled. One day, water dripped from the ceiling and collected in the light fixtures.

An August 2011 email from the SDA suggested turning on the heat to dry out the building.

“You are kidding me right?” Gilly responded Aug. 9. “Turn the heat on. Nice solution.”

Gilly said they were told they had the settings wrong, but problems have continued. The system shut off occasionally during the winter, leaving the school frigid when students arrived. It shut off again last week, sending Smurlo up into the ceiling to restart it.

“Our building and grounds guy was coming out at night in the winter to make sure the system was running,” Smurlo said.

Gilly said he also contacted local state legislators, and there has been some movement.

In November, the SDA sent Gilly an email saying they are working with Tamburro to resolve the final issues. But the email also said the drainage basin might require further redesign, which could cost more money, and “significantly delay the closeout of the project.”

If there are new costs, one-third of the funds might have to come from the district’s escrow account. That work would delay the return of any remaining funds.

In January, the district received a list of repairs to be made by Tamburro, including to the air handler, toilet cleanout, the drainage basins and the catwalk. The SDA also has $50,000 of Tamburro funds in an escrow account, which would be released on completion of the catwalk. A letter to the district indicates Tamburro’s obligation on the drainage basins would be satisfied at the completion of the work even if they do not pass inspection.

The SDA met with district officials in early April and the work schedule called for Tamburro to begin working on the drainage basins the week of April 8. Gilly said they did begin pumping the water out of the basins last week. Calls to Tamburro were not returned.

Contact Diane D’Amico:

609-272-7241