The Crusader Newspaper Group

The IRS forgives millions of debts from Gary schools

Crusader Staff Report

Uncle Sam has a nice side to him after all. The U.S. Internal Revenue Service has agreed to forgive a large chunk of debt of the Gary Community School Corp.

The decision provides some relief to school officials and Emergency Manager Peggy Hinckley, who is struggling to reduce the Gary’s school district’s enormous debts. Hinckley made the announcement during a Gary School Board meeting on April 10, where retired accountant Mary Felton was sworn in to fill the vacant 6th District Seat. Nellie Moore was elected president.

The biggest news at the meeting was Hinckley’s announcement that the IRS and the GCSC reached an agreement that removes the government liens on all of Gary’s schools. By forgiving a large chunk of the district’s $8.4 million in debts, the district won’t have to pay about $7 million to the federal government. The IRS agreed to accept a payment of $320,000. The district must pay Laszlo & Associates, which brokered the settlement.

“The IRS has accepted our offer, so the issue is settled. Liens have all been released on all properties,” Hinckley said.

Karen Freeman Wilson 1
Mayor Karen Freeman-Wilson

Gary Mayor Karen Freeman-Wilson said the settlement gave the district hope.

“I think it opens up a number of opportunities for school property, and, in turn, community development.

With the settlement, Hinckley said the district can now put its properties up for sale. The liens made it impossible for the district to sell any of its properties. The district has more than 30 vacant school buildings, some of which have been left open and vandalized. The latest building to become vacant will be the Wirt-Emerson School of Visual and Performing Arts, which closes in June.

In 2014, the district owed the IRS $6.7 million, but the amount increased to $8.4 million in 2018 due to penalties and interest. IRS began putting liens on the school properties after the district did not make payroll tax payments in 2012 and 2013.

The Gary School District remains buried under debts totaling over $100 million after years of dwindling school enrollment and property tax revenues. In 2017, the state took control of the Gary School District, which overall received an ‘F’ grade on the state’s accountability report.

On the school board, Felton replaces Rosie Washington, who resigned last year months after Hinckley seized academic and financial control of the district.

Felton has held several accounting jobs for the city of Gary and the Gary Housing Authority. A member of the Gary Library Board, Felton also operated her own accounting business.

The board voted 5-1 to elect Moore as its president. School Board vice president Robert Buggs, who voted for himself, called the election “illegal,” saying the process was supposed to take place within 30 days of Jan. 1.

In other school board news, former Supt. Cheryl Pruitt began paying back the $30,000 bonus awarded by the Gary School Board in 2016. Indiana Attorney General Curtis Hill’s office announced the settlement on April 3.

So far, Pruitt has paid $20,000 that came before a March 30 deadline. The remaining $10,000 payment is due by April 30.

According to the agreement, a $10,000 fine will be imposed if Pruitt fails to make the payment before the deadline. Last December, an audit from the State Board of Accounts requested Pruitt to return $30,000 that she said was a bonus she received as part of the 2012 contract. Pruitt said the bonus clause was specified under payroll.

In 2016, Pruitt received $178,300, according to reports. SBOA officials disagreed with Pruitt, saying there was no such bonus listed in the contract. The audit called for the money to be paid back. Pruitt agreed to the settlement “to buy its peace and avoid the costs of litigation.”

Both Washington and Moore defended the $30,000 bonus, saying it was appropriate.




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