IRS seeks $6.78M from Gary schools in unpaid taxes

The Internal Revenue Service is seeking $6.78 million in unpaid payroll taxes from the financially strapped Gary Community School Corp., a district the state had already labeled "high risk."

The IRS has filed two liens with the Lake County Recorder's Office against the district — one seeking payment of $5.27 million for payroll taxes in 2013 and the other demanding $1.51 million owed for part of 2012 and 2013, the Post-Tribune reported.

Both documents state that the IRS is giving notice that taxes, including interest and penalties, have been assessed against the district and Michael Washington, its interim chief financial officer.

Gary city attorney Robert Lewis said the district plans to develop payment plans for its debts and is "working diligently to get these taken care of."

Superintendent Cheryl Pruitt said the district, which has been hit by employee layoffs, mounting bills, shrinking funding and enrollment, is addressing its debt through a fiscal plan.

School spokeswoman Charmella Greer added that, "Students are first, and we will continue to handle the financial situation."

In February, state schools Superintendent Glenda Ritz took the unusual step of designating the district as "high risk" because of its financial woes and poor student performance. Ritz also placed a full-time Indiana Department of Education staff member in the district to oversee improvement measures.

Last month, the Gary Sanitary District filed 21 liens against district schools, saying the corporation owes about $800,000 in sewage bills.

Pruitt and Gary Mayor Karen Freeman-Wilson announced Friday that a deal has been reached to pay those bills.

In September, the Illinois Central Bus Co. demanded $3 million in past-due bills from the district, which recently reached a settlement to pay off that debt by Dec. 31.

School officials plan to issue $1.2 million in bonds to settle some of its debt. A hearing on that proposal is scheduled for Nov. 25.

And in August, Pruitt told the school board the district has lost $100 million in revenue since 2009.

State financial data shows the district lost $13 million under property tax caps last year — more than any Indiana school district.