The harbinger of Eureka City Schools' controversial proposal to cap transfers in an effort to stem the tide of students leaving for other districts — taking the state funding that comes with them — may have been a lawsuit filed last year against a small charter school.

Filed in January of 2016, the case alleges that Pacific View Charter School was illegally operating two sites within ECS' boundaries while under the administrative umbrella of the Loleta Elementary School District located some 20 miles away.

By doing so, the Eureka district argued, Pacific View was siphoning away a major revenue source: Average Daily Attendance funding paid by the state for each student who arrives to class on any given day.

From transfers alone — not counting the students who choose to attend private or charter schools — the ECS shortfall comes in at an estimated $6.4 million a year, or $8,000 per student.

Similar litigation has taken place up and down the state, especially as charter school numbers swelled in recent years.

While the case is now moot with a proposed settlement on the table, Pacific View Director James Malloy says he wonders why any of this needed to happen in the first place.

"It's been handled very, very poorly on Eureka City's part," he says, noting that Pacific View fills a "specific niche in the education community that we stay in."

The charter school, which serves about 200 K-12 students, had a location in Eureka for about 15 years without issue. Many of its students, he says, came over on referrals from ECS.

In addition, Malloy says, ECS wasn't interested in past overtures by the charter to move under the county's largest district.

That changed in 2015, the director says, when the school came to an agreement to take over the former St. Bernard's Elementary campus.

"At the time we did that, everything that we found told us we could have two sites in Eureka City Schools' [boundaries] ... and it was happening all throughout the state," Malloy says.

He says he reached out to Eureka Superintendent Fred Van Vleck two years ago to find a resolution as Pacific View was preparing to move into the Henderson site, taking on many of the private Catholic school's former students for the K-6 program.

That proposal to come under Eureka's jurisdiction, Malloy says, had basically everything now included in the proposed settlement set to go before the ECS board for approval on March 30.

Instead, Malloy says, Pacific View was met with the lawsuit that also named the Loleta Elementary School District. According to the district's court filings, the case went forward after several warning letters were sent and attempts to "resolve this dispute" were unsuccessful.

"It's unfortunate that we've wasted a lot of time and money to be where we first started," Malloy says, who also notes the school was unable to find the necessary facilities in Loleta and Eureka was more convenient for most of its students.

Van Vleck did not return multiple phone calls and emails seeking an interview for this story. Eureka City Schools board President Lisa Ollivier declined to comment, citing pending litigation.

"I can't speak about any of that," she said, calling the settlement "predecisional" until it's approved by the board.

She described the interdistrict policy and the Pacific View lawsuit as "completely separate items," saying the former came about due to the June sunsetting of the countywide agreement that allows for school choice, which prompted a chance to review how the interdistrict transfer process works.

Once the lawsuit settlement — which includes a student cap, no expansions and an agreement not to ask for facilities funds for 10 years — is approved, a corresponding petition will place Pacific View under the auspices of ECS, bringing an estimated $12,500 in administrative fees into district coffers.

None of the sides admit fault under the agreement, with each paying their own legal fees.

For Pacific View, that comes to about $5,000 for the lawsuit because the school's insurance kicked in when ECS asked for damages. Another $5,000 went to having an attorney prepare the petition for Pacific View to join the Eureka district.

There's no doubt the lawsuit has taken up a lot of ECS time as well. Nearly every board meeting agenda since the lawsuit was filed has included a closed session item on the litigation. How much the lawsuit has cost ECS is unclear. An email received from ECS as the Journal was going to press stated the district was working on the legal tally request orignally sent to Van Vleck on March 10.

In the end, the Pacific View lawsuit was rendered moot by a precedent-setting appellate court decision that came down late last year, finding that charters can't operate satellite campuses within the same county but outside their authorizing district under state law.

When the California Supreme Court decided in January to let the ruling stand, charter schools across the state began to scramble to join up with the very districts that might have been suing to have the campuses shut down.

While the litigation between Eureka, Pacific View and Loleta is headed to a final sign-off next week, the debate over the county's long-held open door policy that allows students to attend the district of their choice appears to be just heating up.

The interdistrict transfer agreement that covers all of Humboldt's 30-some school districts appears to be extended for one more year, but where it will land after that is still up in the air.

In a February letter to ECS staff, Van Vleck talked about how the school board that hired him five years ago placed a "high priority on lowering the number of parents sending their students to different districts."

"We have been effective at stopping the growing number, but not in reducing the number," he wrote. "Up until four years ago, we had an average decline of 160 students per year in enrollment. Over the last four years, our enrollment has increased slightly, which is a major improvement over the previous average loss."

That, Van Vleck says in the letter, has not been enough to offset increasing costs, which has ECS deficit spending at a "rate we cannot sustain."

Enter Eureka's proposal to cap the number of interdistrict transfers any school district can accept, which includes exceptions for siblings, foster and homeless students, as well as children whose parents who work in the boundaries of another district for a certain number of hours a week.

Talks on the subject are continuing on the county level, with area superintendents scheduled to meet later this month.

Also in limbo are Eureka students attending Cutten schools after this year, following the revelation that paperwork for many of them was not properly filed with ECS.

According to minutes from the Feb. 16 ECS board meeting, trustees agreed with Van Vleck's recommendation to extend interdistrict transfers for the 2017-2018 school year to "give families time to plan for the future" with the exception of Cutten.

Based on numbers compiled from the minutes of a Cutten School District meeting in January, about 180 students — or 74 percent of Cutten's interdistrict transfers — come from ECS.

Ollivier says the ECS board is hopefully that a "fair resolution" can be found for those students, but declined to detail what that might include, saying Eureka trustees decided it's not a "matter for public discourse at this time."

Meanwhile, Loleta Superintendent John Sutter says he believes moving Pacific View over to Eureka's jurisdiction will work out better for everyone. But he, too, was a bit perplexed at the process.

Sutter says every district in the county loses students under what he termed the county's tradition of a "de facto" free choice system, but his philosophy as an educator has always been to turn inward to see what "we can do better" to retain those who leave.

Van Vleck and the Eureka board, he says, are taking a "different approach" by basically "trying to turn off the spigot."

"I don't really fault him for that," Sutter says.

Kimberly Wear is the assistant editor and staff writer for the Journal. Reach her at 442-1400, extension 323, or kim@northcoastjournal.com. Follow her on Twitter @kimberly_wear.