The Manteca Unified School District complied with grant regulations and will not have to relinquish $2 million to the state, officials from the California Office of Public School Construction decided this week.

    “The documentation and clarifications (the school district) has made to us throughout the process has satisfied the staff that oversee this grant program,” OPSC spokesman Eric Lamoureux said Tuesday.

    The decision settles a three-month-long bureaucratic battle that some worried would put a halt to construction of Neil Hafley and Shasta Elementary Schools’ new multipurpose gymnasiums.

    Questions arose in December regarding $2 million in state Joint Use grants that the district received on the condition that the City of Manteca pay a share of the buildings’ $11 million cost.

    State officials took issue with the district’s plans to accept redevelopment “pass-through” funds for the city’s share, arguing that redevelopment money does not satisfy grant requirements because it is money that essentially belongs to the school district already.

    Until this week, state investigators remained skeptical of the district’s claims to the money. But new information received this week made them reevaluate their position, Lamoureux said.

    In a March 26 letter, school district attorney Larry Lasnik argued that the city’s contribution to the projects is money that the district would not have ordinarily received, because the city agreed last month to advance the district $1 million in future redevelopment money.

    Technically, the loan — which is awaiting a final OK from the school district — will put “new money” in school district coffers.

    Without the state and city funding, Lasnik wrote, the gymnasium projects would be killed.

    “The alternative would be to leave the site of each project as bare ground, with only the stub-ups of the underground utilities to mark the location of the gymnasium that would have been there,” reads the conclusion of the three-page letter.

    After an “exhaustive” review of the project, OPSC officials agreed with Lasnik’s findings.

    “(District administrators) sought to prove that the monies they were receiving were in excess to what they normally received. And they clarified that it was,” OPSC project supervisor Brian LaPask said Tuesday. “They wouldn’t have received those funds without the two joint-use projects.”

    Assistant Superintendent of Business Services Michael Dodge has maintained from the start that the process was handled correctly.     It was the same funding strategy used to secure state money for a gym at Golden West Elementary School in 1999, he has said.

    “We believe it was all correct from the beginning,” Dodge said. “It was just a matter of going through all the stages.”