Fresno construction company sues Fresno Unified

The Fresno BeeNovember 27, 2012 

The president of a local construction company is suing Fresno Unified over its no-bid method of choosing contractors, saying the district improperly picked Harris Construction Co. Inc. to build a new middle school.

Stephen Davis, president of Fresno-based Davis-Moreno Construction Inc., says in his lawsuit that a contract with Harris to build Rutherford B. Gaston Sr. Middle School in southwest Fresno violated state law and should be undone.

"We think this contract is illegal," said San Diego attorney Kevin Carlin, who filed the suit and who is involved in a similar legal battle with a San Diego County district.

The lawsuit not only seeks to stop Fresno Unified from paying more money to Harris for building the middle school, it also asks that Harris repay any money already paid to it by the district for the project.

Fresno Unified awarded the middle school construction contract not by the traditional practice of choosing the lowest bid, but instead by a method called lease/leaseback.

Under lease/leaseback, a district leases land to a developer for a nominal amount, typically $1 a year. A school is then built, and the district pays the developer for it over an extended period of time.

That's how it worked with the new middle school, the suit alleges, with Fresno Unified agreeing to pay Harris Construction monthly lease payments to a guaranteed maximum of more than $36.7 million. The contracts were approved by the FUSD board on Sept. 26.

Davis' suit -- which he filed as an individual Fresno Unified taxpayer and not as president of Davis-Moreno -- alleges that the district violated state law because the middle school project was not competitively bid.

In addition, the suit says district officials did not comply with conflict of interest requirements under state law.

Those requirements came into play, Carlin said, because of donations made by Harris Construction and its owner, Richard Spencer, to Measure Q, Fresno Unified's $280 million bond measure that passed in 2010.

Harris Construction has received most of Fresno Unified's construction business since the district started using lease/leaseback in May 2011. Since then, Harris has been awarded seven contracts totaling about $78 million.

Officials with Harris Construction -- including Spencer -- did not return a phone call and email seeking comment.

Fresno Unified spokeswoman Jamilah Fraser said in an email that the district couldn't comment because it has not been "officially served with any lawsuit" as of Tuesday afternoon.

However, Fraser added in her email that lease/leaseback is authorized by a specific section of the state education code.

And that, Carlin said, will be the key part of the lawsuit that will be argued.

Carlin said there are two contracts involved in lease/leaseback. One of those involves the district leasing land to the developer for a nominal fee. It is Carlin's contention that the state law section Fresno Unified -- and other districts -- cite relates to that contract.

It is the second contract -- which involves the district paying the developer back over an extended period of time to build the school -- that violates another section of state law, Carlin said.

The lawsuit says the district's lease/leaseback contracts are illegal because they violate state law that says when a school district pays someone for construction, the contract must be given "to the lowest responsible bidder."

Carlin said lease/leaseback is a growing trend among California school districts that is being pushed by "a small group of consultants and general contractors (who) are profiting tremendously" from the process.

Harris Construction, Carlin said, is one of those promoting the new trend.

The change, he said, is "effectively shutting out the vast majority of general contractors and subcontractors that would ordinarily bid on school work in the open market and driving up construction costs for school districts due to reduced competition."

The reporter can be reached at (559) 441-6320, jellis@fresnobee.com or @johnellis24 on Twitter.

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