The Fresno County District Attorney’s Office is looking into Fresno Unified School District’s lease-leaseback deal with a local construction firm.
District Attorney Lisa Smittcamp said Thursday that her office’s Public Integrity Unit is “monitoring the situation” concerning a controversial multimillion-dollar deal the school district made with Harris Construction to build Rutherford B. Gaston Middle School. But, “at the present time, no official investigation is being conducted,” she said.
Smittcamp said two officers from the District Attorney’s Office attended a Fresno Unified Board of Trustees meeting Wednesday that addressed lease-leaseback deals. Fresno Unified Superintendent Michael Hanson held a news conference following Wednesday’s board meeting to discuss the case, ending his silence on the matter.
On Wednesday, Fresno Unified Trustee Brooke Ashjian said the FBI is also investigating the contract, but Thursday he said he could not provide any further details about his meetings with the FBI.
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Fresno Unified spokeswoman Amy Idsvoog said Thursday that the Superintendent’s Office was unaware of any external investigations.
“We still don’t have any information that validates any outside investigation from anyone,” Idsvoog said.
$114.7 millionThe amount awarded to Harris Construction for lease-leaseback projects since 2011
A lease-leaseback agreement is a route outside the traditional bidding process — in which contracts typically go to the lowest bidder — and is designed to help cash-strapped school districts build schools. Through a lease-leaseback deal, a district can handpick a developer who will agree to front the construction costs, then accept repayment from the district over time.
Another local construction firm, Davis Moreno, has taken Fresno Unified to court, saying that because the district had bond money to pay for Gaston Middle, the lease-leaseback method was misused. The deal included a pre-construction agreement in which Harris Construction agreed to do consulting for free if it was awarded the $37 million contract. The 5th District Court of Appeal released an opinion last month saying Fresno Unified illegally used the lease-leaseback method, and now the district is pushing for the case to go to the California Supreme Court.
Some Fresno Unified trustees have said they were left out of loop regarding pre-consulting details of the Harris Construction contract. A modification of the opinion was later released by the 5th District Court of Appeal, saying the court accepts allegations about the existence of a prior contract as true — even though attorneys for Fresno Unified said there was no pre-construction contract.
However, at Wednesday’s news conference, Hanson appeared to contradict the attorneys: “I never said there was no pre-construction agreement,” he said.
Ashjian and fellow trustees Carol Mills and Luis Chavez have publicly called for the board to hire an independent firm that has no ties to the district to review the contract. Fresno Unified leaders have shot down their attempts to get the motion on an agenda, and board members have written conflicting letters to the editor in The Bee about whether an outside investigation is needed.
Candidly, it’s sometimes uncomfortable in situations like this when I’m the employee of an elected board and they’re not unanimous.
Fresno Unified Superintendent Michael Hanson
Hanson said he believes he has answered their request by hiring outside attorneys to review the case. The Dowling Aaron law firm was hired to look at the Harris Construction contract, in addition to the district’s internal counsel, Hanson said.
“These outside attorneys independent of the case — they had not viewed it or seen it at all — they looked at the leaseback agreement and determined that Fresno Unified’s use was similar to other leaseback agreements across the state…,” Hanson said.
But trustee Luis Chavez says this isn’t what he was asking for. “I’m hoping we still get an independent review process — a third party that has no vested interest in the school district that’s not internal staff,” Chavez said Thursday. “At the end of the day, we’re stewards of taxpayer dollars, and people want to know how the money was spent, and we need to be as transparent as possible.”
Mills said she still wants the board to vote on an outside investigation. If allowed to vote, the board might confirm the selection of Dowling Aaron as the firm, but trustees should have a say, she said. Mills also said her understanding of Dowling Aaron’s role was to handle the appeal of the court case — not conduct an independent investigation.
“I personally don’t recall the board requesting them to do an independent investigation. If that were the case, we wouldn’t have asked for it,” Mills said. “My understanding is, that’s not within the scope of their employment.”
Mills and Chavez said they had not been contacted by the FBI or the DA’s Office. No other board members returned phone calls Thursday.
Hanson said Wednesday he did not use the lease-leaseback method in order to favor Harris Construction, and that the firm was simply the best fit for the job. He provided details about 24 other lease-leaseback deals Fresno Unified has made since 2011, nine of which were awarded to Harris Construction — including the three most expensive contracts on the list. In all, Fresno Unified has awarded Harris Construction $114.7 million in lease-leaseback projects since 2011.
Hanson defended the use of lease-leaseback agreements, saying that “the same process has been used by hundreds of districts in the state for a decade before we even began to use it at Fresno Unified.”
He criticized the law for being vague about how the lease-leaseback method can be used and said he hopes that by going to the Supreme Court, clarity will be provided for districts across California. In an email sent to all Fresno Unified teachers and staff Wednesday night, Hanson said projects like the new Gaston Middle School are important to students. When he first came on as superintendent in 2005, Hanson’s email said, facilities were “in a horrible state of disrepair and neglect.”
In the email, Hanson said posting general information regarding lease-leaseback deals to Fresno Unified’s website Wednesday night was an act of transparency.
“Improving our school facilities is a good thing. I don’t think there’s a parent in this city who doesn’t want their children in a clean, comfortable, safe space for close to 8 hours each day, 180 days of the year. And, as the leader of this district, I will continue to work to improve our facilities, because it matters greatly!” Hanson said. “The voters of this city have made it clear that they want our facilities upgraded, and we will do whatever we can to make that happen, with fidelity, transparency and fiscal responsibility. It is the only way we are going to truly be successful in this endeavor.”