The state Legislature, at the behest of construction industry lobbyists, is desperately scrambling to mitigate the potential fallout of an appellate court ruling against Fresno Unified School District.
The court sent shock waves throughout California when it said Fresno Unified’s leaseback contract with Harris Construction to build Rutherford B. Gaston Middle School violated competitive-bidding and conflict-of-interest laws.
The district has appealed the ruling to the California Supreme Court, which soon will decide whether to hear the case.
We urge the high court to take up the district’s appeal and bring clarity to the legality of the controversial leaseback contracts, which are used by districts to avoid competitive bidding.
Contractors, meanwhile, are up in arms about the consequences if leaseback contracts similar to the model used by Fresno Unified are upheld as illegal. This is because California’s “disgorgement” law calls for contractors to pay back all money if they entered into an illegal contract.
Columnist Dan Walters, who covers the Capitol for The Bee and McClatchy’s other California newspapers, reported early Wednesday that a “newly amended bill would allow contractors whose lease-leaseback school construction agreements are declared illegal to keep their payments.”
Walters further reported that the “revised measure is an ‘urgency bill’ that would take effect immediately upon being signed by the governor, but that means it also would require two-thirds votes in both legislative houses.”
San Diego attorney Kevin Carlin, who represented Fresno contractor Stephen Davis in the lawsuit against Fresno Unified, wants the construction money returned to the schools in instances where illegal leaseback deals were used.
He also is critical of lawmakers taking Assembly Bill 975, which originally sought to set up a system for rating bidders for construction contracts, and turning it into a bill that would protect leaseback contractors who completed their projects before July 1 of this year.
“Now that the contractors have been caught with their hand in our schools’ cookie jar, they are asking Sacramento legislators via last minute gut-and-amend language that is retroactive to let them keep all the cookies they have taken from our schools under their illegal contracts,” Carlin said in an email.
We appreciate Carlin’s sentiment.
Many of these leaseback deals around the state were promoted by builders, construction industry lobbyists and consultants such as Terry Bradley, the former superintendent of Clovis Unified School District. Sometimes the agreements were hatched between districts and builders in near secrecy and flew under the radar of school boards and the public.
Having to return the money would send the message that if you want to build schools in California, you best operate on the straight and narrow.
Moreover, the construction industry is overselling the potential fallout of the appellate court ruling. The three-judge panel did not deem all leaseback contracts illegal – only portions of the version used by Fresno Unified.
Assembly Bill 975 is unworthy of passage.