Bill would protect contractors despite leaseback deals like in Fresno

Proposed legislation could end Fresno Unified’s chances of recuperating $37 million the district spent on a no-bid project that’s now under investigation.

Amendments made to Assembly Bill 2316 on Tuesday would protect contractors who signed lease-leaseback contracts before July 1, 2015, even if they are later deemed to be invalid.

The bill says contractors who entered into invalid leaseback contracts are still entitled to be paid for the projects. Leaseback agreements allow school districts to circumvent the traditional competitive bidding process.

Fresno Unified’s leaseback contracts are under federal investigation after a local contractor took the district to court alleging that administrators deliberately misused the leaseback financing process – which was designed to help poor districts – in order to ensure the deal went to Harris Construction.

Contractor Stephen Davis, who claims the contract is illegal, is fighting for Harris Construction to return the $37 million spent on the project to the district. Fresno Unified has declined invitations to join Davis in his fight and has asked a judge to dismiss the case.

The California Supreme Court has allowed Davis to move forward with his claims, and school districts across the state have been watching the case, which could change how schools are financed.

AB 2316 would delete language that says school boards are not required to advertise for bids and would provide more guidelines in the leaseback process, but would still allow districts to use a method other than the competitive hard-bid process.

The bill would allow districts to use a “best value” system when selecting contractors that considers factors other than lowest price, such as “demonstrated competence” and other qualifications.

But Kevin Carlin, the San Diego-based attorney representing Davis, says that in addition to being a “get out of jail free card” for contractors, the proposed bill is subjective and can be misused – just like the leaseback process.

“ ‘Best value’ is code word for ‘give the deal to your best friend,’ ” Davis said Wednesday. “It’s still a subjective selection process, and anytime you introduce subjectivity, you introduce the opportunity for fraud, favoritism and corruption. They’re wallpapering over the problem with pretty language.”

On May 4, the Assembly’s Committee on Education will hold a hearing on AB 2316. On May 5, a Fresno County Superior Court judge will decide whether to accept Fresno Unified’s motion to dismiss the Harris Construction case.

This story was originally published April 27, 2016 at 5:00 PM with the headline "Bill would protect contractors despite leaseback deals like in Fresno."