L.A. Unified asks state Supreme Court to hear Fresno Unified’s case on leaseback

A Harris Construction sign is shown outside the construction office where Fresno Unified’s new Gaston Middle School is being built in West Fresno Thursday, October 25, 2012.
A Harris Construction sign is shown outside the construction office where Fresno Unified’s new Gaston Middle School is being built in West Fresno Thursday, October 25, 2012. Fresno Bee Staff Photo

The Los Angeles Unified School District is supporting Fresno Unified in its fight against a recent appellate court ruling that questions the intent of Fresno’s use of no-bid contracts.

L.A. Unified — the largest school district in California and the second largest in the country — filed a legal brief last week asking the California Supreme Court to review a 5th District Court of Appeal opinion that criticized Fresno Unified School District’s handling of a $37 million leaseback contract.

L.A. Unified is undertaking a massive bond-funded school construction program and has spent billions of dollars on leaseback contracts. In the brief, attorneys for L.A. Unified say that the appellate court’s opinion has created “uncertainty and conflict” regarding school districts’ leaseback contracts and contradicts previous court decisions that upheld districts’ use of them.

Fresno Unified Superintendent Michael Hanson released a statement late Thursday night praising L.A. Unified’s decision, saying he hopes the recent scrutiny will lead to a win for his district and adding “we don’t have anything to hide.”

“Nothing speaks louder in terms of legitimacy than the largest district in the state committing billions in taxpayer dollars to lease-leaseback as an effective, financially viable means of enhancing school facilities,” Hanson said.

Leaseback agreements are an alternative method to the regular bidding process and were designed to allow cash-strapped districts to build schools by handpicking consultants who will front the cost of a project and then be repaid by the district in increments over time.

But the 5th District Court of Appeal said in Fresno Unified’s case — in which Harris Construction was paid to build Rutherford B. Gaston Middle School — the leaseback agreement wasn’t used the way the law intended. The court found that the contract in question was a leaseback agreement in name only, since Fresno Unified had the money to pay for the project upfront. Critics have since questioned whether the leaseback method was used in order to favor Harris Construction.

Local contractor Stephen Davis took Fresno Unified to court, asking that the millions spent on the Gaston Middle project be returned to Fresno Unified. Davis also alleges that the school district broke conflict of interest laws by allowing Harris Construction to provide pre-consulting services for a project it was ultimately awarded.

The 5th District Court of Appeal sided with Davis, calling into question a 4th District Court of Appeal decision that defended Los Alamitos Unified School District’s similar use of a leaseback contract.

Fresno Unified has since filed a petition for review, asking the state Supreme Court to reconsider the 5th District’s opinion. Fresno Unified notes that leaseback contracts have been widely used by school districts across the state for years and are the easier, more affordable option. Earlier this week, an attorney for Davis asked the high court to deny Fresno Unified’s request, saying the appellate court “has merely blown the whistle” on years of cronyism and sweetheart deals perpetuated by the leaseback exemption.

Other organizations have also recently filed briefs in support of Fresno Unified, including the California Association of School Business Officials, the California School Boards Association and the Coalition for Adequate School Housing.

The Beverly Hills Unified School District has filed a brief in support of the Davis decision, saying it will reinforce public integrity.

Hanson said the district will continue a “commitment to transparency,” even though he has been mostly silent about the issue and has refused to answer specific questions about the Harris Construction deal.

“This is the one thing that I think should be abundantly clear to everyone in this state: lease-leaseback is a state-approved facilities improvement process that gives school districts the necessary flexibility to select contractors based on factors other than price alone and allows districts to focus on their qualifications, experience and past performance on projects similar in type and scope, etc.,” he said in his statement Thursday. “It eliminates the need to conduct a traditional hard-bid process for construction projects, which can often slow progress in making facilities upgrades. That’s it. The long and short of it.”

Mackenzie Mays: 559-441-6412, @MackenzieMays

Fresno school board meets

The Fresno Unified board of trustees will meet in regular session for the first time since summer break at 5:30 p.m. Wednesday.

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