Sanger Unified defends use of no-bid contracts

The Sanger Unified School District approved a multimillion-dollar no-bid contract with Harris Construction this week, despite ongoing controversy about Fresno Unified doing the same.

At a meeting Sept. 22, the Sanger Unified Board of Trustees approved a near $9 million “leaseback” contract with Harris Construction to build an addition to Sanger Academy Charter School. The move comes in the midst of a federal grand jury investigation of Fresno Unified School District’s leaseback contracts with Harris and Bush Construction.

Sanger Unified has penned other leaseback contracts recently, including one in June with Bush Construction for nearly $8 million. No court has declared the method illegal.

Leaseback agreements were designed to allow cash-strapped districts to build schools by going outside of the traditional competitive bidding process and handpicking contractors to front the cost of a project, then pay back those contractors over time. But the 5th District Court of Appeal said in June that when Fresno Unified signed a leaseback contract with Harris Construction to build the $37 million Gaston Middle School in southwest Fresno, the district wasn’t using the financing method the way the law intended.

Since the state Supreme Court denied Fresno Unified’s request to review the 5th District opinion last month, school districts have backed away from the leaseback method, including L.A. Unified, which has spent billions on leaseback contracts in recent years.

But Sanger Unified Superintendent Matt Navo said his district has primarily used the leaseback financing method for several years, and it’s not going to stop now. No court has said the leaseback method itself is illegal; Navo said his district’s use of leaseback contracts is not the same as Fresno Unified, even though they involve the same players.

Sanger Unified is “stretching its bond dollars” to pay for projects and plans to pay back Harris Construction in increments over time – like the law intended, Navo said. Harris also is not providing any preconsulting work on the Sanger project.

Stephen Davis, the Fresno contractor who took Fresno Unified to court, alleged that the district broke conflict-of-interest laws because it hired Harris Construction as a consultant on the project that it later was awarded.

“Our board has had such poor experiences with the traditional bidding process. … As far as I can remember, we’ve done a lease-leaseback process with our construction projects. We have really been able to build very efficiently and with the best quality when we’ve done it this way,” Navo said. “In review with our legal counsel, we feel it is legally sound and within the spirit of the law and there’s no reason to stop.”

Neither Harris nor Bush construction firms have responded to calls about the federal investigation. Navo said the two firms’ involvement with the grand jury will not prevent his district from working with them in the future.

“We’re not going to shy away from what we think is best for kids because Harris and Fresno Unified have something going on. … We feel like, quite honestly, that FUSD, us and all other districts that deal with lease-leaseback have been doing this for the right reasons and in the right manner,” Navo said. “I don’t think we’re going to not do business with Harris because they have this distraction going on. That’s not fair.”

Fresno County Superintendent Jim Yovino sent a memo to superintendents earlier this month saying leaseback agreements remain a legal project-delivery method for districts, but that districts must comply with the components of the method recently addressed by the court.

“Absent any additional legislation or subsequent legal challenges that change the law applicable to lease-leaseback arrangements, the 5th Appellate District Court of Appeal’s published opinion is law and school districts must comply with it when utilizing lease-leaseback arrangements,” Yovino said. “The project delivery method will be determined on a project-by-project basis.”

But the Howard Jarvis Taxpayers Association is monitoring school districts’ use of leaseback contracts in the midst of the Fresno Unified case and is advising officials to stay away from the practice for now, said Jon Coupal, the group’s president.

“I think it would be foolish for any school district to proceed within those parameters until the law is resolved. I think they’re opening themselves up for all kinds of potential problems,” Coupal said. “Why would you want to subject your taxpayers to the risk of what may be an illegal contracting procedure?”

This story was originally published September 24, 2015 at 5:44 PM with the headline "Sanger Unified defends use of no-bid contracts."