Video: Fresno Unified’s Hanson reports on lease-leaseback construction contracts
Despite Fresno Unified’s claims that Harris Construction was not favored to win multimillion-dollar contracts that are now under federal investigation, emails obtained by The Bee show that the developer and district officials discussed no-bid projects long before the school board approved them. And now some trustees are questioning whether the relationship between district and Harris officials was too cozy.
According to emails from 2011 – requested by The Bee under the Public Records Act – school district officials exchanged “lease-leaseback” contracts with Harris Construction officials prior to board approval and held lunch dates with the company’s vice president, Mike Spencer. Spencer also invited district officials for a glass of wine and offered deluxe seats to a Grizzlies baseball game.
While Fresno Unified Chief Operations Officer Karin Temple has contended that emails exchanged with Harris Construction are standard business practices, some trustees for the district say the emails paint an unsettling picture of district officials’ relationship with the developer.
On Aug. 5, Spencer emailed Lisa LeBlanc – the former Fresno Unified facilities executive who now oversees operations at the Contra Costa Unified School District – asking how Fresno Unified’s legal review of leaseback contracts was proceeding.
“From what I can see, we are going to be moving and shaking on Roosevelt in 60 days, which means we’ll be out to bid within 30. Obviously, you see where I am going? We probably need that agreement finalized in the next 2 weeks,” Spencer said.
The fox went deeper into the henhouse than anyone ever knew.
Fresno Unified Trustee Brooke Ashjian
LeBlanc responded later that day, telling Spencer she would provide him with the district’s version of a leaseback contract “so you can at least begin looking at the language.” On Aug. 8, LeBlanc sent to Spencer leaseback documents that had been approved by legal counsel.
“Please review and let me know if you have any questions,” LeBlanc said. Spencer responded, “Thank you for getting us these forms in advance.”
Harris Construction was not officially awarded the leaseback contract for Roosevelt High until a school board meeting on Nov. 2.
“The fox went deeper into the henhouse than anyone ever knew. When you’re talking about wine and baseball games and cutting deals, this is not how I envisioned the public works bidding process. Nobody does public work like this,” Fresno Unified Trustee Brooke Ashjian said Wednesday. “What’s the truth? Everybody knows what happened; just quit spinning it. We called for an independent investigation and they shut it down, and now we know why.”
Fresno Unified’s leaseback contracts with Harris and Bush construction firms are being investigated by a grand jury. The leaseback financing process allows school districts to avoid the traditional low-bid process and instead handpick a contractor.
At stake were contracts with Harris valued at nearly $115 million in taxpayer funding.
‘Standard business practice’
On July 11, 2011, Spencer wrote Temple an email with a preconstruction services agreement attached, referencing a Bullard High School project that the board did not actually award to the firm until May 2012.
“We think it has all the elements in it that allow us to move right into a lease-leaseback agreement when the time comes, which I think, knowing the needs of Bullard, is fairly soon,” Spencer said. “Second attachment is very straightforward lease-leaseback methodology. Of course, we have volumes on ‘how’ the partnerships of lease-leaseback work – and you and I have talked about it a number of times.”
Temple thanked Spencer and said she would review it.
But Temple and other district officials have said there was no foul play in the Harris Construction dealings.
Last month, when asked about another email – sent July 15 – in which Spencer says “We are absolutely a go” on several school construction projects he had not yet been officially awarded, Temple said she couldn’t speculate on what the email meant.
The emails released Monday show that on July 19, Temple responded to Spencer saying, “Many thanks to you and Harris Construction for what we anticipate will be an excellent partnership on these important projects for the schools and the community.”
Preconstruction agreements have been criticized because they allow contractors to provide consulting services on projects they can be later awarded. While Temple has said that there are no guarantees and that “a preconstruction agreement does not equal a lease-leaseback,” in each of the 15 preconstruction agreements posted to Fresno Unified’s website, the contractor that performed consulting services also ultimately handled the general project.
The phrase I’ve heard over and over is that this is common business practices. If it is, then we need to revise that.
Fresno Unified School Board President Luis Chavez
Temple said last month that conversations with Harris Construction were merely to determine whether the firm was “willing and able” to take on the projects.
On Tuesday, Temple again pointed to contract language that says deals are subject to school board approval and said the email exchanges don’t mean otherwise. She said the district followed the same process with all 25 of the leaseback contracts it approved. When asked about the emails, Temple said, “Communicating with pre-qualified contractors is standard business practice.
“These communications allow staff to assess a pre-qualified contractor’s suitability, willingness and capacity for a project,” Temple said in an email Tuesday.
School Board President Luis Chavez said it’s time for things to change.
“The phrase I’ve heard over and over is that this is common business practices. If it is, then we need to revise that,” he said. “We’re going to have to sort this out and look at the restrictions and parameters for staff.”
Ultimately, Harris Construction received nine of 25 leaseback contracts awarded by Fresno Unified. Those nine included the three most expensive: a $37 million project on Gaston Middle School, (which is being contested in court by another contractor), a $34 million Bullard High School project and a $19 million Fresno High School project.
The majority of projects awarded to Harris Construction were funded by Measure Q, a bond voters passed in 2010. Harris Construction and owner Richard Spencer – Mike Spencer’s father – contributed the most donations to the Measure Q campaign. Richard Spencer also donated to school board members’ election campaigns.
Too close for comfort
Temple pointed to a list of 14 contractors that the school board voted to pre-qualify for leaseback projects and said those votes gave officials the green light to talk with contractors about potential projects. Therefore, any of the 13 other contractors on the list could have been awarded the projects in question, Temple said.
The school board received a memo on March 15, 2011, that the district was requesting qualification statements from contractors for leaseback services on future facilities projects, and the district publicly advertised a notice to bidders several days earlier.
On May 17, days before the school board officially approved that list of pre-qualified contractors, Fresno Unified Purchasing Manager Edward Collins sent Spencer a link to the board meeting agenda, directing him to the list.
Six days later, Tim Marsh, then president of Harris Construction, asked LeBlanc whether he should attend the meeting, and he offered to forward a leaseback contract to her to review.
LeBlanc said it wasn’t necessary for him to attend, but added, “yes, I would like to see your typical agreements. Any information on (how) the bidding process has been structured would also be helpful.”
That’s not the only time Harris Construction offered advice to district officials on how to handle business.
In an email in July of the same year, Mike Spencer talked about a certain contract clause, telling Temple, “You will want to make it a permanent policy for all of your lease-leaseback agreements (if I can suggest).”
In an email on April 25, Spencer questioned that an Addams Elementary School project had been publicly advertised by the district to bidders. In a proposal on April 18, Harris Construction had provided an estimate for work on Addams and other schools, saying “should these projects result in a construction contract, these estimating service fees will be reversed and made part of the fee for construction services.”
We can grab a glass of wine in my office or Fig Garden. I’m serious – whatever you’d like.
Harris Construction’s Mike Spencer to Fresno Unified’s Karin Temple
“Do you still want ‘estimating services’ on this school?” Spencer wrote to Temple and LeBlanc in the email, pointing to the advertisement for bids. “If the drawings have been released and are now in the hands of contractors, it is tough to value-engineer them and find real savings in the constructability review process – at least to have those savings captured prior to the bid. Are the other schools planned to go out to hard bid? If so, we need to move quickly. Do you have those dates?”
Ultimately, the Addams Elementary project was not awarded to Harris Construction and was not done via a leaseback contract.
Chavez said he was concerned about Spencer overstepping his authority.
“It appears that Harris is basically schooling our staff on the leaseback process,” he said. “Instead, it should be our folks outlining the terms and conditions.”
The emails also show that Spencer and Fresno Unified officials held multiple meetings and lunch dates.
“We can grab a glass of wine in my office or Fig Garden. I’m serious – whatever you’d like,” Spencer wrote to Temple on April 15.
In an email sent Aug. 1 to LeBlanc, Spencer writes, “Thanks again for lunch last week – that was really fun … You ladies are entertaining.”
Temple said Tuesday that she didn’t accept that invitation for the glass of wine and that she paid for her own meals. LeBlanc did not comment.
Spencer also offered Fresno Unified project managers Lincoln Owensby and Tim Patterson – who oversaw projects awarded to Harris Construction – access to the CRU Club, the indoor restaurant/bar at Chukchansi Park sponsored by Richard Spencer’s wine company. Harris Construction and Superintendent Michael Hanson, as well as Fresno Mayor Ashley Swearengin, were involved in a “Fresno Unified night” at the ballpark around the same time, which celebrated the passing of Measure Q.
Chavez said that any gifts accepted from a contractor would have to be reported.
“The relationship between the district and a contractor should always remain at the professional level. I don’t know if there was a friendship, but there needs to be a buffer between the person overseeing the contracts and the contractor,” he said.
Attorneys for Fresno Unified released more than 350 pages of emails on Feb. 29 in response to a request made on Dec. 1 by The Bee for certain emails exchanged between district and Harris Construction officials. The district withheld some of those records, citing several exemptions, including student privacy and pending litigation. The district did not disclose how many records were withheld.