Last year, a 5th District Court of Appeal ruling put millions of dollars in payments to contractors who worked on school construction projects under no-bid contracts in jeopardy.
This week, California Assembly’s committee on education advanced a bill that would protect those payments even if they’re deemed illegal because of a conflict of interest.
Unlike typical public-works projects, so-called lease-leaseback projects have allowed schools to forgo competitive bidding and merely choose the contractor they want. The district then leases property to the contractor for $1 a year, while the contractor builds improvements. The contractor then collects lease payments from the school district for up to 40 years until the project is paid off.
But school districts haven’t been treating the deals like true leases. Instead, they’ve paid contractors in full upon completion of a project like a normal construction job. That’s illegal, the 5th District decided in Davis v. Fresno Unified School District.
The Davis decision – and another this year in the 2nd District Court of Appeal – also bolstered state conflict-of-interest laws, ruling corporate consultants cannot help make contracts they profit from.
If lease-leaseback contracts are successfully challenged and invalidated in court, contractors could be forced to repay districts all the money received.