Maybe SUHSD board members and administrators should have lunch meetings with bond oversight committee members instead of contractors. And the meetings should be on school property, with everyone bringing their own bag lunch. Contractors shouldn't be involved with board members in any way, shape or form.
Sweetwater's gathering storm
By Susan Luzzaro
The San Diego Reader
Jan. 30, 2013
Clouds hanging over the Sweetwater Union High School District have gathered into a storm. Four sitting board members, a former board member, and a former superintendent have been indicted. And serious financial woes may soon threaten the district.
At the December 2012 board meeting, Rick Knott, interim chief financial officer, gave a presentation to the Sweetwater board that enumerated signs pointing to serious financial challenges for the district. He prefaced his remarks by saying, “I’m not saying we are at risk, but we have some of the factors that could indicate a district getting into a difficult situation.”
At Sweetwater’s December board meeting, member Rick Knott presented a troubling financial picture of the school district.
Deficit spending was the first issue Knott addressed: “This district has a history of spending more money than we take in,” he said.
The deficit spending bomb is set to explode in 2015. Even with the benefits of Proposition 30 factored in, the district is still in trouble. Knott warned that in 2015, “We will have a negative fund balance, meaning we will have more obligations than we have assets.”
On January 18, in a follow-up interview, Knott said his presentation was meant to be a warning to the board and the public. He explained that the chronic overspending is a result of state revenue streams shrinking and the district’s reluctance to cut programs or lay off staff.
Another predictor of poor fiscal health Knott presented in December was the district’s cash-flow problems. “We also have not had sufficient cash to meet our obligations on a timely basis, and we’ve had to borrow from other funds.”
In a 2011 article, U-T San Diego drew attention to the fact that the district was borrowing from Proposition O funds. (Proposition O was a $644 million construction bond passed in 2006.) The district borrowed $40 million from the fund intended to modernize schools in order to pay for day-to day-operations. Following public outrage over this borrowing, the district backed off from borrowing an additional $58 million.
The district then turned to borrowing from Mello-Roos funds to make payroll. There are 17 Mello-Roos (or community facilities districts) in Sweetwater. Property owners in these districts pay additional property taxes to help fund public infrastructure and services.
The district’s continued borrowing from Mello-Roos funds has caused hard feelings in the community. Even though the money is paid back, Mello-Roos-paying residents believe their money is not being spent the way it is intended and that Mello-Roos-funded schools are being short-changed and falling into disrepair.
A sound household budget has accounts set aside that anticipate the future. But according to Knott’s report and the follow-up interview with him, the district has not been putting money aside for maintenance; he used leaking roofs by way of example. Nor has money been put aside to replace the district’s aging fleet of buses. They also failed to put money aside for elections. (Knott says he has addressed these problems in the new budget.)
Another way to assess the health of Sweetwater’s budget is by comparing it to the Chula Vista Elementary School District’s budget. Sweetwater and Chula Vista have essentially the same tax base and the same Mello-Roos districts.
Anthony Millican, Chula Vista elementary’s spokesperson, discussed in a January 17 email how his district handles budget challenges similar to Sweetwater’s.
On roof repair and such: “We regularly set aside two percent of our total expenditures as a budget for routine maintenance.”
On elections: “When we know a board member election is coming up, we set aside an amount for the cost of holding the election. We allocate about $51,000 for board member elections. This year (2012) we also allocated $53,000 for the Prop E election. That is the cost that we pay to the Registrar of Voters for holding such elections.”
Another contrast between the two districts is their budget reserves. The state recommends that a district have at least 3 percent in reserve. According to Knott, Sweetwater has 3 percent, or $7 million. Millican writes: “Our ending balance reserves are 19.18 percent, well above the state’s recommended three percent minimum requirement. That is $37.3 million in dollar terms.”
In his December presentation, Knott went on to advise the board that a district is in trouble when it has a combative relationship with oversight agencies. While Knott’s comment was not specific to Sweetwater, the district has had a combative relationship with the Proposition O bond oversight committee. The committee acts in an advisory capacity to the district on expenditures from the $644 million bond construction money. At one time, the bond oversight committee passed a no-confidence vote “on [Superintendent Ed] Brand’s interactions with the committee.”
After Knott’s presentation, the board voted to certify the district’s solvency. But since then, others have spoken out regarding Sweetwater’s financial issues.
Nick Marinovich, the committee’s chair, said in a January 20 interview that he finds it a struggle to obtain the financial documents the committee needs in order to do adequate oversight. Marinovich brought up the Voice of San Diego’s August report on capital appreciation bonds that will cost Poway residents $1 billion to borrow $105 million.
When Marinovich asked district representatives if Sweetwater had any capital appreciation bonds, he says he was led to believe they did not. But he later discovered the district does have capital appreciation bonds related to Proposition BB (a $187 million bond in 2000). While the bonds do not have the devastating interest rates Poway’s have, Marinovich says the issue points to the district’s lack of forthrightness.
Kevin O’Neill, also a bond oversight committee member, brought forward another financial concern during a January 20 interview. In November 2012, the board gave the green light for the district to seek a $38 million bond-anticipation note. A bond-anticipation note is a short-term bridge loan, according to O’Neill. It comes due in five years or less. Such loans are given in anticipation of increased bond money coming in as assessed property values rise. O’Neill is concerned that Sweetwater might be buying more financial woes if assessed values do not rise before the note comes due, in which case the debt will have to be paid from the general fund.
O’Neill believes that the district should hold off on construction projects for the time being. However, Knott says the district is going to market on the bond-anticipation notes in February.
Showing posts with label . Marinovich (Nick). Show all posts
Showing posts with label . Marinovich (Nick). Show all posts
Wednesday, March 20, 2013
Saturday, January 28, 2012
When the Trouble Started for Sweetwater Schools
Bond money seems to have gone up in smoke in other school districts, but Bonnie Dumanis focuses on Chula Vista Democrats. Why?
When the Trouble Started for Sweetwater Schools
January 23, 2012
By Rob Davis
The construction company's website implicitly acknowledges the potential for public officials to abuse their posts. But the Seville Group says it stands above that. Integrity isn't just a buzzword, its About Us page says. Ethics are at the core of the company's existence. Without ethics, there is only failure.
Click on the company motto — Edge, Execute, Excel — and its principles appear.
"We have a simple test," it says. "Before you make any decision on behalf of the company ask yourself these questions: Is it illegal? Is it immoral? Is it unethical? Is it stupid? Most public officials who get into trouble should have answered ‘yes' to one of these questions. The same is true for companies that work for public agencies."
Trouble started for the Sweetwater Union High School District on a spring evening in 2007, with what seemed like a routine decision on an innocuous agenda item involving Seville. Months earlier, voters had approved borrowing $644 million to modernize the South Bay school district's buildings. Now, the public agency overseeing the South Bay's middle and high schools had to choose someone to oversee all that spending.
The selection process had been exhaustive, board members were told. Then-Superintendent Jesus Gandara recommended what he said was the top firm: a joint venture of Seville Group and another company, Gilbane. The board hired the venture and handed it $7.5 million in work.
But Gilbane/Seville hadn't initially been the top firm. The district's internal ratings were tossed out. That happened routinely.
The district's decision to hire Gilbane/Seville — and later to give it even more work — brought instant criticism, even allegations of corruption. Now, five years later, it has led to criminal charges, in what District Attorney Bonnie Dumanis says was a pervasive pay-to-play scheme.
At the same time Gilbane/Seville leapfrogged another company ranked higher, it bestowed its largess on officials handing out tens of millions in contracts. Court records show that Gandara, who recommended the company, saw "Jersey Boys" with a Gilbane contractor and was treated to expensive dinners at restaurants across the region.
When Gandara's daughter competed for the title of Miss Texas, where they lived previously, the contractor, Henry Amigable, stepped forward with a $1,000 sponsorship, court documents say. When then-board member Greg Sandoval's daughter vied to become Miss South County, Amigable wrote a $500 check, records show. Gandara, Sandoval and two current Sweetwater board members — Pearl Quiñones and Arlie Ricasa — all face felony charges of failing to report numerous gifts from contractors.
The case strikes at the heart of the South Bay political establishment. Beyond those charged, investigators have searched the home of Bertha Lopez, a Sweetwater trustee whose husband, Jose, is the Otay Water District's president. They've also searched the homes of two former Southwestern College officials, Nicholas Alioto and John Wilson.
Investigators have interviewed the mayors of Chula Vista and National City, county supervisors and a San Diego city councilman. Jaime Bonilla, another Otay Water District board member, is also mentioned in search warrants; Bertha Lopez and Seville employees had an appointment to dine at his house.
The case has widely been publicized as a bribery investigation. Dumanis has said the officials accepted "what amounted to bribes." But only one person faces a bribery charge, Gilbane's former employee, Amigable.
Prosecutors haven't charged anyone with receiving bribes. School officials instead are charged with failing to report gifts and filing false gift disclosure forms, both felonies. Prosecutors have also leveled lesser misdemeanors, alleging the school leaders had a personal financial interest in their decisions.
The circumstances speak to the unseemly side of politics, a world where gift-giving, influence peddling and campaign donations are all routine and legal — to a point. Politicians across the county regularly receive campaign funding from lobbyists and contractors doing business with their agencies. It's how the system works.
California law allows public officials to accept up to $420 in gifts annually from businesses and people working with their agencies. The gifts have to be disclosed, and they can't be explicitly traded for someone's vote. Prosecutors say the Sweetwater officials far exceeded gift limits, taking thousands without reporting it on state forms submitted under penalty of perjury.
The case also shows how a typically unseen influence game is played. One example: Prosecutors say Southwestern College's Wilson fed inside information to one construction company, recommended the firm for a job, retired a month later and then went to work for it. No charges have been filed related to it, though Dumanis has said more charges could be forthcoming in the case.
Prosecutors haven't disclosed everything that they uncovered while executing search warrants in December. But the evidence they have released so far connecting the gifts to favorable votes is largely circumstantial.
Weeks before Gilbane/Seville got that Sweetwater contract, Quiñones went to Seville's president for a favor. Quiñones was prepping for a bigger political stage and wanted a resume builder.
She asked Rene Flores Sr. to contact then-Assemblyman Joe Coto, D-San Jose, on her behalf, court records show, and sent Flores her resume. "[H]ope you can help me with this... it is really important to me," she wrote.
Flores forwarded the resume to Coto, according to emails released by prosecutors, telling the assemblyman he hoped he would find Quiñones "an appropriate compensated commission where she might serve the State of California." Quiñones was considering running for state office, Flores said, and hoped to raise her profile and make more public appearances.
As the vote on Gilbane/Seville neared, court records show Flores emailed Quiñones to say he was trying to set up a meeting with Coto. "And again, I want to thank you very much for your support," Flores wrote.
Quiñones replied that she could meet a couple of weeks later. "Please let me know..." she said, "and also I support those that support me!"
Questions about impropriety arose from the moment the deal with Gilbane/Seville was struck in 2007.
Nick Marinovich, a contracting expert who served on an earlier construction oversight committee, publicly questioned the school board's decision to hire Gilbane/Seville.
Marinovich had spent nearly three decades overseeing public construction projects for San Diego County. He knew how contractors were supposed to be selected — with a process free of political influence, without top executives getting involved.
But Gandara had participated and recommended Gilbane/Seville, even though another venture, Harris/Gafcon, ranked higher and was drawing good reviews as the district's current construction overseer. So Marinovich went to the board and lodged his criticism. The reaction? "Indifference," Marinovich said.
"It didn't pass the smell test," he said in a recent interview. "It was really just a gut level reaction."
Community concerns persisted. A 2008 San Diego County Taxpayers Association report urged more transparency for Sweetwater's construction hiring, noting that any questions about Gilbane/Seville could've been avoided if the district had been open about its reasons. The report noted that at least one unnamed community member was worried about possible corruption.
Gandara had repeatedly intervened in the district's selection process for construction companies. A 2009 voiceofsandiego.org investigation found that lower-ranked firms were routinely picked. One law firm, Garcia, Calderon & Ruiz, was hired even though it rated last out of four firms. The internal rankings were often disregarded, the investigation concluded, making it difficult to determine why the district hired the firms it did. Both Seville and the law firm have since had their work suspended. Seville says it isn't a target of the D.A.'s investigation.
Concerned parents routinely went to board meetings throughout 2009 and 2010, criticizing the board for its oversight of construction spending and for accepting campaign donations from companies working for the district. One parent, Stewart Payne, said he thought the board's behavior was strange enough that he went to the FBI in early 2011. Then he and other parents went to the district attorney.
"I just said: Something's wrong here, I don't know what it is, but something's not making sense," Payne said. "Something was just wrong."
When the Trouble Started for Sweetwater Schools
January 23, 2012
By Rob Davis
The construction company's website implicitly acknowledges the potential for public officials to abuse their posts. But the Seville Group says it stands above that. Integrity isn't just a buzzword, its About Us page says. Ethics are at the core of the company's existence. Without ethics, there is only failure.
Click on the company motto — Edge, Execute, Excel — and its principles appear.
"We have a simple test," it says. "Before you make any decision on behalf of the company ask yourself these questions: Is it illegal? Is it immoral? Is it unethical? Is it stupid? Most public officials who get into trouble should have answered ‘yes' to one of these questions. The same is true for companies that work for public agencies."
Trouble started for the Sweetwater Union High School District on a spring evening in 2007, with what seemed like a routine decision on an innocuous agenda item involving Seville. Months earlier, voters had approved borrowing $644 million to modernize the South Bay school district's buildings. Now, the public agency overseeing the South Bay's middle and high schools had to choose someone to oversee all that spending.
The selection process had been exhaustive, board members were told. Then-Superintendent Jesus Gandara recommended what he said was the top firm: a joint venture of Seville Group and another company, Gilbane. The board hired the venture and handed it $7.5 million in work.
But Gilbane/Seville hadn't initially been the top firm. The district's internal ratings were tossed out. That happened routinely.
The district's decision to hire Gilbane/Seville — and later to give it even more work — brought instant criticism, even allegations of corruption. Now, five years later, it has led to criminal charges, in what District Attorney Bonnie Dumanis says was a pervasive pay-to-play scheme.
At the same time Gilbane/Seville leapfrogged another company ranked higher, it bestowed its largess on officials handing out tens of millions in contracts. Court records show that Gandara, who recommended the company, saw "Jersey Boys" with a Gilbane contractor and was treated to expensive dinners at restaurants across the region.
When Gandara's daughter competed for the title of Miss Texas, where they lived previously, the contractor, Henry Amigable, stepped forward with a $1,000 sponsorship, court documents say. When then-board member Greg Sandoval's daughter vied to become Miss South County, Amigable wrote a $500 check, records show. Gandara, Sandoval and two current Sweetwater board members — Pearl Quiñones and Arlie Ricasa — all face felony charges of failing to report numerous gifts from contractors.
The case strikes at the heart of the South Bay political establishment. Beyond those charged, investigators have searched the home of Bertha Lopez, a Sweetwater trustee whose husband, Jose, is the Otay Water District's president. They've also searched the homes of two former Southwestern College officials, Nicholas Alioto and John Wilson.
Investigators have interviewed the mayors of Chula Vista and National City, county supervisors and a San Diego city councilman. Jaime Bonilla, another Otay Water District board member, is also mentioned in search warrants; Bertha Lopez and Seville employees had an appointment to dine at his house.
The case has widely been publicized as a bribery investigation. Dumanis has said the officials accepted "what amounted to bribes." But only one person faces a bribery charge, Gilbane's former employee, Amigable.
Prosecutors haven't charged anyone with receiving bribes. School officials instead are charged with failing to report gifts and filing false gift disclosure forms, both felonies. Prosecutors have also leveled lesser misdemeanors, alleging the school leaders had a personal financial interest in their decisions.
The circumstances speak to the unseemly side of politics, a world where gift-giving, influence peddling and campaign donations are all routine and legal — to a point. Politicians across the county regularly receive campaign funding from lobbyists and contractors doing business with their agencies. It's how the system works.
California law allows public officials to accept up to $420 in gifts annually from businesses and people working with their agencies. The gifts have to be disclosed, and they can't be explicitly traded for someone's vote. Prosecutors say the Sweetwater officials far exceeded gift limits, taking thousands without reporting it on state forms submitted under penalty of perjury.
The case also shows how a typically unseen influence game is played. One example: Prosecutors say Southwestern College's Wilson fed inside information to one construction company, recommended the firm for a job, retired a month later and then went to work for it. No charges have been filed related to it, though Dumanis has said more charges could be forthcoming in the case.
Prosecutors haven't disclosed everything that they uncovered while executing search warrants in December. But the evidence they have released so far connecting the gifts to favorable votes is largely circumstantial.
Weeks before Gilbane/Seville got that Sweetwater contract, Quiñones went to Seville's president for a favor. Quiñones was prepping for a bigger political stage and wanted a resume builder.
She asked Rene Flores Sr. to contact then-Assemblyman Joe Coto, D-San Jose, on her behalf, court records show, and sent Flores her resume. "[H]ope you can help me with this... it is really important to me," she wrote.
Flores forwarded the resume to Coto, according to emails released by prosecutors, telling the assemblyman he hoped he would find Quiñones "an appropriate compensated commission where she might serve the State of California." Quiñones was considering running for state office, Flores said, and hoped to raise her profile and make more public appearances.
As the vote on Gilbane/Seville neared, court records show Flores emailed Quiñones to say he was trying to set up a meeting with Coto. "And again, I want to thank you very much for your support," Flores wrote.
Quiñones replied that she could meet a couple of weeks later. "Please let me know..." she said, "and also I support those that support me!"
Questions about impropriety arose from the moment the deal with Gilbane/Seville was struck in 2007.
Nick Marinovich, a contracting expert who served on an earlier construction oversight committee, publicly questioned the school board's decision to hire Gilbane/Seville.
Marinovich had spent nearly three decades overseeing public construction projects for San Diego County. He knew how contractors were supposed to be selected — with a process free of political influence, without top executives getting involved.
But Gandara had participated and recommended Gilbane/Seville, even though another venture, Harris/Gafcon, ranked higher and was drawing good reviews as the district's current construction overseer. So Marinovich went to the board and lodged his criticism. The reaction? "Indifference," Marinovich said.
"It didn't pass the smell test," he said in a recent interview. "It was really just a gut level reaction."
Community concerns persisted. A 2008 San Diego County Taxpayers Association report urged more transparency for Sweetwater's construction hiring, noting that any questions about Gilbane/Seville could've been avoided if the district had been open about its reasons. The report noted that at least one unnamed community member was worried about possible corruption.
Gandara had repeatedly intervened in the district's selection process for construction companies. A 2009 voiceofsandiego.org investigation found that lower-ranked firms were routinely picked. One law firm, Garcia, Calderon & Ruiz, was hired even though it rated last out of four firms. The internal rankings were often disregarded, the investigation concluded, making it difficult to determine why the district hired the firms it did. Both Seville and the law firm have since had their work suspended. Seville says it isn't a target of the D.A.'s investigation.
Concerned parents routinely went to board meetings throughout 2009 and 2010, criticizing the board for its oversight of construction spending and for accepting campaign donations from companies working for the district. One parent, Stewart Payne, said he thought the board's behavior was strange enough that he went to the FBI in early 2011. Then he and other parents went to the district attorney.
"I just said: Something's wrong here, I don't know what it is, but something's not making sense," Payne said. "Something was just wrong."
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