PUBLISHED January 2016
This case addresses the same basic two questions addressed in Davis v. Fresno USD: (i) whether Government Code section 1090 applies to corporate consultants and (ii) whether the lease-leaseback agreement at issue in the case is proper. The ELA amicus brief just focused on the latter question. The ELA first argues that Davis was wrongly decided. But the ELA also argues that, if Davis was properly decided that the specific lease-leaseback agreement at issue in this case was legal. Specifically, the fact that the lease-leaseback agreement did permit the district to use and occupy the site during the term of the lease and could even withhold payment if there was “substantial interference with the use of right of possession by the [d]istrict.” (The ELA filed a similar brief in California Taxpayers Action Network v. Tabor Construction, Inc. and Mt. Diablo USD.)
The ELA filed an amicus brief on January 4, 2015, in support of the district.
UPDATED May 2016
Adequate school facilities are essential in providing a 21st century education for all of California’s students. Facilities construction and modernization financing have been the subject of legal disputes recently, with California courts reaching differing conclusions. Specifically, the use of lease-leaseback arrangements instead of the competitive bid process for construction continue to generate litigation.
In McGee v. Balfour Beatty Construction LLC et al., a case in which CSBA’s Education Legal Alliance filed an Amicus (friend of the court) brief on behalf of defendant Torrance Unified School District, the appellate court ruled that pursuant to Education Code 17406, a valid lease-leaseback contract only requires that the real property leased be owned by the district, the contractor agree to a guaranteed maximum price, and title to the site and improvements on it will vest in the district at the end of the lease.
The holding in McGee conflicts with a recent ruling on a similar issue in Davis v. Fresno Unified School District, where the court ruled that a valid lease-leaseback arrangement must involve a "genuine lease" which includes a financing component and must provide for district occupancy of the building or improvement during the term of the lease.
While the courts differed in McGee and Davis on what constitutes a valid lease-leaseback contract, they agreed on the question of whether Government Code 1090, which prohibits officers and employees from having a financial interest in a contract they make on behalf of a public agency, applies to corporate consultants. Unequivocally, both McGee and Davis said yes.
It is anticipated that the plaintiffs in McGee
will petition the California Supreme Court for review.