Photo by Sam Hodgson
Construction is under way on new facilities at Montgomery Middle School.
In researching our story on the correlation between school bond campaign donors and bond-funded contracts, Wendy Fry and I came across several stories related to this issue in California and elsewhere.
Along the way, we compiled a reading list of the most compelling and informative pieces we found on this complicated issue. We’ve shared a few of those stories below.
• California Watch focused in May on the role of bond underwriters in school bond campaigns.
In only five cases since 2007 has a campaign donor failed to receive a bond-selling contract from the school district.
School districts say they choose bond underwriters for their expertise and competitive rates and because they’ve served them well in the past. And underwriting firms say they contribute only after they’ve been hired to sell the bonds, avoiding any undue influence.
But critics say that no matter when the agreement is made, the campaign donations influence school districts’ business decisions. They argue that pre-arranged underwriting contracts bypass a truly competitive sale, leaving in doubt whether districts got the best possible deal.
• The Denver Post, covered the same issue in Colorado, where bond underwriters are similarly active in funding school bond campaigns.
The Denver Post analyzed 15 successful Colorado bond campaigns backed by large contributions from investment banks. In every case, the bank that helped finance the campaign sold the bonds.
The Post found that individual school districts took as much as $137,500 from a single bond company, and that in six of the 15 campaigns, bond company donations amounted to a majority or nearly half of all contributions.
• The Bond Buyer, a trade magazine that covers public finance, examined in 1999 a possible move by the Municipal Securities Rulemaking Board, (a federal regulator of the bond market) toward stricter rules on political giving by underwriters. In 2010, the Securities and Exchange Commission approved a new MSRB rule requiring municipal bond dealers and banks to publicly disclose any contributions to bond ballot initiatives.
The MSRB’s discussion on contributions for bond ballot measures will address a series of complaints in recent years about contributions made to campaign committees that promote voter approval of bond ballot measures. Voter approval is required in many state and local jurisdictions. And critics claim broker-dealers that contribute heavily to the ballot measures for new bonds often are given key roles in the bond transactions.
• And here’s the Contra Costa Times investigating the same issue in 2010. This one focuses on the attempt by then-state Sen. Roy Ashburn to pass legislation barring underwriters from making contributions to school bond campaigns.
To restrict underwriters from donating or working on bond campaigns — and possibly having an advantage over firms that don’t — state Sen. Roy Ashburn, R-Bakersfield, proposed SB 623. The bill died last month in committee, but Ashburn, who is leaving office this year because of term limits, said he will try to attach it to the state budget as a trailer bill.
“It is ethically wrong,” he said. “It is a despicable process, and it should be stopped.”
State Sen. Mark DeSaulnier, D-Concord, voted against the bill. He said he’s not entirely opposed to it; instead, he just wants more time to study it.
“The bill was a close call for me,” he said, “but I would like to make sure that I understand what the problem is to make sure the bill is worded correctly, so we’re getting after the problem.”
• One district that wasn’t included in our story is the San Diego Unified School District — we didn’t find a compelling pattern there between donors and companies that were awarded contracts.
However, two companies that made large donations to the district’s campaign for Proposition S in 2008 fell under scrutiny after they were awarded a no-bid $12 million construction management contract on the bond last year.
Those companies, which joined together for the contract, dissolved their partnership four months later, a turn of events examined in this San Diego Union-Tribune story last March.
Gafcon-Vanir secured the contract in November. Out of six finalists, the partnership had the lowest-scoring proposal in the first round of the process, based on paperwork and qualifications.
The six finalists proceeded to an interview process, consisting of a 10-minute presentation and 35-minute question-and-answer session. Gafcon-Vanir succeeded at that level.
Gaffen had political ties to one of the five members of the selection committee — Andy Berg of the National Electrical Contractors Association. Gaffen served on the campaign committee for the unsuccessful 2010 school district parcel tax measure, Proposition J, which Berg chaired.
Gaffen issued a statement for this story emphasizing his firm’s experience. Berg said the high interview scores he gave Gafcon were based on merit — not politics.
Correction: An earlier version of this post said the MSRB had not tightened federal rules on donations from underwriters. Those rules were tightened in 2010.
Will Carless is an investigative reporter at Voice of San Diego currently focused on local education. You can reach him at email@example.com or 619.550.5670.
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