The Morning Report
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When Poway Unified approved a contract with financial firm Dolinka Group in 2014, it did so with the understanding the deal would “not exceed” $625,000.
Halfway through the five-year deal, Dolinka Group has already made $1.27 million on the contract – double the amount publicly authorized by the school board.
The contract authorized Dolinka Group to provide consulting for Poway’s Mello-Roos Community Facility Districts – a special district created with property owner approval that lets Poway Unified collect money through an extra tax.
Poway staff now say the fee cap was actually an annual amount, so the board really approved a $3.1 million contract in February 2014.
That’s news to board member Kimberley Beatty, who recently asked staff to tally the payments made under the contract. The figure does not include separate payments to Dolinka for help completing bond sales.
“It’s an extraordinary amount of money, for one. And second, there is a lack of transparency,” Beatty said in an interview. “I think this warrants an audit.”
At least two of her board colleagues said they’d support a review.
“I think it bears scrutiny if for no other reason than the grossness by which it has exceeded the estimate,” said board member Charles Sellers.
“I’d fully support such an audit. If Dolinka has been overpaid, the District should own that mistake and correct it however possible,” board vice president T.J. Zane wrote in an email.
CEO Benjamin Dolinka did not respond to requests for comment.
Poway staff declined to say whether their interpretation of the Dolinka contract means all other multiyear “not to exceed” contract totals approved by the board are really annual amounts, not totals.
During last week’s board meeting, Sellers offered up another vendor’s contract as a point of comparison, showing a “not to exceed” amount was paid out incrementally over the term of the contract – not annually.
“We have an amount and a term and it seems pretty black and white,” Sellers said in an interview.
Warren Diven, the district’s bond counsel, told the board last Tuesday he was not familiar with the board documents, but that Dolinka’s contract has no limit.
Beatty, who was elected in 2012, did not attend the 2014 meeting when the Dolinka contract was approved. The exact contract price was not discussed, according to an audio recording of the meeting, although one board member asked if it would be more cost-effective to bring the work in-house instead of outsourcing it to Dolinka. Staff said no.
Neither board member Andy Patapow – who approved the Dolinka contract – nor board President Michelle O’Connor-Ratcliff responded to inquiries.
As Poway’s Mello-Roos administrator, Dolinka tracks student enrollment and projects it into the future, assigns tax rates, negotiates with developers and recommends when and how to sell more bonds to pay for new infrastructure in certain areas of the district.
Dolinka also works as a consultant on Poway’s multimillion-dollar Mello-Roos bond sales, earning tens of thousands more on the bond sale it helped create – posing a potential conflict of interest. The firm has also served as financial adviser on other bond sales, including Poway’s notorious $1 billion capital appreciation bond deal in 2011, which sparked changes to state law.
“I don’t want to put any more money in Benjamin Dolinka’s pocket since he was the primary architect of the CABs,” said Sellers.
Efforts to remove the firm from the district’s employ have so far been unsuccessful. District staff – including Superintendent John Collins, who is currently on paid administrative leave pending an audit of his employment contract – have defended Dolinka and advised against making any changes.
Separate from the $1.27 million at issue, Dolinka made at least another $1.67 million for work on 18 different Poway bond sales between 2010 and 2015. Dolinka is poised to make another $150,000 next month for special tax consultant work.
Dolinka has also overseen San Ysidro School District’s Mello-Roos program in recent years. That program, and other San Ysidro bond debt, was recently dinged by the San Diego County Grand Jury for double payments to vendors, scant documentation and other problems. The report didn’t say which firm may have been overpaid.