Sacramento City Unified School District Bond Oversight Committee History and Performance

Jan 1998 through Nov. 2002

BACKGROUND. In January of 1998 the League learned the Sacramento City Unified School District (SCUSD) was considering another school rehabilitation bond, following defeat of an earlier $225 million bond Measure U, which failed because the community did not believe the District would spend the bond money wisely. The League advised the District that for a future bond Measure they should have a Master Plan assessing the repairs and modifications necessary; agreement that all bond proceeds were to be used for one time spending only; agreement that spending levels of off-set operations and maintenance costs should not be diverted to reoccurring costs such as salaries, but rather used for other one time costs such as computers, bond sinking funds and extra class room construction to support classroom reductions as examples; endorsement of an Oversight Committee as proposed by the Sacramento Metro Chamber of Commerce (SMCC); and other fiscal controls. Our understanding is that in preparing for the bond issue, district staff reduced the original $250 million bond sum to $195 million, without a change in scope of work. As a result, cost figures for the new bond were below the cost of the required work. However, it was anticipated that if the bond passed, the District would be eligible for additional money from local and state matching funds. The overall plan covered a new high school in the Rosemont area, and a school facilities repair program, to be financed by the $195 million bond Measure and other federal and state money. The SMCC, in conjunction with Sacramento Area Congregations Together (ACT) formed a Blue Ribbon Panel to advise the SCUSD on the marketing of the bond Measure. In March 1999, Director Pat Kelly volunteered to become the League observer of the activities of the Panel. A presentation was made to the League Board in June 1999, who questioned the lack of specifics with regard to costs over the term of the bonds, and cost allocations with relation to Capital vs. Operations and Maintenance as bond money became available.

DISTRICT RESOLUTIONS 2070A and 2070B. The District approved Resolution 2070A which ordered the bond election, and set the specifications for the bonds and the manner in which they would be sold. Resolution 2070 B was passed to satisfy critics wherein Item 4 stated, “The district shall fund maintenance and operations as necessary to properly maintain district facilities” to guarantee that the maintenance budget would not be reduced to pay for other salaries.

THE SPECIAL ELECTION. The $195 million bond Measure, if passed was estimated to cost property owners about $46 a year per $100,000 of assessed value. From the outset, facing the requirement of a two-thirds majority vote for bond passage, the District's plan was to use a Special Election, slated for October 19, 1999, which would cost the District about $322,000, as no regular election was scheduled until the following March, which could jeopardize the District's chances for matching funds. Their strategy was to convince election officials to use public school sites as polling places, and to schedule a "Back to School Day" on the same date for parents who would be inclined to vote for school bonds. As was the case with the San Juan School District, they hoped to win support of the Taxpayers League by providing the same provisions for an Oversight Committee (OC) and an independent audit to ensure money was spent on school improvements only. The League's Board, in June 1999 agreed the District's facilities needed extensive repair, and voted to remain neutral with respect to the Measure, leaving it to the voters to decide whether they were willing to encumber themselves with long-term indebtedness. The bond Initiative became Measure E, and was passed in October with 78.3% of the vote.

THE OVERSIGHT COMMITTEE. On November 12th, The SMCC invited the League to join the OC, and Director Pat Kelly, a professional state auditor was selected to represent the League. The limiting responsibilities and purposes enumerated by the district after committee’s formation are:

1. Selection of an independent auditor for the school bond.

2. Receive an annual auditor's report and communicate the findings to the board and general public.

3. Ensure that funds are used only on school building improvements, not district salaries or administration.

4. Provide regular reports to the President of the Sacramento City Unified District Board of Trustees that the expenditures match those promised during the bond campaign. In addition, release these general findings to the general public.

5. Review the district’s maintenance effort to ensure proper maintenance of school buildings after repair and renovation.

6. Review district’s building repair funding plan comprised of local and state bond funds, and other funding sources.

The first meeting of the OC was in January 2000. Despite promises made prior to public vote, bond language merely indicated the only specific task assigned the OC was to ensure that bond money was spent only on construction, not salaries, and the OC’s original leader and district officials seemed to feel that that was its only job. However, other OC members saw the obligation to the public was to warrant that the program was conducted properly. OC members also questioned the basic study and pressed for its revision based on the following: A) The figures had no relevance to the work proposed, B) Figures didn’t account for inflation, C) “Soft costs” (architects, engineers, inspectors, etc.) were far too low, D) There was no criteria for determining the sequence of work, and E) The scope had not been updated to show additions of recent discoveries or deletion of work already done by district maintenance forces in the interim. The Board authorized OC to contract with KPMG for a study. ($12,000 fee). KPMG recommended that district essentially do what OC members had been requesting.

OVERSIGHT PROBLEMS. After the first several meetings, the committee met quarterly, not enough to keep abreast of events and to pursue investigations. Essentially no oversight was accomplished. Recognizing that review of every aspect of every project is not feasible or appropriate, sampled review would have been a responsible approach to oversight responsibility. However, the OC either was denied, or not afforded, the opportunity to perform reviews. The district blunted review efforts by prolonged discussions of format, content and statements that added staff would be required, and requests to see the district's own documents, forms, etc. was entirely turned aside. OC was in contact with only a few managers of the effort. Little knowledge was gained of the broad organization. The OC was not able to identify personnel or procedures used to ascertain scope of projects, selection of consultants (architects, engineers, etc.), contracts with same, review project plans and specifications, review construction contract documents, award construction contracts, inspect construction, authorize payments, authorize change orders, and coordinate with school personnel. OC was unable to review performance or any of the documents mentioned above. OC understood that Architects and Engineers prepared plans. However, a “project manager” was also encountered whose role seemed very broad, but was never spelled out. Fees paid were also not divulged to OC. Also, without knowing the tasks that the consultant “project manager” performed, the OC could not rule out that he was paid from bond money for work that is properly a district cost.

The prioritization of the schools to be refurbished and the elements to be done apparently was decided in an expedient fashion. The process and the criteria used were often not divulged. Detailed lists of the elements in a construction project were not provided to OC and were effectively denied. OC was even not supplied plans or written scope of the projects that members were authorized to visit and were therefore unable to compare contracted work with that listed. Appropriateness of work accomplished was not possible due to the limited information and access granted to OC. OC did not attempt to review the work listed to be accomplished at the individual schools. Casual observation indicated that school personnel were not aware of the distinction between those elements that would logically be contracted (funded by bond money), and those that could be routinely be done by district forces.

A format was finally established and was provided on a few projects long after they were completed. Unfortunately, the reports were not timely and items were, and are, too general in nature. The only reported items are: Total Expenditure, Budget, Amount Over, State Contribution, District Cost and Soft Cost Amount. Copies of district documents such as “Contractor’s Schedule of Values” and “Change Orders”, which would detail expenditures, are not available. Neither were lists of “Soft Costs” (fees of professional consultants and inspectors).

The disposition of bond funds after receipt was not available, nor was account cash flow documents. Details regarding the use of borrowed money and its cost were not disclosed. After almost two years, it seems the OC cannot reasonably stipulate that expenditures match those promised individual schools, and that election goals are being met. The district’s true goal seems to be, “Get money & spend it”, whereas the goal should be, “Spend the money properly”. Further, the maintenance effort review has consisted only of conversations with the district manager. No field verifications have taken place. An example of concerns was reported in the Sac Bee on Oct 3, 2002. The board deleted 3 roofers to help remedy a budget shortfall, saving about $148,000 per year. As quoted, district personnel stated that roofers were not needed since many reroofings had been done with bond money. Deleting district construction related positions has the effect of moving maintenance and construction money to fund other activities, meaning that the work that those maintenance positions would have done must now be done by bond money projects. Effectively, district salaries are being replaced by bond funds to accomplish the work. That’s something the board said that it would not do.

With regard to Rosemont High School, no information of major expenditure of bond money was provided, except the budgeted cost. OC saw nothing of lists of land acquisition consultants, their roles and fees; costs of land, studies and reports (EIR, etc.); site studies and reports; professionals employed and their fees; elements to be included in the school; and the schedule or phasing of the project. Appointments to review sites were difficult to obtain, and information needed to identify work at the site were not available. Communication between the OC and district, and between the chairs and members was not sufficient to keep issues current and meaningful. The feeling is that the OC has not strongly enough sought the information necessary to fulfill its oversight obligation.

COMMITTEE ACCOMPLISHMENTS. All committee members that were active deserve to be acknowledged for their expertise, value, and efforts. That they accomplished so little probably resulted from the original leader’s and the district’s perception of their charge. Despite that, the Committee did prod the district to set in progress a realistic listing of the “Scope of Work” that needed to be accomplished, a proper estimate of the cost of the work, and the establishment of the criteria to be used in determining the order in which the work is to be done. District established the “Facilities Strategic Planning Committee” (FSPC) to accomplish that task. However, the OC had seen no results. OC did sample district’s performance in coordinating work and scope of work with the project school principal, staff and its parent organizations. OC contracted with district’s independent auditor to verify that bond funds were spent only on “construction”, and the Auditor indicated conformance. OC contracted with KPMG Consulting to evaluate district’s “Project Management Plan”. OC began an inquiry into district’s preventative maintenance program to verify maintaining of pledged budget. It also began review of maintenance operational procedures and responsibilities. OC identified the district’s unsatisfactory performance in requesting state matching funds. And the OC worked to encourage recruiting of replacement committee members.

RECOMMENDATION THE LEAGUE END PARTICIPATION IN OVERSIGHT COMMITTEE. Citing two years of dissatisfaction with the cooperation to, management of, and lack of effectiveness of the SCUSD Oversight Committee, League Representative Pat Kelly recommended the League withdraw from further participation in the activity. The concerns were documented in this report, and presented to the League Board. The Board reviewed the report, voted unanimously to withdraw from further participation in the OC, and directed a letter be sent to the SCUSD advising of its action.

Joe Sullivan - President