San Dieguito High School District clarifies use of lease-leaseback method for its construction projects

At its Feb. 5 meeting, the San Dieguito Union High School District was set to approve the use of the lease-leaseback method for two upcoming district construction projects. Parent Steven McDowell objected to the lease-leaseback agreements being part of the board’s consent calendar.

“You want to be more transparent to the community and give the public the opportunity to speak on it,” McDowell said.

McDowell said he had concerns that the projects were using the lease-leaseback method and not going out for competitive bid. He said he hoped for a discussion on the pros and cons of the lease-lease back method versus a competitive bid process.

The board agreed to pull the items from consent to be discussed.

With the lease-leaseback method, a school district has the flexibility to select a contractor not just by the lowest bid, but on the ability to complete the project. The property is then leased to the contractor, usually for a low amount. The contractor then builds the project and leases the property back to the school district.

Eric Dill, associate superintendent of business services, said that the district issues a request for proposals for construction managers and conducts a competitive process to select one.

Dill said there is also a competitive process with lease-leaseback that is built into the contract, noting that the construction manager receives three to five bids per trade contract. Dill said the biggest benefit of the lease-leaseback method is the guaranteed maximum price.

Going into the program, the district agrees on the maximum amount they are going to pay and the construction management company has the incentive to get it done on time.

With a contractor, the district assumes responsibility for delays and change orders that all must be board-approved and can cause a three- to four-week delay due to board meeting schedules. Dill said trades can back up and a six-month project can instead take 12 months.

“With lease-leaseback, it’s all handled within the guaranteed maximum price, and the construction manager continues to move the project forward and keep it within what we’ve established will be paid,” Dill said. “The protection of the lease-leaseback helps make sure we do what we’ve set out to do and not burn dollars.”

Board member Amy Herman said when she first began on the board, she had never heard of lease-leaseback, but has seen how effective it has been. She said she is glad it is an option for the district.

“It’s worked really well,” Herman said. “Projects come in under budget and on time, and provide facilities for our students, which is our No. 1 priority.”

The board voted to approve lease-leaseback agreements with Byrum Davey Inc. for athletic field improvements at the La Costa Valley site, expected to be complete in fall 2016, and Erickson Hall Construction Company for phase two of work at Torrey Pines High. The vote for Erickson Hall was not unanimous, with trustees Maureen “Mo” Muir and John Salazar voting against it because of the company’s “massive contributions” to school bonds, which they felt represented a conflict of interest.

“It makes it seem sleazy and ‘pay to play,’” said Salazar. “It makes it hard for me to vote for Erickson Hall because of that.”

Dill said he has no knowledge of the private businesses that choose to donate to bond campaigns; they have hired two construction managers since Prop AA and he said donations weren’t a factor in their evaluations.


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