Monday, June 23, 2008

And what about all of the other concerns?

June 23, 2008

Mark Zandberg

Dear Mr. Zandberg:

Thank you for contacting our Office regarding your concerns about the Edmonds School District. You asserted that the District’s purchase of pianos violated state bid laws and represented a conflict of interest. You also asserted that the District’s purchase of land for use as a bus facility violated state bid laws.

Piano lease

We found that the District did not purchase the pianos, but entered into a lease agreement with a purchase option. We reviewed the lease agreement and all supporting documentation for the lease between the District and the business it leased the pianos from. We also discussed this matter with our legal counsel. We were not able to find conclusive evidence of a conflict of interest or that the vendor received preferential treatment from the District. We found that although the District technically complied with state bid laws, it cannot be sure it received the lowest, reasonable price for the lease of the pianos as it did not obtain competitive quotes from multiple vendors. We reported this issue to the District and recommended it use the bid process to ensure the lowest, reasonable price is obtained.

Purchase of land

You stated you believed the District paid more than the asking price for property that will be used for a new bus barn. The District’s original appraisal valued the land at $3.3 million. A subsequent appraisal valued the land at $5.6 million, which the District paid. We reviewed state law (RCW 28A.335.090) which states:

…(2) Any purchase of real property by a school district shall be preceded by a market value appraisal by a professionally designated real estate appraiser as defined in RCW 74.46.020 or by a general real estate appraiser certified under chapter 18.140RCW who was selected by the board of directors.

While the law requires an appraisal, it does not say the purchase must not exceed that appraisal. We reviewed the District’s purchase and discussed the matter with legal counsel and determined the final purchase price was negotiated by the District and the seller and went through the proper approval process.

Thank you for bringing your concerns to our attention. If you have any further questions or comments, please feel free to call Chris Kapek, Audit Manager at (425) 257-2137.



BS:CK:jc H-2007-132


Anonymous said...

I wonder how the Auditor defines "conflict of interest". Perhaps Arnie and Marla have to be married to each other.

Why go through the trouble of a second appraisal from the seller?

Anonymous said...

"f. The Board may elect to have identified sites appraised by a "Member of Appraisers Institute" appraiser prior to purchase, exchange or sales."

Why even bother with an appraisal? Next time they should go without. It just quantifies the degree of incompetence.

Anonymous said...

Actually, in reading opinions out of the Attorney General's Office, it is illegal (unlawful) to pay more than appraised value, unless other improvements are being made to the property outside of the purchase and sale agreement.

This constitutes a "gift of public funds" as described on the Attorney General's website.

Anonymous said...

May a school district pay a price for the property in excess of the appraised value?

You also inquire as to whether the District may pay a price in excess of the appraised fair market value of the property. We believe that such an action would not be permissible if the price being paid is only to obtain title to the property. Payment of an amount above the appraised value for which the District obtains no consideration would be a gift of public funds in violation of article 8, section 7 of the Washington Constitution. If, however, in exchange for the funds which exceed the appraised price, the District receives some other type of benefit, a gift would not occur.

Anonymous said...

Click that "supporting documentation" link. It's a bit long and convoluted but it tells an interesting story of the lengths to which the administration has gone in this case.

Considering the oddball changes of the lease, all in the favor of the District, one cannot help but think "why would a business do so much for no profit?" Just to be nice? Businesses generally don't do $75K+ deals without expecting some profit. Somewhere.

Seems to me the "preferential treatment" began at the Rotary meeting. It's called "networking." In this case it was poorly done. But that's typical for this crew, isn't it?

Anonymous said...

Isn't Sonntag up for re-election? I know how I'm going to vote. I'll make sure I tell all my friends too.

Anonymous said...

What do I know? I'm just a "complainer." But if you read the letter from Lawyer Henry to the District, there seems to be an odd admission. At the point of the public sale of the pianos where owner Tucker indicates an agreement with the District to not sell certain pianos so that they can come back to the District, it seems that that act could be interpreted as a conspiracy to commit fraud on the public. The advertising for the sale probably didn't warn the public that all the pianos were for sale "except those that we're not going to sell you because the District wants them back." Wouldn't that seem deceptive to a "reasonable person"?