BL SPECIAL REPORT: With a company hired almost two years ago to audit county school records, San Benito County has yet to come up with any answers. Hundreds of thousands, if not millions of dollars in developer fees remain missing from Hollister, San Benito High and Aromas-San Juan Unified school district accounts. After private negotiations, only Hollister School District (HSD) has settled its lawsuit with the county. Both parties agreed to keep the terms of the settlement confidential. They admitted a settlement was reached only after BenitoLink was alerted to the fact and filed a California Public Records Act request.
In February 2017, the county began looking into the developer fee problem by initiating a review of its accounting operations. Eventually, BenitoLink learned of the issue, began investigating and reported on it for the first time in November 2017.
In May 2018, BenitoLink learned HSD was suing San Benito County after Supervisor Anthony Botelho lambasted the Hollister School District for filing the suit and causing money to being spent defending it.
On July 24, the Hollister School District and San Benito County settled the lawsuit filed back on Feb. 6 to the amount of $263,000. The suit, which did not set a dollar figure on alleged damages, listed a wide range of complaints, including breach of contract, declaratory relief, illegal expenditure, waste and/or injury to the public, special recovery of personal property, breach of mandatory duty and preliminary and permanent injunctive relief.
The suit claimed that San Benito County did not transfer developer fees it had collected since 2003 to Hollister School District and hid the fact from the district. An estimated $1 million was due to the county’s three largest school districts, according to county auditor Joe Paul Gonzalez.
After looking into discrepancies at the request of HSD trustee Rob Bernosky, Gonzalez said districts had what he described as “over-expenditures” on their books of $700,265 (HSD), $387,923 (San Benito High School) and $210,670 (Aromas-San Juan Unified).
In the settlement, the county agreed to pay the Hollister School District by Aug. 1, 2018, yet continued to deny the district’s allegations concerning developer fees during negotiations and in the settlement.
The settlement was negotiated in closed sessions by the San Benito County Board of Supervisors and Hollister School District trustees. Neither side’s representatives would explain how far apart they were or how they came to the figure of $263,000.
According to Gonzalez in a BenitoLink November 2017 investigative report, the county entered into a $69,000 contract in February 2017 with business consultant Parc Corp LLC, to review and reconcile thousands of checks written to and by the school districts and posted in clearing accounts from 2003 through the 2015-16 school year. The project was to be completed by June 30, 2017, and was estimated to take 853 hours billed at a pre-discounted rate of $120 per hour, or $102,360. However, Gonzalez said Parc offered a reduced government rate and another discount for a flat fee payment of $66,500.
Gonzalez told BenitoLink on Sept. 20 that the review has dragged on and might not be completed until December. He could not explain why delivery had been delayed for a year and a half, but said the county is holding the company to the original contract amount. His only comment about the delay was that “it’s a lot of data to collect and it’s very complicated.”
According to the July 24 settlement agreement, HSD maintained that San Benito County failed to accurately collect developer fees or school impact fees on its behalf, and that fees were still collected after the school district revoked the county’s authority to do so, effective Jan. 1, 2017.
To avoid further disputes, San Benito County and the Hollister School District negotiated the settlement without any admission of liability or wrongdoing. The agreement, however, does not prevent HSD from suing the county again. Hollister School District trustees Peter Hernandez (a candidate for the Board of Supervisors), Patricia Moore, Elizabeth Martinez and Elsa Rodriguez voted to approve the settlement during a closed session meeting June 24. HSD Superintendent Lisa Andrew, who abruptly resigned June 19, 2018, signed it on July 12. According to trustee Bernosky, Andrew was able to sign the agreement even after resigning because the trustees had not accepted it until an interim superintendent had been chosen. Bernosky cast the only vote against the settlement.
Explaining his vote for the agreement to BenitoLink on Sept. 15, Hernandez said it was in the best interest of the school district. He added that he would have preferred to discuss the issue in open sessions in order to have open and honest debates.
“There are certain legal limitations we have, but anything the public is entitled to know I’m all for, and am frustrated we didn’t at least acknowledge the approval in public,” he said.
For his part, Bernosky said, “I was in favor of a settlement with the county, but I thought that we should have the complete agreement in hand before voting on it. Entering into a settlement agreement, having money change hands, but not being able to vote on the final agreement and tell the taxpayers what we did is wrong. People interested in the Hollister School District should not have to go to a county supervisors meeting to find out what school board members voted to do.”
Bernosky also said he wanted to understand which of the outstanding issues Hollister School District had with San Benito County would be addressed in the agreement.
“Developer fees, public records act, property taxes, accounting irregularities, were all on the table,” Bernosky said. “A storm is brewing over state finances and San Benito County is not exempt. Pension payments are going to be crowding out being able to deliver services and each entity needs to know that it is getting the revenues it is entitled to. The Hollister School District needs to know what it has so that it can plan for the next economic downturn, which will be coming.”
That neither side has admitted liability or wrongdoing brings to question what has changed or been resolved since Bernosky first told HSD’s assistant superintendent of business services Gabriel Moulaison and county auditor Gonzalez about the problem of uncollected developer fees. Bernosky explained Sept. 13 that the district claimed the county either collected fees correctly and did not disperse them to school district accounts; collected fees and deposited them in the wrong accounts; or collected fees and kept them.
Moulaison told BenitoLink on Sept. 11 that, following a conversation with Bernosky, “I was told by county planning that there was a problem on their end with the collection.” Moulaison said, “These concerns were brought to me within a few months of my arrival at HSD, and I cannot speculate as to why the issues went unresolved prior to my employment with the district.”
Bernosky told BenitoLink in November 2017 it was his understanding San Benito County owed HSD more than $1.14 million because of accounting errors. He claimed hundreds of millions of dollars needed to be accounted for and questioned the competence of Gonzalez and county treasurer Mary Lou Andrade as the overseers of monies due to the school districts. (Andrade is retiring following the Nov. 6 election after serving since February 1983. Current management analyst Melinda Casillas will be taking her position.)
The only detectable change is that the Hollister School District has been collecting the developer fees since Jan. 1, 2017, according to Moulaison, which interim Superintendent William Barr thought should have been the case all along. Barr told BenitoLink on Sept. 12 he was dismayed that something changed around 2003 when the county apparently took over the collection responsibility from HSD. Per the July agreement, San Benito County is now directing all building permit applicants subject to the district’s developer fees to the Hollister School District business office.
“A developer will come to the school district, pay the fees, and we give them a certificate of compliance, which they present to either county or city planning before they can get a permit,” Moulaison said.
After the school district signed off on the settlement, it then went before the San Benito County Board of Supervisors in closed session. Board Chairman Anthony Botelho signed it July 24 for final approval.
Each side agreed to pay their own attorneys’ fees, an issue that drove Botelho to denounce the Hollister School District at the May 8 Board of Supervisors meeting for filing the lawsuit and not being interested in settling the case.
Moulaison said on Sept. 17 that HSD incurred legal fees of $230,800, of which $50,500 was spent to sue the county a second time under the Public Records Act; the remaining amount was for developer fee litigation. The county did not respond to BenitoLink’s Sept. 2018 requests for comment regarding legal fees.
“I was pleased that we were able to work out a reasonable settlement rather than go through litigation,” Botelho said Sept. 11. “It doesn’t prove one side or the other is right.”
He believes, however, that some good has come from the litigation process.
“Both sides recognized the shortcomings in their accounting and we’re better for it,” Botelho said.
Moulaison said the settlement agreement is only between San Benito County and the Hollister School District. San Benito High School District Superintendent Shawn Tannenbaum told BenitoLink on Sept. 13 the high school district is still investigating the situation and will know in a few months if it will take any action. Aromas-San Juan Unified School District Superintendent Michele Huntoon did not respond to BenitoLink’s requests for information regarding action it may or may not take against the county, or the status of $210,000 she said last year the district was holding while waiting to see if the county would want it returned.
Both parties agreed to maintain the terms of the agreement in confidence, but when BenitoLink learned that there was a possible settlement and contacted county counsel, BenitoLink was informed the counsel was not at liberty to discuss the subject. After making an official request under the California Public Records Act, county spokesman Kevin O’Neill confirmed there had been a settlement. He explained Sept. 12 that under the agreement, as he understood the confidentiality clause, the county and school district were essentially agreeing to “not make a big deal of the agreement”—they would not be announcing it and everyone just “wanted to move forward.”
Other related articles:
BL Special Reports
BL Special Reports are long-form articles. BenitoLink team members put extra time and effort into researching and investigating important issues for the benefit of the community. BL Special Reports are funded by individual donations made by San Benito county community members or friends of San Benito county who value high quality journalism. Help support more projects like these by Donating to BenitoLink, giving one time or by making monthly payments that fit your budget. Your support keeps these stories coming.