Supervisor Brent Oleson anticipates lawsuit over lease-purchase agreement use

Child and Youth Development
Child and Youth Development

CEDAR RAPIDS — One Linn County supervisor said he’s preparing for a possible legal fight over the board’s approval of a lease-purchase agreement to build the county’s future public health and youth development services building.

Supervisor Brent Oleson said Friday he has been in discussions with legal counsel in anticipation that the county’s first foray into a lease-purchase agreement has come under scrutiny by Master Builders of Iowa, a state association of contractors.

“The county is gearing up,” Oleson said.

Several supervisors have said a lease-purchase agreement for the Dr. Percy and Lileah Harris Public Health and Youth Development Services building allows for the support and selection of a local contractor — rather than follow a more standard open bidding process.

The building is planned for 1019 Seventh St. SE.

But Master Builders of Iowa President and Chief Executive Officer Chad Kleppe said the agreement could run counter to state competitive bidding laws.

“I know this project has been in the making for a couple of years, and it sounds like a great project and a great opportunity,” Kleppe said Friday. “We’re looking at the dangerous precedent that could be set where an owner could pick and choose with who they’re going to contract.”

Kleppe said the association was looking into the legalities of how the lease-purchase agreement is being implemented, but added it was too early to say if legal action will be taken.

Oleson said his concern is that those opposed to the county’s use of a lease-purchase agreement might try to tie up the project in litigation until Iowa lawmakers in the upcoming General Assembly ban the use of such an agreement by local governments.

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“I think that we have to consider filing a lawsuit of our own to allege that they are using the judicial system as a weapon, instead of what it’s for,” Oleson said. “That’s something we’re considering today.”

Oleson drew parallels to the Iowa Legislature’s 2017 ban on local governments’ use of project labor agreements for construction projects. Several local agencies, including Linn County, used such agreements to select local contractors for public building projects following the 2008 flood.

“The reason (Master Builders of Iowa) is opposed to this is because we were successful with the project labor agreements and now, if we were successful with this, it could spread like a prairie fire, where school districts and cities and counties use this method to have more control over the building of their public works buildings,” Oleson said.

Sen. Dennis Guth, R-Klemme, floor manager for the 2017 Senate bill that banned local governments’ use of project labor agreements, said it was too early to say if specific legislation might target lease-purchase agreements in the upcoming session.

“I think it’s just something we’re going to have to watch, and if it is apparent all this is trying to do is circumvent the legislation we passed last year, then we have to plug the hole,” Guth said Friday.

While a private entity has the ability to select whichever contractor they desire, Kleppe said a governmental body — using public dollars — must follow competitive bidding laws to ensure the best use of taxpayer dollars.

“When it’s public sector funds being utilized for the project, a whole new set of rules have to apply. Those rules exist to prevent cronyism and nepotism,” Kleppe said. “Creating this preference certainly has the potential to impact the taxpayer at the end of the day.”

But Oleson said the lease-purchase agreement will include a selection process. The board will seek input from county staff and experts before making the final decision.

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Factors including total cost, use of local workers and past performance will be weighed when choosing a contractor, he added.

“You have to consider price, but price alone is not necessarily the only thing the people who elected us want to look at. I think they want their neighbors who are plumbers or construction workers or electricians to actually work on these projects,” Oleson said.

The board earlier this month sent a request-for-proposals to Cedar Rapids contractors Miron Construction, Unzeitig Construction, Tricon Construction Group, Kleiman Construction, Ryan Companies and Rinderknecht Associates. The document calls for a contractor to be selected in February.

Supervisors have said contractors who helped the county rebuild after the 2008 flood received preference.

Four of the contractors to receive a request-for-proposal — Miron, Unzeitig, Kleiman and Tricon — worked on post-flood projects for the county. The remaining two — Rinderknecht and Ryan — are the only two of the six listed as members on the Master Builders of Iowa website.

Kleppe said Master Builders of Iowa represents between 30 and 40 general contractors, subcontractors, suppliers and service providers in Linn County. Some local companies not receiving a request-for-proposals from the county have raised concerns, he added.

Supervisors on Wednesday voted 4-1, with Supervisor John Harris opposed, to enter into a lease-purchase agreement for the 55,000-square-foot building at 1019 Seventh St. SE. Its name will honor civil rights figures Percy and Lileah Harris.

Using a “reverse-referendum” rule, the county approved the use of general obligation bonds for urban renewal — not to exceed $31.5 million — to fund the project.

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Officials have estimated the building’s construction cost at about $21.5 million. Additional expenses include furniture, fixtures, equipment and contingencies.

Sen. Guth said one argument against a more selective process, such as a project labor agreement, is that standard competitive bidding practices ensure the best deal for the public.

“Too often we have had local governments put out a bid that is designed to only seem feasible to the good ol’ boys that are local,” Guth said. “Saying that you can’t limit (contractors) doesn’t mean they don’t get the project. It just means they have to compete for it ... Do you want to favor local workers to the tune of 3 million bucks?”

Meanwhile, Supervisors have argued that a lease-purchase agreement places construction risk on the contractor and eliminates the possibilities of change-order expenses, which can save the county money.

l Comments: (319) 339-3175; mitchell.schmidt@thegazette.com

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