The San Jose Environmental Innovation Center (EIC) has been in the news a lot recently, due to the fact that it is $1.6 million over budget and six months behind schedule. This project was always risky, as it utilized complicated tax credits that expose the general fund—the guarantor of the project—to future risk.
During my tenure as a San Jose councilmember, I have had to deal with numerous general fund debt obligation issues. Some of these projects end up totaling millions of dollars each year, for expenses related to golf courses, the Hayes Mansion and similar ventures that reduce available funds for other core city services. So, being in the position to avoid future financial risk, why would I support yet another project such as the EIC, which could imperil our general fund? When this issue came to the council, I voted “no” several times, where was I often the only “no” vote. When there is a single dissenting vote, this automatically means that any substitute motion would die for a lack of a second. This is true in all cases.
The first time I voted against the project was on May 17, 2011, when I was the only “no” vote. This is important, because the project could have technically been stopped that day, thus avoiding the current situation. The next time I voted against this project was on Oct. 25, 2011, when once again I was the only “no” vote. On Jan. 10, 2012, the item returned to the council, and this time I was joined by my colleagues Xavier Campos, Kansen Chu and Ash Kalra in voting “no.” However, the 7-4 vote was still not enough to stop the project and place the general fund at risk. The item returned to council twice more on Oct. 2, 2012, and April 30 of this year, and in both of these instances, I was once again the only “no” vote.
In each of these prior decisions, councilmembers were allowed to vote unencumbered by legal limitations. However, on May 31, 2011, the council was constrained by the city charter. The charter requires the council to accept the lowest cost bid for public works projects. This requirement—accepting the lowest cost bid—has been reaffirmed by voters of San Jose in eight municipal elections.
Whether or not an individual councilmember supports a particular project, the council must accept the lowest bid. If the lowest cost bid is not accepted, it opens the door for a lawsuit from the winning contractor, as the city would not be following the process laid out in the city charter.
The winning contractor had its attorney speak at the May 31, 2011 council meeting, and he noted that nothing was done improperly in the bid. The council must select the lowest bid, he reasoned. The city attorney and public works director both reaffirmed this opinion on lowest responsible bids. After listening to my colleagues speak at length on the issue, I knew that this was going to pass—even the head of the building trades union spoke in favor of accepting the lowest bid.
A substitute motion to reject all bids would have had zero support since the tax credits were expiring and the project would be dead. The overwhelming majority of the council wanted to move forward with this project. It stands to reason then, that this is exactly what the council did that day. The die had already been cast on moving forward with the project in a prior vote, and now the council was simply following the legal mandate laid out it in the charter.
Going forward, the council may want to consider asking voters to amend the charter in a way that allows for more flexibility during the bid review process. This may be difficult, however, as many voters feel that the lowest bid is always the best bid, and this stipulation avoids awarding contracts to friends, relatives and major campaign donors. Where the council really has discretion, in my opinion, is during the deliberation phase of the project, when we are debating whether or not to build something at all. This is where I respectfully disagreed.
Pierluigi Oliverio is a councilmember for San Jose’s District 6.