It was a decade ago that the Vanguard chronicled, in a multi-part series, how former DJUSD Deputy Superintendent Tahir Ahad used his position at the school district to start up a private education consulting business in 1999 – Total Schools Solutions.
The school district would pass a facilities bond in November 2000 that relied heavily on approximately $32 million in state matching funds. A key error, however, occurred in 2001, when the district signed contracts to build Montgomery Elementary School. The funding for the project would be $9 million, half of which came from state matching funds.
But when it came time for the district to recoup that money from the state, Mr. Ahad, preoccupied with running his business on the side, missed a deadline for the application – by five months, and this would eventually set the stage for a show down between the school board and Superintendent David Murphy in the fall of 2006.
It was November 2006, when Davis City Manager Bill Emlen came before the board to deal with some problems, from the city’s perspective, with the proposed King High construction, when the school board learned that the district needed an additional $5 million in COPs (Certificate of Participation) in order to be able to afford to complete the King High construction project.
The revelation that the district only had enough money to complete half of the King High project put an immediate halt to the prior conversations and eventually a halt to the King High project itself until the district and school board could figure out what had happened with now nearly $10 million in facilities money.
We go back to a conversation on August 18, 2005, with the previous school board, right before the election of Gina Daleiden, Tim Taylor, and Sheila Allen.
Tahir Ahad, still the Associate Superintendent for Business Services, came before the board for approval of a $10 million COP. He told the board, “These items are brought to you to implement the action plan which you briefly talked about on June 9  to raise money for the construction of King High School and to pay for some other projects in the master plan.”
Board Member Joan Sallee would then ask Mr. Ahad: “And the reason we are doing this is to give us additional money because we have not enough left in the facilities bond? We’ve fulfilled our requirements, we’ve fulfilled our responsibilities to the community, but we want to go on and work on King High School and some other projects that deserve funding but were not included in that original facilities bond.”
Tahir Ahad responded: “Yes, you are right Joan.”
Later in the discussion, Board Member Jim Provenza expressed his support for this plan: “It would be a benefit to the students of the district to get started on those projects a little earlier.”
Board member Keltie Jones followed by saying: “Particularly for me, the key factor is that this is supporting the reconstruction of King High which I think is long overdue and that the students shouldn’t feel they’re second class and not included in all the upgrades that everyone else gets in the district.”
This sequence is vitally important because it establishes that Tahir Ahad, as well as three board members at that meeting, acknowledged and clearly understood that they were voting to authorize debt to be taken out to finance the construction of King High and other projects.
November 2, 2006, just over a year later, Superintendent David Murphy, with Tahir Ahad now gone, and a new board seated, was already talking about taking out another COP for $5 million to fund King High School.
Gina Daleiden forcefully spoke to this: “We learned just a few minutes ago that more than fifty percent of the [King High] project is unpaid unless we make a decision about COPs. That is news to me.”
David Murphy, however, tried to reassure the school board that all the money was in place; however, they just did not have the documentation. How he could make such an assertion prior to the audit was unclear.
Mr. Murphy stated: “I’m sure we have all the money that we think we have, but the documentation provided to the FCMAT [Fiscal Crisis and Management Assistance Team] team was deficient… I’m confident that not only do we have the money that we believe we have, but the documentation will show that.”
Former Board Member B.J. Kline came before the board during public comment to make a strong statement.
He explained: “When we approved back in September or October last year, I believe what it was when we did King High, we were told we were fully funded. We had the money in the facilities master plan, because we got the COPs, we had the money, I signed it, my name is on it. So I’m disturbed that we might not have half the money to build this school. And we made a commitment to that community to give them their school… This is one of the questions we asked during the discussion. Are we done with this? Can we move ahead with no problems? And we were assured that there would be no problems… The financing, there’s no excuse for that, absolutely, 100% no excuse… I’m a little bit, I’ll use the word, it’s pretty heavy, disgusted tonight.”
Board member Daleiden expressed her discomfort for going ahead with the project without secured funding: “The deal is that ultimately this board is responsible for the finances of the school district… So all of this clean up work essentially eventually falls on our shoulders. I am feeling very uncomfortable and a little nervous… I’m worried about causing more problems for our system than we already have. The problems seem to be a little deep. As I sit here today, I don’t know and that’s part of the problem.”
With the superintendent not able to account for what happened with the money, the board majority stopped construction on King High to figure out what happened.
They brought in Terri Ryland and FCMAT to do an audit.
On December 7, 2006, Superintendent David Murphy gave what amounted to an apology to the school board.
He said: “The project was approved by the board on August 17. However, on November 2, it was quite clear that the district’s procedures and the staff’s work by which we’ve kept the board updated and clearly involved in a timely way to understand changes by which to fund this project were very inadequate.
“On November 2, it was clear that five board members were surprised to learn that the complete funding of the financing project had not already been approved by a board decision and would be dependent on a current or a future board decision. During the November 2 board meeting, staff indicated a second certificate of participation [COP] would be needed at that time to be issued in the future in order to complete the funding of this budget and that was not expected by this board.
“Although that COP would be repaid by CFD [Community Facilities District] revenues, the fact is the board was quite surprised by that need and believed the King High School had already had a formal board approved financing plan. I had not realized the board would be surprised, but the fact is all five board members were. We’d like to and should acknowledge where we see those things occurring, and then we should say what we should do as a consequence of looking at those facts clearly, publicly, and that’s what we’re doing. No one wants such surprises, I don’t want them, the board doesn’t want them, nobody wants them. They’re not done by deliberate intent but they sometimes occur.”
What the board would learn is that the district, at the behest of Superintendent Murphy and Tahir Ahad, backfilled the shortfall for Montgomery and then Korematsu, using money that was supposed to go to King High and then asked the district for more money without explaining what had happened.
As Gina Daleiden stated at the meeting: “Essentially it’s telling us that the bulk of that COP money went to Korematsu… It looks like about $7 million dollars went to Korematsu… That would be a little bit of a new surprise for me. I mean I’m pretty surprised because that was not a discussion that I ever heard that the COP money was for Korematsu.”
Here was the key discussion during the December 7, 2006, board meeting when this was disclosed:
Ryland: “There was a time yes, when you did, and in fact, there was a receivable on your books as late as the 05-06 year anticipating the receipt of that money… So there was a time when it was part of the plan and it was anticipated that it would be spent on the projects at that time.”
Provenza: “At what point did it go off…”
Ryland: “It was reversed just this last fiscal year, at the end of the 05-06 year, negative five million dollar adjustment to state apportionment was made.”
Murphy: “In the district’s tracking documents that I looked at, that change occurred sometime before May of ’06.”
Gina: “So for two years it looked like the money was there when in reality we had not obtained it.”
Provenza: It wasn’t in our flow sheets but it was still being relied on… It was not in the flow sheets.” “We weren’t aware of the Montgomery money being relied on. But it was in fact being relied on.” “I think the problem is that the board was not properly informed that that money was still being relied on. That’s one of the reasons that we thought that the money was there for King… What I’m hearing is that the Montgomery money was being relied upon to pay for these projects, it was not in our cash flow reports, so that we did not know that.”
Ryland: “It was on the books as a receivable until the end of the year.”
Provenza: “But we don’t see the books as the board, we just see the cash flow report.”
Ryland: “Right, exactly. That’s one of the key points by FCMAT, and would be one of my key points as well is that if that reconciliation had been occurring, between the facilities department and the finance department regularly. ”
In a 2008 interview with the Vanguard, Gina Daleiden sums up what happened: “Basically here comes Montgomery, they’re short the money because they missed the filing deadlines, so now Montgomery is drawing more local funds than were anticipated. Here comes Korematsu, that’s budgeted for a certain amount, enrollment declines… Korematsu gets fewer dollars from the state, so now Korematsu is drawing on more of the local funds, and at some point this $10 million gets dumped into the same fund and now it’s all rolling together so it’s covering whatever was being pulled out before, also modernization projects are in that same funding… Basically King was the last project in, in that course, and the first one to run out of money.”
Gina Daleiden, in her interview with the Vanguard, cited the FCMAT report (available on the district webpage on the right hand column) page 95: “There was funding that was not yet board approved that was on a line that was called ‘redevelopment agency’ funds,” and that is actually in the FCMAT report, page 95, “since the issuance of FCMAT’s initial draft report, the district has disclosed that the $3 million was entered on the wrong line and instead should have reflected a new COP issuance,” which would have been financing “with a second $3 million to be requested in 2007. Since neither amount had been approved by the board, it is not appropriate to reflect that as cash flow unless clearly noted as potential cash. The current practice of listing the amounts without such a notation must be discontinued. The district should ensure that all revenue projections are realistic and based on likely funding.”
Why this money was placed under the label, “redevelopment agency funds” is not clear. The district staff under David Murphy claims this was an error. Regardless, it led the board to believe money was actually there when in fact it was only “anticipated.”
Three months after the meeting with Terri Ryland on December 6, 2006, David Murphy announced his retirement.
At the time he stated: “Since February 1, when I turned 60, my wife Robbie and I have been discussing what would be best for our family and with our life… It is now an appropriate time for me to conclude a wonderful era of 35 years of public service and spend more time with my family while we are all healthy and happy.”
He would retire July 31, 2007.
The timing of the announcement was suspicious, given that it came a mere months after the King High fiasco.
Adding fuel to the fire was a statement from former school board member Joan Sallee in the Davis Enterprise: “I was deeply saddened to hear of Murphy’s retirement. … I am very sorry that the current school board did not see fit to retain his services. The district has suffered a grievous loss, at a time when we can least afford it.”
Her comment suggested this was perhaps a forced retirement. Given the nature of personnel matters, that was never conclusively determined.
—David M. Greenwald reporting
Readers who wish to see the full series can do so here: