Vice Mayor Jason Lee wants to know why nearly $100,000 of public money allocated for diversity, equity and inclusion is being used by Stockton’s interim city manager to pay for a consultant to help him do his job.
City staff couldn’t provide a complete answer.
The Hollywood media mogul-turned-councilmember spent the better part of an hour Monday afternoon at an Audit Committee meeting questioning city staff on Stockton’s contract procurement processes, DEI funding efforts and what exactly Stockton is getting from Lathrop City Manager Stephen J. Salvatore.
“The public has a right to know how their tax dollars are being spent,” Lee said. “And the council needs to make sure that tax dollars that are being spent, are being spent on behalf of the needs of the city.”
The one missing from Monday’s discussion: interim City Manager Steve Colangelo.
Colangelo, a career events manager, was hired as Stockton’s interim chief executive in February despite concerns that he had no experience in civic operations. Councilmembers who voted to appoint Colangelo assured the public their new pick was qualified to take on the role.
But just a few days later Colangelo hired Salvatore as an adviser to provide strategic guidance on best practices in municipal management for $11,000 a month, with compensation and reimbursements not to exceed $99,000, according to an investigation by Stocktonia. That’s on top of the more than $20,000 monthly salary Colangelo is being paid.
Lee was one of four councilmembers who voted to appoint Colangelo. He chairs the council’s Audit Committee, which includes Councilmembers Michele Padilla and Michael Blower.
“I don’t care who sits in that chair. They could be Ronald McDonald, they can put a clown, they can put a rocket scientist,” Lee said before voting to hire Colangelo in February. “Whoever sits in that chair will be fired if they don’t do the will of the board of directors that comes directly from the stakeholders.”
Lee has largely stayed away from publicly criticizing Colangelo since his hiring. However, Lee called for at last month’s committee meeting a review of all new contracts approved by Colangelo without notifying council.
Contracts, such as the one awarded to Salvatore, that fall under the city’s procurement threshold of $100,000 can be awarded without council approval under the city manager’s discretionary authority.
On Monday, Lee expressed frustration that Colangelo had spent money on Salvatore’s contract when Stockton has been forced to cut $15 million in spending from next year’s budget, resulting in the denial of needed expense requests from various city departments, such as the city clerk and city attorney’s offices.
When asked, staff also could not describe what specific duties Salvatore had performed under his agreement, or how his work under that agreement had been beneficial to the city.
The District 6 councilmember also questioned why this contract was able to be procured with an indemnity clause, meaning the city assumes all liability, despite staff concerns — liability insurance requirements were also waived — and without the the proper paperwork.
Colangelo denied staff requests to submit the city form — Justification for Sole Source, Sole Brand or Single Available Source Procurement, known as an SSJ Form — required to justify awarding a sole source professional services contract without competitive bidding. Internal city communications have shown that staff were told that a memo sent to the city attorney explaining the agreement would need to suffice.
City contracts under $100,000 can be awarded without a competitive bidding process if the situation justifies it, such as a certain vendor being the only available source for the required goods or services needed.
Lee asked staff what happens to the SSJ Form after it’s filled out.
“It goes through procurement, where we actually go in and we search. We will search other cities, for co ops, for anything,” responded Stephennie Link, city procurement specialist. “We like competition, so we search for whatever we can find so that it’s not a sole source.”
“Is this the checks and balances created to make sure that we have a fair and equitable process, and that we get the best deal,” Lee asked in turn.
Link confirmed that it was.
Lee also condemned the recent decision to shift DEI Officer Preya Nixon from the city manager’s office to human resources and reclassify her position as HR analyst, a move the vice mayor suspects was made to free up DEI money in the city manager’s office to pay for Salvatore’s contract.
Newly-minted Deputy City Manager Chad Reed told the committee that money to pay for the consulting agreement came from a professional and special services account that also included funding for DEI contract support.
When asked to clarify the funding source for Salvatore’s contract by Councilmember Padilla, Interim Budget Officer Brandon Sepulveda confirmed that there was $100,000 of unused DEI money in the account when Colangelo was hired, though it wasn’t made clear if that money was freed up from the elimination of Nixon’s position in the city manager’s office.
Lee said Colangelo was not brought on to make these kinds of decisions.
“We hired an interim city manager on an interim basis, a six-month contract, and my vote was strictly to help us get (the Administrative Services Department) and payroll under control,” Lee said at Monday’s committee meeting. “Not to change the direction of our culture, not to, you know, to do all of this.”
Financial mismanagement over the past two years, worsened by the city’s transition to a new accounting system, has resulted in more than $1.6 million in retroactive payments to city employees who were underpaid and over $100,000 in late fees to the California Public Employees’ Retirement System.
He’d been asked to support the mayor in hiring Colangelo because there were concerns that staff were afraid to hold people accountable and an outside hire with no ties to the city was needed, Lee said, noting that he’d received a lot of heat in the news media for his vote.
“I think this City Council was blindfolded and has been working under the belief that the interim city manager had a very clear scope on what he could do,” he said. “We had a very clear understanding.”
Lee also questioned why a contract that did not abide by the city’s best practices was allowed to go through despite staff concerns and at the detriment of expanding DEI efforts, noting that the council two years ago had passed a resolution against racism and simultaneously committing to advancing diversity, equity and inclusion within Stockton.
“What I’m trying to understand, and I don’t get it, maybe my colleagues do, so I’ll defer to you, how is it that there were plans to expand DEI,” Lee said, “by moving a person out of the position, changing the title, and taking away the budget to pay for a city manager in another city that has not given us any proof that there’s been value to that agreement.”
Both issues could eventually become the focus of a council investigation, Lee said, demanding a report on the city’s DEI efforts and spending to be brought before council at its meeting next week.