A STOCKTONIA INVESTIGATION
In December 2023, the Stockton City Council held its first vote in over a year on whether to approve more spending on the construction contract for a new City Hall.
The Department of Public Works had requested about $93,000 to pay for waterproofing in the basement of one of the new buildings. The City Council approved the funds without debate.
Yet spending on the contract had already increased six times, by $4.3 million.
All without public discussion or a City Council vote.
For nearly a decade, the cost of the project has grown as Stockton has issued government contracts to hire construction experts to renovate the buildings.
But even after the city agreed to contracts worth tens of millions of dollars, costs continue to climb.
An investigation by Stocktonia found that the main driver is contract increases largely invisible to the public.
The city bought the 1980s-era Waterfront Towers with the intention of transforming the downtown buildings into the so-called New City Hall. It hired three main contractors from 2019 to 2022, at an initial cost of about $44.5 million.
Since then, Stocktonia’s investigation found:
The City Council voted to increase the contracts nine times.
But spending actually increased at least 33 times.
The City Council voted to increase the contracts by about $4.2 million.
But spending actually increased by at least $17.5 million.
By spring 2025, the total cost of the three contracts was about $62 million — and counting.
The city has yet to move into New City Hall.
This unseen spending is possible under a Stockton policy that allows the city manager, city staff and contractors to increase spending on certain contracts up to about 10% without a City Council vote – and then, after the council approves a single increase, to repeat the process.
The increases the City Council votes on are sometimes just the tip of the iceberg.
Here’s how the “10% rule” works:
• The council must approve any contract of $100,000 or more.
• The city manager, city staff and the contractor can agree to increase the contract as many times as they choose without a City Council vote, as long as the increases don’t exceed an amount equal to 10% of the contract plus $100,000.
• Once the total increases reach that amount, the city manager and staff must get City Council approval before spending more.
• But the City Council votes only on the single increase that tips the total over limit — whether that increase is $1 or $1 million.
• If that vote passes, the city manager and staff can now increase the contract by 10% of the new total cost, plus $100,000, without returning to the City Council. Like compound interest, the limit grows higher each time the process repeats.
The result: As contract spending balloons, oversight by the City Council — and the public — shrinks.
Stocktonia found that the three main contracts associated with the New City Hall project have snowballed under this 10% rule. One has nearly quadrupled.
The unseen spending fed public confusion about a project some Stocktonians have lambasted for years over its cost and delays.
“When we ask for help with any issue, we are continually told that … the city cannot afford it,” midtown Stockton resident Julie Devincenzi told the City Council in 2023. “The city could, however, in 2017 afford to buy a shell of a building for a New City Hall. … What’s the cost per year of this building that hasn’t housed anyone yet?”
At the time of that meeting, the cost of the three contracts had risen to $45.9 million.
To Henry Koffman — a licensed engineer and longtime contractor, who now directs the University of Southern California’s construction engineering program — the 10% rule “sort of gives an open checkbook,” he said. “It’s a moving target that keeps increasing.”
Video: The 10% rule and why it matters
The city sent no response to an emailed list of questions about Stocktonia’s findings, including questions about why the contracts grew, whether the increases are typical of city construction contracts and if the 10% rule gives the City Council and the public enough oversight over how much contracts grow.
Stocktonia’s investigation is based on city documents obtained through a California Public Records Act request for the New City Hall contracts, and for records of all increases to those contracts through May 2025.
The resulting 350-plus pages of city records are dated from December 2019 through December 2024. Many are contract amendments and change orders — alterations to construction contracts that often increase the price.
Most of the amendments and change orders have never been reviewed at public City Council meetings. For the handful that were, reports provided to councilmembers at that time mentioned previous change orders and amendments — but only in broad terms, and only after they had already been approved. Some reports note that the approval will expand the city manager’s spending authority, but without specifying how much.
The 10% rule traces back to city contracting policies that have existed for more than a decade, reaffirmed in later City Council resolutions.
NEW CITY HALL |
A STOCKTONIA INVESTIGATION
SEE MORE:
Timeline: A nearly 20-year history of delays, cost increases
Video: How to understand the growing costs, and why they matter
For this investigation, Stocktonia reviewed those policies and resolutions, and a city calculation tool used to track contract increases, obtained through a public records request. Stocktonia also analyzed change orders for the New City Hall project and City Council documents.
The 10% rule is not confined to New City Hall. It applies to countless other city contracts. And while the unseen spending on New City Hall happened under former City Manager Harry Black, the 10% rule predates him. It gives any Stockton city manager that same power.
Whoever the City Council ultimately chooses as Stockton’s permanent city manager will wield the same authority to spend money on city contracts beyond public view.
(Above left: Stockton’s historic City Hall. Above right: The downtown office building the city bought. Photos: Annie Barker/Stocktonia/CatchLight Local/ Report for America )
Unseen spending, rising costs
When the City Council first approved buying the Waterfront Towers in 2017, costly misfortunes had plagued efforts to find a new home for Stockton’s government for a decade.
Officials had been working to move out of the historic City Hall on El Dorado Street since 2007. That year, the city bought a $35 million downtown office building it planned to make its new headquarters. But after its 2012 bankruptcy, Stockton lost the building in a settlement with creditors.
The city continued renting space at the downtown office building while still using historic City Hall. In 2017, the City Council bought the Waterfront Towers, with plans to consolidate operations there.
At $13.6 million, the towers represented an affordable second chance in the eyes of those who supported the deal. Officials estimated that renovations to ready the towers for city workers would cost an additional $11.9 million, according to City Council discussions at the time.
In 2018, Stockton hired Davis architecture company Indigo Hammond + Playle to assess the towers. The next year, the city again hired Indigo to design the full renovations for about $1.4 million.
In May 2021, a change order landed on the City Council dais. It sought to increase Indigo’s contract to cover extra design work related to replacing the Waterfront Towers’ heating, ventilation and air conditioning system, adding weatherproofing and other renovations. The work would cost roughly $527,000.
The council at the time included Mayor Kevin Lincoln, and councilmembers Paul Canepa, Christina Fugazi, Sol Jobrack, Susan Lenz, Kimberly Warmsley and Dan Wright. They unanimously approved the extra expense, but not without discussion.
“My concern is, that number’s going to keep edging up,” Canepa — now chair of the San Joaquin County Board of Supervisors — said before the vote.
Yet the number Canepa was worried about had already edged up.
Nine months before the $527,000 change order, the city manager and staff had granted Indigo roughly $106,000 for designs related to mapping the HVAC, mechanical and plumbing systems and other work.
A City Council report about the May vote briefly mentioned the $106,000. But under the 10% rule, the City Council never voted on the increase. The $527,000 change order only went before the council because it tipped the total value of Indigo’s change orders over the 10% limit.
In May 2022, the City Council unanimously approved an additional $600,000 – after the city manager and staff had previously granted change orders worth $14,900 and roughly $175,000. Information councilmembers received before the May vote mentioned the $14,900 and $175,000, long after they’d already been approved. This pattern continued as Indigo’s contract grew further.
Ultimately, what started as a $1.4 million contract grew to about $5.3 million. Of that, about $1.1 million arose from change orders that never received a direct City Council vote.
Another contract grew by far more.
The city hired a general contractor, El Dorado Hills-based Roebbelen Contracting Inc., in May 2022.
The original contract amounted to about $42.3 million. About a year and a half passed with no further review of Roebbelen’s contract at a City Council meeting.
Then, in 2023, city staff asked the council to approve the $93,000 increase for waterproofing the basement.
The city manager and staff had already increased the contract by more than $4.3 million. And the Dec. 12 vote on the $93,000 would automatically authorize $4.7 million more in unseen spending.
A report provided to councilmembers before the vote touched on the past spending, and the work it had paid for.
It also referenced the the 10% rule: “Upon Council approval of the recommended contract changes or amendments, the administrative authority will be reset, providing the City Manager with authority to approve future contract changes or amendments up to the new calculated limits,” the report stated.
But it didn’t spell out the many millions in extra spending the vote would authorize.
Before the vote, former Public Works Director Chad Reed — now a deputy city manager — gave a general presentation about the New City Hall project.
“No additional funds are being requested,” Reed said. “So, I just want to start off with that. Get that out of the way,” he added, laughing.
“Good way to start,” Lenz replied.
It’s unclear what Reed meant by the comment. He did not respond to Stocktonia’s recent requests for an interview.
Councilmembers asked no questions ahead of the vote. They approved the $93,000 in a 6-0 vote, with Councilmember Michele Padilla absent. In addition to Padilla, councilmembers Michael Blower, Lenz, Lincoln, Brando Villapudua, Warmsley and Wright were on the council at the time. Padilla, Blower and Villapudua are still on the council.
In November 2024, another change order for Roebbelen crossed the City Council dais. The $300,000 would go toward adjusting the Waterfront Tower’s office layouts, according to a report councilmembers received before the vote.
By then, the city manager and city staff had already approved nine more increases worth an additional $4.5 million since the vote on the $93,000.
The report briefly mentioned the prior spending. But the issue was relegated to the consent agenda, a period when councilmembers decide multiple issues with a single vote, unless one requests an issue to be considered separately.
No one did, so no discussion occurred. The City Council granted the $300,000 increase — alongside 19 other issues — in a 5-0 vote, with Lincoln and Lenz absent. The vote opened the door for about $5.3 million more in unseen spending.
Ultimately, the Roebbelen contract ballooned from $42.3 million to about $54.5 million.
Of the roughly $12 million in increases, the City Council voted on about $393,000.
That level of growth on a contract is unusual, former councilmember Sol Jobrack said. Jobrack was among the seven council members who voted unanimously to hire Roebbelen in 2022.
“There should be a really good explanation,” he said. “Did the city screw up that bad in the scope? And if they screwed up bad in the scope, did the building have that many issues? Why didn’t they account for this? Who is responsible?”
Construction at the Waterfront Towers in Stockton in July 2025. (Photo by Annie Barker/Stocktonia/CatchLight Local/ Report for America)
Why contracts change and costs grow
Change orders in construction don’t necessarily signal problems.
Owners and contractors may have a variety of reasons to agree to work beyond the scope of their original contract, from the discovery of hazardous substances at a job site to labor disputes, shipping delays, and severe weather, according to the American Institute of Architects.
Builders also use change orders after encountering unforeseen conditions, such as obstructions discovered underground at a site or issues uncovered during the renovation process, according to the AIA.
Even without such conditions, change orders are common in renovation projects like New City Hall — so much so that builders often anticipate them, according to Koffman, the USC construction management program director.
“When you take an existing building (and renovate it), all kinds of weird things happen. So you expect overruns,” he said.
The COVID-19 pandemic also contributed to overruns across the construction industry, likely including the New City Hall project, current and former city councilmembers said.
“Especially in the middle of COVID, I think costs were all over the place,” Jobrack said in a phone interview. The “cost of concrete, cost of rebar, cost of labor, everything in 2020-2021, it got ridiculous.”
By allowing contract increases, “what you’re trying to avoid is a project literally dying. Because at the end of the day, you have to deliver on this project,” he said.
In his experience, Koffman would typically anticipate change orders for renovation projects to equal 5% to 10% of the original contract price, he said. That money would usually be set aside for contingencies when the contract was signed.
The cost of the New City Hall change orders surprised the longtime contractor. Koffman said he was struck “not really, by the number of change orders … but at the dollar amount.”
At $17.5 million, the value of change orders for all three New City Hall contracts equals more than a third of the combined value of the original contracts. “When you get to 30% for me, that’s a red flag, and I think there has to be a good reason for it,” Koffman said.
When the City Council approved the construction contract for New City Hall in May 2022, officials did not say what the contingency amount on the project would be, if any. Jodi Almassy, Stockton’s public works director at the time, did not respond to requests for comment for this story. A spokesman for the city also did not respond to questions.
The high cost of change orders for New City Hall also stood out to John Heilman, vice mayor of West Hollywood and a professor of local government law.
At “about a third of the overall contract price, I would say that’s a high amount for change orders,” Heilman said.
But both Heilman and Koffman stressed that the high cost of the change orders may be justified, because legitimate unforeseen problems are so common when renovating older buildings.
Yet when the City Council and the public never see most change orders, it’s difficult to understand the full scope of what extra work was needed, and why.
“Clearly, we did not do anywhere close to our due diligence,” former Councilmember Dan Wright said of the decision to buy the Waterfront Towers when asked about the growing cost of the extra work.
Above and below: Photos from city documents, provided under state public records law, show the interior of the Waterfront Towers during renovations. City officials did not grant a tour of the building. (Provided by city of Stockton)
Unseen spending, construction problems
Because the City Council never directly voted on most change orders on the New City Hall project, members also never discussed the specific work in those approved orders at any public council meeting.
Stocktonia’s review of change orders on Roebbelen’s contract found that much of the work traced back to a handful of issues with the Waterfront Towers. But the two change orders the City Council directly voted on dealt with work unrelated to those problems.
The recurring issues included:
Insulation
Insulation covering the towers’ exteriors was cracked and damaged. “Due to unforeseen damages in the EIFS (exterior insulation finishing system) on the exterior of the building, it was requested that the cracks and damages be repaired,” one change order stated.
City staff approved increasing Roebbelen’s contract five times, by a total of about $594,000, for insulation repair.
Concrete slabs
Contractors found more than 884 feet of cracks in the Waterfront Towers’ concrete floors, including the foundation, change orders show. City staff granted more money to fix the cracks four times. Overall, the work cost about $415,000.
Structural scans
Contractors had to X-ray areas of the Waterfront Towers because the locations of key structural elements such as steel cables were inaccurate in the buildings’ as-built drawings, change orders show. City staff increased spending on X-rays three times as work progressed. The scans alone cost roughly $355,000.
Pursuing the X-rays then triggered other problems. In one case, the city paid builders nearly $44,000 to remove insulation covering an area they needed to scan.
Obsolete HVAC system
When the Public Works Department first asked the City Council to hire Roebbelen for $42.3 million, the contract was already far more expensive than the city had anticipated. But the city needed the contract because the Waterfront Towers required expensive work — particularly on the HVAC system, former Public Works Director Almassy said at the time.
The system is “older than me,” she told the council before the vote on Roebbelen’s contract. There was “no thought into replacing the HVAC system,” when the previous council bought the Waterfront Towers, Almassy added.
But even after hiring Roebbelen, the city increased the contract three times by nearly $526,000 for more HVAC work, change orders show.
Elevators
Contractors had to replace all four of the Waterfront Towers’ outdated elevators, change orders show. After the original contract, city staff increased Roebbelen’s contract six times for elevator-related work. Change orders for replacing the elevators, and other elevator-related upgrades, cost about $1.6 million.
The origins of the 10% rule
Stockton city contracts have been able to grow unseen under the 10% rule for more than a decade. Early versions of the rule can be found buried in the city’s 100-page book of official building standards, and in forms city staff used to draft service contracts, former City Manager Bob Deis said in a 2011 report.
Previous city councils had approved both. But while the documents suggested the 10% rule was limited to construction agreements and certain service contracts of more than $100,000, in practice, the city had used it to increase many other types of contracts over that amount, Deis said.
In November 2011, Deis asked the City Council to enshrine that practice in law. The intent, he said, was to “create a more efficient process that allows the City to conduct its business efficiently, while retaining the authority of the City Council to make policy decisions and determine significant contracts and contract change orders.”
The council approved the expanded rule in a unanimous vote.
In 2021, the City Council sought to further clarify the rule in a vote about increasing the city managers’ purchasing power. Only Mayor Christina Fugazi, then vice mayor, voted no.
Like Stockton, other cities often don’t require every single change order to go before the City Council. Unlike Stockton, in some other cities, the limit that triggers council review is often based on an amount set aside at the start of the project for contingencies, rather than on a recurring percentage that applies to all contracts, according to Heilman, the West Hollywood vice mayor.
“Based on what I’ve seen (in) my city and other cities, it’s usually anything within the contingency, so if it’s a million- dollar project, and there’s a hundred thousand dollar contingency, the city engineer has the authority to approve any COs during the construction project that are within the contingency.”
Then, if city staff still need more money, the issue would return to the City Council as a budget amendment, rather than as a vote on a particular change order, according to Heilman.
Stockton’s system didn’t shock Heilman. At the same time, he said he understood how it could raise transparency questions.
“In an ideal world, I think more information should be provided so that the public, those that are interested, understand this, and the council understands why they’re exceeding the contingency on the project,” Heilman said.
Construction work outside the Waterfront Towers in July. (Photo by Annie Barker/Stocktonia/CatchLight Local/ Report for America)
Unseen spending, years of delays
On top of New City Hall’s unseen cost increases and construction challenges, the 10% rule also obscured from public view another major problem the project faced: delays.
By the time the City Council hired management company Griffin Structures to direct the project in 2021, Stocktonians had already been demanding answers about progress on New City Hall for years.
“I want to know when we’re going to move — (when) are we moving from this building over to the new building,” Kathleen Gapusan, longtime resident of a houseboat docked in the shadow of New City Hall, asked the City Council in 2019.
For nearly two years, Griffin sought no additional money from the city. But starting in 2023, the city manager and staff signed five change orders agreeing to pay Griffin to manage the project for nearly two extra years.
Under the 10% rule, the City Council reviewed two of those change orders — covering 10 months — before they were signed. For the rest, the council did not publicly review the reasons for the extensions before they were approved.
Perhaps the most contentious cost increase that never saw public City Council discussion happened in a contract amendment that architecture firm Indigo requested from the city in 2021. In its request, Indigo blamed city departments for delaying its work.
That July, Indigo said, the company had presented department officials with designs for New City Hall that were 90% complete. Officials reviewed the plans and told the architects to proceed.
But five days later, the city went back on its decision, Indigo stated. “While Indigo had the completion work effort underway, the City provided additional review comments which changed the design in certain areas and modified key design criteria,” the company stated.
In September, Indigo sent officials new, 100% completed designs. But the city went back on its decision a second time, Indigo stated.
“Following that submittal which really only had to correct a few remaining building and fire department comments, the City initiated a late, out-of-sequence review by its IT department resulting in an unprecedented 219 IT-related comments,” the company stated.
“The IT comments should have occurred much earlier, but instead came after the design was substantially completed to the 100% complete stage of development.”
But none of this information was discussed at a public City Council meeting before Indigo was promised more than $92,000 for the extra work.
The city has repeatedly pushed back its move into the New City Hall facility. (Photo by Annie Barker/Stocktonia/CatchLight Local/Report for America)
Few answers on the unseen spending
Former City Manager Harry Black declined to comment for this report. Former Public Works Director Chad Reed discussed New City Hall with Stocktonia early in Stocktonia’s investigation, but declined later requests for interviews about its findings. Stockton officials did not allow a tour of the Waterfront Towers.
Roebbelen sent no response to an emailed list of questions about Stocktonia’s findings. That list included questions about why the company’s New City Hall contract grew, whether that escalation is typical of similar Roebbelen projects and to what extent Roebbelen employees understood Stockton’s 10% rule. Griffin sent no response to a similar list of questions.
Indigo directed any queries about its New City Hall contract to the city.
Video: What’s next for New City Hall
Stocktonia contacted 12 current and former city councilmembers who oversaw various stages of the New City Hall project, from the Waterfront Towers purchase through the approval of the latest change order, for interviews about this story’s findings.
Michele Padilla and Brando Villapudua did not respond to interview requests. Nor did former councilmembers Paul Canepa, or former mayors Kevin Lincoln and Michael Tubbs. Former councilmember Susan Lofthus declined to be interviewed.
Mayor Christina Fugazi sent no response to emailed questions for this investigation. She did answer questions for a column about the cost increases, saying that she wanted to find ways to shift the cost of contract overruns to vendors and contractors when possible.
When asked to explain when change orders must come before the City Council, one of the councilmembers who responded said he understood that the increases had to meet a certain running total to trigger council oversight.
“If it exceeded the threshold, or if there was an aggregate that exceeded the threshold, then it would have to come to council,” Sol Jobrack said. The former District 1 councilmember lost his reelection bid to Padilla in 2022.
Other councilmembers who responded said they were not familiar with the 10% rule when Stocktonia described the policy.
Dan Wright said the council could have required a vote on change orders after a specific amount of time or total spent, but did not.
“The change orders will come to us if it exceeds a certain dollar amount. We could have set it up so every change order had to come to us, but that’s not a good way to do business because it slows everything down,” he said.
But as to the idea that approving a single change order could then permit later spending increases up to 10% of the total contract, Wright said, “It’s not a standard practice that I was aware of.”
Former councilmember Kimberly Warmsley said she believed every contract increase typically goes through the council, but that language included in the New City Hall change order resolutions may have given the city manager and staff more spending authority.
Susan Lenz and Michael Blower said they believed city policy required individual change orders over a certain amount to always receive a council vote.
The volume of New City Hall spending that happened beyond council oversight stuck out to Warmsley, she said.
“It’s a little … disappointing if there were repairs that were made that is an excessive amount, that council may not have been aware of,” she said.
But the council had faith in city staff and the city manager to make those decisions, Warmsley said. She lost her reelection bid to Vice Mayor Jason Lee last year.
For Heilman, the law professor and West Hollywood vice mayor, the unseen growth of the contracts points to a larger challenge in government spending.
“That is always sort of a difficult balance to strike,” he said. “How do we address this in an efficient way … but also try to be transparent and provide the public with a full understanding?”
Aaron Leathley is a government accountability reporter for Stocktonia.
See the timeline: A nearly 20-year history of delays, cost increases
A STOCKTONIA INVESTIGATION
Reporting: Aaron Leathley
Photojournalism: Annie Barker
Multimedia: Daniel Garza
Research: Hope Muñoz
Editing: Scott Linesburgh, Cassie Dickman, B.J. Terhune, Josh Susong
Graphics and design: Jim Sergent, Josh Susong
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