City of Pearland, education nonprofit settle dispute for $2,500

When a marriage ends in divorce, often times, neither side walks away happy.

And so it is in the Houston suburb of Pearland, where an unusual marriage between a handful of local government agencies — including the City of Pearland and the Pearland Independent School District — has ended in a messy divorce. And no one seems to be walking away happy.

At issue is a nonprofit called the Northern Brazoria County Education Alliance, which, among other things, aims to improve local workers’ skillsets and help with local job placement.

The nonprofit brought about an unusual intermarriage of the city and the school system that some in Pearland defend and some have criticized. Long story short: Its work was largely funded by city tax dollars, but its employees were technically on the school system’s payroll.

“I’ve been contending all along the school district was innocent,” said Bonny Cain, the former school superintendent in Pearland and currently the head of the Waco schools. “There was nothing illegal on the part of the school district. And I will tell you, (the education alliance) was an excellent, excellent support for the kids in Pearland ISD. Everyone benefitted greatly. It was a win-win for the community, a win-win for the businesses, and it was a win-win for the students. I was really shocked whenever it went down (that) this was something wrong.”

The education alliance received almost $600,000 over the past three years from the Pearland Economic Development Corp., a nonprofit that is largely an arm of the Pearland city government. PEDC gets money from a portion of the city’s 1.5-cent sales tax; it expects to get more than $6.5 million in city sales taxes this fiscal year alone.

The education alliance’s executive director, Terrie Morgan, is on the Pearland ISD payroll, school district documents show, but at one time, three education alliance employees were on the school system’s rosters through an agreement approved by the school district’s trustees, said Renea Ivy-Sims, a spokeswoman for the Pearland schools.  

“It was the ability for the employees to be able to get benefits” through the school system, said Mike O’Day, a board member of both the education alliance and the Pearland Economic Development Corp. and a former Republican state House member. (Asked why he left the legislature in 2009, O’Day said he “didn’t want to be in politics [because] you have to deal with reporters.” But then he laughed.)

A 2009 post on the Houston Chronicle‘s Pearland blog listed O’Day as one of the 10 most influential people in the city, and called him “the strongest force in setting up” the education alliance. A February 2010 edition of the education alliance’s newsletter says O’Day had served a two-year term as the alliance board’s chairman.

The contract between the alliance and the school system called for the alliance to reimburse the schools for the employees’ salaries and benefits, both Sims and O’Day said.

The alliance has paid the school system more than $300,000 in salary reimbursement, Morgan wrote in an e-mail. School district records show the alliance was current on what it owed as of last week, Sims said.

Morgan’s most recent contract with the Pearland schools began March 1 and includes an annual salary of $38,000. Last year, in the same position, Morgan earned $58,000. She is also eligible for the schools’ health and retirement benefits.

Two other education alliance employees, James Sudela and Sheila Reed, had employment contracts with Pearland ISD as of February 2010. Sudela served as the operations director, earning $50,000, and Reed served as the marketing director, earning $40,000, documents show. Both were also eligible to receive health and retirement benefits from the district. Both are still listed on the education alliance’s website as employees, but neither currently has a contract with the school district.

The education alliance also has its offices at the Pearland ISD headquarters on North Main Street, and has paid more than $18,000 in rent since moving there in mid-2009, Morgan wrote.

But at some point last year, the marriage started to fracture.

At least three board members of the economic development corporation have, at some point, simultaneously served as board members for the education alliance — which posed a potential conflict of interest to some, including Pearland Mayor Tom Reid.

“Conflicts like that are not good for cities, not good for organizations, and we don’t want to be exposed to that,” Reid said.

In a phone interview with Texas Watchdog, O’Day said he did not attend board meetings or vote on funding matters — but it was not clear from the interview whether he meant the PEDC board or the education alliance board. 

As of press time, O’Day, who is president of a Pearland water well-drilling firm, had not responded to an e-mail asking for clarification.

Minutes from the June 24, 2010, PEDC board meeting say that O’Day was present at that meeting and that he voted to approve the 2010-11 PEDC budget, which included $210,000 for the education alliance.

Reid said it was O’Day’s position and ability to vote on both boards that led Pearland City Council members to work with the PEDC to “strengthen their by-laws regarding the ethics issues, since that was not really covered in their by-laws before.”

Reid himself previously was an ex-officio board member for the education alliance and is currently an ex-officio board member for PEDC. (“When you are mayor, you are the ex-officio member of everything,” he said.) Cain, too, is still listed on the education alliance’s website as an ex-officio board member, even though she’s now in Waco, but said she attended only one board meeting, and that her role was more that of “figurehead” than anything else.

Another Pearland resident who once served on both boards was City Councilman Ed Thompson, who said the duplicate service was intentional — and meant for a good cause. He said the PEDC board wanted him to serve on the education alliance’s board so it could have another “pair of eyes” taking stock of what was going on there.

The education alliance’s bylaws also specified that it had to have representation from the PEDC, the City Council and other local groups, he said.

But it was too late to save this marriage.  

In October, the Chronicle reported that the education alliance would not get additional money from the PEDC because lawyers for the Houston suburb felt the “contract with the alliance was not a good contract.”

“It was not like somebody was trying to cook the books,” Cain told Texas Watchdog. “When (the education alliance) presented it to the school district, their PEDC had already looked into it. If the PEDC had already looked into and they said, ‘This is good’ … then it’s not the school district’s job to look into what a municipality’s rule is.”

Nevertheless, the school system had its attorneys go over the contract one more time, and they found nothing wrong, Cain said.  

Late last year, PEDC asked the nonprofit group to pay back $120,000 the PEDC had given it earlier in the year, Pearland City Attorney Darrin Coker said.

“You need to be whistle-clean … and that will be corrected in the future when appointments come up and term limits are up,” the mayor said. The PEDC board members serve two-year terms.

Earlier this month, the two sides reached a settlement: The education alliance agreed to pay PEDC back $2,500 to settle all claims, and the paperwork shows that neither party admits to any wrongdoing.

***

Contact Lynn Walsh, lynn@texaswatchdog.org, 713-228-2850 or on Twitter, @lwalsh.

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