State Rep. David Lewis of Dunn took significant steps in this year’s legislative session to protect the state contract of a friend and campaign donor.
For years, Martin Edwards & Associates of Linden, whose president is Rickie Day, has held a state contract to tow, store and sell vehicles seized from repeat driving while impaired offenders. Lewis’ actions this year – including tucking language into a technical corrections bill that became law in the final minutes of the session – ensured that contracts for those services would continue to be bid out to the private sector when they expire next year.
Lewis’ legislative actions went against a state agency that has expressed interest in taking over the program because state officials believe they can return more money to local schools – at least $250,000 a year – according to preliminary estimates. By law, some of the program’s proceeds go to school districts.
Day donated $5,000 to Lewis’ campaign earlier this year, $100 shy of the maximum contribution, according to reports filed with the N.C. State Board of Elections.
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Lewis, a Republican who is chairman of the powerful House Rules committee, said his actions had nothing to do with Day’s contribution. He said he believes private contractors can do the work more effectively than the State Surplus Property Agency, part of the Department of Administration, which has considered taking the program in parts of the state, including Day’s territory.
“I am very suspect whenever anybody tells me that the government can perform services of this nature more efficiently than the private sector,” Lewis said in an interview. The agency hasn’t provided him a business plan proving the state can operate the program more cost-effectively than private contractors, he said.
Money for school districts across the state is at stake in the dispute over the seized vehicle contracts.
Aside from officials in two state agencies, at least one other Republican House member believes the Surplus Property Agency can return more money to schools.
“It doesn’t belong being contracted out,” said Rep. George Cleveland, an Onslow County Republican. “It costs the state money that should be going to education.”
Lewis acknowledged he protected Day’s state work.
“Throw me in the briar patch,” he said. “Accuse me of trying to fight for my folks. I’m OK with that.”
Protecting a contract
Here’s how the issue unfolded at the General Assembly:
Cleveland filed a bill in mid-March that would have hurt Day’s business. The bill authorized the Surplus Property Agency to store, process, maintain and sell cars seized by authorities because of offenses including impaired driving while license revoked. Currently, Day’s company has the contract for the eastern part of the state, and Eastway Wrecker Service Inc. in Charlotte has the contract for the western part.
On March 31, the House Regulatory Reform Committee signed off on Cleveland’s bill, sending it to the Finance Committee. On April 1, Lewis’ campaign received a $5,000 contribution from Day, according to campaign reports. The next day, Lewis added a “serial referral” to the Rules committee, which Lewis chairs, meaning the bill would have to be considered there, too.
For the remainder of the session, the bill didn’t go anywhere.
But Cleveland, chairman of the General Government budget subcommittee, inserted language from the bill into the state budget. The language would transfer oversight of the seized vehicle program from the Department of Public Instruction to the Department of Administration. It also allowed the Surplus Property Agency to deal with seized vehicles itself rather than contracting out the services. The General Assembly approved the budget Sept. 18.
Less than two weeks later, behind closed doors and with no public discussion, Lewis, who is a top lieutenant of House Speaker Tim Moore, inserted a provision into a technical corrections bill deleting the budget language that allowed the state agency to provide the services.
As a result of Lewis’ legislative change, contracts for seized vehicle services will be bid out again to private contractors when the existing contracts expire in February. Lewis said he wanted the language removed because he believed it implied that the General Assembly wanted the state to do the seized vehicle work.
The technical corrections bill, Senate Bill 119, was approved at 4:12 a.m. Sept. 30, a few minutes before the 2015 session ended.
Cleveland said he was surprised.
“In my last conversation with Mr. Lewis, I thought what was done in the budget was acceptable, and obviously it wasn’t,” he said.
Day’s $5,000 donation was the largest individual contribution Lewis received in the first half of 2015 and the first Day had given to Lewis. Lewis has “done a lot of good things here for Harnett County” and is a “good friend,” Day said in a phone interview. Day has given to other state and federal candidates in the past, records show.
Day and the Charlotte-based wrecker company also teamed up this year and hired a lobbyist, Alexander “Sandy” Sands of the Nexsen Pruet law firm in Raleigh.
Day said Lewis offered nothing in return for the donation.
“Had David Lewis made any promises to me and guaranteed me anything, I certainly wouldn’t have had to hire Sandy Sands,” he said.
Lewis said that Day sought his help, and he obliged, but that the financial contribution had nothing to do with it.
Lewis’ campaign-finance report lists Day as a teacher. According to the State Board of Elections, every other contribution Day has made to state candidates since 1998 identifies him as a contractor, government contractor or president of Martin Edwards & Associates. Day said he once taught at a community college years ago and that his wife teaches at N.C. State University. Both his and his wife’s names were on the check, he said.
Lewis said he was unaware of the “clerical error on the part of my campaign-finance reporting team” and that it would be corrected. As for the timing of the contribution and his action to stop the legislation harmful to Day’s company, Lewis said: “To be candid, during this exceptionally busy legislative time period, the best I can recall is adding the referral was a part of my normal bill management duties in the House. ... The bill was seriously flawed and misguided in attempting to grow government, while hurting small business – without a solid administrative plan.”
How the program works
The state’s seized vehicle contractors, including Day’s company, handle cars after the arrests of habitual DWI and other offenders. The cars are towed and stored until either they are reclaimed by their owners or the courts seize them and they are sold at auction.
The contractors receive portions of revenue from the towing and storing of vehicles, as well as a fee when vehicles are sold. Public schools also get a share of the revenue.
According to numbers provided by DPI, from October 2013 through September 2014, the two contractors retained nearly $1.1 million combined through their contracts, while school districts across the state received a combined $746,000, and the state general fund received about $19,000.
From October 2012 through September 2013, the contractors brought in more than $1 million, while $684,000 went to the schools and $19,000 to the general fund.
Who can do it better?
Disagreement remains about whether private contractors or a state agency is better fit to operate the seized vehicle program and which would generate more money for public schools.
Several people interviewed for this report said the issue is ripe for a study by the General Assembly’s Program Evaluation Division, or PED, a nonpartisan unit of the legislature that evaluates whether public services are delivered effectively and efficiently and makes recommendations to legislators.
Day questioned whether the Surplus Property Agency has the infrastructure in place to handle the program, citing a complicated process that involves many parties, including law enforcement, clerks of court, attorneys, automobile finance companies and individual car owners.
Private companies, he said, don’t have the overhead that a state agency would have, such as higher salaries and benefits. Also, it would cost the state more money to tow the vehicles to state-owned lots, Day said.
“I just don’t see how they can do it cheaper,” he said.
Officials for the Department of Administration and the Department Public Instruction said they believed more money could be given to schools if the state takes over the program. The vehicles could be sold through the state’s much larger auction site, generating more money, and stored at lower cost on state property, they said.
Preliminary DPI estimates showed that a minimum of $250,000 more annually could be sent to the schools, although the amount would depend on what parts of North Carolina the state took over from contractors.
“We feel 100 percent confident that this contract would fit within our business model and more money would go to North Carolina schools,” said Chris Mears, a DOA spokesman.
Sands said the issue deserves appropriate review in the legislature. There’s been talk of the state taking over the eastern part of the state, including Wake County – where many cars are seized – but bidding out the western part.
Rep. Mike Hager, a Rutherford County Republican and House majority leader, said he is concerned about the change to the budget language in the final minutes of session. The technical corrections bill that included Lewis’ language went through the Rules committee, but wasn’t properly vetted by more appropriate committees, he said.
He also said he is concerned that the General Assembly ignored the requests of the Department of Administration to take over the work.
“Why have we gone against their wishes if they think they can do it better?” Hager said. “I have all these questions, but I don’t have any of the answers.”
He agreed that a PED study would be beneficial.