Jesús Garza disputes allegation that he violated city ethics rule

Consultants hired to investigate an ethics complaint against former interim City Manager Jesús Garza have concluded that he violated a city ethics regulation when engaging the services of former city employees Joe Canales and Laura Huffman without consulting City Council. Garza adamantly disputes that allegation, citing the multiple crises the city was facing and the need to act swiftly to try to alleviate them.

Garza was hired very quickly in mid-February 2023 after the firing of former City Manager Spencer Cronk. Garza had previously served as Austin city manager from 1994 to 2002, working with Mayor Kirk Watson from 1997 to 2001.

The Office of the City Auditor contracted with Weaver and Tidwell LLP and attorney Ross Fischer to investigate a complaint filed with the office. The auditor is required to hire an external party to investigate allegations that a Council member or the city manager have violated city code.

The allegation involves the hiring of the two former high-ranking city employees as consultants to the city manager through a contract with another consulting group. Canales and Huffman were hired through a subcontract with a longtime city contractor but they did not go through the city’s typical hiring process. Both acted as de facto assistant city managers because of their long experience in leadership positions with the city, the report noted.

The investigation concluded that Garza violated a section of the city code that says “a salaried city official or employee may not use the official’s or employee’s official position to secure a special privilege or exemption for the official or employee, (or) to secure a special privilege or exemption for another person.”

According to the audit report, Huffman received payments of nearly $286,000 from the city as a subcontractor through PFM Financial Advisors LLC for work during the February 2023 to February 2024 time period. Canales’ hourly rates were based on the anticipated annual salary for the deputy city manager position, totaling $325,000. Canales, who had retired from the city, was not eligible to be hired as a full-time employee because of his previous retirement.

According to the report, “In January 2024, Canales terminated his subcontract with PFM Group Consulting and began providing services to the City Manager’s Office as a part-time employee working less than 30 hours per week.” According to a city spokesperson, Canales stopped working for the city in May. In 2023, the city charter limited the city manager’s purchasing authority to amounts up to $76,000, according to the report.

The report notes that PFM Financial Advisors has provided services to the city since 1992.

“In April 2017, the city executed a 60-month contract with PFM FA to provide financial advisor services in an amount not to exceed $1.5 million, with three 1-year extension options of $300,000 each year” for a total of $2.4 million authorized from April 2017 through April 2025, it reads. According to the report, the scope of work was primarily related to bond sales but also allowed for financial planning and other financial consulting tasks, “including assisting with management studies of various enterprise funds, performing fee studies, and financial evaluations of the developer agreements.”

“The city’s CFO and treasurer reviewed the scope of work for consulting services to be provided by Canales and Huffman as subcontractors and determined that the services aligned with the scope of work related to ‘assisting with management studies of various enterprise funds.’”

However, the report states that the investigators “did not identify any management studies of enterprise funds conducted by Canales or Huffman, and it appeared that their focus was on issues related to organizational help, human resources, and supporting the executive leadership transition as opposed to technical financial issues described in the scope of work for the city’s contract with PFM FA.”

Garza told the Austin Monitor via email: “In early 2023, the City of Austin faced an emergency – with multiple unprecedented crises and challenges highlighted in 2021 and 2022 City Auditor reports, including the aftermath of recent winter storms, issues with our 911 call center and the need to restore public confidence in city departments. It was essential to have the right expertise, so in the essence of time, I brought two highly skilled former City of Austin employees to address and solve these issues effectively.”

In addition, Garza wrote, “They upended their lives to serve the city and organization they care deeply about, achieving widely recognized and outstanding results that fully justified their compensation. The hiring of these individuals did not require formal City Council approval, as they were brought in as subcontractors under an existing City contract managed and approved by the Finance Department. The process used was vetted and approved by third parties. I believe this report and the allegations unfortunately overlook the urgency of the situation, and the valuable work done by these dedicated professionals.”

The Monitor reported changes in city management without fanfare. According to Garza’s announcement in early March, Canales was returning from retirement as a special assistant to Garza. Huffman, a former assistant city manager and leader of the Austin Chamber of Commerce, returned to the city as “a consultant in change management.”

According to Austin Resource Recovery’s after action report, “Winter Storm Mara was a natural disaster with a historic amount of freezing rain and the actual ice accumulation measured approximately .71 inch – the most in Austin’s history. The weight of the ice caused trees, limbs, communications infrastructure, wires, and poles to sag or snap resulting in additional ‘hurricane level’ damage. The storm damage caused loss of electricity for a significant portion of the Austin-metro area. The icy conditions also led to hundreds of car crashes in Central Texas, and many roadways contained storm debris that presented hazards.”

Six months later, The Austin Chronicle published an article that was highly critical of Garza and the contracts, pointing out that Canales and Huffman were paid considerably higher salaries than others might receive for the work they were doing.

The report to the auditor will be forwarded to the city’s Ethics Review Commission to consider whether to take any action.

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