City sued by vendor for breach of contract



Although city staff has complained for months about US Water’s contract overages, cost overruns and failure to provide accurate monthly reports, the provider that previously managed Liberty Hill’s wastewater treatment plant filed a lawsuit against the City last week for breach of contract.

In a lawsuit filed in 26th District Court in Williamson County, US Water Utility Group claims it met all of its contractual obligations, yet the City of Liberty Hill has failed to pay the business “hundreds of thousands of dollars in fees and expenses owed to USW under the contract. USW has demanded that the City pay amounts owed, and the City has refused.”

Following a 20-minute closed session Monday, the City Council unanimously approved the retention of Attorney David Tuckfield of AL Law Group of Austin to serve as litigation counsel in the City’s defense. He will be paid at the rate of $300 per hour.

After the Council meeting Monday, City Manager Greg Boatright said the City took over operations at the wastewater treatment plant on August 3 after giving the company 45 days notice that the Council had voted to terminate the contract.

“We took over due to overages of monthly charges that were only identified after six months into the contract,” Boatright said. “They were required to give us monthly reports on operations and costs, and they failed to do that until the ninth month.”

Boatright said at the fifth month, the company began claiming they were incurring charges over the contract, but the contract only allowed for a 5 percent increase at the annual renewal date. Work orders above the contracted amount ($1,000) required authorization from the City, but overages were not submitted for approval.

“We felt like there was no alternative for us,” he said.

Boatright said the City’s five-year contract with the company was “a fixed fee, a flat rate.”

He said the last number submitted by the company that the City owed was $305,000. During an attempt at mediation, the City offered $205,000, but it was rejected.

“When they get ready to exit a contract, we get hit with this true up. This problem is inherent in the industry. The true up is a way they blackmail the city for additional money,” Boatright said.

During a Council meeting June 22, a representative from US Water, Scott Spidle, apologized for cost overruns and a failure to report costs in accordance with the contract.

“We have not been providing a level of reporting, not only detailed reporting but timeliness of reporting as we should have,” Spidle admitted. “I had staff here locally that was not providing the level of reporting that should have happened. That’s not your fault. That’s not (city) staff’s fault. That’s the company’s responsibility.”

City Chief Financial Officer Amber Lewis said the company was 48 percent over its contracted amount when the City terminated the agreement in June.

City Attorney Elizabeth Elleson said the action taken by US Water Utility Group against Liberty Hill is unusual for service providers.

“This is big. It’s not typical,” she said.

The City has filed a Motion for Summary Judgement, which allows Judge Donna King to decide the case. Elleson said this would keep litigation costs lower as opposed to going to a jury trial. However, she estimated it would be four to five months before the parties would see any movement from the Judge on a ruling.

Lewis said the budget for fiscal 2015 includes about $75,000 for attorney fees. The new fiscal year begins Oct. 1.

Also Monday, the Council held the second of two public hearings on the proposed tax rate of $0.527842 per $100 valuation. No one addressed the Council on the issue. The Council is scheduled to vote on the tax rate and the budget on Sept. 14.

In other business, the panel voted unanimously to approve a Mediated Settlement Agreement between the City and Protestant Stephanie Morris in a Texas Commission on Environmental Quality proceeding regarding an application by the City of Liberty Hill to expand its wastewater treatment plant.

Boatright said the terms of the settlement are not monetary in nature. Instead, the City agreed to notify Morris in the event of any exceedances at the plant as well as correction of those exceedances. The City also agreed to develop a Re-Use policy for treated wastewater.

An additional term of the agreement include the posting of a fertilizer awareness statement on the City’s website that provides information about the impact of fertilizer overuse on the environment.

The City also designated Public Works Director Wayne Bonnet as a liaison between Morris and the City on wastewater-related issues.

“This is the last piece of the puzzle toward approval of our permit,” Boatright told the Council.

After the document is signed and submitted to TCEQ, Boatright said the City can expect a November hearing at TCEQ on final approval of the permit. The City is seeking to expand the treatment plant from a capacity of 1.2 million gallons per day to 4 million gallons.

Boatright said Morris is a beekeeper and her business, Birds and Bees Farm is located on the bank of the South San Gabriel River near the discharge point of the treatment plant. In her protest, she claimed the effluent in the river had a possible impact on the quality of honey.

The original protestants of the City’s application were Terry and Sharon Cassady, who TCEQ granted standing in a contested case hearing. The Cassadys’ property backs up to the river.

After a hearing in June, the Cassadys withdrew their protest. In an email to The Independent, they cited the high costs of hiring an attorney to represent them in the matter. Additionally, they were concerned about the possibility that a judge’s decision in their favor could be overruled by TCEQ Commissioners. The email cited an example of a similar situation in another county.

Boatright said with the City’s approval of the settlement with Morris, there is nothing barring the approval of the application.

The Council met in a budget workshop following Monday’s meeting, but a budget proposal had not changed from the week prior so there was no discussion.