Memo - John Strojan CorrespondenceCITY OF HOPKINS
MEMORANDUM
To: Honorable Mayor and Members of the City Council
From: Steven C. Mielke, City Manager
Date: December 28, 1995
Subject: John Strojan Correspondence
At the December 19, 1995 City Council meeting, John Strojan appeared before the Council with
questions about the Mainstreet Improvement Project. The Council asked Mr. Strojan to put his
questions in writing and stated they would then consider whether to request that staff respond to
the questions.
Attached is a letter from Mr. Strojan, dated December 26, 1995, as well as all the prior
correspondence about the Mainstreet Improvement Project. Council must now decide whether to
ask staff to expend additional time to research these questions.
The questions raised by Mr. Strojan in his December 26, 1995 letter are questions that he has
asked before both to staff and the State Auditor. The State Auditor responded to Mr. Strojan's
questions by recommending that the Hopkins City Council modify its policy for amending
professional service contracts to require that the Council approve all change order amendments to
these contracts.
Mr. Strojan interprets the above to indicate that the State Auditor did not address his questions.
Staff interprets the Auditors response to indicate that a thorough review of the actions taken by
the City reveals that, while the City's actions were legal, the mechanism for approving changes in
contracts should be improved. These modifications have been made.
If the Council wishes, staff will prepare additional information in response to the questions
contained in Mr. Strojan's letter of December 26. However, it should be noted that Mr. Strojan
also states in his letter that "I had many other questions which involved the Consultant Contract
on the MIP" ( Mainstreet Improvement Project). I expect that answers to the questions contained
in the December 26 letter will only be followed by additional questions from Mr. Strojan.
MARK B. DAYTON
STATE AUDITOR
January 13, 1994
STATE OF MINNESOTA
OFFICE OF THE STATE AUDITOR
SUITE 400
525 PARK STREET
SAINT PAUL 55103
The Honorable Charles Redepenning, Mayor
The Honorable Members of the Council
City of Hopkins
1010 First Street South
Hopkins, MN 55343
Dear Mayor and Councilmembers:
This Office has completed an inquiry into issues raised by a citizen regarding the City of Hopkins.
The purpose of this inquiry was to gather and evaluate evidence as to whether City officials
committed illegal or unauthorized acts during the financing and construction of the Mainstreet
Improvement Project (MIP) completed in 1992. During this inquiry, we reviewed evidence
offered by the complainant and provided by City staff. This letter is to report our findings.
Misuse of Ta x Lncrement Funds
The complainant questioned whether it was appropriate for the City to use tax increment funds
(TIF) to finance portions of the MIP.
We reviewed MIP Project Summary Reports and legal correspondence submitted by City staff.
We leamed that the MIP had numerous funding sources. The dominant funding sources included
TIF, Minnesota State Aid For Streets, and special assessments. City staff demonstrated that
several properties affected by the MW lay within redevelopment districts which are primarily
improved through TIF monies. City staff also presented outside legal counsel opinions explaining
how MIP met redevelopment project requirements established by Minn. Stat §§ 469.001 to
469.047. Therefore, we believe MIP could be partially funded through TIF to accordance with
Minn. Stat. § 469.042 subd. 4.
Potential Conflict of Interest
The complainant noted that the project was funded through special assessments. The complainant
alleged that a former Councilmember who owned a business on Mainstreet had a conflict of interest
when voting for the special assessments associated with the MIP.
City staff provided an October 6, 1992 opinion from the City Attorney to the Councilmember
regarding the issue. The City Attorney advised the Councilmember that since the
Councilmember's business was not receiving any special dispensation and the assessment was to
be uniformly applied throughout the business district, there was no conflict.
(612) 296-2551
An Euual Onywrtuntity Emoio�zr
City of Hopkins
January 13, 1993
Page 2
The potential conflict alleged by the complainant is not prohibited by State statute. For those
conflicts not covered by statute, the Minnesota Supreme Court has set forth the rule starting with
the case of Lenz v Conn Creek Watershed District. 278 Minn. 1(1967). Under this case and
others handed down by Minnesota Courts, it is not clear whether the involved Councilmember
should have voted. The Councilmember could have abstained and avoided all appearances of a
conflict of interest (For the record, the Councilmember's vote was not determinative of the
outcome.)
This Office receives numerous allegations that public officials have statutory conflicts of interest
We have found that officials may aid themselves in avoiding these situations by adopting policies
requiring the disclosure of potential conflicts. While the City of Hopkins is not subject to the
requirements of Minn. Stat §§ 10A.07 through 10A.09, the City may amend its own policies to
require its elected officials and senior administrators to annually file statements of economic interest
with the City Clerk and the City's attorney. The adoption of this policy would protect City
officials from allegations that they did not publicly disclose potential conflicts. The policy would
also enable the City Attorney to provide guidance prior to a Council vote.
Improper Contract Amendments Anpmved Inappropriately
The complainant noted that construction costs totaling $110,177.50 were authorized through a
change order amendment to the original $2,714,850 MIP construction contract The complainant
believed that additional work of this magnitude should have been contracted through the sealed bid
process in accordance with Minn. Stat. § 471.345.
Minn. Stat. § 471.345 requires that municipalities solicit bids for certain contracts estimated to
exceed $25,000. However, the statute provides no direction regarding change orders nor whether
change orders constitute a new contract or an amendment to an existing contract What constitutes
an extension of an old contract or the creation of a new contract is a question of fact. The statute is
also silent as to how change orders should be negotiated. For an answer to these issues, we
looked to the public policy behind the contracting law and other statutes for guidance.
In Colter v. City of St. Paul, 223 Minn. 376, 387, 26 N.W. 2d 835.841 (1947), the Minnesota
Supreme Court characterized the public policy behind the contracting law as follows:
"The very purpose of requiring competitive bidding is to divest the officials having
the power to let contracts of discretion in some respects and to limit its exercise in
others. In the area of discretion is precisely where such abuses as fraud,
favoritism, extravagance and improvidence in connection with the letting of
contracts are prevalent Ordinary legal remedies are inadequate to correct resulting
wrongs. The purposes of requirements for competitive bidding are to prevent such
abuses by eliminating opportunities for committing them and to promote honesty,
economy, and aboveboard dealing in the letter of public contracts. The
requirements are said to have been born of `distrust' of public officers whose duty
it is to make public contracts."
Minn. Stat. § 429.041 subd. 7, addresses contract changes for local improvements funded through
special assessments. The statute states that a council may authorize changes and need not rebid for
work if the change does not increase the original contract price by more than 25 percent. Case law
City of Hopkins
January 13, 1993
Page 3
suggests that if the final contract price increased over 25 percent and the council did not rebid, the
contract may be void. The intent of this statute could be a recognition that rebidding for changes in
projects may not be the most cost effective method to handle unanticipated work necessary to
complete a project. A successful bidder may not be able to effectively integrate with the existing
project or cooperate with the existing contractor.
Minn. Stat. § 469.015 addresses procedures for awarding contracts and bid requirements for
redevelopment projects. The statute requires that construction work and every purchase of
equipment, supplies, and materials involving expenditures which exceed $15,000 shall be
competitively bid. An exception for emergencies, with a limit of $30,000, allows contracts to be
awarded without advertising for bids.
With this case law and statutory guidance, we have evaluated the documentation provided by the
City regarding the $110,177.50 change order amendment.
City staff provided copies of the change order amendment, relevant City Council reports,
memorandums from the design consultant, and internal staff memorandums discussing the change
order amendment Also, a March 17, 1993 City Attorney letter to this Office provided the City's
opinion on the issue.
Based upon the information submitted, it appears that after the MP had commenced, the City
uncovered an apparent necessity to relocate a sewer on the Suburban Chevrolet property. The City
of Hopkins solicited sealed bids for the additional material needed, but made a conscious decision
not to solicit sealed bids for the additional labor. Instead, on April 7, 1992, the City Council
authorized a $110,177.50 change order amendment to the original MIP construction contract.
The basis for this decision was discussed by City staff prior to the decision. The documents
indicated that City staff believed 1) the project could be linked to the current MIP; 2) the work
could be done in conjunction with the corresponding phase of the MIP; and 3) the staff had
discussed the issue with the City Attorney and checked costs with several sources. In a March 17,
1993 letter to this Office, the City Attorney opined that the relocation was an integral part of the
improvement project, that the process was not a violation of Minn. Stat § 471.345, and that the
labor cost was appropriately authorized through a change order amendment to the original contract.
These factors could justify the decision not to solicit bids for the additional construction, since it
appears that there was not any fraud, favoritism, or improper dealings to suggest an abuse of
discretion. In addition, the change order did not increase the original contract price by more than
25 percent.
On the other hand, based on the information received, it does not appear that City staff believed
that the relocation of the sewer was urgent or essential to the completion of the MIP. As such the
relocation could be interpreted as a separate project which would then be subject to the bid
requirements of Minn. Stat. § 471.345. The option to solicit bids was discussed in an internal
memorandum prepared by the City Engineer. We also note that the Suburban Chevrolet project
was part of the amended MIP funded with the TIP monies previously discussed in this letter. The
requirements of Minn. Stat. § 469.015 affect all projects authorized through §§ 469.001 to
469.047. Under this statute, the City of Hopkins could be in violation for not publicly soliciting
bids for the labor portion of the sewer relocation.
City of Hopkins
January 13, 1993
Page 4
Ultimately, whether the City violated the municipal contracting law is a question for a court to
decide pursuant to a suit filed by an aggrieved or potential bidder. In this instance, it appears that
City staff diligently considered the City's negotiation options, obtained an opinion from the City
Attomey, and made a recommendation to the Council. The City staff's decision has obviously
been questioned by at least one citizen. Absent a court decision, this difference of opinion cannot
be resolved.
The complainant also questioned the propriety of the Council's approval of the $110,177.50
change order amendment through the consent agenda rather than voting on the amendment as a
specific item.
We obtained a copy of the minutes for the April 7, 1992 City Council meeting which recorded the
Council's actions. The amendment was approved through the consent agenda. Minnesota Statutes
do not require contracts or amendments to be approved as specific agenda items. However, we
believe that it is good public policy to place all potentially controversial issues on the agenda. This
encourages a final opportunity for the City Council to discuss the issues prior to making a decisive
vote.
In this instance, City staff recognized that there was a potential legal issue and contacted the City
Attorney for an opinion. We reviewed the Council Reports submitted by City staff regarding this
amendment. While the reasons for expanding the project were fully discussed in the reports to the
Council, the potential legal issue regarding how to contract for the additional construction services
was not addressed. While City staff may have been assured that the amendment to the MIP
construction contact was the appropriate method to negotiate the sewer relocation, the City
Council is responsible for the decision. We are not certain that the Council was aware that this
potential legal issue existed at the time of the consent vote. Since the Council is held responsible
for the legal liabilities of the City, we believe that it is appropriate for the Council to specifically
review and approve any issue which required the opinions or legal determinations of the City
Attorney.
Unauthorized Disbursements
The complainant alleged that disbursements made to both Westwood Professional Services
(feasibility and design services) and RLK Associates (construction management services) exceeded
the amount authorized by the negotiated bids and contracts.
In response to our questions, City staff provided over 200 pages of documents and numerous
letters to this Office explaining the City's process when contracting with and then compensating
Westwood and RLK for services provided on the MIP. Based upon this information we learned
the following:
• Westwood Professional Service's bid to design the MIP included a flat fee of $22,000 for
the feasibility study and 5 -7 percent of the estimated $3,000,000 MIP ($150,000 -
$210,000). The contract was signed for $288,000 which was $78,000 or 37 percent over
the bid maximum. Total payments to Westwood surpassed $343,000. This amount
exceeded the contract by $33,000 or 11 percent and the bid maximum by $111,000 or 48
percent.
• RLK's bid for construction management services was 8 -9.5 percent of the estimated
$3,000,000 MIP ($240,000 - $285,000). The contract was signed for $290,440 which
City of Hopkins
January 13, 1993
Page 5
was $5,440 or 2 percent over the bid maximum. Payments to RLK surpassed $377,000
and exceeded the contract by $86,560 or 30 percent
City staff responded to the allegation by stating 1) that the City's service contracting procedures
were complied with during the contracting process; 2) that the scope of the projects were
expanded, as authorized by the City Council, prior to signing the contracts; and 3) that overruns to
the contract amounts were fully explained. City staff advised that the City Council was made
aware of all changes and cost overruns. The primary method for informing the City Council of the
contract costs were Project Summary Reports prepared by City Staff and submitted to the City
Council prior to the City Council's approval of the disbursements.
We agree that the City's written procedures for contracting for services were followed by City staff
and that it is not unusual for the scope of a project to expand. City staff were also able to
demonstrate that the City Council authorized the additional services performed by both Westwood
and RLK. We do not agree, however, that the City Council was adequately informed of the
additional costs related to the City Council's decision to expand the scope of the services provided
by Westwood and RLK.
The City's policy relating to professional service contracts is silent as to how service contracts
should be amended. Therefore, we reviewed the City's contracts with Westwood and RLK. The
Westwood contract contained the following language:
"Additional work beyond the scope of these tasks will be performed by the consultant as an
`extra' to the quoted lump sum figure. The consultant will place requests for additional
services in writing and obtain City approval prior to invoicing."
The RLK contract provided for additional service and compensation for those services as follows:
"RLK Associates, Ltd. will provide additional services under this contract, as authorized by the
Client and requested by the Client with charges for those additional services invoiced at the
stated rates..."
While the Council did authorize the additional services, City staff acted as the City agent when
approving the additional costs. The change orders submitted to this Office regarding the contracts
appear to have been approved by City staff and not by the Council. Moreover, when we reviewed
the Project Summary Reports, we discovered that the "Total bids and Estimates" column generally
matched the "Amount Paid" column. We believe this representation is misleading, since the
Council should not be expected to remember the original contract amount. Therefore, the Project
Summary Report does not adequately report to the Council the costs of the Council's decision to
authorize additional work.
Minnesota law does not require that professional services be competitively bid. The absence of
such a requirement creates many situations which give rise to similar allegations from citizens
about their public officials. This Office believes that it is good public policy for a local government
to institute a competitive bidding process for professional services, which the City of Hopkins did.
However, it is equally important to monitor contract payments, progress, and amendments.
Currently, the City of Hopkins does not have adequate procedures to ensure that the Council is
City of Hopkins
January 13, 1993
Page 6
adequately informed of the costs of its decisions to amend service contracts. Therefore, we
strongly recommend that the City modify its policy for amending professional service contacts to
require that the Council approve all change order amendments to professional service contracts.
This Office is concerned with state -wide problems in managing service contracts. We have found
that professional service contracts are not monitored as closely as those contracts required to be bid
in accordance with Minn. Stat. § 471.345. As a result, service contracts are susceptible to
expeditious alterations which are not necessarily in the best interests of the public.
For your information, we have attached a copy of a letter sent by this Office to the City of
Minneapolis regarding bidding and change -order processes. That letter more fully details the types
of problems other governmental units may be having with the management of contracts.
Open Meeting Law Violation
The complainant made one allegation which was not related to MIP. The complainant believed that
the City Council took action at a workshop by hiring independent auditors. The appointment of the
City's independent auditor at a Council workshop would be a violation of Minn. Star § 471.345.
City staff have provided copies of the November 11, 1992 City Council Regular Meeting Minutes.
The minutes indicate that the City's independent auditor was officially appointed at that meeting.
The complainant raised valid concerns regarding the City's procedures to request bids for and
authorize changes to the Mainsheet Improvement Project While Minnesota statutes and cotnmon
law do not directly address contract changes and do not require competitive bidding in the case of
professional services, this Office recommends that the City review its current policies and
implement procedures which will ensure that the City Council has an opportunity to fully discuss
changes to contracts and ensure that the public is well served by its Council's actions. We would
like to extend our appreciation to the City of Hopkins staff who were extremely courteous and
helpful to members of this Office during the course of our inquiry. If you have any questions
regarding these issues, please contact me at (612) 296 -2551.
Sincerely yours,
,thtet
Paul L. Almirall
Deputy State Auditor
Special Investigations
PLA:DK:kf
cc: Complainant
Steve Mielke
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August 28, 1995
Mayor and Councilmembers
Hopkins City Hall
1010 First Street S.
Hopkins, MN 55343
Subject: Unresolved concerns
in Jan. 21, 1995 letter to Council
Dear Mayor and Councilmembers:
The mills of the gods must have stopped.
On Jain. 21, 1995, I sent a letter to each councilmember regard-
ing questions I had raised during the State Auditor's investigation
into the Mainstreet Project consultants contracts which were not an-
swered by the Auditor's report gated 1- 13 -94. Mark Dayton, in his
letter of 3 -1 -94 to me,stated: I sincerely hope that you are able
to resolve your concerns with the City of Hopkins to your satisfac-
tion,." That was the purpose of my 1 -21 -95 letter to the Council.
411 also ,ent background information which I was not sure the Council
had ever seen.This was directed to Fran Hesch and I was confident she
would read it and pass on to the rest of the Council. She assured me
in a 1 -28 -95 letter that the matter would be taken up by the Council
and she expressed surprise that I had not been brought in on the clos-
ure of this issue. If, when, and where the matter of my 1 -21 -95
letter was before the Council is a mystery. No one on the Council
contacted me personally with explanations as I had expected. The
Feb. 1995 minutes never mentioned receipt of the 1 -21 -95 letter, or
any public discussion or referral to a work session cr other meeting.
However, I received a letter from City Attorney Miller dated
2 -27 -95 stating that my letter.had been referred to him (by whom ?)
for response. He concluded that by review of the correspondence,
that the investigation by the Auditor's Office had been completed
and the file closed. He also advised the City Manager that no com-
pellin reason remains to reconsider the various items ccntained in
my letter. The City considers this matter to be closed as well.
Then this decision took place is unknown to me by way of any public
record I have received.
The City Attorney generously states: "If you disagree with the
opinion I have riven the City, please have your legal counsel contact
me and I will be glad to discuss this with him." Since when does a
citizen have to be represented by legal counsel to get answers to
questions regarding the actions of a City Council? Is this what
lawyers mean by arbitrary and capricious:
t
.ayor & Ceuncilmembers- Hopkins
August 2E, 1995
Page 2
I was not asking that the reopen the Mainstreet investi-
E tion, if in fact it was ever open, but simply to answer the un-
answered questions on how, when and by whom additions to the
contract amounts for Design ($`2 and Construction Management
(45,440) took place. I still feel.that it is improper to not put
the State Auditor 1 -13 -94 report and my letter of 1 -21 -95 on the
Council agenda's for Public discussion. Every correspondence, com-
olimentary or critical, should be publicly acknowledged on the Council
agenda.
'_r. Mielke,in his 3 -23 -94 letter to me, offered to make copies
available of information which would presumably satisfy my concerns.
This should not be difficult and I am willing to pay reasonable
charges for the following:
1. Copies of agendas, staff reports, and -minutes of any kind
of meetings when the Council discussed and approved the
actions _-have questioned.
2. The record of any meetings, staff reports, or correspondence
involving the "all parties" referred to by Mr. "armening in
his explanation to the State Auditor of the 15.440 addition
to the RLK Construction Management contract far unpaid wages
for then Westwood employee RLK for design work.
3. Any correspondence with the State Auditor which indicates
that "procedural recommendations have been implemented to
their satisfaction, as stated by Yr. Miller in his letter
of 2- 27 -95.
Citizen trust in our Public officials Is of utmost importance.
A recent letter to the °U:4- SAIL04 ov a councilmember asked for the
citizens of Hopkins to "trust us. Fair enough. But that trust
is not a blind trust. It is earned by actions. We don't expect one
council to never make mistakes or always agree with Citizens' opinions.
Being open and willing to stand up for their actions or admit when
they are wrong is how trivet is created. It is not enough to just say
No, Case Closed.
It is acceptable - occasionally to allow consultants to 3r -
pare contracts fon City signature - but tefonet�:e.RIayor and City
Manage_sifn the formal cofftraCt on behalf of trle icy, the Council
should insist that the proper Staff and City Attorney review has
been done tr assure that the bid terms acccepted by the Council
are in the written contract. I noticed in a recent legal publica-
tion for a new ordinance that the bottom line stated, Approved as
to Form and Legality, to be signed by the City Attorney. Consultant
written contracts should contain similar assurances.
would be happy to appear - at a future Council Meeting, cork
Session, or Special :eetink to discuss these questions.
Mr. a 3-23-94 letter, sated
T'. 1'.1 e13_, _;1 � i_y 4 lt t , stated t;t ?_`., the final Main-
street Project Financial Summary would be sent to me in April, '1994.
inquired as jv its availability during a visit to the City Hall
in July, 1994. It was not available then. - still have not re-
ceiye it after 17 months. The Mainstre__ Project was completed
in 195;4.
1
f or & Councilmembers- Hopkins
agust 28, 1995
e 3
I have not received any copies of the Work Session minutes
since January 1995, even after repeated requests of Pat
att Gisborne.
Previous to January 1995, Work Session minutes were only
sporadically, usually after I asked Pat for them.
Attached are copies of newspaper clippings which show how
actions of officials may create mistrust. The cartoon summarizes
my questions.
Sincerely for open government,
John J. Strojan
1
Attachments
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September 24,1992
-1-
Re: Mainstreet Consultant fees
and possible conflict of interest.
To: Hopkins City Council and Staff
Councilmember Redepenning, in his 7 -19 -92 letter to me; states
the following:
"My understanding of the Mainstreet project is as follows":
When RLK was hired, a specific set of improvements were an-
ticipated to be completed and RLK was paid a flat fee to ac-
complish the management of those improvements. The City staff
did not recommend overhead charges against the fire services:
in order to encourage fire service installation, only the actual
cost of the construction was recommended for assessment against
the property. In the staff's opinion, the fees associated with
this additional assessment were unnecessary and would not have
encouraged property owners to install fire sprinklerservices
to their 'buildings."
On 4- 12 -91, the Council accepted bids for the Mainstreet Project
totaling $2,714,853.
On 5 -3 -91, the Council awarded a contract for Phase IV, Con-
struction Management to RLK for a "flat fee" of $290,440. The
request for the 8 fire sprinkler services were not submitted
to RLK until July and August of 1991. These could not have been
part of a specific set of improvements anticipated to be com-
pleted when RLK was hired on 5 -3 -91 as con4ended by Council -
member Redepenning . Even if they were, there is no justi-
fication to not charge overhead costs on assessments.
Let's back up to the March 20, 1990 Council meeting. Jon Thiel
Public Works Director, in Council Report 90 -70 dated 3- 14 -90.
outlined a process the staff had used to solicit requests for
proposals (REP). The report (portion attached) showed a summary
of the bids submitted by five consulting firms for each of the
phases remaining to ultimately result in the reconstruction of
Mainstreet. This summary showed the estimated fee percent range
for each phase based on a 3 million dollar project. The staff
recommended the firm of Westwood Professional Services, Inc. be
retained to engineer / plan this project based on the staff con-
clusion that the Westwood estimated fees are "within reason"
for a $3,000,000 project.
The staff report states that final fee cost will be negotiated
for each phase as it is approved, presumably within the "reason-
able "range of fees set forth by Westwood in the REP before the
Council on 3- 20 -90.
What happened next?
A contract for a two phase feasibility study was signed by the City
in April, 1990. A flat charge of $22,000 was proposed by Westwood
in the RFP and the $22,000 appears unchanged in the ccontract for
the feasibility study. For the next four months, Westwood worked
on this study until the extent of the actual project was determined
on 8 -21 -90 and a public hearing was held on 9- 18 -90.
The next phase would be Design. In the RFP, Westwood proposed a
"range" of 5% to 7% for Design, which for a $3,000,000 project would
be, at most $210,000. However, the actual contract on 11- 15 -90,
makes no mention of the RFP proposal of 5% to 7 %, but includes a
"flat fee" of $288,000. The percent fee now escalates to 9.6% or
a net difference of $78,000. For the next five months, Westwood
works on the Design phase.
On 4- 12 -91, the City opened bids on the Mainstreet Project, which
totaled $2,714,853, as designed. An assessment hearing was held
shortly after the bid opening and the Council approved an assess-
ment roll and finally was in a position to award contracts for the
reconstruction of Mainstreet in July of 1991.
The Council approved a contract with RLK, dated 5 -1 -91, for Con -
struction Management services. Previously the owners of Westwood
apparently split up and worked out some arrangement to divide the
work and fees for the remainder of the project. In the original RFP,
Westwood proposed a "range" of 4% to 6% for construction management
which would be,at most, a fee of $180,000. However, the actual
contract with RLK for Construction Management on 5- 1- 91makes no
mention of the RFP "range" of 4% to 6 %, but includes a "flat fee"
of $290,440. The percent fee now escalates to 9.68% or a net dif-
ference of $110,440.
•
The escalated percentages would be even higher if calculated using
the actual project cost of $2,714,853 instead of the $3,000,000
used in the RFP of 3- 20 -90.
This complete disregard of the bid proposal of Westwood in the RFP
of March 20, 1990 is a distortion of the RFP process. It is gross-
ly unfair to the other consultants when the result of the "flat
fees" in the contracts puts the Westwood and RLK totals for Design
and Construction Management, not at the "reasonable" expected
maximum fee of 13% or $390,000; but now at a "fat" 19.28% or
$518,440. I thought the purported advantage of Design / Con-
struction Management was a cost effective way to save the city
money.
To make these consultant costs even more questionable, the 6 -30 -92
Mainstreet Project Summary Report lists the amounts proposed to be
paid (including approximately $20,000 of fees added by the Clock
Tower and Suburban Chevrolet storm sewer projects ) as $347,467
in Acct,No. 303 to Westwood and $321,223 in Acct. No
'390 to RLK.
-3-
These two figures total to $668,690 or a net increase of
$258,690 from the high end of the RFP fees and the current
project summary. Some other charges have obviously been added
probably for the fire sprinklers and other work not included in
the original bid.
I recall Councilmember Shirley saying in the Clock Tower bond
discussion, "It lights my torch when a bidder gets the bid, then
starts playing around with it, the City gets whipsawed and
caught in between and I don't like the position I'm in now."
Is a complete audit of the consultant fees necessary or is there
an explanation of these large increases in fees from the RFP to
the current Mainstreet Summary? Does the City Attorney review
these contracts, obviously written by the Consultant? Does the
Staff write reports explaining why these "negotiated" fees are
so different from the RFP "range" of fees?
The City Manager, in his letter to me on Aug. 28, 1992 stated
the following: "With regard to the overhead charges on fire
sprinkler installations, City staff did not recommend these charges
for reasons previously stated to you. To my knowlwdge, there was
no specific discussion regarding this topic at a Council level.
The Council received recommended assessment amounts from the en-
gineering department and passed upon those recommendations."
By what authority does any Staff member "not recommend overhead
charges against the fire services in order to encourage property
owners -to install fire sprinkler services to their buildings ?"
Only the City Council has the authority to make such decisions
regarding assessments.
City Policy 7 -D Roadway Improvements under 10.02 of Assessment
Policies states: The total project cost for streets constructed
or reconstructed in any given project shall be equal to the actual
construction cost, plus associated costs such as legal bonds, ad-
ministrative and engineering.
This rule has always applied to any portion of a street project,
including sewer and water connections and fire sprinkler connect-
ions, even if assessed separately. Assessing projects before the
work is done, while legal, does not comply with the present City
Policy. However, Chapter 429 has a provision to correct assess-
ments, which sh ould be done to comply with "actual construction
cost." The Campbell Addition Project, with the 8% Contingency and
22.8% overhead costs, is an example which I will address separately
later.
Apparently no overhead charges were assessed against any of the
$128,935.43 of private improvements in the March 17, 1992 hearing
process of which Councilmember Redepenning was both a property
owner proposed to be assessed for 820 Mainstreet and a voting
Councilmember.
Assuming a 25% overhead charge, the City is "losing" approximately
$32,000. Councilmember Redepenning, by this generous Staff and
Council action, saved 25% of $6566 or $1641. In addition, the
generous Council action on the Mainstreet Project, in subsidizing
the actual sanitary sewer connection costs by a reduction of 45 %,
saved Councilmember Redepenning another $2868. In addition, the
Council reduced the street assessments from the 70% assessed and
30% City share - in Roadway Policy 7 -D, 10.04 and 10.06 - saving
Councilmember Redepenning approximately $4400. In addition, the
current alley improvement project, to be paid entirely with TIF
funds, will save Councilmember Redepenning additional money.
Is it fair or proper for an elected official to benefit financially
in this manner while in office?
In a previous letter to the City Council dated May 15, 1992,
I quoted from comments made by Meg Bye in the Minneapolis Star
Tribune on May 10, 1992, page 8A, as follows:
"People who say the end justifies the means completely forget
that the means are what the democratic process is all about. It's
about truth, about how you spend money, and how you conduct your-
self. Yes, integrity does matter, because if you don't have that,
nothing you achieve means anything."
In all this gloom and doom is a ray of sunshine. Councilmember
Shirley recently stated publicly that, although the Council voted
to repair sidewalks at no charge to property owners, he insisted
on paying the approximately $90 of repair hiss would have cost,
since he had voted for the new policy. Atta boy. Jim. Your
conscience and sense of fairness wouldn't let you do otherwise.
Why can't Councilmember Redepenning and City Manager Mielke see the
unfairness of the fire sprinkler assessment instead of putting the
responsibility on Staff? If H &R Block makes a mistake on your in-
come tax return, you are the one who is responsible.
Sincerely,
-4-
John J.Strojan
309 Althea Lane
Hopkins, MN 55343
612 - 935 -4974
ATTACHMENTS:
Councilmember Redepenning letter 7 -19 -92
PWD Thiel - Council Rpt. 90 -70 Re: RFP pages 1 & 2
Mainstreet Project Summary Report 6 -30 -92
City Mgr. Mielke letter 8 -28 -92
City Roadway Pdlicy 7 -D pages 5 & 7
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Creekwood to celebrate Earth Day
=wean Higley 7 and the school property. - -
Berg said the school's project has received favorably response
the Minnesota Department of Transportation, and the state
dseape architect. The council's support may aid in getting
funding for _, the project, Berg said.
� auistreet improvement project
B efo work begins on the Mainstreet improvement project,
and property_ owners along the street will learn how
' it is go to cost them.
ids on the project are scheduled to be reviewed April 12, and
',there will be separate bids for the street construction (curbing
• and surfacing), utilities (sanitary sewer, water main and storm
sewer), traffic signals, street lighting, landscape amenities
(sidewalk, pavers, tree grates and planters), and the plaza area
and trees.
The assessment roll for the property owners will be based on
the Lowest bid for each category plus overhead costs.
On April 2, the City Council also established some assessment
policies, including:
Assessing for driveway aprons wider than 24 feet and for
businesses that have more than one driveway. Businesses will be
required to pay the total costs for more than one driveway.
• Determining that the cost for the work between the 5th through
11th avenues is higher than the cost for the work between 12th
and 20th avenues. It is estimated that 5th -11th Avenues will cost
about $67 a linear foot, and the cost between 11th -20th Avenues
will be $60.75 a linear foot.
• Mandating that property owners replace water and sanitary-
sewer lines deemed in need of replacement. The engineer will
eet with the property owners to explain what-work may be
needed. Replacing both service lines is estimated to cost about
$5,000.
Construction management firm
RLK Associates Ltd. (Richard L. Koppy) has been hired to pro-
vide project - management services for the Mainstreet improve-
ment project.
For a cost to the city ranging from $240,000 to $285,000, Koppy's
company will be responsible for engineering, public relations,
surveying, project monitoring, and a job -site office on
Mainstreet.
- Koppy is familiar with the Mainstreet project, having worked
for the engineering company for the project — Westwood Profes-
sional Services.
The Creekwood Apartments
plan to celebrate Earth Day on
Sunday, April 21, by organizing
a cleanup crew for Minnehaha
Creek.
John Vaughn of the Animal
Humane Society of Hennepin
County will kick off the event at
9:30 a.m. with a demonstration
) nd speech on urban wildlife.
�fhen volunteer residents, apart-
ment staff members and Boy
Scouts will wade through the
creek to pick up refuse. Several
local businesses and organiza-
tions are donating material for
the project.
At lunch, provided by
Creekwood, Lee Paddock of the
state attorney general's office
will present slides and talk
about environmental issues, and
a prize will be awarded for the
most unique trash item found.
To volunteer, call 938 -5575.
Last- minute injunctior-
o stop landfill project
■
By Eileen Harvala
An° 11th hour '= attempt by
- Earth Protector Inc. and some
Westbrooke Patio Home owners
to stop the city's landfill gas -
remediation project was unsuc-
cessful last week.
Earth Protector, whose presi-
dent is Leslie Davis, and 11
Westbrooke homeowners sued
to prevent the project from be-
ing started, and sought a
restraining order or injunction
against the city to block any
work until the suit is settled.
The city's attorneys for the
landfill work were served
papers on the suit at 2:30 p.m.
Wednesday, April 3, and ap-
before Hennepin County
istrict Court Judge Cara Lee
Neville at 3:30 p.m. She heard
arguments in the case at 12:30
p.m. Thursday, April 4, and at
the conclusion of the hearing
said she would either make a
decision Thursday evening or
early Friday morning.
She said that in either case no
work was to be done at the land-
fill until 10 a m Friday, April
5.
Earth Protector and the
homeowners alleged:
• That the agreement between
the city and the Westbrooke
Patio Homes Association
(WPHA) was invalid because it
was not authorized in writing by
two-thirds of the Westbrooke
residents, and constituted an in-
effective conveyance of interest
of land.
• That the project constituted a
Loss of use and enjoyment of the
Westbrooke commons area.
• That the Westbrooke
covenants prevent nuisances
from noxious, destructive or of-
fensive activities.
• That the excavation con-
stituted a loss of foundation sup-
port for the homes.
• That excavating any g<
from the Westbrooke open
'was "unconstitutional
of an estate in land.
According to a memo
Judge Neville, all of
counts depended on whet'
agreement executed b.
WPHA and the city was s
Neville ruled that the
ment is valid because it c
a "license" which does t
quire approval by two-tit
the association members'
She also wrote: "The fa
dicate that the [city) is a
tingto clean upahaz
waste site, not attempting
ploit or profit from the gc
that will be removed."
Neville ruled that the '
tiffs have failed to demor
that they will suffer irrep
harm."
She wrote: "While the
weeks during the project r
unpleasant and inconv
the plaintiffs, through
agent — the Westbrooke
Homes Association — e
into a valid licensing
ment, which allows the
implement its project.
"The contract also ca
replacement of the soil re:
with good soil anc
landscaping. When this h
weighed against the mo
losses that will be sustai:
the city due to delays a
possible health threats
may result if the proj
delayed until Oct. 1, 19i.
balance tips heavily in ff
denying the ten;
injunction."
At 9:30 a.m. Friday, A
the city received notif
that it could proceed wi
project.
The dty's attorney, Joh
from Doherty, Rumble
Butler, said that Judge NE
ruling was based on the