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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. 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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 • 1 d_. ainsna-r 24, (qqy "Wats. 0 1.4-4t n .3,,arta .4 4 0 • 5 3-6' trona ACT% .1 55703 0-41 ore: lel _ Pas—. covrtst-e. -,-trt coCt‘a u4s* WArtne-te Aica-mev, en? Ariwrawt-4-1 G Cae Ae.3 arn; Witt& tr--C &ss■eten purnotA sevrAe7( • r eit:o r RA.044.k 6 LN" • "Cm AWL ii4r. —Ca.)— ariUt40,2____Wi itpn,eir in sate gs% nr trfl aA7 9 3 600 id ;avail-440A alaeg-i-, 4k._124nj- • Akv;AA4-c4 reify jaa., Cit L 3 Lila& - P _ 00-nartL " t u-J4-ca, coal / L 2./ - oe,e, cl-wett SA ftAorerc4t Ett-Pfunoln.Sit- _ . it 1 - 13- 4 ci 'fi £t ...it_ • eu-ca _ th WAikn Cekt-A"_ - • lt-9 s4 say e •-e , 0 otta eaaar27 ijka L.r. tietal a ett-rt COIrCinAd - 1:R•&■ /at4r4-1Yes".. 01/4 Cat■44i - eN 6____rtmnyi <>9. Ladr_c= n t-t%..— csintTeum—t „ dthr4 _ rt. imion_e et e-ca._ "1"--c.4eurusg..4 1:_q_ca 71_1_ 9 T _ V3) vc.di er-ery. ,. th k J _ S t OL ......h. = tat_ 0.4.1-2,‘se fir. ¥ �, , --�-, j c- Z3- ra -o-_ _ � ..� asst of-o • 0•' i 12- v l 2 3 -5 3 _ , MJ — Ar_ -r Lad_ , c -Z ew e - ! , - — '-, 1 - 1z -1 -?" - __[ Z - 3- S 2b__ -- - .cam" o. Guov-r..%f a.« 7/y B J_!1 - '- - A 14'l-,--- r a._•Sars - w--f st ;ii sue - _bars-LA • • Aball I / L.. / — A•4111 Al ral re . Asa • r�L/i1i - /►+- / • v . %tom �- i � _� a■e Seam a-alla Akar R • ;I • / 4 '20 l 9R . i stttas- t99t � 1 ll� • • • t sde sax • On. at • r 4 ' / • / 41! • A -� • 4 ,er U let i Loa- • "726_4 itetmeL. a au 3 -4 3 • 0—#4 Kt/ • cit. . ? li n s -4411414. tt i‘t & . 04e5.thea_09 - 1a 1 .0k , tTh i tt. A - Xrute -- torn—v • to-t^4Littri:C- iota catka-.. 4`: e F usw , r e-AstrAt • ct. 550 1 3_ est_ - 7-7 27 o -2,_ • 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. 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City t e ., ,tea . ° , ,[ t , c ,r cu.-( acott Ltrikek, kA p z . a �- ChA + q r G- 2 -0--Q2 4 4” -tu L 4 Q c4i ctiA i i tt , R F t C rv�-• n.0 , L.A , � at ( � ,tat -&-re .� •-f,, 0—,0 4 cf-A -( n - a — �t 3 o r/ '-r l ) 4'4 gas 3 Cc e r_ ittli 0 .55) 933--47`17(7/ 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