MINUTES OF MEETING
NORTH SPRINGS IMPROVEMENT DISTRICT
The regular meeting of the Board of
Supervisors of the North Springs Improvement District was held Thursday, August
1, 2002 at 4:10 p.m. in the District Office, 10300 N. W. 11 Manor, Coral
Springs, Florida.
Present and constituting a quorum
were:
Matt Lauritzen President
Salvatore J. Mendolia Secretary
Also present were:
Rhonda K. Archer Finance
Director
Dennis Lyles Attorney
Donna Holiday Recording Secretary
John McKune Gee & Jenson
Warren Craven WCI Communities
Roger Moore District Staff
FIRST ORDER OF BUSINESS Roll Call
Mr. Lauritzen called the meeting to
order at 4:10 p.m.
SECOND
ORDER OF BUSINESS Approval of the
Minutes of the July 3, 2002 Meeting
Mr. Lauritzen stated that each Board
member had received a copy of the minutes of the July 3, 2002 meeting and
requested any additions, corrections or deletions.
There not being any,
On
MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the minutes
of the July 3, 2002 meeting were approved as presented.
THIRD
ORDER OF BUSINESS Status Report
on Water Plant Expansion Project and Felix Equities
Mr. McKune stated at the end of
January this year, we started getting calls from some of the contractor's
suppliers and subcontractors about not getting paid by the general contractor,
Felix Equities. Felix is the contractor
for our water plant expansion. It is a
contract valued at about $6.5 million.
There is roughly $600,000 to $700,000 worth of work to complete so we
are fairly well through the job. After
fielding more and more calls from the subs for not getting paid, I received a
call from the Felix Project Manager on-site who said he was still holding a
check for $125,000 sent to him for the December pay request. He had not sent it to the office in New York
because for the last three months when he sent our payment to that office, they
disappeared and they haven't paid the subs.
He handed the $125,000 check back to me and we put it back in the
construction trust fund. We spoke with
the bonding company, we spoke with Felix at length and discussed it with Mr.
Moyer, Mr. Lyles, Mr. Moore and Ms. Archer.
We came up with the process we have used in the past when there were
delinquent payments to the subs and that is we entered into a joint check
arrangement where at the end of each month Felix gave us their request for the
monthly draw and a list of their subs and suppliers who had sent in invoices
for the previous month and we would approve those individual amounts and the District
cut a check for the subs made to Felix and the sub. The way it was supposed to work is that we
would sit in our office with a stack of checks, Felix would arrive at our
office with his subs, we would give the sub a check if they gave us a partial
release of lien and we would do that through the end of the job. We have done that before. We progressed for about three months in that
manner and caught up on about three months of delinquent payments to the subs
in the first round of joint checks.
About a month ago we started accumulating the next group of joint
checks. We had more and more of a problem
with Felix who was having a problem getting the subs to appear on site. On July 9, Felix and its parent company filed
for Chapter 11. We again were speaking
regularly with their bonding company and this is a bonded job and if Felix
disappears, it is the obligation of the bonding company to complete the
job. Of course, bonding companies don't
want to honor that obligation. They were
anxious for us to complete and continue with the joint check procedure because
every check we wrote diminished their liability. Having filed for Chapter 11, we decided to
stop the joint check exercise. We wrote
to the contractor several times saying we will not do anything until we get
something in writing from the bankruptcy court and from their bonding company
indicating the requirements for them to continue on the job. Felix abandoned the job last Friday. They walked off the job at 9:30 a.m. We received a call saying they were going to
do that because the day before, they petitioned the bankruptcy court and asked
to be relieved of the job. They had
shown to the bankruptcy court that Felix was not going to make a profit on the
job. As you will recall when we awarded
the job to them, they were a very low, low bidder. They left a lot of the table. They abandoned the job at 9:30 a.m., I called
their bonding company and informed their attorney that they had walked off the
job and asked what they proposed doing.
About an hour later I received a call from the Felix representatives
saying they had struck a deal with the bonding company to allow them to continue
on the project so at 4:00 p.m. they started to round up the people they had
fired at 9:30 a.m. They had a problem
doing that. By Monday they had rounded
up their primary labor force. They had
hired a project manager who had really whipped the job into shape during the
last three or four weeks they were on the job and unfortunately he passed away
the day after he got fired on Friday. He
personally wanted to do a good job. That
was the remaining knowledge on the job that Felix had.
Mr. Lauritzen asked can we rebid the
job?
Mr. McKune responded no. We cannot do anything because there is still
a valid contract between the District and Felix.
Mr. Lyles stated there are two
things that restrict us from doing that.
We have a valid and binding contract that requires the surety to now
step into the shoes of the contractor and through whatever means they can put
together, either hiring Felix people already familiar with the job, or bringing
in another general contractor entirely, they are obligated to complete the job
in accordance with the contract and we at that point will start paying them. As draws come due we would make periodic
payments to USF&G and even though the job ends up costing them additional
money over and above what it would have cost, they have to complete the
job. That is one layer of protection. Mr. McKune and I have ensured that every step
with all of these things with Felix was immediately made known to USF&G so
they can't claim surprise or that we were not notifying them of what was going
on with the job. They have been notified
of everything that has been happening so that from our point of view they would
be positioned to step in immediately and keep the job going and there would be
no defenses on their part under the surety instruments to say that we have
waived our right to have them complete the job because we didn't give them
notice so that they would have an opportunity to cure before this terrible
thing happened to Felix Equities.
The other problem is that Felix is
in bankruptcy court now and as you know stays are entered and you can't alter
the contractual relationships you have.
We are not a creditor of Felix, we will be paying Felix under our
contract. That flow of funds is
necessary to hopefully, reorganize Felix Equities so that they can pay their
creditors or some portion of what they owe their creditors. The bankruptcy court is not going to let us
terminate the contract.
Mr. Lauritzen stated that is the
bonding company's problem.
Mr. Lyles stated if we were to
terminate the contract with Felix, it would be our problem. We can't do that. The completion of the job is the bonding
company's responsibility and problem. We
don't want it done haphazardly or done just to get a completion
certificate. We want it done right and
will monitor whoever comes in and however the engineer handles that is
something that will develop as the weeks go by.
We are in good shape considering we have had this multifaceted disaster
descend upon us because we kept the surety involved, they know and are not
denying anything. We will closely
monitor what goes on with the bankruptcy court and make sure we don't do
anything such as writing a two party check that the bankruptcy court doesn't
want going to a sub but it may be the trustee in the bankruptcy that we end up
writing checks to.
Getting the job done under these circumstances is not
the same as having an ongoing contractual relationship with a live and viable
contractor. There will be bumps in the
road.
Mr. Lauritzen stated I am concerned
with the hesitancy of the bonding company to do their job. That is why they are a bonding company.
Mr. Lyles stated what they do is cut
deals. They may have wanted to cut a
deal with us.
Mr. McKune stated the bonding
company's attorney asked me if we wanted to take over the job. I said no.
Mr. Lyles stated they wanted us to
take over the job and may want to give us what remains and let the excess
become our responsibility. We want them
to take over and complete the job. That
is why they are the surety.
Mr. Lauritzen asked what stage of
the job are we in?
Mr. McKune responded we told the
contractor to give us a new estimate of completion that accounts for all the
delays and problems. He has worked up a
preliminary number. It will be toward
the end of the year by the time it is done.
I didn't want to present any estimated date of completion to you until
we receive in writing from the bankruptcy court and bonding company, the
instructions of procedural methods.
Mr. Lauritzen asked what else does
that effect that we have to be concerned about?
Ms. Archer stated this contract is
so far behind schedule that we should have already started the next plant
expansion and we haven't completed this one.
The only relief we have is that we are in the rainy season. Otherwise, I think our demand would be
exceeding our capacities. There are
components that are getting completed.
Mr. McKune stated fortunately, we
are at a stage with this job such that the major components are in
operation. The water plant has been
expanded. Everything on site at the main
plant is done. We have half the new
wells on line and we are close to getting three more new ones on line because
they recently started up that particular facet of the wellfield. We had one major pump station at the county
line which is probably thirty days away from bringing on line. We have uprated the capacity of the plant so
we can go for an extended period of time without having a problem. In the past thirty days we installed two additional
high service pumps that will address any potential low pressure problems in the
extremities of the District.
Mr. Lauritzen asked what is the
worst case scenario? If everybody drops
the ball where are we at?
Mr. McKune responded we are in good
shape; we can make water, we can treat water; we can send it out and give
everybody what they need. In a
workmanlike manner we need to finish the plant.
There are some work items that remain that are not part of this contract
yet. There was a change from the gas
chlorination system to the liquid system because of safety concerns and that is
a costly system to put it. It requires
its own building. We just about have the
building permit from the City to add these structures and we were going to add
this work by change order to this contract.
We are not going to do that now because not only do we not want to give
Felix any more work, the bonding company will refuse to accept any more
liability. We will have to put this
additional work in another package and put it out to bid. I want to wait and get Felix complete and off
the job because the next expansion area is in the middle of where Felix is
working in now. We don't want to get two
contractors on the site at one time. We
would like to be going into the next plant expansion. We may end up taking this additional work and
put it in a bigger contract and we will have enough plant capacity to take the
time to do that.
Mr. Lauritzen asked is there any way
we could have avoided this?
Mr. McKune stated we are a victim of
circumstance. We were reluctant to award
the job to Felix to begin with for reasons other than this. This type of problem was not a concern at the
time. About midway through the job Felix
Equities was purchased by a firm called Link.net and it turns out that
Link.net's major business is the installation of fiber optic cable throughout
the U.S. Our payments were going to
Link.net and they were trying to keep themselves afloat. It is Link.net that filed for chapter 11
along with their subsidiaries. As far as
continuing with the joint check procedure, that is something we are able to do
but we are not going to do anything until we get instructions from the
bankruptcy court and the bonding company.
Mr. Mendolia asked is there anything
we can do legally?
Mr. Lyles asked do you mean get an
injunction through the court system? No
because the remedy here is set forth in the contractual documents which is
calling on the surety to complete the job.
Right now the surety is saying through the reorganization process and
their negotiations with Felix, the subsidiary, they are ready to go back to
work and we just have to work out how we are going to process payments to keep
the subs and the Felix entity working on the job. They are willing to go back to work. Mr. McKune and I are in constant contact with
everything that happens here. We don't
want to send payments into this bottomless hole that will result from the
bankruptcy proceeding. We want to make
sure that to the extent that we cut a check, it goes towards the timely
completion of the project.
Mr. Mendolia asked do we have the
money to complete the job?
Mr. McKune responded right now there
is enough money in the construction trust fund to finish the project with the
old contract. Based on the value of the
work that remains, we have enough to build that. Felix is experiencing additional costs
internally. We are not going to have to
pay those but that adds to their financial problems.
Mr. Lauritzen asked what was the
original completion date?
Mr. McKune responded six months
ago.
Mr. Lauritzen asked you are saying
it will take another six months to complete?
Mr. McKune responded yes. At a Board meeting some time ago we agreed
that we would extend the contract date for Felix based on their estimate of
time to complete the work that was going on at the time that we authorized them
to do that was in addition to the then current contract amount. They agreed to do that and that is the
completion date we have been waiting for.
Now we know the reason why they didn't give that to us, because they
simply didn't know what to do. I think
we are still obligated to do this because they are doing work now and they have
been doing work that they were authorized to do on a work order basis with the
understanding that that work would be added to their contract price by change
order. Everyone has agreed with that,
even the bonding company. Probably by
the next meeting we will present to you the final schedule of completion from
Felix, we will also have a proposal for a change order to put a bow around all
the activity. It will increase the
contract amount by some amount and that will totally define the scope of work
and that will be their new schedule of completion. We could probably make quite an issue out of
getting liquidated damages but we would never collect. It is better to give them a new completion
date and get the job done. We have
enough money left in the bank to finish the work, if we have to get another
contractor there is no guarantee he will honor that amount.
Mr. Mendolia asked how far away are
we from bidding the next expansion?
Mr. McKune responded six months.
FOURTH ORDER OF BUSINESS Staff Reports
A. Attorney
There
not being anything further, the next item followed.
B. Engineer
There
not being anything further, the next item followed.
C. Superintendent
- Meeting Dates for Fiscal Year 2003
Ms. Archer stated enclosed in your
agenda package is a list of meeting dates for fiscal year 2003.
FIFTH
ORDER OF BUSINESS Supervisor's
Requests and Audience Comments
There not being any, the next item
followed.
SIXTH ORDER OF BUSINESS Approval of Requisitions and
Invoices
On
MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the
requisitions and invoices were approved.
On
MOTION by Mr. Mendolia seconded by Mr. Lauritzen with all in favor the meeting
adjourned at 4:50 p.m.
Salvatore J. Mendolia Matt
Lauritzen
Secretary President