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