CITY COMMISSION SPECIAL MEETING
CITY MANAGER'S OFFICE
August 28, 2012
5:00 p.m. - 6:47 p.m.
7 North Dixie Highway
Lake Work, Florida
Appearances:
Pam Triolo, Mayor
Scott Maxwell, Vice Mayor
Michael Bornstein, City Manager
Suzanne Mulvehill, Commissioner
Chris McVoy, Commissioner
Andy Amoroso, Commissioner
Glen Torcivia, Esq., Interim City Attorney
Brian Joslyn, Outside Counsel
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MR. JOSLYN: The one problem I will tell you we had with this is that, you know, tremendous amount of turnover in the City. I think since the project started, you are the fifth City Manager.
MR. BORNSTEIN: Hopefully the last.
MR. JOSLYN: From your lips to God's ears.
MR. BORNSTEIN: -- get this thing finished.
MR. JOSLYN: And all in the other departments. Mr. Krohl has been very helpful, is going to testify at trial. Mr. Karnes, very helpful, is going to testify at trial, and Corio Gorman (phonetic), who is the City's sort of separate construction manager to handle the project is going to also testify at trial.
So by April -- at the end of April of 2008, the pool work had been done. The final zoning approval still had not been obtained because of the challenges to the comp plan at the DCA levels and these two lawsuits. The suit by Mr. McNamara over the lease, and the suit by the City over the referendum. The City was holding off on doing much with the referendum case because we had attended -- I handled the oral argument at the Fourth, and we were waiting a decision from the Fourth on that, which would clearly determine how we were going to have to handle that referendum case.
We got the decision later in the year, but by then things with Greater Bay had deteriorated significantly.
After the pool work was done, the City and Mr. Gorman and Greater Bay were discussing next steps. You had an upcoming deadline on the $5 million park bond of -- late in the year of August 2000 -- later in the year of 2009. So what was going to have to be accomplished was site plan be approved, and so that we had design drawings for the work that was going to be funded by that $5 million grant.
Greater Bay was requested, and I don't have the specific date in mind, but by June or July of 2008, the City counsel voted to request a site plan be submitted by Greater Bay by October 17th of 2008.
The October date was picked because that got it into the mill of review, so that it would be reviewed and eventually approved early in the year so that all the design drawings could be done so that we could get the park bond money funded.
Greater Bay never objected to providing the site plan. There is no time limit in the development agreement about when they are supposed to produce a site plan. What they produced was not what the City believed ought to have been produced.
They produced essentially a landscape plan, and it was produced the day -- late in the day, after the close of business on October 17th. At that point, the City was going to reject the plan.
Mr. Willard, one of the principals of Greater Bay and the fellow who came down from his home in Rochester, New York to the City when required, had a series of meetings with the then City Manager where the City Manager pretty much reamed him out over the pool punch list that was still undone.
I mean, for example, they charged about -- I can't remember the exact cost. It was over a thousand dollars each for benches, and all they are is the concrete benches with 2 by 4's on them, and they hadn't even painted them.
Their argument was, Well, this is pressure treated lumber. You can't paint pressure treated lumber for six months or something like that. It's just ridiculous stuff we were encountering.
In October, before the site plan was turned over, it turns out the principals of Greater Bay -- we have a memo for essentially what's an agenda I guess of a meeting or a phone call.
The two principals have not been deposed yet. That is going to be done in late October. There were a number of things on there that are of interest. One was the pool project was about a $400,000 all in item. There wasn't supposed to be any profit in this number, and one of the first questions on this sheet is where is the $100,000 profit on the pool.
Another item is, How do we set up for litigation with the City, question mark, title issues, and that was it. And there were some title issues on the property because of the original bearers for grants, but they had been resolved by that point.
It just -- we didn't get title commitments or anything, because they weren't in any position to get their financing. But my partner, Bob Crane (phonetic) had handled the title issues and then sent out a memo to them at the end of 2007 saying, I've got Chicago Title. They are going to write title insurance for you, and there was never another complaint from these guys, never another comment from these guys about title until that memo.
After that memo was written and presumably they had their meeting or phone call, we got a letter from their lawyer in mid November of 2008, alleging that the City had breached the agreement by hiring Stratacon to do the structural exam of the building.
The way that came up was -- and I know this is terribly confusing to you, and to explain in a short period of time, but the building department had decided in the spring of '08 that the building needed to be condemned. There was -- we had two structural reports at that point that said the building was structurally unsound. Until these guys actually started doing work at the site, the City was owning and operating a building where you can have falling concrete falling into baby carriages and stuff.
So the building department said, We are red tagging the building, and we are going to tear it down next year. That started a big hue and cry in the City. A lot of people believed that the building was historic. It should be preserved.
A number of people believed that the building didn't need to be tore down, and should be kept in operation until these guys actually
started work. There was a reluctance to throw the tenants out, a number of whom had been there forever.
So another structural analysis was done after the building department's decision in June -- May or June that said, Yes, indeed it's structurally defective. That report was turned over to these guys, Greater Bay. One of the issues in this memo -- agenda memo was who's going to pay for the construction of the building.
Obviously if these guys were going to tear down the building as part of their construction, that would normally -- you'd think it would be on them, but it appears from that memo -- we are going to have to find out during deposition -- that they were hoping that they could put that on the City, okay?
So you have a couple of factions in the City that were vehemently -- one faction vehemently opposed to this project, couple of commissioners at the time vehemently opposed, never passed up an opportunity to say, We have to get out of this contract, it's not going anywhere, blah, blah.
The company Stratacon was doing work near the casino building out on the beach, and their forte is historic preservation. They made an approach, I believe it was to Commissioner Mulvehill first, at one of her campaign events before she was elected. I think you then referred him to the -- I can't remember the exact sequence.
MS. MULVEHILL: I can clarify.
MR. JOSLYN: Yes.
MS. TRIOLO: Commissioner Mulvehill?
MS. MULVEHILL: My recollection is that they read it in the paper that John G's was going to be torn down and closed, and they came to John G's, they came to the restaurant.
MR. JOSLYN: Right.
MS. MULVEHILL: And whether --
MR. JOSLYN: I think you were having a function there that day.MS. MULVEHILL: I might have been. I don't remember exactly, but that's how they found out about it.
MR. JOSLYN: So they came to the City and proposed that they do a structural analysis to see whether the building really needed to be torn down. Clearly they were trolling for work, because --
MS. TRIOLO: Who is this?
MR. JOSLYN: Stratacon Construction. But they said they'd do the structural analysis, and they'd come up with some proposals, and it wouldn't cost the City anything. That was the breach that Greater Bay alleged was committed by the City.
And if you recall, I said as long as -- the contract said as long as you're not in default or in breach of the agreement, if the zoning approval date isn't achieved byJune 30th, you could terminate. So by alleging that the City was in breach of the agreement, they were trying to forestall the City's ability to terminate the contract, because after a discussion that Mr. Willard had with the City Manager late in the year where he got reamed out, it was pretty clear that the City was aggravated and that they might lose the job.
We believe, our legal opinion is that they stepped over the line when they wrote the letter alleging breach, because they went way more than that. They essentially terminated the contract, because they said the only -- we're willing to proceed, but only under a fundamentally altered economic arrangement where the City would indemnify them against all of their expenses until the bond money started coming in.
We never saw an addendum, this addendum they were proposing that they were willing to operate on was never drafted, never brought to the City, never signed. After we got the letter, Mr. Karnes called me, asked me if I was available for an attorney/client session. That attorney/client session was held, I believe,December 3rd.
Mr Willard had been before the City Commission the day before on December 2nd. The City Commission was unimpressed. The attorney/client session that was held on the 3rd was designed to discuss getting rid of the McNamara and We Love Lake Worth lawsuit by terminating Greater Bay, so you would solve all your problems at one time.
Mr. McVOY: This is 2008?
MR. JOSLYN: 2008, December 3rd. The Commission voted the next day.
MS. TRIOLO: Who advised that, December 2008, to get rid of the McNamara suit and the --
MR. JOSLYN: Mr. Karnes and I.
MS. TRIOLO: Okay.
MR. JOSLYN: I was in attendance at the meeting. Our firm assisted in the negotiation of the development agreement. We did the zoning research for the changes in comp plan, changes in zoning, although that was handled really internally by the City, and from time to time I would get calls from Mr. Karnes while all this was going on.
There were a number of points at which the City reached a point with Greater Bay that they were on the verge of terminating. One was during negotiations. They were selected in April of 2006. It took until November to negotiate this agreement with these guys, because they were utterly unforthcoming with necessary information.
All of this -- I have gone through 40 some thousand e-mails and documents. I mean, we got -- all of the stuff that I'm telling you is in paper. Corio Gorman recommended to the City Manager at the time in 2006, around September, that we terminate negotiations, because these guys were just not responding. There was a City Commission meeting held. Mr. Renaldi, who owns the bed and breakfast here where Willard would stay when he was in town was a big supporter, he sent out an e-mail blast. There were a lot of supporters at the meeting.
The City Commission voted to continue the negotiations, and they were finally resolved by the agreement in November, but that was the first point. The second point where a recommendation was made to terminate the agreement was when Greater Bay took over a month to respond to the City after the City had approved a form of this addendum to do the pool work.
The City approved the addendum in December. We got no response from these guys at all through early January.
Mr. Karnes did a memo -- I don't know what you call them -- to the City Commissioner, to the City Manager, recommending that the City do the pool work itself, because these guys were dragging their feet, and we were going to lose the FRDAP Grant money. We got a letter from Greater Bay's attorney in response to that that said, You could hire consultants if you want, you just can't do any work on the job, which sort of undercuts their argument about hiring Stratacon.
So as to the breach they've alleged, first off, we think they stepped over the line and actually didn't declare breach, they terminated the agreement in November, which now relieves us of any obligation. We're getting that teed up for a summary judgment notice that we are going to try to get heard in the next couple of months.
The second thing is that they performed so poorly at all stages of this that -- we believe that they, you know, missed the mark and breached the agreements themselves, and we clearly did not have final zoning approval by the time that termination occurred by the City . So they wrote their breach letter. The City said, Fine, you're done, and then they sued a year later.
We've deposed their architect, their engineer, their second land planner, pool contractor. Did I say traffic engineer? Every one of those people were stiffed, none of them got paid. So much for Greater Bay's obligation to pay for their own -- hire and pay for their own experts.
So our argument at trial is going to be, Hey, we weren't in breach. Stratacon is not a breach. Your lawyer said we could hire consultants in his earlier letter. We provided you a structural analysis separate and apart from Stratacon in May or June of 2008. You didn't give us a peep about that, and Stratacon did nothing. I mean they did a structural analysis, but it had no effect at all on the work you guys were supposed to be doing or hoped to do.
So you did a crappy job on the pool, your site plan didn't meet what we considered to be standards, and we had that underlying zoning approval date. We think we win the case. They are suing for $30 million, which is the profit that their original financing said that they would achieve, and that number is very defective for a number of reasons.
One, half of this building was going to be a ballroom to rent out for event space. In their projections, they show that space being rented as if it's regular tenant space at 55 bucks a square foot. Their projections are that every square foot of space in the new building, the 50,000 square feet, would be rented at 55-dollar a square foot, plainly ridiculous rents. Their analysis ignores costs associated with the construction, like the debt involved in the parking structure, etc. So their projections are very suspect.
We have Hank Fishkind, a very prominent Florida economist. Dr. Hank Fishkind is our financial analyst. Our title expert, if they are going to address title issues, is an attorney from West Palm Beach name Al Lasorte, who has practiced for 30 some years in the field of title litigation. He has -- when deposed, if deposed, has opined that there are no title defects.
So we believe the things they are alleging are nonsense or wrong, and we believe we are in a pretty clear position based on the letters we received from their lawyer. We had a mediation, gosh, a year and a half ago. We were originally teed up to go to trial last fall, and for a variety of reasons, that didn't occur.
We now -- we have a new judge, Meenu Sasser, on the case. She was a commercial litigator for 20 some years at Gunster, and is a very good trial judge. So we are set for trial December 17th, specially set to start and finish that week.
We have -- I also have Carry Killbay (phonetic) at Killbay & Associates, a very prominent land planner to opine, if necessary, on the comprehensive planning and zoning issues, plus Larry Corio Gorman, and so we are pretty ready to go.
I have the 12 volumes, 12 big 3-inch volumes of -- 4-inch maybe -- of documents in order, chronological order that we put together from all of the e-mails and stuff. The attorney on the other side is a competent fellow from Lake Mary.
So you have a couple of factions in the City that were vehemently -- one faction vehemently opposed to this project, couple of commissioners at the time vehemently opposed, never passed up an opportunity to say, We have to get out of this contract, it's not going anywhere, blah, blah.
The company Stratacon was doing work near the casino building out on the beach, and their forte is historic preservation. They made an approach, I believe it was to Commissioner Mulvehill first, at one of her campaign events before she was elected. I think you then referred him to the -- I can't remember the exact sequence.
MS. MULVEHILL: I can clarify.
MR. JOSLYN: Yes.
MS. TRIOLO: Commissioner Mulvehill?
MS. MULVEHILL: My recollection is that they read it in the paper that John G's was going to be torn down and closed, and they came to John G's, they came to the restaurant.
MR. JOSLYN: Right.
MS. MULVEHILL: And whether --
MR. JOSLYN: I think you were having a function there that day.MS. MULVEHILL: I might have been. I don't remember exactly, but that's how they found out about it.
MR. JOSLYN: So they came to the City and proposed that they do a structural analysis to see whether the building really needed to be torn down. Clearly they were trolling for work, because --
MS. TRIOLO: Who is this?
MR. JOSLYN: Stratacon Construction. But they said they'd do the structural analysis, and they'd come up with some proposals, and it wouldn't cost the City anything. That was the breach that Greater Bay alleged was committed by the City.
And if you recall, I said as long as -- the contract said as long as you're not in default or in breach of the agreement, if the zoning approval date isn't achieved byJune 30th, you could terminate. So by alleging that the City was in breach of the agreement, they were trying to forestall the City's ability to terminate the contract, because after a discussion that Mr. Willard had with the City Manager late in the year where he got reamed out, it was pretty clear that the City was aggravated and that they might lose the job.
We believe, our legal opinion is that they stepped over the line when they wrote the letter alleging breach, because they went way more than that. They essentially terminated the contract, because they said the only -- we're willing to proceed, but only under a fundamentally altered economic arrangement where the City would indemnify them against all of their expenses until the bond money started coming in.
We never saw an addendum, this addendum they were proposing that they were willing to operate on was never drafted, never brought to the City, never signed. After we got the letter, Mr. Karnes called me, asked me if I was available for an attorney/client session. That attorney/client session was held, I believe,December 3rd.
Mr Willard had been before the City Commission the day before on December 2nd. The City Commission was unimpressed. The attorney/client session that was held on the 3rd was designed to discuss getting rid of the McNamara and We Love Lake Worth lawsuit by terminating Greater Bay, so you would solve all your problems at one time.
Mr. McVOY: This is 2008?
MR. JOSLYN: 2008, December 3rd. The Commission voted the next day.
MS. TRIOLO: Who advised that, December 2008, to get rid of the McNamara suit and the --
MR. JOSLYN: Mr. Karnes and I.
MS. TRIOLO: Okay.
MR. JOSLYN: I was in attendance at the meeting. Our firm assisted in the negotiation of the development agreement. We did the zoning research for the changes in comp plan, changes in zoning, although that was handled really internally by the City, and from time to time I would get calls from Mr. Karnes while all this was going on.
There were a number of points at which the City reached a point with Greater Bay that they were on the verge of terminating. One was during negotiations. They were selected in April of 2006. It took until November to negotiate this agreement with these guys, because they were utterly unforthcoming with necessary information.
All of this -- I have gone through 40 some thousand e-mails and documents. I mean, we got -- all of the stuff that I'm telling you is in paper. Corio Gorman recommended to the City Manager at the time in 2006, around September, that we terminate negotiations, because these guys were just not responding. There was a City Commission meeting held. Mr. Renaldi, who owns the bed and breakfast here where Willard would stay when he was in town was a big supporter, he sent out an e-mail blast. There were a lot of supporters at the meeting.
The City Commission voted to continue the negotiations, and they were finally resolved by the agreement in November, but that was the first point. The second point where a recommendation was made to terminate the agreement was when Greater Bay took over a month to respond to the City after the City had approved a form of this addendum to do the pool work.
The City approved the addendum in December. We got no response from these guys at all through early January.
Mr. Karnes did a memo -- I don't know what you call them -- to the City Commissioner, to the City Manager, recommending that the City do the pool work itself, because these guys were dragging their feet, and we were going to lose the FRDAP Grant money. We got a letter from Greater Bay's attorney in response to that that said, You could hire consultants if you want, you just can't do any work on the job, which sort of undercuts their argument about hiring Stratacon.
So as to the breach they've alleged, first off, we think they stepped over the line and actually didn't declare breach, they terminated the agreement in November, which now relieves us of any obligation. We're getting that teed up for a summary judgment notice that we are going to try to get heard in the next couple of months.
The second thing is that they performed so poorly at all stages of this that -- we believe that they, you know, missed the mark and breached the agreements themselves, and we clearly did not have final zoning approval by the time that termination occurred by the City . So they wrote their breach letter. The City said, Fine, you're done, and then they sued a year later.
We've deposed their architect, their engineer, their second land planner, pool contractor. Did I say traffic engineer? Every one of those people were stiffed, none of them got paid. So much for Greater Bay's obligation to pay for their own -- hire and pay for their own experts.
So our argument at trial is going to be, Hey, we weren't in breach. Stratacon is not a breach. Your lawyer said we could hire consultants in his earlier letter. We provided you a structural analysis separate and apart from Stratacon in May or June of 2008. You didn't give us a peep about that, and Stratacon did nothing. I mean they did a structural analysis, but it had no effect at all on the work you guys were supposed to be doing or hoped to do.
So you did a crappy job on the pool, your site plan didn't meet what we considered to be standards, and we had that underlying zoning approval date. We think we win the case. They are suing for $30 million, which is the profit that their original financing said that they would achieve, and that number is very defective for a number of reasons.
One, half of this building was going to be a ballroom to rent out for event space. In their projections, they show that space being rented as if it's regular tenant space at 55 bucks a square foot. Their projections are that every square foot of space in the new building, the 50,000 square feet, would be rented at 55-dollar a square foot, plainly ridiculous rents. Their analysis ignores costs associated with the construction, like the debt involved in the parking structure, etc. So their projections are very suspect.
We have Hank Fishkind, a very prominent Florida economist. Dr. Hank Fishkind is our financial analyst. Our title expert, if they are going to address title issues, is an attorney from West Palm Beach name Al Lasorte, who has practiced for 30 some years in the field of title litigation. He has -- when deposed, if deposed, has opined that there are no title defects.
So we believe the things they are alleging are nonsense or wrong, and we believe we are in a pretty clear position based on the letters we received from their lawyer. We had a mediation, gosh, a year and a half ago. We were originally teed up to go to trial last fall, and for a variety of reasons, that didn't occur.
We now -- we have a new judge, Meenu Sasser, on the case. She was a commercial litigator for 20 some years at Gunster, and is a very good trial judge. So we are set for trial December 17th, specially set to start and finish that week.
We have -- I also have Carry Killbay (phonetic) at Killbay & Associates, a very prominent land planner to opine, if necessary, on the comprehensive planning and zoning issues, plus Larry Corio Gorman, and so we are pretty ready to go.
I have the 12 volumes, 12 big 3-inch volumes of -- 4-inch maybe -- of documents in order, chronological order that we put together from all of the e-mails and stuff. The attorney on the other side is a competent fellow from Lake Mary.
We believe that he's hired on a contingency, and that he's looking to ring the gong.
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![Dr. W. H. Cotton’s ode: “Oh, My Lake Worth, Florida!” [circa 1920].](http://1.bp.blogspot.com/-yhHyCn84ZIQ/WezjlEL-0tI/AAAAAAAAPZ4/CzkhriK6zpEJJ3d9Je1495d49gIhnMlxACK4BGAYYCw/s1600/LakeWorthPioneers.JPG)
