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CITY OF LAKE WORTH
CITY COMMISSION SPECIAL MEETING
CITY MANAGER'S OFFICE

7 North Dixie Highway
Lake Work, Florida

August 28, 2012

5:00 p.m. - 6:47 p.m.

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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THE CLERK: We are in private session now.

MR. TORCIVIA: As I indicated, we have this litigation called Greater Bay Group versus the City. Our outside counsel has been Brian Joslyn, I think from the inception of the case, and Mr. Joslyn requested this session so we could provide you with an update, talk about the settlement options and litigation expenditures.

MR. JOSLYN: Thank you. I know a couple of the commissioners are very familiar with the case. I will give you a real brief sketch. You had a development agreement with a company called Greater Bay Group, LLC. It was a two person, two company limited liability company that was going to develop your casino, pool area, finance that subject to the development agreement that was signed between them and the City in November of 2006.

As a result of poor performance by these guys, and as a result of their declaration of breach of the development agreement in November of 2008, where they alleged -- sent a letter to the City, alleged that the City was in breach of the development agreement. The City -- well, their letter actually, we believe, has the legal effect of terminating the agreement. They accused the City of anticipatorily [sic] breaching the development agreement by hiring a company, at no cost to the City, called Stratacon to do an engineering survey of the casino building.

There's no prohibition in the contract for such an action by the City. We have some internal memoranda from the company. It was turned over in discovery where as early as October, they were looking for ways to set up litigation with the City.

They sent a the letter saying the City was in breach, and that they were still ready to proceed, but that the City would have to execute an addendum to the contract that would fundamentally alter the economic relationship.

They were responsible for paying everything other than what the City's contributions were. The City was obliged to provide them with money from a FRDAP Grant. They were going to get a payment of a $5 million park bond issued from Palm Beach County, and a contribution of money that the City had in its beach fund, which at the time the development agreement was signed was around -- somewhere around a million dollars.

Separate from that, they were responsible for everything else, and the project they projected or came to the City with was going to cost around $20 million, so they were going to have to finance about $13 million of this job. The agreement had a provision in it that said that if they did not receive their final zoning approvals for the project by June 30, 2007, either side of the arrangement could terminate the contract as long as that side wasn't in breach of the agreement.

So there is a recognition that the zoning and the comp plan for the beach was going to have to be changed, because the preexisting comp plan designation did not permit a private use of the property. That change was made. The City accomplished the zoning changes, and the comp plan changed by May of 2007. We had a lawsuit filed, the comp plan, that went up to the DCA, and a challenge was filed by Lawrence McNamara.

Post June 30th of '07, there was a lawsuit filed by Mr. McNamara, and another fellow whose name escapes me at this point, challenging the development agreement, because the lease under which Greater Bay was going to operate the property after construction provided for a 20-year lease, plus several five-year options that ran a following year charter that prohibits more than 20-year leases.

The lease was amended to accomodate [sic] to that provision or that challenge, but zoning approval was not obtained by June 30, 2007, because of these challenges. There was also a referendum that was a petition that was circulated to bring the whole issue to the City citizens for a vote.

The City attorney at the time, Larry Karnes (phonetic) believed that that referendum was illegal, because it ran afoul of the restriction in Florida statutes that says you can't bring a referendum to challenge zoning changes that affect five or fewer parcels. The City simultaneously was in a lawsuit on that very specific issue with a group called We Love Lake Worth -- no, excuse me not We Love Lake Worth, Save Our Neighborhood.

The City lost at trial, and the case was on appeal during this period of time on the issue of what affects five or fewer parcels means. The judge in the case, on the Save Our Neighborhood case, said it wasn't the subject of the zoning change, but the impacts on surrounding properties that could be factored in, in order to determine whether this statute restricted or not the referendum rights.

Late in the game, the Fourth District Court of Appeals ruled for the City, and it's the first case in Florida that defined what that means. And as a result, City won that case, and then the referendum challenge was -- we were trying to get the referendum challenge resolved by having them recognize that the law was on our side, because there weren't five or fewer lots out there -- or there were five or fewer lots out there. So let me backup -- Any questions?

MS. TRIOLO: Mr. McVoy?

MR. McVOY: Since I was an involved party at that point, the one piece you left out is the way that it was resolved, is that the City sued We Love Lake Worth at that time --

MR. JOSLYN: That's true.

MR. McVOY: -- for the record.

MR. JOSLYN: City sued them, and I think the decision was made at that time was because Mr. Karnes was concerned that once he rejected the petition, that there would be suit for mandamus, and the law on mandamus does not permit the government to file a counterclaim challenging.

So we wanted to raise the issue -- discussions with Mr. Karnes, we wanted to raise that issue, because he felt pretty firmly about it, five or fewer parcels. So the City filed suit against We Love Lake Worth. Those two lawsuits were pending by June of 2007.

So the City got a letter from the attorney for Greater Bay that said because of these lawsuits, we do not have our final zoning approval, and the final zoning approval under the development agreement was a condition for them to -- their time clock to start on obtaining the financing.

Once the final zoning approval was obtained, they had 90 days to get their financing lined up to get a commitment letter. They said because of these lawsuits, final zoning approval hasn't been obtained. We don't believe we should have to start getting our financing, and the City agreed.

So we said your time for obtaining financing hasn't started yet, but we have a problem, because the 200,000 and change we were going to get from the FRDAP, F-R-D-A-P, Grant expired at the end of April of 2008. So we had about a seven, eight-month window to arrange work on the site that would allow that money to come into the project.

And what was decided upon was to alter the sequence of work that Greater Bay had originally planned, to do the pool work first, rather than at the end of the whole casino redo.

By the way, the project that Greater Bay Group came up was to -- they were going to knock down the casino building, and they were going to replace it with a building roughly twice its size, about a 50,000 square foot building.

To accomplish that, they were going to have put in a parking structure, and it was pretty complex, although we never saw any design drawings or anything like that. So the City went to Greater Bay, said, We need to realter this work, so you can get that FRDAP money, and over a very long period of time, from the City's perspective, we finally negotiated an addendum to the agreement that altered the sequence of the work, allowed them to do the pool work. They accomplished the pool work sort of, by the time the FRDAP money came in, and that's where we were by the end of April 2008.

The pool was shoddily done. The fellows who came to the City building department had a -- what architects call cartoon drawings, a hand drawing of what they intended to do with the pool with stick figures and stuff. That was rejected by the building department.

They said, Since you have to replace the heaters on the pool, we need engineering for that. It's required by law. These guys didn't have an engineer lined up. They-- the City then hired an engineer to do the design drawings for the pool heaters and stuff, and it was realized at that point that we were going to have segregate out the pool heaters from the rest of the job, because the engineering and all of that wouldn't be accomplished in time for them to get the work done by the April 30 deadline.

So they did the pool work with the understanding that some of this heater work was going to be done later. We had a pretty significant punch list that was sent to them in May that they never addressed all of those issues. There were a number of them that they just plain dropped the ball on. There were some defects in the pool work that have subsequently come to light.

I have given your pool report that was just done by your pool consultants to Joe Krohl (phonetic), who used to be your building official and is going to be a witness in the trial to try to pars out from that the defects that have been identified, and which ones we can assign to Greater Bay as defects to discuss at trial --

MS. MULVEHILL: For a correction, he was --

MS. TRIOLO: Commissioner Mulvehill?

MS. MULVEHILL: Yeah, he was never our building official, Joe Krohl. He was our Public Works director, just for the record.

MR. JOSLYN: I will have it straight by trial.

MS. MULVEHILL: It's okay.

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.

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