Letters are flying between Grand Marais City Attorney Chris Hood’s office in St. Paul and the legal office representing Burbach Aquatics, the firm the City of Grand Marais entered into a contract with in 2005 when it was looking into rehabbing the municipal pool in the Grand Marais Recreation Area. The pool design firm is contending that the city would be breaching its contract if it helped the county turn the dream of a new community center and “natatorium”—indoor swimming pool—into reality.
The agreement between Burbach and the city, dated June 9, 2005, defines the project as “the repair, renovation, or replacement of the municipal swimming pool located in the City of Grand Marais, County of Cook, State of Minnesota.”
It states, “The owner agrees that if they enter into agreements with other entities regarding this project that they will extend the terms and conditions of this agreement into any of these other agreements.
“…The owner and BAI [Burbach Aquatics Inc.] shall be bound by the terms of this agreement for the life of the project. Life of the project shall be either through completion of construction or for a maximum five- (5) year period of suspension, in the event the owner suspends the project. This is an exclusive contract for performance of all the consulting work on this project, including all tasks and phases of professional services as specified herein.”
An October 28 letter from attorney Curtis Smith of Moss & Barnett of Minneapolis states, “BAI has re-analyzed its claims and position in this matter. Based on our current understanding of the proposed project, it appears that the natatorium portion has a probable cost of $6,500,000. Based on this cost, BAI’s Phase II [design] and Phase III [construction] fees under the agreement would be $861,250. [Phase I was a feasibility study.] Under Article 8.1.5 of the agreement, the city agreed that ‘in the event of breach or wrongful termination of by the owner, BAI shall be compensated 50 percent of basic compensation for Phase II and Phase III basic service.’ Accordingly, the city’s exposure is $430,675, plus costs of collection, including attorney’s fees….
“Notwithstanding its solid claim, BAI is willing to settle its claims and release the city from the agreement for a payment in the amount of $300,000. This represents a substantial discount to the city of its exposure and likely damages, as well as avoiding the costs of litigation or arbitration.”
Attorney Chris Hood wrote a letter back on November 3 stating, “The city disagrees entirely with your client’s position in this matter with respect to the city’s liability for breach of contract, as the city has committed no such breach, even assuming for sake of argument only that the contract referenced in your October 28 letter remains in force at this time.
“Nonetheless, the city desires to meet with you and your client to discuss possible resolution of this dispute to bring this matter to a close and to allow Cook County…to move forward with the county’s community center project…, which the county has indicated is in jeopardy due to your threatened lawsuit.
“The city is making this effort to contact you again since we believe the project will be of significant benefit to all of the citizens of Cook County and the region, and it is therefore in the public interest for the city to pursue resolution of this dispute, which is now needlessly and without foundation holding this project and this community hostage. Action at this time is necessary to forestall litigation.”
On November 15, 2011, Cook County Attorney Tim Scannell told the county board that Attorney Hood said Burbach’s attorney wants to meet in his office on December 7 or 8. Scannell said he would be down in the Cities at that time and planned to attend this meeting to discuss the possibility of a financial settlement with Burbach.
Leftover funds
The board discussed what can be done with leftover funds from 1 Percent Recreation and Infrastructure Tax projects— such as the proposed community center—that come in under budget. The library expansion project is expected to have some contingency funds left over, and a question arose as to who can authorize what happens to those funds.
Attorney Tim Scannell recommended to commissioners that they be clear when they pass motions approving 1 percent projects whether the amount is a set amount or an amount up to a maximum amount.
The board told Rob Barse of ORB Management, the consultant firm overseeing the 1 percent projects, that they want the Grand Marais Library Board to formally request any reallocation of leftover funds from the library project.
Increasing project amounts
Community member Gene Glader expressed disapproval of the board’s authorizing $3.1 million for improvements at Superior National at Lutsen Golf Course instead of the $1.8 originally slated for the project. A maximum of $20 million (plus the cost of bonding) can be collected for 1 percent projects, so more money for one project means less money for others. Glader said he believed it would be “very bad” to take money from a project that hasn’t been fully planned yet, such as the proposed new community center, and give it to another project that is ready to move forward.
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