AGENDA #5a
TO: Mayor and Town Council
FROM: Ralph D. Karpinos, Town Attorney
SUBJECT: Settlement of Claims related to Gas Pack Permit Fees
DATE: May 29, 2002
The purpose of this memorandum is to report to the Council the settlement of claims for underpaid building permit fees for gas pack inspections.
On March 4, 2002, following receipt of a petition, the Council discussed in closed session the issues related to the undercharging for inspections of gas packs (combined heating and air conditioning systems) being installed in the Glenn Lennox neighborhood.
(The minutes of that closed session discussion are attached and are being released along with the issuance of this memorandum pursuant to the N.C. Open Meetings Law.)
Following the March 4 discussion in closed session, we continued to negotiate with the attorney for Mechanical Systems and with a representative of Lee Air Conditioners, the two companies which had the largest amounts in undercharges for these permits. Based on the Council’s discussion, the Manager and I settled the claim with Lee Air Conditioners. In the Lee case, the underpayment of permit fees was $550. We accepted $350 to settle that claim.
In the Mechanical Systems case, based on further communications with the Council after the closed session authorizing settlement, we have now settled that case. In the Mechanical Systems case, the underpayment of fees was $9625. We accepted $6125 to settle that claim.
ATTACHMENT
ATTACHMENT 1
MINUTES OF A CLOSED SESSION
OF THE CHAPEL HILL TOWN COUNCIL
MONDAY, MARCH 4, 2002, AT 9:25 P.M.
Mayor Kevin Foy called the meeting to order at 9:25 p.m.
Council members present were Flicka Bateman, Pat Evans, Ed Harrison, Mark Kleinschmidt, Bill Strom, Dorothy Verkerk, Jim Ward, and Edith Wiggins.
Staff members present were Town Manager Cal Horton, Assistant Town Managers Sonna Loewenthal and Florentine Miller, Town Attorney Ralph Karpinos, and Town Clerk Joyce Smith.
Mr. Karpinos stated that the closed session was to discuss a potential lawsuit against the Town by Mechanical Systems & Services. He said the issue involves the undercharge by the Town for building permit fees. Mr. Karpinos reminded the Council of the petitioned received tonight during the business meeting.
Mr. Karpinos said that the last offer from Mechanical Systems & Services to settle the matter was $4,500. Mr. Karpinos said he does not recommend acceptance of that offer based on what was due the Town, $9,625.
Mr. Karpinos stated that the Council’s options are:
· Accept the $4,500,
· Attempt to continue to negotiate, or
· File a lawsuit.
Mr. Karpinos said his opinion is that based on law in this area is that Mechanical Systems & Services does in fact owe the money. He reminded the Council that this case involves an employee of the Town who had no authority to reduce the fees. Mr. Karpinos said there is some risk involved in going forward with a lawsuit, so it may be worth making a compromise and accept the $4,500.
Council Member Harrison asked what was the estimated cost of a lawsuit. Mr. Karpinos stated approximately $1,500 to $2,000. He said the lawsuit would be filed in Orange County District Court, and based on the facts, the case should be decided on a summary judgment without a trial.
Council Member Harrison asked what the law is. Mr. Karpinos said fee schedule was set by the Council, and an employee cannot negotiate those fees downward.
Council Member Kleinschmidt asked did this happen because we are a local government. Mr. Karpinos responded that individuals of the Town cannot represent the Town and negotiate a fee.
Council Member Bateman said then the Town’s argument is that we have a fee schedule that is public record. So, she said, the company should have made themselves aware of that schedule. Mr. Karpinos said basically, the answer is yes.
Mayor pro tem Evans asked if the company’s argument is valid. Mr. Karpinos said in this case, not in his opinion.
Mayor Foy suggested authorizing the Manager and Attorney to negotiate and
accept $7,500.
Council Member Verkerk asked if other fees are outstanding. Mr. Karpinos said yes, but in much smaller amounts. He added he had negotiated with the company and indicated the Town would accept $7,000 based on the cost of litigation, and their response was to appear before the Council tonight with a petition.
Council Member Ward asked who would pay for the litigation. Mr. Karpinos said the expense for the actual litigation would be minimal, basically his time and a small amount of court fees, which could be collected from the company.
Mayor Foy asked what action was needed. Mr. Karpinos said he needed some direction on how to proceed.
Mr. Horton said if the person had come to us, noting that he knew what the fee schedule was, and the permits technician had given him different information, then the situation would have been different. The person could have asked that since he had so many inspections in a limited area, could he ask for a consideration of the fee. Mr. Horton said he then may have recommended to the Council some reduction in fees. But, he said, that did not happen.
Mr. Karpinos asked if he was authorized to accept $7,000. There was consensus of the Council. Mr. Karpinos noted that if the $7,000 was not accepted, then the Town could litigate for the entire $9,625.
Council Member Kleinschmidt said he did not believe it was reasonable to assume the company knew the fee schedule. Council Member Strom said that if the fee schedule was posted, he should have known that the fee was not negotiable. Council Member Kleinschmidt said he was uncomfortable with this type of litigation.
Mr. Karpinos said there was no indication of kickbacks or any other similar improper behavior on the part of our employees or Mechanical Systems.
The Council agreed by consensus to allow the Attorney to proceed with
negotiations.
The Closed Session was adjourned at 9:40 p.m.