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 a Town employee 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 legal facts, a summary judgment should occur. 

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 Bateman asked how this happened.  Mr. Horton said the employee is a permit technician and she is the person who would issue permits.  We do not know how she was convinced to do this, he said, and have no explanation.  Mr. Horton added she is a 25-year employee, and is still a good employee.

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, no.

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. Horton said since the Town’s number of inspections were reduced, there was some savings for the Town.  He said they had come up with the $7,000 figure based on the amount recovered from the employee as well as what we estimated the lawsuit might cost.  Mr. Horton said about $1,400 was recovered from the permits technician.

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 would 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 some allegation from the company of bribes or kickbacks, and he has communicated that there was no indication of any of that type of behavior on the part of our employees.   But, he said, the company still mentioned that in their letter.

The Council agreed by consensus to allow the Attorney to proceed with negotiations.

The Closed Session was adjourned at 9:40 p.m.