Submitted by Adam Kaufman
Legal Analyst
November 18, 2014 7:21 a.m.
At its meeting Tuesday November 18 the Fernandina Beach City Commission will consider settlement of litigation resulting from its purchase of the City’s water utility from Florida Public Utilities and the imposition of “impact fees” upon new utility customers beginning in 2003.
If approved and when the settlement becomes final the City will stop imposing impact fees on water utility customers. The City will also repeal the ordinance it passed in 2003 and all subsequent ordinances and resolutions related to imposition of those fees other than its ordinance passed in 2013 refunding over $155,000 of improperly assessed impact fees.
When final the settlement provides that the City will pay into a fund a maximum sum of $1,800,000 for claims of approximately 400 water utility customers who paid an impact fee beginning in March 2003. From that fund Court approved fees for the attorneys who acted on behalf of Joanne Conlon who initiated the litigation are to be paid as well as approved fees for the administration of the settlement. Conlon will receive $5000 from the fund “as an incentive award” for her efforts in bringing the lawsuit.
Payments to the City’s attorneys estimated by the Observer as at least $800,000 are separate and apart from the settlement. The settlement and these attorney fees are not covered by the City’s insurance carrier.
In August 2011 the City of Fernandina Beach was served with a “class action” lawsuit brought by Conlon alleging that the water utility impact fees did not comply with Florida law. In August 2013 the City filed a proceeding to validate water utility bonds proposing to support repayment of those bonds by the continued imposition of impact fees.
In each case now Federal Court Judge Brian Davis ruled against the City. Each case was appealed by the City.
The agreement states that the Parties “recognize the tremendous time and expense that would be incurred by further litigation” in those cases and the “uncertainties” in any such litigation and that each have “concluded that their interests would be best served” by settlement. As is customary the agreement provides that Conlon’s entry into the settlement “is not an admission of any lack of merit of her claims” and the City similarly “denies all allegations of wrong doing” or that it “committed any violation of law.” The Resolution placed before the Commission reiterates in its final “whereas” clauses these statements.
In her Memorandum to the Commission with regard to settlement, City Attorney Tammi E. Bach states that the “Water Fund has sufficient funds available to place into an escrow account,” and that $1.8 million has been accrued in the fiscal year ending September 30, 2014 “as a ‘Settlement Expense’ in anticipation of Commission approval.”
Bach, however, makes no specific recommendation as to approval of the settlement in her Memorandum. Bach states that it is at “the pleasure of the Commission.” There is also no written communication to the Commission in which the City Manager affirmatively supports entering into the settlement agreement.
The settlement agreement underscores that none of the Commissioners currently serving on the City Commission were members of the Commission in 2003 and “did not participate in the adoption of the Impact Fees,” but the agreement does acknowledge that the current City Manager “who was hired in May of 2012, served as Mayor in 2003 when the Impact Fees were adopted.”
The settlement upon ratification by the Commission still requires approval and action by the Courts. Upon that approval it will be overseen by a Court approved Settlement Administrator. The Administrator will notify members of the “class,” (those who have paid impact fees beginning March 2003), as to their rights under the settlement agreement and how to apply for a “pro rata share” of the “net settlement fund.” The “net settlement fund” is equal to the total amount of claims submitted or $1,800,000 whichever is less minus Court authorized payments. Bach noted in her Memorandum that the total amount of impact fees paid to the City has been approximately $2.3 million since 2003.
If the City Commission approves the settlement, the City also has agreed to dismiss its action against local attorney E. Clinch Kavanaugh, one of the attorneys for Conlon, with regard to his attempt to obtain a transcript of a City Commission meeting with regard to the Conlon and bond validation litigation which he suggested was improper and not consistent with Florida law.
On October 7, 2014 attorneys for the City informed the Florida Supreme Court that the parties in the Conlon and bond validation proceedings had entered into a tentative settlement agreement. City Attorney Bach informed the Observer that the statement made to the Court was in error and pre-mature. On October 20, and October 26, the Observer, upon the advice and with the support of Florida’s First Amendment Foundation, made a public records request for a draft or final copy of the settlement agreement. The request to the City Clerk on October 20 was denied by the City Attorney. The request to the City Manager on October 26 was not responded to.
Editor’s Note: The Fernandina Observer’s legal analyst, Adam Kaufman, has covered the impact fee lawsuit extensively. We have placed previous articles for your review below.
Impact fee class action arguments at the Court of Appeal
“The $5,000,000 – Impact Fee Lawsuit Day 1”
“Impact Fees – “A paper napkin calculation?”
Adam Kaufman is a semi-retired mediator and attorney. A graduate of Northwestern University School of Law, he was born and raised in the Bronx, NY. and attended NYC public schools, including Stuyvesant High School. He still serves on the American Arbitration Association Labor Panel. From 1994 – 2005, he was Regional Director for the New York State Public Employment Relations Board.
$2.6 million, after adding the city’s attorneys’ fees, on on unwinnable case. The previous administrations foisted this folly upon the taxpayers. The present administration continued it.
How large a shovel do you need to fuel a raging fire with dollar bills until you have burned through 2,600,000 singles? Piled one atop the other, the stack would be 283.4 meters (not feet) tall – about 2/3 the height of the Sears (Willis) Tower in Chicago. Look at a picture of the Sears Tower or Empire State Building and imagine a stack of money extending 2/3 up the side.
Who ultimately pays for the ineptitude shown here?
The cost will be considerably higher than that. By the time the administration of settlement funds is completed legal expenses will easily be in excess of $1 million. Remember, the City has already refunded $735,000 in illegally collected impact fees. Add that to the $1.8M and you have a total of $3,535,000. This all could have been avoided if the City Attorney, City Manager and the Commissioners had simply read the law and eliminated the impact fees when the illegality was brought to their attention almost four years ago. Instead, they engaged in an enormously expensive process of senseless litigation using no fewer than three law firms.
Does this mean the city will no longer charge per seat impact fees on restaurants?
Adam, thanks again for your excellent manner in being able to distill the key points of this case and the settlement. As Pat K. says, I think the $1.8 is only part of the cost. I guess the only positive takeaway is that we will have supported a number of members of the legal community of NE FL over the last several years. Has CK offered to buy a round at the Palace?
To respond to David Lott’s comment. The City has paid about $1 million in fees. Neither Clinch nor Tanner Bishop earned a cent over the last three years prosecuting citizens’ right to recover illegal charges. The City illegally charged its citizens for the right to use their own property and the City spent $1 million plus in legal fees in an unsuccessful attempt to continue to illegally exact fees from its citizens. David, you were an acting City Manager for some period during that time and did nothing to stop the City’s illegal practices. If rounds are to be bought at the Palace you should be the one buying. Kavanaugh and Tanner Bishop have worked for over three years without compensation to protect citizens’ and property owners’ rights. Their fees will be paid from the proceeds recovered for our citizens. Not a cent will be paid to them by the City. Their compensation comes out of the money that should be repaid to citizens from whom it was illegally exacted.
To answer John’s question. Yes, the City may no longer charge water impact fees. My guess now is that they will continue to charge other impact fees. Those, in my view, are equally illegal. There has been no growth in the City and impact fees may only be spent to ameliorate the costs of growth. No growth = no impact fees under state law. If they do otherwise they are acting illegally under state law.
Patrick, Your points are well taken but I think Dave said that in jest. Could be wrong, but it sounded that way