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6. Settlement Agreement - City v. Owl Corporation et al.Ilw Tel 406.758.7709 Fax 406.758.7771 charbalI @ kah spel 1.corn Vl...1�IkL.... i7:# ►1\� 17fi�i Mayor Tarnmi Fisher and. Kalispell City Council Charles Harball, City .Attorney Jane Howington, City Manager City v. Owl Corp. et al. - Presentation of Settlement .Agreement to Council for Approval February 7, 2011— Regular Council Meeting BACKGROUND p The staff seeps a motion from the Council for approval of the settlement agreement on the above stated litigation. The City staff (City Manager and City .Attorney) participated in mediation prior to going to trial on this matter in which the settlement agreement was crafted. Mayor Fisher made herself available to staff and monitored the proceedings. The settlement agreement is attached to this memo as well as the City's settlement statement which sets forth the facts and background of the case. The essence of the proposed settlement agreement is that the City will pay the balance of amounts due to Owl Corp. (approx. $312,000) on the grater utility portion of the latecomer's agreement in three installments over the next 2 gears. Kalispell USFS LLC, Big Slay HIE LLC and Montana DNRC will each contribute $5,000 to this payoff. The City will then step into the position of Owl Corp. and will be reimbursed for this investment on the same terms as Owl Corp. would have been under the latecomer's agreement. RECOMMENDATION: That the City Council approves the settlement agreement in the above stated matter. FISCAL IMPACTS: The City benefits from this settlement agreement by avoiding the risk of a substantial negative litigation result. The City preserves the significant likelihood of recouping all costs of the construction of the grater utility. Respectfully submitted, 4 s Charles H- rball ` City Attorney] Wane Howington, City Manager JOHN B . DUDIS BRUCE A. FREDRICKSON** KEN A. KALVIG ANGELA M. LEDuc* MARs1 ALL MURRAY (of counsel) Charles A. Harball Kalispell City Attorney 201 First Avenue East Kalispell, Montana 59901 LVIG & LEDuc, P.C. ATTORNEYS AT LAW Southfield Tower 1830 3rd Avenue East, Suite 301 Kalispell, MT 59901 January 28, 2011 Client: Kalispell USFS, LLC Matter: Kalispell v. Owl Corp. (latecomer fees) File No.: 483.001 Re: City of Kalispell v. Owl Corp., et al Cause No. DV-09-1249(B) Dear Charles: The following document is enclosed: P.O. Box 1678 KALISPELL, MT 59903 PHONE: 406-257-6001 FAX: 406-257-6082 ALL ATTORNEYS LICENSED IN MT *ALSO LICENSED IN NEVADA ALSO LICENSED IN NORTH DAKOTA Wa,-t T T .Q Alf, r January 28, 2011 letter to Dennis Lind enclosing the fully executed Stipulation and Settlement Agreenn ent (cop,,ul), Thank you. Sincerely, /{ Lisa K. Pooler Paralegal itsa@kalvigiaw.eom RWKalispell USFS, LLMorrespondencelHarball TM 1-28-201I,doc KALVIG & LEDuc, P.C. Copy ATTORNEYS AT LAW JOHN B. DuD s Southfield Tower P.O.. Box 1678 K.ALISPELL, MT 59903 BRUCE A. FREDRICKSON** KEN A. KALVIG 1830 3rd Avenue East, Suite 301 PHONE: 406-257-6001 ANGELA M. LEDuc* Kalispell, MT 59901 FAX: 406-257-6082 ALL ATTaRNEYs LICENSED IN MT MARSHALL MURRAY *ALSO LICENSED IN NEVADA (of counsel) ALso LICENSED IN NORTH DAKOTA January 28, 2011 r7r � r r V A Ifny r Dennis B. Lind Datsopoulos, MacDonald & Lind, P.C. Central Square Building 201 West Main Street, Suite 201 Missoula, Montana 59802 Client: Kalispell USFS, LLC Matter: Kalispell v. Owl Corp. (latecomer fees) File No.: 483.001 Re: City of Kalispell v. Owl Corp., et al Cause No. DV-09-1249(B) Dear Dennis: The following document is enclosed: Stipulation and Settlement Agreement (fully executed original). Thank you. FSin rely, Lisa K. Pooler Paralegal lisa@kalviglaw.com M. Mark Goldberg Grant Nelson Charles A. Harball Michael A. Viscorni Jeffrey M. Hindoien Philip B. Condra James M. Scheier Tara R. Fugina RWKaiispell USFS, LLC\CorrespondencelLind TNT 1-28-2011_doc 1 2 4 5 6 7 8 9 14 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Dennis E. Lind, Esq. DATSOPOULOS, MACDONALD & LIND, P.C. 201 West Main Street Missoula, MT 59892 (406) 728-9810 Settlement Master/Mediator MONTANA ELEVENTH JUDICIAL DISTRICT COURT, FLATHEAD COUNTY CITY OF KALISPELL, } Cause No. DV-89-1 249(B) } Petitioner, } OWL CORPORATION, a Montana corporation, FLATHEAD SCHOOL DISTRICT NO. 5, KALISPELL USFS LLC, BIG SKY HIE LLC, STATE OF MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION and FLATHEAD COUNTY, Necessary Parties. OWL CORPORATION, a Montana corporation, Counter -Plaintiff, vs. CITY OF KALISPELL, Counter -Defendant, OWL CORPORATION, a Montana corporation, Cross -Claimant, vs. KALISPELL USFS LLC, BIG SKY HIE LLC, STATE OF MONTANA DEPARTMENT OF NATURAL RESOURCES AND CONSERVATION, ) FLATHEAD COUNTY, and DOES 1-107 ) Cross -Defendants. l STIPULATION AND SETTLEMENT AGREEMENT IT IS HEREBY STIPULATED AND AGREED by and between the parties and their STIPULATION AND SETTLEMENT AGREEMENT PaZye 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 undersigned counsel that this matter is completely resolved upon the following terms and II conditions: 1. Within 30 days of the date of this Settlement Agreement, the City of Kalispell (hereinafter "City") shall seek to obtain the approval of the terms of this Settlement Agreement by the Kalispell City council. If that approval is not obtained, this entire Settlement Agreement shall be void as between all parties. If, however, that approval is obtained, within 90 days after said approval is obtained, City shall pay $150,000 to Owl Corporation (hereinafter "Owl") in settlement of this matter. As additional consideration in settlement of this matter, beginning one year after the date the aforesaid $150,000 payment is made by City to Owl, city shall also pay Owl two annual payments of $81,368, plus4% interestper annum. Simultaneous with it making its $150,000 payment, City shall execute a Promissory Note for Owl as to the aforesaid two remaining annual payments. 2. If City obtains the aforesaid approval, within 30 days of being advised in writing of that approval, Big Sky HIE LLC (hereinafter `HIE") shall pay $5,000 to city in settlement of this matter, Kalispell USFS LLc (hereinafter "USFS") shall pay $5,000 to city in settlement of this matter, and Montana Department of Natural Resources And Conservation (hereinafter "DNRC") shall pay $5,000 to City in Settlement of this matter. 3. If City obtains the aforesaid approval, city and owl hereby agree to the following additional terms and conditions of settlement: a) city hereby agrees that the "Latecomers Agreement For Reimbursement For Municipal WaterAnd Sewer System Extensions" dated August 10, 2005 (hereinafter "subject Latecomers Agreement") terra is extended from 17 years to 30 years. b) City agrees to re-record the subject Latecomers Agreement, and an agreement extending its terra as aforesaid, so as to encumber all of Sections 25, 201 35 & 36, Township 29, Range 22 vilest, P.M.M., Flathead County, Montana. c) In return for the aforesaid settlement monies paid by City, owl hereby STIPULATION AND SETTLEMENT AGREEMENT 'age 2 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 assigns to City its entitlement to collect any more water assessment fees or fire flow fees under the subject Latecomers Agreement. City hereby agrees to indemnify and hold Owl harmless with respect to any liability or claims associated with any future water assessments or fire flow fees under the subject Latercomers Agreement or the City's collection of said assessments or fees. d) Notwithstanding the foregoing, however, city and Owl acknowledge that Owl is still entitled to collect its outstanding EDU's for Sewer assessment fees pursuant to the subject Latecomers Agreement. Accordingly, City and Owl agree that Owl's ability to collect its future EDU's for Sewer assessment fees will not be affected by the terms of this settlement, except that Owl shall now have a term of 30 years to collect same pursuant to the amendment set forth in paragraph 3(a) above. 4. All of the parties to this Settlement Agreement agree that until the Kalispell City council either approves or disapproves the terms of this Settlement Agreement as set forth in paragraph 1 above, this matter shall be informally stayed in that no party shall file any pleadings or motions until that date. However, if this Settlement Agreement is not I approved by the Kalispell City Council, any party may immediately proceed to move this matter expeditiously towards trial. 5. Each party shall be responsible for his/her/its own attorney fees and costs incurred in this matter. Notwithstanding the foregoing, if any party is required to take action to enforce or interpret this Settlement Agreement, the prevailing party in such action shall be entitled to an award of his/her/its reasonable attorney fees and costs. 5. Simultaneous with the payment of the aforesaid $150,000 payment by the City and its execution of the aforesaid Promissory Note to Owl, a usual and customary M DTL Mutual General Release shall be executed by all parties releasing any and all claims by and between therm. Notwithstanding the foregoing, this Mutual General Release shall expressly reserve any claims which City or Owl may later have STIPULATION AND SETTLEMENT AGREEMENT Page 3 1 2 3 4 5 6 7 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 11 against each other based upon future actions or inactions associated with their ongoing rights and obligations regarding sewer assessment fees under the subject Latecomers Agreement, as amended, as well as under this Settlement Agreement. 7. Simultaneous with the execution of the aforesaid Mutual General Release, 11 the parties shall execute and file a usual and customary Joint Stipulation For Dismissal With Prejudice, dismissing all claims, including all Counter -Claims and cross -Claims, which stipulation shall then be filed with the Court in this action. 8. Simultaneous with the execution of the aforesaid Mutual General Release, City shall execute and record a Memorandum Of Understanding certifying that all the latecomers who are parties to this lawsuit have fully satisfied all of their obligations under the subject Latecomers Agreement. 9. This Stipulation and Settlement Agreement is entered into by the parties with their full knowledge and consent. There have been no other promises made to any party I which are not contained in this agreement. DATED this 201" day of January, 2011. etitioner—City of Kalis I1 .. ..... ... Charles . arbVrPetitioner Es.. q. Attorney f City of Kalispell Respondent— wl corporation � f Michael A. viscomi, Esq. Attorney for owl Corporation By: Respondent —Flathead School District No. 5 Jeffrey M. Hindoien, Esq. Attorney for Flathead School District No. 5 STIPULATION AND SETTLEMENT AGREEMENT Page 4 1 2 3 4 5 6 7 8 9 10 11. 121 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 against each other based upon future actions or inactions associated with their ongoing rights and obligations regarding serer assessment fees under the subject Latecomers Agreement, as amended, as well as under this Settlement Agreement. 7. Simultaneous with the execution of the aforesaid Mutual General Release, 11 the parties shall execute and file a usual and customary ,point Stipulation For Dismissal With Prejudice, dismissing all claims, including all Counter -Claims and cross -claims which stipulation shall then be filed with the Court in this action. 8. Simultaneous with the execution of the aforesaid Mutual General Release, City shall execute and record a it ernorandum Of Understanding certifying that all the � g latecomers who are parties to this lawsuit have fully satisfied all of their obligations under the subject Latecomers Agreement. g. Th is Stipulation and Settlement Agreement is entered into by the parties with their full knowledge and consent. There have been no other promises made to an party y which are not contained in this agreement. DATED this 20" day of January, 2011, e itianer—City of Kalisp�ll Charles arbal sq. Attorney f P r etitioner City of Kalispell B: Respondent rI corporation s Michael A. iscomi) Esq. Attorney for Owl corporation Bw Res ndent--F la Bead Sc ool Disf riot No. 5 :"Hindo , Esq. -JJ"Wttorney for Flathead School District No. STIPULATION AND SETTLEMENT AGREEMENT Page 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 t S Oement Faster/Me iator- Dennis E. Lind, Esq. By: Respondent —Kalispell USFS, LLC Ken A. Kalvig, Esq. Attorney for Kalispell USFS, LLC es on ent—Big Sky HIE, LLC , PhijilSB. qpndra, Esq. A rney for Big Sky HIE, LLC B: Respondent —Fontana DNRC Jaynes M. SCheier, Esq. Attorney for MT DNRC B Respondent —Flathead C my 7e. Tara R. Fugin , Esq. Attorney for Flathead County STIPULATION AND SETTLEMENT AGREEMENT Page 5 1 2 3 4 4 Cag' 71 8 9 10 11 12 13 14 t5 16 17 18 19 20 21 22 23 24 25 26 27 2s Settlement Master/Mediator- Dennis E. Lind, Esq. B Respondent --Kalispell USFS, LLC Ken A. Kalvig, Esq. Attorney for Kalispell USI=S, LL espon ert—Blg Sky HIE, LLC Phi' B. P ndra, Esq. - rney for Big Sky HIE, LLC B Y . Res pondent--Montan DN RC -�P *6 POVV30� No go 644 Jarn ail. Soheier, E9q. Attorney for NIT INN RC B: Respondent Flathead60nty Tara R. Fig in , Esq. Attorney for Flathead County STIPULATION AND SETTLEMENT AGREEMENT 'age 5 1 2 3 4 5. 6 7 8 9 10 11 12 13 14 15 16 17 IS 19 20 21 22 23 24 25 26 27' 28 Settlement IVlaster/lVladia0or--- Dennis E. Lind, Esq. STIPULATION AND SETTLEMENT AGREEMENT .......... ... ........ F a Rill Ken A. Kalvig--,--E-sq. Attorney for Kalispell USFS, LLC : Re—spondent—Big Sky HIE, LLC PhIfilp B. Condra, Esq. Attorney for Big Sky H I E, LLC Respondent—Mo. itana DNRC James M. Scherer, Esq/ Attorney for MIT DNRC Respondent —Flat - head County Tara R, Fugina, Esq. Attorney for Flathead County page 5 1 2 3 4 5 6 71 8 9 10 11 161 17 18 19 20 21 2? 23 24 25 26 27 28 Settlement Master/Mediator- Dennis E. Lind, Esq. STIPULATION AND SETTLEMENTAGREEMENT v Respondent —Kalispell USFS, LLC Ken A. Kalvig, Esq. Attorney for Kalispell DSl=S, LL espon nt- Big Sky HIE, LLC Phi ' B. COndra, Esq. A rney for Big Sky HIE, LLC 1 BY . Res pondent -Manta na DN RC i Jane M. Scherer, E q. Attorney for MT DN RD w B '. I //�, z Resp ndent Fl thead my Tara. R. Fug in , Esq. Attorney for Flathead County Page 5 January 5, 2011 Dennis E. Lind .Attorney at Law Datsopoulos, MacDonald & Lind, P.C. 201 West Main Street, Suite 201 Missoula, ACT 59802 Re: City of Kalispell v. Owl. Corporation., et al. -- Settlement Statement Mr. Lind: The City of Kalispell [the City], as petitioner sought relief under the Unifonn Declaratory Judgment .act at MCA 27-8 et seq. from the 1 l th Judicial District Court in Flathead County. The City is a party to a contract with Owl Corporation [Owl] that affects the rights and obligations of parties outside of the contract as well as the contracting parties. Following the filing and service of the action by the City, counter and cross claims were filed for damages. The purpose of seeking the declaratory judgment was to settle and to afford relief from uncertainty and insecurity with respect to rights, status and other legal relations. The subject contract was entered into in Flathead County, Montana for municipal improvements made and located in Flathead County, Montana and providing municipal services to properties located in Flathead County, Montana and owned by interested parties. The Agreement The CITY and OWL entered into the Latecomers Agree ent for Reimbursement for Municipal Water and Sewer System Extension with the purpose of constructing and extending municipal water and sewage conveyance facilities to property owned and being developed by OWL, as well as to serve other properties in the service vicinity of the new extensions. OWL., as the developer, financed and paid for the design and construction of the extensions. At the request of the CITY, the extensions were sized to serve other properties in that service vicinity as well. The CITY, in consideration of this over sizing, agreed to collect an agreed upon contribution from the "latecomers" to reimburse OWL for its investment. As more particularly stated in the recitals of the Agreement: "E. The City and Developer desire and intend by this Agreement to provide for collection of the fair pro rata share of the total project costs of the Extension from the owners of the properties which benefit from the Extensions, but who did not contribute to the original cost Thereof. Dennis E. Lind Attorney at Law City of Kalispell v. Opal Corp. Settlement Statement January 5, 2011 Page - 2 F. The City has determined and .Developer has agreed that the fair pro rota share of the total project costs of the Extensions, to be collected from the owners of properties who tap onto, connect to or use the Extensions, shall be based upon the equivalent dwelling units ("EDU") associated with the expected use of the subject properties at the rates set forth in Section 5 below. " The issue of argument revolves around the water line extension and the oversize to meet fire flog requirements. The relevant portions of the Agreement state as follows. S. The total project costs for the Extensions including costs eligible for reimbursement under this Agreement arc as itemized on Exhibit "B. " Said eligible portion of the total project costs includes costs for design engineering, surveying, construction, construction inspection and construction contract administration incurred and pain by .Developer. The Assessment .,Fees for each of the properties who subsequently tap onto, connect to or use the Extensions shall be based upon the estimated equivalent dwelling units ("EDUs") associated with such properties in the amounts set forth in Section S(a) and (b). The amounts set forth in Sections S(a) and (b) are based upon total capacity of 2,467 EDUs for the municipal water system extension and 1,136 EDUs for the sewer system extension, with 127 EDUs for the municipal water system extension and 127 EDUs for the sewer- system extension being allocated to the property owned by Developer- as described on Exhibit ►►C, "for which no Assessment ,Fee shall be charged and for which .Developer shall not be entitled to reimbursement pursuant to this Agreement. (a) The Assessment Fee for owners of properties who subsequently tap onto, connect to or use the municipal water system extension shall be $164.28 per EDU, adjusted annually in accordance with Section S(c) below. The maximum number of EDUs for which Developer shall be entitled to reimbursement for the municipal water system extension shall be 2,340 EDUs. (c) The per EDU Assessment Fees set forth in Sections S(a) and (b) above shall be increased annually, over the prior year's Assessment Fee, on the first day of January each year, based upon the ten (10) year United States Treasury Note rate as of the last day of Office of City Attorney City of Kalispell Dennis E. Lind .attorney at Law City of Kalispell v. Owl Corp. Settlement Statement January 5, 2011 Page -- 3 the immediately preceding November, plus .1.5%. 6. The EDUs for purposes of computing the Assessment .Fees to be collected pursuant to this Agreement shall be determined in accordance with .Exhibit "D, " attached hereto and incorporated herein by this reference. 7. Notwithstanding anything to the contrary in this Agreement, the Assessment Fees to be collected pursuant to this Agreement shall not be collected with respect to property owned by developer as described on Exhibit "C, " attached hereto and incorporated herein by this reference. 8. The City agrees not to allow any tapping into, connecting to or using of the Extensions without the owners of properties to be benefited from said tapping or connecting having first paid to the City the Assessment Fees and such other charges as set forth in Sections 4 and 5 above. During the term of this Agreement, the City shall not have the authority to waive the Assessment .Fees for tapping into, connecting to or using the Extensions, without the prior written consent of Developer. To the extent that the City sloes waive any Assessment ..Fees, the City shall be responsible for payment to .developer of the Assessment .Fees that would have otherwise been payable by the owner of such properties benefiting from tapping onto, connecting to or using the Extensions. The relevant portion of Exhibit "D" sets out the following: If a project with a fire flow requirement higher than the base fire flow of 11000 GPM were to connect to the main, the future development would benefit from this extra capacity due to the oversized pipe. Therefore, there would have to be a payment for the additional fire flow above and beyond the 1,000 GPM already supplied. This fire flow cost would be figured by converting the extra demand to an equivalent number of dwelling units. For example, if a new development were to need afire flow of 1,500 GPM, the cost will be figured by converting the extra 500 GPM to the number of dwelling units that will use 500 GPM. In this case, this would be 500 GPM/ 0.62 GPM per dwelling unit, which equals 806 dwelling units. Undisputed .Facts Soon after OWL caused the grater conveyance extension to be constructed to its property, Flathead School District No. 5 constructed Glacier High School in the vicinity of the new extension and connected to it. The school facility required 1,500 GPM of fire flow and it paid Office of City Attomey City of Kalispell Dennis E. Lind Attorney at Law City of Kalispell v. Owl Corp. Settlement Statement January 5, 201 I Page - 4 the appropriate latecomer's fees for the 500 GPM excess fire flow that it demanded. This fee, collected by the CITY, was paid over to OWL. Thereafter four other facilities were constructed by different owners, each requiring fire flows in excess of 1,000 GPM, but not exceeding 1,500 GPM. The CITY did not initially bill the owners of the Holiday Inn Express or the 'Talley Lake Ranger District for the excess fire flog because their total fire flow needs did not exceed 1500 GPM. OWL, upon learning of this, complained to the City that it should have been paid for the excess fire flow. The City, in its role as administrator of the contract, then billed each of these owners for all of the calculated water latecomer's fees, including the excess fire flow fees, but only received the domestic water latecomer's fees less the excess fire flow fees. The CITY paid all latecomer's fees it collected to OWL. Whether each "latecomer" that requires fire flow in excess of 1,000 GPM should, by the terms of the agreement, pay the calculated latecomer's fee for fire flow, regardless of whether ot- not the fire flow capacity of that portion of the conveyance system has already been paid by a previous latecomer? Arguments OWL asserts that the language, cited above in Exhibit "U' of the agreement does not restrict the collection of payment for fire flow in excess of 1,000 GPM from each user demanding such excess even though the excess fire flog capacity has already been paid by a previous latecomer. Latecomers who connected to the extension after Glacier High School and who required fire flow in excess of 1,000 GPM and less than 1,500 GPM assert that Glacier :high School has already paid for the excess 500 GPM and that this should not be paid again. The argument of OWL is essentially that the Agreement is clear that OWL can only collect the amount of its investment less the capacity it requires for its own development and that it is not demanding any more than that. It asserts, however, that the Agreement does not specifically restrict its ability to recoup its investments from the excess fire flow demands of each of the users of the extension. The argument of those latecomers needing excess fire flow that has been once purchased is that the entire basis of the agreement is founded upon the analysis of a ratio of system capacity to its capital costs. OWL is thereby reimbursed for its investment in the oversized portion of the extension as those latecomer users pay for the previously unutilized increments of available capacity. In theory, therefore, OWL will finally and completely realize its investment when the physical capacity of the water line has been fully demanded. Interpreting the Agreement to mandate latecomer payment for fire flog on a noncumulative basis not only results in an early payout for OWL but further results in the last latecomers receiving the windfall of paying no Office of City attorney City of Kalispell Dennis E. Lind Attorney at Law City of Kalispell v. Owl Corp. Settlement Statement January 5, 2011 Page - 5 water latecomer fees at all. This they argue is not in keeping with the "fair pro rata share" theory the Agreement is founded upon. From. the City's standpoint, it concurs that the parties could have agreed to the administration of the contract as now demanded by OWL. however, it agrees with the latecomers that intuitively the calculation of fire flogs should be cumulative and that is, in fact, how it initially calculated and billed the fees. The clause of the contract at Exhibit "D" that is at the root of the ambiguity was drafted by the engineer who was working for Owl... Although the City engineers reviewed the language, it was not discussed for clarification and a "meeting of the minds" on that particular issue was not achieved. The drafting engineer, in a later email communication, conceded that the language could be interpreted in two different ways. The City's Case The City, as administrator of this contract, has acted reasonably throughout in this matter. Its initial interpretation of the contract, at Exhibit "D", is a reasonable interpretation of that clause. Upon receiving notice of OWL's different interpretation, it notified all those latecomers affected that additional latecomer fees were being assessed. when the latecomers declined to pay these fees the City then filed the matter into District Court seeping a declaratory judgment. The City does not believe it should be liable for any damages in this matter as a result. Weakness in the City's Case The City acknowledges that one of its city engineers that warped with the OWL engineer testified that he agreed with the contract interpretation of OWL. However, he did not testify that he actually discussed the particular clause with the OWL engineer and he further, by the testimony of all city witnesses, directed the other engineers in the office to bill the fire flow fees on a cumulative basis. Upon request by the Holiday Inn Express owners and the Talley Lake Ranger District facility owner, the City provided preconstruction estimates of costs, including latecomer fees. These estimates did not include any fire flow fees in excess of 1000 GPM, based upon the fact that the Flathead School District had already paid for an excess 500 GPM and neither owner required more than 1500 GPM. These two latecomers will legitimately claim that they acted in reliance upon the City's preconstruction estimates. hi hindsight the City could have shared this communication with OWL and possibly avoided this misunderstanding. Office of City Attorney City of Kalispell Dennis E. Lind Attorney at Lair City of Kalispell v. Owl Corp. Settlement Statement January 5, 2011 Page - 6 Settlement Discussion At some point prior to the filing of the matter into court, OWL informally `suggested" that if the City would pay, or convince one of the latecomers to pay its fire flow assessment, he would waive the other fire flow assessment. No other settlement discussion has occurred. The City would consider contributing to a settlement along the lines set forth immediately above. It believes that because the interpretation of OWL could have been a valid interpretation, had there truly been a meeting of the minds, meeting halfway is a reasonable solution. It also understands and is sympathetic to the arguments of latecomers that they relied upon the initial estimates provided to them by the City. It would therefore contribute to half of the latecomer fees if the latecomers also make a reasonable contribution to that half. The City may offer its contribution in the form of cash or waived water impact fees of future OWL development or some combination of the two. Sincerely, Charles A. Harball City Attorney Office of City Attomey City of Kalispell