Tab 25. Daily Interlake Article dated February 10, 2011 "Council to pay developer $312,000"Council to pay developer $312,000
CALEB SOPTELEAN/Daily Inter Lake I Posted: Thursday, February 10, 2011 2:00 am
The Kalispell City Council agreed Monday to pay developer Owl Corp. $312,000 to settle a
dispute over payment for connecting to water lines.
The settlement deals with latecomer fees for water/fire flow connections in excess of 1,000
gallons per minute for development in the northern part of the city after Glacier High School was
built.
Owl Corp. of Kalispell, a business owned by Mark Owens, developed West View Estates, a
residential area on the north side of West Reserve Drive. Owl paid for larger -capacity water and
sewer lines with the understanding that those connecting to the lines later would pay their share
through what are known as "latecomer fees."
Later development in the area on leased state land included the Flathead National Forest/Tally
Lake Ranger District, Holiday Inn Express and Department of Natural Resources and
Conservation.
Mayor Tammi Fisher explained that the city bought out the developer's rights to collect latecomer
fees.
"We do have to `front end' the $312,000, but have the opportunity to be made whole," Fisher said.
The city originally did not require Holiday Inn Express and the Flathead Forest office to pay Owl
for water capacity in excess of 1,000 gallons per minute. Upon learning this, Owl complained to
the city that it should have been paid.
The city filed for a declaratory judgment in District Court and Owl filed a cross complaint. The
settlement ends those legal actions.
Big Sky HIE [Holiday Inn Express] LLC, Kalispell USFS LLC (a Denver -based developer) and
the Montana Department of Natural Resources and Conservation each will pay $5,000 to the city
for their water/fire flow connections within 30 days as part of the agreement.
They could have been required to pay $150,000 for the connections if the case went to trial, City
Attorney Charlie Harball said. The agreement kind of got them off the hook, Harball said.
However, he noted that they likely paid between $40,000 and $50,000 for legal fees.
Harball said the situation arose due to a misunderstanding about contract language. Harball said he
worked on the Aug. 10, 2005, development agreement with Owl's attorney, but documents that
were attached to the agreement were drafted by the developer's engineer.
Although city engineers reviewed the language, it was not discussed for clarification and a
"meeting of the minds" between the city and developer was not achieved, Harball said.
The city will pay $150,000 up front and make two $81,368 payments plus four percent interest
over the next two years. The money can be recouped plus an additional 1.5 percent interest when
development occurs that connects to the water line.
Owl still owns the right to collect for sewer connections.
Council has 90 days to pay the $150,000. Harball suggested the city pay the money from water
impact fees. Council member Bob Hafferman agreed, but that issue remains to be decided.
The city could have been liable for up to $500,000 if the case went to trial and the city lost,
Harball said.
Council member Tim Kluesner said some people probably were wondering, "What the heck
happened here? Action or inaction of the city has cost us $312,000. We have some serious issues
of policy within our own departments here."
City Manager Jane Howington said the latecomer's agreement in question "was very ambiguous
and has since been fixed."
"Since I've been here, things have come out of the woodwork, and when we think we've gotten
rid of all the ghosts, something else appears," Howington said. "There's a tremendous amount of
stuff that was done by handshake agreements over the last 10 to 15 years. We're having a devil of
a time getting everyone to modernize their procedures," she added.
Citing examples, Howington said the city previously "leased out buildings for $1 for the next
forever. Problems crop up with the roof or fire [safety] and they want us to correct it."
Harball said he has 20 contracts cross his desk each day. There's possible litigation as a result of
every contract. If it happens once every 20 years, that's not bad, he said.
"It's our job to be aware of what's going on," Kluesner said. He was notified about the agreement
prior to Monday, "but not everyone [on council] was."
Council member Jeff Zauner said he was surprised by the news. When he speculated that it would
take years for the city to recover the money, Harbalf agreed.
Harball said a procedure was put in place to assure this kind of thing doesn"t happen again.
Reporter Caleb Soptelean may be reached at 758-4483 or by e-mail at
csoptelean@dailyinterlake.com.