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1991-1992 Closed Meetings/Chronology of Events . 5-28-91 6-21-91 7-3-91 7-31-91 . CITY OF ALBERTVILLE CHRONOLOGY OF EVENTS PERTAINING TO CLOSED MEETINGS Based on Andy Savitski's complaints concerning the assessments on his lots in the Sunrise Commercial Park, the attorneys began looking into the cost of the bonding for Sunrise Commercial Park. City Clerk Linda Houghton and attorneys Mike Couri and Bill Radzwill met at City Hall with Tom Truszinski of Juran & Moody to discuss the fiscal agent fees associated wi th the 1988 bond that financed the improvements in Sunrise Commercial Park and that al so refunded two prior bonds. Juran & Moody was asked to refund those fees. City attorney delivered to the preliminary schedule of adjustment Sunrise Commercial Park assessments. Ci ty a to the The city attorney noticed that the reduced fee for refunding bonds correlated with statutory limitations requiring that total savings be at least 3% of net present value. If the fees had not been reduced, refunding could not have occurred. Aug-Sept The attorney continues to work out an adjusted assessment of the Sunrise Commercial Park and the revised assessment schedules are discussed at regular City Council meetings. 9-10- 91 The Ci ty at torney contacted Juran & Moody regarding questions as to the fees charged on the Sunrise Commercial Park improvement bond. 10-1-91 Mayor Walshl Councilman Donatus Vetschl city CI erk Linda Houghton and Ci ty Attorney Mike Couri met at City Hall with Tom Brownell of Juran & Moody to discuss the matter of settlement. At this meeting the City suggested a settlement in the area of $401000. Brownell suggest Juran & Moody would consider a settlement more in the $8,000-$10,000 range. 10-7-91 . The Ci ty Counci I approves the adjusted assessment schedul e for Sunrise Commercial Park and sets an assessment hearing for October 30, 1991. . 10-16-91 Juran & Moody faxed spreadsheets of prior work to the city attorney's office. The city at torney spoke via telephone wi th steve Mat tson and Ted Brownell regarding work performed on the Sunrise Commercial Park bond and the refunding bonds. Mid-Oct The city discovers that the levy schedule in the sewer refunding bond was not correct and that the City had not levied sufficient amounts in 1990 to cover the debt service for the bond payment in 1991. 10-21-91 At the regular City Council meeting the Council was advised to set a closed meeting to discuss financial matters covered under the attorney/client privilege. A closed meeting was scheduled for October 30, 1991, after the assessment hearing previously scheduled. . 10-23-91 Mayor Walsh, Councilman Vetsch, and City Clerk Linda Houghton met at the Radzwill Law Office in st. Michael with attorneys Mike Couri and Bi 11 Radzwi 11 to di scuss the Juran & Moody matter, financial position of the city, and what the city's legal options were in regard to financial errors made by previous city administration. 10-30-91 The reassessment hearing on the Sunrise Commercial Park was continued to November 19, 1991, in order to negotiate an agreement with Andy Savitski. 10-30-91 The City Council met in a closed session to discuss Juran & Moody issue and legal options in regard to financial errors by prior ci ty administrator (minutes of meeting attached). 11-4-91 The ci ty attorney contact Ted Brownell of Juran 7 Moody to discuss refunding issues. 11-18-91 The City Council passes a resolution to deduct $9,065 from the total Sunrise Commercial Park assessment to compensate the owner for additional expenses he has already incurred or will incur in the future to develop his property. . 11-19-91 The City Council passes a resolution adopting the adjusted assessment for the Sunrise Commercial Park. 2-18-92 At the regular City Council meeting, the city . . . 2-21-92 3-2-92 3-17-92 5-4-92 5-18-92 6-1-92 7-6-92 7-20-92 cl erk was di rected to schedul e a closed session of the Ci ty Counci 1 on the March 2, 1992, Council meeting to discuss attorney/client privileged information. The city attorney regarding settlement with steve Mattson. continues discussion of Juran & Moody issue The City Council recessed the regular Council meeting to meet in a closed session at 8:55 PM (minutes of the closed session are attached). The Council reconvened the regular meeting of the City Council at 9:20 PM. The Council did not meet in a closed session as scheduled at the 3-2-92 closed meeting because of a lack of information. The City Council schedules a closed session to discuss matters covered under attorney/client privilege as recommended by City Attorney Bill Radzwill for May 18, 1992. The City Council recessed the regular Council meeting at 8:45 PM to meet in a closed session (minutes of the closed meeting attached). Mayor Wa 1 sh reconvened the regul ar Counci 1 meeting at 9:10 PM. The Council did not meet in a closed session as planned at the closed meeting 5-18-92 because a settlement has not been reached. Upon recommendation of the city attorney, the City Council schedules a closed meeting to be held at 6:30 PM on July 20, 1992. The City Council met in a closed session at 6:30 PM (minutes of the closed meeting attached) . . MINUTES OF CLOSED MEETINGS CONDUCTED BY THE ALBERTVILLE CITY COUNCIL REGARDING POSSIBLE LITIGATION October 30, 1991 - 8:58 PM PRESENT: Mayor Jim Walsh, Councilmen Donatus Vetsch, Duane Berning, Mark Barthel, and Mike Potter, City Attorneys Bill Radzwill and Mike Couri, City CLerk Linda Houghton Mayor Walsh called the closed meeting to order. The purpose of the closed meeting is to discuss possible litigation against the previous administrator and Juran & Moody, Inc., financial advisors for the City. Mayor Walsh turned the meeting over to the City Attorney to explain the events as they have unfolded. Radzwill explained that in 1988 two prior bonds were refunded and the refunding of those bonds together wi th the G. O. Improvement Bond for the Sunrise Commercial Park were combined. The total of the improvement bond was $110,000 and the two refunding bonds totaled $395,000. . In May of 1991, Andy Savitski complained that the assessment on his commercial park lots were higher than he expected. The attorney began checking into the bonding and found that fiscal fees of $11,000 were changed to the $110,000 improvement bond, while fees of onl y $3,950 were charged to the two refunding bonds totaling $395,000. On June 21 Radzwill, Couri and Linda met at City Hall with Tom Truszinski of Juran & Moody and questioned why the improvement bond was charged 10% fiscal fees and the refunding bonds were only charged 1%. The city attorneys told Truszinski that the only plausible explanation they could find was that the fees were shifted from the refunding portion of the bond to the improvement portion of the bond in order to meet state requirements for refunding. Truszinski agreed to discuss the matter with his superiors at Juran & Moody. Mayor Walsh, Linda, Radzwill and Couri met at City Hall with Ted Brownell of Juran & Moody on October 1 to discuss the issue of settlement of the City's claim that Juran & Moody shifted fiscal fees from two refunding bonds to the Sunrise Commercial portion of the bond in order to meet state statutes as to net value savings. It was the City's position at that time that a settlement of around $40,000 was appropriate. Brownell indicated that Juran & Moody would consider a settlement of $8,000-$10,000. Brownell indicated that he did not have the complete files on the bond issue with him at this time. He would have to check his records at the office for copies of the trial runs for the bond as requested by Couri. . On October 16 Couri spoke via telephone with Brownell who told him he had found the trial runs Couri has requested. Brownell . . . Closed Meeting October 30, 1991 Page 2 stated that, in fact, he had had the trial runs with him on October 1 at City Hall when it was originally requested. Two trial runs, one undated and one dated November 28, 1988, were faxed to Couri that day. At around the same date, Couri discovered that the levy schedule in the sewer refunding bond was not correct and the City had not levied sufficient amounts in 1990 to cover the debt servdce for the bond in 1991. In reviewing the trial runs faxed to his office, Couri noticed that the 800 telephone number printed on the trial run was different from the numbers that were on all previous correspondence from Juran & Moody up through 1990. Couri contacted MC! to determine when the 800 telephone number listed on the trial run was assigned to Juran & Moody and was told that number was not assigned until January of 1990. Based on this information Couri concluded that the trial run document is not authenic and appears to have been created after January of 1990. The matter of the 800 telephone number was brought to Mayor Walsh's attention prior to the regular Council meeting on October 21. Mayor Walsh asked that a meeting with Acting Mayor Donatus Vetsch, City Clerk Linda Houghton, himself and the attorney be set up at the attorney's office as soon as possible. This meeting was held on October 23 at which time the information was presented to those present. Radzwi 11 feel s Juran & Moody made an error in the 1 evy necessary to fund the bond by misreading the $41,000 figure that should have been levied annually as the total amount to be levied over the life of the bond. The bond document calls for an annual 1 evy of $2,500. The previ ous administrator actual 1 y 1 evi ed a different amount, but the attorney has been unable to determine how that amount was arrived at. If Juran & Moody intentionally deceived the city on the refunding bond, it could have caused the prior Council unknowingly to do something illegal. If that is so, a failure by Juran & Moody to comply with state statutes regarding refunding could put the bond in jeopardy and could leave room for the bond to be challenged. The City may be entitled to punitive damages on these charges. Radzwill recommends the City withdraw its $40,000 offer to settle based on the fact that the bond does not cash flow and the City does not know the extent of damages it may have suffered. By paying more interest on the bond than the City earned on interest, Radzwill estimates that the city may have lost between $300,000- $400,000 that may have been earned had the City received advice . Closed Meeting October 30, 1991 Page 3 regarding investment options for funds kept in the checkbook at 5.25%. The City should then systematically start a discovery process. Radzwill stated that the discovery process is costly, but that the court costs and the city's legal fees should be recovered in either a trial award or a settlement. Through deposition, Juran & Moody must admi t whether the trial runs faxed to Radzwi 11 's office are true and correct. It is also necessary for Juran & Moody to depose to the fact that the trial run documents were in their paper files, as Brownell has stated to Couri. In light of the discoveries the attorneys have made, Walsh suggests that the city consider a settlement of $200,000 from Juran & Moody in addition to punitive damages. Radzwill also recommended that the City attempt to collect from its Errors & Omissions insurance for the errors and omissions caused by the previous administrator. The attorneys stated there is no indication that the previous administrator took any Ci ty funds, but her failure to perform her duties caused the City to lose money. . Councilman Berning questioned the attorney about whether there was a way that Juran & Moody could get out of this issue and what the City would be looking at in legal fees. Radzwill stated that legal costs could run between $8,000-$20,000. Radzwill explained that in the discovery process will force Juran & Moody to admit whether the trial runs are true and correct. Once this is accomplished, the City will be able to present evidence that the 800 telephone number printed on the trial run was not assigned until January of 1990. The City will notify Juran & Moody that the offer of settlement is being withdrawn solely on the basis of the bond levy errors. Radzwi 11 emphaticall y reminded the Counci 1 and Linda that absolutely no comments could be made regarding this closed meeting once it is adjourned. Potter made a motion directing the City Attorney to proceed wi th the discovery process. After the discovery process is compl eted, the Counci 1 wi 11 set up another closed sessi on to discuss how to proceed. Barthel seconded the motion. All voted aye. Vetsch made a motion to adjourn this closed meeting at 10:21 PM. Potter seconded the motion. All voted aye. . . . . March 2, 1992 - 9:03 PM PRESENT: Mayor Jim Walsh, Councilmen Mike Potter, Duane Berning, Mark Barthel, City Attorneys Bill Radzwill & Mike Couri, City Clerk Linda Houghton The purpose of the closed meeting was to discuss the City's possible claims against the former administrator and against Juran & Moody, Inc. The City had discovered that a refunding bond issued through Juran & Moody to refund two other bonds and to finance the Sunrise Commercial Park improvements showed that $11,000 had been charged to the commercial project while $3,950 had been charged to the two refunding bonds. Because the improvement bond was for $110,000 and the two refunding bonds total ed $395,000, it appeared that the majority of the fiscal fees were added to the improvement portion of the project in order to enable the two refunding bonds to be refinanced within state guidelines as to net present value savings. Radzwill, Couri, and Linda met with Tom Truszinski from Juran & Moody to discuss this question on June 21, 1992. Truszinski explained that when the former Juran & Moody representative to the City of Albertville left his position with Juran & Moody, he took with him his files. Truszinski agreed to look into this matter. At the October 1, 1991, meeting with Ted Brownell of Juran & Moody, Brownell indicated that a settlement of $8,000-$10,000 may be reasonabl e. Couri suggested that the Ci ty was looking at a settlement around $40,000. Couri explained that he has discovered that a schedule faxed to his office from Juran & Moody on October 16 lists a 800 telephone number that does not appear on any other correspondence from Juran & Moody until 1990. Upon checking with MCI, Couri had been told that this telephone number was assigned to Juran & Moody January of 1990. Later Couri was informed by MC! that the 800 number had actually been assigned to Juran & Moody in October of 1988. This means that the schedule Couri received via fax could have been generated on the date listed on the schedule, and that the previous date of January 1990 given by MC! was incorrect. The discussion changed to the former administrator's failure to levy bond payments, failure to pay federal, state and P.E.R.A. taxes, and other errors that have resulted in additional expenses to the City. Couri advised the Council that attempts to collect damages through the court system from the former administrator would be expensive for the City and may result in no compensation. Walsh requested written documentation and exhibits detailing what has occurred and how it pertains to the former administrator. A claim will be made on the City's Errors & Omissions policy and the bond on the former administrator. . . . Closed Meeting March 2, 1992 Page 2 The Council agreed to meet in another closed session during the regular City Council meeting on March 17, 1992, if a report from the City Attorney is ready. The closed meeting adjourned at 9:25 PM. ) . . . Mav 18, 1992 - 8:45 PM PRESENT: Mayor Jim Walsh, Councilmen Donatus Vetsch, Duane Berning, Mike Potter, and Mark Barthel, City Attorney Mike Couri, City Clerk Linda Houghton Mayor Walsh opened the closed session to discuss financial matters under the attorney/client privilege. Walsh asked Couri to provide the City will a letter advising the city that they legally schedule and meet in a closed session. Couri reported on the progress of the insurance and bond claims against the former administrator. The bond company wi 11 investigate the matter and will contact the former administrator and other pertinent witnesses on the subject if the Council wishes to proceed. Couri does not feel that the amount that possibly be recovered through the bond would be enough to justify the expenses the City would incur in pursuing this option. Couri recommended that the Council either make a decision to proceed, wi th the knowl edge that pursuing ei ther the insurance company or the bonding option would be costly to the City. Couri reported on the progress of the Juran & Moody (J&M) issues. He presented a summary of events detailing past actions by J&M. J&M has made an offer of settlement of $4,000. Couri suggested that a committee be appointed to negotiate with J&M on a settlement. Barthel made a motion to have two of the Council meet with representatives of J&M in an attempt to negotiate a settlement. Vetsch seconded the motion. All voted aye. After an agreement is reached with J&M, the minutes of the closed meeting will be summarized and released to the public. Couri will set up a meeting for the committee to meet with J&M as soon as possible. The clerk has in her possession as a part of the record the Summary of Events report submitted by Couri. All other copies of the summary were collected by Couri. Potter made a motion to continue the closed session at the next Council meeting if a settlement has been negotiated. Barthel seconded the motion. All voted aye. The closed session was adjourned . . . JURAN & MOODY SUMMARY OF EVENTS 1. August 23, 1988, J&M presents a preliminary calculation detailing a proposed bond refunding ln the amount of $680,000.00. Bonds to be refunded are the 1984 Sewer Bonds, the 1982 Improvement Bonds, and the 1982 Clinic Bonds. Estimated fiscal fees are $6,800.00 and estimated Refunding Computation fees are $6,800.00 for a total of $13,600.00 in fees for the refunding. 2. Sometime after August of 1988, the Clinic bonds are dropped from the refunding proposal, leaving a total of $400,000.00 as the refunding bond issue. This is shown in the next preliminary calculation dated November 15, 1988, which details a financial advisory fee of $4,000.00 and a Refunding Computation fee of $4,000.00, for total fees of $8,000.00. 3. The final analysis, dated December 23, 1988, lists a bond tefunding issue of $395,000.00 with no Refunding Computation fee and a Financial Advisory of $3,950.00. Total fees are $3,950.00, or 1% of the bond issue. 4. The refunding bonds were issued at the same time as the G.O. Improvement bonds for Savi tski' s property, and while the refunding bonds are separate from Savitski's issue, the two were approved together and were billed together to the City. Savitski's bond issue was in the amount of $110,000.00, with a fiscal fee of $11,000.00, or 10% of the bond issue. The fiscal fee was passed on to Savitski through the assessment placed on his property. 5. Fiscal fees on the $210,000.00 bond issued for Albertville on July 6, 1988 came to $4,000.00, or slightly less than 2%, which seems to be normal and is in line with what J&M charged before and after Savitski's bond issue. These fiscal fees are in addition to the discount charged on bo.nds, usually an additional 2%. 6. I believe that the fiscal fee on the refunding bonds was shifted to Savi tski ' s bond issue in order to meet state statutes regarding bond refunding. Under the statutes, a refunding must save at least 3% over the payments due on the existing bonds. The refunding bonds had savings over the statutorily required amount of about $2,700.00, not enough to pay for the approximately $7,000.00 to $7,500.00 that was shifted to Savitski' s bond issue. Had the shift not occurred, the required 3% would not have been met and the bonds could ~r . . . not have been refunded in 1988. 7. Interest rates have come down since these bonds were issued in December 1988. If the bonds had not been refunded in 1988, they could be refunded today at lower rates than the City is currently paying. However, I have not calculated the difference in cost that the City may have been able to save by issuing the bonds today instead of 1988. / andt.P'W J. ~aCArihU-r Michael C. (.,'(Juri StatZ/e.v A. Rlli,i'otl, . . William. S. RadzwiJl RAJ>ZWIU LA W OFFICE AU(lf"tUlY./j at Lilli' l~dJ.:ewOM P1'oft!S~'i(J'1tI1 Build/liS 7()5 Ccmtrul AvemUf: Etf"t P. 0, /Jo.'t 309 Sallll Midmel, Mimlt's"ul. /;.5$76 (On) 497. 19.1() (612) 497-Z.599 (FAX) Mei J. Dallmml, AdmflJ. A,v,vi:dlJllt J0I111 [)p.T.IlwuJ"i!l1U, Fillallcial A"a~y.fl K,.i,\'ll"a DcLculfUlrKllu, Ar.f.YIufIls RC'l:iml1lr: DOlllla .J, N!i.u.\'OIl, Recepricl/Il.c;tlClel'k May 28, 1992 CONFIDENTIAL A1DC'rt.vi 11 & City Counn; 1. Alh~rtville City Hall 5964 Main Ave. N.E. ^lbertville, MN 55301 Dear Councilmembers: In regard to the clo$ed council meetings that have baan held 1n A1berLville ~o discu~~ ul~imo the city may hQVC againat third parti es , it is our position t.hat the cloYt.2d meetings called to cHscus::; l:l t.igation strategy Qna rn/;lt.ters that would affect. t.hC! liti9a~ion of those claims were proper. with reference ~o tho Juran & Moody matter, thA Cnuncil, upon advice trom our orrice, authorized the filing of a lawsuit against Juran & MUlJuy. After further facts had beoome claar, the council i:igr~~u that litigation ::;hould not be pursued at this time, but t.hat negotiCltluus should be undertaken with .1uran & Moody as to settl~ment of the dispuL~. Speoificc of the City's strengths and weaKnesses in litigation ClflU in negotiation.s were disoussed, as were settlement ot'ff:t,t"::; made by Juran IX Moody. All of these discussions involved sensitive iosu~s coming within the seope of tho attorney-olient privilege. In a $imilar fashion, tho Counoil has met to disouss 'what.her to pursue the League ot Mlnuesota cities Insurance Trust, Wo~tern surety company (fidelIty 1:Juud) or fOl..mer City ~mployoeo,or any combination of the three, in litigation regarding damages'suffered by the City due to errors and/or omissions made at City Hall from 1985 through the early part of 1991. Specifically discussed at these meetings were the po~~iLle recoveries the city could expect, the potential defenses that could b~ asserted against the city in litigation as well as an assessment of the strength of these defenses, and the amount of money the ClLy may be willing to spend on such litigation. Th~~!:;!::; discussions also involved ocnoitive issues coming within the I::icope of the att.orney-client privilege. . . . From RADZWILL LAW OFFICE PHONE No. 612 497 2599 Ma~.29 1992 3:11AM P03 Albertville City Council May 28, 1992 Page Two In both o~occ, the closQd-meeting discl.1~R ; on~ dealt with specifics that, if dealt with publicly, would severely prejudioe the City in litigation and negotiations Qgaino~ a third party on thrl.u,;iE:! mattera. With regQrd to both matters, we feel our advice t.o close the meetiI19~ and the Council's actions in closing thE! meetings were pl.-oper and neceasnry undor the attorney-cli"l'1t prlvll~ye exception to the open moeting law undQr Minne~ota statute~ and case law. We believe Uldl tho city of Albertville could not hava e:Ctectively addressed the atrcngthe: and weaknQs5ttil5;t concerning litig~Llui1 or the City's claims in these matter~ had the meetings be~n u!J~nly hE!ld .whoro part:i es with whom the cit.y waR neguLidtin9 (Jul.-an & Moody and t.he r~Gaguc of Minnesota Cit.i.es In~uL'GlJl(.:~ Trust) would have access to tho Ci t.y' s negotiating and trial strategies. I have discussed this mattar with Mike Gallagher of the state (,)1 Minnesota Attorney General'a Office. He ia in agreement t.hat, under Minnesota case law und statutory law, the matters diliJcussad at the clo:;)E:!l.l meetings we:l:e proper matters in which to Cllose a meeting under t.he attorney-client. privilege. He is aleo in agreement that minutes of the closed meetings should be published when the need tor confidenti<:lllty no longe1.- exists. That t.ime would occur aft..e.!:" Lht:! city has seetled a matter or ilfter tho cit.y hac chocen not to pursuQ a matter furth~r. If you have any questions re9arding these matt.ers, p] Aa~A teel free to contact me. sincerely, ~ r:~, Michael C. Couri RAD~WILL LAW OFFICE . . . July 20, 1992 - 6:30 PM PRESENT: Mayor Jim Walsh, Councilmen Donatus Vetsch, Mike Potter, Duane Berning, and Mark Barthel, City Attorney Mike Couri, City Clerk Linda Houghton Mayor Walsh called the closed meeting to order. The purpose of the meeting is to discuss the course the City should take to determine whether to attempt to recover monetary compensation from Juran & Moody and/or the previous administrator. The Council agreed not to proceed with legal action against the previous administrator based on the fact that the records of the Ci ty for the time period are incompl ete, making proof of liability on the part of the previous administrator very difficult and expensive. Mayor Walsh, City Clerk Linda Houghton, and City Attorney Mike Couri met earlier with steve Mattson to discuss settlement issues. Ma t tson said he woul d go to J &M' s Board of Di rectors and woul d contact us wi th a set t 1 ement offer. Couri reported that steve Mattson of J&M has made the City an offer of settlement in the amount of $3,800. J&M's basic premise, according to Couri, is that the City can settle on their terms or take the case to court. Couri cannot recommend the City going to court from a financial standpoint. The Counci I directed Couri to contact J&M to accept the settlement offer and to have them draft a legal release for $3,800. The Council will release information regarding the closed meetings at the second regular Council meeting in August if the settlement has been completed. Upon completion of the settlement, the City Council concurs that the City of Albertville will sever all ties with Juran & Moody, Inc. Barthel made a motion that upon reviewing all evidence presented and attempts to negotiate with J&M, the City of Albertville will accept the offer of $3,800 from Juran & Moody, Inc. Pot ter seconded the motion. All voted aye. C 0 u n c i I man Berning asked the minutes to reflect that the Council did not have as strong evidence of damage as they at first believed. Based on Couri's recommendation at the May 18, 1992, closed meeting, the Council agreed not to proceed with action against the previous administrator. Vetsch made a motion to adjourn the closed meeting at 7:05 PM. Barthel seconded the motion. All voted aye. /","",i ( /