Council rankled by ongoing overrun dispute

Forest Lake City Council members told staff they preferred a speedy resolution to the Daniel DePonti Airport’s paving project cost overrun situation as frustrations continued to mount with the engineering firm responsible for the disparity.

The council discussed the issue at a special Feb. 6 work session, which was attended by members of Dresel Contracting, a Chisago City-based firm that contracted with the city to perform excavation work last fall during the paving of the airport runway. As the project was nearing completion, the city was told by SEH, the engineering firm that designed the runway for the city, that an error in its estimation of how much fill would be needed to replace topsoil at the site had led to an overrun that would add hundreds of thousands of dollars to the project – 90 percent of which is likely to be paid by the Minnesota Department of Transportation Aeronautics once its budget rolls over in July. However, SEH and Dresel haven’t been able to agree on how big the change order should be; City Administrator Aaron Parrish said both firms’ levels of how much they believe Dresel is owed have fluctuated over time, with the closest the two groups have gotten being in the mid-$900,000 range for Dresel and the mid-$700,000 range for SEH. Until a change order can be approved, Dresel is out the money owed to it above and beyond its initial contract; if the parties can’t come to an agreement, Parrish said, the city may be forced to rack up legal fees to resolve the situation.

Though Parrish stated his belief that Dresel should provide more justification for its cost amounts and Freer said the amount of money the company was allotting for overtime seemed too high, in general the council was eager to come to an agreement that would get Dresel paid. More than $700,000 was allocated to the airport fund this year, as the city anticipated that it may need to front the money to Dresel until MnDOT chips in with its reimbursement this summer, and Councilman Sam Husnik, who is also on the Airport Commission, suggested using the funds to help pay down what’s owed to the contractor.

“I don’t think we should make them wait week after week,” he said.

The council members were unanimous in wanting to get Dresel what is owed to it, but some were also wary of taking any action that could provide a loophole to SEH, which has verbally agreed to pay for the local share of cost overrun, according to Parrish. The council’s friction with SEH on the project dates back to its earliest stages in late 2015 and early 2016, when the firm’s initial project development failed to take into account additional project costs that weren’t included in their original report. Councilman Michael Freer shook his head in frustration after learning that no one from SEH had come to the work session, even stating his suspicion that the overrun may have been intentionally hidden from the council so that the project could be completed and SEH could be paid.

“This project would have never gone forward if this had been part of the pricing,” he said. When the project was approved in 2015, it was with the condition that it would not cost more than $3 million – a local share of $300,000.

Councilman Mara Bain said she didn’t want the city to make a payment that could be seen as a settlement while SEH wasn’t assured of making payment, while Mayor Ben Winnick said he wanted to make sure council actions didn’t let SEH “off the hook.”

“I don’t want to do anything that gives SEH any kind of wiggle room on this,” he said.

According to Parrish, SEH wants further justification for Dresel’s overtime claims and a few other cost items listed in the change order, but owner Jeremy Dresel said that he’s already fulfilled SEH’s requests for information multiple times. Each time, he said, he’s been either met with a different request or the statement that despite his documentation, the engineering firm just doesn’t believe them.

“We’re willing to give them any information they want,” he said. “But what do they want?”

Dresel apologized for feeling that he needed to bring the issue to the council, but he said that SEH has barely been communicative with the contractor since news of the overrun broke. After council queries to the timeline of the overrun, Dresel said his firm notified SEH immediately when the overrun was discovered a few weeks into the process, adding that updates were provided as the firm continued to work (he said that SEH told his business to just keep working). Meanwhile, said Parrish, the city was informed that there was an issue with a lack of fill dirt but was never informed of the magnitude or with any suggestion that costs would exceed the project’s contingency cost.

“We were not fully made aware of the scope of the situation,” he said.

After hearing council feedback, Parrish said he would work to finalize a payment agreement with SEH that would elucidate the firm’s responsibilities for paying for the local cost overrun. He also hoped to continue to facilitate discussions between SEH and Dresel so the firms could meet in the middle about the overrun cost. Freer and Husnik encouraged Parrish to push for a deal to be done by or earlier than Feb. 21, the date of the council’s next work session, while some council members mulled the idea of legal recourse against SEH should it continue to draw out the process.

“We’ve got to very soon (decide), either they’re willing to work with us, or we’re going to have to go after them,” Winnick said.

In other airport news, the council approved an updated version of the airport’s new land lease, known colloquially as Version 3.0, during the body’s Jan. 23 meeting. The new lease will only effect new lessees; current lessees’ leases will remain the same. The approval followed a vote of disapproval of the lease earlier in the month by the Forest Lake Airport Commission. Husnik, who is also a commission member, was the lone council vote against the new lease; he said there was no problem with the original lease that needed fixing.

The leases are on land where lessees can build their own hangars. The new lease contains updated language in a few sections, including portions that discuss the need for the primary use of the hangar to be for aircraft and a provision that doesn’t restrict the city as much on when it can consider rent increases.

The lease has appeared before the council multiple times in the past few months. Some council members have voiced their displeasure that the lease has been a recurring discussion topic when the majority of the council has considered the lease a settled issue, while Husnik said that the city has been ignoring the perspective and expertise of the commission members.

  • Jesse Lee

    A fine example of how private businesses continue to practically steal money from taxpayers on any project performed for the government. And then everyone wants to turn a blind eye to this extortion and blames their govt leaders for all this supposed waste of tax money instead of shaming businesses for their actions. Round and round we go…