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What is water plant deal really worth?

December 17, 2017 GMT

SAN BENITO — Details continue to slowly emerge following the city’s $9.02 million settlement stemming from a lawsuit against companies involved in the construction of the $17 million water plant.

The city has apparently received $1.87 million in cash and $3.1 million worth of services from Evoqua Water Technologies to be used to bring the water plant back into operation.

However, until late last week, details behind the settlement’s payments, as provided by the city, were unclear.

The settlement stems from a 2014 lawsuit against Evoqua and other companies in which the city argued the water plant opened in 2009 did not properly operate.

Friday, city spokeswoman Martha McClain would not confirm whether the city received $1.87 million in cash, describing that amount as “a net balance of settlement funds.”

“Included was a $4 million cash settlement from Evoqua as well as their agreement to perform certain work to make repairs to the water treatment plant,” McClain stated in a press release.

But those numbers don’t seem to add up.

From the total $9.02 million settlement, attorneys’ fees, expenses and a contingency fund amounted to $4,049,381, calculations show.

That left slightly more than $4.9 million, which appears to include Evoqua’s $3.1 million worth of services and a net balance of $1.87 million.

As part of the settlement, Evoqua agreed to perform $3.1 million in services, including conducting a pilot study, providing test data and installing and commissioning equipment, McClain stated.

Evoqua agreed to help the plant produce six million gallons of water per day, according to a press release.

The company agreed to supply “state-of-the-art upgraded membranes designed to provide the best ultra-filtration available and enable the plant to ultimately produce and deliver 10 (million gallons per day) in the future,” the press release states.

Under the agreement, Evoqua will train employees to operate the water plant, staff a technician or engineer for 12 weeks and organize weekly meetings while visiting the plant to monitor its operation for two years.

Attorneys get rich?

Attorneys’ fees and expenses took about $3.8 million of the total settlement.

A city contract, obtained last week by the Valley Morning Star, shows City Attorney Ricardo Morado’s Brownsville-based law firm of Roerig, Oliveira & Fisher and Arnold & Itkin, a Houston law firm, agreed to take 40 percent of the total settlement amount.

It appears Arnold & Itkin, whose specialties include personal injury claims and product liabilities, served as the lead firm in the case.

Attorneys’ contract

The contract, signed by past Mayor Celeste Sanchez on June 12, 2014, states Roerig, Oliveira & Fisher and Arnold & Itkin agreed to split 50 percent of that amount among themselves.

“The division of attorneys’ fees between the firms does not affect (the city’s) share of the recovery,” the contract states. “It is further understood that if (Arnold & Itkin is unable to recover anything, either by settlement or trial, (the city) shall owe (Arnold & Itkin) nothing as a fee or expense.”

The specifics

The settlement paid $1.29 million to Roerig, Oliveira & Fisher; $1.29 million to Arnold & Itkin of Houston; and $188,219 to Beck Redden & Secrest of Houston.

Expenses totaling $1.05 million included $692,816 for experts and consultants; $65,721 to make about 130,000 copies; $118,718 in travel costs; and $16,662 in interest charged on expenses.

“It is understood and agreed that at (Arnold & Itkin’s) discretion, (Arnold & Itkin) is authorized to secure a loan for the purpose of paying the costs and expenses to prosecute (the city’s) claim,” the contract states. “(The city) hereby agrees that the full amount of the interest charged on such loan will be reimbursed to (Arnold & Itkin) as costs, out of (the city’s) percentage of the settlement proceeds or recovery.”

According to Arnold & Itkin, expenses also included the costs of investigation, private air travel, meals and telephone and fax use.

Non-recoverable expenses are listed as $103,061.

“As part of this power of attorney, (the city) authorizes (Arnold & Itkin) to reimburse the firm for its expenses and fees prior to disbursing money to (the city,” the contract states. “However, (Arnold & Itkin) will not unreasonably withhold disbursement from (the city).”

How we got here

The settlement stems from a lawsuit filed in 2014 in which the city argued the water plant did not properly operate.

After three years in court, the city announced it had reached the settlement in June.

Earlier this month, city commissioners met in closed session with Morado before disclosing the settlement’s disbursements.

At about the time the city filed the lawsuit, commissioners decided to shut down the water plant opened in 2009.

Meanwhile, commissioners launched a $3 million project to renovate the city’s 90-year-old water plant, aiming to turn it into the main water source.

The amount of money the city has pumped into the old plant is unclear.

However, the city’s use of the plant as its primary water source led to problems.

In September 2016 and last January, the old plant temporarily shut down, cutting water service across town.

As part of an agreement, Harlingen provided the city with water used to temporarily serve the city’s homes and businesses.