Arroyo protests setting aside $4 million in 2021 Fiscal Year budget for potential attorneys’ fees in years-long Lift Station 87 litigation

Other four commissioners vote to approve budget amendment

Erik ‘E’ Arroyo. Image from his campaign website

During his very first meeting as a Sarasota city commissioner, Vice Mayor Erik “E” Arroyo questioned a $4-million carryover from the 2020 fiscal year budget to the 2021 fiscal year budget.

Ultimately, he voted against it, calling the use of the funds “completely speculative.”

The money, Finance Director Kelly Strickland and City Attorney Robert Fournier explained, was reserved in the event the city needs it to pay attorneys’ fees in its long-running litigation with AECOM Technical Services Inc. That case involves Lift Station 87. In September 2009, AECOM USA assumed the original city contract for construction of that facility.

Later, representatives of an engineering firm the city hired in 2013 determined that the design for microtunneling to extend a pipeline under Hudson Bayou could have damaged or destroyed the Osprey Avenue bridge over that body of water.

During the Nov. 16 discussion, Arroyo asked that the budget item be pulled from Consent Agenda 2 of routine business matters. “I’d like to talk to staff,” he said, because of concern that the amendment would increase the 2021 fiscal year budget.

In addition to the potential attorneys’ fees, the amendment included $156,051 for five other expenses.

“This is really a housekeeping issue,” Strickland explained to Arroyo. Typically, she said, staff will put such an item on the commission’s agenda early in the new fiscal year, which begins on Oct. 1.

The funds were expected to be spent in the previous fiscal year, she continued. Since they were not, staff asked that they be carried over to the new budget.

Strickland acknowledged that the $4 million in potential attorneys’ fees was “rather unusual.”

Then she asked Fournier to provide a fuller explanation.

As a result of the dispute over design flaws with the original Lift Station 87 project, Fournier said, the city filed suit against AECOM, and AECOM countersued. The 12th Judicial Circuit Court denied attorneys’ fees to both parties, he continued. Therefore, AECOM filed an appeal with the Florida Second District Court of Appeal, so the city has to defend that, he added.

Oral arguments are coming up soon, Fournier pointed out.

(The court’s online docket says those arguments have been scheduled for the 9:30 a.m. session on Tuesday, Dec. 8.)

“If that goes the way we hope it will,” Fournier continued, “we won’t be spending the money, but it was put aside …”

“Is this increasing the budget by $4.16 million?” Arroyo asked Strickland.

Kelly Strickland responds to questions during the Nov. 16 meeting. News Leader image

Yes, she replied.

Yet, the $4 million “is speculative at best, right?” Arroyo asked.

“Exactly,” she told him.

“What else could we use these funds for if not [attorneys’ fees in the AECOM case]?” he asked.

“It’s restricted to water and sewer [expenses],” Strickland told him.

Then Deputy City Manager Marlon Brown explained that the $4 million could be used only for purchases related to the city’s water and sewer programs. The money could not be transferred into the General Fund, he added.

The General Fund, which largely is made up of property tax revenue, covers operations of many city departments, including the Sarasota Police Department.

Arroyo told Strickland that it appeared the remaining $156,051 in the budget amendment already had been spent.

She repeated her earlier comment: that the money was expected to be spent during the 2020 fiscal year, but it was not.

“We may have started a project or a program and not completed [it] by the end of the fiscal year,” Brown said.

Among the other expenses are $20,578 for sidewalk cleaning, $50,000 for software for the Solid Waste Management Division and $55,700 for a “Grease Reel System and multiple small tools” for the Vehicle and Equipment Maintenance Repair Fund, the document shows.

This is material provided by city staff regarding part of the remaining $156,051 in the budget amendment. Image courtesy City of Sarasota

(Graco, which is one company The Sarasota News Leader found online that sells grease reel systems, says those are “heavy-duty hose reels [designed] to handle common shop fluids: lubricating grease, petroleum- and synthetic-based oils, hydraulic fluids, transmission fluids, gear oils” and others.)

Following Arroyo’s exchanges with staff, Mayor Hagen Brody asked for a motion. Commissioner Jen Ahearn-Koch made it, calling for approval of the budget amendment.

Commissioner Liz Alpert seconded it, reiterating Strickland’s point that “this is a housekeeping item. … [It] doesn’t really increase the budget.”

This is the breakdown of the items included in the budget amendment. Image courtesy City of Sarasota

“This is, by definition, fiscal irresponsibility,” Arroyo stressed. “I think we should approve the concrete $156,051 and leave the $4 million for a later date.”

“I know it’s speculative,” Brody responded, “but it’s restricted money. It’s coming out of the Water and Sewer Management Fund. I know what staff is trying to do with this,” Brody added, “so I’m going to support it.”

“It would be fiscally irresponsible not to put aside money that may be needed for this lawsuit that has been ongoing,” Alpert pointed out. “I think it would be terribly wrong not to make sure we have the money ready to go for that. If we don’t use it, then we get to decide how it’s reallocated.”

Ahearn-Koch concurred with Alpert. “It’s better to prepare for that than to be behind the eight ball and not prepare for it,” Ahearn-Koch said.

When Arroyo started to speak again, Brody told him, “Hold on a minute. You spoke to the motion twice. Let’s just take a vote.”

With Commissioner Kyle Scott Battie also supporting the motion, it passed 4-1, with Arroyo in the minority.