CITY RISKS ANOTHER LAWSUIT WITH DOWNTOWN UTILITY PROJECT

The City of Lubbock and Delbert McDougal will have a press conference tomorrow at the Pioneer Hotel (tentatively renamed Pioneer Condos) to announce the beginning of the construction of the underground utilities relocation for downtown, the Pioneer remodel and plans for a potential downtown movie theatre. According to an e-mail dated 1-20-2012 from former City of Lubbock Chief Financial Officer Andy Burcham, the announcement will serve as a kickoff to publicly celebrate the utility relocation project. A good overview of the downtown redevelopment project is contained in this letter written to AT&T by Rob Allison, former Assistant City Manager, on November 29, 2010.

To summarize the downtown redevelopment project, the City Council entered into a five year contract with McDougal in December 2008 for McDougal to act as the “master developer” of the Downtown Revitalization Action Plan. He receives $30,000 a month, plus expenses, for his services. During the past three years McDougal and the City have adopted a plan for the redevelopment, passed a comprehensive downtown zoning ordinance for the redevelopment and have adopted a three phase plan for relocating the utilities from overhead to underground. The projected time frame for the design and construction to relocate the utilities is ten to fifteen years. Phase one of the utility relocation project will be announced tomorrow and includes a “utility duct system” in which all of the utilities will be moved from their present location and placed in a giant underground duct. The first portion of the duct begins at Ave. Q and runs down Main Street to Ave. O. It runs the length of Ave. O south to 19th Street. It runs the length of Ave. O north to 4th street then proceeds east to Ave. L and then south for one block where it ends. Plans, funding and a timeline for the other two phases of the relocation project have not been released.

The problem with the project is that the City expects each private utility to pay for the cost of relocating its utilities from the present location, whether the utilities are underground or above ground, to the utility duct. The cost of relocating the utilities is substantial and some of the private companies impacted have raised questions about the project. Connie Wharton, a representative of Suddenlink, sent a list of questions about the project to Rob Allison on February 25, 2011. A copy of the questions and his responses is here. The important points raised by Allison’s response relates to the cost of the project and AT&T’s participation. For phase one of the relocation the City has appropriated 7.5 million in funds and has a grant for 1.5 million bringing the city investment to 9 million. AT&T has communicated to the City that it will cost 40 million to relocate its utilities for all of downtown and that the initial phase will cost 1 million. AT&T has refused to participate in paying any of these costs.

According to Allison, representatives of the City have met with AT&T representatives Cameron Monroe (Amarillo), Robb Thetford (marillo), Bob Garza (Richardson) David Nichols (President, Texas) and Joseph Cosgrove (Associate General Council) and have failed to reach an agreement on reimbursement. It appears that AT&T broke off negotiations with the city on April 6, 2011 by e-mail from AT&T representative Robert Digneo in which he states, “We are not in a position to absorb any of the costs of the telecom facility relocation in this project.” In response to the e-mail, Allison threatens to turn the city lawyers loose upon AT&T. After telling Digneo that the city intends to go forward with the project anyway, he says, “It appears this will become an issue with the attorneys. I will notify our Team of your position.” A copy of the e-mail is here.

It now appears that the city has two choices on how to handle AT&T. They can absorb the cost of the relocation which will cost taxpayers 1 million in the first phase and 40 million for the entire project, or they can sue AT&T to force them to reimburse. Neither choice is acceptable. Making taxpayers pay for the AT&T relocation is not an option because it is not fair to Suddenlink, Atmos Energy, NTS and others who have agreed to incur substantial costs for the relocation project for AT&T not to pay its share of the costs. Yet, the last thing the city needs is another lawsuit. At any given meeting of the City Council there are behind the door discussions of numerous lawsuits that never seem to end, including the infamous AAG suit that has been ongoing for almost six years and has consumed more than 3.5 million in taxpayer funds to pay attorneys. Just recently the city was sued for 9 million over the Republic Power Partners failed partnership with High Plains Diversified and lost on appeal of a lawsuit filed by an employee who claimed she was denied a promotion because of retaliation. That suit will cost $500,000 in damages in addition to the attorneys fees incurred to defend the losing effort. Needless to say, the city does not handle litigation well. Nonetheless, the City Council has decided to proceed with the project so taxpayers should gird up for another lawsuit and protracted litigation with a well funded and aggressive opponent. It is a 40 million dollar bet that the city cannot afford to lose, but probably will.