The Town of Marana has agreed to pay a bonding company $625,000 to settle a dispute over the Honea Heights subdivision sanitary sewer project.
United Fire Casualty Company sought $1.39 million to cover additional costs it incurred on a project to link approximately 180 homes to a sanitary sewer system in the 30-year-old subdivision off Moore Road near Sandario Road. The homes remain on septic systems, pending final hook-up to sewer lines.
Marana said "we didn't owe anything," said Cedric Hay, an assistant town attorney.
Motions for summary judgment were denied, the cost of litigation loomed, so Marana and United Fire Casualty looked into settlement. "We ended up at $625,000," Hay said, and the Marana Town Council agreed to the settlement at its meeting last Tuesday.
At the Dec. 1 council meeting, the governing board is being asked to approve two payments; one, of $250,000, to be paid within 30 days of settlement approval; the other, of $375,000, to be paid in July 2010, when Marana has entered a new fiscal year.
"Budget-wise, that will enable us to spread those costs a little bit," Hay said. "Two payments were part of the mediation."
The dispute "came about as a byproduct of the town trying to get the people of Honea Heights hooked up to the sewer," Hay explained.
Initially, Marana received a $900,000 federal rural development grant through Pima County to move the neighborhood from septic systems to a gravity sanitary sewer treatment system. Through an intergovernmental agreement between the town and county, Marana would pay "anything above and beyond to get the people of Honea Heights connected," and Marana assumed responsibility for the project.
Contractor Grimm Construction was hired to install some 13,000 linear feet of sewer lines and manhole structures. Its eventual contract was $1.36 million.
Grimm started the work in September 2005. But it ran into difficulty with soils on the site. Stability and compaction weaknesses within the existing soils required that material be hauled in, which "really drove up the costs," Hay said.
In August 2006, Grimm defaulted on the contract. "The driving factor causing the default was the tremendous financial strain that Grimm was working under due to the fact that the native soils were not suitable for use as backfill," despite assertions otherwise, according to United Fire's legal filing. The company asked for an additional $440,763, which was denied.
United Fire Casualty Company, which provided surety, "stepped into the shoes of Grimm" and elected to complete the project, Hay said. United Fire hired Sage Associates to investigate the project, and then retained Highland Engineering to finish the work. Highland encountered the same soils problems, which "fundamentally and drastically changed the scope of the work," United Fire claimed. It incurred additional costs of $1.39 million, which it wanted paid because soils were not properly characterized.
"They expended more than they had planned on," Hay said. "So they filed the suit."
Hooking up homes in Honea Heights remains unfinished, Hay said.
"It's not done," Hay said. A contractor is awaiting notice to proceed with final connections to the sewer system. The original grant provided for 200 connections; Hay estimates there are 180 connections.
"Our primary interest is getting these people connected to the sewer," Hay said. "We're paying everything from here on."