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Legal fees growing in town’s sewer bid

Huntertown officials defend amount spent

In its ongoing battle to expand utility services and break ties with Fort Wayne City Utilities, Huntertown paid its attorney more than a quarter of a million dollars in the first five months of this year.

Through May, the town, which has an annual budget of $1.7 million, is spending at a rate many times higher than towns of similar size. It trails slightly behind Allen County government, which has 33 departments and an annual budget of $159 million.

Payments of $304,397 for legal services were approved between Jan. 1 and May 30 by members of the Huntertown Utilities Service Board and the Town Council. Most of it was for utility-related matters including the town’s disputes with Fort Wayne City Utilities and for ongoing litigation with local developers. Just over $238,000 of that was paid to David Hawk, the town’s longtime attorney.

An additional $259,948 in engineering and consulting fees were paid during that same time, also largely related to utilities issues and for a wastewater treatment plant that has yet to be approved by the state.

If Hawk had worked for the town 40 hours a week during those months – which is unlikely since he has a full-time practice and is paid a retainer and for services as needed by Huntertown – he earned $298 an hour. No detailed invoices or a breakdown of the charges were available.

But Hawk said he has spent many hours on Huntertown issues.

Huntertown can’t be compared with other municipalities because others are not fighting for control of their own utilities with a much larger entity, he said.

“The city of Fort Wayne has fought us tooth and nail on all these issues,” Hawk said.

There is no such thing as an average fee for attorneys in northeast Indiana, with rates running from $75 an hour on the low end to $500 on the high end.

“It all depends on the complexity of the case and the expertise and experience of the attorney,” Allen Superior Court Judge Nancy Eshcoff Boyer said.

“I’m speculating, but I would think you would be hard-pressed to find an attorney (in this area) charging less than $125 an hour,” she said

Attorneys who work for Allen County are paid $150 an hour, county Auditor Tera Klutz said.

The county employs numerous attorneys from a dozen different law firms. While some may be paid a salary, all are paid hourly for special issues or litigation, she said.

Other municipalities

McCordsville, a town near Fishers and Carmel, is similar to Huntertown in dynamics with a population of 4,797 to Huntertown’s 4,810, and has an annual budget of about $3.6 million.

McCordsville budgets about $35,000 a year for legal expenses and spent about $23,501 from January through May this year on attorneys, McCordsville Clerk-Treasurer Catherine Gardner said.

The most the town spent for legal fees – $75,860 – was in 2001 during a sewer plant expansion, Gardner said.

Huntertown’s deputy clerk-treasurer, Janine Rudolph, said the town budgeted $21,537 to pay legal expenses this year and has spent $26,640 so far.

When it was pointed out that town records show that $304,397 was paid to attorneys in the first five months of the year, Rudolph said in an email that the money was taken from the water and sewer funds.

This year’s utility budgets – separate from the town’s $1.7 million budget – is $1.9 million for the wastewater utility and $4.4 million for the drinking water facility, Rudolph said.

As of May 30, the balance of the sewer fund was $393,382 and the balance of the water fund was $3.6 million, she said.

A year ago, Huntertown council members were forced to create a new cash reserve fund so they could borrow up to $500,000 from the water utility to cover costs in a nearly depleted sewer budget.

Columbia City, nearly twice the size of Huntertown with a population of 8,750, budgeted $43,000 this year for legal expenses that will cover all departments, including police and fire, parks, streets and roads, communications-911, redevelopment commission and four city utilities, including drinking water, wastewater, electric and stormwater, Mayor Ryan Daniels said.

Churubusco, with a population of 1,796 and an annual budget of $1.3 million, budgeted $12,750 this year for legal fees, which is about what the town usually spends each year, Clerk-Treasurer Madalyn Bartyl said.

During the same five-month span Huntertown spent $304,397, Allen County spent $455,917 on legal expenses, Klutz, the county auditor, said.

Although the county does not budget for legal expenses, it has averaged $923,339 a year for the past five years, she said.

Growth, control

Huntertown and McCordsville have both experienced rapid growth. According to the 2010 census, Huntertown’s population almost tripled during the decade of 2000 to 2010, while McCordsville’s population more than quadrupled.

Like Huntertown, McCordsville is in the midst of a proposed annexation and both are governed by five-member councils.

Huntertown officials have said they want to control their growth and that is not possible while the town is under contract to City Utilities for sewage services, Huntertown Councilman Jim Fortman said.

“The reason we’ve had to spend so much on legal expenses is because City Utilities keeps challenging us,” Fortman said.

Council President Pat Freck agreed.

“We have to spend that money to fight City Utilities,” she said, adding that “Dave Hawk has never asked for a raise since I’ve been on the council.”

Freck said all utility-related expenses, including legal, engineering and consulting are approved by the Huntertown Utilities Board, and the council has little input.

“It’s disheartening to see that kind of money being paid for legal services,” said Andrew Conner, president of the Huntertown Utilities Board. “This legal struggle with Fort Wayne has been draining on our resources; however, I know that to simply give up and allow Fort Wayne to raise our sewage rates and encroach on our service area unopposed would be devastating to Huntertown in the coming years.”

Conner said if the town amortizes the cost of legal fees over 20 years and adds it to the costs of the proposed $14.2 million wastewater treatment plant, it will still end up with a much more cost-effective solution than continuing a wastewater agreement with Fort Wayne.

But City Utilities attorney Tim Pape said the reason for the litigation is Huntertown’s doing.

Huntertown voluntarily exited its contract with City Utilities last year and then sought changes in state law and sued Fort Wayne to take advantage of those changes, Pape said.

When Huntertown decided to exit the contract, it lost its bulk contract rates, which are less than half of regular customer rates, Pape said.

Since that time, although City Utilities bills the town at regular rates for sewage processing, Huntertown reconfigures the invoice and pays only the bulk invoice amount, and now owes $900,000 in retroactive sewer fees, Pape said.

The issue has yet to be decided in an Allen County court.

City Utilities has spent $107,000 during the first five months of the year for legal fees related to Huntertown issues, Pape said. The utility has an annual budget of $159 million and budgeted $416,000 this year for legal expenses, he said.

City Utilities also spent about $110,000 in lobbying expenses this past legislative session, Pape said. The fees were incurred with three law firms on multiple issues, including Huntertown matters, he said.

Hawk is confident Huntertown’s expenses will diminish once the permit for the proposed $14.2 million wastewater plant is approved and construction begins.

“I think we will get a favorable ruling because we will not be degrading the water quality” of Eel River and Geller Ditch, Hawk said.

A first permit application was denied by the Indiana Department of Environmental Management two years ago, and the town appealed that decision. In May, the appeal was dropped and a second permit application with a reconfigured discharge site was submitted and is currently under review by IDEM. In the first eight months after IDEM’s decision in October 2012, Huntertown spent more than a quarter of a million dollars on the appeal.

New projects

Huntertown is constructing a $1.8 million drinking water plant – set to be operational early next year – at Lima and Carroll roads, part of a $4.5 million project to improve the capacity and pressure of the town’s water system.

The town’s contract with City Utilities expired last year, although Fort Wayne continues to treat the town’s wastewater.

Huntertown received a permit last month to build a $4 million equalization basin to store and pretreat wastewater, which is necessary whether the town stays with City Utilities or builds its own plant, officials said.

The town’s annexation, approved Friday, is estimated to add 1,500 people to Huntertown’s population and about $192,000 a year in additional revenue, mostly from county economic development and local option income taxes, according to the town’s fiscal report.

But the town may incur new legal battles, with attorneys representing developers adjacent to the proposed annexation arguing that the fiscal plan does not address the town’s inability to provide water and sewer services to developed and undeveloped areas within the proposed area.

McCordsville’s town manager, Tonya Galbraith, said McCordsville had to build its own wastewater plant in 1988 because of failed wells.

“That started our growth,” she said. “We are on a direct line between Interstate 69 and Interstate 70.”

She agreed with Huntertown’s thinking about owning and operating its own utilities.

“It is nice to have our own wastewater treatment plant because it gives us control over growth,” Galbraith said.

But Dave Garman, a candidate who won the GOP primary for Huntertown Council, is worried that a new wastewater treatment plant may come at too high of a cost and that there seems to be no ceiling on what the town is willing to spend.

“I worry about the amount of dollars (this council) is spending,” Garman said.

“As an incoming council member, what are we going to have left to work with in January when we take office?” Garman said.

“I worry about them borrowing from Peter to pay Paul and wonder what else they are letting go to pay these (legal and consulting) expenses,” he said.

Some street projects have been pared down because of low funding levels. Council members have delayed taking action on Carroll Road east of Lima Road, an area identified as one of three most in need of repair. The other two roads – Woods and Hathaway – are scheduled to be fixed, but available funds will support only a patching job, not a full repaving, said Casey Erwin, an engineer with DLZ who works with the town on multiple projects.

In the meantime, there seems to be no end in sight to the town’s legal issues.

In the last two weeks, developers opposing the annexation of 530 acres between Gump, Dunton and Cedar Canyon roads are gearing up for a fight.

A Huntertown business has filed a tort claim against the town, asking for $132,000 in lost income, wages and damages after wastewater from town pipes flooded the business, and an Eel River resident filed an appeal with the Indiana Department of Environmental Management challenging a permit granted to Huntertown last month to build the $4 million equalization basin to collect, store and pre-treat wastewater.

vsade@jg.net

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