Fort Smith Board changes insurance on $300 million in assets, critical of utility director

The Fort Smith Board of Directors voted to drop Travelers Insurance for municipal property and vehicle coverage on $300 million of assets Tuesday night (Feb. 16), opting instead to enter into an agreement with the Arkansas Municipal League (AML) against the judgment of insurance broker Brown Hiller Clark (BHC).

The decision came after several months of wrangling, and is expected to save the city approximately $200,000 in premiums at what BHC believes to be a higher personal risk.

Also Tuesday, City Directors set a special meeting to move forward on selecting finalists for the City Administrator position; took Utilities Director Steve Parke to task for “springing” an $8.6 million contract on them for last-minute approval; and approved termination of a construction contract with Dixon Construction, Inc., for unfinished work on the Greg Smith Riverwalk that could end up in litigation.

AML vs. BHC
The Arkansas Municipal League won approval for its proposal after several months of back-and-forth between it and Brown Hiller Clark, the city’s broker of record.

Scott Clark, BHC’s executive vice-president, told City Directors that the recently drafted memorandum of understanding between the city and AML, which addressed many of the city’s concerns over “ambiguities” in AML’s coverage, “alters the original agreement,” and, as such, does not apply to reinsurance companies, which would be responsible for major losses that go beyond the $100,000 scope of an AML claim.

AML Executive Director Don Zimmerman presented the Board with new contract language from reinsurance company Alliant that assured replacement cost value on buildings and vehicles versus the actual cash value of the original language. This assurance was at the heart of Clark’s objections, and ended up being enough to secure confidence from five of the City Directors. In the end, Keith Lau and George Catsavis were the only Directors to vote against the measure.

Lau and Catsavis shared the concerns of attorney Bob Honea and insurance professional/former City Director Phillip Merry, who spoke out against the AML proposal. Honea and Merry said the AML is not regulated by the Arkansas State Insurance Department, and that could put the city at a higher risk than the estimated $200,000 it would save on annual premiums.

Zimmerman told Directors he believed the savings would go beyond reduced premiums when factoring in the AML’s $5,000 deductibles versus the $25,000 price tag from Travelers.

The new contract will run from March 1, 2016, through the end of February 2017.

$8.6 MILLION IN 3 DAYS
City Utilities Director Steve Parke was reprimanded by Directors Tuesday for sending an $8.6 million proposal from Texas-based CDM Smith for implementation of the Program Management Information System (PMIS) in relation to the city’s $480 million consent decree for violations of the federal Clean Water Act.

Directors Kevin Settle and Tracy Pennartz did not speak out against the document, but Settle had an issue with a 21-page proposal of such a hefty price tag being given to him and fellow Board members with only “three days to decide.”

Pennartz went a little further with her criticisms, telling Parke she was concerned that he would pass the proposal through “without consulting our own internal IT department.”

“I guess what bothers me about that is that our IT department is like our internal experts. They’re our internal expertise on issues of the computer system, our server, and so forth,” Pennartz said. “I’m a little bit flabbergasted they wouldn’t have been more involved in this process, and you’re asking us to approve an $8.6 million contract without their approval.”

Lau called it “a great example of how we have certain departments that operate as their own kind of private island without consulting other departments” within city government.

When Pennartz asked if she was “right to be concerned” about it, Russell Gibson, the city’s IT Director, said that “Typically there would be some involvement from the outset, if nothing else as a courtesy to the department because eventually these systems will integrate.”

The Board voted to pull the item from the consent agenda and table it until the March 1 regular meeting.

CONTRACT TERMINATED
Morlin Dixon of Dixon Construction, Inc., lost his bid to finish the final portion of the Greg Smith Riverwalk after completing approximately 91% of the project. Weather delays were blamed for his being 57 days past due.

While Bobby Aldridge of Frontier Engineering acknowledged that there had been some weather delays that resulted in change orders rightfully delaying completion, he advised the city that Dixon’s subcontractors had pushed forward with certain work not according to an approved plan and that much of the work was unsatisfactory, or as Aldridge put it “a bunch of little things that added up to a big thing.”

Dixon was in attendance Tuesday night after being terminated from the job on Feb. 9 via letter from Doug Reinert, the city’s Director of Parks and Recreation. Not only did Dixon and his attorney, Matt Ketcham, argue that he should be allowed to finish the job, but they also asserted the city “should pay” for approximately $45,000 in rework that Dixon had to perform for lost seeding and topsoil as a result of flooding that occurred in December.

Neither the city nor Dixon were insured for the damages.

In the end, Settle, who is also an engineering manager at Exide Technologies, reminded Dixon that the project stemmed from a $1 million grant from the Walton Family Foundation, and that he “would have done everything I could have to finish this project.”

“It’s gone too far. Now we should let the courts handle it,” he added.

Ketcham and Dixon did not indicate if that would be their next step. As for the city, it should move into a “settlement agreement concluding the Contract at the current state of performance and that the City complete the work through necessary contracts or use of its own forces,” according to Reinert’s letter of termination.

The city has proposed paying Dixon for May water damage and the re-surveying of the trail in an amount totaling $15,385.28. The city would also pay for approximately $4,000 for the replacement of trees lost in the December flooding.

CITY ADMINISTRATOR MEETING SET
Finally, the Board agreed to set a special meeting date for Thursday (Feb. 18) to determine finalists for the city administrator position that has remained open since Ray Gosack abruptly left the post in June 2015.

Deputy City Administrator Jeff Dingman stepped into the interim position immediately following Gosack’s departure and is one of nine candidates that the Board will be considering.

The meeting, which begins at 6:30 p.m. from the Riverfront West Building and is open to the public, will consist of an executive session in which City Directors will narrow down the applicants to their final three candidates. Names will be announced in a public session to follow. The Board will then hold a series of evening meetings on Monday, Feb. 29; Thursday, March 3; and Monday, March 7 to consider each of the candidates.

On March 8, the Board will announce its final decision. Exact times for each of the meetings will be locked down after the Feb. 18 date.