At about the time the Riverbank Skate Park was opened, in June 2004, the City of Riverbank began a more than decade-long court battle with its contractor. Eleven years later, the city has lost and now owes more than $600,000 as the result of the final judgement.
Over the years, information about the action has only shown up on the council agenda under the ‘Closed Session’ heading. As litigation or negotiation, discussion of the legal matter was deemed confidential, since it involved strategic decisions.
In September, the council agenda showed a resolution requesting time to pay off the judgement, amounting to $622,857.16.
The staff report accompanying the resolution reviewed the action in Barham Construction Inc. vs. City of Riverbank in Stanislaus Superior Court.
The report indicated that the city hired contractor Barham to build the Skate Park, but became “very dissatisfied with the performance of the contractor.” It cited delays associated with correcting construction defects. The city pursued legal action in June 2004, the same month the facility opened.
The report continued, “Over the course of the last eleven years, the case has taken many unexpected and surprising turns, leading to an adverse judgment against the City.”
According to the report, state law allows the city to make payments of a large settlement over time if paying it in full would result in an undue hardship. The city says its current level of revenues for the General Fund for Fiscal Year 2015-16 will require massive layoffs of personnel, with a resultant negative impact to city services, to pay the settlement all at once. To budget for payment of the judgement in its entirety during the next fiscal year would result in an undue hardship for the city.
The resolution was passed by the council, 5-0, on Sept. 22, 2015. It describes the financial history of the city budget over the years, along with the specific uses for the various fund categories the city uses in its budget process. Also, it points out the legal restrictions on those various funds, pointing out the settlement can only be paid out of the General Fund. The document also points out that the year’s projected budget already shows a deficit of $222,000, before paying any judgement.
The document explains to the judge about Riverbank’s difficulties with declining revenues since 2008. At that time, the city was forced to lay off six employees, in addition to leaving four city positions vacant.
Also, it cites the impact declining revenue has had on the funding that pays for the contract with the Stanislaus County Sheriff’s Department for Police Services here.
The resolution concludes with a finding that: “Because the inability to provide services at the level currently being provided will result in an undue hardship for the citizens of the City of Riverbank, the Council finds and determines that it is necessary to pay the judgment in installments over a 10-year period with equal installments of principal and interest (accruing at 7 percent per annum) on the unpaid amount.
City Manager Jill Anderson said the city is waiting to hear from the court whether the judge will accept the proposal.
Back in 2004, when undertaking the legal action, the council at the time also established a fund to cover a potential adverse ruling in court. Anderson said that, over the years, legal costs have consumed the money set aside.