The School Committee 5-0 voted Thursday night to request that the Board of Selectmen call a Special Town Meeting in order to fund a $6 million settlement with TLT Construction Corporation which would end litigation over work done as part of the 2004 Reading Memorial High School building project. The settlement would end a nine-year legal battle over payment for work done as part of RHMS’ renovations.
At the Special Town Meeting would the town’s case would be reviewed, including a full timeline of the last nine years. The settlement process will be outlined and a funding vote will be requested. The Selectmen agreed to call for the Special Town Meeting, but a formal vote will wait until the Board’s October 25 meeting in order to allow the vote to be properly advertised. If the Selectmen vote to hold a Special Town meeting it will be one of two held in November.
The vote followed a two-hour, closed joint executive session held been the Board of Selectmen and the School Committee at the superintendent’s office. Upon returning to public session, School Committee Chair Jeanne Borawski read a prepared statement on behalf of the Committee explaining their position in favor of the settlement before taking the vote.
Borawski’s statement revealed that the town’s case, which in 2013 had been sent to a Special Master by Middlesex Superior Court in lieu of a trial, had as of a September 2016 ruling resulted in approximately $3 million in compensation for TLT. Borawski explained that waiting for a final ruling rather than settling would have pushed the compensation due TLT to nearly $7 million because of annual interest mandated by state law.
“On account of the volume of material to be reviewed, a Superior Court judgment would not be expected until sometime well into 2017. By Massachusetts statute, a court judgment is subject to 12% annual interest, and interest would apply from the date the complaint was filed in November, 2007,” said Borawski. “As a result, the amount of the judgment would now more than double. If the final court judgment were issued in late 2017, it is expected that the total amount could be close to $7 million in TLTs favor.”
The session was attended by all members of both committees as well as Town Manager Robert W. LeLachuer, Superintendent Dr. John Doherty, School Director of Finance Gail Dowd, and Raymond Miyares, town counsel.
The full statement released by the School Committee follows below:
School Committee votes to request that Board of Selectmen call for Special Town Meeting to address High School Construction Litigation
Tentative settlement to be reviewed between Town of Reading and TLT Construction at a joint meeting of the Reading Board of Selectmen and School Committee. The Reading School Committee voted to request that the Board of Selectmen vote to call a Special Town Meeting during November Town Meeting to address the High School construction litigation with TLT Construction Corporation that began in 2007. The Board of Selectmen will vote on this request at their next meeting on October 25th. At the Special Town Meeting, the timeline of events over the last decade will be reviewed, a funding vote will be requested, and the settlement process will be outlined in order to ensure that no funds from operating budgets will be impacted.
The Reading Memorial High School construction project began in 2004, and TLT Construction Corporation was the general contractor for the project. In the fall of 2007, TLT filed a lawsuit in Middlesex Superior Court against the Town of Reading, claiming that the Town owed additional money for work performed under the contract. In response, the Town filed a counterclaim, alleging that TLT did not complete the contract work on time and that the Town had to correct various parts of the project work TLT did perform.
In 2013, after several years of the litigation, discovery process and attempts at reaching a settlement with TLT, the court referred the case to a Special Master, a retired judge, who conducted a hearing process in lieu of a trial in the Superior Court. The hearings began in December of 2013 and concluded in March of 2015. Closing arguments were presented in July of 2015.
Since that time, the Master has been preparing and issuing to the parties draft decisions on the various issues that make up the matters in dispute. These issues included payment to TLT for asbestos abatement work, the Town’s replacement of the outdoor track, compensation to TLT for additional work outside the scope of the contract, correction of site work, and liquidated damages for failure to complete the work on time. The first draft ruling was issued in January of 2016, and the most recent ruling, which left only a small portion of the claims still to be decided, was issued in September of 2016. The net result of the rulings to date is approximately 3 million dollars, in TLT’s favor.
If the process continued, each party would have the opportunity to respond to the draft rulings with proposed revisions, and the Special Master would then prepare a final report to the Superior Court. Under the applicable legal procedure, the court would review the Master’s final report and may adopt it, reject it in whole or in part, or send it back to the Master with instructions for additional action. Ultimately, the Superior Court would enter a judgement in the case, whether on its first receipt of the Special Master’s report or after such additional action by the Master as it may order. On account of the volume of material to be reviewed, a Superior Court judgment would not be expected until sometime well into 2017. By Massachusetts statute, a court judgment is subject to 12% annual interest, and interest would apply from the date the complaint was filed in November, 2007.
As a result, the amount of the judgment would now more than double. If the final court judgment were issued in late 2017, it is expected that the total amount could be close to $7,000,000 in TLTs favor.
Given these circumstances, the School Committee and TLT have reached a tentative settlement agreement in the amount of $6 million, subject to Town Meeting approval. If approved by Town Meeting, the settlement would be paid through three sources of funding: remaining funds from the RMHS building project (approximately $800,000), certified free cash, and borrowing-with the debt being paid off over a period of several years. No operating budget funds would be utilized, and the result of the override election will not have an impact on the funding sources for the settlement. It should also be noted that the override vote scheduled for October 18th is to support the operating budgets for the town and schools, and has no real impact on the capital plan. The override was not required because of this legal settlement.
As a result of the settlement, it is expected that capital projects currently on the 10-year capital plan (i.e. roof replacements, field replacements, and capital equipment) would be pushed out additional years into the future in order to disperse the impact. Town officials are also exploring the possibility of additional MSBA reimbursement funding for the High School project. As several people have understandably inquired, town and school officials want to also clarify and emphasize again that this issue is not related in any way to the need for an override ballot question. Even if the litigation had been resolved years ago, an operational override would be necessary at this time to sustain current services of the town and schools-and to address the structural deficit in the operating budgets that has been developing over the last several years. Revenue from an override would successfully address these identified deficits. Although litigation has taken years, it was a process that legal counsel at the time believed was the best course of action. After almost a decade-long process, however, the School Committee supports moving forward on a settlement in order to bring the litigation process to a necessary close and to best position our Town and schools for the future.
