In July, City Manager Jim Wieprecht briefed the Council on the bankruptcy case surrounding W.F. Delauter & Son Inc, the contractor that did work on the water and sewer line replacements on Roberts Mill Road and sewer lines on Fairground Avenue in 2023.
Most of the issues regard the paving work that was done on both roads. MT Laney was subcontracted by Delauter to complete the paving work, so ultimately Delauter is responsible. On Fairground Avenue the road surface is sinking where the sewer replacement was completed. Thankfully, the sewer line itself is intact and functioning properly.
On Roberts Mill Road the paving issues were discovered shortly after the work was completed. However, with winter coming, the repairs were deferred to the spring when temperatures would allow paving work to resume. Unfortunately, during that delay, Delauter filed for bankruptcy and the paving subcontractor, MT Laney, stopped responding to the City.
City Attorney Jay Gullo gave the City two options for moving forward. The first is likely to be the most successful. It requires the City to seek a claim on the bonds for each project (these are monies that were set aside as a performance bond that ensures the project is finished and a payment bond, which is how the contractor gets paid). The City held back $20,000 to be paid to Delauter to finish up small projects like yard repairs and grass planting but these projects were completed by the Town once Delauter declared bankruptcy and the money became tied up as an asset. However, before the City could get Delauter back to address the paving issues, Delauter claimed bankruptcy. Additionally, MT Laney is claiming they haven’t been paid by Delauter and they want to also make a claim on the bonds, further complicating the issues.
Gullo described the claims against the bonds as similar to an insurance claim; someone similar to an adjuster will review the claim. "They try to make sure that they can pay out the least amount possible, so we have a tough road ahead of us."
The second option is handled in bankruptcy court where the City is one of many on a four-page, three columned list of creditors. "They [Delauter] do not have enough assets to pay all of their bills and while we are listed as a creditor, we are certainly not at the top of receiving it," said Gullo. He said the priority of the bankruptcy court is ensuring Delauter’s assets pay their employees first. The $20,000 is also considered an asset of Delauter's, thus the City may not get to keep it and it is unlikely that it will be enough to fix all that needs to be repaired.
Gullo asked the Council to consider the level at which they wanted to get involved if bankruptcy court is how they choose to proceed. "Getting a bankruptcy expert to review the matter and decide what claims can be filed to give us a priority may be something we can do," he offered. "Although you never get what you’re supposed to get in the end." He did mention that the City would not be able to collect twice, so if awarded monies from the bonds, they would not be able to collect from the bankruptcy case, so the Council would need to decide if paying the bankruptcy experts fees would be worth the expense.
As of October, the City’s engineer, CDM Smith, has made a list of the defects that will be reviewed by the bonding company. Without having the papers in front of him, Wieprecht was unable to give the official number but estimated $60,000 for the paving issues on Roberts Mill and an unknown amount for the sinking of Fairground Avenue.
After an easy discussion, the Council approved to pursue the claim against the bonds.
