Tooele Transcript Bulletin – News in Tooele, Utah

August 7, 2014
Pen stroke ends Overlake lawsuit

Tooele City, developers reach out of court settlement that involves cash and water deal  

The 12-year-old legal battle between Tooele City and the developer of Overlake subdivision is over.

The end of the protracted conflict came with the stroke of a pen at 11 a.m. this morning. But this time, not in a courtroom.

The new agreement between both parties will require Tooele City to pay no more than $15.6 million instead of the full $20.7 million that a jury awarded to Overlake’s developers, Tooele Associates and Perry Homes.

The $5.1 million reduction is not a direct savings to the city; water credits given to the developers from the city will be subtracted from the $20.7 million to make up the balance of the payment.

However, Tooele Associates may purchase additional water from the city, which could shave off millions of dollars from the final cash settlement.

After the Tooele City Council approved the out of court settlement by resolution Wednesday night, council members headed to the mayor’s office in City Hall to formally sign the document.

Before noon today, Tooele Associates representatives met in Salt Lake City and added their signatures to the agreement, ending all lawsuits between the city and Overlake developers.

“We believe this settlement will allow our city to move forward and will close a difficult chapter in our history,” said Brad Pratt, Tooele City council chairman. “It addresses the jury’s verdict in a way that minimizes its impact on the citizens of Tooele.”

Tooele City officials are confident that they will be able to meet the financial obligations of the agreement without raising taxes or reducing city services.

“At this time it is not our intent, nor our plan in the future, to raise taxes or cut services as a result of this settlement,” said Tooele City Mayor Patrick Dunlavy.

Tooele City has already cut a check for the initial $2 million payment to Overlake developers using fund balance, or rainy day funds, accumulated in the capital projects fund, according to Dunlavy.

The settlement averts a Sept. 4 Utah Supreme Court appearance during which both parties were scheduled to again pick up the battle in court with oral arguments for an appeal of the $20.7 million final judgment entered by the 3rd District Court.

According to the settlement, while neither party admits fault, liability, or wrongdoing, both parties accept that the total amount of the claim against Tooele City by Tooele Associates, including accumulated interest, to be $21 million.

The developers agreed to credit the city with the value of 1,805-acre-feet of municipal water at $3,750 per acre-foot, for a total of $6.8 million.

The $3,750 per acre-foot value for water was agreed upon by both parties because that is the price Tooele Associates would have paid for water if they had been required to purchase the water back in 2002 before the lawsuit started, according to Dunlavy.

The $13.6 million that remains after subtracting the value of the water rights transfer, and the initial payment, will be paid by the city in nine annual payments of approximately $1.5 million per year. The payments include interest at 2.15 percent annually.

However, the agreement gives the city the option of paying the last two annual payments with additional water rights, in lieu of cash, at $3,750 per acre-foot.

The last two annual payments total $2.8 million, according to the payment schedule included in the agreement.

The agreement also gives the developers the option, until Dec. 31, 2029, to purchase up to an additional 1,495 acre-feet of water rights certificates at $3,750 per acre-foot. If the developers purchase the entire 1,495 acre-feet of water, they will pay Tooele City $5.6 million.

If the city opts to make the last two payments with water rights, and the developers exercise their full option to purchase additional water, the net cash payments to the developers made by Tooele City would be $9.2 million instead of $15.6 million.

The agreement contains language that restricts the water rights that Overlake developers obtain from Tooele City to use in the Overlake subdivision.

“My fear was if we had just paid the developers the $20.7 million that the money would have left our community,” Pratt said. “Now part of our payment, the water rights, will stay in our community and help build the community. Overlake will be developed. We will get more homes and more people, which will increase the economic opportunities in our community.”

The agreement includes other concessions by both parties to settle disputes stemming from the original development agreement for Overlake.

The settlement will allow the development of Overlake to resume and add up to 4,800 homes to Tooele City.

“It has always been our primary objective in this dispute to find a way to develop Overlake,” said Bill Perry of Perry Homes. “We believe that this settlement will allow us now to do so and we believe that both parties will benefit from the future development of the Overlake property.”

Tooele City agreed to accept all current public improvements in Overlake and to complete, at the city’s expense, improvements to 400 West and other curb, gutter and sidewalks in the subdivision.

Tooele City also agreed to promptly review and approve updated plans for the next phase of Overlake and the golf course plat.

“I especially look forward to developing the Overlake golf course community, including an improved entrance and a full service clubhouse,” said Drew Hall, managing partner of Tooele Associates.

Existing zoning, design standards, and amenities will remain in place in Overlake, according to Tooele City Attorney Roger Baker.

“It is important for the existing residents of Overlake to know that the quality of their community will not change,” he said.

The developers agree to pay for a third-party firm to complete inspections of public improvements and to pay all other applicable impact and development fees.

All undeveloped areas, outside of existing subdivisions of Overlake, will be withdrawn from the North Tooele City Special Service District, according to the agreement.

Future disputes between Tooele City and Overlake developers will be resolved by neutral experts. The agreement describes protocol for conflict resolution between the parties.

The origins of Overlake dates back to 1995 when Hall approached Tooele City officials with an idea for a master planned community northwest of the city proper.

Tooele City negotiated a development agreement that was signed in 1997, and the city annexed roughly 2,000 acres of property owned by Tooele Associates and combined it with another parcel nearing 1,000 acres that was already in the city limits. This became the subdivision known as Overlake.

In 2002 Hall filed several lawsuits in 3rd District Court against Tooele City claiming the city had violated the development agreement for Overlake.

Hall alleged that Tooele City misapplied public improvement ordinances; required public improvements in Overlake to meet standards not required of other developers; created an arbitrary punch list of items that needed to be fixed for public improvements to be considered complete; slowed down or refused to make final inspections; and refused to recognize prior admissions that some public improvements were complete.

In 2004 Tooele City filed a countersuit against Tooele Associates for violations of the Overlake development agreement.

The case went to jury trial in 3rd District Court in June 2009.

The jury found that both Tooele City and Tooele Associates violated the development agreement and awarded a net judgment of $20.7 million in damages to Tooele Associates.

In 2010, 3rd District Court Judge Randall Skanchy, who presided over the jury trial, declared a mistrial, citing irreconcilable conflicts in the jury’s verdict.

Hall appealed the mistrial ruling. The Utah Court of Appeals reversed the mistrial ruling in August 2012 and sent the case back to Skanchy for final judgment.

Tooele City asked the Utah Supreme Court to review the Court of Appeals decision to overturn the mistrial ruling in September 2012. Two months later the high court announced it would not review the Court of Appeals’ decision.

In October 2013, prior to entering his final judgment in favor of Tooele Associates for $20.7 million plus post-judgment interest, Skanchy denied several motions filed by Tooele City, including a request to set aside or modify the jury verdict and a request for a new trial.

Tooele City officials announced their intention to appeal the final judgment to the state Supreme Court in December 2013.

Tooele Associates’ attorneys filed a cross-appeal that asked the court to require Tooele City to pay an additional $9.2 million in legal fees and pre-judgment interest.

Both parties were scheduled to make oral arguments before the Supreme Court in September.

“I’ve always said we will do what’s in the best interest of the citizens of Tooele City,” Dunlavy said. “This settlement accomplishes that objective. I am grateful that Mr. Hall and Mr. Perry were willing to continue to negotiate with the city towards this end.” 

Tim Gillie

Staff Writer at Tooele Transcript Bulletin
Tim covers education, Tooele City government, business, real estate, politics and the state Legislature. He became a journalist after a long career as an executive with the Boy Scouts of America. Tim is a native of Washington state and a graduate of Central Washington University.

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