7/23/2008 8:54:00 AM
County votes to terminate FHM contract

Allison Arthur, Leader staff writer

On the same day Fred Hill Material Inc. says it cut a $55,000 check to Jefferson County, commissioners voted to send a pay-up-now letter terminating a contract with FHM and suspending work on an environmental impact statement for a controversial pit-to-pier project.

Interim County Administrator Dennis Richards said yesterday FHM owes the county $55,000 for work done in April and May that the county paid a consultant for, and FHM would owe a total of $98,000 by the end of July.

Commissioners voted unanimously Monday to send FHM a letter that underlines and boldfaces the word "terminate" contained in a section of a contract that allows either party to end the agreement for any reason.

FHM consultant Dan Baskins said Tuesday the letter was "politically motivated" and a "horrendous mistake" that could end up costing taxpayers in the long term should a court agree with FHM. He said the company would be asking the county to remedy its error.

Baskins said a check for $55,000 was cut on Monday and mailed on Tuesday and that it would have been sent last week but wasn't because a company CPA was out on personal leave.

"They're not just going to walk away from this just because we're 15 days late," Baskins said when told initially of the letter Tuesday morning.

Commissioner David Sullivan, D-Cape George, said Tuesday the payment problem with FHM has been ongoing.

"This has gotten to be a chronic problem with Fred Hill Materials not paying their bill. They owe us for April and May and we gave them notice," Sullivan said Tuesday.

Sullivan said he expects to renegotiate a contract with FHM to protect the county in the future from incurring that kind of debt.

"We can't carry that kind of debt from them without any explanation from them," Sullivan said. He suggested an escrow account be set up.

Richards explained that the county has a contract with Geo-Engineers and that the county relies on FHM to reimburse the county once Geo-Engineers does the work.

This is not the first time FHM and the county have been at odds over a contract to do an EIS.

In fact, Baskins gave the county verbal notice a year ago that it would suspend a contract with the county after Sullivan suggested he didn't like the way an environmental consultant was treated and wanted to give Wheeler Consulting Group an opportunity to bid on the EIS contract.

Ultimately, the county ended up agreeing to two contracts for the EIS: One contract is between Jefferson County and FHM. That's the one commissioners voted July 21 to terminate. The other contract is between Jefferson County and Geo-Engineers. That contract was suspended Monday in the same letter signed by Richards and dated July 22.

"Because of these continuing violations of Section V of the contract, Jefferson County hereby invokes the last sentence found in Section VII of the agreement which states "upon 60 days notice either party to this agreement may terminate this agreement for any reason," the letter to FHM CEO Alex J. Hill stated.

Baskins said the company had invested $500,000 into the EIS project since last fall.

Baskins acknowledged that the company has had cash-flow issues this summer, in part because the wet spring weather delayed projects and because contractors it does business with - including the federal government - have been slow to pay.

"We're booked for one of the best years ever," Baskins said.

"This is a politically motivated action by county commissioners. They are acting in bad faith and have created a huge liability to themselves and the county because they have an obligation to process the permit. They are trampling over the civil rights of our corporation," Baskins said.

Sullivan and Phil Johnson, D-Port Townsend, are both up for re-election this year. Both are Democrats who have voiced strong concerns about FHM's pit-to-pier plans.

Baskins also noted that the company had been slow to pay some bills because it had questions it wanted answered before doing so.

"We've actually had to pay for the DCD director's time, and the county is so cash-strapped that we're funding the DCD department to continue to work on the project," Baskins said initially.

DCD Director Al Scalf said Tuesday that it is true that DCD includes his time and time other staff members spend on the company's project. He said he was aware FHM was disputing those charges, which amounted to $3,911 in April and $2,522 in May.

As for FHM not paying in a timely manner, Scalf said, "As tight as our budget is I can't keep extending not paying us that. I'm OK now but come December I can't carry a $100,000 bill from FHM. My budget won't accommodate that."

Baskins said Tuesday afternoon that he had talked to DCD staff and they told him that work on the EIS this summer had been "content rich."

As for Monday's pay-up-now letter, Baskins said the company would "vigorously defend our legal rights." He said the letter would not stop the EIS from moving forward and might even "speed it up."

"It's a horrendous mistake they've made, and we'll have to prove that in court," Baskins said. "You don't sue governments. You ask them to correct their errors," he also said.

Sullivan said FHM has minimized the need for an EIS in the past, and "I think we need to have a real good EIS."