The attorney who noticed an apparent clerical error in a lease agreement the Haines Borough says cost taxpayers more than $125,000 said this week he was surprised it wasn’t remedied when he discovered it 20 years ago.
Attorney Budd Simpson said the Haines Borough could still seek recovery of the funds from several years, at least as far back as the statute of limitations allows. “It’s worth asking for,” Simpson said.
The former attorney for the City of Haines, Simpson wrote the municipality in Aug. 30, 1990 about an “obvious error” in a supplemental lease agreement between the city and Totem Oil seven months earlier, in February 1990. Simpson recommended that Totem be asked to agree to a corrected rate.
The correction, however, apparently never happened. Borough officials say as far as they can tell, the paper trail ends at Simpson’s Aug. 30 memo to former city administrator Walt Wilcox. Wilcox left the job in 1992 and died in 2009. Then-city Mayor Frank Wallace also has died.
Simpson said he couldn’t remember the glitch or the memo, but said Wilcox was typically thorough about such matters.
“Walt was very detail-oriented on things like that. He would get on things and just pester them until they were finished. It would really surprise me if Walt didn’t follow through with that. It’s a small thing to send that letter to Totem and take care of it right then… I wish I could say Walt told me he took care of it, but I can’t remember.”
Former city clerk Susan Johnston also said she had no memory of the apparent mistake, but that it may have gone through the desk of the city treasurer. “Somebody should have caught that. I can’t imagine that getting by someone with a math background.”
Kathy Pierce worked as city treasurer when the contract was approved and when Simpson discovered the apparent error. Pierce, who now operates a summer fishing charter business and works for the school district in Skagway, said she didn’t have any recollection of the Totem contract, or subsequent billing under its terms.
“It really doesn’t ring a bell at all. It was just too long ago,” Pierce said this week.
An error of the magnitude described in the Simpson memo should have prompted changes in the contract, Pierce said. “That definitely should have been presented to the city council in the form of an amendment to that contract.”
According to manager Mark Earnest, the error cost municipal coffers about $125,000 during the final six years of the contract alone. The contract expired in February and currently is being renegotiated with fuel supplier Delta Western, which purchased Totem in the mid-1990s.
Earnest said the error may have been overlooked by staff for years because the tariff – which applies to all liquids transported across municipal docks – is the same amount as the supplemental lease fee cited in the 1990 contract.
The apparent error stemmed from a mistake in describing the amount charged Totem for leasing borough property under its fuel tanks near the Lutak Dock. According to Earnest, the city intended to charge Totem five-tenths of a cent (a half cent) per gallon on the first two million gallons that went through the tanks annually. Instead, lease language set the rate at five one-thousandths of a cent.
The Chilkat Valley News reported the half-cent-per-gallon rate supplemental lease fee in a March 1, 1990 story about the city approving the 20-year lease. The newspaper also reported that the lease rates were subject to review every five years.
Earnest was at a manager’s convention in California this week and couldn’t be reached for questions, including whether the borough would seek at least some recompense as suggested by attorney Simpson, and whether rates were reviewed every five years, as allowed by the contract.
Earnest previously said the borough’s proposal to seek a doubling in the terms of the lease agreement – to one cent per gallon on the first two million gallons – could be viewed partly as compensation for the lost funds. Delta Western was seeking a half-cent rate, according to Earnest.
According to the March 1990 newspaper article, the lease was the longest one the city had negotiated. Previous leases were for a maximum of seven years.
Tom Hall, the president of Totem Oil who signed the lease, said this week he never would have agreed to the fee the borough claims was mistakenly not charged.
“If there was supplemental rent, I don’t have any recollection of it. I was paying base rent and a through-put fee (tariff). If you paid rent for the property on the hill, that’s the rent, and you pay the tariff, you’ve covered it. I don’t think I would have agreed (to supplemental rent). That would be double-dipping,” Hall said this week.
Hall said a separate supplemental fee above the fixed rent and tariff wouldn’t have been appropriate because his company installed and owned the pipes across the dock. (Fuel previously was shipped across docks in Portage Cove.)
A copy of the lease provided by the Haines Borough this week lays out the supplemental rent and the base rent and includes language that the rent doesn’t include additional “costs, taxes, tariffs or similar (charges).”