Evanston, a city perpetually plagued by budget problems, faces a worse deficit than usual this year due partly to legal costs incurred from fighting four major lawsuits.
The city has a projected $3.6 million deficit embedded in 2002-3’s proposed $138 million budget. Almost half of that gap comes from unexpected litigation fees. The city budgeted only $125,000 for legal fees but ended up paying about $1.8 million.
If Evanston loses any of the lawsuits they are fighting, the possible expenses are even worse. Liabilities from legal claims are projected to jump dramatically next year. Director of Finance Bill Stafford said next year’s possible liability is at least $6 million.
“It’s a major cost this year, and it’s a major cost next year as well,” Stafford said.
The cases include high-profile lawsuits filed by Northwestern and the Vineyard Christian Fellowship Church as well as two involving disputes over construction contracts. The Evanston Law Department expects all four will be resolved during the 2002-2003 fiscal year.
The NU lawsuit concerns the development of the Northeast Evanston Historic District. In a suit filed in November 2000, the university claims the City Council approved the district to pressure NU into contributing money to the city. Because of its charter, NU is not required to pay property taxes.
The historic district includes 49 university buildings, and the historic designation means that the university cannot make changes to the buildings without prior authorization from the city.
“We believe strongly that the city acted in a discriminatory manner against the university and that it did not follow proper procedure,” said Alan Cubbage, vice president for university relations.
In court documents, the city responded that it acted in accordance with its role as a city government and passed the proposal to protect single family homes, not to coerce money from NU.
According to legal department estimates, the city will likely spend $546,900 in legal expenses relating to this case before the fiscal year ends Feb. 28. The university is not seeking damages, only a halt to the district.
Another pending case involves a zoning appeal by the Vineyard Christian Fellowship Church. The church purchased a building at 1800 Ridge Ave., and the city twice denied them a zoning change allowing them to hold worship services there.
Church leaders, who knew how the property was zoned when it bought the building, claims the city discriminates against religious services but not other cultural activities. Because of this provision, the church has been able to use the site for events other than church services.
“They can talk about God, but they can’t worship,” said Vineyard’s attorney, Mark Sargis.
The city voted to keep the building zoned as an office building because re-zoning it as a church would take it off the tax rolls, said Jack Siegel, the city’s attorney.
Sargis said if the judge rules in the church’s favor, Vineyard will probably ask for the city to pay for legal fees and the cost of renting Evanston Township High School’s gym for worship services, which costs about $100,000 per year.
The trial finished before the 2001-02 fiscal year was over, so it does not affect this year’s legal expenses, Siegel said. But if the judge rules against the city, it will affect the 2002-03 budget.
The city also has two cases pending concerning construction contracts. In one case, McNally Tunneling Co. sued the city concerning a contract for sewer work. The company claims it accrued $7 million in unexpected costs, partly relating to a problem with a boulder that got in the way of construction.
Evanston argues that these extra costs were not justified by the contract it had with the company, Siegel said. The city has agreed to pay costs for the boulder, but this only constitutes about $700,000 of the unexpected expenses.
According to reports from the legal department, Evanston expects to pay more than $1 million by the end of the fiscal year in this case, and if it loses it could pay up to $7 million in damages.
The final case concerns an unsigned contract. The Keefe-Shea Joint Venture company claims the city was wrong in granting a permit for an unrelated sewer construction project to a rival company. The city waived a requirement to favor minority-owned companies, a requirement Keefe-Shea met, because one company bid $620,000 lower.
“We did it because we would like to save the taxpayers $600,000,” Siegel said.
Legal costs from this lawsuit are expected to total $257,900.
But despite the budgetary hardships precipitated by the various lawsuits, Stafford said this is not an ongoing trend – just a glut of lawsuits coinciding with a difficult economic climate.
