At the July City Council meeting, City Manager Jim Wieprecht briefed the Council on the bankruptcy case surrounding W.F. Delauter & Son Inc., the contractor that did the water and sewer line replacements on Roberts Mill Road and sewer lines on Fairground Avenue in 2023.
The problem the City is dealing with on Fairground Avenue involves work leading to the paving work over the replaced sewer lines. Initially, the defect was thought to be limited to a small area, but over the winter months and with regular use, the issue was found to be more expansive. According to Wieprecht, the road surface is actually sinking where the sewer replacement was done. According to Wieprecht, the issue appears related to the compaction above the sewer line, which was the responsibility of Delauter, not a collapse of the new sewer line itself. The City has televised the sewer line to ensure the line itself is intact and functioning properly.
On Roberts Mill Road, issues with the topcoat of blacktop were noted in several portions of the street shortly after completion. With the onset of winter, correcting the problem was deferred to spring when temperatures would allow paving work to resume. Over the winter, it became apparent that the issue wasn’t limited to the areas initially identified, but was present throughout the new road surface. The City was having conversations with Delauter and the paving subcontractor, MT Laney, on how to best address the defects when Delauter filed for bankruptcy, at which point MT Laney stopped the direct dialogue with the City.
According to the City attorney Jay Gullo, the City will have to seek claims on the bonds for both projects. The City has two bonds for each project: a performance bond that ensures the project is finished and a payment bond which is how the contractor gets paid.
Gullo said that what would have been warranty work is now much more complicated because of the bankruptcy. "They [Delauter] have a list of creditors as long as your arm that they owe." said Gallo. "The issues that have come up [the collapsing road surface] are worse than were initially thought."
There was also a "punch-list" of items for the Roberts Mill Road project that could not be finished until the weather warmed up, such as yard repairs and grass planting, explained Gullo. These were all anticipated, which is why the City held back $20,000 to finish these items. These items were completed, but before the City could get Delauter back to address the paving issues, Delauter claimed bankruptcy.
Unfortunately, Gallo said, the $20,000 that the City held back "technically is considered an asset of Delauter and is under the jurisdiction of the bankruptcy court." This means the City may or may not have to fix the issues at its own expense. "The bottom line is $20,000 isn’t going to be enough to fix all that needs to get fixed," pointed out Gullo. "It’s a drop in the bucket."
The paving work was done by a subcontractor, M. T. Laney, who works through Delauter. Gullo explained that the subcontractor says they will not honor anything on the projects until the bankruptcy has been dealt with. To further complicate matters, Laney claims they haven't been paid for all of the work they have done, so they want to file a claim against the payment bond.
Gullo noted that a bonding company can be challenging to work with. "They don’t take our side because they don’t want to pay out, much like an insurance company," he said.
For now, the City will need to involve its own engineers to get an estimate on how much it will cost to fix the issues and provide proof to the bonding company so that the City can tap in to the funds in the bond.
