Interim City Manager Veronica Albin has started the process of negotiating what the city will pay its long-time financial advisor Leo Valdez for work he did under a verbal contract with former city manager Gus Cordova.
Albin and Valdez exchanged emails July 31 over how the city would pay Valdez and his firm, Phoenix, Ariz.-based Hutchinson, Shockey, Erley and Company, for assembling two funding applications.
“I would suggest we sit down and negotiate and agree to a fee,” Valdez stated in an email to Albin. “I would rather do that, then (sic) drag the issue through the courts and let the SUN have a field day at our expense. The city needs to understand that working on the various applications, not only involved me, but also included other members of my firm’s staff.”
But over the course of just three emails between the two, negotiations seem to have hit a wall.
Under the agreement Valdez submitted to the city, he was slated to earn three-fourths of 1 percent of the total amount of the funding awards. But Valdez only submitted an invoice for $50,000 and another $7,155 for out of pocket expenses and gross receipts taxes in order to avoid breaching the city’s cap on professional services agreements.
Albin contends she cannot pay Valdez a flat fee for a contract that was drafted after the work was completed. In order to determine how much money the city owes Valdez, Albin requested that he submit a detailed listing of the work completed on the city’s behalf.
“I absolutely intend to pay you,” Albin stated in an email to Valdez. “My issue is that I cannot execute a contract for a flat fee after the fact. This is why I have asked for the hours you spent working on the project, and the times and dates you met with staff and engineers, etc., on our behalf. With that information and an hourly rate, I can authorize appropriate payment for the services you’ve provided.”
Valdez declined to comment for this article because of the possibility of future litigation.
“In all my previous dealings with the city I have never been asked to list or account for my time,” Valdez stated in an email to Albin. “I take big risks when working on projects. If projects do not get approved, I don’t get paid a fee nor my out of pockets. My firm is basically financing the success of making things happen. How does one attach an hourly fee for this risk? I don’t know how we get passed (sic) this impasse as I have no way of accounting for every minute I spend on these projects.”
During a previous interview, Valdez said Cordova instructed him to work on assembling applications for a state Finance Authority loan and a grant from the state Water Trust Board. But a contract for the agreement was never submitted to the city until Valdez had completed the applications.
Albin said the issue now was not whether Valdez actually completed the work, but what amount the city should pay for the work.
“I’m not really questioning if he did the work,” Albin said. “I just need an hourly rate and what he worked on to determine what we can pay him.”
A review of emails between Cordova and Valdez showed frequent correspondence between Valdez and members of the state Finance Authority, engineers and city staff over the course of several months.
And the city was awarded a $6.5 million loan through the state Finance Authority and a $2.6 million grant from the Water Trust Board this spring.
Cordova did not return several messages seeking comment for this story. However, during a previous interview Cordova said he asked Valdez to assist the city in applying for the two funding sources. Cordova said he thought Valdez was billing the city under the terms of a previous contract.
The contract to which Cordova was referring dated to 2004 when the city signed a contract with Valdez for financial advisory services related to a proposed surface water treatment plant, in which the Council voted down April.
In an Aug. 14, 2007 email, Valdez told Cordova he could continue to work under his 2004 contract for the water filtration facility. The contract was initially set to expire July 1, 2005, but it also stipulated that it would automatically renew every 60 days until the project was complete or until one party terminated the contract.
“Do you believe the contract has terminated since I believe you mentioned contracts terminated after five years regardless of the language?” Valdez stated in the email to Cordova. “If you determine the contract has not terminated, I would suggest we amend it to reflect the coordinating of the various funding sources, apply for the 2007 (Water Trust Board) and apply for the clean water loan. I have already started the process on the last two items and have been working on coordinating the various funding sources for the last three years.”
The Phoenix-based financial firm for which Valdez works has held previous contracts with the city. Since 2002, Hutchinson, Shockey, Erley and Company has been paid a total of $51,368.46 for financial services, according to city documents.
City staff and a SUN reporter were unable to locate the vouchers or invoices for the individual payments in the city’s check registers and could only find minimal descriptions of the payments on the city’s financial software.
According to the city’s documents, Hutchinson, Shockey, Erley and Company was paid $17,500 in August 2002, $1,434.80 in June 2004, $31,098.66 in November 2006 and $1,335 in April 2007. The descriptions for these payment are only listed as “financial services” and “contractual services” but do not specify any specific services.
Under an April 2007 contract, which was signed by Cordova, Valdez was tasked with creating a “financial analysis debt report” and providing other “financial advisory services,” including managing the city’s outstanding debt, implementing payment schedules and creating a report identifying all of the city’s outstanding debt.
Valdez did correspond with city staff in relation to city debt and had submitted several versions of a spreadsheet detailing the city’s outstanding debt to city administrators.
The 2007 contract, which expired in April 2008, provided for a cash fee of $15,000 as well as out-of-pocket expenses up to $2,500, per diem up to $95 and 32 cents for each mile traveled by Valdez.
In previous years Valdez has also proposed other contracts to past city administrators, many of which were also not signed.
In 2006, Valdez sent a proposal to former city manager Chris Rainwater for a three-year contract to provide “financial advisory services” for the city’s water diversion project. That contract provided for payments equal to 1 percent of the project’s total funding, but not to exceed $30,000, which at the time was the threshold for public bidding and Council approval for professional services agreements. Valdez also sent Rainwater a proposal that same year to provide the city with advisory services for new bonds. That contract also capped payments at the $30,000 professional services threshold. Neither contract was signed by Rainwater nor executed by the city. In 2002, Valdez was hired to help with the election of the three one-eighths of 1 percent gross receipts taxes for the Water and Sewer Departments.