Livingston rakes in high legal costs over past five years

mnorth@mercedsun-star.comAugust 12, 2011 

When it comes to the Bizarro World of legal costs for cities in Merced County, those with less tend to spend more.

Over the past five fiscal years, Livingston, one of Merced County's smaller cities, racked up more in legal fees than any other city in the county, spending $3,469,770.15, according to city records.

When that number is placed next to Livingston's 2009 census population of 13,368 people, it comes out to $259.56 for every resident.

The city of Merced has the most residents in the county with 76,273, according to 2009 census data. Its legal costs over the past five fiscal years total $2,230,008.19, which translates to $29.24 a person.

Livingston leaders know there's a problem and say a solution is in the works.

Fewer than 10 years ago, even $100,000 a year in legal fees would have been a shock, said Councilman Gurpal Samra.

"We've probably spent more in legal fees in the last five years than we have in the last 15 years combined," he said, noting that with fiscal year 2005-06 added to the total, legal fees jump to more than $4 million for the city.

Lawsuits take toll

In the past five years, Livingston has been involved with three lawsuits brought by Foster Farms, the giant poultry producer based in Livingston.

Samra used to be mayor of Livingston, and legal fees continued to run wild after he left office in 2008, only to return as a member of the council in 2010.

The legal costs are the reason why Livingston's enterprise funds are in the gutter, Samra said.

"All these deficits we've had in our enterprise funds, that has been due to these legal fees, not rates," he said, adding that without legal costs the city's enterprise funds would be in much better condition.

Enterprise funds provide services to the public for a fee, which allows them to be self-sufficient.

As of Thursday, the city's water fund deficit is at $1,165,713.48, the domestic wastewater deficit is at $373,356.48 and the sanitation fund deficit is at $475,966.45, according to city records.

"This is the madness I was trying to stop," Samra said.

But the city is moving on, he noted. A new city manager, city attorney and changes on the council should stop legal fees from running rampant.

"It bothers me a lot because the way things were in the city, the people of Livingston have to pay for it," said Samra, who expects legal fees to be significantly lower by the end of the year.

"I've been talking to the new city manager. We're already looking at what we're going to do to lower these fees, because this should not be," he said.

Jose Sanchez of Meyers Nave law firm took over as city attorney for Livingston in September of last year. He said he expects a steep drop in legal fees in the next couple of years.

Randy Boyce, senior vice president and general counsel for Foster Farms, agrees.

Livingston needs Foster Farms and Foster Farms needs Livingston, but poor water infrastructure and a lack of cooperation led to costly lawsuits, he said.

"Having to fight those battles in court is horribly counterproductive, said Boyce, who describes himself as a lawyer who doesn't like to litigate. "I think those days have come and gone."

Boyce has seen a change in the attitude at City Hall over the past year and thinks city officials are making the right decisions to address water quality issues.

When it comes to matters between Foster Farms and Livingston, Samra said, litigation isn't the best route. "We resolved more with Foster Farms sitting at a table than we did in a courtroom," he said.

Capital projects and legal fees are the main reasons utility rates need to be raised, Samra said. Had legal fees not been so high from the last administration, the increases might not have been so dramatic. "This is why our residents are having to face these higher bills," Samra said.

Merced touts efficiency

Merced has the lowest legal fees-to-resident ratio for several reasons.

Having an in-house legal team rather than contracting out the work, as smaller cities do, is a big help, said Jeanne Schechter, chief deputy city attorney for Merced.

"This office, which is responsible for overseeing all litigation for the city, tries to be as efficient as possible with the taxpayer dollars and use that money wisely," she said. "We certainly seek, when we can, to be reimbursed."

When developers come in with big projects, such as a Wal-Mart, the city requires that they agree to pay for any litigation that tags along. "That's a cost that's more appropriately born by the developer and not by the taxpayers," Schechter said.

In cities that contract out for legal services, any phone calls or discussions between council members and attorneys runs up legal bills for the city.

Merced's in-house team prevents such free-flowing charges, Schechter said.

Other cities trend more toward Merced's legal cost ratio instead of Livingston's.

Over the past five years, Los Banos has spent $1,974,834.67 on legal fees, putting its cost at $56.23 a person.

Dos Palos has spent $237,582.29, which translates to $48.49 a person.

Gustine comes out to $538,412.35 and $105.61 a person.

In Atwater, City Hall has forked over $2,135,788.16, setting its ratio at $81.52 for each resident.

Reporter Mike North can be reached at (209) 385-2453 or mnorth@mercedsun-star.com.

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