Waldport park project gone awry leaves council to sort out dispute between contractor and city manager

By GARRET JAROS/Lincoln Chronicle

WALDPORT – The biggest news out of the Waldport city council meeting Thursday might have been the offhand mention during the public comment period that a petition to recall five councilors had been submitted just hours before.

But it was eclipsed by an allegation that city manager Dann Cutter suggested a contractor working at Louis Southworth Park inflate the cost of materials so the contractor donating his labor might make a little money off the project.

Cutter vehemently denied the allegation in response to questions Friday from the Lincoln Chronicle.

The allegation surfaced midway through the meeting during a discussion about how to handle J&J Residential Construction’s failure to fulfill its $143,000 contract to complete the concrete work for four picnic pavilions, two pickleball courts, a basketball court and an entryway atrium at the park.

City staff recommendations for council discussion and possible action were fourfold — go after the contractor’s bond and take them to court; seek donations of concrete from suppliers and see if that enables J&J to complete the work; seek a new contractor and purchase concrete; or a combination thereof.

The discussion began with Mayor Heide Lambert’s stated confusion about whether there was paid labor on the job — the contract stipulated there was not — and whether J&J had used paid workers, and whether they were paid in accordance with Oregon Bureau of Labor and Industries regulations.

After some back and forth between council members and the city manager, the matter of whether paid labor was used was laid bare by J&J owner Jay Larson who said he had to pay his employees out of his own pocket to try to finish the job.

“Yes, I had gotten my workers at times working on the city park to try to accomplish the goal that was in hand, which is a little over excessive for what my bid is…” Larson said. “And I had to pay out of pocket for … my guys to work, because if you’re asking me and my son to do a job – that’s a lot.”

As the discussion continued, Larson said he was under the impression that community volunteers, including other contractors, would be working alongside him as needed to make the workload manageable. He also said that because of the low-lying land, 75 percent of his time was hauling in thousands of yards of rock and grading and compacting it.

“We (tried) to get as much done as we (could) but to an extent when I am losing money hand-over-fist I had to tell my guys to stop working,” Larson said. “I can’t keep doing this in order to get the city park done. I shouldn’t have to pay out of my own personal pocket to do a city park. … I can’t keep doing this on my own time and dime.”

Prompted by Lambert to suggest a solution, Larson said the city would need to pay for his worker’s wages and the still-needed supplies. Compounding costs is that the concrete for the atrium and a section of the pickleball courts failed and needs to be replaced.

Councilor Susan Woodruff thanked Larson for his work and said that he and the city were excited when he volunteered to help. She also noted that it was clear in the contract how much fill and leveling and other specifications were required.

“But maybe you didn’t have that statement of work before the contract was signed,” she said. “That I don’t know.”

Larson said he would like to finish the project but can’t pay for it out of his own pocket. If he had to finish it by volunteering his and his son’s time, Larson said, it would take years to complete because they need to work other jobs to make a living.

Lambert suggested Larson come back to the next council meeting with a new bid of what he believes it would cost to complete the work. The council concurred.

Question over material costs

But it was after that, during a discussion of prevailing wages, that Larson claimed that before signing the contract, Cutter told him to inflate material costs “so eventually at the end of the project I could possibly get some money.”

Cutter interjected to say Larson signed the contract, to which Larson interrupted saying he was not lying about what Cutter told him and his son.

“I have no reason to lie here about this because anything that’s happening isn’t benefiting me,” Larson said. “Right now, the city park did not benefit me one bit. Only thing it did was benefit the city by me giving free labor.”

Lambert then asked Larson if what he is saying is that “when you bid this the city manager asked you to inflate the cost of materials…” But she again tied it in with avoiding paying state-required prevailing wages.

“To volunteer my time,” Larson said.

“To volunteer your time,” Lambert said. “And so you did that not knowing the scope of work, started the work, realized that in order to get it done by fall … it cost more than you thought because you were paying labor …”

Larson agreed that was the case.

“I don’t know what to do with this,” Lambert said. “Does council know what to do with this right now? I don’t know what to do with this. My brain is going bananas right now.”

Woodruff said the council would need to figure it out, to which Lambert agreed.

“… But I feel like these allegations are really serious,” Lambert said. “And I don’t know how to give them merit or dis-merit them.”

“We had a signed contract that spells out the terms of the contract,” Cutter said.

“Yes, but he’s saying you coerced him before he signed the contract,” Lambert said.

“How would I coerce someone into signing a contract?” Cutter replied.

“Well, I don’t know. But one of them was telling him to inflate the cost of materials so he could get paid,” Lambert said. “That’s a serious allegation, Dann.”

Lambert asked the council to consult its attorney about the issue “because I am being told by a citizen, he is being coerced by our city manager to lie about his bid.”

Woodruff pointed out that whatever the council decides on that matter, the work still needs to be finished, while council president Greg Dunn and councilor Rick Booth again pointed to the signed contract.

“Well, I have gone into contract law situations and just because a contract is signed does not mean that it is final,” Lambert said. “Especially when we are being told the city manager told him to inflate the cost of materials to pay his volunteers. That is not part of the contract.”

A pin-drop silence followed before Lambert reiterated that she wants council to consult with the city’s attorney, “whether or not it’s in executive session or not, I don’t care, to discuss these allegations because I’m not going to ignore them.”

Lambert then asked Larson to make his allegation official by putting it in writing and sending it to her at city hall. Larson said he would.

Larson and Cutter respond

The Chronicle reached out Friday to both Larson and Cutter for further comment.

Larson, who did not know the contract was on the council’s agenda until someone called his son Wednesday, said he stands by his allegation.

“I hate to throw him (Cutter) under the bus but he was going to throw me under the bus yesterday,” Larson said.

Cutter said the bid for work from Larson “corresponds to a reasonable expectation of the valuation of the concrete, rebar and rock work that was expected of Mr. Larsen.

“In no way shape or form did that contract allow for an increase in valuation of product to provide a profit beyond what would be expected from a standard contract,” he added. “I have no recollection of ever saying, nor would I say anything like that at any time. However, being bluntly honest, I would also never tell a contractor to not make a profit on a job …”

Cutter said Larson included $30,000 for labor in his bid and Cutter told him that needed to be removed from the total or it would need to be prevailing wage job as this bid was supposed to be for no labor.

“And he then revised his bid to remove the labor,” Cutter said. “I will say that his material cost did increase, but we were also specifying the size of rebar that was necessary. We had done our calculations on his material costs and the city felt they were in line with the bid that we received. We did not suggest, nor in our opinion did he inflate the cost of materials at any point.”

Cutter did say there was a conversation at some point about material costs and markup.

“There was a question of material costs at cost,” he said. “And I swear I never used the word inflate, but we would not have said that they could not pass a markup on to the city. That’s not what we do. We don’t specify that. I think their question was whether, because this was a donation, they had to do it at invoice. And I said something to the effect of ‘No, that the standard markup is acceptable.’”

But Cutter said Larson’s accusation to inflate the cost of materials to cover the labor was “absolutely not the case.”

“We did our analysis of the materials required and felt that it would come in over what he bid,” Cutter said Friday. “But I remember some conversation in which they asked about whether they had to provide the invoices for the cost of the materials. And I believe our response was, like any contractor, we would just expect you to provide us your cost with markup on the materials.

“Very quickly however, they started asking us to buy the materials so that we would get a discounted price from the vendors,” Cutter said. “And we did. And at no point did we allow a markup on any of the materials that we bought.”

In other city developments:

• A petition to recall Dunn, Woodruff, Booth, Jayme Morris and Michelle Severson was submitted to Waldport officials on Thursday by Tony Thimakis on behalf of a coalition called Justice for Waldport. The recall effort, according to the group, is a result of the city council’s April 3 expulsion of Waldport’s “lawfully elected mayor, Heide Lambert, as well as their nonaction in regard to citizen complaints, and their failure to sufficiently supervise the city manager.” The petitioners must still collect a specific number of signatures from registered voters and the signatures submitted to election officials for verification. If there are enough valid signatures there would be a recall election.
• Attorneys for the city and Lambert will be in Lincoln County Circuit Court on Tuesday to argue over whether a writ of review that the council’s action April 3 to remove her from office was illegal. The council later reversed its decision, allowing her to return to office, and is arguing the issue is now moot.
• The council voted to add June 19 — “Juneteenth” — as a paid holiday for city employees. It is already a holiday for state and federal employees. The day commemorates the end of slavery in the United States. Waldport employees will now have 12 paid days off a year.

• Garret Jaros covers the communities of Yachats, Waldport, south Lincoln County and natural resources issues for Lincoln Chronicle and can be reached at GJaros@YachatsNews.com