SJ-R: A semi-load of coal from Elkhart is dumped in the coal intake area at City Water, Light and Power in 2013.

Publication: The State Journal-Register by Crystal Thomas, Staff Writer
Published: 12/1/2017

A lawsuit filed Thursday alleges city and City Water, Light and Power officials hid from aldermen and the public the details of a consultant’s report that suggested the city was overpaying for coal to operate its power plants.

The complaint, filed by Springfield residents, Michael and Jennifer Frakes, says the move resulted in aldermen last year ignoring a lower bid that would have saved the city over $5 million per year.

A spokeswoman for Mayor Jim Langfelder on Friday disputed that the consultant’s report was kept secret, saying aldermen were made aware of it in executive sessions.

The Frakes’ lawsuit names Langfelder, city attorney Jim Zerkle, CWLP chief utility engineer Doug Brown, CWLP electric division manager John Davis, and Arch Coal Inc., which is CWLP’s coal supplier.

The complaint says the city asked Ely Consulting Group to make recommendations as it was preparing to renegotiate its contract with Arch. Ely came back with a report saying the city was paying “artificially high” prices for the coal and that the price should have been closer to $32-$33 per ton instead of the $45 per ton CWLP was paying. It recommended the city solicit bids and to negotiate a price even lower than the $39 per ton that was estimated by the CWLP.

The lawsuit alleged the city hid the Ely report from the public and aldermen, claiming “attorney client privileged information.” When the city solicited bids, Foresight Coal Sales of St. Louis offered between $31.55 to $36.55 per ton for the first five years of its contract, as well as financial assistance to maintain the Dallman Power Station, according to the complaint. The city would not have been able to claim the prices of the first two years of the contract, according to a phase-out clause in its Arch Coal contract.

The lawsuit then alleged the city went on a “press campaign” to “push the narrative” that a reduced price of $39 per ton saved the city $5 million. 

In a presentation to the City Council, Brown and Davis said the difference between the Arch Coal and Foresight’s lesser offer was $1 million, whereas the lawsuit claimed the difference was actually $5 million. Arch Coal settled on a fixed rate $35.90 per ton for five years with the city. It also offered to dispose coal ash for a fix rate, which Foresight did not offer in its bid. Powerpoint slides from the presentation show that if the Arch Coal offer was rejected the Viper Mine near Elkhart most likely would have to close, causing losses to the city’s and county’s economy.

The “tainted presentation” and withholding of “critical information” caused the City Council to choose to renew Arch Coal’s contract, a breach of the city’s fiduciary responsibility, according to the complaint.

In a statement, city spokesperson Julia Frevert pushed back against the claim that the city concealed the Ely report. Because the city was negotiating with Arch Coal and facing possible arbitration, it could not publicly release the report.

“However, official meeting records show that the Ely Consulting Report was provided to the members of the City Council on March 22, 2016, at the Committee of the Whole meeting during Executive Session,” Frevert wrote in an e-mail. “During this session, Mayor Langfelder advised the alderman that they could meet with Corporation Counsel and review the report in detail at their convenience.”

Frevert also listed four dates in which the city coal contract was discussed in public and five times it was discussed during executive session. City Council Coordinator Tim Griffin, who was present during the 2016 March executive sessions, verified the Ely report was discussed.

“All contract issues were discussed thoroughly in public including all the items in the Ely Report,” Frevert wrote.

David A. Axelrod, the plaintiffs’ co-counsel, said the Ely report shouldn’t have been privileged information.

’Based on my understanding of attorney-client privilege, that is not a privileged document,” Axelrod said. 

Fred Nessler, the plaintiffs’ other attorney, said the complaint spoke for itself. He said the Frakes approached him with research they had done themselves.

“One has to ask the question why you would have to spend more for a lesser product,” Nessler said.

Both Axelrod and Nessler said they had not talked to Foresight, nor are they party to the lawsuit.

The lawsuit asks for the contract between the city and Arch Coal to be rescinded and for any payments to be returned. A call for comment from the plaintiffs’ attorney Frederick Nessler was not immediately returned.

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