September 2017 MML Review Magazine

A U N I T E D V O I C E F O R M I S S O U R I M U N I C I PA L L E A G U E C O M M U N I T I E S

THE MISSOURI MUNICIPAL September/October 2017

Brentwood, Missouri City Of Warmth www.mocities.com Chapter 100 Hidden Trap • Construction Contracts • 2018 Supreme Court Preview

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REVIEW

THE MISSOURI MUNICIPAL

September/October 2017; Volume 82, No. 5

CONTENTS Features 4 Brentwood, Missouri: City of Warmth

by Janet Vigen Levy

9 Hidden Trap In Chapter 100 Could Cost Cities

by Nathan M. Nickolaus, Esq.

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12 Construction Contracts:

Landmark Legal Decision

by Joseph C. Blanner, Esq.

15 2018 Supreme Court Preview For Local Governments

by Lisa Soronen

Departments

22 West Gate Region Civic Leadership Awards

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24 Getting To Know You: Bryant Delong 26 News From The Bench: Court Focuses On Park Photography Permits 29 Professional Directory 30 MML Calendar of Events/ Members' Notes

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MISSOURI MUNICIPAL LEAGUE BOARD OF DIRECTORS President: Mayor Kathy Rose, Riverside; Vice President: Mayor Matthew G. Robinson, Hazelwood; Immediate Past President: Mayor Randall Rhoads, Lee's Summit; Eric Berlin, City Administrator, North Kansas City; Sally Faith, Mayor, St. Charles; Bill Falkner, Mayor, St. Joseph; Stephen Galliher, Mayor, Sedalia; DJ Gehrt, City Administrator, Platte City; Barry Glantz, Mayor, Creve Coeur; Tim Grenke, Mayor, Centralia; Debra Hickey, Mayor, Battlefield; *Bill Kolas, Mayor, Higginsville; Donald Krank, Council Member, Black Jack; Chris Lievsay, Council Member, Blue Springs; Paul Martin, Attorney, Olivette; *Norman McCourt, Mayor, Black Jack; Marcella McCoy, Finance Director, Harrisonville; Susan McVey, Council Member, Poplar Bluff; *Carson Ross, Mayor, Blue Springs; Scott Wagner, Council Member, Kansas City; Eileen Weir, Mayor, Independence; *Gerry Welch, Mayor, Webster Groves; Nici Wilson, City Administrator, Odessa *Past President AFFILIATE GROUPS Missouri City Management Association; City Clerks and Finance Officers Association; Government Finance Officers Association of Missouri; Missouri Municipal Attorneys Association; Missouri Park and Recreation Association; Missouri Chapter of the National Association of Telecommunications Officers and Advisors; Missouri Chapter of the American Public Works Association; Missouri Association of Fire Chiefs EDITORIAL Laura Holloway / Editor Lholloway@mocities.com Dan Ross, Richard Sheets, Lori Noe Contributing Editors The Review September/October 2017; Volume 82, No. 5 The Missouri Municipal Review (ISSN 0026-6647) is the official publication of the Missouri Municipal League state association of cities, towns and villages, and other municipal corporations of Missouri.

Publication office is maintained at 1727 Southridge Drive, Jefferson City, MO 65109.

Subscriptions: $30 per year. Single copies: $5 prepaid. Advertising rates on request.

Published bi-monthly. Periodicals postage paid at Jefferson City, Missouri.

Postmaster: Send form 3579 to 1727 Southridge Drive, Jefferson City, MO 65109.

To contact the League Office call 573-635-9134, fax 573-635-9009 or email the League at info@mocities.com.

Website: www.mocities.com. www.mocities.com

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FEATURE Review

by Janet Vigen Levy

Brentwood, Missouri City Of Warmth

Brentwood City Hall

The city of Brentwood is a small but growing progressive community boasting a unique blend of quality residential neighborhoods and one of the most thriving business districts in the St. Louis metropolitan area. Located within minutes of downtown St. Louis, Brentwood is known as the “City of Warmth” because of its small-town charm and friendly atmosphere. The proud hometown spirit is felt around every corner.

This City of only two-square miles has much to offer: high-quality housing, beautiful neighborhoods, ample parks and walking trails, top-notch city services, a vibrant business community, premium lodging, a multitude of dining opportunities, an exceptional school district, and a recently renovated state-of-the-art recreation complex with meeting rooms, an indoor ice rink, sports leagues, and activities for all ages.

Nestled in the heart of St. Louis County, Brentwood offers a variety of living options, including single-family homes, condominium developments and apartments. Most of the residential areas are within walking distance to Brentwood’s restaurants, shops and businesses. The City is home to a wide array of businesses, from one-person shops to large retailers.

With more than 8,000 residents and 1,350 businesses,

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theReview September/October 2017

the City’s population nearly triples during the day. In 2015, NerdWallet ranked Brentwood as the third-best city location in Missouri to start a business. City and business leaders are committed to keeping Brentwood a progressive community that moves forward while maintaining a small-town feel.

The city of Brentwood is a fourth-class city with a city administrator form of government. A mayor and an eightmember board of alderman serve as the City’s legislative body.

The City is comprised of four wards, each of which elects two aldermen to serve two-year staggered terms. The mayor appoints alderpersons and/or citizens to serve on various boards and commissions. A number of city departments oversee various facets of community life, including economic development, planning and development, parks and recreation, streets and the library.

While current-day Brentwood is a dynamic city with its eye on the future, it places a high value in the preservation of its historical roots.

Proud Past Brentwood’s rich history stretches back more than 200 years. In 1804, Louis J. Bompart arrived in the area and purchased 1,600 acres of land. Later, the Marshall family acquired property just west of that, and the Gay family bought land to the north – together completing the boundaries of what is now the city of Brentwood.

Prominent businessman, Thomas Madden, arrived in the early 1870s and purchased 100 acres within the existing boundaries to establish his farm. The area continued to gradually grow, attracting new families to the settlement.

Madden was recognized as the entrepreneur of the community, as he operated a rock quarry, tavern, barbershop, grocery store and blacksmith shop. His well-known presence in the town led to its original name, Maddenville.

Maddenville served as one of the original stops along the Manchester Trail; a westward route regularly traveled by prairie schooners and mail coaches in the late 1800s. While some of these travelers stayed in town only for a short rest between stops, others chose to remain. The community

continued to prosper, especially with the advent of rail service via the Missouri Pacific and the invention of the automobile.

In 1919, Maddenville residents discovered that neighboring Maplewood was preparing to annex their town. In order to avoid annexation and maintain autonomy, residents officially incorporated as a village. The renamed community of Brentwood was established Dec. 15, 1919.

Parks And Recreation The City’s parks and recreation department manages various facilities and recreational areas in Brentwood and organizes a number of community events throughout the year. The department also partners with the neighboring cities of Maplewood and Richmond Heights in what is known as the Parks and Recreation Cooperative (PARC).

The program invites residents to take advantage of the recreational facilities and programming in any of the three cities.

The Brentwood Recreation Complex reopened in September 2015 after an extensive renovation. The community center renovations included upgrading the ice rink; making the building handicap accessible; replacing the roof and sprinklers; and bringing it up to current codes.

Ice rink improvements included new locker rooms, offices,

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bleachers and skate rental areas, plus the replacement of refrigeration systems and installation of a new ice plant/ice rink floor assembly.

Brentwood Ice Arena was the practice facility for the St. Louis Blues during the era of Hall of Famers Al McInnis, Brett Hull and Adam Oates. The ice arena is also home to the St. Louis Skating Club. Founded in 1894, it is the oldest ice skating club west of the Mississippi. Club skaters have competed or entertained locally, nationally and internationally.

The city of Brentwood oversees seven well-maintained parks, all of which are connected by paved biking and walking trails or sidewalks.

Schools And Library Brentwood School District is a highly rated progressive public education resource offering a host of quality programs and resources not normally found in a district of its size. The district includes an early childhood center, two elementary schools, a middle school and Brentwood High School that collectively enroll more than 900 students. In 2016, U.S. News & World Report selected Brentwood High School as one of the Best High Schools in the country. The Missouri Department of Elementary and Secondary Education named Mark Twain

Elementary as a 2017 Gold Star School. The Brentwood Public Library celebrated its 75th anniversary in 2013.

Services And Public Safety Brentwood provides city-owned and operated residential trash service, plus curbside recycling free for all residents.

Brentwood’s fully staffed police and fire departments boost the community’s safety. The Brentwood Police Department’s success is evident through the area’s noticeably low crime rate. In addition to emergency response, patrol and criminal investigations, the Brentwood Police Department provides additional services including car seat installation, vacation checks and reduced-cost bike helmets.

The Brentwood Fire Department has served the City and surrounding communities since 1935. The department conducts in-service fire inspections for all commercial businesses within Brentwood, as well as large condominium and apartment properties.

Future Focus In 2019, Brentwood will turn 100! The Brentwood Century Foundation is spearheading the effort to turn 2019 into one big celebration. As Brentwood looks forward to its (continued on page 8)

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theReview September/October 2017

Brentwood's Innovative Approach To Sidewalk Slab Repairs The city of Brentwood, a recognized Tree City USA municipality, is home to hundreds of trees living in the City’s rights-of-way. Over the years, some of the growing tree roots have shifted, but not broken, the adjacent sidewalk slabs.

Although they remain structurally sufficient, some of the angled and tilted slabs could be hazardous to pedestrians.

Brentwood’s traditional solution is to remove the uneven slabs, install new materials and restore the site. A typical sidewalk-replacement process could span two or more days.

In late 2016, the Brentwood Public Works Department discussed an alternative process: using a polymer, known as PolyLevel, to lift and realign sunken concrete slabs in lieu of demolishing and replacing the slabs. In January 2017, Brentwood’s Director of Public Works, Dan Gummersheimer, reviewed a potential project for this new process: a portion of sidewalk along St. Clair Avenue that was uneven due to Sweetgum tree roots.

In late February 2017, the city of Brentwood contracted with Woods Basement to raise approximately 195 feet of sidewalk using PolyLevel. After placement of a few strategically machined holes, the high-density polymer was injected below the sidewalk slabs until the slabs were level. The holes were grouted, and any defects and restoration work were completed prior to the contractor’s departure. The results were immediate, and the sidewalk was available for pedestrian traffic within a short period of time following the injection process.

This innovative approach allowed the work to take place in late February, weeks ahead of conventional concrete work and without the need to rely on cold-weather concrete techniques.

The project was completed in just four hours. The contracted cost was $2,200, compared to $3,175 for conventional replacement work.

This polymer-process project provides an option that is less disruptive than conventional demolition and replacement of sidewalk slabs, as well as one that is less costly, less messy, and with no detrimental impact to mature city-owned trees. The chemical composition of the polymer is inert and will not harm the mature trees.

The immediacy of the work completion prevents long durations of out-of-service sidewalks while also retaining the original color and characteristics of the existing sidewalk slabs. The work is guaranteed to remain level for two years and could be completed again if roots grow and impact the surrounding sidewalks.

Other municipalities could benefit from implementing this process, since it allows an outside contractor to raise sidewalk slabs that are in good condition but not level, while allowing the public works department to replace sidewalk slabs that are broken or defective. Municipalities can prioritize that sidewalk slabs to be replaced with in-house staff and which slabs would be ideal candidates for leveling with the polymer process.

Brentwood’s Public Works Department considers this cost-effective, minimally disruptive method a long-term solution to the City’s tree root problem. After experiencing successful results in the first location, Brentwood’s Public Works Department has identified nine other sidewalk locations to complete in the near future.

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Brentwood Fire Station (continued from page 8)

second century, the City is working on ambitious plans.

In Januar y 2017, t he city of Brentwood commissioned a team of consultants to evaluate and recommend a comprehensive city-wide development plan to renew the Manchester Road corridor. In May 2017, the board of aldermen approved three projects for implementation.

The Deer Creek Flood Mitigation Project involves the planning, design

and construction of improvements to the Deer Creek Channel. This project aims to alleviate ongoing flooding problems located along Deer Creek and work to protect affected properties from the 100-year flood plain and frequent flooding.

The Manchester Road Overlay is a Missouri Department of Transportation (MoDOT) project focusing on pedestrian and vehicular improvements to Manchester Road within the city limits of Brentwood.

This 1.5-mile project, anticipated to begin in approximately 2020, will consist of a mill and overlay of the existing asphalt pavement; replacement of the existing concrete gutter with curb and gutter; partial access management of existing business entrances; and pedestrian improvements to sidewalks, pedestrian signals and crossings. In conjunction with the MoDOT project, the city of Brentwood is studying ways to improve the overall appearance of Manchester Road, a vital commercial corridor.

The Rogers Parkway Connector Project involves planning, design and construction of a connection between the city of Brentwood’s Rogers Parkway and the Great Rivers Greenway’s (GRG) Deer Creek Greenway. In partnership with GRG, the city of Brentwood aspires to connect its residents to the surrounding larger community, while at the same time sharing Brentwood’s wonderful park and open space amenities with the region.

These projects are designed to ensure and enhance the City’s vibrancy for many years to come.

Brentwood approaches its first centur y mark as an outstanding community in which to live, work, shop and play. The future looks bright for this City of Warmth.

Janet Vigen Levy serves as the communications manager for the city of Brentwood. Learn more about the City at www.brentwoodmo.org. Connect with @BrentwoodMO on Facebook and Twitter.

8 theReview September/October 2017

FEATURE Review

by Nathan M. Nickolaus, Esq.

Hidden Trap In Chapter 100 Could Cost Cities

Chapter 100 Bond financing is one of the most popular tools in the municipal economic development toolbox.1 It is popular for a number of good reasons.

On the surface, it seems fairly easy to do, and in most cases the bond counsel and the company do all of the heavy lifting. It does not require the consent of any of the other taxing jurisdictions, although they do get notice. It doesn’t carry the controversy that tax increment financing (TIF) does. Most importantly, it is known to carry no risk to the city.

However, that last statement turns out not to be completely true. It turns out,

that some risk may be involved after all.

The basics of Chapter 100 are relatively straightforward.2 The city purchases land and builds a facility for a prospective company. In most cases, this is actually done by the company in the name of the city. Since the real property is owned by the city, and a city does not pay property taxes, the company effectively receives a property tax abatement.3 The city does not pay tax on the building regardless of the use.4 Since the purchases for construction were made in the name of the city, there is no sales tax charged

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on those purchases.5 Certain equipment and machinery can also be purchased sales tax free. The company then leases the property, building and equipment from the city and the lease payments are used to retire the bonds that paid for it all.

Many believe that this is where the process ends with the entire project having been completed tax free.

However, the lease payments from the company to the city are potentially subject to the imposition of sales tax found at §144.020.1(8) of the Missouri statutes. This is a sales tax, although

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it functions in many ways like a use tax. It imposes sales tax on any lease of personal property, unless sales tax was paid on the property when the lessor acquired it. This tax would only be applicable to the tangible personal property portion of the lease, as there is no sales tax on real property transactions. It would also not apply to construction materials since they become part of the real property and therefore not subject to sales tax.

However, other tangible personal property, even if acquired using the city’s sales tax exemption, could be taxable when it is leased to the company by the city.

Recently, Missouri Department of Revenue (DOR) audits have begun looking for this potentially unpaid sales tax. This has resulted from audits of the company rather than the city. DOR has pressured companies to pay this tax; however, ultimately it is the city, as the “seller” who is responsible to see that the tax is paid. It is not clear whether DOR will continue this policy or not.

City officials should not assume that just because they have had a Chapter 100 project in place for many years that this danger is not out there. Since

10 theReview September/October 2017

the department of revenue has pursued the companies to pay the tax, the city may not be immediately aware of the problem.

"

Chapter 100 remains one of the most valuable and easily-used tools for local economic development. City officials should be aware of exactly how it works and where the traps are located.

"

Cities and the companies they work with can avoid this hidden tax. First, if the company paid sales taxes on the tangible personal property when

purchased, there is no liability for tax on the lease. It is not uncommon, particularly in small transactions, that the city does not offer its sales tax exemption. Second, if the property was exempt from sales tax, no tax liability occurs as a result of the lease. For example, materials used in construction of the building are not subject to sales tax, and would likewise not be an issue in the tax on the lease.

The third method is probably the least understood, but offers the greatest protection. Section 144.054.3 of the Missouri statutes allows an exemption to the sales tax on the lease of tangible personal property if the project is eligible under Chapter 100 and it receives a certification from the Missouri Department of Economic Development (DED). There are, of course, a number of requirements that must be met in order to receive such a certificate.

Obviously, the lease must be part of a Chapter 100 project. It must also be what is determined to be an eligible project. Missouri law contains two different definitions of projects eligible for Chapter 100. The Missouri Constitution states that applicable uses include “manufacturing, commercial, warehousing and industrial development purposes, including the real estate, buildings, fixtures and machinery.”6 This is a very broad definition of eligible projects, with the term “commercial” potentially including almost anything. Missouri statutes however, provide a much narrower definition that includes only “warehouses, distribution facilities, research and development facilities, office industries, agricultural processing industries, service facilities that provide interstate commerce, and industrial plants.” While this may seem broad, it is not. The term “office industries” is specifically defined to include only national headquarters for telecom, IT and insurance companies. The term “service facilities that provide interstate commerce” has been interpreted narrowly by DOR to include only companies that sell services exclusively out-of-state.7 Thus, a hotel that would

clearly fit under the constitutional definition of “commercial” would not be an eligible project under the statutory definition, as traditionally interpreted by DOR. Missouri’s courts have on occasion addressed this discrepancy between the Constitution and the enabling statute.

For example, in StopAquila v. City of Peculiar, the Missouri Supreme Court upheld the use of municipal revenue bonds to finance the construction of a privately-owned utility, Aquila.8 The Court found that because Aquila was in the business of selling electricity that meant it was engaging in commerce, it was a commercial facility; therefore, the City was authorized to participate under the Missouri Constitution.

Assuming that the project meets the definition of eligible projects, the actual tangible personal property must be defined as machinery. Machinery is the only tangible personal property listed in § 100.010 that is not otherwise exempt already (the other two being fixtures and building materials). Machinery is not clearly defined; however, DOR in the past has indicated that it must be directly used in the production process.

Thus, a wool spinner in a thread factory would be machinery, but the blender in the employee lounge would not.

DOR also has traditionally included office furnishings such as desks, chairs and computers within the definition of machinery. Art, foosball tables and workout equipment, for example, have not been included in the past, even though it is perfectly acceptable to purchase them through Chapter 100 funding.

The DED exemption is discretionary.

Thus, even if a project falls within the statutory definitions of an eligible project and the property meets the definition of machinery, there is no guarantee that DED will award the exemption certificate. The parties must submit an application for the exemption to DED.9 DED also encourages parties contemplating a Chapter 100 project to meet with them as early as possible to discuss eligibility.

An additional area of concern in

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  to Chapter 100 projects is regards  normal municipal construction whether

rules  apply. Arguably, because the project is being constructed in the name of the city, prevailing wage (§ 290.210 et seq. RSMo), competitive bidding, and payment bond requirements (§ 107.170 RSMo) should apply. However, in most cases the courts have not applied those rules. Largely this is determined by how the project is structured. In many instances, the municipality is only indirectly involved in the construction process. The company itself acts as the developer; building the facility as the agent of the city. In such a structure, the construction company is contracting with the company and not the city. As a result, the courts have held, based on specific factual scenarios, that competitive bidding was not required;10 that prevailing wage did not apply;11 and that payment bonds might not be required.12 The court also pointed out in the Septagon case that a subcontractor can obtain a mechanics lien against the company’s leasehold interest.

The court found that the purpose of payment bonds is to protect contractors on public projects where ordinarily mechanic’s liens cannot be used; where a mechanic’s lien can be used, there is

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no requirement for a payment bond.

While it may appear then that Chapter 100 projects are exempt from all of these requirements, that is not necessarily so.

It will depend on how directly involved the city is in the construction process.

A city may wish to protect itself by requiring a payment bond or prevailing wage.

Chapter 100 remains one of the most valuable and easily-used tools for local economic development. City officials should be aware of exactly how it works and where the traps are located. Cities should seek out knowledgeable and independent legal guidance during the process to insure success.

Nathan M. Nickolaus is a principal at the firm of Cunningham, Vogel, and Rost P.C. He is a 1988 graduate of the University of Missouri – Columbia School of Law, former general counsel of the Missouri Department of Economic Development, and 2012 Lou Czech Award recipient.

Footnotes are available for this article by contacting MML at (573) 635-9134 or info@ mocities.com

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FEATURE Review

by Joseph C. Blanner, Esq.

Construction Contracts Landmark Legal Decision Makes Governmental Owners Responsible For Damages Attributable To Design Inaccuracies On Public Works Projects It is no secret that Missouri can be slow to change. There seems to be a reticence or skepticism for that which is new and untried. It is this attitude that has led to us being referred to as the Show Me State.

Given this mindset, it should come as no surprise that it took nearly 100 years for Missouri courts to for m a l ly a d opt a doctrine set forth by the United States Supreme Court regarding construction contracts a century ago.

In 1918, the United States Supreme Court found in U.S. v. Spearin, 248 U.S. 132 (1918), that the government offered a warranty “implied by law” to the contractor that the plans provided by the government were adequate for the contractor to perform the work bargained for in the contract. In other words, by providing a set of plans, the government represented to the contractor that the plans would be reasonably accurate for the performance of the work. Since the contractor’s proposal and agreement to perform for a given price were based on those plans, the accuracy of this representation is incredibly important to the contractor.

While this doctrine was widely held and applied in numerous other states, it was not formally adopted in Missouri until the Court handed down 12 theReview September/October 2017

its decision in Penzel Construction Company v. Jackson R-2 School District in February. According to the Court, “after examining Spearin and Missouri precedent, we believe Spearin claims are acceptable vehicles for bringing causes of actions based on deficient plans and specifications in construction projects involving a government entity-owner.”

What Is The Significance To Public Entities Of The Formal Adoption Of The Spearin Doctrine In Missouri?

Spearin claims are important because they provide some means of recovery for contractors who have been provided a set of plans and specifications from a governmental entity that were not accurate. As a result of these errors and inaccuracies, the contractor has incurred costs in excess of those that

were reasonably anticipated at the time it prepared its proposal and entered into the construction contract. Adoption of Spearin allows the contractor to pursue damages associated with the added costs attributable to the design errors. This means that public entities, including cities, counties, school districts, and water and sewer districts, could face added costs for public construction projects where the design documents are deficient or inaccurate.

The Court in Penzel reasoned that the government owner is the one best positioned to bear the risk of loss associated with errors and inaccuracies in the plans and specifications because it prepared or contracted with those who prepared the documents. Typically, in a situation where an owner hires the design professional to prepare the plans and specifications that the contractor is going to construct, the contractor has no claim for damages relating to errors directly against the design professional. This is because there is no contract between the contractor and the design professional. Rather, the contract is between the owner and the design professional. The legal term for this is absence of privity of

contract. Without a direct contract with the design professional, the contractor typically has no claim against it for errors. According to the Court, “placing the burden on contractors to ensure the adequacy of an owner’s plans would reduce the efficiency of the industry that is especially damaging to societal interest when government owners inevitably fund a portion of these increased costs.”

Thus, under Spearin, the contractor can assert a claim against the government owner and the owner can then assert a claim against the design professional.

A good illustration of the foregoing concepts can be seen by an examination of the facts of the Penzel case. There, Penzel was bringing a claim largely on behalf of the electrical subcontractor, Total Electric. Penzel and Total Electric argued that: (1) there were numerous things left out of the electrical drawings; (2) the plans called for incompatible parts; (3) parts were specified that were no longer available; (4) there were code violations; and (5) aspects of the plans were inadequate. As a result of the foregoing, Total Electric argued that it incurred added labor costs due to multiple installations, tracking down the correct parts, remedying situations where the wrong part was listed, etc.

Based on the foregoing, the Court found that, “Penzel has presented sufficient evidence for a reasonable trier of fact to find that the plans were deficient and caused damages.” In other words, under the Spearin doctrine, Penzel could be awarded damages for design errors. It should be noted that the Court extended Spearin claims to contractors and subcontractors.

The Court was not content to stop at the adoption of the Spearin doctrine in Missouri after a century of waiting.

It proceeded to formally authorize the use of the modified total cost method for calculating damages.

What Is The Modified Total Cost Method For Calculating Damages Attributable To Delay, Inefficiencies, Lost Productivity And Defective Design?

To understand modified total cost, it is helpful to understand the total cost

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method of calculating damages. Total cost takes the total costs incurred by a contractor on a project and subtracts the cost that it anticipated incurring, as demonstrated by its bid. The difference between the two is the amount it claims as damages.

As an example, assume that a contractor bid $1,000,000 and the total costs incurred on the project

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were $1,500,000. Using the total cost method, its damages would be $500,000.

There are obvious problems with this method of calculating damages. First, it presumes that the proposal was accurate (i.e. that there were no errors made in preparing it). Second, it presumes that the added costs incurred were not attributable to the contractor and that these costs were reasonable. Because the total cost method is an all-or-nothing www.mocities.com

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proposition, the Court rejected its use in determining the amount of damages.

Missouri requires damages be proved with reasonable certainty.

Going back to the prior example, assume that the contractor underbid by $200,000. He may have missed an aspect of the work or made mathematical errors. His bid reasonably should have been $1,200,000. Because the total cost method does not take this into consideration, he would be awarded $500,000 in damages, rather than the $300,000 in damages he actually incurred.

The modified total cost method takes the total costs incurred by the contractor and the proposal as a starting point for the calculation of damages, but then takes into consideration other factors, such as errors by the contractor. In other words, it allows for adjustments to the contract/proposal amount, the total cost of performance or both.

Thus, according to the Court, “the modified total cost method is more aligned with our State’s contract law

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policy than the total cost method … The goal of the modified total cost method and the goal of Missouri contract law are consistent.” By so finding, the Court recognized for the first time in Missouri the modified total cost method as an appropriate way to calculate damages under certain circumstances.

Under What Circumstances Can The Modified Total Cost Method Be Used?

The Court in Penzel found that the modified total cost method can be used to calculate damages when the facts of the particular case warrant it. In that case, they were found to be warranted because of the “sheer volume and variety of disruptive events.” In other words, it was either highly impractical or impossible to calculate the actual amount of damages attributable to each disruption, delay or error. In these circumstances, the Court found that using the modified total cost method was appropriate.

In so finding, it adopted the following four-part test to determine the appropriateness of the method: (1) the nature of the particular losses make it impossible or highly impractical to determine them with a reasonable degree of accuracy; (2) the contractor’s bid or estimate was realistic; (3) its actual costs were reasonable; and (4) it was not responsible for added expenses.

The foregoing decision will certainly have an impact on public works contracts where the design documents are inaccurate, insufficient or have deficiencies and will impact the method of calculating damages to the contract resulting from these inaccuracies. It should be noted that an application to transfer the case to the Missouri Supreme Court has been filed. While few cases are transferred, it is possible that the Court will agree to hear the case because of the significance of the legal issues presented therein. If it does, the decision adopting the Spearin doctrine and the use of the total cost method for calculating damages could be affirmed, reversed or modified. So, stay tuned.

Joseph C. Blanner, Esq., is with McCarthy, Leonard & Kaemmerer, L.C. He can be reached at (314) 392-5200 or by email at Jblanner@ mlklaw.com.

FEATURE Review

by Lisa Soronen

2018 Supreme Court Preview For Local Governments Lisa Soronen details the four most interesting cases for local governments to be reviewed this coming fall, plus one monumental case still under consideration that will affect every city in America.

Travel Ban The so-called travel ban executive order prevents people from six predominately Muslim countries from entering the United States for 90 days; freezes decisions on refugee applications for 120 days; and caps total refugee admissions at 50,000 for fiscal year 2017. The Fourth Circuit ruled it likely violates the Establishment Clause, noting that its “text speaks with vague words of national security but in context drips with religious intolerance, animus and discrimination.”

The Supreme Court concluded that, until it rules on the merits of this case, the executive order cannot be enforced against persons, including refugees, who have a “bona fide relationship with a person or entity in the United States.”

In Trump v. International Refugee Assistance Project, the Supreme Court will decide whether the decision to

deny a visa is reviewable in this case, whether the travel ban violates the Establishment Clause, and whether the travel ban became moot on June 14.

Technology And The Fourth Amendment In United States v. Carpenter, the Supreme Court will decide whether police must obtain warrants per the Fourth Amendment to require wireless carriers to provide cell-site data.

Cell-site data showed that Timothy Carpenter and Timothy Sanders placed phone calls near the location of a number of robberies around the time the robberies happened. The federal government obtained the cell-site data from Carpenter’s and Sanders’ wireless carriers using a court order issued under the Stored Communications Act that requires the government to show “reasonable grounds” for believing that

the records were “relevant and material to an ongoing investigation.”

The defendants argued obtaining the information was a “search” under the Fourth Amendment, requiring a warrant.

The Sixth Circuit held that obtaining the cell-site data does not constitute a search under the Fourth Amendment because, while “content” is protected by the Fourth Amendment, “routing information” is not.

House Parties In District of Columbia v. Wesby,* the Supreme Court will decide whether, when the owner of a vacant house informs the police that he has not authorized entry, an officer assessing probable cause to arrest those inside for trespassing may discredit the suspects’ claims of an innocent mental state.

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For speech to be protected by the First Amendment, it must convey a particularized message. According to the Colorado Court of Appeals, “Masterpiece does not convey a message supporting same-sex marriages merely by abiding by the law and serving its customers equally.”

Regarding Masterpiece’s free exercise of religion claim, the Colorado Court of Appeals applied rational basis analysis to Colorado’s law and “easily conclude[d] that it is rationally related to Colorado’s interest in eliminating discrimination in places of public accommodation.”

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Police officers arrested a group of late-night partygoers for trespass. The party-goers gave police conflicting reasons for why they were at the house (birthday party v. bachelor party). Some said “Peaches” invited them to the house; others said they were invited by another guest.

Police officers called Peaches, who told them she gave the partygoers permission to use the house. But she admitted that she had no permission to use the house herself; she was in the process of renting it, and the landlord confirmed by phone that Peaches hadn’t signed a lease.

The partygoers sued the police officers for violating their Fourth Amendment right to be free from false arrest.

D.C. Circuit granted the partygoers summary judgment, reasoning police officers lacked probable cause to make the arrest for trespass because “all of the information that the police had gathered by the time of the arrest made clear that the plaintiffs had every reason to think that they had entered the house with the express consent of someone they believed to be the lawful occupant.”

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Religious Freedoms The issue in Masterpiece Cakeshop, L t d . v. C o l o r a d o C i v i l R i g ht s Commission,* is whether Colorado’s public accommodations law that prohibits discrimination on the basis of sexual orientation, violates a cake artist’s First Amendment free speech and free exercise rights.

The owner of Masterpiece Cakeshop, Jack C. Phillips, declined to design and make a wedding cake for a samesex couple because of his religious beliefs. The couple filed a complaint against Masterpiece, claiming it violated Colorado’s public accommodations law.

Masterpiece argued that being required to comply with the law violates Phillips’ free speech and free exercise rights. The Colorado Court of Appeals rejected both of Masterpiece’s claims.

Masterpiece argued that wedding cakes inherently communicate a celebratory message about marriage and that, by forcing it to make cakes for same-sex weddings, it is being unconstitutionally compelled to express a celebratory message about same-sex marriage that it does not support.

The billion-dollar question for local governments is whether the Supreme Court will take a case where it is asked to overturn Quill Corp. v. North Dakota (1992). In Quill, the Supreme Court held that states cannot require retailers with no in-state physical presence to collect sales tax. In Direct Marketing Association v. Brohl (2015), Justice Kennedy stated that the “legal system should find an appropriate case for this court to reexamine Quill.” South Dakota passed a law requiring remote vendors to collect sales tax, which is currently being litigated in state court.

If the South Dakota Supreme Court strikes down this law by the end of August, it is possible the Supreme Court could decide this question by June 2018. *Indicates a case in which the SLLC has filed or will file an amicus brief.

Lisa Soronen is the executive director of the State and Local Legal Center (SLLC) that files Supreme Court amicus curiae briefs on behalf of the Big Seven national organizations, including the National League of Cities, representing state and local governments.

She is a regular contributor to CitiesSpeak.

This article reprinted with permission from the author. The article originally appeared on the National League of Cities' blog, CitiesSpeak, at https://citiesspeak. org/2017/07/24/2018-supreme-court-previewfor-local-governments/ .

Experts in Municipal Bond Financing Carl Ramey | (314) 342-2242 | rameyc@stifel.com Martin Ghafoori | (314) 342-8467 | ghafoorim@stifel.com Brittany Pullen | (314) 342-2936 | pullenb@stifel.com 501 North Broadway | St. Louis, Missouri 63102 Stifel, Nicolaus & Company, Incorporated | Member SIPC & NYSE | www.stifel.com/publicfinance

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18 theReview September/October 2017

Thank You to MML's 83rd Annual Conference Sponsors!

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MML Board of Directors' August Meeting The MML Board of Directors incorporated a fun event into their annual August meeting, by participating in a Missouri community mural painting.

The design was created by Wildy's World Art Studio in Columbia, Missouri.

Each board member present had the opportunity to take part in the project, and the artist will complete the finishing touches. The mural will be displayed at the MML Annual Conference and other events.

Meeting topics included final plans for the 2017 Annual Conference;strategic plan discussion; legislative directions for 2018; and the presentation of the past president's plaque to Mayor Randall Rhoads of Lee's Summit, Missouri.

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LOCAL GOV Review

West Gate Region Civic Leadership Awards The West Gate Region of the Missouri Municipal League honored outstanding civic leaders in 23 member cities at its Civic Leadership Award Banquet on July 20 in Blue Springs, Missouri. The banquet gave West Gate communities an opportunity to recognize the contributions of business and civic leaders in developing stronger cities. Each mayor selected an outstanding civic leader in his or her community. Each leader was presented with a certificate of appreciation. The West Gate Region of the Missouri Municipal League consists of member municipalities in the five metropolitan counties of Jackson, Clay, Platte, Ray and Cass.

Honorees were recognized from the following cities: Belton, Blue Springs, Excelsior Springs, Gladstone, Grandview, Harrisonville, Houston Lake, Independence, Kansas City, Lake Winnebago, Lee’s Summit, Liberty, North Kansas City, Oak Grove, Parkville, Pleasant Valley, Raymore, Raytown, Riverside, Smithville, Sugar Creek, Weston, and Wood Heights.

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GETTING TO KNOW YOU In this issue, North Kansas City Council Member, Ward I, Bryant Delong shares some thoughts about local government service.

about issues and the direction they believe the community is heading. I’ve only been an elected official a short time but it has been a very rewarding experience.

Bryant Delong Council Member Ward 1 North Kansas City, Missouri

What Sparked Your Interest In Local Government?

Delong: I first became interested in local government after attending my first city council meeting in Farragut, Tennessee. I went to the meeting that night to fulfill one of the requirements of the Boy Scout merit badge Citizenship in the Community. The topics that night were not the most thrilling — discussion of new street lights and how late baseball field lights could be on, but it has stuck with me ever since.

What Advice Would You Offer To Someone Considering Services As A Local Government Official In Their Community?

Delong: I would suggest devoting time to getting out and talking to neighbors, as well as attending local and regional events. That’s where you’ll get the “pulse” for how the community feels

24 theReview September/October 2017

In Your Opinion, What Are The Most Important Issues Facing Local Government Today?

Delong: Aging infrastructure and preemption are a couple issues I feel are facing local governments everywhere.

Aging infrastructure, particularly underground, is and will continue to be a major issue for many municipalities.

Waste water treatment plants nationwide alone will need “at least $271 billion to meet current and future demands.” Infrastructure upgrades may not get all the accolades, but we need to make sure we are not ignoring it. In terms of preemption I think we need to continue to work towards a balance of local, state, and federal control. I think the MML does a good job fighting for Missouri municipalities in this area. I also think we need to be more cognizant of youth participation in local government.

How Would You Describe Your City To Someone Who Has Never Visited?

Delong: I saw this description in the headline of an article recently about

North Kansas City and found it very fitting, “The best of both worlds: Suburban ease with urban charm in KC.”

What Are Your Interests Outside Of Local Government?

Delong: Spending time with wife and two boys (1.5 and 2.5 years old.)

Following all Kansas City sports teams.

I’ve also been a Sporting Kansas City season ticket member for the last four years.

Where Would You Most Like To Travel, And Why? Delong: My wife and I met while working for United Airlines, so we spent a lot of our free time using our flight benefits to travel the world. We spent a lot of that time exploring Asia and Europe and parts of the US. I think a lot of our future trips will focus more on exploring the US and some Central and South American countries.

MML would like to learn more about your local government career! If you would be interested in participating with the Review's "Getting To Know You" feature, contact Laura Holloway at Lholloway@mocities.com.

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NEWS From The Bench

by Kenneth Heinz

Court Focuses On Park Photography Permits

While it would seem unlikely that the picturesque surroundings of a public park in a community of 400 residents would become the subject of a decision of the United States Court of Appeals for the Eighth Circuit, that is exactly what happened in the case of Josephine Havlak Photographer, Inc. v. Village of Twin Oaks, decided July 26, 2017.

Twin Oaks is a community in St. Louis County. In 1994, the Village dedicated an 11-acre public park. The park includes a walking trail, lake, waterfall, gazebo, bridge, playground and sporting amenities. In 2011, the Village upgraded the playground and the park experienced a dramatic increase in visitors, including a large number of commercial photographers.

A photographer testified that because of the gazebo, waterfall, bridge and other garden structures, the park presented “a lot of good photo opportunities in a small area.” Apparently, commercial photographers began competing for shooting locations within the idyllic park. There were often up to eight at a time, who would congregate for photos 26

theReview September/October 2017

on the park bridge and use the park’s restroom facilities as dressing rooms. In reaction to this increased overexposure, the Village notified photographers of its ordinance prohibiting commercial activity within the park.

Plaintiff is a professional photographer who describes her work as conveying an expressive message. She filed suit against the commercial activity ban even though she had never used the park for photography before the lawsuit.

In response to the lawsuit, the village board amended its park ordinance to create a permit process for commercial use of the park. The ordinance allowed for automatic approval of events lasting less than an hour, having fewer than 10 people and with 48-hours advance notice. The permit fee was $100. Larger events required board approval with consideration of the risk of damage or injury, disruption to public use and other factors. Plaintiff amended her lawsuit to challenge the new permitting ordinance.

Plaintiff first challenged the village ordinance as being overbroad facially.

The Eighth Circuit dismissed the facial overbreadth challenge because there was no evidence of any allegedly unconstitutional scenarios as applied to the plaintiff.

The Eighth Circuit then analyzed the plaintiff ’s challenge that the permitting process abridged her freedom of speech rights under the First and Fourteenth Amendments. The court acknowledged that permitting is a legitimate manner of regulating competing uses in a public forum like a park. The court pointed out that regulation must not be based on the content of the message. This was made clear by the U.S. Supreme Court in cases such as Reed v. Town of Gilbert, 135 S. Ct. 2218 (2015). The Court found that the ordinance was content neutral since it applied to all commercial enterprises, not just photographers.

The court then considered whether the ordinance was narrowly tailored to serve significant government interests of reducing congestion and maintaining park safety. The court answered in the negative to the photographer’s argument

that the ordinance was overbroad because it applied to groups of all sizes, citing the history of congestion and the limited facilities. The court also rejected the plaintiff ’s argument that the ordinance was overbroad because it was not restricted to certain

"

First Amendment issues are difficult for municipalities. This case is a good portrait of how proper preparation of ordinances and presentation of evidence can lessen the chances of rulings against the local government.

"

congestion points, since it regulated all commercial activities, not just photographers. The court next rejected the plaintiff ’s argument that the twoday application period for small groups and 14 days for larger groups “chilled artistic expression.” Plaintiff argued that unpredictable light and weather conditions required spontaneity. The court held that these time periods were reasonable for photographers to obtain permits. Next, the court rejected the plaintiff ’s argument that the $100 permit fee was excessive. The court found that the evidence of the overall cost of employing an officer for patrol and permitting was sufficient.

Next, the plaintiff argued that the park was “unique” and “one of a kind” so that there were no other reasonable alternatives. The court answered in the negative, pointing out that the natural attributes of a park exist in multiple locations across the St. Louis area. Finally, plaintiff argued that the licensing ordinance was impermissibly

vague. The court found, however, that the ordinance provided articulated standards and objective factors for the clerk and board to consider in granting permits.

First Amendment issues are difficult for municipalities. This case is a good portrait of how proper preparation of ordinances and presentation of evidence can lessen the chances of rulings against the local government.

Kenneth J. Heinz is a principal with Curtis, Heinz, Garrett & O'Keefe, P.C. Heinz serves as general counsel for several communities.

Contact the firm at 314-725-8788 or www.chgolaw.com.

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MEMBERS' Notes Lee's Summit Receives AAA Bond Rating

MML Calendar of Events September 10-13 ����� MML 83rd Annual Conference, Osage Beach, Missouri 15 ����� Public Disclosure Ordinance Deadline 22 ����� Emerging Local Government Leaders Pop Up Conference, Kansas City, Missouri 27 ����� Missouri Public Utilities Assoc. Annual Meeting, Osage Beach, Missouri

October 11 ����� MML Webinar: Business Retention And Expansion

The city of Lee’s Summit has received the highest possible bond rating, AAA, from Moody’s Investors Service. The new AAA rating is attributed to the City’s strong fiscal management; healthy reserve balance; growing tax base; favorable location in the Kansas City, Missouri, metropolitan area; manageable debt and pension levels. The rating also recognizes that the City’s financial management practices, along with a growing local economy, will continue to support a stable and manageable financial future.

13 ����� MoGovernment Finance Officers' Association Fall Seminar, Columbia, Missouri

Hazelwood Lifeguard Honored For Quick Intervention

18 ����� City Clerks And Finance Officers' Association South Central Meeting

A city of Hazelwood lifeguard, Anne Fitzgerald, quickly reacted to a woman who went into cardiac arrest at the Hazelwood Aquatic Center in July. The lifeguard immediately relied on the lifesaving skills she learned in her lifeguard training classes and started administering CPR and chest compressions. A handful of lifeguards stepped in to help and brought out the AED machine. After the second shock, the woman’s heart started beating again. A few minutes later, she regained consciousness.

18 ����� MML Central Regional Meeting, Jefferson City, Missouri 19 ����� City Clerks and Finance Officers' Association Eastern Meeting 19 ����� MML Northwest Regional Meeting, Chillicothe, Missouri 19-20 ����� Missouri Local Government Employees Retirement System Annual Meeting, Osage Beach, Missouri 22-25 ����� ICMA Annual Conference, San Antonio, Texas 26 ����� MML West Gate Regional Meeting, Weston, Missouri

November

7 ����� Election Day

10 ����� MML Office Closed: Veterans' Day Observed 15 ����� MML Webinar: Fundamentals of Municipal Government 15-18 ����� National League of Cities' City Summit, Charlotte, North Carolina

Certified Municipal Clerk

December

7 ����� MML Webinar: Everyone Needs A Coach

15 ����� First Day of Candidate Filing Find more events and details on www.mocities.com and in the MML monthly e-newsletter.

MML's Latest Member News

@mocities www.facebook.com/mocities www.linkedin.com/company/mocities www.mocities.com (573) 635-9134

30 theReview September/October 2017

Fitzgerald and the other lifeguards involved received a certificate of appreciation from the Midwest Chapter of the Sudden Cardiac Arrest Association.

Watch for the latest member news on the MML website at www.mocities.com.

The Latest News section features the latest updates and achievements from member cities. If you have something to submit, please email Lori Noe at Lnoe@mocities.com!

Clayton City Clerk June Frazier has earned the designation of Certified Municipal Clerk (CMC) awarded by the International Institute of Municipal Clerks (IIMC), Inc. IIMC grants the CMC designation only to those municipal clerks who complete demanding education requirements and who have a record of significant contributions to their local government community and state.

Congratulations June!

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