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Sioux Falls, SD 57104


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The Chamber Advocate

October 06, 2017

The Events Center Siding Settlement

On Tuesday, the Council heard a presentation and had an extended dialogue regarding the recently released settlement on the Events Center siding. A lot of information was presented and good questions were asked. We’ll reflect on a few areas that seem central to the issue.

First, is the issue of the settlement itself. When the administration was faced with what was generally considered “non-conforming” work, it began negotiations with the construction manager and others. In the simplest terms, it seemed there were two polar options – one was to demand remedial work to fix or replace the siding while the other was to negotiate a settlement. Based on advice from professionals that replacement may not correct the aesthetic issue and that the siding was doing its job of protecting the building, the administration decided to pursue a settlement. 

Next, is the confidentiality of the settlement. Two things seem clear, first the parties believed that they had the legal right to keep the terms confidential and second, the private parties requested confidentiality, not the city. The city insisted on releasing the general financial framework of the settlement, but that was all that could be divulged. As we now know, the State Supreme Court ruled differently and compelled the release of the settlement’s details.

Third, the city stated that the settlement’s value was $1 million. Of that, some $444,000 was a cash settlement, $41,000 was a payment avoided and the remaining $514,000 was the early release of dollars held in the construction manager’s contingency fund. This may be the most controversial issue.

To recap, the administration made a judgment call that a settlement was better for the city than pursuing a siding replacement solution which may have caused protracted litigation and was not guaranteed to remedy the aesthetic issue. Plus, the siding was no threat to the integrity of the building. Also, the parties believed it was legally permissible to keep the terms confidential and it seemed to be a condition precedent to getting the deal done. Some may continue to disagree with these decisions, while others are more concerned about the general issue of transparency.

As for how the $514,000 was described, there seem to be a couple ways to interpret it. One interpretation is that the construction manager released part of their contingency and the impact to them is they are forfeiting their right to use these funds to address issues that might emerge in the future. The CM gave up something (future protection) and the city received something (a guaranteed release of the contingency). The other interpretation is that these dollars would most likely be returned to the city in the future so the settlement was not really a benefit to the city if no other defects were discovered. Of course, the only way to know this for certain is to be able to predict the future. Both are plausible positions, and we will not know which one was optimal until 2024 since that is the amount of time latent defects, if discovered, could have been covered by these funds.

One final issue that lingers is whether the siding, as it exists, is doing its job and protecting the building as it should. While city professionals noted that there are no structural threats to the building, the Council is asking for confirmation from an external source. We would like to see the administration provide the requested confirmation to put the issue of structural integrity to rest. It appears the Council will continue this discussion at a future date.


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