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N.D. lawmakers narrowly deny funds to pay private attorneys in Heritage Center lawsuit

BISMARCK -- By just one vote, state lawmakers on Monday denied a request for $75,000 to pay private attorneys hired by the State Historical Society to fight a lawsuit brought by the general contractor who oversaw the North Dakota Heritage Center ...

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BISMARCK - By just one vote, state lawmakers on Monday denied a request for $75,000 to pay private attorneys hired by the State Historical Society to fight a lawsuit brought by the general contractor who oversaw the North Dakota Heritage Center expansion.

Historical Society Director Claudia Berg said she was "very surprised" that the Budget Section voted 18-19 to withhold the funds, after the state Emergency Commission voted 4-2 last week to recommend moving the $75,000 from its $700,000 contingency fund to the historical society.

Berg said she doesn't know where the agency will find the money in its budget, which already was cut by 4.05 percent, or $875,000, in February to help balance a projected $1.07 billion revenue shortfall. The agency's total budget is about $28.4 million, though Berg said much of that is for projects.

"It's going to be very difficult," she said. "If we could have covered it, we would have been doing that to begin with."

Wahpeton-based Comstock Construction Inc. sued the historical society for breach of contract in March, claiming the agency improperly withheld payment for work done on the $51.7 million Heritage Center expansion. The 97,000-square-foot project began in 2011 and was completed in 2014, roughly doubling the size of the original museum that opened in 1981.

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The historical society is withholding more than $387,000 from Comstock for what it says is unfinished work, including repairs to concrete that's already cracking. In April, the agency hired Serkland Law Firm of Fargo, which already was representing the North Dakota Veterans Home in a similar ongoing lawsuit filed by Comstock in May 2013. The funds requested Monday were to pay Serkland's anticipated legal fees through the end of the 2015-17 biennium next June.

Budget Section members opposed the transfer for different reasons.

Rep. Jeff Delzer, R-Underwood, who also voted against it on the Emergency Commission, reiterated his belief that the legal fees should come from the agency's operating budget.

Senate Minority Leader Mac Schneider, an attorney and Democrat from Grand Forks, said after voting "no" that he was disappointed that the attorney general's office - which normally represents state agencies in lawsuits - wasn't there to explain the situation. He said his concern is what type of legal work should be done in-house versus hiring outside counsel.

"The State Historical Society should not have to come up with this money from their budget," he said, adding, "I do not feel good about (voting 'no')."

Historical society officials and Attorney General Wayne Stenehjem have said outside counsel was needed because his office is short-staffed and lacks an in-house expert on construction litigation. Schneider said the office should have adequate staff to handle such cases and try to head them off before they reach court.

Senate Majority Leader Rich Wardner, R-Dickinson, who voted for the transfer, noted an amendment would have required any unspent money or legal fees recouped through the state's counterclaim to be deposited back into the contingency fund.

Berg said the agency will "try to correct some information that's out there" and may return with a similar request at the Budget Section meeting in September. In the meantime, agency officials will look for places to pull the funds from the budget, while also planning cuts to meet Gov. Jack Dalrymple's request for 90-percent budget proposals for 2017-19.

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"It means programs. It means staff," she said.

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