Gladstone, O’Connor settle lawsuits

GLADSTONE — After more than two years of legal battles and more than $200,000 in legal fees, the city of Gladstone finally ended a series of lawsuits with former City Commissioner Mike O’Connor by approving a settlement agreement Wednesday night.

“In approving this settlement agreement with Mike O’Connor, the city will not only end the lawsuits but also save the city thousands of dollars on legal costs that would have been spent defending the city,” Mayor Joe Thompson, who did not comment on the settlement during the special meeting, said in a statement released after the meeting had ended.

O’Connor’s relationship with the city began in 2015, when he was elected to the commission on a platform that included abolishing the city’s downtown development authority and making fundamental changes to utility billing to make each utility entirely self-sufficient. His official time with the city ended on Sept. 26, 2016 when he resigned suddenly minutes before a meeting after learning he would be required to sign a non-disparagement agreement as part of the termination settlement with former City Manager Darla Falcon.

However, O’Connor did not fade quietly into the background. Shortly after his departure, he filed a complaint with the Michigan State Police regarding the DDA and the use of DDA funds. The Delta County Prosecutor’s Office did not file charges in the case after determining there was “no evidence of criminal wrongdoing by any individual.”

While the complaint was being investigated, O’Connor took matters into his own hands. Adopting the name “Citizen Mike,” O’Connor waged a mass mailing campaign against the city and the DDA, circulated a petition to have the DDA abolished, and started a corporation called “906 Justice,” which maintained a website and, for a time, a storefront office. He also hired a staff attorney for the corporation with the express goal of suing the city, and, while suing the city, sought to be reelected to the commission.

O’Connor’s first lawsuit was filed on June 28, 2017 and by October of 2017 he had filed three lawsuits against the city and one against City Clerk Kim Berry. Two of the suits were consolidated by the court, and the suit against Berry was dismissed earlier this year.

The settlement reached Wednesday addresses O’Connor’s first lawsuit — known as the “DDA Lawsuit” — which challenged the constitutionality of the DDA, the amount of tax incremental revenue captured by the DDA, and how that revenue was used. The settlement also addresses what has been dubbed the “Headlee Lawsuit,” which claimed several transfers from the city’s electric, water, wastewater, and solid waste funds to other city funds or for payments to reduce the city’s unfunded liability to the Michigan Municipal Retirement System were violations of the Headlee Amendment of the Michigan Constitution.

A third lawsuit addressed in the settlement was the Oct. 9, 2017 suit for injunctive relief filed by the city against O’Connor after he claimed to represent the city at a meeting of the state tax commission. At the time, O’Connor asked the tax commission to allow the Delta County prosecutor — which had already declined to press charges against the city and DDA — to investigate and take action on $1,500,000 he claimed the city had fraudulently received.

Under the eight page settlement approved unanimously by the commissioners at the special meeting Wednesday, neither party admits fault or liability related to any of the suits. O’Connor, who was not present Wednesday but had previously signed the agreement, will dismiss all of his lawsuits without paying any costs or attorney’s fees to the city. The city also agreed to dismiss its suit against O’Connor, but will pay $35,000 into a trust account for O’Connor’s attorney Andrei Ciobanu.

“That’s what the legal council recommended we do with the funds,” City Manager Darcy Long told the Daily Press following the meeting, adding it was a normal practice to place legal funds into a trust.

The city also agreed to enter into contracts with two consulting firms within 90 days. Consultants from Utility Financial Solutions, LLC. of Holland, Mich. will perform a cost of service and a utility rate study for the electric, water, wastewater, and solid waste funds during the 2019-2020 fiscal year. Joseph Turner of Michigan Property Consultants, LLC., of Saginaw, Mich., will review the capture of the assessed value of the properties within the DDA district that were relied on for funding the DDA in the fiscal years between 2009 and 2018.

“Utility rate studies are a common process done by utilities and will help the Gladstone Commission in future budgets process set rates based on the most current information,” Commissioner Dave Phalen, who was the only commissioner absent from the meeting, said in a statement. It was noted by Long that despite not being there to vote, Phalen had expressed his support of the agreement previously.

While the majority of commissioners did not comment on the settlement agreement during the meeting, instead releasing statements made prior to the meeting or during the meeting’s brief closed session in a press release, concerns were raised by Commissioner Darin Hunter that the city would be bound to raise rates if the consultants recommended to do so. Under the settlement, the city is required to abide by the recommendations made by UFS and Turner so long as the recommendations are consistent with the law.

“We don’t know what’s going to happen on that,” said Long, adding it was “not likely to happen.”

The only other issue addressed Wednesday was an amendment to a purchase agreement with Rock Electric Service for the lot adjacent to the former Stropich gas station building. Greg Styczynki, who recently purchased the former gas station from the city for $30,000, will pay the city an additional $3,000 for the lot, where he intends to build a home.