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8:25 AM Tue, Sept. 18th

Pure Wafer vs. City of Prescott lawsuit may require outside counsel

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PRESCOTT - Outside legal representation for a lawsuit the city is facing over its agreement with Pure Wafer, Inc. will be among the issues the Prescott City Council will consider this week.

The study session will take place at 3 p.m. Tuesday at Prescott City Hall, 201 S. Cortez St.

The agenda includes a professional services agreement with the Dickinson Wright Mariscal Weeks law firm for representation for a suit that Pure Wafer brought against the city in late September.

Pure Wafer's lawsuit maintains that the company (formerly Exsil, Inc.) entered a "bargain" with the city in 1997 under which the company would build a $45 million silicon wafer reclamation facility that would employ as many as 100 people.

In exchange, the city would provide water capacity of up to 195,000 gallons per day, and sewer capacity to receive up to 195,000 gallons per day.

"Under that bargain Pure Wafer and the city understood, expected and agreed that Pure Wafer would be discharging into the city's sewer system each day up to 195,000 gallons of effluent which would contain fluoride of up to 100 milligrams per liter," the lawsuit states.

The lawsuit is related to the Arizona Department of Environmental Quality (ADEQ) consent order that the city approved this past May, in which it agreed to deal with the high levels of fluoride that have been detected in the city's treated sewage.

Throughout 2012, Prescott's effluent reportedly tested above the state's fluoride standards. The city attributed the fluoride issue to the Pure Wafer facility, which is located near the Prescott Airport. ADEQ gave the city a year to correct the problem.

City officials and a Pure Wafer spokesman said at the time that the two sides differed on the interpretation of a development agreement that Exsil and Prescott entered into in 1997.

Throughout this past summer and fall, the City Council conducted a number of closed-door executive session discussions on the Pure Wafer situation.

Then, in late September, attorneys for Pure Wafer filed a lawsuit in U.S. District Court, seeking an injunction against an ordinance that the city approved in May, which implemented new rules for the pretreatment of wastewater discharges.

The lawsuit maintains that the design, approvals, construction and testing of the facilities required by the new city ordinance would take at least nine months and would cost $1 million or more.

In addition, the lawsuit, states, the annual operating costs for the new facilities would be $325,000 or more for the remaining life of the facility - possibly exceeding a total of $11 million.

On Oct. 30, the city filed an answer and a counter claim on the matter, maintaining that the company knew or should have known of the city's obligations, and that the facilities were releasing excessive amounts of fluoride.

The city's answer adds that the company knew that it "had already been required to reduce the concentration of fluoride in its effluent, that applicable federal, state and local environmental laws were subject to material change and that the development agreement on which Pure Wafer purports to rely required the developer... to always operate its wafer cleaning facility in full compliance with all applicable environmental laws and regulations."

Although the City Council will be considering entering a contract with the Dickinson Wright law firm, a city memo states that the terms of the agreement are a part of a "confidential and privileged" engagement letter.

City Attorney Jon Paladini maintained Friday that the expected cost of the legal representation is not public information, because releasing it would reveal the city's legal strategy to the opposing side.

"You don't disclose what the litigation might cost the city, because that factors into the legal strategy," Paladini said. "The obligation we have is to protect the (wastewater) rate payers."

Paladini said he "wholeheartedly disagreed" with the city's previous practice of revealing the expected cost of outside legal representation.

Attorney Dan Barr, a media law expert with the First Amendment Coalition of Arizona, said Friday that the cost of the outside representation would eventually become public information, regardless of whether the city releases it prior to the council vote.

"Even if they had an argument (for confidentiality), as soon as they present the bill, that is a public record," Barr said.

Paladini allowed that the costs would be public information after the fact. "We can discuss how much we've spent to date, but not how much we're planning to spend," he said.

In other action, the council will:

• Hear a progress report on the city's new regulations on group residences.

The council approved the new regulations on Sept. 19. Although homes that were in existence at the time were not subject to the new rules, the city ordinance included a 60-day period for homes to voluntarily register to establish that they were in existence before the approval.

By late Thursday afternoon, Prescott Planning Manager George Worley reported that 27 existing group homes had registered under the new rules.

He added that a number of other homes had indicated interest in registering. The deadline for registration is today, and Worley said he would present the final number to the council on Tuesday.

• Consider an agreement with the Town of Chino Valley, replacing the town's current water transportation tax with a fee. Under the agreement, the amount the city would pay each year for the water it exports from Chino Valley would total about $60,000. City Manager Craig McConnell said the current amount for the tax totals more than $100,000 per year.

Follow Cindy Barks on Twitter: @Cindy_Barks.