Chief Administrative Officer John Kelly hopes to save taxpayers millions by appealing the latest ruling in a lawsuit the city filed in 1996 to take over Dedeaux Utility Co. after an annexation.
Gulfport has to date paid $11.4 million for the utility company that served 2.6 square miles of Orange Grove. The Dedeauxs wanted $9 million when the court battle began in 1996, but the city felt the water and sewer company was worth $2 million.
The Dedeauxs appealed the first two verdicts, when juries set values lower than the family was willing to accept. They won each appeal to the state Supreme Court. Each time a jury raised the utility’s value, the city had to pay interest on the amount owed, dating to 1996.
The third verdict, in 2013, set the utility’s value at $8 million. The Dedeauxs said they were willing to accept that amount, but the city appealed the decision. The city lost its appeal on the utility’s value, but the Supreme Court returned the case to an eminent domain court for a special judge to set an interest rate on Gulfport’s final payment of $2.7 million — the difference between what previous juries had ordered the city to pay and the value set by the third jury.
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Gulfport has paid the $2.7 million from its BP settlement fund, which reimbursed the city for financial losses from the 2010 oil catastrophe in the Gulf of Mexico. Judge William Barnett set the interest rate in August at 8.17 percent for the majority of the utility’s assets.
The interest on the $2.7 million adds up to $3.7 million. Kelly said the city believes the interest payment should be in line with what the city spends to finance water and sewer improvements, which would be no more than 4 percent.
“The judge heard evidence,” said Biloxi attorney Peter Abide, who represents the Dedeauxs. “He heard from both sides. Eight percent is routinely awarded in these sorts of cases where people don’t have to wait 20 years to be paid. That was one of our arguments: It should be at least 8 percent because we’ve had to wait 20 years to be paid.”
The city paid 8 percent on the previous two jury awards, Abide said, and paid 8 percent interest for Lyman Utilities in eminent domain litigation. “This is the first time they’ve challenged that rate,” he said.
Meanwhile, interest on the $3.7 million in interest is running at a court-set rate of 7.75 percent, or $787 a day.
“If the city is correct on appeal, it could realize a savings to the taxpayers of around $2 million,” Kelly said in an email to the Sun Herald. “The focus of this remaining issue is narrow. Understandably, the city cannot litigate this matter in the forum of public opinion, but will let the Mississippi Supreme Court have the final say.”
He said the city has paid an additional $522,100 in legal fees to its private attorney, Gary White, who bowed out of the case over the summer. In-house counsel Jeff Bruni is handling the city’s appeal. Kelly said expert fees have cost the city about $84,000.