The V&T Railway Commission on Monday rejected a claim for condemnation costs which would have pushed the price of relocating an asphalt plant out of the railroad right of way to more than seven times the original contract price.
Commissioners unanimously agreed that, not only is Road and Highway Builders of Sparks not entitled to the $1.3 million in additional claims filed, it must return the bulk of the $200,000 they have already been paid.
The claim was filed over costs of moving the RHB asphalt plant located along the V&T's route between Virginia City and Mound House. The commission condemned a piece of that property as right of way for the historic railroad reconstruction project.
Under federal law, when a public body takes land by condemnation, it must not only pay for the land but the cost of relocating any business equipment and plants in the right of way.
Under the original contract, commission lawyer Michael Rowe said RHB was to be paid the actual cost of relocating it's aggregate stockpiles as well as the marinating and hot plants which produce asphalt for use in building roads. The contract was for up to $200,000.
The company originally submitted a bill to the V&T Commission for $563,179 but the commission rejected it, paying, instead, the $200,000 agreed to in the contract.
After the Nevada Department of Transportation advised RHB it could submit more invoices to recoup relocation costs, the company submitted bills seeking an additional $1,321,379. If paid, that would push total relocation costs to better than $1.5 million.
"The billing submitted in July included costs far exceeding documentable costs for manpower, equipment and invoices," said Rowe in a letter to the commission.
Rowe based his conclusion on an analysis by engineer Christopher Beck who reviewed all the work done to relocate the equipment and get it back into operation as well as contractor costs, employee time sheets and other costs.
Beck told the commission RHB was entitled to $61,269.92 for the verified costs of moving the hot plant, scales and other equipment. He said other costs which he deemed profit were eliminated because the federal law doesn't permit a company to make a profit from condemnation relocation costs.
He rejected all other claims except for $5,531 in electrical work to put the hot plant back in operation.
He not only rejected the $1.3 million claim, he told the commission RHB was entitled to just $66,801 in relocation costs and recommended the company be made to pay back $133,199 of the $200,000 they were paid last year.
Rick Thompson of RHB objected to the entire hearing saying the company was never informed of all the items it could claim as legitimate relocation costs and wasn't informed that Monday's meeting was it's final appeal before the commission.
"We didn't know what you were going to do today," he said. "This is news to us that this is an appeal and your final decision is going to rely on Mr. Beck's report."
Rowe told the commission there were numerous conversations and a total of five letters fully informing RHB's lawyer of the process, the information needed by Beck and the company's rights.
"It seems to me your argument is not with us," said commissioner John Tyson. "It should be with your attorney."
The biggest items recommended for rejection by Beck were $309,000 for "standby" costs at the hot plant, $58,000 for standby at the marination plant which prepares the raw materials making up the asphalt and $582,000 for standby costs at the aggregate crusher.
"The individual is entitled to only what his costs are," said Beck. "He is not entitled to profit."
Costs, he said, are "what is actual, reasonable and necessary."
"You are entitled to costs. Standby is not a cost."
He added that those standby periods when the equipment wasn't in production were the fault of RHB since the company allowed its air quality permit to expire during that period and was prevented from running the plants by the Nevada Division of Environmental Protection.
Thompson said it wasn't that simple, that the permit renewal involved much more than just a quick filing with the state because the plants were moved to a different location.
He also said the contract didn't address all the costs needed to get the company's asphalt plant back in operation once the equipment was moved.
"We were not aware of the extent of modifications needed to get back to a safe and efficient quarry," he said adding that those costs should be considered valid relocation costs.
Former chairman Bob Hadfield moved to deny the claim and to demand repayment of the $133,000 Beck and Rowe concluded RHB has been over-paid for the relocation. The vote was unanimous.
Thompson said after the vote he isn't sure what the company's next step is.
"Probably litigation," he said.
