Ely City Councilwoman Michelle Beecher, Mayor Pro Tem, presided over two agenda items that were related to the Nevada Northern Railway.
The first agenda item was to discuss and take action on discontinuing the May 23, 2019, proposed settlement for the City of Ely versus S&S Shortline Leasing, LLC.
The offer was that the city would dismiss its claims in the litigation with prejudice. S&S would pay the city $150,000 for all alleged damages. The dismissal would resolve all claims by both sides regarding past and future amounts due under the lease/joint development agreement.
The city and S&S would enter into an agreement to lease all of the land the city owns under what has been referred to as the Nevada Northern Railway. The lease would be for 99 years at $50,000 a year.
This amount would stay consistent for 1-5 years of the lease. For years 6-10 the lease would increase by 1 percent. In years, 11-15, the lease would increase an additional 1 percent. In 16 years, the parties would meet to discuss the cost adjustment to the yearly amount of the lease for the next five years.
The city would keep its rights of way on both sides of the track. If S&S removes any track, it will replace the same within three years of removal.
S&S would pay the city $225,000 for all of the assets above the ground on the leased property, such as rail, ties, ballasts, etc. Along with several other key points of the settlement offer.
Mark Bassett, executive director of the Nevada Northern Railways’ Foundation, explained how the initial lawsuit all began.
“Over five years ago, just after the city council elections, three hours and 11 minutes before the canvass of the votes, the City of Ely, filed a lawsuit against S&S,” he said. “The lawsuit was in the name of the City of Ely, and also the railroad foundation. At this particular time we were not informed of the lawsuit, the foundation found out about the lawsuit when S&S called and asked why are you suing me?
“The lawsuit has been percolating for five years now. It is set to go to trial this October, we have continued the trial more than one time, and the city and the foundation came together in 2019 to work together to resolve the lawsuit.”
Bassett went on to explain that the Sunday before the 2019 city council meeting, the foundation received notice that the joint prosecution agreement that was entered upon with the city and foundation had been terminated. On May 23, 2019, the city council approves the settlement offer.
“This is not a settlement agreement yet, you have an agreement to agree. The foundation board has voted unanimously to continue with the lawsuit. The foundation would really truly like to see it go away, but at this particular point and time, the feeling of the foundation is that we need to continue it and the foundation really hopes the city will join us in wrapping up this lawsuit for the betterment of the city the foundation and the community,” Bassett said.
Rory Kay with McDonald and Carano, counsel for S&S Shortline Leasing, spoke before the counsel: “I do want to make a couple of points, this is a settlement agreement between S&S and the city, it’s not between the foundation and the foundation.
“In 2019 the settlement was approved and S&S has been negotiating separately with the foundation. It is my understanding that the foundation does not want to reach an agreement at this time.”
When the council approved the terms of the settlement in May things moved forward. A week before the council meeting, a final draft had been submitted.
“I find it a little coincidental that we have this agenda item popping up after we had a written agreement to exchange between the city and S&S. In any event, in litigation like this you have to submit it to the court for approval,” Kay said. “So there is a motion that the city has filed for a determination of a good faith settlement in front of Judge Dobrescu. So when Mr. Bassett comes up here and says it’s not legal, that’s what Judge Dobrescu is going to rule on.”
The part of the settlement covers the northern part of the line where S&S is in contract and for storage of railcars. There is a promise not to interfere with the historical portion of the line, according to Kay.
“As I go through and listen, Economic Development is a big thing here, and in the future if there is a way that S&S can work to help out the mine on a historical line and run cars through a historical line up through the northern line, my client is willing to negotiate that but my client does not want to interfere with the foundation, and that is in both of the agreements,” Kay said.
Kay recommended to the council to push this item out another four week so additional discussion could take place and it would allow for Judge Dobrescu’s findings to be completed.
“We put out the fire, last year in May, before we put gasoline on that, and really blow this thing up, we should consider the settlement,” Kay said. “My client has reached a settlement with the city, he is open.”
Chris Stanko, counsel for the foundation, spoke briefly to the council. “I have to disagree with a lot of things with Mr. Kay. The settlement is not an agreement. It’s an agreement to agree. We will continue to march this case forward, as my client said, we never even wanted to be in this case, but it was actually another outgoing council, and now here we are.
“The talk about economic development? Bassett has put $23 million in the railroad complex since he came on in 2002, the guy lives for economic development. The agreement in May of 2019 has a provisional to rip out the track and you have three years to put it back. Economic developers aren’t typically ripping things out.”
Stanko asked the council to work together with the foundation and join them in the lawsuit.
Beecher asked the council if they had any questions. A motion was made by Councilman Jim Alworth, and was seconded by Councilman Kurt Carson.
Councilman Ed Spear said, “I’d like to ask some questions that I can’t ask in public.”
Beecher, “Are you opposed or in favor of the motion?”
Spear said, “I’m in favor of the agreement but it’s litigation that bothers me a lot.”
Beecher, “Would you like to discontinue the agreement?”
Spear, “I’m going to vote Aye.”
The motion passed 3-1.
The council voted 3-1 to terminate legal counsel from John Samberg with Wolf