REPORT TO COUNCIL
SUBJECT
Title
Action to Authorize the City Manager to Execute a Settlement Agreement with Rosendin Electric Inc. and Zurich American Insurance Company and Take Any Other Action(s) Necessary to Resolve the City’s Reimbursement Claim for Damage to the Lick Mill Pump Station related to the Citywide Emergency Generator Replacement - Phase 1 Project and Approve Related Budget Amendments
Report
BACKGROUND
On August 18, 2020, the City Council awarded a construction contract for the Citywide Emergency Generator Replacement - Phase 1 project to the lowest responsible bidder Rosendin Electric, Inc (Rosendin). The contract executed was for a total not-to-exceed amount of $3,363,510 and included removal and replacement of the emergency stand-by generators at nine City facilities: City Hall - East Wing, Emergency Operation Center, Radio Shop (at the Utilities Corporation Yard), Fire Station 1, 7, and 8, Parks Service Center, and Rambo and Lick Mill Storm Drain pump stations.
On Friday, January 19, 2024, during Rosendin’s work on the Lick Mill Pump Station, the contractor mistakenly removed components of the Motor Control Center (MCC). The MCC functions as the central control system for the pump station. This error inadvertently disconnected power to the station’s active pumps just ahead of a forecasted weekend rain event.
In the early morning of Monday, January 22, 2024, at approximately 3:30 a.m., on‑call staff from the Water and Sewer Utilities Department received a high‑water alarm from City dispatch. Upon arriving at the station, staff discovered that key MCC components had been dismantled, leaving Pump #2 and Pump #3 without power. City staff immediately contacted Rosendin’s foreman, who returned to the site and attempted to reconnect the wiring and components. However, the contractor did not properly verify the wiring phasing before re‑energizing the pumps, causing them to run in reverse. This reverse rotation resulted in extensive damage to the motors, sensor cables, lifting chains, anti‑rotation locks, and suction bells of the active pumps, as well as the electrical bucket for Pump #2 due to cable twisting.
Following this incident, City staff engaged the City’s pump repair vendor, Shape Inc., and the control system vendor, True Blue, to troubleshoot the system and assess the full extent of the damage. The assessment by True Blue indicated that the Programmable Logic Controller (PLC), was also damaged as a result of this incident. The City provided temporary portable pumps which were deployed to maintain pumping capacity while permanent repairs were completed. At the June 25, 2024 City Council meeting, staff presented a Post-Emergency Report and received City Council approval transferring $685,000 from the General Fund’s Budget Stabilization Reserve to the Storm Pump Motor and Control Replacement Project in the Storm Drain Capital Fund and authorizing payments to these vendors (Report to Council 24-452).
DISCUSSION
All repairs to the Lick Mill Pump Station, including the restoration of Pumps #2 and #3 and all associated wiring and support equipment were completed on March 26, 2025.
On April 22, 2025, the City formally submitted a reimbursement request to Rosendin totaling $481,428 for costs incurred as a result of Rosendin’s actions at the Lick Mill Pump Station. The reimbursement request included all actual expenses related directly to the pumps, associated wiring, and equipment, deployment of temporary pumps, and City staff labor during and subsequent to the outage (through March 2025); in other words, the costs and expenses traceable to the property damage the City suffered. City personnel performed a wide range of emergency response activities, including manual pump operation during outages and overnight shifts, pump removal and installation, float installation, assembly and disassembly of temporary pumps, participation in internal and external coordination meetings, and preparation of expenditure documentation. Not included in the City’s reimbursement request to Rosendin was $17,395.62 in third-party claims paid out by the City to residents who experienced water damage to their vehicles as a result of the flooding.
On January 5, 2026, the City, Rosendin Electric, and Rosendin’s insurance carrier (Zurich American Insurance Company) finalized settlement terms to resolve the City’s claim. The key terms of the settlement agreement include:
• Settlement Payment: $481,428 paid to the City of Santa Clara (full reimbursement of costs and expenses related to the City’s property damage).
• Mutual Releases: The City and Rosendin/Zurich mutually release all known and unknown claims related to the incident and related contract payment disputes (excluding any outstanding amounts owed to Rosendin for work under the Emergency Generator project contract).
• Outstanding Payments: The City will pay Rosendin $195,763 in accounts receivable and $159,325 in retention from this Project within 30 days of the City’s receipt of the Settlement Payment.
• Contract Close-Out: Release of remaining contract funds to Rosendin and initiation of project close-out for the Citywide Emergency Generator Replacement - Phase 1 project.
• Each Party Bears Own Costs: Each party is responsible for its own legal and related costs.
A formal settlement agreement consistent with these terms is now presented for Council approval (Attachment 2). The agreement has been approved by the City Attorney’s Office as to form and signed by Rosendin and Zurich American Insurance Company. Upon Council approval, the agreement will be circulated for City signature.
ENVIRONMENTAL REVIEW
The action being considered does not constitute a “project” within the meaning of the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines section 15378(b)(5) in that it is a governmental organizational or administrative activity that will not result in direct or indirect changes to the environment.
FISCAL IMPACT
City staff have identified $481,428 in expenses the City incurred related to its own property damage from January 19, 2024, through March 2025 arising from Contractor’s actions. Approval of the Agreement will provide the opportunity for the City to be reimbursed by Rosendin Electric Inc. for these costs. Staff completed a reconciliation to determine the funding sources for the costs incurred for these repairs, including contractual services and staff costs. The following budget amendment table details the recommended allocation for the reimbursement based on the reconciliation.
Budget Amendment
FY 2025/26
|
|
Current |
Increase/ (Decrease) |
Revised |
|
General Fund |
|
|
|
|
Revenue |
|
|
|
|
Other Revenue |
$3,622,328 |
$450,116 |
$4,072,444 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Budget Stabilization Reserve |
$81,000,000 |
$450,116 |
$81,450,116 |
|
|
|
|
|
|
Sewer Utility Fund |
|
|
|
|
Revenue |
|
|
|
|
Other Revenue |
$0 |
$18,135 |
$18,135 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Unrestricted Ending Fund Balance |
$3,686,320 |
$18,135 |
$3,704,455 |
|
|
|
|
|
|
Water Utility Fund |
|
|
|
|
Revenue |
|
|
|
|
Other Revenue |
$681,430 |
$13,177 |
$694,607 |
|
|
|
|
|
|
Fund Balance |
|
|
|
|
Unrestricted Ending Fund Balance |
$1,328,171 |
$13,177 |
$1,341,348 |
COORDINATION
The report was coordinated with the Water and Sewer Utilities Department and City Attorney’s Office.
PUBLIC CONTACT
Public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov or at the public information desk at any City of Santa Clara public library.
RECOMMENDATION
Recommendation
1. Authorize the City Manager to Execute a Settlement Agreement with Rosendin Electric Inc. and Zurich American Insurance Company and Take Any Other Action(s) Necessary to Resolve the City’s Reimbursement Claim for Damage to the Lick Mill Pump Station related to the Citywide Emergency Generator Replacement - Phase 1 Project; and
2. Approve the following Fiscal Year 2025/26 budget amendments:
a. In the General Fund, recognize reimbursements in the amount of $450,116 and increase the Budget Stabilization Reserve in the amount of $450,116 (five affirmative Council votes required to appropriate additional revenue);
b. In the Sewer Utility Fund, recognize reimbursements in the amount of $18,135 and increase the unrestricted ending fund balance in the amount of $18,135 (five affirmative Council votes required to appropriate additional revenue); and
c. In the Water Utility Fund, recognize reimbursements in the amount of $13,177 and increase the unrestricted ending fund balance in the amount of $13,177 (five affirmative Council votes required to appropriate additional revenue).
Staff
Reviewed by: Craig Mobeck, Director of Public Works
Approved by: Jovan Grogan, City Manager
ATTACHMENTS
1. Location Map
2. Settlement Agreement