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Lake Lawn, Delavan work to hash out issues on billing

DELAVAN — Although Lake Lawn Resort's future in the city of Delavan is not certain, the city will reimburse Lake Lawn Resort for engineering costs that many city officials say never should have been billed. The council also decided not to charge the resort for the work of two city attorneys on development issues.

The city will, however, bill the resort for questions council member Dave Kilkenny asked a city attorney about the developers agreement between the resort and the city.

The city council made those decisions and others Tuesday about invoices and payments between the city and the resort.

The council in September authorized consultant Baker Tilly to review the financial activity between the two parties. Council members wanted clarification on about $300,000 in invoices.

Staff and city attorneys were asked to review the results of the audit. Once they got a legal decision on what could and could not be billed, staff on Tuesday asked the council to make policy decisions on some of the invoices.

The city's developer agreement with the resort was the legal basis for the review. The two parties had an agreement that the resort would reimburse the city for costs incurred related to the development. Most of the costs were attorney and engineering fees.

Here are the votes the council took Tuesday before the Gazette's production deadline:

-- The city should not bill Lake Lawn $14,905 for work done by city attorney Steve Koch. Koch's work might have related to the development and therefore was legally billable, according to special counsel Mark Schroeder. Koch might have been working, however, on things that Schroeder already had been billed for, council members decided.

At this point, it would be difficult to decide if the city was billing two attorneys to do the same work, council members said.

"It's not a question of a dollar amount," council member Mary O'Connor said. "It's a question of double billing. I don't know if we can determine if it's double billing without incurring costs."

Kilkenny was the only council member to vote in favor of billing the resort for Koch's time.

-- The city will bill the resort $1,534 for questions Kilkenny asked Schroeder about the developer agreement. The resort has said it should not be responsible for this cost, among others. The city could start a special-assessment process to get that money from the resort, Koch said.

The vote was unanimous.

-- The city will not bill the resort $11,651—its cost to re-engineer a lift station. This will result in a credit of $10,000 to the resort.

The two parties talked at length about the issue and agreed the engineering change was needed, Kilkenny said. However, a contract never was signed.

Kilkenny was the only council member who voted in favor of billing Lake Lawn for this cost.

Anchor Bank of Madison in October bought the resort for $19.97 million at a sheriff's foreclosure sale. The same bank in 2009 foreclosed on the resort's $51.9 million mortgage and was awarded $34 million in court.

The sale has not been finalized in court, and it is possible an investor could negotiate a deal with the resort owners or with the bank.

The bank has said it will close the resort if it still is the owner after Nov. 30.

Lake Lawn has issued a closing notice to the state that states the resort will terminate the jobs of 126 full-time employees. An additional 50 seasonal employees and 110 part-time employees also would lose their jobs.