By RAY QUIROGA
publisher@sbnewspaper.com
Berkley Surety, the underwriter of the construction company accused of defaulting on San Benito CISD’s troubled multi-million-dollar bond-funded faculties, is refuting remarks made during March 20 school board meeting and attributed to an attorney representing the school district. That portion of the meeting was then the basis of an article which ran in a neighboring newspaper.
In a leaked email signed by Berkley Surety Vice President Nancy Manno, and addressed to San Benito CISD Board President Orlando Lopez, Manno writes that a number of details in the article are incorrect and “reflect a fundamental misunderstanding of Berkely’s obligations, if any, as surety under the terms of the performance and payment bonds at issue. As such, I am writing to address those misstatements to make sure there are no misunderstandings at this juncture.” The email was copied to the SBCISD Board of Trustees and the School District’s legal counsel.
The article reported that a year after the district stopped construction upon concerns attributed to the projects’ foundation issues, Berkley Surety now would oversee the projects.
This after board members, in late January of this year, voted to place Davila Construction, the projects’ contractor, in default of its contract to build a $21.3 million performing arts theater and an $8.8 million Natatorium/Aquatics Center.
At the March 20 school board meeting, Baltazar Salazar, the district’s attorney hired by the district to specifically advise the board/District on the bond-initiated construction projects, informed the board that Berkley Surety, acting essentially as Davila’s underwriters, was taking over the construction projects.
“The suggestion in the article that Berkley has already elected to take over the construction project, which the article suggests Mr. Salazar advised the board, is incorrect,” Manno remarked in the email. “While taking over and completing a bonded construction project after default is certainly an option available to a surety such as Berkley, as the District and its counsel are well aware, Berkley is still investigating the claim and has not yet made a final determination as to its obligations, if any, under the applicable performance bonds, nor how or whether it intends to proceed.”
Manno goes on to add that the investigations includes the examination of specific “critical” documentation it has yet to receive from the District. The NEWS reached out to the District for comment last Thursday and was advised that the request was forwarded to legal counsel.
Salazar and Lopez, for their part, stand by their comments with Lopez telling the NEWS on Wednesday that he was repeating the information provided to him, district officials, the rest of the board and the public during the March 20 meeting.
In her email, Manno explained that Berkley is not an insurer. “It is important to ensure the District is aware of the difference between suretyship and insurance. Although Berkley maintains lines of insurance products and the word, ‘insurance’ is in its name, it’s well established under Texas law that surety bonds such as the ones at issues are not insurance,” she writes. “Relatedly, the performance bonds and payment bonds at issue do not “double the amount of actual construction of these two facilities (as stated in the article).”
Going back to late January of this year, after an almost 11-month pause in the construction of two multi-million dollar facilities stemming from a controversial November 2018 $40M bond election, San Benito CISD officials issued a carefully worded statement informing the media, and the public, that the board of trustees voted to place the construction company tasked to complete those projects in default.
The vote came a week earlier, on January 25, 2024, during the tail end of the Board of Trustees’ meeting and after the trustees reconvened from executive session.
Construction ceased in March 2023, when now former SBCISD Superintendent of Schools Theresa Servellon stopped construction when architect Mike Allex, of ROFA Architects out of McAllen, discovered that geopier rock columns where misaligned, which could cause the structures to be unsound.
The District’s two-page, 517-word statement outlines a timeline of events leading to the trustees’ decision to place Davila Construction in default, noting that on November 6, 2018, a majority of San Benito CISD voters (by a 54% margin) approved a $40 million bond proposal which enabled San Benito CISD to construct three state-of-the-art student facilities: A Performing Arts Center (PAC), an Natatorium/Aquatics Center (NAT), and an Indoor Multipurpose Athletic Center. The Indoor Multipurpose Athletic Center has been completed and is situated next to San Benito High School.
On November 7, 2019, Davila Construction, Inc. was hired as the Construction Manager at Risk for both the: The Performing Arts Center (PAC) $23.1 million, The Natatorium/Aquatics Center (NAT) $8.8 million.
The San Benito CISD Board of Trustees later amended the contract to include $1.8 million in site work for utilities and ground preparation.
As part of the contract, San Benito CISD was protected with surety bonds from Berkley Surety which protected the District for the full contract price in the amounts of $21.3 million, $8.8 million, and $1.8 million, should Davila Construction default on the contract.
“During the construction phase of the Performing Arts Center (PAC) and the Natatorium/Aquatics Center (NAT), San Benito CISD’s architects and engineers noticed some discrepancies in the placement of the foundation and the supporting ground structure. Out of an abundance of caution, San Benito CISD immediately directed Davila Construction to stop construction until the discrepancies could be verified,” the District’s statement reads.
What followed were the months of weekly meetings with a team of architects, engineers, surveyors, attorneys, and construction personnel who attempted to verify and mediate the various discrepancies in the construction. After many meetings, the team has concluded that the remediation is not prudent or feasible based on the number and the extent of construction discrepancies, which have been verified with new testing and measurements, the statement continues.
“While the delay in the construction of these two student facilities has been unfortunate, the San Benito CISD Board of Trustees and Administration felt that it was absolutely necessary to ensure the safety and the integrity of these two important student facilities and to protect the bond funds dedicated to their construction,” the statement notes.
As mentioned, on January 25, 2024, the San Benito CISD Board of Trustees voted to place Davila Construction in default of the contract. Furthermore, the District gave Berkley Insurance notice of default of the contract and made a claim for the performing and the payment bonds in the amount of $21.3 million, $8.8 million, and $1.8 million, according to SBCISD officials.
“The San Benito CISD Board of Trustees is taking this opportunity to fully inform the community of the actions that have transpired and the rational for these actions. The community can be assured that no bond funds have been placed at risk as the price, performance, and payment of the Performing Arts Center (PAC) and the Natatorium/Aquatics Center (NAT) construction are protected by insurance bonds,” according the statement.
The NEWS reached out to Davila Construction for comment at the time but received no response.
Well before the bond election itself, the projects, the amount of taxpayer dollars needed to carry out the completion of the facilities and other ancillary circumstances surrounding the proposal created a rift in the community and among the varying boards of trustees through the years since the election, which ultimately spilled over years later leading to the decision to halt construction, which fell under the previous board majority’s purview.
That majority shifted again last May as now former Board President Ramiro Moreno lost his bid for reelection after one term in office. Servellon, who was hired during Moreno’s tenure as a replacement for Dr. Nate Carman, subsequently drew criticism for calling for the halt of construction, which the minority, at the time, led by then former board president (and now current board present) Lopez, deemed unnecessary, as was the district’s decision to relieve the project manager Joseph Palacios of his duties.
With the District’s apparent course correction, the current board minority, and former board majority, as well as their supporters, viewed this revelation as vindication. However, there are members of the current majority who do not agree with that assessment, doubling down on the stance the faction has touted all along, explaining that geopier issues were, and continue to be, remediable but it was the past Moreno/Servellon-led administration’s decision to allegedly stifle communication among the various contractors in charge of the work, coupled with what the faction deemed as the unwarranted elimination of Palacios as project manager, that created the situation the district currently finds itself in as it pertains to the bond projects.
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