City Misleads Public on Zipcar Contract

Furthermore, the city staff put out information to the public that reflected their verbal agreements with Zipcar but not their written contract, meaning the released information had no force of law behind it.

In July, the Davis City Council quickly passed approval of a contract with Zipcar that would authorize roughly $74,000 from a non-general fund source to help get a Zipcar program off the ground. 

At the next council meeting, Councilmember Sue Greenwald moved to reconsider that 5-0 vote on the grounds that she was concerned about language in the Zipcar contract that would potentially expose the city to liability.  She was joined by Rochelle Swanson, but the vote failed.

In the ensuing weeks, Davis Enterprise Bob Dunning began to hammer the city for the deal, arguing that this was a subsidy to a private company, that the city was advantaging an out-of-town car rental company over existing business, and that the city could face liability in the case of an accident.

After getting hammered for several weeks, the city eventually put forth a Fact Sheet and Joe Krovoza and Stephen Souza wrote an op-ed based on the Fact Sheet, defending the program.

On October 8, Bob Dunning returned from vacation and hammered them, calling it a series of “lies our leaders told us.”

Wriote Mr. Dunning, “Council members Stephen Souza and Joe Krovoza repeat the lie that ‘Car-sharing is different because it is instant, hourly, friendlier to the environment and located near users who need short-term mobility.’ “

While I believe Mr. Dunning was inaccurate in this description, particularly on a subjective issue such as the issue of car-sharing, and I also believe even now that the city faced, at the very most, very limited liability on the contract, he was correct in pointing out the discrepancies between the claims that the two councilmembers made and the contract itself.

Bob Dunning reported this Sunday, quoting from Paul Navazio’s letter to Council which he apparently received on October 25.

In that letter to council, Mr. Navazio states, “Contract amendments are being worked out to essentially reflect the agreements reached with ZipCar – on selected program elements – after the Council approved the original contract, and prior to the roll-out of the program last month.”

Mr. Navazio continues with a shocking admission, “The need for the amendment(s) came to light as inconsistencies were identified between the current, executed contract and the ZipCar Program FACT SHEET that we have on our City website.”

Actually, this quote from the acting City Manager downplays what really happened – in that it implies that these inconsistencies were inadvertent, when in fact, according to sources inside the city, they were quite deliberate. 

As we understand it, the city worked out the contract with Zipcar and Council approved it.  This occurred during the first regular meeting of the new council – an agenda that contained several complicated agenda items but Council, at the behest of Mayor Don Saylor, raced through it and completed the meeting by 8:30 pm.

Zipcar, sources informed the Vanguard, urged the city to sign the contract with the understanding that they would work out the details later and clean up some of the language. 

A source close to the city told the Vanguard that the city signed the contract knowing full well that there were holes in the contract that under some circumstances might expose them to unnecessary liability, but that Zipcar assured them it could be handled after the fact.

But what was the rush?  Why not clean up the language before sending it to council?  We have no answers for this other, than the need, perhaps, to make the trains run on time.

Council was basically told by City Staff and the City Attorney that this contract had been thoroughly reviewed, that it was fine and that they had nothing to worry about.  As a result, Council did what they ought to do, they trusted their professional staff and hired attorney and passed the item without a close read of the contract.  This was a huge mistake.

The source does believe that the city only faced limited liability, but even that was unnecessary.  The city needed to change that provision and also remove the provision where a city employee would have the responsibility of transporting the Zipcars for repairs. 

There was never a real danger that the city could be sued for an accident.  The insurance provision in the contract covers liability and stipulated that this would be handled by Zipcar and the driver’s insurance, not the city.

Wrote Bob Dunning “The city is not likely to escape liability when and if a Zipcar  driver is involved in a serious accident causing great bodily harm or death.”

He continued, “The folks at Zipcar  certainly think that’s the case or they wouldn’t have demanded the contract state that the ‘City will maintain Commercial General Liability insurance with a combined single limit of not less than $1,000,000, will have Zipcar  named as an additional insured under such policy and will provide Zipcar  with a certificate evidencing such insurance.’ “

We do not believe he is correct here, however, the city’s claims about liability were not reflected in the actual language contract – despite the FACT Sheet representing to the public that it did. 

Nevertheless, even by the provisions of the contract, Zipcar itself carried insurance that covered the individual driver.

Indeed, in the contract, Zipcar was said to maintain the following insurance in Schedule C section 3 of the contract, “During the term of this Agreement, Zipcar will maintain the following insurance: (a) Commercial Automobile Liability in the amount of $1,000,000 combined single limit (CSL), with Personal Injury Protection (PIP) and Uninsured (UI) and Underinsured Motorist (UIM) coverage at state minimum limits; (b) Commercial General Liability in the amount of $1,000,000 each occurrence, general aggregate and products and completed operations aggregate; and (c) Commercial Excess in an amount of $1,000,000 each occurrence and annual aggregate.  Zipcar will add City as a designated insured on Zipcar’s Commercial Automobile Liability policy and as an additional insured on Zipcar’s Commercial General Liability Insurance policy. Eligible Persons are insured as described in the Member Agreement. At City’s request, Zipcar will provide City with a certificate of insurance evidencing such coverage.”

However, in Schedule B under “City Obligations” it says, “City will maintain Commercial General Liability insurance with a combined single limit of not less than $1,000,000, will have Zipcar named as an additional insured under such policy and will provide Zipcar with a certificate evidencing such insurance. City will notify Zipcar not less than thirty (30) days in advance of any cancellation of such policy. City will also carry any required Worker’s Compensation, Disability or other insurance on behalf of its employees providing maintenance services to Zipcar hereunder. Any City employee transporting vehicles for maintenance services must apply for membership and be approved by Zipcar prior to operating any Zipcar Vehicle; provided, however, that with respect to the foregoing, Zipcar shall not charge the City or employee any membership fee.”

The Vanguard spoke with City Attorney Harriet Steiner back in October, who clarified the city’s obligations.

City Attorney Steiner told the Vanguard, “The Zipcar Agreement has two different insurance and indemnity provisions.”

“The first,” she said, “is on Schedule C paragraph 3 and it provides that Zip Car will maintain insurance and name the city as a designated insured and additional insured under Zipcar’s insurance policies.  This provision applies to the use of Zipcars by customers of Zipcar.”

The second provision, as we had suspected, puts the city as the active party due to the fact that city employees are using the vehicle.

“The second provision is Schedule B, paragraph 3 and relates to times when the city staff is transporting a Zipcar for maintenance,” she told the Vanguard.

“Here, the City is the active  party (since the city employee is driving the car for the purpose of taking it for service),” she continued.

She concluded, “Under this provision, the city employee is still entitled to the same insurance benefits as any other Zipcar driver, but the city agreed to provide insurance in addition to the general insurance.”

According to Ms. Steiner, the city and Zipcar have now agreed to delelete Schedule B, paragraph 3 entirely.

She reports, “This amendment to the Zipcar agreement will go to the City Council next month for approval.”

At this time it looks like that will either come down on November 16 or November 30.

In making the changes, Ms. Steiner stated, “Zipcar has hired its own employee to transport the cars for maintenance so that the city will not have any active role in this  contract (other than providing the parking spaces).  Zipcar’s obligation to transport its cars for service shall be included in the contract.”

It is that last part which attempts to correct discrepancies between the city’s Fact Sheet and the contract.

There are several appalling aspects of this.

First, the city pushed forward the contract knowing that it was not as clean as it could be.  It could have been cleaned up very quickly and sent back to council prior to passage.  Instead, it was rammed through with virtually no discussion.

Second, the city, in response to the grilling by Bob Dunning, produced a FACT Sheet that reflected their unwritten understanding with Zipcar as to how the contract would work, but it did not reflect the language of the contract.  That means it was not legally binding.  It also means that Zipcar had no obligation to honor it.

Moreover, the city appears to have been completely unconcerned about the discrepancy.  They dragged their feet for four months on it.

In defending the city on this issue, I completely underestimated the level of sheer incompetence on the part of city staff and the city attorney.  Council should be able to listen to the advice of staff and their attorney and make an informed decision without having to have their own lawyer dissect the contract.  But that is not what happened here.

The final appalling aspect is that the city put out a Fact Sheet KNOWING that it was at odds with the written contract, and then tried to claim that was the deal.

Bob Dunning makes a lot of accusations about lies here, and I certainly do not think Joe Krovoza or Stephen Souza lied here.  They were given bad information by the city and hung out to dry by city staff.

But I do think the city comes pretty close to lying when it claims in the Fact Sheet terms of the contract that are not, in fact, terms of the contract.

This is the key provision, “The insurance liability provisions are standard and do not cost the city any money. Drivers are provided insurance through their Zipcar membership, not through the city. The insurance provisions have been thoroughly reviewed by the city’s legal counsel and risk management and provide sufficient coverage to minimize the city’s risk to the maximum extent provided by law.”

The truth is that the city had intended at some point to do away with that clause from the contract that put the liability figure at $1 million, but they had not yet done so.  Most likely, the city did not face real liability, certainly not for collisions.  But the language was not good and the city recognized that. 

So, to tell the public that the insurance provisions were thoroughly reviewed by the city’s legal counsel and risk management, and yet a few weeks later announce it was changing said contract is pretty disingenuous.

Bottom line, Bob Dunning deserves a lot of credit for continuing to pursue this story, well after the point I thought it was beating a dead horse.  I criticized him for continuing to pursue this story, in part because of the relatively low exposure the city would face should the deal go awry.  I still think he was wrong about the car rental issue, I think the city’s liability was minimal, but without pushing this story we would not be at this point.

The key point of this story is the dishonesty of city staff.  The Fact Sheet is pretty close to a lie.  They knowingly told the public something about the contract that was not true.  I understand they believed they had an understanding with Zipcar, but it was not legally binding and so Zipcar has no obligation to change the contract.  That is inexcusable.

I asked who was responsible for this mess.  The finger squarely has to be pointed in several directions.  It starts with Bill Emlen, the City Manager at the time this was done.  It extends to Ken Hiatt and Stacey Winton, who handled this project specifically.  It extends to Harriet Steiner, the city attorney, who signed off on language that was less than clear.  It extends to the transition from Bill Emlen to Paul Navazio, and I don’t think Mr. Navazio is blameless here either.

There is a policy problem here.  Council was given assurances by city staff and the city attorney that this was a good contract and they should be able to rely on the advice of their staff.  Council got hung out to dry here.  The city was very slow to react to Bob Dunning when they knew there were problems with the contract.

And the idea to put out a Fact Sheet based not on the contract but on verbal understandings with Zipcar was a horrendous blunder.  That is really where the problem  comes into play.

Mistakes happen.  If language needed to be fixed, then admit the mistake, tell the council to rescind the contract, do what you need to do.  It is a one-day story and they should get it right.

The problem happens when you know there is a problem and you claim to the public otherwise.  That is a breach of the public trust.  Heads need to roll on that.  To me, the other errors are forgivable in the sense that mistakes can happen.

Finally, I am going to put some of the blame here on Mayor Don Saylor.  Twofold, really.  First, he rammed that first agenda through and failed to allow proper discussion.  He wanted to show that he could run a quick, efficient and civil meeting.  But in so doing, mistakes occurred.

The second mistake is that he has never came forward to acknowledge there are problems here.  He thwarted Sue Greenwald and Rochelle Swanson’s efforts to reconsider the vote, while letting Joe Krovoza and Stephen Souza put their necks on the line, in part for his mistakes.  And as Mayor, what has he done to make sure the city language in the contract was consistent with the FACT Sheet?  This is because of his policies, and on his watch.

I close with an apology to Bob Dunning. I don’t think he got everything right here, but without his staying on this story the truth would not have come out.  I will be the first to admit, I thought this was much ado about nothing.  I still wish Mr. Dunning would pay half as much attention to the retirement and compensation issues in the city, but now, based on what I have been told, everything of which is borne out in the public record, I think this is a huge fiasco upon which  heads should have to roll.

Finally, while I am supportive of the Zipcar program in theory, I think the city should now nullify the contract.  In addition, I believe the city council should forward this matter to the grand jury for an independent investigation into what occurred and to determine if city staff broke the public trust and laws in this matter.

—David M. Greenwald reporting