The city of Sandy Springs is suing the Perimeter Center Improvement Districts and two of its own contractors over paperwork errors that forced a repayment of $2.8 million in federal streetscape funds, according to City Attorney Wendell Willard.

As a negotiating tool in the dispute, the City Council last year authorized legal action against the PCIDs, which commissioned the streetscape project, and CH2M Hill, a company that ran city public works services at the time. The negotiations have not worked and the city earlier this month filed suit, with current city public works contractor AECOM also named as a defendant, Willard said.

“It’s going to take some time to thrash it out,” Willard said, adding he is still hopeful of a settlement.

The PCIDs and AECOM could not immediately be reached for comment, and CH2M declined comment, citing the litigation.

The dispute involves a sidewalks and streetscape beautification project along Peachtree-Dunwoody Road between I-285 and Abernathy Road carried out around 2008 and 2009.

The PCIDs commissioned the project using federal grant money provided through the Georgia Department of Transportation, with the city acting as a fiscal agent required under the grant policy. The PCIDs are two jointly operated self-taxing business districts, one in Fulton County and one in DeKalb. The grant—and the lawsuit—specifically involve the Fulton CID.

Years later, in 2014, the Federal Highway Administration audited the grant for compliance with its terms. According to a written statement from the city, the audit found “non-compliance” in the project’s paperwork, including “lack of information in the files related to materials and testing information; missing sediment and erosion control reports; and failure to include Buy America requirements [a mandate to use American-made products] in the Project contract.”

The federal government demanded its nearly $2.8 million in grant money back and sought reimbursement from GDOT, which in turn demanded the money from the city. According to Willard, rather than hitting the city with one huge bill, GDOT has agreed to deduct the money from the city’s annual allotment of state road-paving funds.

Willard said the dispute is about who bears responsibility for the paperwork errors, not whether they happened.

“I guess it’s finger-pointing,” he said of the dispute’s length.

The city argues that PCIDs is on the hook for the funding under the terms of the project agreement. The city and the PCIDs have discussed the dispute for some time without resolution, Willard said.

The city also argues that CH2M was responsible for vetting the project’s compliance. At the time, CH2M managed the city’s public works and administrative services under Sandy Springs’ model of outsourcing nearly all government departments to private contractors. AECOM was included because it was “the contract service company for the, at least, last year of the term during which the work under the grant was being performed and completed,” Willard said in an email.

In 2011, the city ended its deal with CH2M to shift to a system of several contractors operating different departments. AECOM took over the public works contract, and now also holds a new contract to oversee projects on a list funded by a new transportation special local option sales tax.

The cities of Brookhaven and Dunwoody also often collaborate with PCIDs on street projects. Following news of the Sandy Springs dispute last year, Dunwoody spent $4,000 auditing its PCIDs contracts for similar errors and found none. Brookhaven said it regularly monitors the details of such deals and had no issues.

John Ruch

John Ruch is an Atlanta-based journalist. Previously, he was Managing Editor of Reporter Newspapers.