Insurance company taking over San Benito $40 million project

SAN BENITO — A year after the San Benito school district’s shutdown of a $40 million bond-funded project, an insurance company is taking over construction after the school board placed its contractor in default of its contract.

Now, Berkley Insurance is standing behind performance and payment bonds amounting to double the project’s construction costs, a district contracted attorney told school board members.

In January, board members voted to place Davila Construction, the project’s San Antonio-based contractor, in default of its contract to build a $21.3 million performing arts theater and a $8.8 million aquatics center a year after officials shut down construction following an architect’s finding of flaws in the two buildings’ foundations.

“The attorney was pretty clear as far as the bond construction and the bond money,” school board President Orlando Lopez said Tuesday. “This board has focused on keeping transparency with this situation and we always are putting the kids first as we continue to make sure this project gets done for the kids and the betterment of the community.”

In a meeting, Baltazar Salazar, the district’s Houston-based construction attorney, told board members Berkley Insurance, Davila’s insurance company, was taking over the construction project.

Berkley Insurance “is actively involved in trying to take over the construction that was basically left by Davila Construction,” he said during the March 20 meeting.

Earlier this month, the insurance company’s consultants conducted a walk-thru of the project site off Interstate 69, taking “inventory of all of the equipment that we have currently paid for and some of it that’s pending,” Salazar told board members. “We have more steel coming in, hopefully in the next couple of weeks, to the property so everything’s going forward. They now have access to all the drawings, they have access to all the documents that this school board and this school district have and we’re very positive that we’re going to have a positive outcome with this.”

In response to board member Oscar Medrano’s question, Salazar said he didn’t have the project’s timetable.

“I want to make sure that when they do evaluate everything, that they do it right. To me, that’s the most important part — that they do it right,” Salazar said. “It takes a little bit of time because they had to go back and review all of the documentation, all of the plans, to see if they are up to spec.”

“I will assure this board Berkley Insurance is one of the world’s largest insurance companies, so we’re not dealing with a small mom-and-pop operation,” he said. “They’re a world-wide, very reputable company so we are properly insured and we are guaranteed the price that we originally signed (in) the contract with Davila Construction.”

During his presentation, Salazar stressed Berkley Insurance was standing behind performance and payment bonds.

“We are heavily insured,” he said. “We have payment bonds and we have performance bonds double the amount of the actual construction of these two facilities. Berkley Insurance has not denied coverage. They have not denied performance bonds and they have not denied any payment bonds. We’re doubly insured. In addition, Davila (Construction) has insurance so we’re going to tap into that, too.”

Salazar stressed the project’s bond money “is protected.”

“I want to ensure the community that none of the monies that were allocated for this natatorium and performing arts center — that all of those monies are still available,” he told board members. “The bond money is still in the bank. It’s still designated for that purpose. We have not spent. The district can’t use it for anything other than these items. We still have money in reserve. We made approximately $2 million in interest over the last year, with those specifically designed for those projects. So none of the money is at risk.”

In response to board member Rudy Corona’s question, Salazar said he was not withholding information from the public.

“We are not holding anything back — we’re not hiding any files. There are no secret emails that I’ve been sending,” Salazar said. “All of that the board is aware and the public. Every one of those facts is true and so we have been transparent with the chief financial officer, with the general counsel, with our acting superintendent and board members. These are public funds and we need to have 100% transparency.”

During discussion, Corona said he wanted to debunk “false accusations.”

“I just wanted to clarify on that because there were false accusations being made that the board was being aware of things and wasn’t being transparent,” he said. “I just want the public to know that we are relaying everything we can in giving out information.”

In March 2023, then-Superintendent Theresa Servellon, under the past school board, ordered the district’s biggest construction project halted after architect Mike Allex, with McAllen-based ROFA Architects, reported finding some geopiers, or deeply anchored 2-foot-wide rock columns, misaligned with the buildings’ foundations’ targets.

For months, Allex and officials with Davila Construction worked to determine repair plans aimed at jump-starting construction as the shutdown pushed the project at least a year behind schedule.

Since a previous school board proposed a $40 million bond issue in 2018, the construction project has become one of city’s hottest topics, a political football drawing fire from opponents.

In 2018, a previous administration pushed for the bond issue to fund construction of the $21.3 million performing arts theater, the $8.8 million aquatics center and a $5.7 million indoor practice field, which has been completed.

In a heated election, 54% of voters passed the bond issue.

In October 2021, Davila Construction launched the project to build the performing arts theater and aquatics center.

In February 2023, before officials shut down the construction project, a district report showed Davila Construction was requesting the performing arts theater’s completion date be pushed from July 21 to Dec. 28 while the aquatics center’s completion date be changed from April 14 to Sept. 19.

Officials haven’t announced a new timetable.