San Benito school board enters into $13.3M settlement in $40M bond project

SAN BENITO — After a nearly two-year construction shutdown, the San Benito school board’s entering into a settlement with its former contractor’s insurance company paying $13.3 million to help jump-start a $40 million bond funded project.

The $13.3 million settlement with the Berkley insurance and surety company covered the district’s payments to Davila Construction, the district’s former contractor, board President Orlando Lopez said.

“We got our money back in what we invested in Davila, and it’s long overdue,” he said in an interview.

Now, the district has $29.3 million, with about $12 million invested in the construction of two buildings whose foundation flaws were among concerns leading board members to find the San Antonio-based contractor in default in January.

“There are already several million dollars invested in that property, and we keep all the inventory that’s there now,” Lopez said.

In a meeting, board members entered into the settlement agreement.

Meanwhile, the district’s deposited a total of $29.3 million “in interest-bearing accounts specifically designated for bond construction projects,” Baltazar Salazar, the district’s Houston-based construction attorney, told board members during Friday’s meeting. “These bond monies can only be spent on bond projects and not on general operations of the San Benito Consolidated Independent School District.”

With the settlement, the district’s ready to move the project forward, Salazar said.

”This settlement will give the San Benito Consolidated Independent School District Board of Trustees an opportunity to carefully study and choose their next steps forward,” he said.

During the company’s months-long evaluation of the project, Berkley’s options apparently included taking over construction.

After board members found Davila in default in January, Nancy Manno, vice president of Berkley Surety, stated “taking over and completing a bonded construction project after a default is certainly an option available to a surety such as Berkley.”

As part of a contract, Berkley surety bonds 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,” district officials stated in January, referring to the project to build a $21.3 million performing arts theater and an $8.8 million aquatics center.

“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,” officials said at the time.

In response to the claim’s monetary amounts, Salazar stated Wednesday the district “settled for $13.3 million.”

In March 2023, then-Superintendent Theresa Servellon, under the past school board, ordered the 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’ foundation targets.

For months, Allex and officials with Davila Construction worked to determine repair plans aimed at jump-starting construction.

In January, Superintendent Fred Perez’s office said the team “concluded that the remediation is not prudent or feasible based on the number and the extent of construction discrepancies.”

Now facing escalated costs, district officials will consider project plans, while construction has no timetable.

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

In 2018, a previous administration pushed for the bond issue to fund construction of the district’s first performing arts theater and aquatics center along with an indoor practice field.

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

As part of the overall project, district officials set out to build a $21.3 million performing arts theater, an $8.8 million aquatics center and a $5.7 million indoor practice field, which has been completed.

As part of a 2019 contract, the district paid the Edinburg-based Brighton Group a $1.25 million fee to serve as project manager based on estimated $30 million construction costs.

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

By February 2023, board members were terminating the Brighton Group’s contract without cause, with the remaining construction project about halfway completed, officials said at the time.

By now, the project has fallen about two years behind schedule.

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.