Council approves Riverfront Drive change orders while staff investigates procurement and assessment discrepancies

The Mankato City Council approved multiple change orders for the Riverfront Drive reconstruction and approved corrective authorization after staff disclosed procurement and special‑assessment irregularities and said an outside review is under way.

City Manager Susan Arnds briefed the council on a sequence of late change orders and an incentive clause in the construction contract that together required council consideration. Change orders 5 through 11 initially totaled about $266,000 but, after detailed review, were identified at $210,704.50; a separate contract provision authorized up to $7,000 per early day (maximum 40 days) in incentive pay. Arnds said the contractor met contract standards and is entitled to $280,000 of incentive pay; adding that amount raised total change orders above the city manager’s 5% administrative threshold and required council approval.

Arnds told the council staff discovered a larger issue in reviewing final invoices: the city had ordered traffic signals, street lights and signal cabinets in March 2024 that totaled $947,128 and that appear to have been intended as reimbursable state‑aid owner‑provided items. Staff did not obtain the expected council authorization for those purchases in March 2024; Arnds said the purchases were made from state contract vendors (so competitive procurement requirements were met) but the internal approval and budget amendment steps were not properly recorded.

A separate discrepancy emerged in the special‑assessment figures published during the project. Staff told the council the assessment roll used during the November 2023 feasibility hearing and in notices totaled $1,742,222.41, but subsequent documents circulated to the council listed the special‑assessment estimate as $1,034,700. Arnds said she did not have a firm explanation for the differing numbers and that the city is working with Bolton & Menk (engineering) and has retained an outside investigator to review procurement and recordkeeping related to the project.

Arnds said the final assessment roll will be brought back to council at a future final‑assessment hearing; she noted final assessments commonly change from preliminary estimates because work actually performed (driveway counts, utility installations and petitioned private work) can differ from initial estimates. Staff listed 78 properties that will receive assessments and two parcels with petitioned private work totaling $123,309 that will be added to final assessments.

Council members pressed staff on the scale of the discrepancy. Council member McLaughlin said he had not seen an error of this size in his council experience. Arnds said staff and auditors reviewed procurement procedures and found no systematic problems beyond failures to follow internal steps in this project; she reiterated the city had engaged external investigators to ensure a full review.

Council approved the outstanding change orders (including the incentive payment) and the corrective authorization for the traffic signals and street lights at the meeting. Council member Levin moved to approve the change orders and corrective authorization; Council member Hetampa seconded and the motion passed on a recorded voice vote.

Arnds said staff will return with a finalized special‑assessment roll and the council will schedule a final assessment hearing. The city is working to finalize sources and uses for the project before presenting the final roll to property owners.