SOUTH SIOUX CITY -- A lender claims the city of South Sioux City has breached its contract to make monthly payments related to a financing agreement of the now-closed Big Ox Energy plant and owes more than $3.3 million.
Wells Fargo Trust Company also is asking a judge to rule that the city is obligated to continue the $225,000 monthly payments. The city contends it is not legally required to do so.
South Sioux City Mayor Rod Koch said he couldn't comment on details of the lawsuit because of the pending litigation.
"At the end of the day, hopefully we can come to an agreement," he said.
Filed Sept. 4 in U.S. District Court in Omaha, the complaint says South Sioux City has not made any payments since sending a late payment in May 2019.
"South Sioux City has communicated to the collateral trustee its intention that it will no longer make any minimum guaranteed amount monthly payments," the suit said.
The balance due as of July 14 was $3,324,078, plus applicable interest and penalties, and increases each month payment is not received.
Wisconsin-based Big Ox and South Sioux City reached a tipping agreement in September 2014 in relation to construction of the biofuel and wastewater treatment plant on the city's south side. Under terms of the agreement, the city would pay Big Ox a monthly guaranteed payment of $225,000, to be increased each contract year by 2 percent. The agreement mandated that the city "shall not be released or discharged from its obligations under the agreement ... for any reason," according to the petition.
In February 2015, Big Ox, the city and Wells Fargo entered into a new agreement in which the payments were to be made to Wells Fargo, acting as a collateral trustee. The agreement was an inducement for Wells Fargo to provide financing for construction of the approximately $30 million Big Ox plant.
The late Wayne Boyd, then the city's attorney, provided a legal opinion that the agreement did not violate any laws or the city's charter, an opinion Wells Fargo said it relied upon when entering the agreement.
Since it stopped payments to Wells Fargo, the city claims, according to the lawsuit, that the agreement is unenforceable under the law. Wells Fargo contends in the suit that South Sioux City's previous legal opinion prohibits it from now claiming that the agreement is unenforceable.
Big Ox shut down the plant, which converted organic waste into methane and also pretreated industrial waste and discharged it to Sioux City's Wastewater Treatment Plant, in April 2019 after Sioux City declined to renew the company's wastewater treatment permit because of nonpayment of outstanding fees, fines and other charges.
In January, Nebraska regulators revoked Big Ox's air and stormwater permits because of a continual failure to comply with state regulations.
Koch said Friday that the city continues to look for a buyer who will restart the plant, and potential buyers have visited the site.
"We're extremely hopeful someone will come in, buy it, pay all the debts off and get it up and running correctly," Koch said.
Koch said the city also remains interested in buying the plant and seeking a third part to operate it. The city is planning to build its own wastewater treatment plant at an estimated cost of $45 million, and Koch said that an operational Big Ox facility would boost the city's capacity to treat industrial waste.
Subject to odor complaints soon after it began operations in September 2016, Big Ox still faces 15 lawsuits filed in Dakota County District Court by residents living near the plant who said toxic gases from the plant backed up into their homes through the city's sewer system and have caused health problems and property damage. The city of South Sioux City also is named in those suits.
A federal class action lawsuit accusing Big Ox of negligence and causing a nuisance was recently settled and dismissed.Big Ox still faces a federal lawsuit filed by a former plant neighbor who says the company is partially responsible for her husband's death and that odors and gases from the plant ruined their home, making it uninhabitable.