A dispute between the city of Santa Fe and a construction contractor's bondholder has gone all the way to the state Supreme Court, while in the meantime another lawsuit over the same leaky water tank is supposed to head to trial early next year.

The city has already spent more than $117,000 on legal fees for the ordeal and expects the cost to rise before it's over. Instead of relying only on the full-time city attorney's staff, officials have retained the services of Sheehan, Sheehan and Stelzner "because of the complexity of the matter and the expertise possessed by that firm in construction litigation matters," according to a memo from William Cassel, an assistant city attorney.

Cassel also wrote that the city "anticipates the value of the remedy will far exceed the cost and expense of the litigation."

At issue is a liner that Lone Mountain construction firm installed inside a concrete water storage tank near Christus St. Vincent Regional Medical Center in 2003 at a cost of $650,000. City tests conducted after the "rehabilitation" indicated the tank leaked more after the liner installation than before. Some tests indicate up to 7 gallons of water is leaking from the tank every minute, adding up to an estimated loss of nearly 4 million gallons per year, said Cassel.

Last year, the city filed a breach of contract claim against the contractor, Dow Roofing Company, a subsidiary of Dow Chemical which manufactured the raw materials and Watersaver Inc., who made the liner.

Kristin Eisenbraun, an attorney for Lone Mountain, wrote in a court filing that the construction firm can't admit or deny the truth of the city's allegations because it does not have "strict proof."

Doug Baker, an attorney representing Dow, said he plans to seek a dismissal for his client's part of the case since the company did not control the material after it was delivered to the liner manufacturer.

The case is set for trial in early 2010.

In a related case now under consideration by the state Supreme Court, the city had first sought to exercise its rights to recoup the money it paid the contractor from a construction surety bond in District Court. When a judge denied the petition, the city appealed to the state Court of Appeals, which agreed with the lower court. The Supreme Court, however, agreed to review the actions of the other courts.

"What that says to me is that the Supreme Court saw something in the initial papers that they wanted to look at," said Cassel.

Note: An earlier version of this story gave the wrong figure for how much water is estimated to leak from the tank.

Contact Julie Ann Grimm at 986-3017 or jgrimm@sfnewmexican.com.