Detroit to get $4M in settlement over defective LED streetlights

Christine Ferretti | The Detroit News

Detroit — The city's lighting authority spent $3 million to replace thousands of defective LED streetlights that were threatening to dim a third of Detroit's lighting grid.

The cost was absorbed by the Public Lighting Authority of Detroit after a $4 million settlement with the LED manufacturer, Leotek Electronics, did not cover the nearly $7 million effort to swap out 19,500 lights the authority believed were faulty.

Leotek must send the money by Dec. 23, according to the terms of a federal lawsuit settlement obtained by The Detroit News under the Freedom of Information Act.

In return, the authority will ship its unused Leotek lighting units from the original batch — approximately 6,587 — that it was in still possession of back to the California-based company.

The lighting authority, per the settlement, cannot discuss further details surrounding agreement or its immediate impact on the maintenance fund, said its spokesman, Dan Austin.

The agreement resolves the suit filed by the lighting authority in May, arguing that upward of 20,000 LED lights supplied by Leotek were "prematurely dimming and burning out" and putting the city's revitalization progress "in jeopardy."

The authority tapped its maintenance fund to begin a replacement project in June after the lights failed in "large sections of Detroit." At the same time, the lighting authority sought reimbursement through the court amid disagreement over warranty benefits.

Detroit's state-of-the-art lighting system has been held up by Mayor Mike Duggan and others as an early success in the city's effort to restore basic services as it grappled with its financial crisis. Before the three-year, $185 million overhaul, about 40% of Detroit's 88,000 streetlights didn't work.

Duggan, in a statement to The News, called the settlement "fair" and said the city was "glad to have this matter resolved."

The mayor in the spring said the authority was "going full speed ahead on replacement" and that it would sue to recoup the cost he originally estimated could be up to $9 million.

"The team at the PLA did a great job of getting 20,000 lights replaced long ahead of schedule and before the days started getting short, which was the most important thing for children walking to and from school," Duggan added.

The state-created lighting authority was authorized by the Michigan Legislature in December 2012 and approved by the Detroit City Council to design and implement a three-year plan to improve the city’s lighting system.

The entity is able to issue bonds to finance capital costs for system upgrades and earmark $12.5 million per year from the city’s utility user tax to finance the bonds.

As of June 30, 2018, $18.4 million was reserved for the operation and maintenance, according to the lighting authority's annual report.

The defective lights were first uncovered during a routine survey of the system last year that revealed the Leotek units were "charred, burned, or cracked," the authority's law firm wrote in its federal complaint.

Installed just a few years ago, the Leotek lights were expected to last at least a decade. But Public Lighting Authority Executive Director Beau Taylor previously told The News the survey found the units were in various stages of dimming and that the authority was moving to swap out all of its Leotek fixtures.

Austin declined to discuss the settlement terms, beyond saying that "the lawsuit has been amicably resolved."

Thor Scordelis, general manager of Leotek USA, in a provided statement said despite the lighting authority's spring lawsuit, "we are glad that this dispute is now amicably and completely resolved" through the mediated settlement.

"Leotek worked with PLA to clarify and remedy the situation including field visits, technical assistance, and luminaire replacements based on our standard warranty," Scordelis said.

"Moving forward, Leotek USA believes in consistent innovation for lighting products and will continually work with our customers and honor our warranty commitments."

Berkeley, California, has had similar issues with about 7,000 LED streetlights supplied by Leotek in 2014 to upgrade the citywide lighting system there.

In early 2018, officials noticed a rate of failure that was "higher than we thought was appropriate," said Matthai Chakko, a Berkeley spokesman, in the spring.

Chakko could not immediately provide an update on Berkeley's negotiations with Leotek over who would cover labor costs for the replacement project. A spokesman for Leotek declined to comment on behalf of the manufacturer.

In Detroit, the lighting authority paid $3.9 million in 2014 to purchase 25,320 lights from Leotek. Installation costs for the lights were about $5.2 million. According to the lighting authority, Leotek, per its 10-year warranty, said it would correct and replace any defects.

The authority's May lawsuit had asked the federal court to grant judgment against Leotek for alleged warranty violations.

Leotek acknowledged in a letter to the lighting authority last December that it had experienced "a higher number of reports of failures" in the models that were dimming the city's streets, primarily in west side neighborhoods and a number of Detroit's major thoroughfares.

The parties entered into "confidential settlement discussions" with a mediator on Oct. 22. The two sides then agreed to settle their disputes and dismiss the lawsuit, the settlement document, signed by Public Lighting Authority Board Chairwoman Lorna Thomas and Scordelis notes.

The lighting authority's board approved the terms and conditions of the settlement during an Oct. 23 closed session. The dismissal was reflected in the federal court docket on Nov. 7.

"The only statement or comment the parties are permitted to make is that the lawsuit has been amicably resolved," the settlement reads. "The parties agree that they will not disparage or denigrate the other party and/or the other party's representatives, products, or services."

Crews in Detroit began replacing the Leotek lights in June by working 10-hour days, six days a week to swap out between 1,500-2,000 lights each week.

In September, Scordelis said in an email to The News that Leotek provided Detroit with 8,179 units of replacement lighting since June. He also called the design flaw "isolated" and said that "not all installations experienced problems."

The lighting authority has said it installed about 1,500 replacement lights from Leotek. The new lights installed were provided to the city at no cost and a different model.

Other lights used in the replacement project were America's Green Line, General Electric and Cree Inc.

Leotek was among four firms contracted by the authority in 2014 to install 65,000 new streetlights, making the city the largest in America to have 100% LED public lighting, Duggan has said. The new system was completed in December 2016.

cferretti@detroitnews.com