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HomeMy WebLinkAboutStaff Report 244-09TO: 9." HONORABLE CITY COUNCIL-B~ FROM: CITY MANAGER DEPARTMENT: PUBLIC WORKS DATE: MAY 18,2009 CMR:244:09 REPORT TYPE: CONSENT SUBJECT: Adoption of a Resolution to Establish a Pledge of Revenue as a Financial Assurance Mechanism for Post Closure Maintenance of the Palo Alto Landfill and Approval of a Pledge of Revenue Agreement with the California Integrated Waste Management Board for Post Closure Maintenance of the Palo Alto Landfdl RECOMMENDATION Staff recommends that Council: 1. Adopt a resolution (Attachment A) establishing a pledge of revenue assurance for 30 years of post closure maintenance costs in an amount of $5.1 million (plus annual inflation adjustments) that would provide for performing maintenance, monitoring and reporting for the Palo Alto Landfill after the landfill is closed in accordance with the California Integrated Waste Management Board (CIWMB) requirements; and 2. Authorize the City Manager or designee to approve the pledge of revenue agreement (Attachment B) made and entered into by and between the City of Palo Alto and the California Integrated Waste Management Board (CIWMB) that will pledge future revenues to be received from refuse rate payers through utility billings to pay for the costs to perform these post closure maintenance activities for 30 years after the landfill closes. BACKGROUND In 1990, the City responded to new State requirements by approving a Resolution (No. 6919) that formally established a landfill closure/post closure maintenance reserve within the Refuse Enterprise Fund in accordance with State regulations. The purpose of establishing the reserve was to demonstrate to the State that the City could provide a source of funding that would ultimately fund the landfill's closure construction and 30 years of post closure maintenance activities. In 1993, the City approved Resolution No. 7192 that repealed Resolution No. 6919 eliminating the closure/post closure maintenance reserve and established a liability to recognize the costs to perform these activities. All of the funds in the reserve remained in the Refuse Fund in order to fully fund the liability (CMR:325:93). The change was made in response to the Governmental Accounting Standards Board requirement that all costs associated with the operation of a landfill CMR:244:09 Page 1 of3 must be recognized as a liability and that the total costs for closure/post closure maintenance activities must be fully captured by the time the landfill reaches its full capacity. The CIWMB accepted the City's liability assurance method as an equivalent Enterprise Fund method as long as it provided for funding that equals or exceeds the CIWMB funding requirements. Since 1993, the landfill has been filled to approximately 98 percent of its permitted capacity and in every year, funds have been added to the closure/post closure maintenance liability account to reflect the percentage of the landfill filled along with an inflation adjustment factor provided by the State. Recently, staff has contracted with a consultant who has prepared a final closure/post closure maintenance plan and cost estimate in response to Title 27 regulations requiring a final plan be prepared and submitted no later than two (2) years prior to closure. The post closure maintenance cost estimate for 30 years increased from $3.4 million to $5.1 million reflecting updated regulatory requirements mostly related to landfill gas collection, monitoring and reporting. DISCUSSION Title 27 of the California Code of Regulations, contains the regulations that specify standards for financial mechanisms of solid waste landfills. A financial assurance mechanism is an arrangement whereby a party facing a potential or certain liability pledges or deposits funds so that: 1) all anticipated costs will be covered; 2) all funds will be secure over time; and 3) all funds will be available when needed. Public Resources Code Section 43501 mandates that landfill operators establish "a trust fund or equivalent financial arrangement" as evidence of financial ability to pay for the costs of closure/post closure maintenance for their respective facilities. There are several mechanisms allowed for government entities to provide financial assurance. The City has chosen an enterprise fund for both the landfill's closure/post closure maintenance and corrective action. For an enterprise fund to provide proper financial protection, the fund (or a specific portion of the fund) must be dedicated to the closure/post closure maintenance and/or corrective action of a specific landfill, and the amount deposited must be tied to the cost estimates for that facility. To provide security over time and ensure funds are readily available, on each anniversary of the establishment of the fund, the balance must be increased by at least the amount determined by Section 22225(a) of the Regulations. In response to State requirements, staff recommends changing the landfill's post closure maintenance financial assurance mechanism from the Enterprise Fund account to a Pledge of (future) Revenues mechanism for the following reasons: 1) The primary advantage to changing to a Pledge of Revenue mechanism is that the City will not need to have all of the funds available in the Refuse Fund to cover the long-term liability of post closure maintenance prior to the landfill closure. In the current Enterprise Fund account mechanism, the City is required to annually certify to the State that all of the funds are available for the 30 year post closure maintenance costs. Changing to a Pledge of Revenue Mechanism will allow the City to collect post closure maintenance costs over a 30 year time period and will have a lesser impact on the rate payers. Post closure maintenance costs are expected to begin after certification of the closure in early 2013; and CMR:244:09 Page 2 of3 , 2) The process of reimbursement for post closure maintenance activities would be simplified. Currently with the Enterprise Fund mechanism, City staff is required to request approval from the State to withdraw fimds from the Refuse Fund for closure and post closure maintenance activities. With the Pledge of Revenue Assurance, the City would not need State approval. Once the attached resolution has been adopted, the City will need to enter into an agreement with the CIWMB to assure that adequate fimds are available to carry out the post closure maintenance of the Palo Alto Landfill. RESOUR<;E IMPACT The current "Enterprise Fund" financial assurance mechanism requires that the :full amount of the post closure maintenance liability be available ($5.1 million). Changing the post closure maintenance financial assurance mechanism to a Pledge of Revenue mechanism will allow the Refuse fimd time to produce revenue to obtain the funds necessary to cover this long term liability. POLICY IMPLICATIONS The recommendation does not represent changes to existing City policies. ENVIRONMENTAL REVIEW Adoption of this resolution and entering into an agreement with the State is not a Project under Section 2lO65 of the California Environmental Quality Act (CEQA) because the activity will not cause either a direct physical change or a reasonably foreseeable indirect physical change in the environment. ATTACHMENTS Attachment A: Resolution Attachment B: Agreement PREPARED BY: DEPARTMENT HEAD: CITY MANAGER APPROVAL: CMR:244:09 RON~ Manager, Environmental Control Programs /jL 1. KL}- GLENN S. ROBERTS Director of Public Works Page 3 of3 ATTACHMENT A NOT YET APPROVED Resolution No. ---Resolution of the Council of the City of Palo Alto to Establish a Pledge of Revenue as a Financial Assurance Mechanism for Post Closure Maintenance of the Palo Alto Landfill WHEREAS, the City of Palo Alto owns and operates the Palo Alto Landfill, a solid waste landfill, in conformance with the findings, conditions, prohibitions and requirements contained in Solid Waste Facilities Permit No. 43-AM-000I issued by, the County of Santa Clara, Department of Environmental Health serving as Local Enforcement Agency for the California Integrated Waste Management Board (CIWMB); and WHEREAS, Public Resources Code sections 43500 through 43610.1 and Title 27, California Code of Regulations (Regulations), Division 2, Subdivision 1, Chapter 6, require operators of solid waste landfills to demonstrate the availability of financial resources to conduct closure, post closure maintenance, and corrective action activities; and WHEREAS, on June 7, 1993 the City Council adopted Resolution No. 7192 which in part established the Landfill Closure and Postclosure Maintenance Liability account within the Refuse Enterprise Fund to demonstrate the City's availability of financial resources through an Enterprise Fund; and WHEREAS, sections 22228 and 22245 of the Regulations specify a Pledge of Revenue as an acceptable mechanism to demonstrate financial responsibility for financing post closure maintenance costs of a solid waste landfill; and WHEREAS, the City now desires to change this mechanism to a Pledge of Revenue. NOW, THEREFORE, the Council of the City of Palo Alto does RESOLVE as follows: 1. The portion of the Landfill Closure and Postclosure Maintenance Reserve Liability account currently set aside for post-closure maintenance is hereby released and Resolution 6919 is hereby repealed to the extent it requires a separate liability account for Postclosure maintenance. 2. In place of the Postclosure Maintenance Reserve Liability account, the City of Palo Alto shall establish a Pledge of Revenue to demonstrate financial responsibility for post closure maintenance of the Palo Alto Landfill in accordance with sections 22228 and 22245 of the Regulations. The pledged revenue shall consist of refuse utility billings designated as net sales in the Refuse Budget. 3. Disbursement of funds for post closure maintenance shall be in accordance with the final closure plan, as approved by the CIWMB. 4. In the event the CIWMB determines that the City of Palo Alto has failed, or is failing, to perform post closure maintenance as required by law, the CIWMB may direct the 090226 jb 0130439 NOT YET APPROVED Director of Administrative Services (Treasurer) to pay to the Director of Public Works (City Engineer) from the pledged revenues sufficient funds to ensure post closure maintenance, who then shall be obligated to use such funds for post closure maintenance in accordance with the directives of the CIWMB. 5. The Director of Public Works is directed to produce an annual report for transmittal to the CIWMB, containing, as appropriate, a revised post closure maintenance cost estimate, prepared as specified by section 21840 of the Regulations concerning the Palo Alto landfill. INTRODUCED AND PASSED: AYES: NOES: ABSENT: ABSTENTIONS: ATTEST: City Clerk APPROVED AS TO FORM: Senior Assistant City Attorney 090427 jb 0130439 2 APPROVED: Mayor City Manager Director of Administrative Services ATTACHMENT B PLEDGE OF REVENUE AGREEMENT FOR POSTCLOSURE MAINTENANCE OF THE PALO ALTO LANDFILL This AGREEMENT is entered into this day 2009, by and between the CITY OF PALO ALTO, a California chartered municipal corporation ("CITY"), and the California Integrated Waste Management Board ("CIWMB") to establish a Pledge of Revenue to assure that adequate funds are available to carry out the Postclosure Maintenance of the Palo Alto Landfill. RECITALS: A. WHEREAS, the City of Palo Alto owns and operates the Palo Alto Landfill, a solid waste landfill, in conformance with the findings, conditions, prohibitions and requirements contained in Solid Waste Facilities Permit No. 43-AM-000I issued by, the County of Santa Clara, Department of Environmental Health serving as Local Enforcement Agency for the California Integrated Waste Management Board (CIWMB); and B. WHEREAS, Public Resources Code sections 43500 through 43610.1 and Title 27, California Code of Regulations (Regulations), Division 2, Subdivision 1, Chapter 6, require operators of solid waste landfills to demonstrate the availability of fmancial resources to conduct closure, postclosure maintenance, and corrective action activities; and C. WHEREAS, on June 7, 1993 the City Council adopted Resolution No. 7192 which in part established the Landfill Closure and Postc1osure Maintenance Enterprise Fund Account within the Refuse Enterprise Fund to demonstrate the City's availability of fmancial resources through an Enterprise Fund; and D. WHEREAS, sections 22228 and 22245 of the Regulations specify a Pledge of Revenue as an acceptable mechanism to demonstrate financial responsibility for fmancing postclosure maintenance costs of a solid waste landfill; and E. WHEREAS, the City of Palo Alto intends to pledge revenues from refuse rate payer fees paid monthly by residents and business within Palo Alto deposited into the Palo Alto Refuse Enterprise Fund; and F. WHEREAS, the City of Palo Alto has determined that projected net revenues from the refuse rate payer fees during the thirty (30) year period of postclosure maintenance shall, during each year of this period, be greater than the yearly monitoring and postclosure maintenance costs contained in the most recent Cost Estimate for the Palo Alto Landfill, which has been submitted to the CIWMB in accordance with section 21840 of the Regulations. NOW THEREFORE, the City of Palo Alto and the CIWMB do agree as follows: SECTION 1. The City of Palo Alto hereby establishes a pledge of revenue to demonstrate financial responsibility for postclosure maintenance costs of the Palo Alto Landfill in accordance with sections 22228 and 22245 of the Regulations. 1 0312009 SECTION 2. The City of Palo Alto agrees to pledge net revenues from refuse rate payer fees as described herein. SECTION 3. The amount of the pledged revenue shall be equal to $168,655 per year for the 30 year period of postclosure maintenance, representing the most recent monitoring and postclosure maintenance cost estimate for the Palo Alto Landfill. It is agreed that the amount of this pledge may increase or decrease to match any adjustment to the identified cost estimate, which is mutually agreed to by the City of Palo Alto and the CIWMB. SECTION 4. If the City of Palo Alto ceases at any time to retain control of its ability to allocate the pledged revenue as identified herein to pay postclosure maintenance costs, the City of Palo Alto shall notify the CIWMB and the local enforcement agency and shall obtain alternate coverage within sixty (60) days after the control of funds lapses, pursuant to section 22245 of the Regulations. SECTION 5. In the event that CIWMB, RWQCB or LEA staff determines that the City of Palo Alto has failed, or is failing, to perform postclosure maintenance as required by law, the CIWMB, RWQCB and/or LEA staff shall confer with the City of Palo Alto and attempt to resolve the alleged violation. If no agreement is reached, the matter shall be presented to the CIWMB which shall give reasonable notice, hold a public hearing, and consider the testimony and documentation submitted by the CIWMB and/or LEA staff, the City of Palo Alto, and any interested parties, prior to making a determination in the matter. In the event the CIWMB then determines that the City of Palo Alto has failed, or is failing, to perform postclosure maintenance as required by law, the CIWMB may direct the Director of Administrative Services to pay the Public Works Director from the pledged revenues sufficient funds to ensure postclosure maintenance, who then shall be obligated to use such funds for postclosure maintenance in accordance with the directives of the CIWMB and RWQCB. II II II II II II II II II II II 2 0312009 SECTION 6. This Agreement shall become effective immediately, and is made and entered into by and between the City of Palo Alto and the California Integrated Waste Management Board (CIWMB). STATE OF CALIFORNIA California Integrated Waste Management Board By: __________ _ Authorized Officer of the CIWMB APPROVED AS TO FORM By: __________ _ Authorized Counsel of the CIWMB 3 CITY OF PALO ALTO By: __________ _ City Manager ATTEST: By: __________ _ City Clerk APPROVED AS TO FORM: By: __________ _ Sr. Assistant City Attorney 0312009