MINUTES OF THE METRO COUNCIL

REGIONAL ENVIRONMENTAL MANAGEMENT COMMITTEE MEETING

Wednesday, September 22, 1999

Council Chamber

Chair Washington called the meeting to order at 1:37 PM.

1.  CONSIDERATION OF THE MINUTES OF SEPTEMBER 8, 1999

Chair Washington said Councilor Park was attending a conference out of state.

2.  REGIONAL ENVIRONMENTAL MANAGEMENT DIRECTOR’S UPDATE

Terry Petersen, Acting Director of the Regional Environmental Management Department, gave a summary of the department’s recent activities. (The summary has been attached to the meeting record.) Items included the following:

•  Tualatin Valley Water Recovery Facility in Beaverton, formerly known as Citistics, has temporarily stopped operation while Waste Management decides what type of waste the facility should process.

•  The REM Department has two personnel changes. It has filled a new Facility Inspector position. Aaron Brondyke, who has been the Assistant to the Solid Waste Director, accepted that position. Mark Foye will temporarily fill the position vacated by Mr. Brondyke.

•  The REM department has hired a new Solid Waste Planner, Bob Hillier, who will work in the Engineering and Analysis division.

3.  ORDINANCE NO. 99-814, FOR THE PURPOSE OF RENEWING THE SOLID WASTE LICENSE FOR OPERATION OF THE WASTECH MATERIALS RECOVERY FACILITY

Mr. Petersen said this facility’s license expired on September 14. The Council has 120 days from the date of application to take action. If no action is taken in that time, the application will automatically be approved. Mr. Petersen said the department has no issues with the facility other than a steep drop in the facility’s recycling rate. It is now at about 5% of the incoming tonnage. The license requires the operator to recover material but does not specify a minimum level of recovery. He said rather than taking action on this specific license, Staff recommends looking at all requirements for all facilities, and if changes are made, applying those changes to this license.

Councilor McLain said she had understood there would be clear language stating Metro would be reviewing its recycling issues and needs with regard to all the facilities and making license requirements retroactive. She asked if that language were in this agreement.

Mr. Petersen said no language like that had been included in this license.

Councilor McLain said she would support renewal of this license only if she knew for certain that staff would be reviewing the recycling issue and changing the license agreements if necessary. She suggested putting at least general language in the staff report or as an attachment stating that intention.

Mr. Petersen said Section 9.1 of the license says, “at any time during the term of the license, either the Executive Officer or the licensee may propose amendments or modifications to this license.” He said that should cover the intention.

Presiding Officer Monroe asked about the words, “may propose.” He asked if a change were proposed, what guarantees would there be that the licensee would agree to that change?

Marvin Fjordbeck, Senior Assistant Counsel, said the teeth are in Section 9.2, which allows the Executive Officer to modify the license, suspend it, or revoke it.

Councilor Washington asked if staff had discussed imposing a minimum percentage for recycling.

Mr. Petersen said there once had been a minimum, but Council had changed that in favor of providing incentives in the form of the system credit fee. He thought going back to a minimum might be an option.

Chair Washington asked for a short history of the facility’s recovery rates.

Mr. Petersen said in 1997 under different ownership the rate was 77%, in 1998 it was 49%, and for the first half of this year it was 6.2%. Most recently it has been below 5%.

Councilor McLain said the facility has recently remade itself, and, in fact, the entire system has changed. In light of that, now would be a good time to reconsider the effectiveness of incentives versus imposing minimum amounts for recycling. She said even if a different waste stream comes in the front door and a different one goes out the back, the steep drop in the recycle rate still raises concern. She wanted to understand why that change had taken place and, perhaps, go back to a minimum recovery requirement if the situation suggests it would improve recycling rates.

Presiding Officer Monroe asked the recovery rates were at other Material Recovery Facilities (MRFs). He asked why this license was being continued in light of this poor recovery rate. He thought the drop was too large to ignore. If other MRFs were doing better, he would like to know why.

Chair Washington said he would like to know more about what other facilities were doing, also. He asked if this was the first time that the drop in recycling at this particular facility had been brought up. He asked if the rest of the licensees had been tracked in this regard.

Mr. Petersen said all the facilities have been tracked in order to calculate the system credit fee. He said the company was not violating its current license agreement, which has no minimum recovery rate. He said the question now was whether the Council wished to change the license requirements for all the facilities. He recommended a comprehensive approach rather than dealing with just this one.

Councilor McLain said her concern was approving another license for this company with the same language. She said in the past, licenses have been extended rather than re-approved if there were issue that needed to be resolved. She did not understand why that could not be done in this case.

Mr. Fjordbeck said the code language favors renewal except when renewal “is not in the public interest.”

Councilor McLain said in her view, renewing this license might not be in the public interest if the recycling rate remains low. That was why she would prefer to approve an extension, then negotiate the license with new language.

Mr. Fjordbeck said if the Executive Officer were to make that determination, then that might be a factor in deciding not to renew. Another way to address the concern would be to add language in the ordinance approving the renewal or to seek a language change in a more comprehensive ordinance, as Mr. Petersen has suggested.

Presiding Officer Monroe asked what would happen if this ordinance were voted down.

Mr. Petersen said that facility would need to cease operation, as they would not be authorized to receive mixed solid waste. They would still be allowed to bring in curbside, source-separated solid waste, but not mixed waste. This license does not allow putrescible waste, but it does allow dry mixed solid waste.

Presiding Officer Monroe said he was troubled that the facility could recover only 5% of dry solid waste.

Councilor McLain said she did not want to hinder staff’s ability to work with the company on this issue. She would prefer an extension until this issue has been cleared up. She said she was very concerned about such low recovery from dry waste. She would like to see staff address this issue region-wide.

Mr. Fjordbeck said the option was only to renew or deny renewal.

Councilor McLain asked if extensions were available only for franchises and not for licenses.

Mr. Fjordbeck said that when provisions were modified in 1998, this was among them.

Chair Washington opened a public hearing on Ordinance No. 99-814 at 2:00 PM.

Adam Winston, General Manager, Waste Management, Inc., 7227 NE 55th Ave, Portland, OR 97218, said Waste Management prefers source-separated recycling. He said his company encourages source-separated recycling. He said source-separation increases recycling tonnage, because the waste is cleaner and easier to market. He acknowledged that there had been a decrease in the recovery of dry waste at Wastech. He said Waste Management has a strong commitment to recycling. He said his company had just invested $90,000 in upgrades at its Recycle American facility. He said his company was doing everything possible to maintain recovery rates. He invited the committee to visit the facilities, but when comparing them to keep in mind that each facility is different.

Chair Washington closed the public hearing at 2:05 PM.

Councilor McLain asked Mr. Petersen when the 120-day notice would expire.

Mr. Petersen said October 7.

Councilor McLain said in that case, it would be important to her to put language in the ordinance or the staff report indicating Metro’s intention to review the recycling rates at this and other facilities and that the licenses might be amended in the near future.

Chair Washington said he would support passing this on to Council, but he said he would support an amendment to the ordinance stating Metro’s intention to review recycling. He would prefer something that applied to all facilities. He said Councilor Park, who would not be back until next week, might have other concerns, also.

Presiding Officer Monroe said he would support this in Council only if he knows specifically what actions the executive plans to take to address the recycling issue and when they will take place.

Mr. Petersen said the 120-day deadline is October 8, not October 7. He wanted that clear in the record. Also he said he understood the Committee would like an amended ordinance that clearly states the Committees request, the actions the executive will take, and the timeline for that action.

Councilor McLain moved to send Ordinance No. 99-814 to the Council with a do pass recommendation, on the condition that it be amended to say a review of recycling at this and similar facilities would be forthcoming. If the review warrants it, then the licenses might be amended.

Presiding Officer Monroe directed staff to draft the amendment to the ordinance for consideration by Council on October 7. The amended ordinance could then be introduced by the committee as part of the committee’s action.

Councilor McLain will carry the motion to a meeting of the full Council.

4.  ORDINANCE NO. 99-815, FOR THE PURPOSE OF TRANSFERRING THE SOLID WASTE FRANCHISE FOR OPERATION OF THE RECYCLE AMERICA RELOAD/MATERIALS RECOVERY FACILITY FROM WASTE MANAGEMENT OF OREGON, INC., TO USA WASTE OF OREGON, INC.

Mr. Petersen said this facility, owned and operated by Waste Management, is located in Troutdale. It operates under a franchise rather than a license. He said the distinction is they are authorized to accept wet waste and to transport waste directly to the Columbia landfill. (More details on this Ordinance can be found in the accompanying staff report, contained in the meeting record.) Mr. Petersen added that although the recovery of dry waste is higher at this facilitate than that at Wastech--19%--there has been a decline here, also. Nevertheless, staff would recommend taking the same action on this franchise as that on the license just considered.

Councilor McLain asked if he was suggesting the same amendment be put into this ordinance, also.

Mr. Petersen said yes. He would recommend comprehensive review at all facilities.

Chair Washington asked about the recovery rate history at this facility.

Mr. Petersen said to keep in mind that the mix of waste has changed at this facility as well as the ownership. He said in 1997 recovery was 56%, in 1998 it was 29%, and now it is about 19%.

Chair Washington expressed concern about what appeared to be a disturbing downward trend in dry waste recovery rates. He also said he would pass on any concerns Councilor Park might have, as with the previous ordinance. He said this underscores the need to review recycling practices at all the facilities.

Councilor McLain said both Mr. Winston and Mr. Raphael had expressed a desire to do a good job on recycling. She said these reviews will give the facility operators the opportunity to do that.

Chair Washington will carry the motion to a meeting of the full Council.

Presiding Officer Monroe said the amendments would need to be presented on September 30, and the ordinance would need to be introduced on October 7. He said the ordinances could not be prepared in time, the alternative would be a suspension of the rules. He preferred not to suspend the rules.

5.  COMMITTEE DISCUSSION OF EXPENDITURE AND REVENUE ISSUES RELATED TO SAVINGS FROM METRO’S SOLID WASTE DISPOSAL SYSTEM

Mr. Petersen introduced a presentation REM staff had prepared regarding outstanding policy issues on the projected solid waste savings (hard copies of the summary slides have been attached to the meeting record.) The issues include two key points: 1) how the savings should be split between the solid waste system and the general fund; and 2) whether to change the excise tax from a percentage to a flat amount. He said that at the end of the presentation he would show an interactive spreadsheet so Councilors could test different tax rates and see what the effect would be.

He said what is referred to as the net savings assumes that $900 thousand has been put back into the Solid Waste Undesignated Fund balance to offset increases in existing programs. That $900 thousand plus any additional money allocated to new solid waste programs would be the total allocation of the savings to the solid waste system.

Councilor McLain asked if Mr. Petersen was assuming that every program that is currently in the budget would remain in the budget at the same level of funding.

Mr. Petersen said yes. He said the primary increases lie in the inflationary adjustments in major contracts, not in the waste-reduction programs or hazardous waste programs.

Councilor McLain asked if the Council chose to drop programs during the budget process, would the $900 thousand dollars then go down and the gross savings would go up?

Mr. Petersen said yes. This assumes the status quo for program costs.

In discussing where the contract savings came from, Mr. Petersen said the bottom line is that not all the facilities will realize the same savings. To exactly capture the savings at only those facilities that enjoy the savings, a differentiated excise tax and regional system fee would need to be devised. He said the current structure, by increasing the fees and the taxes, would not provide a one-to-one relationship with the savings.

Councilor McLain addressed possible options for applying the savings. Regarding retiring the debt, she said at the last Council/Executive Informal meeting, she had requested that staff determine whether that course of action would entail penalties that might offset any savings. She asked if that determination had been done.

Mr. Petersen said a consultant had studied that issue several weeks ago. He said if she had not received that report, he would provide one to her and the rest of the Councilors.

Mr. Petersen said regarding the question of whether to change from a percent to an excise tax, not all facilities are rate-regulated. Some facilities set their own disposal tip fees and others have them set by local governments. In effect, the current 8.5% excise tax might vary, depending on the price the facility charges.

Mr. Petersen explained the chart illustrating variation in the per ton tax among different landfills. He said the $1.10 represents the excise tax and is constant per ton. The white part of the bar reflects the different tip fees being charged--8.5% of varying tip fees.

Mr. Petersen presented four possible options of structuring a per ton tax, along with the pros and cons of each option. He noted that each option assumed the net savings of $5.2 million.

Councilor McLain noted that option #4 taxes different facilities differently. She asked why it would be as beneficial to Metro or to the Recycling rate to go with option #4 as opposed to Option #1.

Mr. Petersen said to realize the benefit from option #4, Metro would need to define a MRF to determine what type of facility would get the favorable rate.

In summarizing each option and its pros and cons, Mr. Petersen said option #4 most likely provides the greatest incentive to recycle, is the most revenue neutral, and is most closely linked to where the savings have been realized. However, it is also the most complicated system.

Councilor McLain said option #4 requires the most precise definitions of what the facilities are. She asked if the MRFs, for example, had been differentiated. Mr. Petersen said no, that in these cases they had been lumped together.

Presiding Officer Monroe asked which option might spur people to try to evade the tax and which presented the most opportunity to avoid paying the tax.

Mr. Petersen said the scenario that would not prompt people to try to avoid paying Metro’s tax would be one that did not increase the tax. He said no increase in either taxes or fees would do that. He said option #4 probably does that best, because increases in the fees or taxes are offset by savings. The total payment to Metro remains the same. Less might be paid in the disposal fee and more in the excise tax, but the total payment would remain the same.

Presiding Officer Monroe asked if any option presented a greater opportunity to avoid the tax.

Mr. Petersen said they are probably equal on that score. He said with regard to switching from a percentage to a per ton rate, each has advantages and disadvantages. The per ton tax does not require Metro to know the tip fee or the gross revenues at the facilities. All Metro needs to know is the tonnage. From that standpoint, the per ton tax would be easier to administer and easier to enforce.

Mr. Petersen asked for committee feedback on 1) the split on allocating the savings, and 2) the preference for a percentage or a per ton tax. With that direction, staff would prepare the appropriate rate ordinances. He called attention to the interactive spreadsheet that would allow the Councilors to test the effects of different allocation percentages. (Results of different test percentages have been attached as hard copies to the meeting record.)

Councilor Bragdon introduced his concept on how to spend the savings. (This concept, labeled “Dakota Option #1, has been attached to the meeting record.) He said he had taken these ideas from all the Councilors and from public testimony. He thanked Mr. Stone for his work putting together the briefing book on this issue, which had valuable in helping him choose from a “cafeteria” of choices.

Councilor Bragdon reminded the committee of what Chair Washington had mentioned before, and that is that these savings do not amount to a lot of money in the scheme of things. He said he was reminded of the way money was distributed after World War II through the Marshall Plan. He said that money had an identifiable source and purpose, and people knew it was temporary. This money might be treated in somewhat the same way. It could be kept together in one fund that people could identify with this agency--e.g., with parks and greenspaces. It would emphasize partnerships with local jurisdictions. It would be viewed as a special, temporary fund. In the Dakota Option #1 discussion, this has been called the “Earth Restoration Protection Fund.”

Councilor Bragdon said many organization had requested donations from this fund for good causes, and it would be difficult to deny those requests. However, he warned against spreading the donations too thinly and diluting the impact the money might have if it were concentrated on issues directly related to

Metro’s mission.

Chair Washington thanked Councilor Bragdon for his contribution to the discussion.

Councilor McLain thanked Councilor Bragdon for the clarity he brought to his concept. She said she agreed with him on the need to limit the vision to short-term programs, recognizing that this is a limited amount of money. She agreed with the theme-related approach, and thought people would appreciate knowing that their $0.35 at the can “savings” was accomplishing something worthwhile.

Presiding Officer Monroe reminded the Council that in the past when Metro has lowered its tip fee, the savings never reached the person paying the bill. Rather, it goes either into the local jurisdiction’s general fund or into the pockets of the garbage collectors. He said he wanted the citizens of this region to see real benefits from the savings through tangible programs such as those outlined by Councilor Bragdon, rather than theoretical savings that end up lost in some general fund.

Jeff Stone, Council Chief of Staff, introduced a proposal developed by Councilor Atherton. (An outline of this proposal, titled “Councilor Atherton Option #1,” has been attached to the meeting record.) Briefly, this proposal would keep most of the savings in the solid waste system and keep the tip fee stable at its current level. It differs significantly from the one brought forward by Councilor Bragdon in that it would apply savings toward retiring public debt on the bonds for both transfer stations by the year 2004. It would provide money for recycling enhancements and incentives for businesses and manufacturers to develop markets for recycled materials, especially plastics, heavy metals, glass, and energy. It would reduce the excise tax on the Oregon zoo and make a one-time contribution to the Oregon Food Bank. Mr. Stone called attention to the last sheet of this proposal, which breaks down the money allocations proposed.

Mr. Stone said another part of this proposal would make a one-time contribution to the general fund balance and encourage the Council and the Executive Officer to keep the general fund balance stable. This would require examining revenues and expenditures each year, to make sure the fund balance is not drawn down again.

Chair Washington noted that the proposal shows allocations from 1999-2003. He asked if the proposal goes beyond that.

Mr. Stone said he had requested that Councilors keep their proposals confined to a four-year period, to avoid committing this Council to an unalterable course.

Councilor McLain said she understood one of the major differences between these two proposals was that Councilor Atherton specifies what dollars would be spent where as well as where the general fund dollars would be spent. The Dakota option was more general in terms of where the money would be allocation.

Mr. Stone added that Councilor Atherton would have some money going to retire the debt for this building in the years beyond 2003.

Councilor McLain asked if there would be penalties if those bonds were retired early.

Mr. Stone said he did not have the figures, but that course has pros and cons. It would raise the question of what to do with the transfer stations once they are paid off and whether to remain in the transfer station business. That would have an impact on the agency. It would raise questions of what would happen between the years 2005 and 2009 and whether that would benefit the agency. He said he did not have those answers. He said the proposal simply shows the earliest date the bonds could be paid off.

Councilor McLain asked if he meant that Councilor Atherton was advocating a basic philosophy of reducing public debt. Mr. Stone said that was correct.

Chair Washington asked Jennifer Sims, Director of Administrative Services, to answer questions regarding penalties on retirement of the bonds.

Ms. Sims said there would be no penalty, but there is a date-- 2004--before which Metro cannot call the bonds. There is a procedure to defease the bonds. She said the savings could be used this way. A report prepared by Chip Pierce, an outside financial consultant, shows what it would cost and the steps for doing that over the next four years.

Chair Washington asked John Houser, Council Analyst, for his comments.

Mr. Houser said he had talked with Mr. Pierce, who had advised him that the fixed rate bond would have an interest rate penalty. He said the bonds could be called as early as 2001, but in 2001 and 2002, Metro would have to pay a small--1% or 2%--interest penalty. He said he did not have similar information on this building’s bonds, but he did know Metro would be paying on the bonds until 2022.

Ms. Sims said the benefit of calling the bonds would depend on how the process is structured. The sooner they are retired, the more complicated it would be. It would be less complicated after 2004.

Councilor Monroe asked what the interest rate is on the current bonds.

Ms. Sims estimated it at about 5-1/2%.

Presiding Officer Monroe said that was pretty modest. He thought that was important in weighing the priorities of this agency.

Ms. Sims added that the rate is tax-exempt.

Mr. Petersen demonstrated how the interactive spread sheet worked, using the Dakota Option #1 as an example.

Councilor Washington asked that each Councilor be supplied with a hard copy of the display. (This as well as a number of other scenarios are attached to the meeting record.)

Presiding officer Monroe recommended first looking at the needs that exist within the solid waste system, then putting the rest into the general fund, rather than deciding on a percentage split first. As to the question of the excise tax rate, he preferred a per ton system similar to option #4.

Councilor McLain said she was leaning toward a per ton tax and option #4. However, it would be important to define MRFs and, perhaps, to distinguish among them according to the amount of material removed from the waste stream. Regarding the split for allocating savings, she was leaning toward a Dakota-type split. She said several items in that split are particularly important to her, including restoring the solid waste fund balance to stabilize the rate for at least three years; providing at least $1 million to shore up recycling programs; and funding programs to address wastes that have proven challenging to recycle in the past. She said she was not as interested in reducing the bonds in the short term, as other needs seemed more acute, such as those in the greenspaces program and those in local jurisdictions trying to comply with the 2040 Growth Concept. She said she was still interested in helping out the Zoo and other Metro facilities; however, not everything could be accomplished in the first year. She said she was not endorsing a particular percentage, but she was endorsing the general mix.

Chair Washington said he was not particularly interested in retiring debt at this stage, especially if it would create complications. He said he had independently been thinking of a split similar to that proposed in the Dakota Option. He also said he was leaning toward a per ton tax similar to that described in option #4. He said he had a couple of caveats based on information presented by one of the haulers at SWAC that morning. He was concerned about the equity of the effects. He promised to prepare something more extensive later.

Councilor McLain asked for a run down of the time frame on getting these general preferences translated into specifics.

Presiding Officer Monroe said next, draft ordinances would be developed by the REM staff and brought to the REM committee for further amendment. They would be based on the 60-40 percent split of the Dakota Option and on a per-ton excise tax. The committee would be able to discuss a definition for MRFs and the precise split for the money after that. He said those draft ordinances should be ready for the committee to discuss at its next regularly scheduled meeting.

Chair Washington asked Mr. Petersen if that seemed feasible.

Mr. Petersen said yes. He thanked the committee for providing the direction his staff needed to proceed.

Chair Washington asked that information be presented based on several scenarios. He said he anticipated changes and wanted to make certain everyone understood that the draft ordinances would not be final documents.

Mr. Stone said the draft ordinances would be for the purpose of beginning discussions. He said that October 7 was the original date set for considering the split. The ordinances would not be ready for action on that date; however, he thought they might be first-read then, thus pushing back action by only one week. However, any substantive amendments would delay the vote by an additional week. Technical amendments would not affect the timeline.

6.  COUNCILOR COMMUNICATIONS

None.

There being no further business before the committee, Chair Washington adjourned the meeting at 3:29. PM.

Respectfully submitted,

Pat Emmerson

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE MEETING OF SEPTEMBER 22, 1999

The following have been included as part of the official public record.

Testimony Cards

Adam Winston, Waste Management