MINUTES OF THE METRO COUNCIL/EXECUTIVE OFFICER INFORMAL MEETING

September 14, 1999

Council Annex

Councilors Present:  Rod Monroe (Presiding Officer), Susan McLain, Ed Washington, Rod Park, Bill Atherton, David Bragdon, Jon Kvistad

Others Present:    Executive Officer Mike Burton

Presiding Officer Monroe convened the Council/Executive Officer Informal Meeting at 2:05 p.m.

Jennifer Sims, Chief Financial Officer, introduced Mr. Tony Mounts, would be replacing Craig Prosser. He came to Metro from the City of Gresham.

Councilor Washington asked where Mr. Prosser had gone.

Presiding Officer Monroe said he had taken the Finance Director position with the City of Tigard.

II.  UPCOMING LEGISLATION

Nothing was discussed.

III.  CHANGE ORDERS 8 AND 24

Presiding Officer Monroe said the main reason for this meeting was to discuss Change Orders 8 and 24. He asked Councilor Washington to facilitate the discussion.

Councilor Washington asked Jeff Stone, Council Chief of Staff, to brief the Councilors on the briefing books he and the council analysts had put together.

Jeff Stone explained how the briefing books were organized. The first component comprises overviews of the net versus gross savings and general fund issues. Other components include the minutes and letters received, technical material presented by REM staff, the executive officer’s recommendations, and the options developed by him and the analysts. Last are copies of reports that have appeared in various media. He said there were five options from which to select, including one to do nothing.

Councilor Bragdon noted that the options themselves contain options.

Mr. Stone said that was correct. He said in developing the options, they had drawn from comments made by the public and the Councilors.

Presiding Officer Monroe said the purpose was not to decide how to spend every dime; rather, it was to determine basic structural ways of dealing with the issue.

Councilor Washington emphasized that the options were options, not recommendations.

Mike Burton, Metro Executive Officer, thanked Mr. Stone and the analysts for putting the book together. He praised the process as being one of the most public he had seen, with excellent outreach. He thought the fact that several local jurisdictions had testified was positive. He said that ordinances would need to be prepared regarding what the rate setting would be. He hoped to obtain direction for his staff on how to proceed. He said all the potential savings from the change orders could be left in the solid waste system or some could be left in that system with another portion going to the general fund. The split decided upon would pose questions on how the rates should be set at different types of facilities. If the decision all the money is left in the solid waste system, the question would become how it should be spent. A similar question would arise for money allocated elsewhere.

Councilor Washington said today the discussions today represents the transition from consideration by the REM Committee to consideration by the full Council. He said after it the issue goes to the Council, specific allocation decisions would go the to Budget Committee. He hoped today to address three important items: 1) whether to reduce the tip fee or keep it at its current level; 2) whether needs remain within the solid waste system that should be attended to first and whether the remainder should be put into the general fund; and 3) whether go from charging a percentage to charging a per-ton rate for dumping solid waste.

He said there would be ample opportunity to discuss the opportunities to spend the savings. The key question was whether the Council believes the solid waste rates and agency stabilization are priorities. He suggested spending time studying the options presented in section 6. He asked to begin discussions by considering the tip fee issue.

Councilor McLain said some of the options for the tip fee include keeping the tip fee at its current level. She noted it had been reduced twice in the recent past. She thought it was important to discuss how the public would benefit from various options. She suggested the public might benefit more from programs to increase recycling than from reducing the tip fee. She thought it was important to consider the effect on recycling of lowering the tip fee. She thought lowering the tip fee would hurt recycling. Furthermore, there would be no guarantee the rate-payers would see a reduction in their rates, as the rates are set by the local jurisdictions.

Councilor Atherton noted that two previous reductions in the tip fee had not translated into reductions in the rates paid by individuals at the curb. Providing individuals with more ways to recycle and more convenience ways to recycle could also help reduce solid waste disposal costs. He said the economics of this situation, like that of many policy issues, is complicated.

Councilor Bragdon brought up the fiscal impact on the agency and the fiscal impact on the solid waste system and the recycling rate. He said looking back a couple of years and looking forward a couple of years indicate that the current tip fee would not be sustainable over the long run. That suggested to him the responsible course would be to keep the fee where it is. With regard to the solid waste system, Metro’s first responsibility should be to take care of the solid waste system. With regard to recycling, he said the first question concerns the relationship was between the tip fee and recycling. The second questions concerns and what can reasonably be spent on recycling before reaching diminishing returns--recovering the first ton yields more productivity than recovering the last ton.

Terry Petersen, Acting Director of the REM Department, said that recycling is an area that does not necessarily increase when more money is spent on it. He said his department is reluctant to spend money on recycling programs unless those programs promise to actually have an impact. He said in looking at the department’s programs--waste reduction and hazardous waste programs--between $1 million and $1.5 million per year could productively be spent to increase organics and commercial recycling and to expand the hazardous waste collection program to keep up with regional growth.

Presiding Officer Monroe said in his view, keeping the charges at a minimum for disposing of household hazardous increases the likelihood those wastes will be disposed of properly. That also saves the customer money directly, rather than hoping the jurisdictions will pass on a $0.20 or $0.30 per month at the can.

Councilor McLain said comments received during public hearings at the REM committee suggested, as Councilor Bragdon had mentioned, looking within the department to identify the needs for recycling and to determine which ones deserve the support. However, the REM committee had not yet considered how much to spend on what. She said one area that had been brought up repeatedly was improving opportunities for recycling in multi-family units. She said REM staff had information on what would be most effective and what was still left in the waste stream that might be pulled out. As to how the tip fee relates to recycling productivity, she said in her experience the lower the tip fee goes, the harder it is to promote recycling. She said at the school where she teaches, whenever recycling becomes difficult and the cost of disposal does not increase, recycling efforts drop.

Councilor Washington asked Mr. Petersen what in his judgment would be the most effective way of achieving recycling goals for the year 2000. He noted the region currently recycles 42% of its waste, and the goal for 2000 is 50%.

Mr. Petersen recalled a meeting with industry where that question had been asked. Industry had said to reach the goal, Metro should raise its tip fee. He said in his view, lowering the tip fee would hurt recycling.

Mr. Burton reiterated that reaching the last part of the goal would be more difficult than reaching the first, and money spent sees diminishing returns. He said any money spent should be spent with results in mind. He said focusing on multi-family units might achieve a few more percentage points, and it should be part of the program.

Councilor Atherton said in his view, part of the reason people recycle is because they know they are doing the right thing. They also want to know that those recycled items are being used in products. He asked what money had been set aside to stabilize the markets for recycled materials.

Mr. Petersen said market development would be a legitimate part of the package, and his department would forward a request for funding at budget time. He said certain items for which the market is currently sagging, such as roofing material and gypsum board, could be productively targeted.

Councilor Atherton asked about actually stabilizing the market for recycled materials.

Mr. Petersen said his department thought more in terms of providing technical assistance, as many of the markets were national and international. He doubted Metro’s money could have much impact.

Councilor Monroe suggested that if it costs $20/ton to dispose of something and $22/ton to convert it to a useful product, Metro’s $3 subsidy could help. He said that might be useful until the market for products made with recycled materials stabilizes and becomes self-supporting.

Councilor McLain said the problem has not been staff denying support for market programs; it has a lack of good programs to support. She said some grants have been given out to businesses, but up to now no permanent solutions have been found. She said part of the problem was buyer’s habits and reluctance to use products that have had previous uses.

Councilor Park asked for clarification on Mr. Petersen’s $1 million to $1.5 million for recycling programs. He asked if that would go on top of the $900,000 for the regional system credit fee. Mr. Petersen said that was correct.

Councilor Park asked if it would take about $1 million to keep the tipping fee level.

Mr. Petersen said rate projections over several years indicates that to keep the current $62.50/ton rate for two years would require about a $1 million draw-down on the un-designated fund balance. He said he was confident of holding that rate for two years and hopeful of holding it for three.

Councilor Park said he would like to keep the option open to use some of the savings to stabilize the rate when that becomes necessary.

Presiding Officer Monroe said he would recommend against reducing the tip fee. First, the solid waste system has first call on solid waste money. Two things need to be done to stabilize that system: 1) use effective dollars to reach the recycling goal of 50%; 2) keep the tipping fee stable. He recommended against artificially lowering the fee not, just because it might be politically popular, because it would just have to be raised again in a year or two. He recommended putting roughly $1.5 million toward increasing the recycling percentage and about $0.5 million toward stabilizing the tip fee. That would mean about $2 million out of about $6 million a year should be kept in the solid waste system.

Councilor Washington asked for a nod test on not reducing the tip fee. Everyone agreed except Councilor Kvistad.

Councilor Kvistad said Metro should return some of the money directly to the rate-payers. He said it would not amount to much--perhaps $0.50 at the can--but he thought it would be important to return even a little of the money as money rather than in the form of new programs.

Mr. Burton asked how much the tip fee would need to be reduced to give $0.50/month back to the rate-payers.

Mr. Petersen said roughly all of the savings would need to be returned as a reduction in the tip fee, which would amount to about $5/ton. Then, assuming the local jurisdictions pass all of the reduction on to the rate-payers, the amount returned at the can would vary by jurisdiction. Rate-payers in Portland, for example, would see a reduction of about $0.35/ month.

Presiding Officer Monroe said Metro had reduced the tip fee by $12.50 and the rate-payers had not seen any reduction in their costs. Reducing the tip fee would not guarantee any of the savings would be passed on. The local jurisdictions set that.

Councilor McLain said she supported Councilor Kvistad’s goal. However, the public had been more specific in their comments. The public had said the $0.35 savings at the can did not mean as much to them as did better recycling programs. She wanted to give money back to the public in ways they had indicated they wanted to receive it.

Councilor Atherton said one of the best ways to have effect is to reduce debt. That guarantees a return on investment. A $2.5 to $3 million applied to transfer station debt would go a long way, as well as debt on Metro’s Regional Center building itself. He thought reducing the debt would provide substantial benefits for the future.

Councilor Washington said that was one of the options. He said that scenario could be tested for economic impact. He said his main goal was to get a sense on whether Councilors favored reducing the tip fee, and he was getting the impression they did not.

Councilor Bragdon said that inflation would catch up with the tip fee. He was also concerned about that a reduction in the tip fee would hurt recycling.

Councilor Atherton said he had been a member of a local jurisdiction that had dealt with previous reductions of the tip fee. He said the greatest benefit was that it set in motion a process of reviewing the whole solid waste franchise issue and the disposal numbers. He said they were surprised at how inexpensive it was to dispose of trash rather than to recycle.

Mr. Burton said that if the decision is made to apply the savings to, for example, the debt on the Metro Regional Center building, the Council would have to go through the process of converting the savings to dollars that could be used.

Presiding Officer Monroe said that would be part of the budget process to follow this decision. The decision at hand was to decide how much of the savings should be kept in the solid waste system and how much should be put toward other needs. After that would come the decision on how much should be used to buy down solid waste bonds or bonds on Metro Central’s building.

Councilor Atherton said he saw this decision as similar to that an individual might face after receiving an inheritance--do you take a vacation, buy a new car, or pay off your debts?

Presiding Officer Monroe said that was correct, but that was going to the next level in this process. Deciding what to spend the money on was budgetary question and today’s discussion was more on policy direction.

Councilor Atherton said in his view, it worked the other way. If the focus was on paying down the debt, it would defer those budgetary questions.

Councilor Washington recommended running the numbers on Councilor Atherton’s suggestion on paying down the debt. He then asked that the discussion turn to considering the needs that remain in the solid waste system. He called attention to the options. Option #1, which suggested putting two-thirds of the funds in the solid waste system and one-third in the general fund. Option #2 reflect just the opposite split. Option #3 would put one-third into the general fund, one-third in the solid waste system, and one-third in what is called “community reinvestment.” Option #4, would put about 55% of the funds into the solid waste system and 45% into the general fund. Option #5 would be to do nothing.

Councilor McLain said she would need to consider each option thoroughly before she would be able to recommend a direction. She did not feel comfortable picking an exact percentage without studying the options more.

Councilor Washington said he was asking the larger question of whether the Council was comfortable using this approach and if not, what other ideas it might have. After that, the exact figures could be worked out.

Mr. Burton said he thought it was difficult to deal with a percentage without knowing how that would translate into action. He said it was important to keep in mind that it would be three years before Metro fully realizes $6 million/year savings. The first year it would be about half of that. He said thinking long-term was good, but it was important to remember that the numbers were not cast in stone; they could be changed when the budget comes up. They could be changed every year at budget time.

He said if the tip fee were left at the current rate, the amount needed to stabilize the fee for three years would amount to about 30% of the savings. That would leave 70% of the dollars either to remain in the system or come out. Whether and how much should remain in the system was the key question in the first set of decisions.

Presiding Officer Monroe said today’s process was intended to provide staff with direction so it could develop legislation on the split.

Councilor McLain said she thought it was premature to do that today, as only three of the seven Councilors had had the opportunity to discuss this before.

Presiding Officer Monroe said the legislation did not need to be item-specific.

Councilor McLain said a boiler-plate was one thing, but she did not think this was a decision-making meeting. She did not think the percentages should be decided today. She thought it would be better to decide on a general sense. She asked what the timeline was for having completed legislation.

Mr. Stone said there was ample time. He said October 1 would be the time from which you would have 90 days before this could take effect. The money from January 1 on would stay within the system. He said the legislation could have blanks in it. He said what was important to determine the split, but the councilors had the luxury of time to review the legislation. The task was to separate out what should be left in the solid waste system and where the rest should be sent.

Councilor McLain said the same thing had been done at the last REM committee. The Committee had been given a list of things in the solid waste area and a list in the general fund, with the understanding that at the next meeting the committee could make further recommendations on those issues. She said she thought the decision should be made in committee and not at an informal discussion such as this.

Councilor Washington said he agreed with Councilor McLain. He was trying to get a sense of whether the Councilors were comfortable with the options presented and whether they wanted staff to begin drafting legislation based on these options.

Councilor McLain said whether he was asking staff to draw up one boiler plate for each option or whether he wanted more direction. She said she did not have enough information yet to decide between the options presented.

Mr. Burton went through the timing brought up by Mr. Stone. He said the savings would begin on January 1, 2000. If the decision is to not change the current tip fee, that reflects the status quo. Beginning January 1, savings begin to accumulate based on that tip fee. Those savings would accrue until Council takes action to do something with it. If the decision is then to leave $1 million in the solid waste system, it would not accrue for some time into the year 2000. That gives some luxury of time. The issue Council were to decide to convert even one dollar of those savings to an excise tax that then normally gets bundled into the regular budget, a budget decision would need to be made.

Mr. Burton said he would like to start the budget process for FY2000 in October of 1999. Thus, it would be desirable to have a discussion of what the budget for FY2000 will look like--whether it would include these moneys--sooner than that. He asked how much of the savings would be accrued between January and July of 2000 if there was no conversion made until July of 2000.

Presiding Officer Monroe estimated it would be about $2.6 million.

Councilor Park said in the REM committee, the Chair had asked for a head nod on whether the solid waste system should be taken care of first, before meeting other needs. He did not know how the rest of the Council felt about that. He said based on Mr. Petersen’s estimates and using constant dollars, that would translate into $2.9 to $3.4 million left in the solid waste system. He said he was aware of the reserve fund from which the regional system credit fee was taken and of the buy down to stabilize the tipping fee, but he was trying to use constant dollars to avoid confusion.

Mr. Burton said he thought it would be useful for staff to provide a second round of figures to show how the percentage splits translate into money and what that would mean in terms of the solid waste system. He said Councilor Park was absolutely right. He said staff could provide information on where those dollars would fit, what they would mean, what their effect would be on current budget on everything including debt. He said his staff had dealt with that, but he realized the Councilors had not yet had an opportunity to deal with it.

Councilor Park said he would like a nod test about whether the solid waste system should be taken care of first. Everyone agreed except Councilor Kvistad.

Presiding Officer Monroe said he felt the decision should be made sooner rather than later, as one of the suggestions for using some of the money was to buy down, in some form, the excise tax at the zoo to offset a proposed price increase. If the Council was interested in doing that, the discussions should be undertaken now.

Councilor Washington said in view of the fact that the briefing books had only been available since the weekend, the discussions should be continued at the REM committee. Supporting material for the percentages should be introduced then. He invited all Councilors to the REM meeting to be held on October 22, 1999, at 1:30 PM, where the issue of the split would be further explored. He then asked for discussion on whether to go from a percentage to a per ton rate in solid waste.

Councilor Park asked Mr. Petersen about a discussion during the Solid Waste Advisory Committee (SWAC) meeting. He said he thought they had said that the disposal rate varies depending on the location in the region.

Mr. Petersen said the current excise tax is 8.5% on solid waste facilities. He said he understood the issue to be that different kinds of materials might be going to different facilities that charge different rates at their gates. Taking 8.5% of that and translating that back to a per ton rate results in a variation in per ton rates. He said it was consistent on a percentage basis but not on a per ton basis. The same kind of waste processed in the same way yields a different per ton rate in excise tax.

Councilor Park said the policy question would be, should a ton pay a different amount of excise tax based on its area of generation within the region.

Councilor McLain said Councilor Park’s question was good, but not new. She said the waste department has historical background on tier one and tier two rates, type of facility rates, flat fees, and what it means to have a systems fee. She said that conversation went on during consideration of direct haul. She said part of the question is new and that is, what do all the changes in the configuration of the system mean? She said the answer to that would involve a couple of years’ conversation. The first part of that had been started and that was the service plan, which should be presented to REM soon. That plan would put forth what is out there in terms of transfer stations both owned by Metro and owned privately. She said that document would give Councilor Park an opportunity to engage in this conversation more thoroughly. She said it would have important information on why the system works or does not in many areas, from configuration of the facilities to the rate system.

Councilor Park said his question was more one of policy, and that was whether the Council believes the solid waste tonnage of the same type should pay a different amount in excise tax depending on where in the region it is generated. If it believes it should be different, then the amount per solid waste ton should have some factor put in it. If it believes it should pay the same amount, then going to a per ton charge makes sense.

Mr. Burton said they do pay the same excise tax per ton.

Mr. Petersen said it is the way the tonnage is added up. He said that was a policy decision.

Mr. Burton said the policy decision would be on whether the Council wishes to count as solid waste, material that passes through a Materials Recovery Facility (MRF) or stuff that goes to a landfill and gets separated out. The rate is the same--8.5%.

Mr. Petersen said Mr. Burton was correct in that the excise tax is 8.5% on all tonnage. But Councilor Park is also correct in that when that is translated into a per ton charge, it is different. He said Councilor McLain’s point is that over time the solid waste system has grown more diverse. Now waste goes to several different places, which makes Councilor Park’s question more important now than it was five years ago.

Councilor McLain said the point Mr. Petersen had just made was that the list she had given Councilor Park of four out of six items make a difference on whether the rate should be the same. She said that was the only way she could decide whether the different types of waste should be taxed the same.

Councilor Park said the question was why the same waste should be charged differently at different facilities based on location of origin.

Councilor McLain said her answer would be yes, if some of the facilities offer hazardous waste facilities where customers could drop off different things at the same time or whether self-haul is allowed at that facility. She said that was the point of the systems fee.

Councilor Park asked what difference the other serviced had to do with the excise tax.

Councilor McLain said that would need to be investigated.

Presiding Officer Monroe said that is the reason for converting to a per ton basis. He said he was interested in four criteria for doing that: 1) it should not hurt recycling by hurting the MRFs; 2) it should not encourage garbage to be lost to the system; 3) it would need to be perceived as fair; and 4) it should be easy to administer. He said if a per ton charge could meet those criteria, that would be his preference.

Councilor Washington said this points up the complexity of the solid waste system. He asked staff if it could simplify the issue.

Mr. Petersen said he thought this particular policy issue could be made understandable. He understood the Council would like that done. He said he needed to continue to work with the facilities that pay this excise tax to let them know the Council is interested in this issue; they would want to be included in discussions about this issue.

Councilor McLain recalled a page at the REM Committee called “Potential Excise Tax Changes Objectives.” She said four of the changes the Presiding Officer had mentioned were on there. She thought a fifth one, which could fall under the “fairness” criterion but goes beyond that, was whether a tax could be easily described and readily understood. She suggested discussing that criterion.

Councilor Washington urged staff to try to simplify the material, in keeping with the spirit of that suggestion. He closed saying that the $60 million savings had generated interest as though it were $60 billion. He said it really wasn’t a lot and would only last for 10 years. He said he hoped that no one would lose sight of the fact that life would continue after that 10 years. He it was also important to remember this would not save the world; it was a temporary convenience.

Presiding Officer Monroe reminded everyone of the REM committee meeting on Wednesday, September 22, at 1:30 PM.

Mr. Burton asked what the procedure would be from here. He said staff would lay out the system and how it was taxed currently.

Presiding Officer Monroe said the decision on how to split the money would come to Council as a recommendation from the REM Committee, as well as any change from a percentage to a per ton charge. The tip fee decision he thought had already been made. As soon as those are made, discussions would begin in the budget committee as a whole on allocation of resources within those two separate areas--solid waste and other.

Mr. Burton said a longer informal had been set aside to begin budget discussion on October 12.

Councilor Washington said barring something unforeseen, the decision on the split would be forthcoming.

Mr. Burton said anyone who is not on the REM Committee and who does not attend can obtain the information.

11.  COUNCILOR COMMUNICATION

 ADJOURN

There being no further business to come before the Metro Council, Presiding Officer Monroe adjourned the meeting at about 3:15 p.m.

Prepared by,

Chris Billington

Clerk of the Council