MINUTES OF THE METRO COUNCIL REGIONAL ENVIRONMENTAL MANAGEMENT

COMMITTEE MEETING

Wednesday, December 6, 2000

Council Chamber

Members Present:  Ed Washington (Chair), Susan McLain (Vice Chair), Rod Park

Also Present: Rod Monroe, Bill Atherton

Chair Washington called the meeting to order at 3:04 p.m.

Chair Washington welcomed the Honorable Laura Pryor from Gilliam County.

1.  CONSIDERATION OF THE MINUTES OF NOVEMBER 28, 2000

2.  REGIONAL ENVIRONMENTAL MANAGEMENT DIRECTOR’S UPDATE

Terry Peterson, Director of the Regional Environmental Management Department, discussed recent enforcement actions against Iconco/Hoffman Construction and River City Disposal & Recycling and updated the committee on the status of transfer station applications and out-of-district regional system credit fees. He reported that Jennifer Erickson of the REM Department had received an award from St. Vincent de Paul and introduced a new REM employee, Lisa Heigh. He noted the “Buy Recycled Gift and Education Fair” would be held on December 8, 2000 at Metro. (For more details, see the copy of the update attached to the permanent record of this meeting).

Chair Washington welcomed Ms. Heigh.

3.  Resolution No. 00-3020, For the Purpose of Considering a Request by Specialty Transportation Services, Inc., for Consent to a Change of Control and Ownership.

Mr. Peterson summarized Resolution No. 00-3020 for the committee.

John Houser, Senior Council Analyst, distributed a memo he had prepared for the committee identifying potential issues and/or questions they might wish to ask the REM staff or the Churchill/STS representatives (a copy of the memo can be found with the permanent record of this meeting).

Mr. Peterson, in response to a question from Councilor Park, said there had been no further action in this matter since they had last met.

Chair Washington opened a public hearing on Resolution No. 00-3020.

Gary Goldberg, President of Specialty Transportation Services (STS), said this contract had been working well for almost 11 years of the 20-year term of the contract. He explained that mergers and acquisitions were commonplace and the Council should expect the same service for the remainder of the contract with Churchill Environmental as a partner.

John Quirk, Churchill Environmental Fund, explained Churchill’s background as a private equity manager. He said they had reviewed the conditions with Mr. Peterson and if the Council gave their approval to the change, they would immediately convert the $7 million loan into STS stock. He said they anticipated the need for more equity from Churchill, which they were already planning to put in. He added that Churchill Environmental was very excited about working with STS.

Councilor McLain asked how an Aasche bankruptcy would fit into picture and how would Churchill help with a corporate guarantee.

Mr. Quirk responded that upon approval of the change of ownership, Churchill Environmental would immediately convert their debt into stock so they would hold roughly 80% of STS. He said the only affect of an Aasche bankruptcy would be a loss of their 20% of the stock. He said if that happened, it would be Churchill’s hope that they could purchase that stock out of the bankruptcy court. He said Churchill would be putting additional money into STS before the end of this year and would be buying new stock from STS, which would reduce Aasche’s 20% ownership. He felt an Aasche bankruptcy would have no affect on the contract.

Councilor Park asked if Mr. Quirk supported the tenets within resolution.

Mr. Quirk said he did. He added that Churchill had a limitation on how much money they could invest in any one company but there were still plenty of funds left to deal with that. He said it was an internal partnership limit.

Councilor McLain asked if a 30-day timeframe was workable to meet the conditions.

Mr. Quirk said it was plenty of time. He said if this resolution was approved, they would like to convert the stock prior an Aasche bankruptcy, if that turned out to be the case.

Chair Washington asked to what extent Gilliam County officials had input into this issue.

Mr. Peterson responded that his department had done their best to keep Gilliam County informed of the negotiations although they had not been active players because it was a Metro contract.

Mr. Goldberg said there had been discussions with Gilliam County because they were also required to appear there for the change of ownership.

Councilor McLain asked why staff felt comfortable with the review of this company’s long and short term financial well being.

Mr. Peterson was not sure how comfortable he was with STS’s long-term financial situation and did not want to speculate on it. He said Mr. Goldberg had been very open about their financial status. He said given the uncertainty, staff felt it was essential to have adequate protections for Metro and the ratepayers in place through these conditions.

Councilor Park asked the rationale behind changing Metro’s access to the STS equipment from 180 days to a year in the event of default.

Mr. Peterson felt it gave more flexibility and assurance that Metro could complete a re-bidding process in an orderly manner if STS defaulted.

asked for an explanation of the process. He wanted to be sure garbage would not stack up the transfer stations.

Mr. Peterson said they had a contingency plan in place in the event that STS stopped work. He assured Councilor Park that garbage would not pile up in the Metro region. He reported that there were a number of truckers ready to start transporting on very short notice with a short-term emergency contract.

Councilor McLain asked Mr. Peterson if he felt everything was covered in this resolution to update the contract in a timely manner.

Mr. Peterson felt the conditions were adequate. He said it was a long term contract that would continue for another 9 years if approved.

Councilor Park asked why specific financial reporting provisions were included in this contract that were not in the last contract.

Marv Fjordbeck, Legal Counsel, said they wanted to have some greater specificity dealing with the relationship with STS, Churchill Environmental, and the Mellon bank. He said the language in the resolution was designed to cover additional financial information items and make them more clear.

Councilor McLain asked who would monitor that financial information.

Mr. Fjordbeck said, as with all contract administration items, it would fall to Mr. Peterson and his staff unless the Legal Department was directed to do so from the Council.

Chair Washington asked about unresolved issues between Metro, STS and Aasche. He wondered what had changed to bring them to this resolution instead of negotiations.

Mr. Peterson felt they could not have reached agreement on the conditions without the resolution.

Mr. Goldberg said many things had evolved within the Churchill group of companies, and that they, quite honestly, had run out of time. He said there had to be a certain order to their work and they had not felt, until now, that they could fulfil the resolution within the 30 days.

Mr. Quirk agreed and said when he was here a month ago to discuss the issues with Mr. Peterson and his staff, that he was not sure whether they would try to save all of Aasche or just STS. He said the plan now was to focus on STS.

Councilor Park asked how they used the lump sum they had received last year. He asked about their plan for replacing and/or servicing their equipment.

Mr. Goldberg said the last resolution spoke specifically to where the monies would be spent. He said their on-going process of equipment maintenance had been in place since the contract started. He said that process continues and they have continued to replace the tractors as originally determined. He said they did not plan to replace the trailers now, because over time they had learned that replacing the floors and the on-going maintenance they were doing would keep the trailers in service through the remainder of the 20 year contract. Other considerations, such as volumes, had declined and it was taking less wear and tear on the trailers. He said on a scale of 1 to 10, the equipment would fall into the 8 to 9 area overall.

The Honorable Laura Pryor, Gilliam County judge, thanked the committee for letting her participate in the process. She said she had 107 families working for this company and their main worries had been the condition of the equipment, since it involved the safety of those families, and keeping the jobs for her County. She said due to the size of her community, she usually knew pretty quickly if someone was not doing their job or paying their bills. She said she was keeping up with the negotiations and had spoken to Mr. Goldberg on occasion. She commended the Metro staff for keeping her in the loop and hoped for a good resolution. She felt comfortable with the Metro staff recommendations and felt Gilliam county could now move forward with their part.

Chair Washington thanked the testifiers for coming as they had all traveled a great distance to get to the meeting to answer the Committee’s questions.

Councilor McLain said she felt comfortable with the work done by the Metro staff. She commented to Mr. Goldberg that she had heard nothing but good things about his company since she came to Metro in 1991. She said it was not the name, but the people who did the work that mattered, and they had been doing a great job. She appreciated his efforts both for Gilliam County and for Metro.

Councilor Park commented that he also appreciated the forthrightness of Mr. Goldberg’s answers.

Chair Washington agreed with the committee members. He appreciated Mr. Goldberg’s comments and Judge Pryor putting a human face on the issues.

Chair Washington assigned Councilor McLain to carry the Resolution to the meeting of the full Council.

4.  Ordinance No. 00-886, For the Purpose of Considering the Application of Willamette Resources, Inc., for a Metro Regional Transfer Station Franchise.

Chair Washington explained that this ordinance was before the committee for discussion only, and that there would be no public hearing at this time.

Mr. Peterson said he had expected to present the merits of the Wilsonville transfer station proposal at this meeting, but said several issues regarding the language of the proposed franchise had come up. Language regarding Metro’s right to audit the facility, to do rate setting if they found it to be in the best interest of the region, and the language about discriminatory rates at the facility were all unacceptable to the applicant. He said rather than discuss the merits of the proposal, he suggested continuing to work with the applicant over the next month to see if they come to some agreement in terms of the language and bring it back to the next committee meeting for discussion. He said there was a 120 day period for the Council to take action so there was time to carry it over if they wished to do so.

Chair Washington said the ordinance would be carried over until sometime in 2001.

Councilor McLain commented that the council was aware of the language in the ordinance and that this was one of three applicants in the queue for transfer station franchises. She said they had agreed it would be extremely important to maintain a high threshold of protection to the overall system and the ratepayers when they started this process. She said since Metro owned transfer stations, it would be important to protect the competition as well as Metro so they could do and fulfil their own jobs. She said the issues, including the ability to audit and rate setting and review, were nothing new to Metro franchises. She said it was important that staff maintain the understanding that they were protecting the system and the people who expected service from the system when working this with this company. She felt they could not go on with this conversation if it meant going below their standards and minimums. She felt the language in this ordinance were not adding to the scrutiny, they were making sure this company had to do the same kinds of things they were asking of other franchisees.

Councilor Park agreed.

5.  COUNCILOR COMMUNICATIONS

Councilor Monroe noted that this was the last REM Committee meeting for Chair Washington. He applauded Councilor Washington’s solid leadership of the committee, and added, since the last issue went unresolved, that he should come back to give his considered opinion when the time came.

Chair Washington thanked Councilor Monroe for the kudos, but said he would probably be trying to find sunny beach when the issue again arose.

There being no further business to come before the committee, the meeting was adjourned at 4:04 p.m.

Respectfully submitted,

Cheryl Grant

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE REM MEETING OF JUNE 7, 2000

Testimony Cards: None.