MINUTES OF THE METRO COUNCIL

SOLID WASTE & RECYCLING COMMITTEE MEETING

Wednesday, February 7, 2001

Council Chamber

Members Present:  Bill Atherton (Chair), Susan McLain (Vice Chair)

Also present:    David Bragdon, Rod Park

Absent:    Rod Monroe (excused)

Chair Atherton called the meeting to order at 3:53 p.m.

1.  CONSIDERATION OF THE MINUTES OF THE JANUARY 17, 2001 SOLID WASTE & RECYCLING COMMITTEE MEETING

2.  REGIONAL ENVIRONMENTAL MANAGEMENT DIRECTOR’S UPDATE

Terry Peterson, Director of the Regional Environmental Management Department, discussed several issues including the block foam collection events, the ENACT awards, the positive Oregonian story about cleaning up illegal dump sites, the Governor’s Occupational Safety & Health (GOSH) award, and that REM has applied for an Oregon OSHA Workplace Redesign Grant. (For more details, see copy of Mr. Petersen’s update attached to the permanent record of this meeting).

3.  ORDINANCE NO. 00-886, For the Purpose of Considering the Application of Willamette Resources, Inc., for a Metro Regional Transfer Station Franchise.

Merle Irvine, Willamette Resources, Inc., 10295 SW Ridder Rd., Wilsonville, OR, requested approval of a regional transfer station franchise. He reported that his facility is authorized to receive and process up to 196,000 tons of solid waste annually, all permits and authorizations had been obtained. He said they had been in continuous compliance with local, regional, state and federal environmental regulations since the start of their operation. He said REM staff reports showed that WRI met Metro code requirements and Regional Solid Waste Management Plans (RSWMP) for a franchise to operate a regional facility.

He noted that WRI had been working with Metro to develop a process for franchising regional transfer stations for two years and he was concerned that now, at the last minute, Metro wanted to discuss a strategic plan before granting a franchise. He offered some conditions he felt would accommodate Metro’s planning process and enable WRI to retrieve material now being landfilled. Those conditions included:

•  Limiting the 50,000 ton disposal capacity restriction to the wet waste sent by WRI to a landfill.

•  No limitation on the disposal of residue from dry waste materials processed by WRI.

•  WRI would charge the same fees as Metro for disposal of wet waste and not charge a disposal fee for dry waste less than WRI’s nearest landfill competitor.

He felt there was a tremendous conflict within Metro because although Metro’s adopted solid waste management plan was based on achieving a recovery rate of 50-53% recycling and recovery, there were regulations completely opposite which would not allow the plan to be implemented, specifically the 50,000 ton cap. He said WRI had capacity now to nearly double the amount of dry construction/demolition debris they accepted, but they could not bring it in because of the Metro restriction so it was forced back into the landfill.

He was concerned that further delay in granting this franchise would cause WRI to lose opportunities that could not be made up, and strongly urged the committee not to delay its passage. (For more detail, see the copy of Mr. Irvine’s written testimony attached to the permanent record of this meeting).

Mr. Peterson summarized the staff report which concluded that there would be some marginal financial benefit to the system as a whole; there would be some reduction in miles traveled by vehicles collecting waste; and some improvement in waste reduction as more dry waste was sent to the facility. The report also concluded that the applicant had certainly demonstrated by previous actions that the operator was very likely to comply with all regulations in a safe and responsible manner.

He reminded the committee that the guiding principle of the financial analysis, and the criteria in the RSWMP and Metro code, was to take a system cost approach. That meant they would look system-wide at changes in collection and disposal, and the cost at Metro and non-Metro facilities, to see net savings, costs and benefits to the region as a whole.

He said WRI had estimated a $392,000 reduction in the cost of collection each year as the vehicles traveled shorter distances to the facility. REM staff felt that appeared to be a reasonable number. Mr. Petersen pointed out, however, that that number would have been larger except there were already two local transfer stations serving the area with a disposal capacity of about 125,000 tons a year. Additional tonnage would come from further away.

He said the applicant’s stated charges for wet and dry waste disposal, $63.46 and $64.58 per ton, respectively, were basically what the Metro facilities charged. Staff’s analysis assumed the rates that the applicant put in writing in the application for their conclusions. Any tonnage shifted from Metro facilities to non-Metro facilities would pay the same tip fee as they do now. There would be no savings from that standpoint. Metro facilities would receive about 60,000 tons of waste less per year. He noted Metro’s fixed costs, such as scalehouse costs, did not vary with tonnage, and would have to be spread over the remaining customers at the Metro facility. He added that higher transfer station operating costs were expected. The net impact of those two things to the customers at Metro facilities be $344,000 each year, while the net system benefit would be roughly $50,000 a year. He said the plan was to keep the present tip fee at Metro facilities so those additional revenues would not be collected from customers the first year. In future years, the rate would probably have to go up.

He commented that any kind of complex analysis they did had certain assumptions built in. Some assumptions could reasonably be changed to decrease the savings further, and some could increase the savings. Things that could further decrease the net savings to the region would be the company’s plans and actions regarding rates. He said this franchise did not have rate oversight by Metro and the company would be free to set their own rates. Metro reserved the right in the franchise, at some point in the future, to regulate rates, but not from the start. He said a small increase in the tip fee at the facility may not cause customers to go elsewhere, but it could capture some of the potential savings in collection. Another uncertainty that could decrease the financial benefits would be if the company acquired a collection business in a more distant area. He noted strong incentive for companies to bring waste to their own facilities. Under that scenario, the actual miles traveled could increase.

One of the things that could increase the savings would be that equipment renewal and replacement costs would go down with less tonnage. He said there could be an opportunity to reduce staffing as the tonnage reduced, which could decrease the cost on the Metro side, which would increase the system cost.

In conclusion, he believed the estimates in the staff report of marginal cost savings were good estimates. There were things that could make it higher or lower, but he felt the report was a good midpoint of potential benefits to the region. (See copy of the staff report included in the agenda packet with the permanent record of this meeting.)

Councilor McLain commented that the Council had asked for the strategic plan five years ago, and two years ago decided that the RSWMP should be updated before the overall strategic plan. She asked Mr. Irvine what he saw as Metro’s authority regarding rate setting.

Mr. Irvine responded that Metro clearly had all the authority. He said Metro audited his transactions every month and a yearly audit at the site to verify the numbers. He said he had no problem with that continuing to happen. He said a Metro inspector came out weekly. He said Metro also clearly had the authority to set rates. His concern was how to go about setting rates and the necessity for the rate setting. He said the franchise document originally provided that Metro could control their revenue but had no responsibility for financial well being of the company. He saw an imbalance there but felt they could work those problems out.

Councilor McLain asked if it would be fair to say that there was not one way or one definition of what that balanced rate setting would be.

Mr. Irvine agreed it would be fair.

Councilor McLain said that conversation was part of the strategic plan process and the rate review/setting process. She felt everyone would benefit from more discussion.

Mr. Irvine agreed and said they needed to define when and how those rates were set.

Councilor McLain how much business he expected to pull from areas that were on some maps, considered underserved but now actually had facilities. She said if the need was going to stand for the application and the criteria, WRI would have to serve those areas.

Mr. Irvine referred her to Map #2 at the back of their submission which had superimposed the areas they had envisioned coming to their facility as a regional transfer station. He said they had not included the area served by Pride in their analysis. He said they had no control over which facility the companies came to for disposal, but economics dictated they would come to WRI rather than going into Metro Central or South.

Councilor McLain summarized his response: in this franchise there was no attempt to set an area and no ability for Metro or WRI to say for with certainty that haulers would or would not use the WRI facility.

Mr. Irvine said that was correct. It would be their decision. He added that as he mentioned in his testimony, they received up to 1900 tons a month in 1999 from one of those customers that they had to cut off because they were in violation of their tonnage cap. He felt the customers clearly saw the benefit of coming to WRI vs. Metro South.

Councilor McLain said she found on- and off-route transportation savings to be marginal. She said the savings depended on whether or not the business would come to the WRI site, which he had already said there was no guarantee. She asked if the waste he was talking about recovering was waste that nobody else was trying to recover.

Mr. Irvine said they had estimated about 6,000 tons of dry waste. He said there were no underserved areas in eastern Washington County for dry waste. He said that had been a problem as they could not compete with those facilities to bring the material in. He said the waste he was talking about went straight to the landfill with little or no recovery and added that there was a great deal of it. If they could encourage it to come to WRI, there really would be no haul cost savings because it is about the same distance and travel time to go to Lakeside as to WRI. He felt the cap needs to be lifted. He said he had commitments to bring in a substantial amount of dry material but could not before the 50,000 ton cap was lifted, which was why he offered his conditions to the ordinance. He felt the net system benefit was not necessarily in the haul cost savings, it would help achieve the recycling and recovery goals in the RSWMP. He said he had considered coming with a variance request but language in the Metro code did not allow it.

Councilor McLain recalled that Council had asked staff to bring variances back for Council approval because a lot of variances were being given as an administrative technique, which they did not like. She said it was not that we didn’t want variances, they had a new process for more Council review.

Marv Fjordbeck, General Counsel, said when the Council amended the code in 1998 they substantially tightened the requirements of applicants. He said the applicant would have to demonstrate that a variance was required because it would be inappropriate to follow code due to conditions beyond the control of the applicant, or that there were special physical conditions that would make it highly impractical or extremely burdensome to follow the code.

Councilor McLain thought Mr. Irvine’s question was fair and Council needed to review the issue. She said she had been more comfortable with the original franchise language which included much broader language about Metro’s ability to audit or set rates at the facility. She asked why it had changed.

Mr. Petersen did not feel the change was less broad than the original franchise language, rather it clarified that the same rules would apply to all facilities in terms of when Metro would step in and decide to set rates. He said it still retained flexibility for the Council in terms of rate setting. He added that the auditing language was exactly same as the Forest Grove franchise.

Councilor McLain said she assumed in the boilerplate for franchises that the section on review and auditing was the same for all facilities, not just Forest Grove.

Mr. Petersen said he could not say it was exactly the same on all of them because he had not gone back to every franchise to see. He knew this was the same as Forest Grove.

Councilor McLain asked for the issue to be on the list for review.

Councilor Park asked Mr. Irvine if his counterproposal, no limit for dry waste residual, was tied to any recycling rate.

Mr. Irvine responded that the code adopting this franchise put a minimum requirement on dry waste. He said they currently did not have a minimum recovery rate.

Councilor Park said, theoretically, you could run up the tonnage moving through, decrease the recycling rate, and not increase your actual recovery rate of material coming out of the waste stream.

Mr. Irvine said yes, that was possible. He said they had a record of maintaining one of the highest recovery rates of these facilities. He pointed out that rate was even with a landfill they owned that was authorized to take dry waste. He said the reason they did not just take the dry material to their own landfill and not pull it out was their commitment not to do that.

Councilor Park said the reason he raised that question was as Council was trying to develop policy, they could sign off on something similar to this and Mr. Irvine would be within his rights, even though it may not fulfil what we wanted to accomplish.

Mr. Irvine responded that Metro had, as a condition of the franchise, the ability to modify the franchise at will.

Councilor Park asked if he would be willing to consider some type of cap for performance proposal.

Mr. Irvine said there was now a basic performance guideline through the credit programs at Metro. The incentive there is to achieve as high a rate as possible. He said the recovery and recycling was dependent on markets so a lot of criteria would have to be included.

Councilor Park asked General Counsel if Metro was able to do some kind of split between wet and dry within the current code.

Mr. Fjordbeck said there was no limitation in the regional transfer station provisions limiting wet or dry waste, or even an upper ton limitation on regional transfer stations in general. He said this proposal had not surfaced until recently. He said there was not a legal prohibition on the Council, although there may be policy prohibition.

Councilor Park asked if the same held true for a local transfer station as opposed to a regional one.

Mr. Fjordbeck said the limitations for local transfer rates is an overall limitation of 50,000 tons. He said retaining a local transfer station status with a facility that captured more than that tonnage would require an amendment of the code or the ability of the applicant to receive a variance under the terms he had described.

Chair Atherton thanked Mr. Irvine. He commented that the Council was trying to step back and look at the big picture. He said a key item on their mind was whether granting these franchises would prejudice Council’s ability to develop the policies of a new strategic plan. He asked Mr. Petersen to comment on the 50,000 ton cap.

Mr. Petersen responded that at the time the cap came about there were similar kinds of questions about where the system was headed that were being asked today. He said the 50,000 tons was an attempt to accommodate some of the need in the outlying areas for transfer capacity without preempting our options regionwide to look at the system. He said the facilities were granted the ability to handle a limited amount of waste that would be transferred pending a more comprehensive look at the system. He commented that Chair Atherton’s plan, in terms of strategic planning, was broader than the planning process they previously went through. He did not think the strategic plan process they were starting would be a repeat of the process from the last couple of years.

Chair Atherton asked if any kind of assurance could be provided regarding how the savings would be translated back to the ratepayers.

Mr. Irvine said he could not provide assurance because he had no control over the local process. He suggested that Metro could provide that information to the local jurisdictions and hope they would act responsibly and recognize the lower costs when they set the rates for the coming year.

Chair Atherton asked Mr. Fjordbeck to comment on Mr. Irvine’s request for amendments to the franchise.

Mr. Fjordbeck responded that the provisions of the solid waste franchise code simply said the Council had to act or deny on the application within 120 days. He said if the application was not acted on within the 120 day period it was deemed granted. He said the ordinance could be amended and would follow the same rules as other ordinances to be amended. It would require one more week before further approval of the Council.

Chair Atherton opened a public hearing on Ordinance No. 00-886.

David White, Oregon Refuse & Recycling Assn., 1739 NW 156^th Ave., Beaverton, OR 97006, submitted a letter of support for the WRI and Recycle America franchises, and lifting the tonnage cap, from Max Brittingham, Executive Director of the Oregon Refuse & Recycling Assn. for the record. He summarized the letter for record. (For more detail, see copy of Mr. Brittingham’s letter attached to the permanent record of this meeting). He commented about rate setting. While there was no guarantee that rates would go down, or even stay the same, the Council could be assured that the reduction in transportation costs would be part of the costs the hauler reports to local jurisdictions. He said those costs were audited by independent auditors and were part of the formula in setting the rates. He added there were other factors, including labor, fuel, franchise fees, disposal and recycling revenue, which all could go up or down at any given year, and had an impact on the rate paid at the curb. He said local members of the Tri-County Council had decided to remain neutral and the ORRA letter was from the state standpoint.

Councilor Park asked if Mr. White had a suggestion about how the haul cost savings could be passed back to the ratepayer.

Mr. White said one way to approach it was a cap on the tip fee rate at least equivalent to Metro’s. he added that you have to remember that the hauler using the facility may not own the facility.

Mr. Houser if there would be legal issues about placing that kind of price sensitive language in a franchise document.

Mr. Fjordbeck was not prepared to recommend that Metro set a price for the facility based on the government price without a rate making review at the facility. He said the proposed franchise suggested a placeholder for rate making which was what the code envisioned as well. He felt the stronger course would be to pursue that rather than to arbitrarily set a rate for the facility solely based on the government’s rate.

Chair Atherton closed the public hearing.

Councilor McLain commented that this ordinance was an application ordinance and not a review of the facility as a good provider, partner, or manager. She added that all of those things were true of WRI and Mr. Irvine.

She said the ordinance had criteria that had to be followed before more transfer stations were added to the region. She said the site was perfect place and she had voted for it to be a transfer station many years ago before there were other facilities in place. She said they had to look at the system in place today. The staff report, lukewarm at best, said the regional system savings were marginal and insignificant. She said there was nothing in the report, or offered today, that gave any certainty that there would be savings. If anyone could reach recycling goals, she felt it would be this facility, but we heard from the company today that it was marginal because there was no underserved area in Washington County. She said the application process had to be completed by review of the criteria and the criteria had not been met in any way.

She said the strategic plan would not carry us into the 21st century or be of value in the next 5-10 years unless the RSWMP had been updated. She said the strategic plan did not have to take more than 6 months to a year. Council and the budget had shown this as a priority and for the next year, a good portion of the Policy and Program Manager’s time will be focused on the strategic plan. She felt if the application was denied today, the strategic plan would benefit. She commented that when the review process was started, some of the facilities were not there and there was no direct haul. She felt the process had to reflect the present system. She said the maps need to be resolved as they are all different and can’t all be right. She said she was ready to make a motion to send the ordinance to council with a suggested denial action.

Chair Atherton agreed that the 5 criteria she spoke of had not been met, but added that the code also provided for other extenuating circumstances. He said the cost impact on Metro facilities had been uppermost in many people’s minds. He said the editorial conclusion on page 13 of the staff report said the rate structure should be analyzed regardless of council decision. He said if they were to deny or recommend approval today, the strategic planning process would go forward with rapid deliberation. He was concerned about a statement on page 13 of the staff report “that approval of this ordinance will result in a significant reduction in system costs, even with these minor increases in Metro rates”. He wondered how that could be true when the numbers are so close in terms of system benefit.

Councilor McLain said the statement could be interpreted a number of ways. If it was read it in isolation you got one take, but if you read it with the rest of the conclusions, you got that it was not a true statement. Regional systems fee would be affected mightily by adding more facilities. Mr. Petersen pointed that out when he indicated there would be fewer customers at our facilities and that we would still have to provide certain public services like household hazardous waste services. Someone will have to pay for that. She felt it would end up in the regional systems fee.

Chair Atherton asked if an amended ordinance would have to be prepared if the committee recommended denial of this application to the Council.

Mr. Fjordbeck said amendments could be adopted today, or the committee could give guidance to the General Counsel regarding how the amendments should go forward, or direct a replacement ordinance to be prepared. He said it could be continued to the next meeting on February 14^th.

Chair Atherton felt it was in the Council’s interest that they provide options

Councilor McLain said she had not seen any staff work that would support amendments.

Chair Atherton said his preference was to continue this discussion until the meeting on the 14^th.

4.  REVIEW OF COMMITTEE WORK PLAN

Mr. Petersen had no additional comment on the work plan. He said he was committed to having a strategic plan done by summer or early fall reflecting where the Council would like to head with the solid waste system.

Councilor McLain agreed that the 6 month timeline was reasonable. She said if it was to draw out to a year, it would only be because our partners wanted more conversation. She said the Council and the staff were capable and motivated to follow the 6 month timeline. She thought Mr. Houser and the other staff had done a good job of integrating the SWAC workplan and the committee’s high goals, capturing the Chair’s goals and the month to month activities that the REM Department was involved in.

COUNCILOR COMMUNICATIONS

None.

There being no further business to come before the committee, the meeting was adjourned at 5:39 p.m.

Respectfully submitted,

Cheryl Grant

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE

SOLID WASTE & RECYCLING COMMITTEE

MEETING OF FEBRUARY 7, 2001

Testimony Cards: