MINUTES OF THE METRO COUNCIL

REGIONAL ENVIRONMENTAL MANAGEMENT COMMITTEE MEETING

Wednesday, May 5, 1999

Council Chamber

Chair Washington called the meeting to order at 1:34 PM.

1.  CONSIDERATION OF THE MINUTES OF APRIL 21, 1999

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.

• A hazardous waste collection event was held in Aloha on May 1. He noted that one of the newspapers had erroneously announced an event would also be held at Washington Square. Those who arrived at the square there were not happy. The department sent a staff person to the square to redirect them. He said a small collection event will be held on June 12 in the Overlook neighborhood.
• The Solid Waste Association of North America (SWANA) held a symposium in Tigard on April 29 and 30 on public/private partnerships in solid waste. Several members of the REM staff participated as organizers and presenters.
• A pilot project called “Reach for Recycled,” aimed at helping develop markets for recycled products, resulted in, among other things, banners that will appear on Hawthorne Boulevard. A tool kit has also been developed for the merchants in the Hawthorne District that promote related events and projects. Mr. Petersen recognized Genya Arnold, REM Public Outreach, for her management of that project.
• May 1-9 is Great Blue Heron Week. The Great Blue Heron is Portland’s Official City Bird.
• The legislation currently in Salem aimed at restricting disposal of pool chlorine was voted out of committee last week. This legislation as it came out of committee would give Metro the authority to regulate disposal of chlorine in its own district. Legislation to do that will be prepared for Council approval this fall.

Presiding Officer Monroe recognized his friend, Clyde, who is a Great Blue Heron, and transmitted Clyde’s thanks to the Humans who declared this Great Blue Heron Week. Clyde indicated that the recognition was long overdue.

3.  RESOLUTION NO. 99-2773, FOR THE PURPOSE OF APPROVING THE YEAR 10 ANNUAL WASTE REDUCTION WORK PLAN FOR METRO AND LOCAL GOVERNMENTS

Mr. Peterson said this item had come before the committee as an information item at the last meeting. He said this plan coordinates Metro’s waste-reduction programs with local governments. It is the basis for allocating Metro’s money to the cities and counties for their waste-reduction efforts.

He said Councilor McLain had raised several issues, which Meg Lynch, REM Waste Reduction and Planning, had worked with her to address. The result was an A version of the resolution, which sets up a process that avoids duplication of programs, better focuses the approach, and provides for performance measures. (This revised version is attached to the meeting record.)

Councilor McLain called the committee’s attention to the wording changes in the resolution, which deletes only five words: “...a revenue sharing program that is tied...” Removing those words sets up a transition year for the program. She said the staff report associated with the A version of the resolution clearly explains the reasons behind changing the program. She said the language changes were not as important as letting the local jurisdictions know that beginning in year 11, money would be tied to performance and results, and would be more focused. She said no support would be removed and no programs would be de-emphasized. She said that beginning next year, the programs would be evaluated for effectiveness, and effectiveness would become the basis for any changes.

Councilor Park noted that although the change entailed only deleting five words, the impact would be great.

Councilor McLain acknowledged that the impact would be great. She said it needed to be, because times have changed. She referred to page 1 of the staff report. She said that when the program first started, the needs were great. Hardly anything did not need to be done. After ten years of operation, certain aspects have emerged as successful and others needed more work. This new approach would help identify those areas that need more work and help local jurisdictions focus and cooperate on a few programs that would have a greater impact toward reaching Metro’s 50% goal.

Councilor Park asked if local partners were comfortable with this change.

Mr. Petersen said he and Ms. Lynch had been working with local jurisdictions, and he believed they were.

Presiding Officer Monroe thanked Councilor McLain for her work on the resolution and for her willingness to accept compromise. He said staff would not, however, have an entire year to gather data on the effectiveness of the process; it would be much less than that. He said the funding for the entire solid-waste program would be under review in the next few months, along with the rest of the budget. He recommended staff gather its data and get as much information as it could to Chair Washington as soon as possible. He said it would help in developing the new budget that would be based upon change order 8, which would take effect in January of 2000.

Mr. Petersen pointed out that in addition to the wording changes in the resolution itself, the plan was also modified. The modified plan is Exhibit A to the resolution.

Chair Washington said he appreciated the staff’s quick response in addressing Councilor McLain’s concerns and apologized if the REM staff had been put under undo strain to do so.

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

4.  ELEMENTS OF THE SOLID-WASTE REVENUE FUND BALANCE

Dennis Strachota, Strategic Policy Analyst, REM, gave a PowerPoint presentation summarizing the REM Contingency and Reserve balances in the Solid Waste Fund. (A copy of the full presentation is in the agenda packet, which is part of the meeting record. A shorter, summary version presented to the committee is attached to the record.) Mr. Strachota briefly explained what constitutes the Solid Waste Revenue Fund’s contingency and reserves as well as its undesignated fund balance. He said the solid waste budget for 1999-2000 is almost $100 million. Of that, $41 million comprises contingency and ending fund balance--$14.3 million in the contingency fund and $26.5 million in the ending fund balance. The ending fund balance cannot be spent by anyone, but must be carried over as fiscal support for subsequent years. The contingency can be spent, but requires Council approval of a budget amendment ordinance to transfer money from it to another account.

Councilor Park asked if the ending fund balance had remained stable over the years. Mr. Strachota said it had grown until last year, when the department began spending it down.

Mr. Strachota explained the reasons for having contingency and reserve accounts, which include both legal requirements and good business practices. Some legal requirements arise from bond covenants issued for construction of Metro Central Transfer Stations, which define for what Metro can spend money. Those covenants are also reflected in a bond ordinance in the Metro Code. In addition, Oregon State Law requires reserves for the St. Johns Landfill closure.

Mr. Strachota said good business practices include protecting the agency against short and long-term financial problems and trying to prevent sharp swings in the solid waste rates. In addition, Metro needs to make sure it has enough money available to pay its obligations. Finally, Metro wants to maintain its good credit rating, which affects how much it costs to raise money through the markets. Metro has a AA rating now.

Chair Washington asked Mr. Strachota to explain why Metro does not have a AAA credit rating.

Mr. Strachota said few agencies have AAA ratings. He said one reason is that Metro’s revenues are based on solid waste revenues, which can be risky. If, for example, tonnage escapes Metro’s facilities, the lost revenue would affect Metro’s ability to pay off its bonds. The second, less important factor, is that Metro relies heavily on a single source of revenue for general funds--i.e., the excise tax. Credit agencies prefer diversification.

The $14.2 million contingency comprises three contingency--an operating contingency, a renewal and replacement fund, and a landfill closure account. The latter would not necessarily need to be on contingency, but having it there provides ready access to money to cover unforeseen expenses. The funds could not be accessed if they were in the ending balance account. The other two are required by bond covenant and Metro ordinance. The operating contingency varies from year to year, calculated to cover 10% increase in tonnage plus 5% in other materials and services.

Chair Washington asked why $2.7 million was considered sufficient for operating contingency.

Mr. Strachota said there were three reasons. First, it is a common amount for solid waste enterprises. Second, it was the amount recommended by an outside counsel. Third, it was an amount suggested through experience.

The renewal and replacement fund, set up by bond covenant, can be spent only on replacing existing equipment; it cannot be spent on new equipment. The amount, now about $700 thousand per year, is determined by an independent engineering firm and comes from the rates.

The St. John’s Closure fund is restricted to closure activities and liabilities. It was set up when Metro acquired the landfill. Metro raised nearly $40 million to close that landfill, and $6.3 million remains. As soon as the DEQ permits, REM will request that the Council allow it to convert what remains in that fund to long-term monitoring and maintenance, all of which will be needed for that purpose.

The unappropriated fund balance, $26.5 million, comprises six elements, of which only one, totaling just over $8 million, is undesignated. The rate stabilization account combined with the contingency fund should provide sufficient cushion to minimize the impact of rate increases in the event of a 5% loss in revenue over a two-year period.

Councilor McLain asked if that takes into consideration the new direct haul and reconfiguration of the types of facilities. Mr. Strachota said the direct haul would not affect rates in this case. Councilor McLain asked about other, unforeseen events. Mr. Strachota said certain circumstances might require a change in how these funds are calculated.

Councilor Park asked $10 million was the total that could be used to stabilize rates--the $2.7 million in the Rate-Stabilization account and the $8.4 million undesignated fund balance. Mr. Petersen said yes. Councilor Park asked how long it would take to spend that down at the rate of $2/ton stabilization. Mr. Peterson said three years.

Mr. Strachota explained that the $4.5 million Capital Reserve Fund is designated for but not restricted to new capital improvements. He said this fund is spent down each year, so it must be periodically replenished. The recycling-business-assistance account was new this year, started with money from the undesignated fund balance. After next year, the money would need to be set aside again. Setting this money aside from the undesignated fund balance keeps any remaining money from simply being returned to the undesignated fund balance. Some replenishment comes from loan repayment, but when the account is spent down, it will need to be replenished from rate revenues.

Chair Washington said he had requested the department provide periodic updates to the REM committee on budget processes. He said more updates would be given throughout the year.

4.  REVIEW OF REVISED SCHEDULE FOR SERVICE PROVISION PLAN FOR REGIONAL TRANSFER STATIONS

Mr. Petersen said the purpose of this information was to keep the committee apprised as a study proceeds on a new plan for transfer station services. He noted that this would be a major policy area the Council would be involved with this coming year. He introduced Doug Anderson, who would make the presentation.

Doug Anderson, Waste Reduction Planning and Outreach Manager, REM, gave a PowerPoint presentation summarizing the plan and the issues that would be addressed. (Hard copies of this presentation are attached to the meeting record.)

He said as an agency involved in the waste-disposal business, Metro should exercise good management practices by periodically checking the balance of supply and demand for services. If there is a gap, programs or facilities need to be changed. He said the department had originally planned to have its study done and recommendations to the committee by July of this year. However, that schedule has had to be pushed back by a couple of months. He emphasized that the committee and Council would be involved at key points in the process.

Mr. Anderson addressed key issues Metro would need to consider as part of the study and in subsequent policy-making. (These issues can be found in the hard copies of the presentation attached to the meeting record. What follows are key issues that generated more discussion.)

First, What will Metro’s policy be toward self-haul customers? He noted that this is the fastest-growing segment of demand. He said the question is whether this should be accommodated and at what cost.

Councilor McLain asked what service was not being provided commercially that prompted people to opt for self-haul.

Mr. Anderson said that is exactly the question the study will attempt to answer.

Councilor Park said that obviously self-haul was perceived as offering some sort of savings. He asked what the difference in costs are between service retail customers and wholesale customers. Mr. Anderson said that had been studied, and it costs Metro significantly more to serve the retail customer. Councilor Park asked if retail and wholesale customers paid the same price per ton.

Mr. Petersen said yes, in spite of the fact that most of the labor for traffic control arises from public customers.

Councilor McLain said tiered rates had been discussed in the past, with higher rates proposed for self-haul. She said at that time, neither the public nor the Council supported that approach. She said perhaps that idea could be revived. She said, however, that if the public was doing part of the work and was seeking service not provided, should Metro take that ability away.

Councilor Park asked if, on the other had, self-haulers were being subsidized. Councilor McLain said that was the other side of the coin, and that needs to be further discussed. Councilor Park said safety at transfer station has also been a concern. He noted that a private vehicle had been accidentally crushed at one facility.

Chair Washington asked if the tiered rate ought to be discussed again. Mr. Petersen said he would like to have a policy put in place that sets rates. He said he favors charging the true cost of service.

Mr. Anderson said a major public involvement process occurred in 1996, wherein a broad array of possibilities had been examined. Tiered rates came out of that. He said customers are charged $5.00 per load as a transaction charge and $62.50 per ton, which ends up being slightly higher, but not high enough to cover actual costs.. The big haulers still subsidize the small haulers.

Other issues that will be coming before the committee and the Council include ownership and operation options. Should new facilities be publicly or privately owned and/or operated? If they are privately owned and operated, should the scale-house operator be independent? He said some concern has been voiced about having an independent party in the scalehouses.

Chair Washington asked if scalehouse operations would be put out to bid. Mr. Anderson said most likely.

Mr. Petersen said the arrangements had not been worked out. He said the purpose of Mr. Anderson’s presentation was to lay out the issues that would need to be addressed. He said the key concern in the scalehouse issue ensuring that rates are assessed fairly for all customers.

Councilor Park asked what had been happening in Salem on a bill giving the Oregon Department of Environmental Quality auditing authority to verify what goes through the facilities.

Mr. Anderson said this issue still has many open questions. He said in terms of Metro’s franchising, Metro retains the auditing right. Councilor Park asked from where Metro gets the authority to do that.

Marvin Fjordbeck, Assistant General Counsel, said the authority came as part of the franchise agreement.

Mr. Anderson said the final issue that would need to be addressed is whether Metro should have a system of full-service facilities or a number of specialized facilities. Full service facilities are very hard to site.

Mr. Anderson said the REM department would be working with the committee and the Council to identify issues, define objectives, and establish the criteria by which the solutions will be evaluated.

Bill Metzler, REM Waste Reduction and Planning, summarized the revised schedule, which is included in the agenda packet that is part of the meeting record. He said the department had held introductory meetings with selected stakeholders about the project. He said at that time they had hoped to complete the project sometime in July, to coincide with the beginning of the new fiscal year. However, some of the stakeholders suggested taking more time, to make certain the needs assessment was complete.

Chair Washington requested that the survey of stakeholders include an area to solicit open-ended comments.

Councilor McLain asked that citizen involvement not be scheduled during August, as too many people take vacations then. She also requested that the study single out recycling as a priority issue to be addressed.

6.  PROCESS TO DETERMINE USE OF DISPOSAL SAVINGS FROM CHANGE ORDER 8

Mr. Petersen summarize the information on the schedule in the meeting packet associated with this agenda item. He noted that Chair Washington had been key in developing the schedule.

7.  COUNCILOR COMMUNICATIONS

There being no further business before the committee, Chair Washington adjourned the meeting at 3:45 PM.

Respectfully submitted,

Pat Emmerson

Council Assistant

ATTACHMENTS TO THE PUBLIC RECORD FOR THE MEETING OF MAY 5, 1999

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