OFFICE OF OPERATIONAL SERVICESOFFICE OF OPERATIONAL SERVICES

PUBLIC WORKS DEPARTMENTPUBLIC WORKS DEPARTMENT

Commission MeetingCommission MeetingNovember 29, 2010 @ 7:00 p.m.November 29, 2010 @ 7:00 p.m.

Temp. Resolution No. R-4908Temp. Resolution No. R-4908

Deferring the Execution of an Amended Interlocal Agreement (ILA) with Broward County for Solid Waste Disposal Service

• Issue

• Background

• Request for Information (RFI) Process

• ILA/Service Agreement Risk Assessment

• Signing Bonus

• Staff Recommendation

PRESENTATION OVERVIEWPRESENTATION OVERVIEW

ISSUEISSUE• The Interlocal Agreement (ILA) for solid waste

disposal is set to expire in 2013• City to receive a “one-time” $725,000 signing

bonus if signs onto a new 10-year ILA by December 31, 2010

• Deferring the execution of ILA may put the signing bonus at risk

• City has a window of opportunity to engage in alternative options that could return greater benefits to the City

• City, enters into an ILA with Broward County for solid waste disposal services becoming a “contract community”

• Other Cities executed same ILA creating the Broward Solid Waste Disposal District (BSWDD) dependent to the county

• Broward County issued bonds to support the BSWDD and requires all contract communities to deliver wastes to system to ensure revenue stream

BACKGROUNDBACKGROUND

BACKGROUND BACKGROUND (Cont’d)(Cont’d)

• Critical Dates• Bonds retire in 2011

• South WTE agreement expires 2011

• North WTE agreement expires 2012

• ILA expires in August 2013

• Resource Recovery Board (RRB) has negotiated amended WTE Service Agreement• 10-year initial term

• Some improvement, but still pass through risks

• BSWDD to pay Wheelabrator for alignment of North and South facility contracts ($6 million+)

BACKGROUND BACKGROUND (Cont’d)(Cont’d)

• Existing ILA intended to sunset and equitably distribute any assets owned by the District

• RRB believes best course of action is to continue with the existing BSWDD and amend the ILA to coincide with the WTE Service Agreement

• Wheelabrator will pay out a one-time $12 million signing bonus to contract communities that execute an amended ILA prior to December 31, 2010• City’s Share is approximately $725,000

• City is obligated to ILA until 2013 and is final date to decide participation in amended ILA

DISPOSAL FEE HISTORY 1992-2010DISPOSAL FEE HISTORY 1992-2010

Since 1996 (past 15 years) the City of Miramar would have paid $14.2 million less if it was paying Non-ILA tip fees

The differential in 2010 is $1.5 million/year

• Request for Information (RFI) issued August 10, 2010

• Five proposals were submitted and all Broward County Cities were invited to review

• Seven ILA cities and two non-ILA cities participated in the presentations of the proposals on October 19, 20 and 25, 2010

• City consultant submitted a final report on the RFI process

RFI PROCESSRFI PROCESS

• RFI process shows outside disposal alternatives competitively compare to the BSWDD Service Agreement

• Liabilities are generally confined to an “arm length transaction” limiting cost increases

• RFI process did not allow for proposers to disclose their “best competitive” details

• A formal RFP will allow for direct comparison of financial and service benefits

RFI OUTCOMESRFI OUTCOMES

RISK ASSESSMENTRISK ASSESSMENT

• Solid waste management consulting for almost 25 years.

• Project Manager for the RRB and Broward County from 2003 to 2008.

• Contract administration and negotiation as Owner’s Representative for 15 large mass burn WTEs in the US (combined capacity > 21,750 tons per day).

• Lead negotiator for SWA Palm Beach County 20 year O&M Agreement in 2008.

SANDY GUTNER BACKGROUNDSANDY GUTNER BACKGROUND

• Components of disposal costs

• Uncertainties associated with Proposed District

• Estimated costs of proposed District compared to alternative

DISCUSSION TOPICSDISCUSSION TOPICS

ILA Cities

ILA Cities

ILA Cities

CURRENT DISTRICT TIPPING FEECURRENT DISTRICT TIPPING FEE

Fee ComponentEstimated Value Description

Base Tipping Fee $47.75 Defined as $47.75

CPI One-Time Adjustment $1.91 Adj. from 2009 - 2011

Monthly Pass Through Costs $3.53 Excludes Ash Monofill, leachate disposal

Change-in-Law Costs ?

Other Costs ? Late payments, etc.

Credits ? Miscellaneous adjustments

Total $53.19

WHEELABRATOR SERVICE FEEWHEELABRATOR SERVICE FEE

• The proposed ILA documents contain many uncertainties.

• Three of the most significant uncertainties include:– District Program expenses and liabilities– Service Fee Pass Through Costs– Change-in-Law risks

• The potential exists for disproportionate costs to Contract Communities.

• Risk allocation include many that are more typical of public ownership.

OVERVIEW OF KEY RISKSOVERVIEW OF KEY RISKS

ILA Cities

ILA Cities

ILA Cities

CURRENT DISTRICT TIPPING FEECURRENT DISTRICT TIPPING FEE

$77.02$30.17$99.20 $7.99

PROGRAM COSTS AND LIABILITIESPROGRAM COSTS AND LIABILITIES

Current District Programs• Contract administration• Recycled material processing• Closure and post-closure

reserves• Environmental compliance• Public information and

education• Household Hazardous Waste• E-waste recycling• Scrap tire removal• Unincorporated collection

services• Research and development

Proposed Programs •Code enforcement•Regional yard waste•Construction and demolition debris•Emergency debris processing and disposal

Proposed Programs •Code enforcement•Regional yard waste•Construction and demolition debris•Emergency debris processing and disposal

PROGRAM EXPENSES/LIABILITIESPROGRAM EXPENSES/LIABILITIES

Approximate Cost $30/ton Approximate Cost $????

Total Program Costs

?????

Total Program Costs

?????

FY 2009

Waste Disposed 63,618.94

Recyclable Material 2,789.05

Disposal Cost $6,266,466

Excess Revenue Distribution $0

Recycling Revenue ($134,919)

Net Disposal Cost $6,131,547

Net Disposal Cost per Ton $96.38

Wheelabrator Service Fee $66.26

Difference (Program Costs) $30.12

MIRAMAR DISPOSAL COSTSMIRAMAR DISPOSAL COSTS

DISTRICT PROGRAM UNCERTAINTIESDISTRICT PROGRAM UNCERTAINTIES

• District assets and liabilities not determined.• New programs envisioned but costs not determined.• Code enforcement costs not estimated.• No business plan. Plan of operations to be modified after

ILA.• As an Independent District, all costs borne by Contract

Communities.• All costs recovered through tipping fees and charges.

WHEELABRATOR SERVICE FEEWHEELABRATOR SERVICE FEE

Adjustments:•Inflation•Change-in-Law

• Capital• O&M• Lost revenue• Pass through

costs

Service Fee

Pass Throughs•Ash monofill expansion•Leachate disposal•Property tax•Non ad valorem

Cell 1A

1991

21 Acres

Cell 1B

Until 2017Cell 1B

1997

13.3 Acres

Cell 1C

Begin development by 2014

(1)

ULTIMATE ASH MONOFILL BUILD OUTULTIMATE ASH MONOFILL BUILD OUT

Full

• No limit. Charged as incurred.

• Ash Monofill expansion

– New cell to be in place by 2017.– Expansion is 6 years earlier due to non-ILA waste.– Not a Capital Cost Adjustment.– Estimated $18M to $20M.

• Leachate treatment and disposal.

• Capping and closure costs.

• Taxes, including non ad valorem, sales taxes.

PASS THROUGH COST UNCERTAINTIESPASS THROUGH COST UNCERTAINTIES(excluded from Service Fee Caps)(excluded from Service Fee Caps)

CHANGE-IN-LAW COSTSCHANGE-IN-LAW COSTS

• Can be adjusted maximum of 10% in any year, or up to 40% combining all prior adjustments over the Service Fee on the Contract Date.

But….• Maximum adjustments exclude Pass Through Costs and

inflation adjustments.• Service Fee was adjusted mid-year (May 2010) by 11.7%

due to Energy Adjustment. • Another similar adjustment possible before Commencement

Date.

CHANGE-IN-LAW SERVICE FEE CHANGE-IN-LAW SERVICE FEE ADJUSTMENTSADJUSTMENTS

• If a capital modification is needed, the District covers about 2/3 of Wheelabrator’s cost.

• Capital may be financed by Wheelabrator with a 10% return on equity.

• If Wheelabrator loses revenue due to C-I-L, District must make Wheelabrator whole. (if air emission changes result in lower energy recovery).

• If operating and maintenance costs increase due to C-I-L improvements, the District must make Wheelabrator whole.

• If ash can no longer to be used for daily cover at WM landfill, District must make Wheelabrator whole.

CHANGE-IN-LAW RISKSCHANGE-IN-LAW RISKS

140% over Service Fee on Contract Date

Total Increase over Proposed Fee

Proposed Service Fee Commencement Date $53.19

FY 2010 SF on Contract Date $77.02 $107.83 203%

MAXIMUM CIL Increase to Service FeeMAXIMUM CIL Increase to Service Fee(excluding inflation, pass through Costs)(excluding inflation, pass through Costs)

ILA Cities

ILA Cities

ILA Cities

TIPPING FEE RANGE – PROPOSED DISTRICTTIPPING FEE RANGE – PROPOSED DISTRICT

$53.19-$110.02$12 - $30.17$65.19-$140.19

Assumes $1/ton escalated for HHW, e-waste, etc.

PROPOSED DISTRICT vs. ALTERNATIVEPROPOSED DISTRICT vs. ALTERNATIVE

Proposed District @$65.19 (Program costs - $12)

Cumulative Savings of $58/ton vs. $77.70

Cumulative Savings of $58/ton vs. $65.19

• In its current form, the City would be exposed to many undefined risks and liabilities.

• The City will have limited control over the risks and liabilities incurred by the District.

• The “signing bonus”, offset by the District’s one-time payment is a fraction of known and unknown risks.

RECAPRECAP

• $725,000 one-time payment offered if execution of ILA prior to Dec. 31, 2010

• Equivalent to $72,500 per year over 10 years

• Miramar produces approximately 70,000 tons of solid waste per year

• A single $1 per ton change in disposal cost = $70,000 per year (or $700,000 over a 10 year period)

ILA SIGNING BONUS ASSESSMENTILA SIGNING BONUS ASSESSMENT

• Expiration of the Interlocal Agreement presents a rare opportunity for options

• The promise of a financial incentive is creating a sense of urgency

• Long-term financial impacts are of great concerns

• A competitive process for options will benefit Miramar residents and businesses

SUMMARYSUMMARY

The Director of Public Works recommends deferring the execution of an amended Interlocal Agreement with Broward County for Solid Waste Disposal Services until the City can complete its own Request for Proposal Process.

RECOMMENDATIONRECOMMENDATION

QUESTIONSQUESTIONS