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Amendment to the Waste Disposal Agreement

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Amendment to the Waste Disposal Agreement REQUEST FOR CITY COUNCIL ACTION MEETING DATE: APRIL 28 , 2015 TITLE: AMENDMENT OF WASTE DISPOSAL AGREEMENT RECOMMENDED ACTION 1. Adopt - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF IRVINE, CALIFORNIA, APPROVING AN AMENDMENT TO THE 2009 WASTE DISPOSAL AGREEMENT WITH THE COUNTY OF ORANGE 2. Authorize the Mayor to sign the Waste Disposal Agreement. 3. Direct staff to execute all provisions of the Waste Disposal Agreement with the County of Orange. EXECUTIVE SUMMARY The City, together with other public County agencies, has a Waste Disposal Agreement with the County of Orange that provides the County a consistent flow of waste and a predictable revenue stream to operate the landfill system , and allows for importation of solid waste into Orange County landfills from outside of Orange County through 2016. In return , participating cities and waste haulers pay reduced landfill fee rates for the full term of the Agreement through 2020. The Agreement maintains stable disposal rates and continuity of service for residents and businesses, ensuring continued cooperation between cities and the County. The proposed Amendment would allow for continued importation of out-of-County waste beyond 2016, allocate a share of future importation revenues to Orange County cities as long as waste importation continues, and extend the Waste Disposal Agreement through June 30 , 2025, presented as Attachments 1 and 2. COMMISSION/BOARD/COMMITTEE RECOMMENDATION Not applicable. City Council Meeting April 28, 2015 Page 2 of 4 ANALYSIS Background The disposal of solid waste at Orange County landfills is governed by a 2009 Waste Disposal Agreement whereby cities in the County have agreed to deposit their solid waste at the County's three landfill facilities in return for low, stable disposal rates. The current Waste Disposal Agreement was negotiated in 2009, took effect on July 1, 2010 and runs through June 30, 2020, with importation of waste from outside the County at County landfills set to expire on June 30, 2016. The City has been party to a Waste Disposal Agreement with the County of Orange since 1997. The County of Orange operates the landfills with long-term capacity and environmental sensitivity as key objectives. The system has provided reliable locations for residents and businesses in all Orange County cities to deposit approximately four million tons of solid waste per year at competitive rates. While surrounding counties have been challenged to find new disposal alternatives at great expense, Orange County has maintained long-term capacity at reasonable costs for its residents and businesses due in large part to this Waste Disposal Agreement. Purpose of Amendment The Waste Disposal Agreement enables the County and cities to work cooperatively and strategically to leverage county-wide assets. Solid waste disposal revenues are utilized by the County to maintain the landfill system, preserve funds for landfill closure costs, address landfill post-closure maintenance, and mitigate long-term risk and environmental liabilities. Cities in the County benefit from additional services provided by the County, including permanent household hazardous waste collection facilities, green waste acceptance at no charge to cities to assist their compliance with state recycling mandates, and support of city programs to meet state waste diversion requirements. The success of waste diversion and recycling in recent years combined with slow recovery from the economic recession has reduced in-County waste generation and related revenues. A committee of City Managers from Orange, Brea, Dana Point, San Juan Capistrano, Tustin, and Los Alamitos, representing all Orange County cities, participated with the County in preparing a framework to address the reduction in revenues and ensure rate stabilization for Orange County residents and businesses. The proposed Amendment to the Waste Disposal Agreement extends the Waste Disposal Agreement from 2020 to 2025, sets forth continuation of future importation to Orange County landfills to offset revenue reduction and establishes a fair-share allocation of net importation revenues to cities. An in-depth review of County resources concluded that the amount of imported waste combined with in-County waste will City Council Meeting April 28, 2015 Page 3 of 4 remain below total disposal tonnage projections contemplated in the current Waste Disposal Agreement. The proposed five-year extension of the Waste Disposal Agreement from 2020 to 2025 will provide additional stability to the system in light of more stringent legislative and regulatory requirements that will expand recycling and reduce the amount of waste to landfills, such as the 75 percent waste diversion target outlined in Assembly Bill 341, an excerpt of which is presented as Attachment 3. The component of the existing Waste Disposal Agreement set to expire in 2016 pertains to importation of waste from outside of Orange County into Orange County's landfill system. The County proposed to the City Managers committee that it would be mutually beneficial for both the County and cities to allow waste importation to continue to all three Orange County landfills beyond the 2016 date. The three landfills are Frank R. Bowerman Landfill, Irvine; Olinda Landfill, Brea; and Prima Deshecha Landfill, San Juan Capistrano. The County is receiving less waste tonnage and revenue than originally projected in the 2009 Waste Disposal Agreement upon which existing landfill disposal rates were based. According to the County, the landfill system will receive 21 percent less waste tonnage by 2016 than originally projected in the 2009 Waste Disposal Agreement and 24 percent less tonnage by 2020 than originally projected. Continued waste importation would provide the County additional revenues to help offset this shortfall in disposal tonnage and revenue, maintain stable disposal rates, pay down County bankruptcy debt, and allow excess landfill capacity to be utilized for the benefit of the County's landfill system. The Waste Disposal Agreement Amendment would allow for continued waste importation beyond 2016. The City Managers committee has taken the position that since the County will benefit financially from this Amendment, the cities should also share in that benefit. After negotiations with the County, the City Managers committee reached a tentative agreement to extend the term of the Agreement by five years to 2025 and allow continued waste importation during the Agreement term (a provision that would otherwise expire in 2016). In exchange, cities would receive up to $30 million over a four-year period beginning in September 2016, and a potential 50/50 share of future importation revenues for as long as waste importation continues dependent upon the County continuing its waste importation contracts with agencies outside of Orange County. Under this scenario, it is estimated that Irvine would receive $2.46 million over the four years, with the potential for similar additional revenue to the City in subsequent years through 2025, as presented in Attachments 4 and 5. This would be in addition to approximately $500,000 in annual host fee revenue the City already receives through a separate 1995 Memorandum of Understanding with the County regarding out-of-county imported solid waste, which provides host fees to the City adjusted annually for inflation, has no expiration date and continues for as long as the County imports waste. It is recommended that the City Council approve the Amendment to the Waste Disposal Agreement to provide stable rates for residents and businesses; continued service City Council Meeting April 28, 2015 Page 4 of 4 levels; ensure long-term landfill capacity; maintain long-term partnerships between the City and County; and share net importation revenues with cities. For the Amendment to take effect, unanimous approval by Orange County cities is required. If approved by all Orange County cities, the proposed Amendment will be considered by the Board of Supervisors at its earliest available meeting. ALTERNATIVES CONSIDERED All Orange County cities must approve the Waste Disposal Agreement Amendment for the Amendment to take effect. The City Council could choose not to adopt the attached resolution approving the Waste Disposal Agreement Amendment. If it elects not to adopt the resolution, the Waste Disposal Agreement will not be extended; out-of-county solid waste importation will not continue beyond 2016; the City would forego its share of future annual landfill and waste importation allocated revenue, and forfeit host fee revenue it already receives under the 1995 Memorandum of Understanding relating to out-of-county solid waste importation. FINANCIAL IMPACT Approval of the Waste Disposal Agreement Amendment will enable allocation of approximately $2.46 million of landfill revenue to Irvine over a four-year period beginning in FY 2016-17, and potentially a similar amount in subsequent years through 2025, and allow the City to continue receiving $500,000 in annual host fee revenue under the 1995 Memorandum of Understanding on out-of-county solid waste importation, for total revenue of approximately $1 million annually. REPORT PREPARED BY Dori Budde, Community Services Manager ATTACHMENTS: 1. Resolution Approving Amendment to Waste Disposal Agreement 2. Amendment to Waste Disposal Agreement 3. Assembly Bill 341 Excerpt 4. Briefing Sheet-Proposed Amendment to Waste Disposal Agreement 5. Allocation of Projected Importation Revenue (County Counter 3/3/15) CITY COUNCIL RESOLUTION
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