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2010-05-03 Special Meeting NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31 SPECIAL MEETING,MAY 3,2010 PAGE 811 ASSEMBLY The New Hanover County Board of Commissioners met for a Special Meeting Session on Monday,May 3, 2010, at 2:05 p.m. in the Assembly Room of the New Hanover County Courthouse, 24 North Third Street, Wilmington,NC. Members present were: Chairman Jason R. Thompson; Vice-Chairman Jonathan Barfield, Jr., Commissioner Robert G. Greer; Commissioner William A. Caster; Commissioner Ted Davis, Jr.; Deputy County Attorney Kemp Burpeau;Deputy Clerk to the Board Kymberleigh G. Crowell;and County Manager Bruce T. Shell. Others present were: Greshman, Brickner & Bratton, Inc., (GBB) Solid Waste Management Consultant Bob Brickner; Assistant County Manager Chris Coudriet; Assistant County Manager Andre' Mallette; Clerk to the Board Sheila L. Schult, County Attorney Wanda M. Copley, Finance Director Avril Pinder; and Senior Budget Analyst Beth Schrader. Chairman Thompson called the meeting to order and reported that the purpose of the meeting is to receive an update from Greshman, Brickner&Bratton, Inc., (GBB) Solid Waste Management Consultant Bob Brickner on Republic Services and R3 Environmental. UPDATE OF SOLID WASTE MANAGEMENT SERVICES NEGOTIATIONS Greshman, Brickner & Bratton, Inc., (GBB) Solid Waste Management Consultant Bob Brickner reported that on April 19, 2010 the Board voted unanimously to endorse the recommendation made by GBB and directed staff to proceed with the simultaneous negotiations. Negotiations were held with the following companies: Republic Proposal: • Assumes responsibility for the servicing of the Rural Drop-Off System for residential recyclables • Operates the construction and debris(C&D)recycling pad to achieve a minimum 10%recycling • Operates the County landfill as the main disposal site for the majority of the County municipal solid waste(MSW) • Installs a landfill gas collection & flaring system to control methane (with energy recovery, installed when economically justified) • If the County wants to handle the mothballing or demolition of WASTEC directly, Republic proposes paying the County almost$1 million upfront. • Republic pricing includes any final landfill capping required during their contracting term. • For the landfill gas collection installation,the County can receive 100%of the Carbon Credits. • Republic will also invest to install new leachate tanks at the landfill. • Republic indicates handling the County yard waste with the C&D woody waste on the C&D pad. • Republic proposed$30.00/ton(price without any landfill-related state taxes). • An additional cost of$2.6 million as contract buyout required,if only a 10-year contract. • The added$2/ton landfill-related state tax makes the total cost estimate an additional$4.4 million. • The upfront payment of$1.5 million to the County is a credit for incurred landfill(LF)expenses. • The total cost estimate at $30.00/ton would be $73.3 million (at 2.3 0/o/yr. over 10 years with 2.2 million total tons)plus$5.5 million increase per above= $78.8 million(approximately). R3 Proposal: • R3 Environmental proposes to build a dirty MRF in a 100,000 sq. ft. building with equipment to process and sort MSW. Their mechanical processing system would capture more recyclables and produce a cleaner refuse-derived fuel(RDF)product for WASTEC. • R3 will operate the residential recyclable RDO's for the initial two years until the MRF is available to receive all of the MSW; whereupon operation of the RDO's will cease and all waste materials will flow directly to the dirty MRF. • The R3 dirty MRF is expected to generate about 1/3 recovered materials and 2/3 RDF (biomass fuel) for firing at WASTEC or other locations if deemed more economically viable over the contract term. • The R3 dirty MRF, which will be built to accommodate a second line, is proposed to be expanded in Year 3 to accommodate materials generated from the mining of the County Landfill. • With their landfill mining proposal, R3 does not propose to implement a landfill gas (LFG) collection system at the County Landfill. • R3 will construct a new C&D waste recycling line for the mechanical processing of C&D at the current C&D sorting pad. • While indicating that certain details of their overall proposal were still in need of field review activities, and that these "studies" would require a contract to be signed first, R3 has provided a guarantee of the County service fee charge for the 10-year contract term. • Based on the proposal, it appears that most of the County employees deemed qualified and able to be retrained could have a job within the overall R3 project needs. • During the initial 90 days after contract signing, R3 will operate status quo and ERM(a subcontractor to R3)will conduct,among other activities,the following: • Establish a baseline of all carbon footprints associated with the RDOs, C&D pad, County landfill and WASTEC • Review all environmental compliance areas of the system • Prepare a detailed health and safety plan • Review RDO sites and materials handling • Review WASTEC operations, costs, capital upgrades and ongoing maintenance needs NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31 SPECIAL MEETING,MAY 3,2010 PAGE 812 • During the initial term of the contract, R3 will review WASTEC's maintenance/upgrade needs and invest capital to update WASTEC to burn their biomass fuel(RDF), or alternatively: 1) Reserve the right to market the RDF/biomass fuel to other solid fuel boiler locations,or 2) Develop their own facility(at their cost)to consume the biomass fuel • If WASTEC has to be taken off-line for the major repairs, all County waste will be landfilled for a period estimated to be a maximum of 10 months(while the R3 NW is also being constructed). • The assumed baseline R3 proposal is for a fixed 10-year charge of$32.56 per ton (which includes payment of the $2/ton landfill -related state tax as applicable while landfilling occurs). This amounts to$71.6 million over 10 years. • An option proposed by R3 is with a maximum total price for all of the integrated services described in their proposal to be a fixed 10-year fee of$56.50 per ton, (i.e. near the current County tipping fee). At 220,000 TYP, this totals $124.3 million over 10 years; but then is less a 40% annual profit sharing payment to the County which is undeterminable at this time. o (Note: R3's profit also depends on the actual value of Renewable Energy Credits and Carbon Credits in the future and is used to reduce the net costs to the County through their proposed profit sharing formula.) • R3 has proposed to provide the County the ability to lock into the lower fixed rate of$32.56 per ton initially and then, at the County's option,the ability to switch to a higher fixed rate with profit sharing if desired in future years. • R3 has guaranteed their MRF to be: • Up and running in 24 months from contract signing. • Achieving a performance of 80% diversion at that time —backed by a financial penalty payment to the County from R3 if not achieved. Comparison Chart of R3 and Republic Proposals: Estimate Estimate of Potential Investment Area of R3 Republic 1 Will pay County for County-incurred LF development costs (County asked for$1.5 million) $0 $1.5M 2 Will upgrade drop-off locations/buy new equipment $0.08M $0.05M 3 Will install LFG collection system (1) $2.4M(1) 4 Will upgrade WASTEC for their system's use (2) (see#7) 5 Will pay for all LF permitting/expansion needs N.A. $7.1M 6 Will pay for dirty NW processing facility and/or C&D $15AM(3) 0 7 Will pay for WASTEC demolition or mothballing $1M(4) $1M 8 Will invest in LFG-to-energy system when justified (1) N/A (1) Republic-Pricing does not include the LFG-to-energy component;but will invest when justified. (1) R3 -As County landfill to be mined by R3,no capital to be invested. (2) R3 - Stated to be subject to studies to be undertaken after contracting; may not happen depending on the outputs of the studies and other R3 opportunities. (3) Re - Specifically noted that County will not own entire facility(only the building) even though the yearly debt is included in the service fees for each of 10-years. (4) R3 -Payment of$1 million to County if WASTEC decommissioned. GBB Recommendation: • R3 Environmental is selected as the preferred contractor for negotiations with Republic Services as the backup based on the following criteria: • Option with very competitive fixed price/ton for entire 10-year contract term • County makes no additional capital investment in WASTEC or County landfill • R3 assumes responsibility for operation of the County landfill, WASTEC and rest of current County integrated system. • R3 will design,permit,finance, construct and operate a new MSWINW and handle the marketing of all recovered materials and RDF fuel. • R3 provides the greatest opportunity to maintain jobs for all current County labor pool • R3 includes responsibility for mining the current County landfill after the new NW is constructed (with second line installed at MRF),including marketing all recovered materials • R3 will provide Letter of Credit (LOC) as project security and guarantee on NW construction time and diversion rate, subject to penalties. • R3 will implement a new C&D mechanical process vs. the current pad hand-sorting,achieving higher C&D material recovery rates. • R3 will be providing a complete system wide carbon emissions audit upon commencement of the contract for future environmental monitoring and benefits determination of carbon credits and renewable energy credits as benefits. Suggested Next Steps: • If GBB's recommendation is accepted by the County Board, the County negotiations team should immediately begin to draft a "comprehensive term sheet" to clearly identify all of the key technical, NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31 SPECIAL MEETING,MAY 3,2010 PAGE 813 economic, financial, security, performance and business issues that would be expected to be incorporated into a detailed contract. • Upon completion of this draft,the County negotiations team would present to R3 the County's version of the"comprehensive term sheet"and then proceed with negotiations to reach agreement. • It is estimated that the total calendar time to develop and negotiate such a"comprehensive term sheet" would be about six(6)weeks. This term sheet is expected to include details on upwards of 50 or more items,as deemed appropriate by the County negotiations team. • If agreement is reached between the County negotiations team and R3,the details of the term sheet(1) could be presented to the County Board at a future workshop session for consideration, or (2) the County team could commence contract negotiations based on the term sheet and the Draft Agreement could be presented to the Board. QUESTION AND ANSWER AND DISCUSSION In response to Board questions,Mr.Brickner provided the following information: • The mining of landfills ends up being the reverse of the sanitary landfill process itself; essentially have to 1) setup and have a significant health and safety program for employees due to off gases and any other bad material disposed of in landfill, then 2)essentially using an excavator and front loader to dig out and through screens and mechanical processing separate materials. This would include all material buried in the landfill; would enter into the cells that have previously been closed. Intent is not to use the landfill again. Materials would be marketed. All regulatory steps would need to be taken to perform the mining process. • It is possible to empty the landfill while trash is still collected by processing new material along with current material. It will take at least ten years to empty the landfill due to the second line not being up and running until year three. Funds received from material recovered and sold would belong to R3. • Base RFP was set for an initial contract term of 10 years with two optional five-year extensions. Commissioner Greer expressed his concern about staff proceeding with hiring a law firm experienced in solid waste negotiations and contracts. County Manager Shell responded that staff took the initiative to move ahead with hiring a law firm due to uniqueness of solid waste issues. Further discussion was held regarding amount of funds being spent on the law firm contract,the term sheet and the consultant fee. Mr. Brickner continued highlighting the following information on the proposal submitted by R3: • 45 tons/hour system(for one line);this would handle all the new waste which includes recyclables; • Estimating 1/3 will become recyclable out of the gross material and other 2/3 refuse-derived fuel (RDF/biomass fuel); • Letters of credit will be established and made available. One specifically for the two year performance of 80%diversion and then a separate,much larger one,for the overall process; • If company collapses and files bankruptcy,then the County is back to running the landfill; • There is no set timeline to enter into the profit share; since initially only benefit to the County would be as low a cost as possible, going with the baseline of$32, anytime during the 10 year term,is at the County's recommendation/discretion when it is ready to flip to a profit sharing; • R3 proposes a 90 day period of time to do a review including their due diligence on the future capability of WASTEC; • Investment into WASTEC is substantially more than$1 million;and • County has tip and service fees. Commissioner Greer stated another company, Waste Industries, has come forward that has a track record and is willing to start right way with the project as follows: • Waste Industries will pay County for County-incurred LF development costs in the amount of$1.5 million. • Waste Industries will work out an agreement with the County, if so desired,to have curbside recycling program for unincorporated part of county, every other week, for around $3.50 per month. There would not be a need for drop off locations if this route was chosen. • Waste Industries is prepared to install a LFG collection system, reap the benefits of selling the gas for ten years and then after that time would share with the County and turn over all the carbon credits. • Rather than upgrade WASTEC for their system's use, Waste Industries would close it altogether as there would be no need for it. • Waste Industries also proposes to pay for all LF permitting/expansion needs. • Will not need a dirty MRF processing facility and/or C&D since Waste Industries will build a new recycling building to handle it,at their own expense. • Waste Industries will pay $3 million for WASTEC demolition or mothballing or give the County the cash. • Waste Industries will provide the LFG-to-energy system. • In the Waste Industries proposal,the tonnage price would be around$31/ton or$34/ton, depending on whether the contract was set at ten years or twenty years. • Bottom-line, if proceed with Waste Industries, the County could receive $9.6 million in the upcoming fiscal year. County would receive about half the money up front and rest over the course of the year. NEW HANOVER COUNTY BOARD OF COMMISSIONERS BOOK 31 SPECIAL MEETING,MAY 3,2010 PAGE 814 He feels this proposal would help with current budget crisis and would not have to wait for a review period and the contract would continue for future years. Discussion was held on the difference between R3's proposal and other proposals. BREAK Chairman Thompson called for a break at 3:45 until 3:55 p.m. Chairman Thompson requested from the Board a motion to accept the consultant's proposal to move forward into the negotiations/term sheet with R3 Environmental. Commissioner Greer MOVED to proceed with the Waste Industries proposal to see if something concrete and satisfactory with the Board could be worked out. He further stated that he was not in favor of moving forward with R3 Environmental and waiting ninety days or longer for the company to decide who can do what. No SECOND was received,therefore the MOTION FAILED. Commissioner Caster commented that he is intrigued by R3's proposal and wishes there was a way to vet all three: R3 Environmental,Waste Industries and Republic Services. Commissioner Greer stated that if county does not go with Waste Industries' proposal or a similar proposal then it is giving up the opportunity to receive money to help with the upcoming budget. He expressed further concerns about the amount of time and cost being paid to hire all these consultants. In response to questions, County Manager Shell stated that two County Commissioners have asked that if the County went back to a landfill only operation and did not continue with the incinerator/WASTEC, could county staff come up with proposal on what it would cost for the county to operate. The assumption being that the County could likely do it as cheap or cheaper due to lack of profit motive end of that operation. He spoke with the Environmental Management staff and requested they put numbers together and refine them in the event the Board was interested but has not brought it up due to this being the Board's process. He further responded that he did not see an issue with staff submitting a proposal so the Board would at least know what it stated and would be additional information for consideration by the Board; it would not jeopardize the system of going forward as motion stands now if approved. Motion: Chairman Thompson, MOVED, SECONDED by Vice-Chairman Barfield, to select R3 Environmental as the preferred contractor for negotiations and Waste Industries as the backup contractor for negotiations. Upon vote, the MOTION CARRIED 4 to 1. Commissioner Greer voted in opposition. Chairman Thompson further directed staff to proceed quickly on the final negotiations and to make sure that the letters of credit are negotiated in such a way as to protect the County should R3 need to be removed also assuring that the airspace is saved for the two-year period. The Waste Industries proposal gives more money in first year but based on GBB's presentation, R3 Environmental has the higher potential of return for the long term. County Manager Shell stated that he will take the steps to see what can be done to shorten the ninety day review period. ADJOURNMENT There being no further business, Chairman Thompson adjourned the meeting at 4:07 p.m. Respectfully submitted, Kymberleigh G. Crowell Deputy Clerk to the Board Please note that the above minutes are not a verbatim record of the New Hanover County Board of Commissioners meeting. A copy of the PowerPoint presentation is available for review in the New Hanover County Manager's office.