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1995-02-02 Work Session """Ill MINUTES OF WORK SESSION, FEBRUARY 2, 1995 PAGE '50'6 ASSEMBLY The New Hanover County Board of Commissioners held a Work Session on Thursday, February 2, 1995, at 10:30 A.M. in Room 501 of the New Hanover County Administration Building, 320 Chestnut street, Wilmington, North Carolina. e Members present were: Commissioners Sandra Barone; William A. Caster; William E. Sisson, Jr.; Vice-Chairman E.L. Mathews, Jr.; Chairman Robert G. Greer; County Manager, Allen 0 'Neal; County Attorney, Wanda M. Copley; and Clerk to the Board, Lucie F. Harrell. Chairman Greer called the meeting to order and welcomed everyone present. County Manager O'Neal commented on questions that were asked at the retreat regarding detailed financial matters related to the operation of WASTEC and the Landfill and reported Staff will present an overview of costs at these facilities. Costs of Ooeratinq WASTEC and the Landfill Over the Last Five Years: Director of Finance, Bruce Shell, presented statements showing the breakdown of revenues, debt service, and utilization of the half percent sales tax for the past five years. The statements reflected revenues with use of the tip fee at $60 per ton versus the current tip fee of $30 per ton. e Discussion was held on the difference in revenues and expenditures for 1990-1992. Commissioner Caster questioned how the difference in revenues was handled? Deputy County Manager Atkinson explained that funds were transferred from the Environmental Management Fund Balance; however, after FY 1992-93, funds. were not available in the fund balance and proceeds from the half percent sales tax were used. Debt Service and Refundinq of Bonds: Discussion was held on the debt service and the refunding of the bonds. Finance Director Shell reported the debt service figures were misleading because the bonds were refunded to obtain a better interest rate with the bulk of savings realized in Fiscal Year 1994. This caused the debt service to drop from $3.8 million to $3.2 million. Usaqe of Half Percent Sales Tax Funds Over the Last Five Years: Finance Director Shell reported $1.3 million was transferred in 1993 and less than $1 million in 1994 from the half percent sales tax. It was noted that in comparing revenue to expenditures in 1994, there was a $354,000 shortfall, which was absorbed by the fund balance of the Environmental Management fund. e Future Landfill Cell Closures: Finance Director Shell reported the County had a choice of setting. up a Capital Reserve Fund or satisfying a financial insurance debt to set aside money for future cell closures. In reviewing the financial position of the entire County, its debt structure, and based on the formulas that are applied, it was felt the County had sufficient financial strength to support future debt. Thirty years worth of cell closures and maintenance totalled $4.5 million, not including the present value; therefore, a Capital Reserve Fund was not established. In FY 1993, an Administrative Reserve was budgeted in the Environmental Management Budget for these funds to be placed in a future cell closure account. with the current flow control problems experienced at the Landfill, the funds set aside in the Administrative Reserve were used and are not available. No separate money has been set aside. Further discussion was held on whether the County should set aside funds for cell closures. Deputy County Manager Atkinson reported modified accrual accounting is used in preparing the budget for WASTEC and the Landfill. This type of accountin~ is basically the recording of revenues received and a<.:tual ~ / ( I MINUTES OF WORK SESSION, FEBRUARY 2, 1995 PAGE 507, expenditures with a conversion to full accrual accounting whereby the liabilities are charged. Currently, there is $2,688,000 on the accrual basis, which is charged against retained earnings and is not a budgetary item, but an accounting mechanism to show that the liability has been charged against the fund. Breakdown of Debt Service: Finance Director Shell presented statements and charts reflecting the total debt service through the life of the debt. A graph was presented showing the largest debt service occurring in FY 1996 at ~4.6 million with a decrease to $2.7 by the year 2005. o FY 1994-95 Analvsis of Revenues: A Revenue Analysis for the Environmental Management Department for FY 1994-95 was presented showing the first six months as of December 31, 1994. It was noted that a loss of revenue will continue to occur as long as garbage is carried out of New Hanover County by Waste Management, Inc. The projected shortfall for this year is $800,000. Loss of Revenues: When reviewing the transfer from the General Fund to Environmental Management Fund, including Special Obligation Bonds, there is a $6.1 million transfer needed from the General Fund to operate WASTEC and the Landfill for the remainder of the year. The following figures were presented on the loss of revenues: Total Waste Stream Total MSW Received Trash taken out of County Trash Received at WASTEC Trash Received at the LandFill 60% of total MSW is burnable - 60% of 163,335 tons Loss of Burnable Waste (98,001 tons - 81,793 tons) Plant Operated at 50% Capacity (81,793 tonsj164,250 tons) Tip Fees Received (135,562 tons x $30 ton) Loss of Tip fees due to price reduction (135,562 tons x $30jton) Loss of Tip fees out of county (27,773 x $60) Loss of Electrical & Steam revenues TOTAL LOSS OF REVENUES 1993-94 163,335 tons 1993-94 135,562 tons 1993-94 27,773 tons 1993-94 81,793 tons 1993-94 53,759 tons 98,001 tons 0 16,208 tons $4,066,860 $4,066,860 $2,033,140 $1.100.000 $7.100.000 Director of Environmental Management, Ray Church, commented on the loss of revenues because of trash being carried out of the County and reported when the tip fee was lowered in April 1994 to $25 and to $30 effective, July 1, 1994, Waste Management, Inc. did not bring the trash back to the County disposal facilities. He noted the reduction in the tip fee from $60 to $30 was the reason for the shortfall as well as trash being carried out of the New Hanover County. Further discussion was held on the shortfall. Chairman Greer expressed concern for the fact that if Waste Management, Inc. should bring the trash back to the County, the Environmental Management Fund would still experience a shortfall of at least $4 million. o Solid Waste Flow Control comparisons: Director Church presented the following bar charts comparing FY 1992-93, FY 1993-94, and FY 1994-95 on the Total Municipal Solid Waste Stream; Total Refuse Burned; Steam and Electric Sales; Total Steam Produced; and Total Electricity Produced. It was noted that steam and electrical sales had significantly increased with a two-boiler operation in the past year versus a three-boiler operation in previous years. ."-""~::"~!j.~i:'f'~~'" "'III /" , ~~~'tf.:. .C,",,:,?,;. . "':~, "" ' MINUTES OF WORK SESS~ON, FEBRUARY 2, 1995 PAGE 508 proiected Life of the Landfill with or without the WASTEC Facilitv: Director Church presented a chart reflecting the life of each cell in the Landfill and reported without the operation of WASTEC, the Landfill would last for 8.92 years. with the operation of WASTEC, the Landfill would last for ~9.77 years. with usage of the 100 adjacent acres owned by the County, the Landfill would last 100 years with the operation of WASTEC and 20 years without the operation of WASTEC. e Cost of Qperatina the Landfill: Director Church presented a statement including all current debt, recycling, and administration for operation of the Landfillc without WASTEC. The cost was projected at $4,483,078. A statement including all current debt, recycling, and administration was presented on the operation of the Landfill with the WASTEC Facility remaining open. The cost was projected at $8,798,615. Three-Year Maintenance Plan: Mr. John Hubbard, the Plant Manager, presented a report on the Three-Year Maintenance Plan. During FY 1994-95, approximately $200,000 has been spent with $187,750 to be expended. The plan has been modified to meet the most critical needs with other items being deferred during the first two years of the three-year plan. Maintenance figures have been projected for the future, and the plant is operating at full capacity since this plan has been implemented. e proiected Life Expectancies of Maior WASTEC Components: Mr. Peter Pattinson, a consultant at WASTEC, presented a report on the life expectancies of major components of WASTEC such as the turbine/generator on each boiler, the three boilers, motors, transformers, switchgear, pumps; cranes, cooling towers, etc. It was noted that with the projected life expectancy of each major component and proper implementation of the maintenance plan, replacement of parts could be budgeted in a proper sequence. Costs of Recvclina: Director Church reported unfortunately recycling is not cost-effective. A chart was presented on recycling costs and revenues generated' from grants. Figures were presented showing the materials recovered from the drop-off sites, composting, the Phone Book School Program, and the Christmas Tree Recycling Project. Discussion was held on a new program recently developed by WASTEC to utilize the remaining existing waste stream more efficiently. Currently, an average of 3,500 tons a month of mixed waste (burnable and non-burnable) is landfilled. Assuming that 50% of this waste is burnable, 58 tons per day could be returned to WASTEC as fuel. After nine working days using the plan, it is anticipated that $58,000 of revenue can be generated annually with use of this program. e SPECIAL MEETING SCHEDULED FOR FEBRUARY 9, 1995 Chairman Greer expressed appreciation to Staff for an informative presentation and reported he needed more time to study the financial statements and charts that were presented at the Work Session. He recommended scheduling another meeting to decide how to address the shortfall at WASTEC and the Landfill for the next fiscal year. Director Church commented on the morale of the employees at WASTEC and requested the Commissioners to schedule ,a meeting as soon as possible to let the employees know if WASTEC will remain open. It was the consensus of the Board to schedule another Work Session on Thursday, February 9, 1995, at 6:00 P.M. .....ill ( I M~NUTES OF WORK SESSION, FEBRUARY 2, 1995 P~GE, 5,O~", ADJOURNMENT Chairman Greer adjourned the Work Session at 12:45 P.M. Respectfully submitted, Qt:;<~ Clerk to the Board ',- o o o