MEETING NOTICE RAMSEY/WASHINGTON RECYCLING & ENERGY BOARD BUDGET COMMITTEE

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1 MEETING NOTICE RAMSEY/WASHINGTON RECYCLING & ENERGY BOARD BUDGET COMMITTEE Date: Thursday, May 25, 2017 Time: 11:00 a.m. 12:30 p.m. Place: Ramsey County Environmental Health Offices 2785 White Bear Ave Suite 350 Maplewood, MN AGENDA: I. Call to Order and Introductions II. Approval of Agenda Action Page 1 III. Approval of Minutes of April 20, 2017 Action Page 3 IV. Waste Delivery Agreements: Rebates and Notice Action Page 4 V Budget Development a Budget Update Information Page 12 b Facility Budget Action Page 13 c Equipment Maintenance and Replacement Budget Action Page 33 d Joint Activities Budget Action Page 44 VI. VII. Updates Adjourn 1 P age 1

2 BUDGET COMMITTEE (Approved by R&E Board 2015) Policy The Budget Committee is authorized to develop and oversee the Joint Activities Budget and the Facility Budget and make budget and financial recommendations to the Ramsey/Washington Recycling and Energy Board (R&E Board). Guidelines The Budget Committee consists of the 3 members, the Secretary/Treasurer and two additional R&E Board commissioners. The Budget Committee includes one commissioner from Washington County and two commissioners from Ramsey County. Members of the Budget Committee are appointed by the Chair of the R&E Board each year. When votes occur a member of each county must be present. Responsibility 1. Analyze and evaluate financial needs. 2. Develop Joint Activities and Facility two year budgets for recommendation to the R&E Board. 3. Review and oversee budget expenditures. 4. Recommend financial solutions to the R&E Board. 5. Oversee implementation of County Board financial decisions. 6. Develop and monitor financial policies for the R&E Board. 7. Oversee and make recommendations on the Operating Reserve Fund, Equipment and Maintenance Fund, and R&E Board Fund Balance. 8. Other duties as assigned. The committee will operate in accordance with operating procedures established by the R&E Board. Meetings are scheduled as necessary. Source Approval of Amended and Restated Ramsey/Washington Recycling and Energy Board Joint Powers Agreement Resolutions (Washington County Board # and Ramsey County B ), September 22, Ramsey/Washington Recycling and Energy Board approval of Bylaws, October 22, Standing committees are subject to the orders of the R&E Board and committee actions may not conflict with actions or directions of the R&E Board. Subject to the notice requirements set forth in Article II, Section I of the R&E Board Bylaws, committee meetings may be held at the discretion of the respective chairperson of each committee. 2 P age 2

3 THURSDAY, APRIL 20, 2017 RECYCLING & ENERGY BOARD BUDGET COMMITTEE MINUTES A meeting of the Ramsey/Washington Recycling & Energy Board Budget Committee (Budget Committee) was held at 11:00 a.m. on Thursday, April 20, 2017 at the Ramsey County Environmental Health Office, 2785 White Bear Avenue North, Suite 350, Maplewood, Minnesota. MEMBERS PRESENT Commissioner Gary Kriesel Washington County Commissioners Toni Carter, Blake Huffman Ramsey County ALSO ATTENDING Kate Bartelt, Anna Burke, Zack Hansen, Kelli Hall, John Howard, Judy Hunter, Jennefer Klennert, Jessica Paquin, Sean Pfeiffer, John Ristad, Katie Shaw, Bill Sumner, Ryan Tritz, Kris Wehlage, Joe Wozniak CALL TO ORDER/APPROVAL OF THE AGENDA Chair Huffman called the meeting to order. Commissioner Kriesel moved, seconded by Commissioner Huffman, to approve the agenda. Roll Call: Ayes: 2 Nays: 0 Motion Carried. APPROVAL OF R&E BUDGET MINUTES February 23, 2017 Commissioner Huffman moved, seconded by Commissioner Kriesel, to approve the February 23, 2017 minutes. Roll Call: Ayes: 2 Nays: 0 Motion Carried. Introductions were made. Commissioner Carter arrived BUDGET DEVELOPMENT Joint Activities, Facility and Equipment Maintenance & Replacement Budgets Zack Hansen walked through the following budgets: Joint Activities Facility Equipment Maintenance & Replacement UPDATES Jennefer Klennert, Foth, reported on the upcoming NAWTEC Conference. The next R&E Board Budget Committee meeting will be on Thursday, May 25, ADJOURNMENT Chair Huffman adjourned the meeting. Approved: May 25,

4 BUDGET COMMITTEE R&E BOARD BUDGET COMMITTEE MEETING DATE: May 25, 2017 AGENDA ITEM: IV. SUBJECT: Waste Delivery Agreements: Rebates and Notice TYPE OF ITEM: INFORMATION POLICY DISCUSSION ACTION SUBMITTED BY: Joint Leadership Team BUDGET COMMITTEE ACTION REQUESTED: Provide a recommendation to the R&E Board on two issues related to Waste Delivery Agreements: Waste hauler rebates when providing a rebate, the number of years to provide rebates, how to determine the level, and how far in advance to commit in the Agreement with haulers to do that. How much advance notice to give haulers in the Waste Delivery Agreements about changes in the tipping fee or hauler rebate. EXECUTIVE SUMMARY: At its meeting on April 27 th the Recycling and Energy Board (R&E Board) requested that the Budget Committee provide a recommendation on two provisions in the Waste Delivery Agreements being proposed for use when waste designation begins in The first issue, waste hauler rebates, is to focus on providing a rebate, for how long and at what level, and how far in advance to commit to the haulers to do that. The second issue is how much advance notice to give haulers about changes in the tipping fee or hauler rebate. ATTACHMENTS: 1. JLT memorandum dated May 18, 2017 FINANCIAL IMPLICATIONS: Upon final approval of the Joint Activities Budgets by the R&E Board and County Boards funds required for rebates will be paid by the Counties to the R&E Board for use in administering rebates, at the levels established in the waste delivery agreements. 4

5 SUBJECT: Waste Delivery Agreements: Rebates and Notice AUTHORIZED SIGNATURES DATE JOINT LEADERSHIP TEAM 5/16/17 RAMSEY COUNTY ATTORNEY 5/12/17 WASHINGTON COUNTY ATTORNEY 5/15/17 Coversheet Page 2 of 2 5

6 May 18, 2017 To: From: RE: Recycling and Energy Board Budget Committee Joint Leadership Team Waste Delivery Agreements: Rebates and Advance Notice Introduction At its meeting on April 27 th the Recycling and Energy Board (R&E Board) requested that the Budget Committee provide a recommendation on two provisions in the Waste Delivery Agreements being proposed for use when waste designation begins in The first issue, waste hauler rebates, is to focus on providing a rebate, for how long and at what level, and how far in advance to commit to the haulers to do that. The second issue is how much advance notice to give haulers about changes in the tipping fee or hauler rebate. Rebates: At what level, and for how long, should rebates be included in Waste Delivery Agreements? Hauler rebates were created in 2007 as an alternative to paying a processing fee to Resource Recovery Technologies (RRT), by incenting haulers to enter into waste delivery agreements with RRT. The chart below shows the total county cost ( subsidy ) paid to RRT ( processing payment ) and haulers ( rebate ) from reflect R&E Board ownership of the R&E Center, and show a reduction in the tipping fee from $86.22 per ton to $70 per ton. The following chart shows the net tipping fee to waste haulers that is, the amount they paid to RRT ( ) or the R&E Board ( ) minus the rebate. The total cost per ton shown combines the tipping fee charged and processing payments made by the counties to RRT, and in the tipping fee charged by the R&E Board. For the period of the net tipping fee has been held steady at $58 per ton, in order to compete with landfills and secure waste delivery through contracts. Note that the total cost of processing was reduced from $86.22 per ton to $70 per ton when the R&E Board purchased the R&E Center. 6

7 At the April 2017 R&E Board meeting a question was asked about whether rebates are reflected in trash bills paid by customers. In short, we don t know. The fees charged by haulers are unregulated, except in municipalities that have organized collection for residential trash, which set fees by contract. Therefore, the price paid by a customer is established in the business transaction between customer and hauler. Experience has been that haulers may have a schedule of charges, but prices can be negotiated by individual residential and commercial customers. Data gathered by the MPCA, cities of Bloomington and Maplewood have shown great variability in residential charges, even by the same hauler. Further, it is well established that disposal costs are about one third of the cost of trash service, and factors related to collection (labor, insurance, fuel, etc.) have an influence on rates as well. Because of this variability, it is impossible to determine if the rebates provided have been reflected in residential trash bills. Rebates have a cost to the counties. Rebates are funded in the Joint Activities Budget, and are, therefore, paid by the County Environmental Charge (CEC) through contributions from the Counties to the R&E Board. Haulers pay the full tipping fee, and then apply for a rebate, which is paid upon verification that the waste was delivered for processing at the R&E Center. 1. Once waste designation is implemented all waste from Ramsey and Washington Counties will be required to be delivered to the R&E Center. Contracts under designation will serve a different purpose than they did previously. Past contracts were necessary to secure sufficient waste to operate. Further, contracts used prior to waste designation had to address tipping fee levels and/or rebate amounts as haulers needed to know the net tipping fee to compare to other disposal alternatives they were able to Page 2 of 6 7

8 use. Now, with designation there is no need to address tipping fee levels as there is no competing alternative disposal method available to them. Under designation, waste delivery contracts are not necessary to ensure waste delivery, but provide the opportunity to allow the use of transfer stations (which provides for operational efficiency), access to rebates, and are less complicated to enforce. In the September 22, 2016 terms for waste delivery contracts approved by the R&E Board, staff proposed that rebates be used, first, to phase in full cost funding for operations by tipping fees and, second, act as an incentive for haulers to sign agreements. At its meeting on April 27th the R&E Board approved a waste delivery agreement for review by the MPCA with a stated rebated for 2018 at $12.00 per ton. Three scenarios have been developed for consideration by the Budget Committee. These are A. Provide a rebate of $12.00 per ton for Ramsey and/or Washington County waste for each of the five years of the Waste Delivery Agreement B. Provide a rebate of $12.00 per ton for each of the first two years, and then reduce the rebate level each year for the remaining term of the agreement. C. Provide a rebate of $12.00 per ton for the first year, and then discontinue the rebates. The chart on the next page shows the effect of these scenarios. IT SHOULD BE NOTED THAT THERE ARE TIPPING FEE AMOUNTS LISTED FOR EACH YEAR BEYOND 2019 THESE ARE SPECULATIVE AND ARE NOT BASED ON ANY BUDGETING OR ANALYSIS. They are for illustration only! Further, depending on the time at which technology improvements are added and debt service and operating costs are altered, the tipping fees could be quite different than those shown. There are two dimensions to the decision about providing the rebate: 1. County costs: a. The total cost over five years to the Counties ranges from $5,280,000 to $26,400,000. b. Funds used for rebates are unavailable for other solid waste purposes, related to the R&E Center (such as technology improvements), joint activities, or to specific county solid waste programs. 2. Benefit to Hauler: a. The three scenarios show the net tipping fee per ton and the rate at which the change occurs. b. In all scenarios there will be jump in price at the end of the rebate period, depending on the level of rebate in the final year. For scenarios A and C that amount is $12 per ton; in Scenario B that amount is $4.00 per ton. Committee Decisions: 1. Should hauler rebates be specifically identified for each year of the term of the Waste Delivery Agreement, or should they be identified at that time that the R&E Board establishes the tipping fee? 2. Should the rebates be held at a steady level for the term of the Waste Delivery Agreements, or vary during the term? Page 3 of 6 8

9 Option Descirptiion Year Rebate Tons Delivered Annual Cost Five Year Cost Projected Tip Fee* Net to Haulers A $12.00 per year for 5 years 2018 $ ,000 $5,280, $ $ $ ,000 $5,280, $ $ $ ,000 $5,280, $ $ $ ,000 $5,280, $ $ $ ,000 $5,280, $26,400, $ $ B Rebate starting at $12 and reducing by $2 per year $ ,000 $5,280, $ $ $ ,000 $4,400, $ $ $ ,000 $3,520, $ $ $ ,000 $2,640, $ $ $ ,000 $1,760, $17,600, $ $ C Rebate for one year 2018 $ ,000 $5,280, $ $ $ 440,000 $0.00 $ $ $ 440,000 $0.00 $ $ $ 440,000 $0.00 $ $ $ 440,000 $0.00 $5,280, $ $ * IT SHOULD BE NOTED THAT THERE ARE TIPPING FEE AMOUNTS LISTED FOR EACH YEAR BEYOND THESE ARE SPECULATIVE AND ARE NOT BASED ON ANY BUDGETING OR ANALYSIS. They are for illustration only! Further, depending on the time at which technology improvements are added and debt service and operating costs are altered, the tipping fees could be quite different than those shown. Page 4 of 6 9

10 Advance Notice of Changes in Tipping Fees and Rebates: How much advance notice should the R&E Board give to haulers that have entered into Waste Delivery Agreements about changes in the tipping fee or hauler rebate? The current draft of the Waste Delivery Agreement states: a. Adjustment of Tipping Fee: The R&E Board, in its sole discretion, shall establish the tipping fee for Acceptable Waste delivered to the R&E Center and Specified Transfer Stations. The tipping fee for the R&E Center and Specified Transfer Stations shall be the same, and there shall be no additional charge to the Hauler for use of Specified Transfer Stations. The R&E Board shall establish the tipping fee on an annual basis. In the event of an emergency, the R&E Board may make additional adjustments the tipping fee. The R&E Board will provide at least 90 days advance written notice to the Hauler of any changes in the tipping fee. Other resource recovery facilities in Minnesota were polled about their tipping fee rates and notice of changes in tipping fees. The following table displays the answers: Advance notice of changes in the tipping fee ranges from 60 days to 6 months. Facility Name Great River Energy Primary Counties Served Anoka, Hennepin Sherburne Tipping Fee for waste haulers Waste Designation? Hauler Contracts? Term? Specified Notice of Change in Tipping Fee? $75.00 No Yes Contract allows for a 3.5% annual increase in tipping fee. Notes GRE held the 2016 rate of $75/t for Yet to be determined what the 2018 rate will be. Hennepin County Hennepin $55/$85 No Yes Olmsted Olmsted, Steele $83.00 Yes Yes 120 days Beltrami, Clearwater, $65.00 No No 20 yr started in 6 months Co s use zero tip fee, so licensed haulers pay $0 at Polk Hubbard, Mahnomen, Norman and Polk 2016 gate, tip fee is billed to the Co of origin. Co s use SW Fee Asmt to collect revenue Pope, Douglas $77.00 No No 4 months We try to give the haulers a 4 Pope Douglas month notice on tip fee increase Prairieland Prairie Lakes Red Wing Ramsey/Washington Faribault, Martin Becker, Clay, Ottertail, Todd, Wadena City of Red Wing, Goodhue Ramsey, Washington $35 hauler $75 private hauler / $80 out of F or M county No Yes Starting in yrs Yes, $87.50 No, City currently negotiating with the County $70.00 Yes, starts in days Yes 20 years 60 days PLMSWA tip fee is $ County tip fees to haulers vary: Otter Tail $88, Todd $90, Wadena $94 I don t know Clay or Beckers No, Red Wing has municipal collection Yes, now and during designation Starting in years Tipping Fees Can be modified through Council Action 90 days 2017 haulers receive a $12 rebate for delivery of Ramsey/Washington waste Page 5 of 6 10

11 90 days was recommended by the Joint Leadership Team because the budgeting process for the R&E Board is the driver for providing advance notice. The Facility Budget and Joint Activities Budgets must be approved by the R&E Board by August 1, pursuant to the Bylaws. The Joint Activities Budget then requires approval by the County Boards. Until the County Boards approve the Joint Activities budget, there is no certainty to the R&E Board that funds will be available to pay for rebates. Generally, the County Boards act on Joint Activities Budgets in September. Providing 90 days notice allows for that timeline, since the deadline for notice would be October 1. It would be possible for the R&E Board to provide preliminary notice to haulers, as soon as it approves the Budgets (and recommends to the County Boards that they approve the Joint Activities Budget) in July. That preliminary notice could be followed by formal notice by October 1. Page 6 of 6 11

12 BUDGET COMMITTEE R&E BOARD BUDGET COMMITTEE MEETING DATE: May 25, 2017 AGENDA ITEM: V.a. SUBJECT: 2017 Budget Update TYPE OF ITEM: INFORMATION POLICY DISCUSSION ACTION SUBMITTED BY: Joint Leadership Team BUDGET COMMITTEE ACTION REQUESTED: For information only. EXECUTIVE SUMMARY: Staff will provide a report on the 2017 budget status to the Budget Committee, including a range of yearend projections. ATTACHMENTS: None. FINANCIAL IMPLICATIONS: None. AUTHORIZED SIGNATURES DATE JOINT LEADERSHIP TEAM 5/16/17 RAMSEY COUNTY ATTORNEY WASHINGTON COUNTY ATTORNEY 12

13 BUDGET COMMITTEE R&E BOARD BUDGET COMMITTEE MEETING DATE: May 25, 2017 AGENDA ITEM: V.b. SUBJECT: Facility Budget TYPE OF ITEM: INFORMATION POLICY DISCUSSION ACTION SUBMITTED BY: Joint Leadership Team BUDGET COMMITTEE ACTION REQUESTED: 1. Approve the Facility Budget and recommend that the R&E Board approve that budget; 2. Recommend that the R&E Board establish the tipping fee for waste delivered from Ramsey and Washington Counties to the R&E Center be set at $77.00 in 2018, and $79.00 in EXECUTIVE SUMMARY: Three proposed Budgets for the Recycling and Energy Board budget were presented for initial review by the Budget Committee at its April 20, 2017 meeting. The Facility Budget has been revised with slight modifications, which are explained in the attached memo from the JLT. ATTACHMENTS: 1. Resolution 2. JLT memorandum dated May 18, DRAFT Facility Budget FINANCIAL IMPLICATIONS: Upon final approval the financial implications will be explicit in the approved budgets. 13

14 SUBJECT: Facility Budget AUTHORIZED SIGNATURES DATE JOINT LEADERSHIP TEAM 5/16/17 RAMSEY COUNTY ATTORNEY 5/12/17 WASHINGTON COUNTY ATTORNEY 5/11/17 Coversheet Page 2 of 2 14

15 Budget Committee: Facility Budget RESOLUTION R&EB BC 2017 WHEREAS, The Ramsey/Washington Recycling and Energy Board (the R&E Board ) is governed by the amended and restated joint powers agreement by and between Ramsey County and Washington County dated September 22, 2015, ( Joint Powers Agreement ); and WHEREAS, The Joint Powers Agreement provides that the R&E Board shall establish a Facility Budget and a Joint Activities Budget; and WHEREAS, The Joint Leadership Team, R&E Board staff, attorneys and consultants prepared a Facility Budget for consideration by the R&E Board s Budget Committee; and WHEREAS, The Joint Powers Agreement requires that the Facility Budget shall include revenue to pay for expenses, and operate as an enterprise fund, and in order to ensure sufficient revenue for the Facility Budget the R&E Board needs to set the level of the Tipping Fee charged to haulers for delivering waste to the R&E Center; and WHEREAS, The Budget Committee has reviewed the Facility Budget at its meetings on April 20, 2017 and May 25, NOW, THEREFORE, BE IT RESOLVED, The Ramsey/Washington Recycling and Energy Board Budget Committee hereby approves the R&E Board Facility Budget, and recommends that the R&E Board approve the Facility Budget. BE IT FURTHER RESOLVED, The Budget Committee hereby recommends that the tipping fee for waste delivered from Ramsey and Washington Counties to the R&E Center be set as follows: 2018: $77.00 per ton 2019: $79.00 per ton Commissioner: Aye Nay Carter Committee Chair Huffman Kriesel Date 15

16 May 18, 2017 To: From: RE: Recycling and Energy Board Budget Committee Joint Leadership Team Facility Budget Introduction Three proposed Budgets for the Recycling and Energy Board budget were presented for initial review by the Budget Committee at its April 20, 2017 meeting. Included in that discussion was the two year Facility Budget. The Committee discussed the draft budget, and changes have been made to reflect the discussion and complete portions of the budget that were under development at that time. Action Requested The Budget Committee is requested to: 1. Approve the Facility Budget and recommend that the R&E Board approve that budget; 2. Recommend that the R&E Board establish the tipping fee for waste delivered from Ramsey and Washington Counties to the R&E Center be set at $77.00 in 2018, and $79.00 in This memo presents the overall budget, with changes from the April 20 th document highlighted. Facility Budget Major Changes Facility Budget Structure The Facility budget is an enterprise fund. This budget includes expenses for operation and administration of the R&E Center. In the R&E Board contracted with GRENS as a Transition Facility Operator, and paid that operator a management fee and reimbursed various pass through expenses. In the R&E Board will pay all expenses as it fully operates the R&E Center. The Facility Budget was approved by the R&E Board in October 2015, two months before the Facility was purchased, and was based on life cycle analyses that Foth prepared in The Committee will recall that the R&E Board did not have access to Resource Recovery Technologies financial statements or budgets, and the Facility Budget was built without direct knowledge of facility operations. It was acknowledged that the approved 2016 Facility budget was a best guess, and until there was operating experience, actual operating costs couldn t be known. The budget is based on the 2016 experience that GRENS and the R&E Board have had in operating the R&E Center. For that reason, there will be larger disparities (positive and negative) when comparing the figures with 2017 budget figures. It should be noted that there were several outstanding expenses that were still being developed in the April draft budget that the Committee first reviewed. These have been addressed and highlighted, below. Line Items are described in the budget document. Personnel Costs: These are costs for Union and non Union staff at the R&E Center. Projected total expenses are an increase of 0.5% for 2018, and an increase of 2.4% in

17 Fuel Supply: Expenses related to use of refuse derived fuel (RDF) by Xcel Energy at its Red Wing and Wilmarth (Mankato) power stations, and Great River Energy s Elk River power station. There are now two line items that separately identify the two outlets for RDF. Figures in this draft budget use estimates for fees; the Fuel Supply Agreement with Xcel remains in negotiations. Landfill: Costs associated with the landfilling of process residue, bulky waste residue at landfills under contract to the R&E Board. At the time this draft budget was prepared, agreements with landfills were not completed; the figures in the draft budget are based on current Agreements with a slight CPI increase. Based on 2016 actual expenses, the projections are double those found in the 2017 budget. A major reason is the difference is waste volumes between budgets (385,000 compared to 440,000 tons). Waste Processing GRE: A new line item that includes some expenses that had been in the Landfill item. This is for MSW that is in excess of R&E Center Capacity that is delivered to GRE for processing, instead of to landfills. Transportation: These are expenses for contractors that haul R&E Board materials to and from a number of locations, including delivering waste to the R&E Center from transfer stations, hauling residue to landfills, hauling RDF to power plants, and hauling metals to markets. Transportation costs are projected to be higher in than budgeted in 2017, but are similar to actual expenses experienced in The R&E Board authorized an RFP for these services at its April 27 th meeting. Transload: Expenses paid to transfer stations under contract for the transfer of Ramsey/Washington County waste from haulers with waste delivery agreements to the R&E Center. The figures in this budget are based on the transload agreement template approved by the R&E Board on April 27, Facility Operations: Expenses related to operating the R&E Center. Expenses in 2018 and 2019 are projected to be steady. Equipment Maintenance and Replacement Fund: Includes transfer from the Facility Budget to the Equipment Maintenance and Replacement Budget, including a budgeted line item and revenue from sale of recyclables. Tipping Fee & Rebate In order to assure sufficient revenue for the Facility Budget, the R&E Board needs to establish a tipping fee for waste delivered to the Facility. Based on this budget, the JLT recommends that the R&E Board establish tipping fees for waste delivered from Ramsey and Washington Counties as follows: 2018: $77.00 per ton 2019: $79.00 per ton In a related action, the R&E Board will need to approve the level of hauler rebates for 2018 and 2019 for those haulers that enter into waste delivery agreements for Ramsey and Washington County waste. This depends on the discussion about hauler rebates scheduled for the May 25 th Budget Committee, and June 22 R&E Board meeting. The rebates are not relevant to the Facility Budget, because funds for the rebates are budgeted in the Joint Activities Budget, but they will be needed in order to proceed with that budget approval. Page 2 of 2 17

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33 BUDGET COMMITTEE R&E BOARD BUDGET COMMITTEE MEETING DATE: May 25, 2017 AGENDA ITEM: V.c. SUBJECT: Equipment Maintenance and Replacement Budget TYPE OF ITEM: INFORMATION POLICY DISCUSSION ACTION SUBMITTED BY: Joint Leadership Team BUDGET COMMITTEE ACTION REQUESTED: Approve the Equipment Maintenance and Replacement Budget and recommend that the R&E Board approve that budget. EXECUTIVE SUMMARY: Three proposed Budgets for the Recycling and Energy Board budget were presented for initial review by the Budget Committee at its April 20, 2017 meeting. The Equipment Maintenance and Replacement Budget has been revised with slight modifications, which are explained in the attached memo from the JLT. ATTACHMENTS: 1. Resolution 2. JLT memorandum dated May 18, DRAFT Equipment Maintenance and Replacement Budget 4. Equipment Maintenance and Replacement Fund Policy, approved March 22, 2017 FINANCIAL IMPLICATIONS: Upon final approval the financial implications will be explicit in the approved budgets. 33

34 SUBJECT: Equipment Maintenance and Replacement Budget AUTHORIZED SIGNATURES DATE JOINT LEADERSHIP TEAM 5/16/17 RAMSEY COUNTY ATTORNEY 5/12/17 WASHINGTON COUNTY ATTORNEY 5/11/17 Coversheet Page 2 of 2 34

35 Budget Committee: Equipment Maintenance and Replacement Budget RESOLUTION R&EB BC 2017 WHEREAS, The Ramsey/Washington Recycling and Energy Board (the R&E Board ) is governed by the amended and restated joint powers agreement by and between Ramsey County and Washington County dated September 22, 2015, ( Joint Powers Agreement ); and WHEREAS, The Joint Powers Agreement provides that the R&E Board shall establish a Facility Budget and a Joint Activities Budget; and WHEREAS, The Bylaws require that and Equipment Maintenance and Replacement Fund be established and incorporated into the Facility Budget, to assure sufficient resources for major maintenance projects as well as major equipment replacement; and WHEREAS, The R&E Board approved an Equipment Maintenance and Replacement Policy on March 22, 2017 (Resolution R&EB ), which identifies the size, scope and scheduled for establishing this fund; and WHEREAS, The Joint Leadership Team, R&E Board staff, attorneys and consultants prepared a Equipment Maintenance and Replacement Budget for consideration by the R&E Board s Budget Committee, as part of the Facility Budget; and WHEREAS, The Budget Committee has reviewed the Equipment Maintenance and Replacement Budget at its meetings on April 20, 2017 and May 25, NOW, THEREFORE, BE IT RESOLVED, The Ramsey/Washington Recycling and Energy Board Budget Committee hereby approves the R&E Board Equipment Maintenance and Replacement Budget, and recommends that the R&E Board approve the budget. Commissioner: Aye Nay Carter Committee Chair Huffman Kriesel Date 35

36 May 18, 2017 To: From: RE: Recycling and Energy Board Budget Committee Joint Leadership Team Equipment Maintenance & Replacement Budget Introduction Three proposed Budgets for the Recycling and Energy Board budget were presented for initial review by the Budget Committee at its April 20, 2017 meeting. Included in that discussion was the two year Equipment Maintenance and Replacement Budget, which is part of the Facility Budget. The Committee discussed the draft budget, but no changes were required as a result of the discussion. Action Requested The Budget Committee is requested to approve the Equipment Maintenance and Replacement Budget and recommend that the R&E Board approve that budget. Equipment Maintenance and Replacement Budget The recently adopted Equipment Maintenance and Replacement Policy (March, 2017) states: Each year, during the annual budget process, the JLT, in consultation with the Facility Manager and the R&E engineering consultant will amend and adjust a rolling five year replacement and maintenance schedule. The non routine repairs, Major Maintenance Projects and Major Equipment replacements on this schedule that will occur in the next budget year will be identified and proposed for funding from the EM&R fund. If approved by the Board, the JLT will then direct the fiscal agent to make appropriate adjustments to the R&E Budget. Should the need for unanticipated major maintenance or replacement arise during the year, the JLT will request the use of EM&R funds from the Board through its regular administrative processes. A five year estimate for Equipment Maintenance and Repair expense is attached: This includes major maintenance projects that are infrequent or are scheduled on a non routine basis. Maintenance projects that are not of this type are funded as part of routine operations in the annual Facility Budget. Based on this five year estimate, a Equipment Maintenance and Replacement Budget has been prepared, showing the projected expenses from the 5 year estimates. This budget reflects the Equipment Maintenance and Replacement Policy approved by the R&E Board at its March 23, 2017 meeting. That policy establishes an Equipment Maintenance and Replacement (EM&R) Fund, incorporated into the Facility Budget. The purpose of this fund is to provide sufficient resources for major maintenance projects and major equipment replacement. As such, the fund is designed to build over time to assure sufficient funding for this work. The line item in the budget labeled Cumulative Reserve reflects this accumulation for funds. Essentially this serves as a capital reserve fund for these maintenance and equipment needs. 36

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41 Equipment Maintenance and Replacement Fund Policy & Procedures PURPOSE The Bylaws for the Recycling & Energy Board (R&E Board) establish an Equipment Maintenance and Replacement (EM&R) Fund, incorporated into the Facility Budget. The purpose of this fund is to provide sufficient resources for major maintenance projects and major equipment replacement. DEFINITIONS Major Maintenance Projects: Maintenance projects are efforts that are necessary to preserve the value of an asset but do not significantly extend its useful life or increase its value. Major Maintenance Projects are infrequent or are scheduled on a non-routine basis. They typically require that funds be set aside over a period of time to provide adequate funding. Maintenance projects that are not of this type are funded as part of routine operations in the annual Facility Budget. Major Equipment: Any R&E Board owned equipment that is included in the Capital Asset Inventory. Capital Asset Inventory: The R&E Board, through its fiscal agent, Ramsey County Finance, maintains a capital asset inventory and the associated schedules of depreciation within the Ramsey County financial system. For the R&E Board s purposes, capital assets are defined as machinery and equipment with a cost of $15,000 or more and a useful life of more than two years, and facility and infrastructure improvement with a cost of $100,000 or more. POLICY It is the expectation of the R&E Board that funds for the operation and maintenance of the facility will be derived from revenue collected in the normal course of operations of the R&E Center. This policy provides a systematic method of assuring that funds are available for replacing Major Equipment and implementing Major Maintenance Projects at the R&E Center, by requiring that certain revenues by set aside for those purposes. This policy does not eliminate the need to budget for routine maintenance and replacement within the annual Facility Budget, nor is it intended to accumulate sufficient funds to significantly improve or expand operations at the R&E Center, which would be funded with other capital sources, such as bonding. PROCEDURE A separate account will be maintained within the financial accounts of the R&E Board for the EM&R fund. FUNDING The following types of revenue will be deposited into the EM&R account: Sale of recyclables: Revenue from the sale of recovered ferrous and non-ferrous metals and any other processing residuals having economic value will be assigned to the EM&R fund. Sale of Surplus Equipment: Revenue, net of fees, derived from the sale of surplus equipment will be assigned to the EM&R fund. 41

42 Miscellaneous Recoveries: Amounts received that are usually characterized as a recovery of operating expense, e.g. rebates, will be assigned to the EM&R fund. Budgeted Amounts: Funds included in the Facility Budget intended to be placed in the EM&R fund. Year-end surpluses as directed by the R&E Board to be placed in the EM&R fund. SPENDING Each year, during the annual budget process, the Joint Leadership Team, in consultation with the Facility Manager and the R&E engineering consultant will amend and adjust a rolling five-year replacement and maintenance schedule. The non-routine repairs, Major Maintenance Projects and Major Equipment replacements on this schedule that will occur in the next budget year will be identified and proposed for funding from the EM&R fund. If approved by the R&E Board, the JLT will then direct the fiscal agent to make appropriate adjustments to the R&E Budget. Should the need for unanticipated major maintenance or replacement arise during the year, the JLT will request the use of EM&R funds from the R&E Board through its regular administrative processes. OTHER The current status of the EM&R fund will be reported to the Budget Committee on a quarterly basis, with reports to the R&E Board as directed by the Budget Committee. ADDITIONAL INFORMATION SOURCES: Amended and Restated Ramsey/Washington Recycling & Energy Board Joint Powers Agreement Bylaws of the Ramsey/Washington Recycling & Energy Board Fiscal Agent Agreement between Ramsey County and Ramsey/Washington Recycling & Energy Board Scope and Authority Requirement for Equipment Maintenance and Replacement fund Accounting for the fund 42

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44 BUDGET COMMITTEE R&E BOARD BUDGET COMMITTEE MEETING DATE: May 25, 2017 AGENDA ITEM: V.d. SUBJECT: Joint Activities Budget TYPE OF ITEM: INFORMATION POLICY DISCUSSION ACTION SUBMITTED BY: Joint Leadership Team BUDGET COMMITTEE ACTION REQUESTED: Approve the R&E Board Joint Activities Budget and recommend that the R&E Board approve the Joint Activities Budget and forward the budget to the Ramsey and Washington County Boards for approval. EXECUTIVE SUMMARY: Three proposed Budgets for the Recycling and Energy Board budget were presented for initial review by the Budget Committee at its April 20, 2017 meeting. The Joint Activities Budget has been revised with slight modifications, which are explained in the attached memo from the JLT. ATTACHMENTS: 1. Resolution 2. JLT memorandum dated May 18, DRAFT Joint Activities Budget FINANCIAL IMPLICATIONS: Upon final approval the financial implications will be explicit in the approved budgets. 44

45 SUBJECT: Joint Activities Budget AUTHORIZED SIGNATURES DATE JOINT LEADERSHIP TEAM 5/16/17 RAMSEY COUNTY ATTORNEY 5/12/17 WASHINGTON COUNTY ATTORNEY 5/11/17 Coversheet Page 2 of 2 45

46 Budget Committee: Joint Activities Budget RESOLUTION R&EB BC 2017 WHEREAS, The Ramsey/Washington Recycling and Energy Board (the R&E Board ) is governed by the amended and restated joint powers agreement by and between Ramsey County and Washington County dated September 22, 2015, ( Joint Powers Agreement ); and WHEREAS, The Joint Powers Agreement provides that the R&E Board shall establish a Facility Budget and a Joint Activities Budget; and WHEREAS, The Joint Leadership Team, R&E Board staff, attorneys and consultants prepared a Joint Activities Budget for consideration by the R&E Board s Budget Committee; and WHEREAS, The Budget Committee has reviewed the Joint Activities Budget at its meetings on April 20, 2017 and May 25, NOW, THEREFORE, BE IT RESOLVED, The Ramsey/Washington Recycling and Energy Board Budget Committee hereby approves the R&E Board Joint Activities Budget and recommends that the R&E Board approve the Joint Activities Budget and forward the budget to the Ramsey and Washington County Boards for approval. Commissioner: Aye Nay Carter Committee Chair Huffman Kriesel Date 46

47 May 18, 2017 To: From: RE: Recycling and Energy Board Budget Committee Joint Leadership Team (JLT) Joint Activities Budget Introduction Three proposed Budgets for the Recycling and Energy Board budget were presented for initial review by the Budget Committee at its April 20, 2017 meeting. Included in that discussion was the two year Joint Activities Budget. The Committee discussed the draft budget, and minor changes have been made as a result of the discussion. The one open issue with this budget is about the principal driver for this budget: hauler rebates. An item earlier on the Committee agenda is intended to provide guidance on this issue. Action Requested The Budget Committee is requested to approve the R&E Board Joint Activities Budget and recommends that the R&E Board approve the Joint Activities Budget and forward the budget to the Ramsey and Washington County Boards for approval. Joint Activities Budget Major Changes from The Joint Activities budget includes non facility related activities of the R&E Board. The total Joint Activities Budget is increased over the 2017 budget by 23.8% and 24.2% for 2018 and 2019, respectively. Sixty three (63%) of the increase is because of the increase in projected hauler rebates as a result of waste designation. The remaining increases are across the program areas of Non Residential Recycling (BizRecycling), General Outreach and Policy Evaluation. There are five program areas: Project Management, Non Residential Recycling, General Outreach, Policy Evaluation, and Hauler Rebates. The principal cost driver for the Joint Activities budget is the Hauler Rebate Program. Over the past five years, hauler rebates have comprised 48% to 67% of the total Joint Activities Budget, as shown in the graph on the next page. 47

48 Tipping Fee & Rebate In order to assure sufficient revenue for the Facility Budget the R&E Board needs to establish a tipping fee for waste delivered to the R&E Center. In the Facility Budget recommendation, the JLT recommends that tipping fees be established at $77.00 per ton in 2018, and $79.00 per ton in The R&E Board will need to approve the level of hauler rebates for 2018 and 2019 for those haulers that enter into waste delivery agreements for Ramsey and Washington County waste. The draft Facility Budget prepared by staff includes a rebate at $12 per ton for each year. Depending on the result of discussion and action by the Budget Committee and R&E Board, the Joint Activities Budget will need to reflect that decision. Assuming that 440,000 tons are received from Ramsey and Washington Counties, and a projected rebate of $12 per ton, the total amount needed for rebates is projected at $5,280,000. This compares to $4,020,000 in (when fewer tons were budgeted) and $8,400,000 for previous years under private ownership when the rebate was $28 per ton. Project Management: Project Management expenses are those associated with work involved in administering and managing the R&E Board s overall activities. Major changes include: Personnel costs The 2017 budget included positions and a budget prior to purchase of the R&E Center, and fully understanding personnel needs. The total salary and benefits for the four R&E Board positons: Accounting Manager, Contract Manager, and two Outreach Coordinators, are now known. The 2018 budget for these expenses is down 5.42% and 1.99%, for 2018 and 2019, respectively. This item includes a 2% cost of living increase. County Project Management Services This is reimbursement to Ramsey County for R&E Board administrative work performed by County employees, such as invoicing, bill payment, administering hauler rebates, Board and Committee administration, and information services. This is reduced in as R&E Board staff will perform more of these functions than in previous years. Buildings and Office Space A reduction of $20,000, because some staff currently housed at Ramsey County Environmental Health offices are planned to move into the R&E Center. Page 2 of 4 48

49 Other Education Increased $50,000. This is funding for a joint data management effort to be procured starting in 2018 that will be used to manage and administer grants and R&E Board data, and which could provide a basis for the two counties to jointly use the data management system for other uses, such as recycling data. Multi Coverage Insurance This expense has been moved to the Facility Budget. Conference and Seminar Increased to reflect that the R&E Board now has staff, and continued work to evaluate future technologies. Non Residential Recycling: The R&E Board will continue its work on non residential recycling, through its BizRecycling, BizAware, and other programs. Major changes include: Design Services Reduced $20,000; this item was combined with similar work in General Outreach. Professional Services Increased from $570,000 to $640,000 o Work with Waste Wise ($400,000), Second Harvest Heartland ($40,000) and a BizMUD technical assistance consultant ($50,000) remains at the same level of funding. o The agreement with EcoConsilium (formerly JL Taitt and Associates) has been increased by $20,000 to $100,000. EcoConsilium provides recycling consulting services to institutions, such as hospitals, colleges, schools, and adult housing, and the increase is for outreach to additional institutions. o A new agreement with one or more consulting firms to assist in reaching multi cultural business owners and operators, in the amount of $50,000. Advertising and Promotion Increased from $150,000 to $340,000 o BizAWARE Outreach A new expense of $50,000 to work with BizAWARE partners to reach out to members. o Website $40,000 for work by MOD, the firm that manages the BizRecycling website. o Communications/Advertising/Partnerships increased by $100,000 to $250,000, includes continued partnership with the Saint Paul Saints ($50,000), as well as an additional partnership with a venue in Washington County ($50,000). In addition, an outreach campaign targeted specifically at businesses in Ramsey and Washington Counties ($150,000). Grants No change in funding levels for grants is proposed. General Outreach: This program includes outreach and education activities targeted at waste generators in the two Counties, including working on the role of the Facility in outreach and education. Major changes include: Communications service, through an existing agreement with Exponent, is at the same funding level ($50,000). Advertising and Promotion is increased by $20,000 o Green Guides for each county are at the same level of funding ($170,000). o Other outreach through various media is increased $20,000, to $150,000. This funding, along with $175,000 from the BizRecycling budget, will be combined in a solicitation for advertising and promotions services through one contract. Other Education Funding is increased from $105,000 to $400,000 for outreach programs, to provide for video production in promoting and explaining the role of the R&E Center, communication related to odor mitigation, communication about new technology options, transportation for school classes to take tours, and other engagement with the public on behalf of the R&E Board. Page 3 of 4 49

50 Policy Evaluation: This program was originally the policy work leading to purchase of the R&E Center. Going forward, it focuses on (1) implementing key policy issues, such as waste designation, (2) specific work on new technologies suitable for the R&E Center, and (3) policy work on state and regional waste management, SWMCB, MPCA and legislature. Major changes include: Legal Services provided by Stoel Rives, to carry out work on implementation of waste designation; assistance on technology improvements such as assistance on public/private partnerships, advice on energy policy and legislation, assistance with MPCA permitting, etc.; transition related work on easements and property licenses; closing out the GRENS transition agreement; assistance on trademark law and applications. The budgeted amounts are $450,000 for 2018 and $400,000 for Engineering Services, provided by Foth, for work on a variety of general engineering and technical issues, primarily related to the R&E Center, including economic research and market analysis for collection, transfer and disposal pricing in the region; market analysis for recyclable materials, including organic waste; monitoring waste deliveries by haulers and from other counties; combustion capacity for RDF; assistance with examining transportation and transfer stations issues associated with organic waste. Also, work on technology improvement evaluation and assisting in procurement for improvements, assistance with continued transition issues, and work on odor mitigation. This work appears in two line items, one for general engineering and technical issues ($400,000 each year), and the other related to technology improvements ($135,000 in 2018; $180,000 in 2019). Hauler Rebates: This program provides funding for hauler rebates for delivering waste to the R&E Center. More information is found in the discussion about tipping fees in the Facility Budget. Revenue: The Joint Activities budget is funded with contributions from the two counties, and each county funds this work with CEC funds. The changes for 2018 and 2019 are as follows: Ramsey County $6,146,123 $7,607,471 $7,633,158 Washington County $2,273,223 $2,813,722 $2,823,222 A history of County contributions compares the proposed funding to Page 4 of 4 50

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