C:\Documents and Settings\JSantos\Local Settings\Temporary Internet Files\Content.Outlook\OGMH8Z9B\Clean Energy Contract Amendment SR.doc
CITY OF BURBANK
PUBLIC WORKS DEPARTMENT
MEMORANDUM
DATE: July 29, 2008
TO: Mary Alvord, City Manager
FROM: Bonnie Teaford, Public Works Director
by: Ari Omessi, Assistant Public Works Director - Fleet & Building SUBJECT: APPROVAL OF AN AMENDMENT TO THE CLEAN ENERGY CNG
STATION OPERATING AGREEMENT
PURPOSE:
To obtain Council authorization for the City Manager to execute an amendment to the current ten-year Management and Operation Agreement with Clean Energy to extend the term by ten years and to include the construction of a time-fill compressed natural gas (CNG) fueling station at the City Yard.
BACKGROUND:
On July 23, 2002, Council entered into an agreement with Clean Energy, formerly ENRG, for the design, construction and 10-year operation of a CNG fueling station located at 810 N. Lake Street. The station opened on April 23, 2003 and has been operating since then under Clean Energy’s management.
Use of the facility has steadily increased over the past five years as the City’s CNG fleet has grown and more private companies are incorporating CNG vehicles in to their fleets.
Because of this increase in usage, Council appropriated $400,000 in the Fiscal Year 2005- 2006 budget for the design and construction of a CNG fueling station to be located at the City of Burbank Yard at 124 S. Lake Street, which would allow refuse trucks to fuel overnight at the Yard, rather than at the busy City-owned public access facility. Due to an increase in anticipated construction costs, an additional appropriation of $175,000 was approved by Council as part of the Fiscal Year 2006-2007 budget.
In January 2006, staff applied for grant funding in the amount of $287,700 from Clean Transportation Funding from the Mobile Source Air Pollution Reduction Review Committee (MSRC) as part of a local government match program to help with constructions costs of the time-fill station. On March 3, 2006, the AQMD Governing Board approved funding for the project in the amount of $287,700.
Attachment 2 – July 28, 2008 Staff Report
C:\Documents and Settings\JSantos\Local Settings\Temporary Internet Files\Content.Outlook\OGMH8Z9B\Clean Energy Contract Amendment SR.doc 2
On September 12, 2006, staff presented a report to Council requesting a budget appropriation in the amount of $403,912 to facilitate the construction of a time-fill CNG fueling facility to be located at the Yard and recommending acceptance of grant funding from AQMD/MSRC in the amount of $287,700. Council requested staff to conduct a cost/benefit analysis comparing the development options for a public fast-fill CNG fueling station, a time-fill fueling facility or a CNG fueling station located at the Burbank Airport.
While s
taff was conducting its research on the various types of time-fill stations and their costs, Clean Energy contacted the City with a proposal to extend the term of its current agreement. In addition, Clean Energy’s proposal included an offer to build a time-fill CNG station at the Yard valued at $750,000. Staff reviewed this proposal with the Transit Task Force Committee, which unanimously recommended moving forward with the contract amendment.
ANALYSIS:
The amendment to the current ten-year Management and Operation Agreement between the City of Burbank and Clean Energy extends the term ten years to September 1, 2022.
The amendment also allows Clean Energy to control retail costs of fuel to the public, while keeping the current billing rate structure (composed of the Southern California Gas Company tariff rate + Clean Energy’s margin, currently $0.504 per gallon equivalent) for the City in place. The City will continue to pay the current contract price per gallon it now pays for the life of the agreement and any extensions, allowing for annual Consumer Price Index (CPI) adjustments.
In exchange for the above mentioned provisions, Clean Energy will provide City employees, residents (upon proof of residency), and contract fleet vehicles, such as transit vehicles, a Clean Energy fuel card guaranteeing CNG at the current City billing rate plus credit card fees and any applicable fuel taxes. This preferential rate will remain in effect for the life of the agreement. Clean Energy will also assist any Burbank business with pursuing available local grant funding opportunities to offset the cost of natural gas vehicles and discuss entering into preferential fuel pricing for those businesses when deploying new CNG vehicles.
In addition, Clean Energy proposes to give the City of half of the funding it receives from the Volumetric Excise Tax Credit . The Volumetric Excise Tax Credit is a program implemented by the federal government which pays sellers of CNG $0.50 per CNG gallon equivalent for every gallon sold. The City will receive $0.25 per gallon equivalent sold, excluding fuel sold to the City. This is estimated to bring the City approximately $180,000 annually if sales remain constant. However, the amount of CNG sold at the Burbank station could decline upon the opening of the City of Glendale ’s CNG station and if a Bob Hope Airport CNG station is built. This would, in turn, reduce our annual payment by Clean Energy. The Volumetric Excise Tax Credit program is due to expire in September 2009, however, Clean Energy believes the program will be extended and they will provide the City half of the set price per gallon established in any program extensions or re-issuances of Attachment 2 - Page 2
C:\Documents and Settings\JSantos\Local Settings\Temporary Internet Files\Content.Outlook\OGMH8Z9B\Clean Energy Contract Amendment SR.doc 3
new, similar programs.
Further, Clean Energy, utilizing their capital up to $750,000, has offered to design, build and operate a private-access CNG time-fill fueling station at the Yard located at 124 S.
Lake Street. This station will be used to fill the City’s fleet of CNG refuse trucks overnight, saving refuse drivers valuable time during their daily routes. Clean Energy estimates that construction will take nine (9) to twelve (12) months to complete. Fuel at this station will be billed at the same rate the City currently pays at the existing public-access CNG station at 810 N. Lake Street. All maintenance, repair and fuel station equipment replacement costs will be paid by Clean Energy. Upon approval of this amendment, staff will develop and present a construction and operation agreement between the City and Clean Energy to Council for approval.
FISCAL IMPACT
:
Clean Energy’s commitment to pay for the design and construction of a CNG time-fill station at the Yard valued at up to $750,000 will save the City hundreds of thousands of dollars. Currently, the Ci
ty has funds in the amount of $496,766.12 appropriated in project account number 498.PW31A.15022.0000.15718 (CNG Time-Fill Station), which will return to Fund 498 upon the closing of the account. Additionally, the City will receive approximately $180 ,000 annually from Clean Energy’s participation in the Volumetric Excise Tax Credit program through September 2009 and potentially for several more years. It is staff ’s recommendation that these funds be deposited into the 532 Fund revenue account number 532.ND000.45045.1000 (Clean Energy Agreement) to offset cost increases in other fuels used in the City’s fleet.
RECOMMENDATION:
Staff recommends adoption of the resolution approving the amendment to the current ten- year agreement with Clean Energy for the management and operation of the CNG fueling s
tation located at 810 N. Lake Street and authorizing the City Manager to execute that amendment.
Attachment 2 - Page 3