FOR THE COUNCIL MEETING OF MARCH 5, 2024
COUNCIL AGENDA REPORT
TO: City Council
FROM: Interim City Manager Alex Posada
BY: Director of Utilities Shad S. Springer
SUBJECT: Adoption of a Resolution Approving a Pledge of Revenue Agreement with the California Department of Resources Recycling and Recovery for Postclosure Maintenance for the Santa Maria Regional Landfill , Facility No. 42-AA-0016
Description:
The City Council will consider changing the funding mechanism from the Solid Waste Enterprise Fund to a Pledge of Revenue Agreement with Cal ifornia Department of Resources Recycling and Recovery for postclosure maintenance for the Santa Maria Regional Landfill.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3), no environmental review is required.
RECOMMENDATION:
Adopt a Resol ution approving a Pledge of Revenue Agreement with the California Department of Resources Recycling and Recovery for postclosure maintenance for the Santa Maria Regional Landfill, Facility No. 42-AA-0016.
BACKGROUND:
The Utilities Department provides integrated waste management services on behalf of the City of Santa Maria (City). This includes municipal solid waste, recyclables, and organic waste collection services for residential and commercial customers, operating the Santa Maria Regional Landfill (SMRL) at 2065 East Main Street, and planning for the design, permitting, construction, and operations of the future Integrated Waste Management Facility (IWMF) at Los Flores.
California Code of Regulations Title 27 , Divi sion 2, Subdivision 1, Chapter 6 (the “Regulations”) requires operators of solid waste landfills to demonstrate the availability of financial resources to conduct closure, postclosure maintenance, and corrective action activities. The minimum period to fund a landfill after closure is 30 years, or until no longer deemed a threat by the regulatory agencies.
The City currently uses the Restricted Enterprise Fund mechanism in accordance with §22241 of the Regulations for financial obligations for closure, postclosure maintenance, 2 and corrective action. This mechanism for funding restricts (reserves) the funds. The City currently has $16,650,000 in restricted funds committed to postclosure maintenance.
The Regulations allow another mechanism to demonstrat e the availability of financial resources: a Pledge of Revenue. A Pledge of Revenue is an agreement between the City and California Department of Resources Recycling and Recovery (CalRecycle) wherein the City commits to budgeting the costs of postclosure maintenance each year instead of funding the full 30 years with restricted cash reserves.
DISCUSSION:
With the added capacity of the proposed construction of Cell 1 Phase II over the next year, the SMRL is expected to reach full capacity by Fiscal Year 2031/32. To fund this expansion at the SMRL and begin the development of long-term capacity at the IWMF , the Utilities Department estimates capital project costs of $25,800,000 in the next two fiscal years. Changing the City’s funding mechanism from the Enterprise Fund method to the Pledge of Revenue method will allow $16,650,000 in currently restricted funds to become available. These funds will be used to offset a portion of anticipated capital costs.
This will provide more time for the City to accumulate revenues for capital costs and reduce the amount of money that will ultimately need to be borrowed to build the IWMF.
The Pledge of Revenue mechanism requires the City to enter into an agreement with CalRecycle to memorialize the City’s financial commitment for postclosure maintenance.
Utilities staff drafted the Pledge of Revenue Agreement for Postclosure Maintenance with the concurrence of the City Attorney’s Office and CalRecycle Staff (Attachment “A”).
Fiscal Considerations
Changing the fundin g mechanism from the Restricted Enterprise Fund to a Pledge of Revenue will allow $1 6,650,000 to become available (unreserved) in the Solid Waste Fund. These funds will be used for required capital projects and keep the Solid Waste Fund solvent.
The recommended action is only for the postclosure maintenance portion of the Restricted Enterprise Fund. The City will continue to fully fund closure and corrective action financial obligations in the Restricted Enterprise Fund (083 -201-01 Closure and 083-201-02 Corrective Action, respectively), as required by Regulations §22241.
Alternatives
The City Council may elect not to approve this agreement and therefore not approve the change in funding mechanism. This will lead to an inadequate cash balance in the Solid Waste Fund. To fund the projected capital expenses, other sources of revenue would need to be identified such as the General Fund or borrowing money through a bond issuance.
The Utilities Department does not recommend this alternative, as funds are available in postclosure maintenance restricted accounts, which do not require subsidy from the General Fund or other funding sources. The use of these funds will also delay when the City needs to borrow money for the construction of the IWMF, allowing mo re time to 3 accumulate construction funds and decreasing the amount of money required to be borrowed.
Impact to the Community
Operators of solid waste landfills are required to continue monitoring and maintaining the landfill once it is closed to protect a gainst the release of hazardous constituents to the environment. The proposed change in funding mechanism for SMRL will continue to provide customers with a local, cost-effective option for the safe disposal of waste and not reduce the City’s commitment to postclosure maintenance for the SMRL.
Other Agency Review
The Pledge of Revenue agreement was reviewed and approved by CalRecycle.
ATTACHMENTS
Attachment “A”: Pledge of Revenue Agreement