The Lake County Board of County Commissioners met in special session on Monday, September 12, 1988, at 9:00 a.m., in the Board of County Commissioner's Meeting Room, Lake County Courthouse, Tavares, Florida. Commissioners present at the meeting were: Glenn C. Burhans, Chairman; Thomas J. Windram; Claude E. Smoak, Jr.; and Don Bailey. Others present were: Christopher C. Ford, County Attorney; James C. Watkins, Clerk; Michael C. Willett, County Administrator; Robert K. McKee, Chief Deputy Clerk; and Toni M. Austin, Deputy Clerk.
CONTRACTS, LEASES & AGREEMENTS/LANDFILLS
Mr. Ed Sledge, Piper & Marbury, appeared before the Board to discuss the Executive Summary of the Service Agreement, dated September 9, 1988, as prepared by Piper & Marbury, as follows:
Mr. Sledge discussed the County's obligations, which are to deliver waste and to pay an annual service fee. At this time, he discussed the monthly billing procedures, in the proposed contract, on Page 33, Section 8.02, Debt Service, which will be used by the County.
Mr. Sledge stated that NRG is required to process 163,000 tons of acceptable waste annually, and to produce at least 525 kilowatt hours of electricity from each ton of waste processed. NRG must design, construct, equip and start-up the Facility. NRG's fixed construction price will not exceed $66,000.00, except for specified allowance items. Its fixed construction period is 28 months. NRG must also make a $10,000,000.00 equity contribution.
Waste Delivery Commitments
The County is obligated to deliver all processible waste generated in the County, to the Facility, and must delivery at least 130,000 tons per year (Guaranteed Annual Tonnage).
The County may increase its Guaranteed Annual Tonnage for any or all years by notifying NRG.
Service Fee Formula
The County will pay an annual Service Fee for its right to use the Facility. The Service Fee will equal (1) Debt Service plus (2) a fixed Operating and Maintenance Charge (adjusted for inflation) plus (3) defined Pass Through Costs minus (4) the County's share of the Electricity Revenues minus (5) outside waste revenues minus (6) (the NRG Shortfall Contribution (up to $800,000) minus (7) NRG's equity contribution.
Debt Service equals the amounts due under the financing documents to repay the $77,240,000 Bond issue used to finance the Facility. It includes the cost of administering the Bonds. Mr. Sledge discussed the Debt Service once the Bonds have been issued. The Debt Service is reduced by the amount of investment earnings on the $7.7 million debt service reserve fund.
Five million dollars of NRG's equity will be contributed to pay construction costs as incurred, with the other five million dollars being contributed during the first five years of operation to reduce the Debt Service payable in those years. The equity contribution will be secured by a letter of credit from a bank satisfactory to the County.
Operating and Maintenance Charge
The Operating and Maintenance Charge is a fixed dollar amount set forth in Schedule 9 of the Service Agreement for each year. It escalates with the Consumer Price Index (CPI). Changes in the CPI will increase or decrease the Operating and Maintenance Charge. The Operating and Maintenance Charge is fixed by the Service Agreement and covers all operating and maintenance costs, except Pass Through costs. It is adjusted only for operating cost increases caused by Force Majeure.
Commr. Smoak questioned the difference between the Producers Price Index and the Consumer Price Index, in relation to the proposed contract, and stated that the County should have the option to look at the potential effect, based on historical past performances of the two indexes, and how it would affect this contract. Mr. Sledge presented an explanation, and stated that this would be a negotiating item, which he recommended the County pursue.
Pass Through Costs
Pass Through Costs are the amounts incurred by NRG for project costs items specified in Schedule 3. Pass Through Costs are either items that are not within NRG's control or items that should not be included in the Operating and Maintenance Charge, because they do not escalate with inflation.
Commr. Smoak questioned the effect of private taxes with a privately owned facility, and requested that an economic comparison be prepared, for a private versus a public facility.
Mr. Willett stated that an economic comparison, for a private versus a public facility, had been prepared by Smith Barney.
Mr. Chris Ford stated that other comparisons of public ownership had been done by Wheelabrator and Ogden Martin Inc., and that he had submitted information, which had public ownership comparisons, which indicated a higher tipping fee.
Mr. Ford referred to a letter received from Jeff Clunie, R. W. Beck and Associates, and stated that there would be a change in the formula, which would be to the County's benefit, and which should be a condition of the contract. The letter further expressed that the County will generate approximately 130,000 tons of processible waste available for delivery to the Facility, and that the range of heating value was reported to vary from 3,000 to 7,000 BTU's per pound, during the course of the year, with an average for the year of approximately 4,500 to 4,800 BTU's per pound. This figure is lower than the 5,000 BTU's per pound, which had previously been assumed.
Electricity revenues are the project's major source of income, and reduces the Service Fee. The County will receive credit for 90% of the electricity revenues received, except that, as an efficiency incentive to NRG, only 50% of the electricity produced above 525 kwh per ton will be credited to the County. Electricity will be sold to Florida Power under a long-term agreement.
Outside Waste Revenues
Tipping fees for outside waste will also be credited to reduce the County's Service Fee.
NRG has agreed that, if it wrongfully rejects any of the County's Guaranteed Annual Tonnage, it will pay damages to the County equal to the County's portion of the lost energy revenues plus the County's alternate cost of disposing of the rejected waste.
This guarantee will be on an annual basis.
Like almost all long-term agreements in the industry, the Service Agreement contains provisions that pass through to the County all costs of Force Majeure that are not covered by insurance. Force Majeure includes changes in federal, state or local law and acts of God.
The Facility is not designed or licensed to take hazardous waste, and the County is prohibited from delivering hazardous waste to NRG. The County must arrange for the pick-up and disposal of any hazardous waste delivered to the Facility.
The Facility can process waste having a broad range of energy content, but is has been designed to process 163,000 tons of waste having an energy content of 5,000 BTU's per pound.
Commr. Smoak stated his concerns with Mr. Clunie's letter, which indicated less garbage and less BTU's. He questioned why it would not be advantageous to the County to remain at 4,500 BTU's, as it has always been presented, until this contract. He stated that he would like to see the financial effect.
Mr. Ford stated that it was his opinion to follow Mr. Clunie's suggestions, with Commr. Smoak suggesting that the figures presented today, be left within the proposed contract, until the Board can receive an explanation from Mr. Clunie.
The contract also provides for an additional disposal fee, if NRG processes more than 163,000 tons of County waste per year. The disposal fee is $20 a ton (escalated in accordance with the CPI). The County receives 90% of the electricity revenues from the excess waste.
The Agreement requires the County to develop landfill capacity for Residue, Unacceptable Waste, and Acceptable Waste that cannot be processed due to a Facility shutdown.
Mr. Ford stated that the Department of Environmental Regulations had indicated that they would allow a Consent Order for the next five years, to use the County's current landfill site as a monofill, which means only ash going into a single line cell, separated from other garbage.
Commr. Smoak stated that the County needs to make sure it has a commitment from DER, that the County get sited, and not a Consent Agreement. He requested that Mr. Michael C. Willett, County Administrator, be instructed to get, in letter form, from DER, a specific commitment, to a temporary ash disposal site, within the context of the time frame of this contract.
Commr. Smoak further stated that DER should be approached with this contract and these terms.
Mr. Mike Stearman, City of Eustis, appeared before the Board and presented his comments regarding the intent of the County to include sharing the water and steam revenue with the cities. Mr. Stearman also questioned the specially permitted waste and the transport clause, in relation to the provision for the payment of the transportation costs.
Commr. Burhans recognized, for the record, information received Mr. Bugni.
RECESS & REASSEMBLY
At 4:05 p.m., the Chairman announced that the Board would recess for five minutes.
CONTRACTS LEASES & AGREEMENTS/LANDFILLS (CONT'D.)
Mr. Sledge stated that there is no separately broken out number, in NRG's operating and maintenance charge, for hauling the ash from the facility to the County landfill.
Commr. Smoak requested that Mr. Charlie Bush, NRG, obtain figures, in relation to hauling, and the breakdown of costs, which creates the total dollar package.
Mr. Sledge stated that he understood that the Board wanted him to continue with the contract, subject to the following:
(1) Beck should investigate the history of the CPI and the PPI and other appropriate inflation indices;
(2) the Board should have advice on the advisability of reducing the Facility design point and performance level from 5,000 BTU's to 4,500 BTU's;
(3) the Board should receive a report on the local property tax projections for the Facility;
(4) the following language should be inserted in the steam sale section: "the parties intend that prior to the County's consenting to steam sales, the mutually agreeable revenue sharing formula shall be developed" or words to that effect:
(5) we should discuss Specially Permitted Waste with Mr. Stearman so that he is assured that specially permitted waste cannot be turned back to the community:
(6) the County should receive a proposal from Ogden concerning the County's ability to include ash hauling as a Pass Through Cost, with a corresponding reduction to the Operating and Maintenance Charge;
(7) the $800,000 NRG shortfall payment formula should be confirmed by computer runs: and
(8) the County should receive a breakdown of the costs included in the proposal (including both capital and operating costs).
The Board scheduled Mr. Sledge on the agenda for the September 20, 1988, regular meeting, at 11:30 a.m.
Mr. Dan Robuck, Attorney, appeared before the Board and stated that Mr. Browne Gregg would prefer not to have Holland & Knight as his bond council, and would like to offer the position to Mr. Ed Sledge. Mr. Robuck stated that NRG anticipated savings of $50,000, to the project, by hiring Mr. Sledge.
Mr. Ford stated that time wise, it would be very advantageous to have Mr. Sledge as the bond council.
On a motion by Commr. Smoak, seconded by Commr. Bailey and carried unanimously, the Board approved the appointment of Mr. Sledge, as the bond council for Mr. Browne Gregg, NRG.
There being no further business to be brought to the attention of the Board, the meeting adjourned
GLENN C. BURHANS, CHAIRMAN
JAMES C. WATKINS, CLERK