The Lake County Board of County Commissioners met in regular session on Tuesday, September 12, 2000, at 9:00 a.m., in the Board of County Commissioner's Meeting Room, Lake County Administration Building, Tavares, Florida. Commissioners present at the meeting were: Welton G. Cadwell, Chairman; Catherine C. Hanson, Vice Chairman; Rhonda H. Gerber; Robert A. Pool; and G. Richard Swartz, Jr. Others present were: Sue Whittle, County Manager; Sanford A. Minkoff, County Attorney; Wendy Taylor, Administrative Supervisor, Board of County Commissioner's Office; Barbara Lehman, Chief Deputy Clerk, County Finance; and Sandra Carter, Deputy Clerk.
The Chairman opened the meeting, stating that the purpose of the meeting was to discuss the Ogden Martin contract. He stated that the process has been a little less than pleasant and thanked Mr. Sandy Minkoff, County Attorney; Ms. Sue Whittle, County Manager; and Ms. Barbara Lehman, Chief Deputy Clerk, County Finance, for their efforts during the process, noting that it took away from their other duties. He stated that he appreciated their efforts.
PERSONAL APPEARANCES
WORKSESSION - OGDEN MARTIN ISSUES
Mr. Sandy Minkoff, County Attorney, distributed a handout containing various points that he felt the Board might want to discuss, regarding the Ogden Martin issue. He stated that, during their research and discussions, they were able to obtain a lot more information about what went on in 1988 than the County ever knew about from outside sources, through some litigation that occurred that the County did not know about, as well as from material they received from Ogden Martin and Mr. F. Browne Gregg. He stated that it is clear that Mr. F. Browne Gregg is a partner in the matter, noting that, unlike what was represented to Lake County in 1988, Mr. F. Browne Gregg has a substantial ownership interest and income interest in the facility and has been receiving payments ongoing since the plant has been in operation. He stated that Ogden Martin cannot modify the service agreement or sell the facility without Mr. Gregg's approval. He stated that Ogden Martin has not been forthcoming, in terms of releasing financial information to the County, so a lot of work was done by the Solid Waste Department employees, particularly Mr. Jeff Cooper, and Ms. Barbara Lehman, Chief Deputy Clerk, County Finance, in trying to come up with financial information, due to the fact that said information was not provided to the County by Ogden Martin. He stated that they did receive information from Mr. Gregg indicating amounts that he received from the facility, which shows significant payments to him during most of the years of the contract. He stated that the difficulty in negotiating with Ogden Martin is due to a tax reason, noting that it appears Ogden Martin took advantage of all the tax credits and accelerated depreciation immediately, within the first few years of the operation of the facility; therefore, it now has a tax cost of zero. He stated that that means, because they are $63 million in debt, even if they gave the County the plant today, they would have to recognize that $63 million as income and their tax bracket could be as high as 44%, when State taxes are included. He stated that they would have $20 million plus in tax, if they gave the plant away, with no value.
Mr. Minkoff stated that throughout the meetings with Ogden Martin they indicated they would give the County the plant, if they were made whole, for tax purposes, but they have refused to consider giving it to the County at the end of the contract, which he finds to be contradictory positions, because the County will be paying all the negative tax impacts when it pays the service fee over the next 14 years. He stated that the profits that are going to be made are going to pay those taxes, so 14 years from now there will not be any negative tax impacts, but they are refusing to allow the County to have the plant at that time. He stated that the Board has discovered, from one of the documents they received, that Mr. Gregg has an agreement with Ogden Martin that allows him to transfer the property to a charity ten years after it begins operations, which he noted will be some time next year. He stated that that charity could be the County or an entity created by the County, but Ogden Martin's position is that that document is ambiguous and that Mr. Gregg could not cause the transfer to happen, without making a substantial payment to Ogden Martin.
Mr. Minkoff stated that there is another agreement, called the Site Agreement, which purports to give Lake County the ability to make Ogden Martin give the County the plant, however, noted that it conflicts with the Gregg agreement, which states that the County will obtain the plant at no cost, but it has to lease the plant back to Ogden Martin for 40 years, at the rate of $1.00 per year, while the service agreement is in force, and fair market rent after the agreement expires. He stated that Ogden Martin takes a position that the fair market rent would only be valued on the real property, so there would essentially be no rent, as opposed to the value of the facility itself. He stated that this is another disagreement that exists between the County and Ogden Martin. He stated that Ogden Martin reads the contract as hard as it can in its favor, so a lot of times there have been contract disagreements, just from reading the document. He stated that Ogden Martin's position has been that, in order for them to be made whole tax wise, if the County paid them in current dollars today, it would be anywhere from $28 to $47 million. He stated that the figures changed each time staff met with Ogden Martin. He stated that the County and Ogden Martin continue to have disagreements in contract interpretations and the County is currently embroiled in a dispute amounting to approximately $450,000 over costs incurred for the retrofit - overhead costs that they are trying to bill the County for from New Jersey. He stated that he felt this was an issue that would be coming back to the Board in a short period of time, because they have been unable to resolve that dispute.
Mr. Minkoff stated that Lake County does not benefit whatsoever from outside waste, so the medical waste provision in the contract has not benefitted the County financially. He stated that, if the County delivers more than 130,000 tons to the facility, or less than 130,000 tons, it gets penalized, which causes the County's per ton cost to increase. He stated that the Solid Waste Department has tried, internally, to manage the County's wastestream, to deliver only 130,000 tons and recycle the rest of the material. He noted, however, that the County is slightly above the 130,000 tons this year. He stated that it is important for the Board to realize that one of their major policy decisions is to decide what the County is going to do in 2014, noting that, if the County does not do anything in that year, it will have to provide some way to dispose of its waste. He stated that, if the County could get out of the contract tomorrow, it would still have to come up with some way to dispose of its waste. He questioned whether the County would want to actually own the facility and, for the next 30 to 40 years, use it to dispose of the County's waste, or look at siting a new landfill someplace, or to transporting the waste to a regional landfill that exists out of Lake County. He stated that the Board needs to keep that point in mind, as they look at some of the alternatives.
Mr. Minkoff stated that the negotiation was a triangle type negotiation, where Mr. Gregg was directly involved; Mr. Steve Richey, Attorney, representing Mr. Gregg, was involved; and there were also attorneys present from Holland & Knight. He stated that sometimes the three groups would meet together, sometimes they would meet only with Ogden Martin, and sometimes they would meet only with Mr. Gregg. He stated that he was certain there were separate meetings between Mr. Gregg and Ogden Martin, as well. He stated that it was hard for him to tell whether Mr. Gregg's involvement was positive or negative. He stated that the County hired two outside law firms, one from Orlando, who is basically a litigation firm, and one from New York, who is more into bond work and putting together solid waste type deals. He stated that the Orlando firm is recommending litigation, to rescind the agreement, and the County has asked them to consider eminent domain. He stated that some other litigation that might occur would be to try to construe the contract options - how much rent they would actually pay, if the County exercised the right to have them convey the facility to the County, or how much would be paid to them, if Mr. Gregg exercised the right to have the facility go to a charity. He stated, however, that the Board needed to understand that it would not be simple litigation, noting that the bond holders and/or trustees would be involved and would be looking for people to recover what they may be out. He stated that the County may also be sued by them, under some kind of securities fraud type issue. He stated that, in addition to the scope of that litigation, the County's debt rating could be impacted, although that is really not a big issue with Lake County, because the County does not have other debt or borrowing. He stated that he has authorized the New York attorneys to talk to the rating agencies, during the process, and noted that, after this meeting, his staff would apprize them of what is going on, rather than have them read it in the newspaper.
Mr. Minkoff stated that, during the negotiation process, as many alternatives as could be thought of were explored, but they were unable to come up with mutually acceptable alternatives, other than two which he would discuss later. He stated that he did not get the impression that Ogden Martin, or Mr. Gregg, were willing to make any significant financial concessions, in order to come to a compromise. He stated that, in the meetings held with Mr. Gregg, he indicated that he would make financial concessions, if Ogden Martin would do the same, but, in the joint meetings, particularly with Ogden Martin, their general counsel questioned whether the County expected them to just give the County money. He stated that there were no financial concessions made. He stated that the County has spent approximately $350,000 in fees and costs, since hiring the two outside law firms, almost evenly split between the two and that Gray, Harris and Robinson estimate that litigation costs could exceed $1 million.
Mr. Minkoff stated that the options are as follows:
Mr. Steve Richey, Attorney, representing Mr. F. Browne Gregg and Recycling 100, addressed the Board stating that Mr. Gregg entered into the discussions with an effort to try to alleviate the concerns and make this deal good for Lake County, because he felt an obligation to do so. He stated that, in Mr. Gregg's sale to Ogden Martin, he continues to get revenue from the facility, as part of the condition of that sale; however, he does not participate in the plant, manage it, or have anything to do with the day-to-day operations of the plant. He stated that there have been hundreds of hours of discussion regarding this matter and millions of dollars worth of attorneys' fees generated from all the various interests that have looked at trying to revise and make this deal better, from Lake County's perspective, as well as from Mr. Gregg's perspective. He stated that they have looked at dozens of alternatives, however, noted that it is a complex deal, based on tax consequences and recapturing on the way that the deal is structured. He stated that they had long and extensive discussions with Ogden Martin, to try to see if they could get to a place where the facility could be bought from Ogden Martin, but avoid the tax consequences that Mr. Minkoff alluded to, and have Lake County own the facility - at the end of the 14 years and 30 days from this date. He stated that they propose to do so, through a process of providing Ogden Martin with approximately $30 million - the figure that has been settled upon, which will enable them to be able to sell out over the next 14 years. He stated that they propose to pay that out of the power money that comes in from the energy generated from the facility.
Mr. Richey stated that Mr. Gregg is willing to step in, put in a process where he can buy Ogden Martin out, run the facility, and turn it over to the County, and the County will gain the tax consequences of the savings from the taxes. He stated that the County will own the plant, which will eliminate all the concern about who is going to own the plant in the end. He stated that it is a complicated process, which Mr. Gregg is willing to do, however, noted that a stumbling block has been discovered in the last 10 days, which is a corporate guarantee by Ogden Martin, given to Lake County, which it pledged on the bond issue, for performance. He stated that it is not a financial guarantee, it is a performance guarantee that the facility will burn garbage and burn it correctly. He stated that this is a major concern, if Mr. Gregg buys the facility from Ogden Martin, as he tries to preclude all the other tax consequences. He stated that, if the guarantee situation could be resolved, Mr. Gregg is in a position to enter into an agreement that would buy out Ogden Martin, substitute it with a company of Mr. Greggs, and Mr. Gregg would take no income or derive any benefit from buying Ogden Martin out. He stated that he has a legal right to share in that buy out, or any income derived from the plant, under his agreement with Ogden Martin, but he would contribute that back to the County, under the $30 million scenario, which he noted would be paid for out of the revenue stream from the electric power generated by the plant. He stated that, in a short period of time, the plant would be in the ownership of the County and Mr. Gregg would be operating it, pursuant to the Service Agreement, as modified, based on all the rigors that have to be gone through to make it work tax wise, and they would proceed to generate the benefits of the savings from the ad valorem taxes. He stated that it would give ownership of the plant to the County and remove Ogden Martin from the process. He stated that, once that is done, there will be a myriad of options that will be available, down the road, over the next 14 years, to decide how Lake County deals with its solid waste and how it brings down the tipping fees. He stated that their primary goal is to see the plant be moved to the ownership of the County and that Ogden Martin be removed from the process. He stated that the proposal from Mr. Gregg would do that. He stated that the major issue that is unresolved is the performance guarantee.
Mr. Richey stated that, if the Board were going to take action this date, he would ask them to allow Mr. Gregg to try to resolve the performance guarantee issue and bring a detailed proposal back to the Board, however, noted that they cannot do that, until they get the guarantee issue resolved. He stated that it would take Mr. Gregg, Ogden Martin, and the County sitting down and trying to work it out. He stated that Mr. Gregg has done as much as he can, on behalf of the County, in trying to put this matter in place, without the County being present. He stated that now they need to sit down with the County and discuss the matter. He stated that part of the agreement is for Mr. Gregg to get back the 200 feet that he voluntarily put in, so that he can build an ash facility and accept the County's ash, so that it will not have to have a monofilament lined landfill. He stated that the ash stays as it is proposed, under the agreement. He stated that Mr. Gregg and the County can deal with the ash, but they have to talk about it. He stated that, with regard to the issue of medical waste, there would still be a couple of months of medical waste coming to the plant, until those contracts are terminated, and then the plant would no longer accept medical waste. He answered questions from the Board regarding this matter.
Commr. Hanson stated that the Board needed to obtain an analysis of what the advantages are going to be to the County, for making a move such as this.
Commr. Swartz stated that, when Mr. Gregg bought NRG and stepped into its shoes and was negotiating with the County to build the incinerator, the Board did not want Mr. Gregg to build and operate the incinerator and insisted that he find an operator with experience, thus the reason for Ogden Martin's involvement He stated that Mr. Gregg sold the plant to Ogden Martin; however, the proposal that Mr. Richey brings to the Board this date would put the operation of the facility back into Mr. Gregg's hands, which he finds to be an interesting irony. He questioned the issue of the 130,000 tons and the way that it was represented to the County. He stated that he would like to meet with Gray, Harris and Robinson, to discuss further their recommendation for litigation to rescind the contract, noting that he was under no illusion that doing that would be easy or inexpensive. He stated that he realized it would be costly and risky; however, he would like to pursue it and have discussions with them, before making any decisions. He stated that he felt the County Commissioners that entered into this contract, while he feels it was unwise, felt it was what they had to do. He stated that he felt they did not believe there were any other options. He stated that he felt the people that were advising them did not advise them well and that the representations that were made from NRG to Mr. Gregg and, ultimately, to Ogden Martin were misrepresentations and led the County into this contract. He suggested that the Board look at the proposal that was being proposed this date, but that a meeting be set up with the County's legal people to look at it.
Commr. Cadwell concurred, noting that he would also like to discuss the issue of eminent domain.
Commr. Swartz stated that his preference has always been to get the County out of the contract. He stated that he only wants to see the County own the facility, as a last resort.
Commr. Cadwell stated that he felt the three options of (1) looking at the County's original discussion to litigate the agreement; (2) the issue of eminent domain; and (3) a more detailed presentation by Mr. Gregg would be fine, noting that he felt the Board could eliminate the other options at this point in time, unless Ogden Martin comes forward with something different.
Commr. Hanson briefly discussed the issue of the tipping fee, noting that the Board needs those figures, as well.
Mr. Richey informed the Board that, in order for Mr. Gregg to present them with a more detailed presentation, he needed to have more input from Ogden Martin. He stated that Mr. Gregg, Ogden Martin, and the County then needs to sit down and try to resolve the guarantee issue, which he noted is a money issue. He stated that the Board needed to authorize staff to work with the three groups of people he alluded to and bring a detailed proposal back to the Board.
Commr. Swartz stated that he felt the Board needed to keep the cities apprized of what is going on, as the County moves forward with this matter, noting that some of them signed interlocal agreements stating that they would deliver waste to the incinerator. He suggested that a presentation by Gray, Harris and Robinson be scheduled to be presented to the Board and then, if some of the commissioners want to meet with them individually, they can do so.
It was the consensus of the Board to bring this matter back for further discussion at the Board Meeting scheduled for October 10, 2000, at which time the issues of rescinding the agreement, eminent domain, and Mr. Gregg's proposal will be discussed.
Commr. Hanson stated that a point the Board needed to remember is that Ogden Martin's profit was tremendous, in those first few years of operation. She stated that the County knew there was a profit, but they did not know how much.
Commr. Pool concurred, stating that Ogden Martin benefitted directly from the plant and he does not understand how they could be hurt by giving back something they gained initially.
REPORTS
COMMISSIONER CADWELL - CHAIRMAN AND DISTRICT 5
MISCELLANEOUS
Commr. Cadwell informed the Board that the Governor's Mentoring Initiative was going to be at the Administration Building from 12:00 Noon until 1:30 p.m. this date.
OTHER BUSINESS
APPOINTMENTS-RESIGNATIONS/COMMITTEES
CODE ENFORCEMENT BOARD
On a motion by Commr. Hanson, seconded by Commr. Pool and carried unanimously, by a 5-0 vote, the Board appointed Mr. Don Miller to the vacant Realtor position on the Lake County Code Enforcement Board.
There being no further business to be brought to the attention of the Board, the meeting was adjourned at 10:30 a.m.
______________________________ WELTON G. CADWELL, CHAIRMAN
ATTEST:
_________________________________
JAMES C. WATKINS, CLERK
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