AgdaPkt 2008-09-08 - Laserfiche WebLink

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R~ i'~pc O"T . ....., " 7A Page 1 To the Honorable Mayor and City Council From tl1.e Ci j M~naef September 8, 2008 SUBJECT South Bayside Waste Management Authority Shoreway Solid Waste Facility Project Financing ReCOMMENDATlON- By resolution, approve, authorize and direct the issuance of debt by the South Bayside Waste Management Authority ("SBWMA") in the maximum amount of $65,455,000. This authorization includes an amount estimated to be sufficient to fund the Shoreway masterplan improvements needed to handle future tonnage from the rollout of new franchised collection services for member agencies. The authorization of new debt is net of cash reserves the SBWMA will contribute to the project, and includes an amount sufficient to refund the SBWMA's 2000 bonds. Pursuant to the SBWMA joint powers agency agreement, at least two-thirds of the member agencies are required to approve any debt sold by the SBWMA. BACKGROUND In April 2007 the SBWMA Board (the "Board") approved a Shoreway Master Plan detailing transfer station building retrofits, the construction of a new materials recovery facility (MRF) building, purchase of new MRF single stream processing equipment. and traffic and other miscellaneous environmental improvements; the Board approved a preferred masterplan option which became the starting point for designing the project. (Please see Attachment 2 for a summary of key masterplan milestones to date). Also, at the April 26, 2007 SBWMA Board of Directors meeting, the Board approved a plan of finance entailing the use of taxable bonds to fund new Shoreway Recycling and Disposal Center ("Shoreway") improvements and to refund and retire the outstanding 2000 bonds. It was noted by staff that taxable bonds would increase the cost of capital but staff believes this would give the SBWMA the flexibility it seeks in the compensation and incentives structure for the future Shoreway Operations Agreement. The transfer station operating agreement, entered into in 2000, is set to expire at the end of 2010. Because the 2000 bonds were sold on a tax exempt basis, the formula for determining compensation to a private enterprise operator o(the facility is restricted by federal tax rules, and in particular, may not be based on net operating profit. This limitation does not provide adequate incentives to the contractor for superior performance (e.g., increasing the quantity of materials recovered, reducing MRF residuals, increasing the quality of the recyclable materials, increasing the revenue per ton received for commodities, etc.) and in effect caps the operator's profit. Such a "profit-cap" is unusual in these types of operating contracts. For example, neither the Sunnyvale SMaRT Station nor the Western Placer Regional Authority MRF, which are both publicly owned but privately operated, have such limits.