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HomeMy WebLinkAbout2.a. SKB-Rosemount Community Trust FundAGENDA ITEM: SKB- Rosemount Community Trust Fund AGENDA SECTION: Discussion PREPARED BY: Kim Lindquist, Community Development Director AGENDA NO. 2.A- ATTACHMENTS: Amendment to SKB Environmental Rosemount Community Trust; Distribution of Funds Table; Fund Balance Growth Analysis; Draft Amendment to Development Commitment; Addendum to Development Contract dated 10/17/89; Development Commitment dated 10/17/89; Interim Use Permit Agreement Reissuance APPROVED BY: ©P- RECOMMENDED ACTION: Discussion Only ROSEMOUNT CITY COUNCIL City Council Work Session Date: September 10, 2008 EXECUTIVE SUMMARY BACKGROUND SKB has applied, and is going through the City approval process for an expansion of their current waste facility. The expansion will increase the size of the landfill to approximately 25 million cubic yards and is projected to increase the overall life of the landfill by 20 years. As part of the amendment to the interim use permit process, the City has typically taken the opportunity to discuss the financial arrangements regulated by the SKB- Rosemount Community Trust Fund, the Interim Use Permit (IUP), and the Development Commitment. The most recent amendment occurred in November 2004. At that time there were three changes made relating to the use of the trust: The Trustees shall distribute trust funds in an amount equal to fifty percent (50 of the donations received from the Donor each year to the City of Rosemount to be used by the City of Rosemount for capital projects identified in the City of Rosemount's Capital Improvement Program, which trust funds shall distributed no later than January 31s of the year following the year in which the donations are received; The Trustees shall distribute the sum of Five Hundred Thousand Dollars ($500,000.00 to the City of Rosemount for the acquisition of the land and /or a building to be used as a library in the City of Rosemount at the time of the closing on the City of Rosemount's purchase of the land and /or building; and The City allowed the SKB Trust Fund to increase annual community distributions based on the Consumer Price Index or percentage population growth in Rosemount, whichever is greater. The IUP has been modified when changes have occurred to the physical features of the landfill, whether they be expansions or modifications to the approved landscape plan. The most recent IUP was approved in 2004. Within the IUP the ash disposal and construction and demolition waste disposal charges are delineated. Per the agreement SKB pays $3.25 per ton ash waste and $.85 per cubic yard of construction and demolition waste deposited in the Facility. Should the amount SKB charges increases, the amount paid to the City increases on a pro -rata basis. In both the Development Commitment and the IUP is referenced the payment of $25,000 per year in lieu of a previously approved end -use plan that included landscaping estimated to cost 3 -4 million dollars. The $25,000 in lieu payment is for 10 years to assist the City in landscaping and natural resource projects. The Development Commitment also regulates the base service charge. At the time of approval the base charge was $2.75 per ton, for each ton accepted and disposed of in the Facility. Computation of the tonnage for the City service Charge is the same as the Waste Generation Charge. DISCUSSION PAYMENT OVERVIEW There are several payments made to the City relating to the operation of the SKB landfill. The following is an itemization of the revenues annually since 1997. User Fee History Base Service MSW Ash C D Cell Landscape 1/2 Excess Year Organization Charges Charges Host Fees Agreement Trust Fund Totals 1997 Laidlaw $66,986.05 $0.00 $0.00 $0.00 $0.00 $66,986.05 1998 Safety -Kleen 75,719.29 0.00 0.00 0.00 0.00 $75,719.29 1999 Safety -Kleen 93,590.56 0.00 0.00 0.00 0.00 $93,590.56 2000 SKB 160,008.06 24,706.83 0.00 0.00 0.00 $184,714.89 2001 SKB 135,795.65 44,068.29 0.00 0.00 0.00 $179,863.94 2002 SKB 112,193.16 48,666.20 0.00 0.00 0.00 $160,859.36 2003 SKB 124,925.75 32,440.22 0.00 0.00 0.00 $157,365.97 2004 SKB 140,934.06 32,182.34 98,091.72 25,000.00 0.00 $296,208.12 2005 SKB 131,920.88 29,869.51 255,922.69 25,000.00 101,572.00 $544,285.08 2006 SKB 150,977.68 29,582.19 257,555.85 25,000.00 114,323.70 $577,439.42 2007 SKB 207,392.50 33,689.18 315,489.55 25,000.00 128,006.37 $709,577.60 2008 SKB 152,677.39 18,141.99 213,439.03 25,000.00 170,362.44 $579,620.85 (Thru 8/31) 2 In 2007 the City received a total of $709,576 from SKB and in the first 8 months of 2008 $579,619. The Council should be aware that the Trust Fund distribution is received in January of the year following the year the money is received. Several Council members have indicated that they would like to receive the entire amount of funds currently being allocated to the Trust Fund as part of the proposed expansion. In 2004 the expansion and subsequent modifications to the Trust Fund agreement resulted in 1/2 of the Fund disbursement being shifted to the City for use in capital projects. There is also strong interest that the funds sent to the City not be earmarked for capital projects but be part of the revenues which are placed into the General Fund. Currently the monies received for the base service charge, the MSW ash charge and the C D cell charges are all received into the General Fund. That would mean in 2007, $556,570 or 78% of the total money paid to the City was directly allocated to the General Fund. Along with the Trust Fund allocation, the City receives $25,000 for 10 years to be used for landscaping purposes. These funds are a result of modifications to the landfill end use plan in 2003 that removed proposed revegetation on the top of the landfill that would have created an Oak Savanna. The payment was in recognition that the proposed landscaping and necessary soils installation would cost approximately 2 -3 million dollars. The City has received 5 years worth of the landscape funds. SKB has used the Trust Fund to provide funding for a variety of local and civic activities that benefit individual groups within Rosemount, Dakota County or the School District. Attached is a complete listing of the organizations that have received funding through the SKB- Rosemount Community Trust since 2000 when SKB gained ownership of the landfill property. The amount of money distributed by the Trust has varied from a low of $67,500 in 2001 to a high of $118,820 in 2007. In 2008 there has been $92,850 distributed since the end of May. The average annual disbursement since 2000, omitting the highest and lowest distribution is $88,031. TRUST FUND OPTIONS There are several options that the Council could investigate in terms of a final outcome in the Trust Fund distributions from here on forward. The fund could be frozen at its current principal, which is approximately 1 2 million which would result in approximately $40,000 being generated in interest for yearly distribution. SKB also provided at a previous meeting three other scenarios that allowed for a Trust Fund cap of $1.5 million, $2.0 million, and $2.5 million, with the Trust distributing the funds generated through the endowment interest. With a cap of 1.5 million, the Fund is projected to reach that amount in 2011, while splitting the contributions with the City in the same 50% formula until then. Under the applicant's projection (using 4.1% interest) the Trust Fund would be able to distribute $62,000 to organizations under the 50/50 split. If the Council was interested in allowing a 2.0 million cap, it is projected that the Fund would not reach that balance until 2014 and would allow a distribution of $82,000 after the cap is reached. In 2016 the fund is projected to reach the 2.5 million cap and would allow a $103,000 distribution. It appears that these computations assume that the Fund distributes 1 /2 of the amount allocation in each of the given years, when in reality they could distribute something less and meet their "cap" goals sooner. It also appears that the projection allows for a greater distribution of grant money if generated during the time period used for building up the cap. CONCLUSION Staff is recommending something similar to what is proposed by the SKB spreadsheet. The following highlights the main points of the proposal: 3 To maintain consistency with current funding of community organizations, staff is recommending the grant amount be capped at $85,000. This means that during the time period of the cap buildup or if investment or Trust revenues result in larger than projected revenues, the total of the grants would still remain $85,000. This figure allows for disbursements at a level similar to that which has been experienced over the last 7 year and provides a level of certainty during the landfill operation and beyond. Maintenance of a capped annual grant distribution should not adversely affect organizations that have relied on the SKB fund for various activities but also does not create an expectation that additional funding would become available. To assist in the maintenance of a long -term consistent grant disbursement, it is recommended that the principal for the Trust be capped to permit generation of $85,000 in interest earnings. The spreadsheet from SKB indicates that a 2 million dollar cap is necessary to generate $82,000 in interest earnings; so the assumption is the cap would be approximately $2 million dollars. The exact figure could be determined with further review and discussion. During the time period when the Trust fund was being built up to meet the desired cap, the funding formula would remain the same; the City would receive 1 /2 of the revenues going into the Trust. This means that the City will not be adversely affected fmancially during the accumulation of the Trust principal since the formula is the existing condition. Additionally, since the grant disbursements would be capped at $85,000 any additional income generated to the Trust is equally split between the City and the Trust, allowing the financial cap to be reached sooner. It is recommended that revisions be made to the formal documents to remove any restrictions for use of funds paid to the City. Presently, the 50% Trust distribution requires its use for capital projects indentified in the City of Rosemount's Capital Improvement Program. Additional recognition of the City's role in the Trust Fund is needed. The Fund name should be changed so it is SKB Environmental -City of Rosemount Trust. Recognition of the City's role in the disbursement of funds should also be clearer in the letters to recipients. There may be some disagreement about the final cap for the Trust Fund and the amount for distribution to various organizations. It is certainly up to the Council if there is a preference to reduce the amount of money being distributed to organizations or the final cap which will permit distributions even after the landfill is closed. In staff's opinion one of the best ways to regulate the future funding is to regulate the amount of disbursements, not necessarily the principal within the Trust. Again, regulating the distribution provides a certainty, can maintain the status quo, and is easily administered. COUNCIL ACTION Staff is asking for direction from the Council regarding the financial side associated with SKB landfill expansion. There are multiple payments that come to the City due to the landfill operation. Much of the discussion centers on the operation of the Trust Fund, which was created as a partnership to distribute funds to various civic organizations benefiting the Rosemount community. Most recently the City began received 50% of the distribution from the Trust. The City's goal is to ultimately be the primary beneficiary of the Trust Fund money; the question is when this should occur. If the determination was made that there should be no new funds into the Trust, the principal would be capped at approximately 1.2 million with interest earnings of around $49,200 for distribution to civic organizations. Obviously the higher the principal, the more interest is generated and therefore the more money available for distribution. Staff's opinion for regulation deals more with capping the disbursement not the principal amount. This would mean no variation in distributions would occur from year to year and would also remove the concern about projecting appropriate interest rates and fund growth. 4 Staff is asking the Council to provide policy direction from the Council on the following policy questions. Staff will work with the City Attorney and SKB to draft appropriate language reflecting the Council's direction: Does the Council wish to cap the amount of money distributed to community organizations through the Trust Fund? Does the Council wish to allocate money to a set cap for the Trust Fund endowment? Does the Council want to remove restrictions on how payments from SKB can by used by the City? Does the Council wish to maintain the current financial structure for the Trust Fund until such time as the cap is reached or accelerate payments to the Trust Fund to reach the cap sooner? 5 Non -City Yearly Totals City Yearly Totals Totals 110,865.00 Average of Totals Years 2000 -2007 100,102.88 Highest Year 2007 118,820.00 Lowest Year 2001 63,750.00 Average of Totals WItF Years 2001, 2008 88.031.17 3,000,00 10,000.00 500.00 15,000.00 3,600.00 4,000.00 2,086.00 12,500.00 3,000.00 2,000.00 3,000.00 500.00 8,000.00 5,000.00 500.00 500.00 2,500.00 100.00 500.00 1,000.00 20,000.00 1,500.00 5,000.00 5,000.00 4,000.00 2,086.00 500.00 1,000.00 3,000.00 5,000.00 2,000.00 3,000.00 4,605.00 10,000.00 750.00 10,000.00 11,250.00 5,000.00 2,000.00 10,000.00 5,000.00 1,500.00 10,000.00 500.00 2,500.00 2,000.00 10,000.00 10,000.00 1,000.00 10,000.00 5,000.00 750.00 10,000.00 12,500.00 300.00 250.00 10,000.00 10,000.00 5,000.00 600.00 5,000.00 10,000.00 5,000.00 300.00 500.00 5,000.00 5,000.00 1,000.00 3,000.00 2,250.00 5,000.00 2,500.00 5,000.00 7,500.00 750.00 1,100.00 10,000.00 1,000.00 3,600.00 8,000.00 8,000.00 7,500.00 5,000.00 1,000.00 3,000.00 1,000.00 11,700.00 1,000.00 1,000.00 10,000.00 1,000.00 500.00 650.00 800.00 3,000.00 8,000.00 10,000.00 7,000.00 2,100.00 1,250.00 2,500.00 8,000.00 4,000.00 2,086.00 3,360.00 3,000.00 1,000.00 900.00 10,000.00 5,000.00 5,500.00 1,000.00 500.00 12,500.00 10,000.00 10,000.00 2,500.00 10,000.00 2,000.00 500.00 1,000.00 250.00 1,000.00 5,000.00 3,000.00 10,000.00 5,000.00 7,000.00 8,000.00 1,000.00 2,600.00 5,000.00 1,000.00 600.00 8,000.00 1,000.00 1,500.00 2,000.00 5,500.00 400.00 10,000.00 8,000.00 1,500.00 2,500.00 3,000.00 2,000.00 500.00 3,000.00 2,000.00 1,000.00 4,000.00 4,000.00 500.00 5,000.00 3,500.00 3,500.00 600.00 1,000.00 3,000.00 3,000.00 2,500.00 2,500.00 2,000.00 500.00 500.00 1,000.00 1,000.00 1,000.00 2,000.00 400.00 5,000.00 7,500.00 3,000.00 3,000.00 2,400.00 3,000.00 3,000.00 5,000.00 8,000.00 1,000.00 1,584.00 250.00 550.00 2,000.00 200.00 7,500.00 200.00 1,000.00 2,850.00 3,500.00 3,500.00 5,000.00 5,000.00 200.00 3,000.00 1,000.00 500.00 3,000.00 3,000.00 2,000.00 5,000.00 4,000.00 2,100.00 7,500.00 700.00 4,000.00 SKB TRUST DISTRIBUTION OF FUNDS 2000 2001 2002 2003 2004 2005 2006 75,500.00 63,750.00 87,300,00' .87 ,900.00. 71;936:00 2007 2008 94,886.00 118,820.00 $i 92,350.00 500.00 1,000.00 10,000.00 10,000.00 500.00 2,000.00 2,000.00 500.00 3,250.00 5,066.00 133,250.00 87,500.00 89,300.00 97 ,900.00: 81,938'',00 116,231.00 96,886.00 118,820.00 92,850.00 0 b O m O 7 7 n V x 8 3 a 1 c a i a s s a ,0 6 I g a 5 8 s a 3 g s a ggs R s V s s a W H+ O t OO V s s A W N+ O m 4' V 01 Owl a W N- O m O' V s N a W N+ O m 00 V W s A W N- O m ae J W to a W N o co 3 0 m m N N a iu 5 1 N N 6 O O N N p N N th O O O O O O N N M N g g Q Q$ Q Q 6 O 2 5 a a a N N N t 3 N N N N N N 3 N N N V V 8 N N N M ti 1 b b N 1 ttt f N N 63 88 N 8 O O N N 8 N N 3 m G) w w a 0 H 0 m i 3 a i g D QQ 72 m w 8 5 5 m g 3 3 A xi m a a n a m g §t fT P N 3 1 N 43 N W 1 2R 43 N N po J N W I Q a 1 N N N �S E N N N 8 3 Wt' N N 43 3 L N N N r 8N p� N m N N O f�1 fJ A g 1 tt' N 43 43 u 3 LL' m g m 0 0 m G "w y `O 3 D G) w 8 0 la 44 0 0 a 1 g 1 g 1 y C q m i m p 0 o j y O) 7 5 N �A 5 0 1 ti g a x a i a n T a N N *3 N N 8 V VV O O O O O O O N N N g g o 6 a O N N Q m Q OO 3" D m aap NN 8 V O8 O Q O O 8 G 43 N 8 o N N N 8 3 3 N N SO a m 8 0. iS N N N a N N N y r a N V V cl g a$ a 1 t N N N .r N iN 8 g8 N Eiita 1 ggg g S N 1 V