To: Board of Supervisors
Department or Agency Name(s): Sonoma County Public Infrastructure
Staff Name and Phone Number: Johannes J. Hoevertsz, 707-565-2550
Vote Requirement: Majority
Supervisorial District(s): Countywide
Title:
Title
Zero Waste Sonoma New Household Hazardous Waste Facility and Office.
End
Recommended Action:
Recommended action
A) Authorize the Director of Sonoma County Public Infrastructure to negotiate and present for subsequent Board consideration a line of credit agreement with Zero Waste Sonoma to provide funding for construction of a new Household Hazardous Waste facility in an amount up to $12 million dollars, if the project is approved by Zero Waste Sonoma following compliance with the California Environmental Quality Act. Zero Waste Sonoma has available cash reserves and cashflow such that the line of credit will only be implemented after the project has been certified under CEQA.
B) In order to facilitate the potential line of credit to Zero Waste Sonoma, authorize the Director of Sonoma County Public Infrastructure to explore and, if feasible, negotiate an amendment to the Landfill Settlement Agreement between the County of Sonoma and The Committed Cities for subsequent consideration by the Board.
C) Delegate authority to the Director of the Public Infrastructure Department to negotiate and execute an agreement, in a form approved by County Counsel, for the County to provide project management services to Zero Waste Sonoma for the HHW facility, and further delegating authority to said Director to enter into subsequent task orders for later phases of the HHW facility project, contingent on County staff availability and reimbursement to County of all personnel costs involved in rendering such services.
end
Executive Summary:
Sonoma County Public Infrastructure (SPI) is collaborating with Zero Waste Sonoma (ZWS) to support the establishment of a new Household Hazardous Waste (HHW) facility in northern Sonoma County. The estimated cost for the project, if approved and certified under CEQA will be approximately $12 million, representing the current $9.15 million estimate plus allowances for r contingencies. Funding is proposed from the County’s contingent liability reserve fund, one of four funds designated for liabilities associated with urban landfill infrastructure. It is important to note that the County currently holds approximately $20 million across these reserved funds. The potential line of credit would initially utilize up to 60 percent of these reserves, representing the peak percentage during the early stage of the loan period. However, as the loan is repaid over the anticipated term of 10-15 years, this percentage of utilized reserves will gradually decrease. This repayment plan is structured to ensure that the peak utilization of reserves is temporary, with a relatively fast reduction in the outstanding loan balance, thereby restoring reserve levels progressively over time.
SPI seeks authorization from the Board to:
• Negotiate a line of credit agreement between the County and ZWS, which would be subsequently brought before the Sonoma County Board of Supervisors and the ZWS Board for approval.
• Work with the committed cities to negotiate an amendment to the Landfill Settlement Agreement between the County of Sonoma and these cities. This amendment, once approved by the Board of Supervisors and city councils, will enable the reallocation of designated funds to support ZWS in constructing the HHW facility if approved under CEQA.
• Enter into an agreement with ZWS to ensure effective project management and successful completion of the proposed facility, located at 5871-5895 Pruitt Ave, Windsor, CA. The agreement will involve Zero Waste reimbursing County staff for services rendered on various phases of the Project. Current estimates of County time and charges are $112,170 for Phase 1 (Project Design); $128,913 for Phase 2 (Project Construction); and $50,264 for Phase 3 (Project Commissioning and Close Out)
Discussion:
Zero Waste Sonoma (ZWS) is embarking on a critical initiative to construct a new Household Hazardous Waste (HHW) facility and executive office space on property it purchased on January 29, 2024, at 5871-5895 Pruitt Ave, Windsor, CA. An HHW facility is designed to safely collect, manage, and dispose of hazardous materials from households that cannot be disposed of through regular waste services. These facilities provide essential services, such as the collection of paints, solvents, pesticides, batteries, electronic waste, and other hazardous materials, ensuring they are handled in an environmentally responsible manner.
This project represents a significant advancement in waste management services within Sonoma County, with a projected initial cost estimate of approximately $9.15 million. To ensure financial flexibility and cover potential unforeseen expenses, SPI is recommending a line of credit up to $12 million.
Financial Assistance and Legal Framework
Sonoma County Public Infrastructure (SPI) Integrated Waste Division funds will provide working capital for the design and construction of project, if it is approved by ZWS following compliance with CEQA. If approved, a $12 million line of credit, from the County Contingent Liability Reserve Fund (41124), will be established to offer ZWS the necessary financial flexibility to complete the project. This initiative is particularly vital considering ZWS's current funding constraints, characterized by sufficient cash flow but lacking substantial reserves.
Authority for providing such financial support is guided by the provisions under the Joint Exercise of Powers Act (JPA), specifically California Government Code section Code 6504, which allows for public agencies, including the County and ZWS, as a JPA, to jointly exercise any power common to the contracting parties, and provides a flexible mechanism to advance funds for the purpose of constructing a JPA project such as the HHW Facility.
To effectively implement this financial strategy, SPI is working closely with the County Counsel’s office to develop the legal framework and agreement terms for the line of credit. This collaboration ensures that the agreement that will come back to your Board complies with applicable legal requirements and clearly defines the respective obligations and commitments of both the County and ZWS.
County Counsel will also assist in negotiating any proposed amendments to existing agreements as may be needed to support the use of public funds for the HHW facility.
ZWS, as a separate public agency, will also be advised by its own general counsel (Best Best & Krieger LLP) as related to any necessary agreements with ZWS.
Strategic Financial Planning
The financial planning for the HHW facility project is underpinned by a conservative yet strategic approach that aims to maximize value for ratepayers and ensure the sustainability of financial resources. Sonoma County maintains robust fund reserves that not only meet but exceed obligations for maintaining closed landfills and managing other potential adverse conditions that could impact the solid waste system. These special-purpose funds are as follows:
1. Contingent Liability Reserve (current balance $12,026,543):
• Original Purpose: Established to address unforeseen environmental liabilities that might arise from landfill operations, ensuring financial stability and compliance with regulatory requirements. This fund was created from the remaining balances of the prior closure/post-closure funds when Republic Services took over all liability for the Central Disposal Site (CDS). It provides a financial buffer to manage unexpected environmental remediation costs and regulatory compliance measures that may not be covered by routine operating budgets. The revenues for this fund came from waste disposal tip fees generated when the County operated the Landfill and county transfer stations.
2. Central Disposal Site (CDS) Leak Fund (current balance $2,606,997):
• Original Purpose: Created under CCR Title 27 to specifically address potential leaks and environmental issues at the Central Disposal Site. This fund is intended to cover the costs of monitoring, detecting, and mitigating any leachate or gas leaks that could pose environmental or public health risks, ensuring ongoing compliance with state environmental regulations. Revenues for this fund came from waste disposal tip fees generated when the County operated the Landfill and county transfer stations.
3. Sonoma Leak Fund (current balance $2,453,823):
• Original Purpose: Voluntarily established by the County to proactively address potential future environmental issues at the Sonoma landfill. The fund is designated for the management of leachate and gas control systems, groundwater monitoring, and other environmental safeguards to prevent contamination and ensure the landfill remains in compliance with environmental standards. Revenues for this fund came from waste disposal tip fees generated when the County operated the Landfill and county transfer stations.
4. Healdsburg Leak Fund (current balance $2,902,198):
• Original Purpose: Voluntarily established by the County to proactively address potential future environmental issues at the Healdsburg landfill. Similar to the Sonoma Leak Fund, this fund is allocated for environmental monitoring and mitigation measures specific to the Healdsburg landfill site, including managing leachate, gas emissions, and groundwater quality to protect surrounding areas. Revenues for this fund came from waste disposal tip fees generated when the County operated the Landfill and county transfer stations.
The above-described funds are “backup” funds and not the primary funds for addressing the CDS liability or urban landfill post-closure maintenance costs and associated liabilities.
Link to the Landfill Settlement Agreement:
These backup funds were redefined by the Landfill Settlement Agreement (LSA)(on file), dated April 1, 2015, between the County of Sonoma and all cities in the County except for the City of Petaluma (the “Committed Cities”). The LSA was designed to manage the Committed Cities and County liabilities for the community’s landfills over a 25-year period. As part of the MOA with Republic Services, Republic assumed responsibility for the environmental liabilities at the Central Disposal Site (CDS), which allowed the County, through the LSA with the Committed Cities, to reallocate the remaining balances of the closure/post-closure funds into what became the Contingent Liability Reserve fund, the CDS Leak Fund, and the Sonoma and Healdsburg Leak Funds.
Before the Landfill Settlement Agreement, these funds had no restrictions and could be used at the County's discretion. However, through the Landfill Settlement Agreement, the County and the Committed Cities stipulated to restrictions on the uses of these funds to ensure they served as a fiscal reserve for environmental protection.
These funds, now subject to the Landfill Settlement Agreement, serve as backup funds in a financial framework that supports the long-term management of landfill liabilities. The strategic deployment of these funds as a line of credit for the HHW facility project reflects a balanced approach to maintaining environmental stewardship while addressing critical infrastructure needs.
Urban Landfill Fund:
The Urban Landfill Fund was also established by the Landfill Settlement Agreement. This fund, along with other specific reserve funds, was created to ensure the County had the necessary financial resources to address any unforeseen environmental liabilities associated with its urban landfills. The fund is used for various purposes, including routine and non-routine maintenance, regulatory compliance, environmental monitoring, and mitigation activities necessary to manage and mitigate potential environmental impacts from the closed urban landfills.
As of April 2024, the Urban Landfill Fund holds a balance of approximately $21.9 million. This year, the fund will be used in part for a major tank project at two urban landfill sites, which is scheduled for completion in the fall of 2024. This project is crucial for reducing long-term environmental risks associated with these sites. The capital expenditures for this project are expected to reduce the fund balance by approximately $7.5 million, leaving an estimated $14.4 million by the beginning of 2025.
Despite this reduction, the fund is projected to remain robust over the long term. By the end of the landfill settlement agreement in 2040, the Urban Landfill Fund is anticipated to have an ending balance of approximately $19.8 million. This projection accounts for the structured phase-out of base concession payments starting in 2035, which coincides with an expected decrease in intensive remedial activities. The continued accumulation of annual income and prudent fiscal management ensure that the fund will maintain its capacity to manage landfill-related liabilities effectively.
Justification for Using Funds
The strategic reallocation of these reserve funds to support the HHW facility project is fiscally responsible and aligns with the County’s long-term environmental goals. Extensive analyses were performed, examining the 30-year post-closure costs against the Urban Landfill Fund, ensuring that a buffer remains within these funds after 30 years, based on 2024 dollars. Given our projections, it is highly unlikely that we will need these backup funds during the analyzed period, reinforcing the feasibility of using them for the proposed loan.
As of April 2024, the combined balance of the Contingent Liability Reserve, CDS Leak Fund, Sonoma Leak Fund, and Healdsburg Leak Fund is approximately $19,989,561. The proposed loan amount of up to $12 million will come from the Contingent Liability Reserve fund. This loan represents about 60% of the total backup fund balances, while ensuring that the CDS Leak Fund, Sonoma Leak Fund, and Healdsburg Leak Fund remain fully funded and available for their original purposes. Including the projected year-end balance of the active Urban Landfill Fund ($14.4 million), the loan represents approximately 35% of all funds. These backup funds retain sufficient balances to meet their original purposes and obligations, ensuring compliance with regulatory requirements and managing landfill-related liabilities, even in the unlikely event the Urban Landfill Fund were to be insufficient.
While final terms of a loan will need to be negotiated and will return to the Board, it is anticipated that ZWS will repay the loan over 10 to 15 years, utilizing revenue generated by an increase to rates which were approved by the ZWS board during a special meeting on March 30th, 2021, through a supermajority vote. This rate increase was based on the R3 recommendation to fund the future HHW facility. The new rate became effective on April 1st, 2021. Leveraging these funds for the HHW facility enhances the County's waste management infrastructure aligning with the original environmental protection and stewardship goals. The robust state of these funds, coupled with ongoing financial monitoring and strategic investments, ensures that Sonoma County can support immediate community and environmental initiatives without compromising its ability to fulfill future landfill-related responsibilities.
SPI’s Integrated Waste Division generates approximately $3.7 million annually in concession fees, $2.6 million of which goes into the urban landfill fund. This steady income stream, combined with prudent fiscal management, allows effective allocation of resources for investments that support our local solid waste system like the HHW facility. Projected end-of-year liability fund balances for 2024-25 stand at about $34.2 million, demonstrating our capacity to support the HHW project with a $12 million line of credit while leaving ample reserves for unforeseen needs or emergencies.
Benefits to Rate Payers:
• Reduced Financial Strain: Competitive interest rates on the loan, facilitated by SPI’s involvement, minimize the financial burden on ZWS and the County’s ratepayers by avoiding higher borrowing costs in the private market.
• Project Efficiency: SPI’s project management expertise ensures the project is completed efficiently, avoiding unnecessary delays and cost overruns.
• Long-term Cost Benefits: The investment in the HHW facility is expected to bring substantial savings and enhance waste management capabilities in the county.
• Community Advancement: The facility will bolster local waste management services, promoting environmental health and community safety.
• Risk Mitigation: The use of the funds for the HHW facility does not put the County or cities at risk, as sufficient fund balance will remain for near-term needs and the amount borrowed will be repaid from approved ZWS revenue streams. Additionally, the thorough analyses ensure that the funds retain sufficient balances to meet their original purposes and obligations, maintaining regulatory requirements.
In developing the line of credit agreement, staff will look to offer competitive rates that balance ZWS’s financial needs with SPI’s fiscal responsibilities. SPI’s involvement in the ZWS HHW facility project is a strategic collaboration aimed at enhancing the County's waste management infrastructure in our commitment to supporting partners like ZWS in their efforts to improve community services surrounding the solid waste system.
Required Amendment to the Landfill Settlement Agreement
Crucial to Sonoma County's environmental and operational strategies, the Landfill Settlement Agreement between the County and Committed Cities was initially crafted to resolve disputes concerning landfill operations and related environmental liabilities. It details the commitments of the parties regarding the management of the active and closed urban landfills.
An amendment to this agreement is necessary to enable the above-described funds to be used for assisting ZWS in constructing a new HHW facility. This amendment aligns with Countywide environmental goals and directly benefits the committed cities by facilitating cost-effective waste management solutions that are crucial for the community. The construction of an additional HHW facility is essential due to the operational challenges and inefficiencies of relying solely on one existing facility located in Petaluma in the southern part of the county. The new facility, if approved by ZWS, will serve northern Sonoma County, improving HHW management capacity and service delivery across the entire region.
With your Board’s approval, staff will work with the Committed Cities to negotiate an amendment to the Landfill Settlement Agreement. The proposed amendment, which will be presented for subsequent Board consideration and approval, would be designed to allow the County to encumber a portion of the Contingent Liability Reserve funds to loan to ZWS for the construction of the potential HHW facility.
Strategic Plan:
This item directly supports the County’s Five-year Strategic Plan and is aligned with the following pillar, goal, and objective.
Pillar: Resilient Infrastructure
Goal: Make all County facilities carbon free, zero waste and resilient
Objective: Objective 1: Align the Board of Supervisor’s strategic priorities, policy, and operational goals with funding and resources.
Racial Equity:
Was this item identified as an opportunity to apply the Racial Equity Toolkit?
No
Prior Board Actions:
None.
Fiscal Summary
Narrative Explanation of Fiscal Impacts:
Although there are no significant fiscal impacts associated with the approval of this item, staffing and County Counsel expenses associated for general administration of the Master Operations Agreement and Landfill Settlement Agreement are included in the Fiscal Year 2024-25 Integrated Waste Administration (41121-34050100) Recommended Budget.
Narrative Explanation of Staffing Impacts (If Required):
None.
Attachments:
1-ZWS & SPI - Agreement for Project Management Services (pro forma)
Related Items “On File” with the Clerk of the Board:
Landfill Settlement Agreement.