July 22, 2004 minutes

JULY 22, 2004 Meeting Minutes

MINUTES

DRYCLEANER ENVIRONMENTAL RESPONSE TRUST FUND
COUNCIL of ILLINOIS

WEAVER RIDGE GOLF CLUB
PEORIA, ILLINOIS

JULY 22, 2004

John Polak, Chairperson, called the Drycleaner Environmental Response Trust Fund Council of Illinois meeting to order at 12:12 p.m. A quorum was present. Roll call was taken with the following members present:

John Bredenkamp
Augustine Chung (via telephonic conference)
David Gibson
Young B. Kim
Jerry Lewicki
John Polak

Also present were:
H. Patrick Eriksen, Program Administrator's Office
John J. McCarthy, Program Counsel
C. Michael Perkins, Program Administrator's Office
Juho So, Program Administrator's Office

PRELIMINARY BUSINESS

The minutes from the June 16, 2004 Council meeting were reviewed. On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the minutes were approved by a vote of 6-0.

STRATEGIC PLANNING SESSION

Mr. Polak noted the meeting would last the balance of the day, with the majority of the focus of the meeting on the Council's annual strategic planning session.

I. Review of Program Status and Evaluation of Past Goals

A. Review of Policies and Procedures

Mr. Eriksen reviewed with the Council each of the policy changes that the Council adopted since the July 24, 2003 Strategic Planning meeting as to the remedial and insurance claims, licensing and underwriting policies and procedures.

B. Payment of Remedial Benefits to an Eligible Claimant When the Most Cost Effective Remediation Technology is not Selected:

Mr. Eriksen reviewed background information with the Council, noting the intent of the Program is to provide monies to cost effectively remediate soil and groundwater contamination caused by the release of drycleaning solvents into the environment. The Council's administrative rules and approved policies and procedures were developed on the basis of achieving the remediation of the contaminated soil and groundwater in the most cost effective manner that would result in the issuance of a No Further Remediation (NFR) letter by the Illinois Environmental Protection Agency.

Previously the Council had adopted the policy that they will not pay for the cleanup of soil and groundwater to a level below the TACO standards based on the current use of the property, i.e., the Fund will not pay to clean up a drycleaning facility located in an area zoned commercial to TACO residential standards.

Mr. Eriksen noted that the Administrator has recently been presented with a situation in which the claimant and the real estate owner wished to expedite remediation at the facility in order to accommodate the demolition and rebuilding of a strip mall where the current drycleaning facility resides. The most cost effective method to remediate the facility will cost approximately $250,000 and will result in the removal and thermal desorption of the contaminated soil that exceeds the Csat limits under TACO regulations. This procedure is anticipated to take one (1) month. The owner of the real estate wishes to excavate and transport the contaminated soil to a hazardous waste landfill. The potential cost of this option is between $800,000 and $1,000,000.

The issue for the Council's review and consideration is will the Fund reimburse the claimant for remediation costs incurred if the claimant chooses to use a more costly remedial technology. The Administrator offers the following options for the Council's review:
1. Only reimburse the eligible claimant for remedial costs incurred using the most cost effective technology. In the example given above, this would mean that the Fund would only reimburse the claimant if thermal desorption was the selected method of remediation; or
2. Pay for eligible remediation costs up to the maximum amount that would have been approved using the most cost effective remediation, i.e. if the claimant chooses to over-excavate and transport the contaminated soil to a landfill at a potential cost of $800,000 to $1,000,000, the Fund would pay $250,000, which represents the anticipated cost of thermal desorption; or
3.  Pay up to $250,000 (which is the anticipated cost of the thermal desorption) provided that the claimant and/or other responsible party agree to pay for the removal and treatment of the same volume of contaminated soil or groundwater as would be treated via the most cost effective remediation method so that the facility could possibly obtain an NFR letter upon completion of the remedial activities.

Mr. Eriksen stated the Administrator recommends that the Council adopt option #3 as being cost effective and also protective of the environment. He indicated removal of only a portion of the saturated soil will not result in the site being able to obtain an NFR letter and will not make a significant impact or reduce the environmental risk to human health and public safety. He further noted that since this issue arose, circumstances changed where a decision is not necessary today but the Administrator would like some guidelines from the Council on this issue as it will certainly present itself again in the future.

The Council conducted a lengthy discussion as to under what circumstances should the Council pay funds, if any, for sites that are not using the most cost effective remedial technology. Mr. Bredenkamp made the motion that if the cleanup costs will exceed the remedial program cap of $300,000, the Fund should pay up to the amount eligible using the most cost effective remedial technology, subject to the following conditions:
1. That a settlement agreement is drafted and signed by the claimant and the Fund prior to budget approval; and
2. The settlement agreement is reviewed by the Fund's legal counsel; and
3. A No Further Remediation letter is in place before any reimbursement is made by the Fund.

Mr. Kim seconded the motion and it passed by a vote of 6-0.

The Council discussed "Should the same policy apply if the preferred remedial process was less than the remedial benefit cap of $300,000 but was greater than the most cost effective technology, what portion should the Fund reimburse?"

After discussion by the Council, it was their consensus to table this issue and bring it back for discussions at such point in time that the Administrator is faced with this issue.

C. Review of Fiscal 2004 Goals and Statistics:

Mr. Polak noted that the Council had made significant progress in dealing with the Fund's solvency by increasing the solvent taxes and license fees, effective January 1, 2004. He indicated that further increases should not be necessary any time soon.

Mr. Eriksen reviewed with the Council the status of their goals for fiscal 2004. He noted that the goals involve Fund solvency, update of administrative rules, pollution prevention and communication. As Mr. Polak previously mentioned, the Council, during the past year, did increase the license fees and solvent taxes, subject to four (4) public hearings that were held in September 2003. It was indicated that later in the meeting Mr. Eriksen would review the updated financial projections based on historical claim and financial data with the Council.

Regarding administrative rules, the Council adopted rule amendments in December 2003 that were filed with the Secretary of State in January 2004 and were adopted effective June 21, 2004. A substantial number of the rule amendments related to necessary changes that occurred as a result of the passage of SB1000 in 2003.

He noted the Council will need to submit a request to the 2005 legislature to amend the Trust Fund Act to codify in legislation the rule allowing drycleaners to use solvent purchases to determine their annual license fee. He noted that at this time, he was not aware of any other potential legislation needed for the 2005 legislative session. Mr. Polak asked if now would be a good time to look at legislation that would define the refund of any excess monies that may exist at the Fund's sunset date of January 1, 2020. He noted that based on current projections, that may not be an issue but it may be beneficial to have the legislature define the method to refund any excess monies so that it could be communicated to the drycleaning industry. The Council discussed this issue and concern was expressed that it may be premature to look at this issue at this point in time.

After discussion, it was the consensus of the Council that the Administrator review this issue with several legislators and get their input if this would be an appropriate issue to have them address during the 2005 legislative session.

Regarding pollution prevention, Mr. Eriksen reviewed with the Council the site inspections conducted during the past fiscal year. He reported representatives of the five (5) Council approved compliance programs have been asked to be in attendance or submit a brief summary of their progress in implementing the Council's revised compliance program requirements.

Mr. Eriksen reviewed communication with the Council indicating that several mailings in English and Korean had been sent to licensed drycleaners regarding the proposed changes to the license fees and solvent taxes. In addition, several mailings had been sent that discussed the buyback of continuous insurance coverage in order to be eligible for remedial benefits. Mr. Polak noted that a major accomplishment was that the major program documents were translated into Korean and are available to the Korean community.

Mr. Eriksen reviewed program statistics with the Council. He distributed to the Council the June 30, 2004 monthly activity report, noting the number of license and insurance applications in effect and the status of the remedial claims and their respective reserves. He reported that there had been an increase in reserves since the last Council meeting in as much as the Administrator's staff had done a comprehensive review of each eligible claim and adjusted the reserves to more accurately reflect the projected cleanup costs for each individual claim based on the known data. He noted remedial claim reserves totaled just over $22 million, with approved budgets outstanding of almost $3 million.

Mr. Eriksen reviewed with the Council various graphs, including licensed versus insured drycleaners, total licenses issued since inception of the Fund, claim dollars paid to date, cash balance compared to approved budgets for the 312 facilities with contamination, and age distribution of when the facility began drycleaning operations. He noted that this graph is comparable to the previous year and it further reinforces that for drycleaning facilities in operation prior to 1999, management practices at the facilities are more indicative of potential contamination than the number of years that the facility has been an active drycleaning plant.

Mr. Eriksen reviewed with the Council the percentage of licensed drycleaners by categories for chlorine-based solvents, petroleum-based solvents equipped with a reclaimer and petroleum-based solvents without a reclaimer. He reported that 89.9% of the licensed facilities use strictly a chlorine-based solvent, 7.8% use a petroleum-based solvent and 2.3% use both a chlorine-based and petroleum-based drycleaning solvent. This is comparable to the previous year in which 91.1% of the licensed facilities use strictly chlorine-based solvents and 7.4% of the facilities use a petroleum-based solvent. However, it does indicate that there is a small but growing trend of drycleaners moving away from chlorine-based solvents to petroleum-based solvents.

D. Review of Historic Budget Approval Statistics:

At the March 10, 2004 Council meeting, Mr. Young B. Kim requested that the Administrator provide a statistical comparison of the initial budget approvals that required three (3) bids relative to the one (1) bid method currently being used for site investigation activities. Mr. Perkins selected a statistically valid sample set of 56 drycleaner facilities to evaluate the average initial bid budget requests and the budget approvals over time. He noted the facility data was broken out into the following two (2) categories:
Category #1 - The original three (3) bid approval method
Category #2 - The one (1) bid approval method broken down into three (3) subcategories:
   a - early one (1) bid budget approvals
   b - modified one (1) bid budget approvals
   c - current one (1) bid budget approvals

Mr. Perkins reviewed the statistics and tables in detail with the Council, noting that the net result was a reduction of the average approved initial budget from Category #1 of $4,410. He noted that an average reduction of $3,000 was accomplished by only requiring a brief site investigation report instead of the focused site investigation and remediation objective report. The remaining reduction of $1,410 has resulted from a strict adherence to maintaining competitive pricing on unit items and the reduced scope of work included in the current budget approval process. He then summarized the Administrator's view on the advantages and disadvantages of the current one (1) bid approval process.

E. Summary of State Programs That Have Drycleaner Clean Up Programs:

Mr. Eriksen reviewed with the Council a comparison of the Illinois program to other state programs. He noted that Illinois is the same as four (4) other states in that their $10 per gallon tax on perc and $2 per gallon tax on petroleum is comparable. Texas remains the highest at $15 per gallon tax on perc and Florida the lowest at $5 per gallon on perc. Regarding the number of entities that pay fees, at this time only Florida, at 1,600 active drycleaners, has more entities paying fees than Illinois. Texas is estimating that they will have somewhere in the range of 2,220 to almost 4,700 active drycleaners but they are just in the initial phases of trying to determine what that number will be. He reported that on average, the total fees paid per drycleaner in Illinois are $4,100; when compared to other states, Kansas is the highest at $6,000. He noted North Carolina did not report a number but they had previously estimated that their total would be $18,650 based upon their fund receiving 4% of the state sales tax on all drycleaning sales. Regarding the number of site assessments initiated, Illinois leads the number of states having initiated 288 site assessments. Florida is second with 260, with Wisconsin being a distant third with 72 initiated site investigations.

Mr. Polak recessed the meeting at 2:50 p.m. and reconvened it at 3:00 p.m. Mr. Polak stated that he was going to make a change on the agenda order and move to an update on the compliance programs. Mr. Eriksen noted that he had requested that the five (5) compliance programs either be in attendance to give the Council an update on the progress they are making at implementing the Council's revised compliance provisions or else provide a written summary. Mr. Henry Parker of S&ECC had provided a written summary which had been distributed to the Council.

Mr. Jim Rusciolelli, representing the STAR Program, addressed the Council. He stated that the STAR organization has made a lot of headway in moving forward with their compliance program. He thanked the Council for clearer guidelines, noting that they would be offering three (3) classes in September that would qualify for continuing education credits. He noted that the STAR Program plans to renew their compliance certificates on an annual basis for the period of January 1st through December 31st of each year, which will make it easier for them to manage. He did not anticipate that reporting should be a problem on a quarter by quarter basis and he felt that all of their members should have obtained four (4) CEUs by December 31, 2004. In addition, Henry and Jan Parker continue to do the physical inspections of the drycleaning facilities on behalf of the STAR Program.

Mr. Richard Kim of ESM addressed the Council noting that their compliance program does not have a large number of members but he continues to try to visit the drycleaning facilities of each of their members twice per year. He introduced Mr. James Han, who he has hired to assist him in conducting the drycleaning inspections. He noted that the biggest item of non-compliance that they have seen is the treatment of the drycleaning machine wastewater. He stated drycleaners are not always properly disposing of it or if they filter it, not changing the filter on a frequent enough basis. He felt the Council provided site inspection checklist would be very beneficial in helping the drycleaner owner/operator and/or facility manager better understand and comply with the Fund's insurance underwriting requirements. Regarding employee education, questions have been raised on how often employee training should be conducted and wondered if the Council had any definitive guidelines. Mr. Eriksen replied that the Council's recommendation is that all new employees be trained on the items listed under section 1 of the compliance program within two (2) weeks of hire. Ongoing frequencies are a decision to be made by the drycleaner owner/operator and/or facility manager.

Mr. Harry Cho of Enviroclean addressed the Council stating that they have not offered any continuing education courses yet this year but plan to in August and September and would be working in conjunction with KADA in setting up CEU courses. He noted that it is not possible for them to do all of their site inspections at once and they plan to visit all of the facilities within the next two (2) years. They are looking at a potential annual renewal date which is similar to the STAR Program. He did indicate that many drycleaners have concerns with the June 30, 2005 and 2006 deadlines for eligibility for remedial benefits. He noted that any communication with the drycleaners must be straightforward and clearly address those deadline issues.

The Council noted that Mr. John Lee from the Asian American Small Business Association (AASBA) was not in attendance nor was a written update received from him.

The Council thanked the compliance program attendees for their updates and look forward to working with them to make the compliance programs as practical and effective as possible.

F. Review of Fund Financial Projections for the Period of July 1, 2004 Through January 1, 2020

Mr. Eriksen reviewed with the Council the Fund financial projections for the period of July 1, 2004 through the Fund's sunset date of January 1, 2020. He noted several changes have been made in the projection assumptions as compared to the projections reviewed at the May 6, 2004 Council meeting. They are as follows:
1. The projected percentage of claims needing active remediation has been reduced from 55% to 45%. This reduction is based on the review of the new claims that have been filed within the past fiscal year.
2. The percentage of claims where a No Further Remediation letter is received via institutional controls has increased from 25-35%.
3. The average site investigation cost has increased $9,650.

Mr. Eriksen noted that these assumptions take into account the most accurate historical data that the Fund has to date. He noted that only a small percentage of the contaminated sites have started moving toward cleanup and so the estimate of future cleanup costs will change. Based on an estimated 950 active remedial claims being filed over the life of the program, assuming no increase in solvent taxes or license fees, the Fund could anticipate a potential deficit of $30,898,259 at the January 1, 2020 sunset date. Mr. Eriksen reiterated that within two (2) years, the Council will know exactly how many remedial claims are eligible for benefits and that will allow the data to be further fine tuned.

Based on his review of the anticipated expenditures, there appears to be no need at this time to modify the solvent taxes or license fees.

Mr. Eriksen has received some first quarter preliminary 2004 solvent data from the Illinois Department of Revenue (IDOR) that showed a substantial decline in solvent tax collected. The Department of Revenue indicated that several solvent suppliers had not filed their quarterly reports. The Administrator stated he would keep the Council updated as to the progress IDOR is making in collecting the necessary solvent tax data.

G. Segregation of Insurance Program Funds

Mr. Eriksen reviewed with the Council the pro forma financial statements and related assumptions for segregating the insurance program monies from the total Fund monies. The numbers presented are an update from what was presented to the Council one year ago and if segregated, the insurance fund balance as of June 30, 2004 would be approximately $1,705,000. Mr. Eriksen noted that the budget for fiscal year 2005 would reflect potential excess revenues over expenditures of $851,000.

II. Program Goals - Fiscal 2004

Mr. Eriksen reviewed with the Council that the Program goals for fiscal year 2004 are a continuation of those that have been set previously by the Council and focus on Fund solvency, pollution prevention and communication.

A. Fund Solvency

Mr. Eriksen distributed to the Council, two (2) sets of financial projections for discussion purposes. One assumed that the revenue remained constant for the remaining life of the program, noting that the Fund could clean up 610 active sites and reach a break even point. The second assumed that there would be 950 active claims remediated. To reach a break even point, he adjusted the revenue stream beginning in fiscal year 2007. His projections reflect that the solvent tax would need to increase to $15 per gallon on perc, $3 per gallon petroleum, with a flat rate license fee of $1,500. Mr. Eriksen once again reiterated that on June 30, 2006, the Council will know the number of eligible remedial claims that they will have to fund and can more accurately adjust the revenue stream at that time to fund the cleanups. He noted that projected average costs for each additional remedial claim is $99,000.

B. Pollution Prevention

Mr. Eriksen noted that the Administrator's office continues to inspect at least 10% of the insured sites annually. He stated 376 inspections have been completed and included in their packet was a memo summarizing the site inspection findings for the last four (4) years. The report noted that adequate secondary containment remains one of the areas that need to be improved upon by the drycleaners. Most of the drycleaners had secondary containment for their hazardous waste containers but it was not large enough to contain 100% of the largest container or 10% of the total volume of all containers in the secondary containment area. Another issue of concern was that a number of drycleaners did not have secondary containment around their vaporizers/misters and the third most frequent problem noted was that compliance program certificates had expired.

C. Communication

Mr. Eriksen reviewed that for the past several years the Council has emphasized the need to continue and expand communication with the drycleaning community. As noted under the "Review Of Status Of Current Goals And Objectives" progress continues to be made in this area. He noted the quarterly newsletter continues to inform the drycleaning community about the Fund's status and current activities. It is being published in both English and Korean. In addition, extra effort needs to be expended by the Fund during the upcoming fiscal year to inform the drycleaning industry of two (2) key dates that are essential to qualify for remedial program benefits. They are:
1. Written application with budget submittal to the Fund by June 30, 2005 that the drycleaner owner/operator intends to do intrusive testing at his facility; and
2. Intrusive testing of the facility's soil and groundwater, submittal of a completed claim form and lab results by June 30, 2006.

Mr. Eriksen stated in order to insure that all drycleaners are informed of these two (2) deadlines, the Administrator proposes the following actions:
1. Place an ad in the two (2) major Korean newspapers in early September 2004, informing them of both deadlines and providing them a telephone number to call and/or address to write for questions or clarification.
2. Inclusion of the deadlines in fiscal year 2005 quarterly newsletters.
3. A targeted mailing to all insured drycleaners who would appear to be eligible for remedial program benefits but have not submitted a budget request to the Fund by October 31, 2004.
4. A mailing of a final reminder to all potentially eligible drycleaners of the remedial program deadlines on April 1, 2005.
5. Participate in two (2) half-hour radio talk shows on a Korean radio station. Schedule the talk shows for September and/or October.

In addition, he stated that we would continue to work with the drycleaning associations to communicate the information. Mr. Eriksen noted that the cost to run ads could range from $2,000 to $3,500, depending upon the size and the frequency.

The Council conducted a general discussion of the most cost effective way to communicate those deadlines to the drycleaning community. Mr. Harry Cho of Enviroclean stated that their experience has been to include articles in the KADA newsletter and/or magazine updating the drycleaner members about the deadlines. He suggested that the Council consider placing an ad in KADA's magazine, which is read by the majority of the Korean drycleaners. Several Council members expressed concern that placing ads in general circulation newspapers such as the two (2) Korean newspapers would result in the information being missed by many of the Korean drycleaners. After additional discussion, on a motion by Mr. Polak and a second by Mr. Bredenkamp, the Council approved by a vote of 6-0, the Administrator to spend up to $2,500 for advertising with the drycleaner associations in the state and/or newspapers to communicate the upcoming deadline.

D. Other Issues

Mr. Eriksen briefly updated the Council that Illinois EPA has a toxicologist that is reviewing green solvents and hopefully will have some recommendations or information for Council review yet this fall on determining if any solvents should be classified as green solvents. The Attorney General's office is in the process of conducting a mailing to approximately 150 unlicensed drycleaners, informing them that if they do not come in to compliance within the next 60 days, that the Attorney General's office will take appropriate legal action.

Mr. Polak noted that it has been approximately two (2) years since the Council has conducted an actuarial study to establish the annual insurance premium. He noted that there has been only one (1) new insurance claim in the past 12 months and doubted if any additional information from that claim would be beneficial to the actuary. He stated that he would talk with Brian Brown of Milliman to see if there is any new information or new trend on insurance premiums for environmental pollution liability insurance coverage but it would be his recommendation that the Council defer doing an actuary study for at least another year. He noted that the cost would probably be at least $15,000 to update the initial study done two (2) years ago. The Council concurred with Mr. Polak's recommendation.

APPROVAL OF PROGRAM BILLINGS

Mr. Eriksen noted that there were two (2) bills for review and approval by the Council.

1. Williams & Company Consulting, Inc $ 90,704.00
Standard flat fee billing for June 2004, licensing, underwriting, claims processing and site inspections.

2. John J. McCarthy $ 2,032.50
Professional legal services to the Council for the period of June 9, 2004 through June 30, 2004.

On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council approved the bills as presented by a vote of 6-0.

CLAIM BUDGETS IN EXCESS OF $75,000

A. Tuggles Cleaners

Mr. Perkins reviewed with the Council the status of Tuggles Orchard Cleaners located in Belvedere, IL, including the site remediation progress. He noted that the environmental consultant has developed and submitted a TACO Tier 3 work plan, which was approved by the Illinois EPA for implementation. The consultant is cautiously optimistic that the site can receive a No Further Remediation letter on completion of the TACO Tier 3 closure. In order to complete the closure, additional monies are needed to do the following tasks: extensive well records research, including door-to-door notification and visual inspection; additional bedrock investigation; additional groundwater investigation; data analysis; modeling and reporting, along with meetings with the Illinois EPA. Including a contingency cost of $12,500, the estimated budget request is $60,530. After review and discussion by the Council, on a motion by Mr. Lewicki and a second by Mr. Bredenkamp, the Council approved increasing the budget on Tuggles Cleaners by $60,530.

B. Zephyr Cleaners

Mr. Perkins reviewed with the Council the status of Zephyr Cleaners in Oak Park, IL. He stated that there are several issues that the Administrator is requesting Council action on.

The first is regarding the three (3) bid requirement. The second is approval of funding of the remediation based on a modified remedial action plan (RAP) without Illinois EPA's approval of the modified RAP.

Issue 1: Mr. Perkins noted bid requests were solicited from four (4) environmental companies for the purpose of preparing a cost estimate. One environmental company submitted a bid with cost estimates and the other three (3) companies showed no interest in participating per the attached letters. This provides the Council with the following two (2) options:
1. The Council require additional bids; or
2. The Council allows the remedial action to proceed without obtaining additional bids as long as the remedial costs seem reasonable.

Issue 2: Proceeding to remedial action without IEPA's approval. Drycleaning solvent contamination believed to be originating from the facility was found at the adjacent property during the previous site investigation activities. The Administrator was recently informed that due to this off site contamination issue, the adjacent property sale is on hold and the adjacent property owner is about to take legal action against the claimant. The RAP previously approved by the IEPA was entirely based on chemical oxidation technology using permanganate. However, it seems that it is necessary to expedite the process due to the potential litigation against the claimant. Mr. Perkins reviewed that although chemical oxidation is a technology which can often accomplish a remediation objective faster than other technologies such as bioremediation, soil vapor extraction, etc., it still takes at least a year for scheduling implementation maintenance. Due to the potential litigation that exists at this facility, excavation seems to be the best remedial option at this time.

In addition, if the Council wishes to allow the remedial action to proceed without three (3) bids and IEPA pre-approval due to the circumstances outlined, the Administrator is asking for additional budget authority of $151,310.

On a motion by Mr. Lewicki and a second by Mr. Gibson, the Council voted 6-0 to approve the additional budget of $151,310, waive the three (3) bid requirement and waive the Council's requirement that all RAPs be preapproved by Illinois EPA.

APPEAL OF CANCELLATION OF INSURANCE COVERAGE

Site #0002283-Plaza Cleaners-Troy, IL and Site #0001746 - Koch Cleaners & Tailors-Highland, IL

Mr. Eriksen referenced for the Council, his summary memo of events leading up to the loss of insurance coverage for Mr. Guller at the two (2) referenced drycleaning facilities. He noted that Mr. Guller's insurance cancelled for failure to license his drycleaning facilities for calendar year 2004. The Administrator's staff began initial notification of Mr. Guller regarding the 60-day Cancellation Notice on March 9, 2004. As of April 30, 2004, Mr. Guller had still failed to pay the license fee and submit any of the license renewal information and therefore his insurance coverage for the two (2) referenced facilities was cancelled.

Mr. Eriksen noted that Mr. Guller paid the license fees for the facilities on June 7, 2004 and the license late payment fees on June 21, 2004. The 2004 licenses were issued for these facilities on June 21, 2004. Mr. Guller subsequently reapplied for insurance coverage as of June 25, 2004. He provided the needed information along with the insurance premium and coverage was issued for both of these facilities, effective June 25, 2005 with a new retroactive date of June 25, 2004 per the Council's underwriting policies and procedures. Mr. Guller is appealing the assignment of a new retroactive date which results in a break in insurance coverage and makes the above referenced facilities no longer eligible for remedial benefits.

Mr. Guller addressed the Council and reviewed with them in detail the financial challenges he has faced over the past several years in maintaining viable businesses at the above referenced facilities. Machine repairs made cash scarce and he had been searching for viable buyers for the plants for the past year. He was motivated to keep the insurance coverage in place but unfortunately had no cash to pay the license fees and maintain the insurance coverage. It was his understanding that it was unusual to have insurance coverage cancelled prior to the anniversary date of the policies which were in June 2004. He stated that restoring the remedial benefits for his properties should not create an adverse selection for the Fund as both plants have NFR letters but it would avail him to sell the facilities.

After lengthy discussion by the Council, Mr. Chung made a motion to deny the appeal. The motion failed for lack of a second. Mr. Bredenkamp made a motion to approve the reinstatement of the retroactive date to the original date in June 2004. John Polak seconded the motion. The motion failed by a vote of 0-6.

OTHER ISSUES AS PRESENTED

The Council tentatively set September 9, 2004 as the next Council meeting. Mr. Steve Kim, president of KADA, personally invited all of the Council members to attend the annual Korean American Drycleaners Association golf outing on August 15, 2004.

There being no further business, the Council meeting adjourned at 5:35 p.m.

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