November 4, 2003 Meeting Minutes

	MINUTES
	DRYCLEANER ENVIRONMENTAL RESPONSE TRUST FUND COUNCIL of ILLINOIS RAMADA INN LINCOLNWOOD, ILLINOIS NOVEMBER 4, 2003
	John Polak, Chairperson, called the Drycleaner Environmental Response Trust Fund Council of Illinois meeting to order at 10:12 a.m. A quorum was present. Roll call was taken with the following members present:
	John Bredenkamp Augustine Chung (via telephonic conference) Andrew Chweh (arrived at 10:27 a.m.) David Gibson Young B. Kim Jerry Lewicki John Polak Also present were: H. Patrick Eriksen, Program Administrator's Office John McCarthy, Program Counsel C. Michael Perkins, Program Administrator's Office Juho So, Program Administrator's Office
	PRELIMINARY BUSINESS
	The minutes from the September 17, 2003, September 30, 2003 and October 3, 2003 telephonic Council meeting were reviewed. On a motion by Mr. Lewicki and a second by Mr. Chung, the minutes were approved as presented by a vote of 6-0.
	OPERATIONAL ISSUES
	A.	Review of Responses to RFP for Third Party Administration Services
		Mr. Polak noted that the Council had previously approved a Request for Proposal for the third party administration services for the Fund as the current contract with Williams & Company Consulting, Inc. expires on December 6, 2003. Mr. Polak noted that Mr. John McCarthy, legal counsel, had been in charge of handling the RFP responses and had sent to each of the Council members, a copy of the proposal received in response to the RFP. Mr. Bredenkamp asked if the pricing sheet was enclosed with the information that was sent. Mr. McCarthy replied no, that he held the pricing sheets and would distribute them to the Council today. The RFP defines that the Council is to review and evaluate the proposals first based on technical and professional merit. The responses are to be ranked according to technical merit and then the Council is to review the pricing. Mr. McCarthy stated that only one proposal was received and that was from Williams & Company Consulting, Inc. Mr. McCarthy asked if there were any questions regarding the proposal submitted by Williams & Company Consulting, Inc. There were no questions. Mr. McCarthy distributed the pricing sheet to the Council members, noting that he had presented a summary comparing the proposed fees submitted by Williams & Company to the fees currently being charged. In addition, he noted Williams & Company had provided a summary explaining their pricing adjustments, noting that several categories had decreased, as the time and cost associated with these categories was not as much as originally anticipated, with most of the other categories increasing by a cost of living increase with the exception of licensing, which had approximately a 22% increase, as Williams & Company had initially underestimated the amount of time necessary to perform the licensing function. Mr. Polak asked the Council if they had any questions regarding the submitted pricing or the proposal at hand. There were none. On a motion by Mr. Gibson and a second by Mr. Bredenkamp, the Council approved entering in to a five (5) year contract with Williams & Company Consulting, Inc., for the fee structure submitted in response to the RFP. Mr. McCarthy noted that he would have the contracts executed by the Chairman and Williams & Company and notify the state's Procurement Department regarding the Council's decision.
	B.	Actuary Study
		Mr. Polak noted that approximately one (1) year ago the Council had contracted with Milliman USA to conduct an actuarial study to determine the insurance premium for the pollution liability coverage issued by the Fund. He noted that this was an outgrowth of the legislative requirement that the Council establish an actuarially determined insurance premium effective July 1, 2003. Mr. Polak commented that since the actuaries had performed their analysis, there had been no new insurance claim data and he noted that Milliman had indicated that there was not significant history or data available to make any significant distinctions in premium by various class factors, such as type of drycleaning machine, type of solvent used, age of drycleaning facility, etc. It was his recommendation that the Council wait at least one (1) more year before engaging an actuary to update the study. At such time, we should have more insurance claim data or data on costs incurred on the cleanup of sites with existing contamination. Mr. Polak polled the Council members and it was their consensus to defer conducting a new actuarial study for another year. Dr. Chweh arrived at the meeting at 10:27 a.m.
	C.	Review of Revised Claim Kit
		Mr. Eriksen noted for the Council that included in their packet was a revised Claim Kit that incorporates changes resulting from the passage of SB1000 and general changes in the Council's operating policies and procedures. The kit was initially compiled in 1999 and the changes were highlighted in red and annotated to the side. Mr. Eriksen reviewed each of the individual changes with the Council. After discussion by the Council, on a motion by Mr. Bredenkamp and a second by Mr. Chung, the Council approved the revised Claim Kit by a vote of 7-0.
	D.	Policy Issue - Remedial Claim Budget Approval Prior To January 1, 2004 For Drycleaning Facilities That Previously Have Not Had Insurance Coverage Or Had A Lapse In Insurance Coverage
		Mr. Eriksen reviewed with the Council that as a requirement to receive remedial benefits from the Fund, a drycleaner owner/operator must have obtained and maintained continuously since June 30, 2000, $500,000 of pollution liability insurance coverage on their facility. Many drycleaners either opted not to obtain the insurance coverage or had a lapse in their coverage since June 30, 2000. SB1000 provides a second opportunity for those drycleaners who failed to obtain or maintain continuous pollution liability insurance coverage since June 30, 2000 to be eligible for remedial benefits from the Fund. These drycleaner owners/operators have until January 1, 2004 to apply for insurance coverage and to pay the appropriate back insurance premium plus a 20% penalty in order to be eligible for remedial program benefits. Recently the Administrator has been contacted by several potential claimants who, due to property transfer issues, would like to proceed with their site investigation testing prior to January 1, 2004. These facilities either have not had any pollution liability insurance coverage at their facility or had a lapse in such coverage since June 30, 2000. Does the Council wish to provide budget approval for these facilities to begin their site investigation prior to January 1, 2004? The Administrator offered the following options for the Council's review: 1) The Council can require that the Administrator not authorize budget approval for any site investigation at these facilities until after January 1, 2004, which is the effective date of SB1000. Authorization would only be issued once it had been determined that the claimant had met all of the requirements for purchasing the back insurance coverage; or 2) The Council would allow the Administrator to issue a budget approval letter for site investigations at facilities which have made application, paid the back insurance premium, and met the other requirements for issuance for back insurance coverage in accordance with SB1000. He noted in either option the Fund would not be able to make payment for the approved site investigation costs until after January 1, 2004, which is the effective date of SB1000. The Administrator's recommendation is that the Council approve option #2, which would assist the drycleaner owners/operators in facilitating the real estate transfers at their location, subject to them meeting all of the requirements for purchasing back insurance coverage. After discussion by the Council, on a motion by Mr. Lewicki and a second by Dr. Chweh, the Council approved adopting option #2 by a vote of 7-0.
	E.	Policy Issue - Determining the Licensure Fee for Petroleum Drycleaners Who Have Both a Dryer With a Reclaimer and Without a Reclaimer
		Mr. Eriksen reviewed with the Council that SB1000 created a new licensing fee category entitled "Petroleum With Reclaimer Dryer." The usage break points for this new category are 50% of the break points for petroleum machines without a reclaimer dryer. The Administrator is aware of at least one (1) petroleum drycleaner who has both dryers with a reclaimer and dryers without a reclaimer. The issue for Council consideration is how should the Administrator calculate the license fee for petroleum facilities that use both dryers with a reclaimer and dryers without a reclaimer? The Administrator recommends that the total petroleum purchases/usage for the current year be allocated to each of the two (2) petroleum categories by applying the percentage of dryers with a reclaimer and a percentage of dryers without a reclaimer to the total number of dryers at the facility. He reviewed an example with the Council. Mr. Eriksen stated that the Administrator's recommendation was such to try to honor the intent of the statute denoting a 50% difference in estimated usage between dryers with a reclaimer and dryers without a reclaimer and not make the calculation so complicated that the petroleum drycleaners could not easily calculate what their license fee for 2004 and beyond should be. Mr. Kim asked a question regarding the solvent consumption differences between a dryer with a reclaimer and one without a reclaimer. Mr. Eriksen stated that the 50% differential had been set in statute by the legislature and could not be modified at this time. After additional discussion, Mr. Lewicki made a motion to accept the Administrator's recommendation. It was seconded by Mr. Bredenkamp. Dr. Chweh stated that there appeared to be no benefit for a petroleum dryer with a reclaimer for using this calculation. Mr. Eriksen reiterated that he was simply trying to apply a formula that kept with the intent of SB1000, which denoted that there was a usage differential of approximately 50%, depending upon whether the petroleum dryer had a reclaimer or did not have a reclaimer. Mr. Peter Marberry provided general comments on the issue to the Council. There being no further discussion, the Council approved the Administrator's recommendation for determining the licensure fee for petroleum drycleaners who have both a dryer with a reclaimer and without a reclaimer, by a vote of 7-0.
	F.	Amendment to Council Bylaws and Appointment of Vice Chairman
		Mr. Polak addressed the Council noting that recently the Council had a meeting in which he was unable to attend and the Council did not officially have a Vice Chairman appointed to conduct the Council meeting in the Chairman's absence. He stated that it was his understanding that the bylaws provide for the Council Chairman to appoint a Vice Chairman, subject to ratification by the Council. Mr. Polak appointed Mr. Lewicki to serve as Vice Chairman of the Council, as he is the senior member in terms of tenure on the Council, having been one of the original Council members appointed by the Governor and has an exemplary attendance record at the Council meeting and is well informed on the issues before the Council at each meeting. On a motion by Mr. Chung and a second by Mr. Bredenkamp, the Council approved Mr. Polak's appointment of Mr. Lewicki as Vice Chairman, by a vote of 7-0. Mr. Eriksen reviewed with the Council a marked copy of the bylaws, noting that there were several changes that needed to be made reflecting the changes to the Trust Fund Act per SB1000. The first relates to Council membership. The bylaws need to be amended to reflect that four (4) of the Council members shall own or operate drycleaning facilities and the elimination of the requirement that two (2) of these members be members of the Illinois State Fabricare Association. Secondly, there was a correction relating to "cooperative agencies" with the Illinois EPA and the elimination that the agency shall disperse money from the Fund pursuant to the rules adopted by the Council. Mr. Eriksen stated that legislation in 1999 eliminated Illinois EPA having authority to disperse money from the Fund. The last change of substance was regarding Council voting. The last sentence under paragraph "F" stating, "If a Council member will not be present to vote, the member may cast their vote in writing to the Council Chair prior to the meeting" needed to be struck. This issue had been raised recently by a Council member, researched by Mr. McCarthy, and determined that a Council member may not cast their vote in writing to the Council Chair prior to the meeting, but must cast their vote either in person or via telephonic conference. On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council approved the amendments to the bylaws by a vote of 7-0.
	G.	Replacement of Contaminated Solvents
		Mr. Eriksen discussed with the Council that at their September 27, 2002 meeting the Council reviewed the issue of and provided guidance to the Administrator on the determination of annual solvent usage and application of solvent taxes for replacement of contaminated solvents. This related to a specific case in which the drycleaning machine broke down, creating a situation which resulted in contamination of solvent stored in the machine. The Council granted an exemption so the replacement solvent would not be taxed nor would it be included in the purchases/usage calculation for licensing purposes. The Council directed that the Administrator bring to the Council similar cases for their review and decision on a case-by-case basis. Attached to this Council memorandum is a letter from Garber's Modern Cleaners in Champagne, IL. Mr. Hamburg noted that a slow water coil leak in one of his petromisers resulted in contamination of 550 gallons of petroleum solvent. He is requesting that the Council waive applying the replacement 550 gallons against the calculation of his purchases/usage for determining his 2004 license and also allow for the refund of the solvent tax paid on the replacement 550 gallons. The Fund has received documentation of the purchases related to the contamination. The Administrator recommended that the Council agree to Mr. Hamburg's request. Mr. Lewicki noted that this was similar to the issue raised over a year ago and feels that based on the circumstances, in order to be fair and consistent, that the Council should waive the solvent tax on the replacement 550 gallons of solvent and not require that it be included as purchases for calculating the 2004 license fee. On a motion by Mr. Lewicki and a second by Mr. Gibson, the Council adopted the Administrator's recommendation to waive the solvent tax and the calculation of the purchases for calculating the 2004 licensure fee at the above referenced facility. The motion passed by a vote of 7-0.
	APPROVAL OF PROGRAM BILLINGS
	Mr. Eriksen noted that there were two (2) bills for the Council's review.
	1. Williams & Company Consulting, Inc $ 51,183.00 Standard flat fee billing for September 2003, licensing, underwriting and claims processing.
	2. John J. McCarthy $ 3,671.16 Professional legal services to the Council for the period of September 1, 2003 through October 26, 2003.
	On a motion by Mr. Bredenkamp and a second by Mr. Chung, the bills were approved by a vote of 7-0.
	REVIEW OF ACTIVITY REPORT AND FINANCIAL STATEMENTS
	Mr. Eriksen reviewed the September 2003 activity report with the Council noting there are currently 1,424 licenses in effect, with 847 facilities participating in the Fund's insurance program. Open remedial claims total 216, with total dollars paid to date of $3,310,694, and estimated reserves of $13.3 million. In reviewing the September 30, 2003 financial statements, he noted that the unreserved Fund balance stands at $6,083,083. Year to date expenditures exceed revenues by $237,724, with $306,651 in remedial claim payments being made for the first three (3) months of fiscal year 2004.
	CLAIM PAYMENTS IN EXCESS OF $75,000
	Mr. Eriksen noted that there were two (2) claim payments for the Council's review. Mr. Perkins and Dr. So would be reviewing the specifics with the Council. 1) Tuggles Orchard Cleaners, Belvedere, IL Mr. Perkins reviewed with the Council background information on the project noting the additional budget request is to perform additional bedrock site investigation at the facility. The Administrator is requesting the Council approve a budget in the amount of $46,500. The high cost of the site investigation is due to the proximity of bedrock to ground surface and the installation of double cased groundwater monitoring wells. Mr. Perkins noted that the actual proposed cost is $31,100, with $15,395 in contingency costs, as it is possible that additional monitoring wells may be required to evaluate the extent of contamination. The contingency is designed to cover all or some of these potential additional costs. He noted to date budgets totaling $60,882.50 have been approved on the site. Northern Environmental is the consultant on this project. Mr. Kim inquired about limiting the testing at the facility because it appears to be very expensive. Mr. Perkins replied that the cost of the bedrock wells are very expensive to install. Discussion ensued if the total project cost would exceed the remedial cap of $300,000. Mr. Perkins indicated that it is possible, that he would have to revisit the file. Concern was expressed by Council members that if testing exceeded $100,000 and that if total costs exceeded $300,000, would it make sense to do additional testing or to address the contamination at the facility? On a motion by Mr. Polak and a second by Mr. Bredenkamp, the Council, by a vote of 7-0, instructed the Administrator to meet with the consultant and the claimant to determine what the ultimate costs may be and determine the best use of funds at this facility and make a report at the next meeting on the results of those discussions. 2) Saunders Cleaners, Northbrook, IL Dr. So reviewed the background information with the Council and noted that Northern Environmental is the consultant at the facility. Approved budgets total $103,768 and the Administrator is requesting additional site investigation costs of $21,985, which encompasses 11 borings totaling $11,985 and $10,000 of contingency costs for IEPA review costs and additional soil borings if needed. Dr. Chweh stated that he wanted to review pictures of the property and review the exact location of where the wells are being installed before he could support additional funding. It was noted that to get closure on the site, it is going to be necessary to delineate the groundwater contamination. Mr. Chris Lee from Northern Environmental presented maps showing the shrinking contamination plume and discussing the need for the additional wells. Dr. Chweh specifically asked Mr. Lee where the wells were going to be placed. Mr. Lee stated surrounding the area, but he did not have the exact location available at this time. After additional discussion, on a motion by Dr. Chweh and a second by Mr. Kim, the Council voted to defer further discussion of this claim until the next meeting to get more information regarding the placement of the proposed wells.
	OTHER ISSUES AS PRESENTED
	Mr. Eriksen stated that the fieldwork for fiscal year 2003 audit has been completed and hopefully a draft report will be forthcoming in the near future. Mailing of license renewals will be taking place shortly as soon as the new DS-3 forms are finished printing by the Illinois Department of Revenue. He reported that Mr. McCarthy and he have been working on a draft of a new agency agreement with the Illinois Department of Revenue. The Council tentatively set Wednesday, December 17, 2003 as the date of the next Council meeting.
	PUBLIC COMMENT PERIOD
	Angela Kwan, an attorney in the Korean community, read a paper on behalf of Mr. Kang, President of the Korean/American Drycleaning Association (KADA). The letter focused on three (3) issues: 1) The Council increased the perc tax to $10 per gallon but previous motions were rejected twice by the Council. Does the bylaws allow for such an increase when previous motions were defeated? 2) The license fee schedule increases that KADA and the Council agreed upon increased the license fees to a maximum of $8,500. The Council has now capped them at $4,500, which is inherently unfair to medium-sized drycleaners. 3) Williams & Company Consulting, Inc. was the sole bidder on the third party administration (TPA) proposal for the Council. Did the Council give sufficient notice if only one (1) bidder responded to the proposals? What does the Council's bylaws and regulations say regarding the bidding process, and KADA believes the Council should reopen the RFP process since there was only one (1) bidder. Mr. Eriksen responded to questions #1 and #2, reflecting back to the Council action of September 30, and referencing those minutes. Mr. McCarthy addressed issue #3 regarding the TPA contract, stating that the bidding was done in conjunction with the state's Division of Purchasing and Management, that two (2) potential bidders had attended the pre-bidder's conference but only Williams & Company chose to submit a bid and that the Council has acted appropriately in accordance with the state purchasing guidelines. Mr. Bob Soni of Northern Environmental, asked the Council to reconsider approval of the budget for Saunders Cleaners. He noted that potential soil boring placements have been provided to Dr. So and his client is trying to sell the business and is on a tight schedule by the landlord to expedite the process. He noted that he feels that the Council is moving in the wrong direction if they wish to approve all the specifics of each project. Mr. Eriksen stated that one of the responsibilities of the Administrator is to review the proposals in sufficient detail so that they are comfortable in bringing a recommendation forward to the Council. Mr. Eriksen stated it is evident the Administrator needs the Council to clarify what information they would like to see when these projects are brought to them for review and approval. After additional discussion by the Council, on a motion by Mr. Gibson and a second by Mr. Lewicki, the Council, on a roll call vote, voted 4-3 to reconsider and approve the additional site investigation costs up to $21,985 on Saunders Cleaners. Those voting in the affirmative were Mr. Bredenkamp, Mr. Gibson, Mr. Lewicki and Mr. Polak. Those opposed were Mr. Chung, Dr. Chweh and Mr. Kim. Mr. Peter Marberry addressed the Council stating that he had heard today Mr. Sung Do Kang stating that the larger drycleaners were not paying enough money into the Fund. He noted his license fee would be going from $1,000 per year to $4,500. He stated that he thought it was inherently unfair that he pay more money to the benefit of over 1,100 other sites. He commented that 15-20 drycleaners cannot pay for the whole program. He stated that the Council needs to put a stop to the madness and the drycleaners need to focus on how the Council is spending their money. Something is not right and it appears that the Council has the power to do whatever they want and there needs to be a checks and balance brought into the system. There being no further business, on a motion by Mr. Gibson and a second by Mr. Lewicki, on a vote of 7-0, the Council voted to adjourn at 12:37 p.m.
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