December 2002 Meeting Minutes

	MINUTES
	DRYCLEANER ENVIRONMENTAL RESPONSE TRUST FUND COUNCIL of ILLINOIS HOLIDAY INN BOLINGBROOK, ILLINOIS DECEMBER 13, 2002
	John Polak, Chairperson, called the Drycleaner Environmental Response Trust Fund Council of Illinois meeting to order at 9:48 a.m. A quorum was present. Roll call was taken with the following members present:
	John Bredenkamp David R. Gibson 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 November 7, 2002 Council meeting were reviewed. On a motion by Mr. Bredenkamp and a second by Mr. Gibson, the minutes were approved by a vote of 4-0.
	REVIEW OF ACTUARIAL REPORT AND DETERMINATION OF INSURANCE PREMIUMS EFFECTIVE JULY 1, 2003
	Mr. Kevin Donnelly and Mr. Dennis Lang of Milliman, USA were in attendance at the meeting to review with the Council their draft report on establishing an actuarially sound insurance premium for the Fund. Mr. Donnelly reviewed the background information and sources of data that they used in preparing their report. This included information from the Administrator on the number of facilities and type of solvent used, the quantity of solvent used in each machine, remedial claim data filed to date and information from a private insurer that is offering pollution liability coverage for drycleaning facilities. Discussion by the Council focused on information provided by the actuaries and included the following: • Should a credit be given for facilities using a fourth or fifth generation machine? • Should there be a premium difference between a dry-to-dry machine versus a transfer machine? • Should there be a credit given if a facility has received a No Further Remediation (NFR) letter? • Should there be a premium differential between a facility using petroleum versus perc? Mr. Donnelly indicated that there was not sufficient data to show that the solvent usage amount should be a primary factor in the premium determination in each facility. In addition, there was some preliminary, although limited data that showed that the newer generation machines should reduce the risk of pollution in the future and therefore may be subject to a premium credit. Mr. Donnelly reviewed their data tables with the Council, noting that a base pure insurance premium of approximately $1,149 per facility was needed. This base rate did not include any factor for administrative expenses, which would include claim and underwriting costs. Mr. Donnelly indicated that in talking with Mr. Eriksen, that a factor of 20% may be appropriate for the Fund. The Council discussed at length what the appropriate factor should be. Mr. Donnelly noted that many private firms have a 30% or more factor to cover such costs as underwriting and claims adjudication. With a 20% administrative factor, the average premium per facility should be $1,411. The Council discussed whether the premium should be a flat rate for all facilities or whether there should be a base premium with credits, taking into consideration some of the issues discussed by the actuaries such as the age of the machine, whether there is an NFR letter issued on the site, etc. Mr. Bredenkamp stated that the actuary's average premium of $1,411 is a tremendous increase and stated he was not in favor of a premium based on solvent usage. He stated he would be in favor of a flat rate premium, say $1,200, which would be $100 per month. After additional discussion by the Council, on a motion by Mr. Lewicki and a second by Mr. Gibson, the Council, by a vote of 4-0, agreed to adjourn for lunch at 11:35 a.m. Mr. Polak reconvened the meeting at 1:00 p.m. Mr. Polak stated that after reviewing all the information presented by the actuaries and the discussion that had been conducted that morning, he would like to make a motion to propose that the actuarially sound insurance premium, effective for fiscal year 2004 (July 1, 2003 to June 30, 2004) be a flat rate of $1,400 per drycleaning facility. In addition, the insured would have the option of paying the full $1,400 when the policy is due for renewal or could pay it in semi-annual installments, with $700 due at the time of renewal and the balance of the $700 due six (6) months later. This alternative would provide flexibility for individual drycleaners to spread out their payment if they so desired. Mr. Gibson asked if there should be a premium difference for facilities with multiple machines. Mr. Polak stated that he had reviewed that issue with the actuaries and felt that there needed to be more information to support differential in premium for facilities using only one (1) machine or those having two (2) or more machines and that it was his recommendation that a distinction not be drawn at this time. Mr. Polak's motion was seconded by Mr. Lewicki and was approved by the Council by a vote of 4-0. Mr. Eriksen stated that he would make certain that the appropriate publication notice was given so that the Council met the 180-day timeframe requirement as defined in the statute.
	STRATEGIC PLANNING SESSION
	Mr. Polak stated that he wished to continue the Council's Strategic Planning Session that had initially began on November 7, 2002, and stated that he would like to resume the planning session with the subject of the Fund's solvency.
	A.	Fund Solvency (cont)
		Mr. Polak noted that last month the Council had voted to increase the tax on petroleum solvents from $ .35 to $1.75, subject to the appropriate hearings and review. He stated that based on additional information that has come to light since the last meeting, that he would like to make a motion to table the proposed increase until such time as the Council determines if the drycleaning industry or the Council wants to move ahead with a legislative package that would address the revenue shortfall that the Fund is experiencing. The motion was seconded by Mr. Lewicki and was passed by the Council by a vote of 4-0. Mr. Polak stated it is obvious that the Fund is going to need additional revenue in order to settle all the potential claims that may be filed against the Fund during its life. He noted that perhaps it would be appropriate to revisit the cost structure and rather than have a solvent tax that if raised to a level that would be by many to be deemed excessive and cause widespread cheating, that it would be more appropriate to determine what the annual revenue is needed per year by the Fund to address and reimburse for the cleanup of contaminated sites and then assess that cost equally to each drycleaner throughout the state. This would result in a flat fee license per location. He stated he wasn't aware of what that dollar amount may be but wondered if that may not be more acceptable. Members from the public indicated that there had been consideration given to this in the concept drafting of SB1069 approximately 2 years ago but that the consensus at that time was that a flat rate license fee and no solvent tax would penalize the smaller drycleaner and benefit the larger one. It was noted that there are a number of drycleaners who use 50 gallons or less of solvent per year which should equate to them doing a reduced volume of drycleaning versus someone using 360 gallons or more per year. Therefore to have each facility pay the same license fee would result in bankrupting the smaller drycleaner. Mr. Polak indicated that this was an issue that should continue to receive discussion and attention from the Council.
	B.	Claims Prioritization
		Mr. Eriksen noted for the Council that included in their packet was a 2-page memorandum outlining claims prioritization and several issues for the Council's consideration at such time that they deem prioritization of claims as being necessary. He noted that at such point in time that the Council determines that there are not adequate resources to pay for the cleanup of all eligible remedial claims, those eligible claims will be ranked using a scoring matrix system. The highest ranked sites will receive priority funding, i.e., if there is $8 million of funding available and the highest rated 150 sites have anticipated costs totaling $8 million, all other sites would be put on hold and the highest ranked 150 sites released for funding. Mr. Eriksen stated that the six (6) priorities are based on the outline approved by the Council at their July 20, 2000 annual Strategic Planning meeting and are as follows: • The first priority will be the abatement of emergency conditions that present an immediate threat to human health and safety such as explosive vapors in basements or utility conduits and migration of free product into the water supply line or wells. • Second priority will be facilities located in a township without a groundwater ordinance when the known drycleaner contamination of soil and groundwater is likely to cause an immediate adverse effect on human health by contaminating potable water resources. • Third priority will be the facilities with drycleaning solvent contamination of soil and groundwater where migration of these contaminants to neighboring properties seems eminent and immediate, which can result in more costly and complicated clean ups in the future. • Fourth priority will be to conduct site investigations at eligible facilities in order to determine the severity of the drycleaning solvent contamination. • Fifth priority will be the facilities in which soil and/or groundwater contamination is higher than soil saturation limits (i.e. free product exists) of drycleaning solvents according to the Tiered Approach to Corrective Action Objectives (TACO) regulation of the Illinois Environmental Protection Agency (IEPA). Active remediation is required to address drycleaning solvent contamination. • Sixth priority will be the facilities in which soil and/or groundwater contamination is higher than the TACO Tier II level but less than the TACO soil saturation limit. Active remediation may be required or possibly a "No Further Remediation" letter can be achieved through installation of engineering barrier or institutional control. Mr. Eriksen noted that the Council should consider the following things in finalizing a prioritization process: • A cash reserve balance for site investigations. • A cash reserve balance for excess costs and prioritized sites that have been released for funding. • Ability to pay in which sites that would exceed the maximum Fund benefit limit would need to provide proof that they have the financial ability to pay and complete the remedial action at the site. Dr. So reviewed with the Council, three (3) examples of prioritization using the matrix developed by the Administrator's office and how they would affect three (3) actual sites that are participating in the Fund. Mr. Eriksen noted that he was asking the Council to review the matrix in detail and be prepared to further discuss it and take action within the next several months. In addition, he was asking representatives of any associations in attendance at the meeting to share that information with their members and submit any comments to the Council. He noted that the prioritization matrix would need to go through the administrative rules process, which would take approximately 6-8 months.
	C.	Legislative Initiative:
		Mr. Eriksen noted that this topic had received discussion at the November 7, 2002 meeting and at that time, the Council had adopted to recommend legislation to provide technical corrections as outlined in the memorandums in the Council packet and in addition, proposed a 10-year extension to the program sunset date which would change it from January 1, 2010 to January 1, 2020. Mr. Polak referenced that it was his understanding that the drycleaning industry would be conducting meetings to look at modifications to the Trust Fund Act that would require legislative action. He noted that he was not in favor of any additional modifications at this time until the industry gave some indication of what modifications they would like to see to the program.
	D.	Pollution Prevention:
		Mr. Eriksen reviewed with the Council that at the November 7, 2002 meeting, they had authorized the Administrator to come back with a proposal for a special project cost to conduct an audit of the current Council approved programs. Mr. Eriksen noted the scope of the audit would consist of a random selection of program participants with a review of the following information: 1. Compliance program application 2. Documentation of employee training records 3. Documentation of continuing education attendance records and course contents 4. Results of individual facility third party compliance audit 5. Program administration technical resources 6. General program record keeping and documentation He noted that he estimated the fieldwork time would range from 20-24 hours, with 4-8 hours of report preparation. Assuming the project would take 32 hours of professional time at the stated special projects hourly rate of $132 per hour, the total not to exceed costs for this project would be $4,224. On a motion by Mr. Lewicki and a second by Mr. Bredenkamp, the Council, by a vote of 4-0, approved the Administrator to conduct an audit of the five (5) compliance programs for a cost not to exceed $4,224.
	E.	Communication:
		Mr. Eriksen reported that Korean versions of the revised initial license application and the Frequently Asked Questions and Answers had been presented to an officer of the Korean American Drycleaner Association for review. Currently they were still under review but hopefully, this would be completed in the very near future. Discussion focused on possibly developing a quarterly newsletter. It was noted that this could be distributed to the various drycleaning organizations in the state such as the Korean American Drycleaners Association, the Illinois State Fabricare Association and such drycleaner publications as the Clothesline. After additional discussion by the Council, it was their consensus that the Administrator develop a quarterly newsletter for calendar year 2003, with a further evaluation of its effectiveness at the end of 2003. Mr. Bredenkamp commented that regarding communication, he felt the DS-3 form was unclear and that as you read it, it appeared that it could be perceived to be the drycleaner's license as indicated at the November 7, 2002 meeting by a drycleaner who had appealed the license late payment fees because he had been told by the Illinois Department of Revenue that his DS-3 form was his license. Mr. Bredenkamp suggested that the Administrator provide to all the solvent suppliers a copy of an actual license so that they can share it with their staff in order to avoid misunderstandings between the solvent suppliers and the drycleaners of what constitutes a valid license. Mr. Eriksen noted that the Administrator's office was in the final stages of sending a mailing to all the solvent suppliers reminding them that the drycleaners must have a valid license to receive solvent and that he would include a copy of the license in that mailing.
	F.	Other Issues:
		Mr. Polak distributed to the Council members an article talking about the ban of perc by the Southern California Air Quality Control Board.
	G.	Remedial Technologies:
		Mr. Eriksen noted that since several of the Council members were absent, that it would make sense to defer presentation of the remedial technologies to a future meeting. This was agreed upon by the Council.
	APPROVAL OF PROGRAM BILLINGS
	Mr. Eriksen noted that the following program billings were before the Council for their review and action:
	1. Williams & Company Consulting, Inc $ 42,227.00 Standard flat fee billing for November 2002, licensing, underwriting and claims adjudication.
	2. John J. McCarthy $ 2,188.32 Professional legal services to the Council for the period of October 23, 2002 through November 27, 2002.
	3. Milliman, USA $ 2,982.60 Professional actuarial services for October 2002.
	On a motion by Mr. Lewicki and a second by Mr. Bredenkamp, the Council approved the bills as presented by a vote of 4-0.
	MONTHLY ACTIVITY REPORT AND FINANCIALS REVIEWED
	Mr. Eriksen reviewed with the Council the November 2002 activity report, noting there are currently 1,465 licensed drycleaners and 901 insurance policies issued and in effect as of November 30, 2002. Open remedial claims at active facilities total 142 with outstanding reserve estimates for those eligible claims of $8,207,894. Mr. Eriksen noted that there has been an increase in the number of budget requests within the last two (2) weeks and that if the increase continued, that the Administrator would be hard pressed to review all the proposals within a 30 day timeframe of receipt. He noted he would keep the Council updated on this issue as the budgets continue to be received. He also noted that the renewal and licensing applications are just starting to come in with 76 having been received as of December 12, 2002. In reviewing the statement of Fund balance and the related statement of revenues, expenditures and changes in Fund balance for the month ending November 30, 2002, he noted that the Fund balance is currently $6,316,231. Year-to-date revenue totals $578,000 with expenditures totaling $761,000.
	OTHER ISSUES AS PRESENTED
	Mr. Eriksen noted that included in the Council packet was a summary of average administrative costs per drycleaner per the various state funds. He noted that the Fund's administrative costs are right in the middle and some states administrative costs are paid directly by the drycleaner and are not reflected in the average costs. The Council discussed a tentative schedule of meeting dates for calendar year 2003. It was the consensus that the third Tuesday or third Thursday of the month would probably work the best for the Council members in attendance. Mr. Eriksen stated he would contact the other Council members to see if that date would work for them in the future. Mr. Eriksen stated that preliminary results on the Council approved Innovative Technology Project were promising and that he hoped to have a complete update at the January meeting. In addition, the Administrator's staff is going to have some recommendations on the initial intrusive testing guidelines in order to minimize out-of-pocket costs for drycleaners who test their facilities for contamination and they turn out to be clean. Mr. Eriksen stated that in the past 30 days, it has been brought to their attention in at least one instance where the site tested clean and some of the work required did not need to be performed but since the drycleaner had entered into a fixed fee contract, they were forced to pay for services that were not needed. Mr. Eriksen noted that the fiscal audit for fiscal 2002 is almost complete and a draft report should be available for Council review in the near future.
	PUBLIC COMMENT PERIOD
	Mr. Henry Parker, of SECC, asked for clarification on where things stood with the refund of solvent tax to John Spomar, whose solvent spoiled due to a mechanical failure. Mr. Eriksen replied that the Administrator is working with the Department of Revenue on refunding him the additional tax paid. Mr. Parker also asked for clarification if Green Earth was subject to the chlorine-based solvent tax rate. Mr. Eriksen replied yes and that distributors had been notified that the appropriate tax is $3.50. The Council then tentatively set the next Council meeting for Tuesday, January 21, 2003, with a start time of approximately 9:30 a.m. There being no further business for discussion, on a motion by Mr. Lewicki and a second by Mr. Gibson, the Council, on a vote of 4-0, voted to adjourn at 3:20 p.m.
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