June 2003 minutes

June 2003 Meeting Minutes

MINUTES

DRYCLEANER ENVIRONMENTAL RESPONSE TRUST FUND
COUNCIL of ILLINOIS

HOLIDAY INN
NAPERVILLE, ILLINOIS

JUNE 11, 2003

JJohn Polak, Chairperson, called the Drycleaner Environmental Response Trust Fund Council of Illinois meeting to order at 10:14 a.m. A quorum was present. Roll call was taken with the following members present:

John Bredenkamp
Andrew Chweh
Augustine Chung
David Gibson
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 April 28, 2003 Council meeting were reviewed. On a motion by Mr. Lewicki and a second by Dr. Chweh, the minutes were approved by a vote of 6-0.

OPERATIONAL ISSUES

A. Legislative Update

Mr. Eriksen reviewed with the Council that approximately two (2) weeks ago, he had met with members of Speaker Madigan's staff and Rep. Giles and Rep. Smith, to explain the Council's proposed legislation and respond to questions that the Speaker's staff had regarding the proposed legislation. Subsequent to the meeting, the Speaker's staff determined that SB1000 would be the most appropriate bill to move the legislation forward prior to the adjournment of the current legislative session.

During the last week of May, several organizations expressed concerns that the proposed legislation did not adequately encourage the use of green solvents. On May 28, 2003, Chairman Polak and Mr. Eriksen participated in a telephone conference call with a representative from the Illinois Environmental Protection Agency Pollution Prevention Division and a member of the Alternative Solvent Coalition. The call resulted in three (3) modifications to the Council's proposed language that would encourage the use of green solvents. The proposed changes were reviewed verbally with each Council member and they individually concurred with the proposed changes. The second amendment to the bill was drafted the morning of May 29th and filed with the House. On May 30, 2003, the House passed SB1000, and on Saturday, May 31, 2003, the Senate passed the bill. It is now being forwarded to the Governor for his signature.

Mr. Eriksen noted the legislation passed this session included all of the Council's proposed amendments adopted at the Council's February 28, 2003 Council meeting, along with the following modifications:

1. Requirement that the director of the Illinois EPA approve the third party administrator's contract.

2. Modification to the definition of a virgin site so that definition did not take into consideration whether any hazardous chemical or waste had been stored at the facility other than chlorine-based or petroleum-based solvents.

3. A reduction in the initial solvent tax on green solvents from $3.50 per gallon to $1.75 per gallon.

4. The addition of language to Section 75, whereby the Council will encourage the use of green solvents when reviewing the license fees, solvent taxes and remedial program co-payment obligation in determining the viability of the Fund.

Mr. Polak thanked all of the individuals and associations for their input and support of the legislation observing that it represented an excellent example of industry cooperation in setting aside individual disagreements to craft and support a piece of legislation designed for the greater benefit of all drycleaners.

Mr. Eriksen reviewed SB1903 with the Council as it may impact the Fund. The bill incorporates the transfer of monies from a large number of special use funds to the General Revenue Fund. Fortunately, the bill did not include a definitive and immediate transfer of funds from the Illinois Drycleaner Environmental Response Trust Fund to the General Revenue Fund. SB1903 does include a provision that provides the Director of the Bureau of the Budget authority to direct the State Treasurer and Comptroller to transfer a specified sum from any fund held by the State Treasurer to the General Revenue Fund in order to help defray the State's deficit for the fiscal year. The maximum transfer under this section of SB1903 from any fund in any fiscal year shall not exceed the lesser of 8% of the revenues to be deposited into the Fund during the year or 25% of the beginning balance of the Fund. Mr. Eriksen noted he had asked Mr. McCarthy to review this provision of SB1903 as to its applicability to the Fund.

Mr. McCarthy stated that recently he had a conversation with an Assistant Attorney General regarding SB1903. The individual indicated that she was aware of five or six other funds that had similar wording provisions as the Trust Fund Act that states that the funds are to only be used for the purposes as defined within the Trust Fund Act. He commented there is concern as to the constitutionality of this part of the legislation. He noted there was some precedent set during the term of Governor Edgar in which authorization was allowed or given to make transfers from special revenue funds to the General Revenue Fund but each transfer had to be reviewed by the legislature and incorporated into statute. The provisions of SB1903 do not provide for that type of legislative review.

Mr. Eriksen noted that he is working to schedule a meeting with the Governor's office to update them on the status of the program, encourage an early signing of the legislation and review the reasons why a transfer of funds from the Drycleaner Trust Fund to the General Revenue Fund would be very detrimental to the ongoing success of the Fund. Special thanks is due Rep. Giles, who assisted in getting the legislation moving again in the House after it appeared it had stalled and Rep. Smith for his work in co-sponsoring the legislation.

B. Direct Payment of Illinois Environmental Protection Agency (EPA) Site Remediation Program Fees:

Mr. Eriksen noted that at the April 28, 2003 Council meeting, the Administrator asked the Council for direction on whether they were willing to allow the Fund to pay Illinois EPA directly on eligible claims, the site remediation (SRP) fees charged by IEPA for reviewing the technical reports associated with the process of obtaining a No Further Remediation (NFR) letter at the eligible drycleaning facility. The Council had directed the Administrator to have further discussions with Illinois EPA staff regarding the mechanics and logistics of the process and report back at today's meeting.

The Administrator's staff had a conference call with Illinois EPA staff and have agreed that the following process should work for both the Illinois EPA and the Fund. The proposed process will minimize the drycleaner's out-of-pocket expenses associated with participating in the Illinois EPA voluntary SRP. The Administrator proposes that the Council adopt the following process regarding the direct payment of SRP fees to Illinois EPA:

1. The eligible claimant must pay out-of-pocket the initial $500 registration fee. The Fund will reimburse the claimant for the registration fee upon receipt of a copy of the cancelled check or verification from Illinois EPA that the enrollment fee has been paid.

2. If the claimant wishes the Fund to directly reimburse Illinois EPA for their SRP fees, they would complete and sign an authorization letter to that effect.

3. Upon receipt by the Fund of the authorization letter to pay Illinois EPA directly for the SRP fees, a copy of the authorization would be sent to the Illinois EPA, instructing them to submit all invoices directly to the Fund. Upon receipt of the invoices, the Fund would review the claim for eligibility and if eligible, process the invoice and reimburse Illinois EPA directly for the SRP costs. A copy of the warrant request would be sent to the claimant so that they know the fees have been paid.

4. At the time that the Fund receives the SRP invoice and reviews it for eligibility, if the claim is no longer eligible, Illinois EPA would be informed of the ineligibility and they would have to seek payment directly from the claimant. The same process would occur in the event that the claimant exceeds their remedial benefit cap from the Fund.

The Administrator and Illinois EPA believe that this is a workable process that would reduce the out-of-pocket cash needs of the claimant during the remediation process. Mr. Eriksen noted it was his recommendation that the Council adopt this policy and procedure, effective July 1, 2003.

He noted that once someone opted to participate in the direct payment, they could not opt out unless they became ineligible or exceeded their remedial benefit limit, as this would minimize the possibility that an overpayment of the SRP fee could occur. As noted at the previous Council meeting, Illinois EPA does not have a refund appropriation associated with this revenue line item and thus any overpayment could not be refunded to either the Fund or the drycleaner.

After discussion by the Council, on a motion by Mr. Lewicki and a second by Mr. Chung, the Council approved the Administrator's recommendation to allow for the direct payment of Illinois EPA's SRP fees on eligible remedial sites, by a vote of 6-0.

C. Policy Issue: Need for Intrusive Site Investigation at an Insured Drycleaning Facility if No Further Remediation Letter Previously Issued for the Facility

Mr. Eriksen noted that the Fund's administrative rules require that all facilities that are insured by the Fund conduct an intrusive site investigation by June 30, 2004, in order to maintain Fund insurance coverage. The Council had previously adopted the position that if a new drycleaning facility was built on a virgin site on or after July 1, 1999, and subject to review of a Phase I environmental report, if the Administrator determines that the facility has been operating in accordance with Federal and State regulations and best management practices, intrusive testing of that facility is not necessary in order to maintain their Fund insurance coverage. He noted he is aware of at least one (1) drycleaning facility that had discovered contamination prior to the Fund's inception and subsequently remediated the contamination and received a No Further Remediation letter from the Illinois Environmental Protection Agency.

He stated the issue for Council consideration is does the facility that discovered contamination prior to the Fund's inception and has remediated the facility and received an NFR letter from IEPA, need to conduct an additional intrusive site investigation prior to June 30, 2004 in order to maintain Fund insurance coverage. He noted the Administrator offers the following options for the Council's review:

1. Keep the existing policy in which a facility would be required to do intrusive testing by June 30, 2004 in order to maintain insurance coverage through the Fund unless it was a new facility located on a virgin site on or after July 1, 1999 and is operated in compliance with Federal and State regulations and best management practices.

2. Exempt a drycleaning facility that had previously discovered contamination, remediated the contamination and received an NFR letter from IEPA, provided that the owner/operator of the drycleaning facility can provide documentation that the facility is operated in compliance with Federal and State regulations and best management practices since the receipt of the NFR letter from IEPA. The drycleaner would need to provide the Fund documentation indicating the level of contamination, if any, remaining at the facility at the time the NFR was issued. In addition, the drycleaning facility would need to have installed pollution prevention equipment such as secondary containment pans around the drycleaning machine and waste storage areas since the date the NFR letter was issued.

Mr. Eriksen stated it is the Administrator's recommendation that the Council adopt option #2, if the drycleaning facility has been operating in compliance with State and Federal regulations and best management practices and has incorporated pollution prevention containment devices. Since the issuance date of the NFR letter, the likelihood that the facility has been recontaminated has been greatly minimized and does not, in the Administrator's opinion, warrant the drycleaner operator incurring additional costs for an intrusive site investigation.

The Council discussed at length the pros and cons of such a policy decision and the ramifications or potential financial impact on the Trust Fund if such policy issue was adopted. Mr. Eriksen stated that he felt it would be on the high side that there would be 50 Fund eligible sites that are currently insured that would have cleaned up had contamination remediated the contamination and received an NFR letter prior to the effective date of the program.

In addition, he noted that the financial risk exposure to the Fund involves the difference in the benefit limit. With the passage of SB1000, the remedial claim benefits limits are increased to $300,000. The insurance program policy limit is $500,000, which if applied to the small percentage of sites that would be contaminated, the potential impact to the Fund is not substantial. Additional discussion ensued and on a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council, by a vote of 6-0, voted to adopt the Administrator's recommendation and exempt facilities that had previously cleaned up contaminated sites provided they could document secondary containment in the implementation of best management practices since the date of their NFR letter.

D. Strategic Planning Topics

Mr. Eriksen noted that the Council had tentatively scheduled Thursday, July 24, 2003, as the date for their annual Strategic Planning Meeting. The Strategic Planning Session provides the Council an opportunity to review the previous year's activities as well as plan for the current fiscal year's activities. He noted that the staff has tentatively identified the following issues, as ones the Council should consider for discussion at the Strategic Planning Meeting:

1. Review of semi-annual projections and review of solvent tax rate, license fee and remedial program deductibles

2. Review of current policies and procedures

3. Review of general program statistics

4. Review of site investigation statistics

5. Report on compliance program audits

6. Claims prioritization

7. Update on other state programs

Mr. Eriksen asked the Council if they had any other topics for discussion. There were none. He indicated if they had topics they would like included, to contact him with them prior to the meeting so they could be added to the agenda. In addition, the Council agreed they would like to have the Strategic Planning Meeting at the Holiday Inn in Naperville, IL, if at all possible. A tentative start time was between 8:30-9:00 a.m. and would last most of the day with any regular business to be concluded at the end of the Strategic Planning Session.

Mr. Eriksen distributed to the Council a rough projection of the cost impact of SB1000 and a possible scenario for an increase in taxes and fees to put the Fund in a break-even position. He stated he would like to discuss this in further detail at the Strategic Planning Session.

E. Request For Proposal-Third Party Administrator's Contract

Mr. McCarthy reviewed with the Council the history of the bid process, noting that in the fall of 1998, the Council, in conjunction with Central Management Services and the Attorney General's Office, issued a Request For Proposal (RFP) to provide administrative services to the Fund. The contract period was for a five (5) year period and there were two (2) bidders of which Williams & Company was deemed to be the most technically qualified and was the lowest cost bidder.

Mr. McCarthy is suggesting that he work together with Central Management Services and, as needed, the Attorney General's Office and put together an RFP for the Council's review and action and bring it back to the Council for their approval at the July 24, 2003 Council meeting.

On a motion by Mr. Polak and a second by Mr. Lewicki, the Council authorized Mr. McCarthy to begin drafting the RFP, by a vote of 6-0.

Mr. Gibson asked that if there would be a transition period between Administrators, would that mean double costs to the Council? Mr. Eriksen stated that he would have to review the current contract to see what provisions were there. Mr. Polak said that it would be reasonable to assume that there would be double costs and that is a consideration in making a decision in the selection process. At that point, Mr. Bredenkamp asked who would make the selection, Central Management Services? Mr. Lewicki replied that no, previously it was the Council's authority and that after they had approved the RFP and proposals were received, that they met and together reviewed the proposals and made a selection for the third party administrator.

Dr. Chweh asked if it was necessary to go through the bidding process as Williams & Company has done a good job in administrating the Fund Mr. McCarthy replied that it was necessary as the statute requires public bidding of the third party administrator's contract. In addition, he stated that he would review the criteria used in the last RFP to determine what may still be applicable and also implement some of the new regulations that Central Management Services has put in process for the RFP process.

APPROVAL OF PROGRAM BILLINGS

Mr. Eriksen noted that there were three (3) bills before the Council for their review and action:

1. Williams & Company Consulting, Inc. $ 61,942.00
Standard flat fee billing for April 2003, licensing, underwriting, claims processing and site inspections.

2. John J. McCarthy $ 2,977.50
Professional legal services to the Council for the period of March 17, 2003 through June 2, 2003.

3. Williams & Company Consulting, Inc. $ 73,503.00
Standard flat fee billing for May 2003, licensing, underwriting, claims processing and site inspections.

On a motion by Mr. Chung and a second by Mr. Lewicki, the bills were approved by a vote of 6-0.

MONTHLY ACTIVITY REPORT AND FINANCIALS REVIEWED

Mr. Eriksen stated that included in the Council packet were the monthly activity reports for April and May 2003 and the April and May 2003 financial statements. He reviewed the key criteria, noting that there are currently 1,373 licensed drycleaners, of which 129 have not renewed their license. He noted staff is currently making contacts to determine who has been licensed.

Mr. Gibson stated he would like a list of licensed drycleaners who have not renewed. Mr. Eriksen said that he would provide that list to all Council members.

In reviewing the financial statements, Mr. Polak stated that he would like a comparison of the current financial numbers to the project budget financial statements. Mr. Eriksen stated he would double check to see what the Council had been using for budget information.

Mr. Eriksen noted that there were no claims in excess of $75,000 requiring Council approval.

OTHER ISSUES AS PRESENTED

Mr. Polak asked if there were any other issues. There were none.

PUBLIC COMMENT PERIOD

Mr. Polak asked if the public had any comments. There being none, on a motion by Mr. Lewicki and a second by Mr. Bredenkamp, by a vote of 6-0, the Council adjourned at 11:39 p.m.

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