August 28, 2014 Meeting Minutes

  MINUTES
 

DRYCLEANER ENVIRONMENTAL RESPONSE TRUST FUND
COUNCIL of ILLINOIS

CHICAGO MARRIOTT NAPERVILLE
NAPERVILLE, ILLINOIS

AUGUST 28, 2014

John Polak, Chairperson, called the Drycleaner Environmental Response Trust Fund Council of Illinois meeting to order at 9:38 a.m. A quorum was present. Roll call was taken with the following members present:

John Bredenkamp
Sung Do Kang
Daniel Kim (arrived at 9:40 am)
Young B. Kim
Paul Kwak
Jerry Lewicki
John Polak

Also present were:

H. Patrick Eriksen, Program Administrator’s Office
John J. McCarthy, Program Counsel
Randy Jackson, Program Administrator’s Office

Yong Kim, Program Administrator’s Office
PRELIMINARY BUSINESS

The minutes from the July 23, 2014 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.

  APPROVAL OF PROGRAM BILLINGS
  Mr. Eriksen noted there were two (2) bills before the Council for their review and approval. They were:
 

1. Williams & Company Consulting, Inc         $77,373.00
Standard flat fee billing for July 2014, licensing, underwriting, claims processing and site inspections.

 

2. John J. McCarthy                                      $3,795.00
Professional legal services to the Council for the period of July 1, 2013 through August 11, 2013.

 

On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the bills were approved by a vote of 7-0.

  CLAIM PAYMENTS IN EXCESS OF $75,000
 

Mr. Eriksen noted there were five (5) claim payment requests in excess of $75,000 requiring Council review and action.

  1. Best Cleaners, Aurora, IL; Claim #50087, Site #0002587:
   

Mr. Jackson reviewed background information on the facility noting additional site investigation activities are needed at the facility. Since it has been four years since the previous sampling was completed, additional sampling in the source area is necessary to prepare a Revised FSIR/ROR and RAP. The estimated costs to complete these activities is $28,000, including contingency costs.

On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council approved the Administrator’s request of $28,000 in additional budget costs by a vote of 7-0.
  2. Yorktown Cleaners, Woodridge, IL; Claim #50519, Site #0001664:
   

Mr. Jackson reviewed background information on the facility noting the IEPA denied the FSIR/ROR on October 12, 2012. On May 4, 2014 the claimant selected a new consultant to conduct additional site investigation activities at the facility and prepare a revised FSIR/ROR and RAP. The estimated costs to complete these activities total $22,000 including contingency costs.

On a motion by Mr. Bredenkamp and a second by Mr. Kang, the Council approved the budget request of $22,000 by a vote of 7-0.
  3.

Kleene Town Cleaners, Chicago, IL; Claim #50010, Site #0001293:

   

Mr. Jackson reviewed background information on the facility noting limited site investigation activities have previously been completed at this facility. IEPA has requested additional site investigation activities be completed to determine the extent of contamination. The estimated costs total $21,500 including contingency costs.

On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council approved the budget request of $21,500 by a vote of 7-0.
  4. APS Town Cleaners, Chicago, IL; Claim #50162, Site #0001026:
   

Mr. Jackson reviewed background information on the facility noting additional site investigation activities are needed to complete delineation of the hotspot area. The estimated costs total $20,370 including contingency costs.

On a motion by Mr. Bredenkamp and a second by Mr. Young Kim, the Council approved the budget request of $20,370 by a vote of 7-0.
  5.

Ravinia Vogue Cleaners, Highland Park, IL; Claim #50312, Site #0002257:

   

Mr. Eriksen asked the Council to reconfirm their prior email approval of drycleaning equipment removal and relocation costs of $36,000.

On a motion by Mr. Lewicki and a second by Mr. Bredenkamp, the Council approved the budget request of $36,000 by a vote of 7-0.
  DISCUSSION OF AASBA COMPLIANCE PROGRAM
 

Mr. Eriksen referenced background information stating Mr. John Lee, administrator of the AASBA Compliance Program, was asked to address the Council as to his failure to provide the Council the following required information:

  1. Calendar 2013 report of:
    • Site inspections performed and the date of those inspections, and
    • Listing of compliance program members
  2. Listing of drycleaning facilities to be inspected by AASBA in 2014.

Mr. Lee addressed the Council listing a variety of reasons why he was unable to timely provide the required information. He stated all of the information required was provided to the Administrator via email on August 27, 2014. Mr. Eriksen confirmed receiving the email but commented staff has not had an opportunity to review the information contained in the email.

Mr. Kang made a motion to accept the late reports Mr. Lee provided in his August 27, 2014 email to Mr. Eriksen subject to validation of the information by the Administrator’s staff.  Mr. Kang subsequently withdrew his motion.

Mr. Polak made a motion to defer any further action regarding the AASBA Compliance Program until the next Council meeting. This would provide the Administrator time to review and validate the information. Mr. Polak subsequently withdrew his motion.

Mr. Bredenkamp made a motion to provide Mr. Lee a onetime exception to the Council’s dates for providing required compliance program information to the Council subject to the Administrator’s confirmation of the information emailed to Mr. Eriksen on August 27, 2014. Mr. Bredenkamp subsequently withdrew his motion.

The Council conducted a general discussion of the AASBA Compliance Program issues outlined by Mr. Eriksen and Mr. John Lee.

Mr. Bredenkamp made a motion to accept the information submitted by Mr. Lee via email on August 27, 2014, subject to review of the information by the Administrator with the caveat if the information does not meet the Council’s established policies, the issue is to be brought back to the Council for reconsideration. The motion was seconded by Mr. Young Kim and passed by a vote of 7-0.

Mr. Polak recessed the meeting at 10:25 am for a brief break. The meeting reconvened at 10:35 am.

Mr. Polak commented the majority of the remainder of the meeting would be spent on the Council’s annual Strategic Planning Session.
  STRATEGIC PLANNING SESSION
  I. Review of Program Status and Evaluation of Past Goals:
   

A.

Review of Policies and Procedures

     

The Council reviewed each of the policy changes they adopted since the August 21, 2013 Strategic Planning meeting as to the remedial and insurance claims, licensing, underwriting, compliance programs, and receivables and collection policies and procedures.

 

B.

Review of Fiscal 2014 Goals and Statistics:

     

Mr. Eriksen reviewed with the Council the status of their goals for fiscal 2014. The goals involve Fund solvency, legislation, pollution prevention and communication.

Regarding Fund solvency, at the Council’s request, Rep. Zalewski introduced HB4322 which would extend the Fund’s sunset date to June 30, 2030. The bill was tabled in February 2014 at the Governor’s request to give the Drycleaner Trust Fund Task Force an opportunity to discuss fund solvency.

As of June 30, 2014, 194 active and 3 inactive remedial claims remain eligible for remedial program benefits. The remaining cost to clean up these facilities is estimated to be $28.8 million.

Regarding legislation, no new legislation was passed that impacted the Fund.  The Drycleaner Trust Fund Task Force has not been appointed as of August 28, 2014.

Regarding pollution prevention, the Administrator conducted 61 site inspections during the year. The inspection results indicated a majority of the drycleaners inspected are in substantial compliance with the Fund’s and State’s environmental rules and regulations. The most frequent non-compliance issue continues to be drycleaners not having proper or adequately sized secondary containment around hazardous waste disposal containers or wastewater vaporizer/misters.

The Council modified the compliance program requirements at their August 21, 2013 and March 12, 2014 meetings. The CEU requirements were eliminated and replaced with completion of the online Best Environmental Management Practices for Perc Drycleaners course. The compliance programs must inspect each drycleaning facility once every four years using the Council approved inspection form. The inspections must be submitted to the Fund within 90 days of the inspection and may be submitted electronically.

Regarding communication, the Council updated the drycleaning industry on Fund solvency, perc operator training and changes in the TACO regulations via their newsletter.

    C. Update on Program Statistics:
      i. General Program Statistics:
       

Mr. Eriksen reviewed various program statistics including the June and July 2014 monthly activity reports and financial statements. The Fund’s July 31, 2014 financial statements reflect a fund balance of $1,741,565. The following graphs were reviewed with the Council:

> Licensed versus insured drycleaners since the program’s inception

> Licenses issued since the program’s inception

> Claim payment dollars paid to date

> Cash balances compared to approved budgets

> Listing of licenses by license category for hydrocarbon and chlorine-based solvents

> Solvent usage over the period from 2004 through 2013

> Number of NFR letters issued
      ii. Enforcement Efforts:
       

Mr. Eriksen referenced a listing of drycleaners who did not renew their 2013 license. Seventy-three (73) drycleaning facilities that were licensed in 2013 did not renew their license for 2014; 28 of these facilities closed; 19 facilities converted to a “drop store” and staff is working on getting the remaining 26 facilities licensed or determine they are no longer operating as a licensed drycleaning plant. The status of these 26 facilities was reviewed with the Council. In addition, a summary of enforcement actions handled by the Attorney General’s Office was reviewed along with a summary of dollars collected to date via enforcement actions.

    D. Review of Fund Financial Projections for the Period of July 1, 2014 Through January 1, 2020:
     

Mr. Eriksen reviewed financial projections for the period of July 1, 2014 through the Fund’s sunset date of January 1, 2020. He outlined changes made in the projection assumptions as compared to the projections reviewed at the April 23, 2014 Council meeting. Projected total claim expenses increase by $5,250,000 to reflect additional remediation costs to address indoor air regulations implemented in July of 2013. The Administrator is estimating 175 of the remaining 197 claims will require additional site investigation and implementation of a “building control technology” at an average cost of $30,000. The net impact of the assumption changes resulted in a net increase in the projected Fund deficit of approximately $5,838,000. Assuming all of the relevant assumptions remain valid through the sunset date of the program, the Fund is facing a $20,889,430 deficit as of January 1, 2020. Mr. Eriksen noted this projected deficit would not be eliminated by extending the sunset date to June 30, 2030 unless the revenue stream increased and/or expenditures were reduced.

The Council conducted a lengthy general discussion of fund solvency. Raising the remedial program deductible or creating deductible tiers, eliminating IEPA SRP fees as a reimbursable expense, scaling back payment of eligible expenses, etc. were discussed. Mr. Lawrence Cohen, representing a real estate management company, suggested the Council look for alternative sources of income. One possible mechanism would be to allow real estate owners to contribute to the Fund and receive direct access to remedial benefits.
      i. Segregation of Insurance Program Funds:
       

The Council reviewed the pro forma financial statements and related assumptions for segregating the insurance program monies from the total Fund monies. If the insurance fund were segregated, it would have a balance as of June 30, 2014 of $8,904,530. The budget for fiscal year 2015 reflects potential excess revenues over expenditures of $101,000.

      ii. Actuarial Review:
       

The Fund has had two (2) actuarial reviews, with the last review conducted in January 2009, which reduced the initial actuarial determined premium of $1,400 to $1,100 per year. The actuary had to rely heavily on data from private insurance companies inasmuch as the Fund insurance claim history was limited.

Issue: Does the Council wish to engage in a new actuarial review of the insurance premium or update the existing actuarial study?

Mr. Polak stated since there was not much new data to go on it would be his recommendation the study be tabled until it was determined if the sunset date of the program would be changed or extended. His rationale was the actuarial analysis would cost at least $15,000, which would further increase the current projected shortfall and most likely would not result in an adjustment of the insurance premium.

On a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council voted 7-0 to table an actuarial review until it could be determined if the sunset date of the program would be modified.
 

Mr. Polak recessed the meeting at 12:07 p.m. for lunch. The meeting reconvened at 1:25 p.m.

  II. Program Goals Fiscal 2015:
   

The Program goals for fiscal year 2015 are a continuation of those that have been set previously by the Council and include a focus on Fund solvency, legislative initiatives, pollution prevention and communication.

    A. Fund Solvency:
     

Mr. Eriksen reviewed that since the sunset date of the program is only 5 ½ years away, it is important the Council consider a plan of action to address the fund solvency issue and accomplish the legislative intent of the Illinois Drycleaner Environmental Response Trust Fund Act. Legislative intent is best summarized by Section 75 of the Trust Fund Act (415 ILCS 135/75):

Adjustment of fees and taxes. Beginning January 1, 2000, and annually after that date, the Council shall adjust the copayment obligation of subsection (e) of Section 40, the drycleaning solvent taxes of Section 65, the license fees of Section 60, or any combination of adjustment of each, after notice and opportunity for public comment, in a manner determined necessary and appropriate to ensure viability of the Fund and to encourage the owner or operator of a drycleaning facility to use green solvents. Viability of the Fund shall consider the settlement of all current claims subject to prioritization of benefits under subsection (c) of Section 25, consistent with the purposes of this Act.

Mr. Eriksen noted as defined in Section 75 of the Trust Fund Act, the Council has the authority to adjust the license fees, solvent taxes, remedial program deductibles, or any combination of each, in order to ensure viability of the Fund. Viability of the Fund is defined to consider the settlement of all current claims.

Council options not requiring legislation are:
1. Increase the license fee. All license fees would need to increase by $6,528 per year beginning January 1, 2016 in order to eliminate the projected fund deficit by January 1, 2020.
2. Increase the solvent taxes.
3. Increase the remedial action deductible.

All other options would require legislative action.

Revenue enhancement options previously discussed by the drycleaning industry and the Council (starting with the least onerous) include:

1. Extension of the Fund’s sunset date
2. Licensing of drop stores
3. Assessment of fees on solvent distributors and solvent manufacturers
4. Implementation of a gross receipts tax
5. Implementation of a sales tax on all drycleaning services
6. Require drycleaners who received cleanup benefits and subsequently sold their drycleaning facility to pay the Fund any gain realized on the sale less the total amount paid into the Fund (i.e. license fees, solvent taxes, and insurance premiums), up to the total amount of cleanup benefits received from the Fund.
7. Any drycleaner receiving cleanup benefits from the Fund must continue to pay into the Fund (i.e. license fees, solvent taxes, and insurance premiums) until the sunset date of the Fund.

Mr. Eriksen noted there are other factors to consider:

1. Time remaining to initiate and complete all cleanups by January 1, 2020 – Active remediation (from start to finish) takes approximately 4 years. This suggests all remaining cleanups must begin by January 1, 2016.
2.
    Limited number of environmental consultants working on Fund eligible claims - If unlimited funding was available to address the contamination remaining at the 197 drycleaning sites with open remedial claims, additional environmental consultants would be needed to work on the cleanup of this contamination during the next 5½ years. This would result in increased cleanup cost inasmuch as the larger regional and national environmental firms have chosen not to participate in the remediation of Fund eligible claims due to the rates reimbursed by the Fund.
3. The Council has no control over the regulatory requirements of the Illinois Environmental Protection Agency (IEPA) or of the Federal Environmental Protection Agency. Changes in regulations (such as the new proposed air inhalation regulations by IEPA) can potentially add tens of thousands of dollars to the cleanup costs of an existing claim.

Mr. Eriksen commented the Council had legislation introduced in February 2014 to extend the Fund’s sunset date to June 30, 2030 but the Governor’s Office requested it be tabled until the Illinois Drycleaner Environmental Response Trust Fund Task Force had an opportunity to review Fund solvency. Task Force members have not been appointed and it is uncertain as to the timing of those appointments.

Attached as Exhibit 1 was a revenue trend for the program for fiscal years 2007 through 2014. During that time period, the number of licensed drycleaners decreased from 1,239 to 914. Correspondingly the total revenue went from $4,786,000 to $2,650,000, which is a decrease of almost $1,000 in average revenue per drycleaner over that period of time.

The Council conducted a lengthy discussion of Fund solvency. Mr. Bredenkamp suggested increasing the solvent tax on hydrocarbon solvents to a percentage that would equal the percentage ratio of perc solvent tax per gallon to the actual cost of perc per gallon. Council members stated the perc tax is approximately 30% of the retail price of perc. Discussion also focused on the volume of perc used to clean one pound of clothes compared to the volume of hydrocarbon solvent used to clean one pound of clothes. When the solvent tax was adjusted in 2004, the ratio was considered to be approximately 5 to 1. Mr. Kang stated the ratio currently is somewhere between 1.5 to 1 and 1.2 to 1.  Mr. Kwak commented the increased efficiency of new hydrocarbon machines allows the average drycleaner to go approximately 2 years without the need to purchase solvent. He believes the Fund needs fees from sources other than just the active drycleaning facilities.

Mr. Kang asked Mr. Eriksen if he knew how many of the open remedial claims were no longer active drycleaning facilities. Mr. Eriksen stated he did not but could assemble the data for the Council and he would provide the information to the Council members in the near future. Mr. Eriksen commented if the Council wished to change the eligibility criteria for continuing to receive remedial program benefits, it would have to seek legislation to make such changes. A general discussion of the claim prioritization process ensued.

Mr. Bredenkamp stated the Council needs to take action to address the Fund’s solvency and does not have the luxury of waiting for the legislatively created Drycleaner Environmental Response Trust Fund Task Force to study the issue. Their proposed legislative recommendation is to be completed by the end of 2014, but as of today, the Task Force appointments have not been made and no one knows when the Task Force will convene.

After additional discussion by the Council, Mr. Bredenkamp made a motion that the Council seek legislation to extend the sunset date to June 30, 2030. The motion was seconded by Mr. Lewicki. On a roll call vote, the motion was unanimously passed.
      i. Claims Prioritization Review of Updated Rankings & Statistics
       

Mr. Eriksen reviewed the updated prioritization results with the Council noting that as of June 30, 2013, there were 194 open, eligible, active remedial claims receiving program benefits from the Fund and three (3) inactive, open, eligible remedial claims. He reviewed the current status of those claims that have been released for full funding.

During the past year, the prioritization ranking changed for a number of facilities based on new site investigation information received during the year. Mr. Eriksen reviewed in detail the updated prioritization rankings for 112 facilities. There are still approximately 32 claims in which the Fund does not have enough information to determine if they would be able to get a risk based closure under the IEPA TACO regulations or if actual remediation would be required. These facilities have a very low score due to the lack of available data.
      ii. June 30, 2014 Cash Flow Analysis:
       

Mr. Eriksen reviewed in detail the worksheet labeled “Cash Flow Analysis – Fiscal Year 2015” which outlined the anticipated revenue sources less current funds committed for outstanding budgets and grandfathered/released remedial claims. The estimated dollars remaining are available for the first prioritization pool. This is currently a negative number. For discussion purposes, he included a second column which is the Administrator’s analysis of the maximum dollar amount that would most likely be spent for each category in fiscal year 2014. Using the projected maximum funding number for released claims, there are no additional funds available that the Council could earmark for additional cleanup.

Mr. Eriksen stated based on the current revenue stream and the number of fully released claims currently in remediation, it is doubtful any new claims can be released for full funding for 3 years.
    B. Legislative Issues:
     

Mr. Eriksen noted the Council already had voted to go ahead and seek extension of the sunset date to June 30, 2030.

Regarding licensing fee payments, Mr. Eriksen stated since the program’s inception, license fees have been paid by the drycleaner to the Illinois Department of Revenue (IDOR). For processing these license receipts, IDOR receives 4% of the gross license fee paid to cover their administrative costs. In FY14, this administrative fee totaled $64,775.

Currently the drycleaner must submit a completed DS-3 Form along with their license fee payment to IDOR.  IDOR validates the DS-3 Form and returns it to the drycleaner who then submits the validated form along with the license application, solvent log and solvent purchase invoices to the Fund for processing and issuance of a current year license. The current licensing process involving payment of the license fee to IDOR has proved to be cumbersome at best. Often the licensing process is delayed because the drycleaner has lost the validated DS-3 Form or IDOR has not coded the license fee payment to the correct drycleaner.

Having the drycleaner submit their license fee payment directly to the Fund eliminates the delay and the need to send the form to two (2) different state agencies and eliminates trying to identify data entry errors made by IDOR.  This would eliminate the 4% administrative payment to IDOR with a minimal or no increase in the administrative fee paid to the third party administrator to issue the drycleaning license. The licensing timeframe would be shortened by at least one week, which is crucial for many drycleaners who need to purchase solvent in January.

Mr. Eriksen noted the Council had approved seeking this legislative change last August and it was incorporated into HB4322 which was tabled in late February.

On a motion by Mr. Bredenkamp and a second by Mr. Young Kim, the Council voted 6-0 to authorize the Administrator to seek legislation requiring the license fee payment be submitted to the Drycleaner Trust Fund and not to IDOR. (Note: Mr. Daniel Kim had briefly excused himself from the meeting). 

Mr. Eriksen stated the Administrator would continue to seek legislative changes to the Trust Fund Act involving the definition of the annual license period and the definition of knowing selling or transferring drycleaning solvent. These proposed amendments had been previously approved by the Council.

Draft rule amendments to implement the legislative changes per HB3349 have been submitted to JCAR for review and approval.
    C.

Pollution Prevention:

     

Mr. Eriksen reviewed updated site inspection information with the Council, noting site inspections are one of two separate mechanisms promoting pollution prevention. The second is participation in a Council approved compliance program.

He stated based on recent site inspection results and the lack of violations noted by the compliance programs in recent years, the Administrator will inspect approximately the same percentage (i.e. 12%) of insured sites in fiscal year 2015 as they did in fiscal year 2014 instead of the 25% approved by the Council. This will save the Council approximately $16,000 in administrative costs for fiscal year 2015.

Mr. Polak requested the summary sheet of site inspection results for the past 14 years be sent to all the compliance programs.

Mr. Eriksen reported 589 individuals have completed the Environmental Best Management Practices for Perc Drycleaners course. There are 147 insured drycleaners who have not completed the course and are members of the following compliance programs:

  • AASBA Compliance Program – 13
  • Cleanus Compliance Program – 20
  • ESM Compliance Program – 18
  • NDI Compliance Program – 75
  • S&ECC Compliance Program - 21

Mr. Polak requested the Administrator send a list of these non-compliant drycleaners to each compliance program so they could follow-up with their members and encourage them to complete the course.

    D. Communication:
     

The Council continues to emphasize the need to communicate with the drycleaning industry. Mr. Eriksen summarized communication efforts that have taken place during the past fiscal year.

    E. Other Issues:
     

Sue Kratz stated the Council should consider increasing the license fees, solvent taxes or remedial deductible now in order to begin reducing the projected long term fund deficit.  Mr. Polak replied the Council needs several meetings to discuss the data presented today and get some different scenarios from the Administrator before moving ahead with any adjustments to the license fees, solvent taxes, or remedial program deductible.

  OTHER ISSUES AS PRESENTED
 

The next Council meeting is tentatively scheduled for Wednesday, October 15, 2014. The Council members the date did not present a conflict for them.

Mr. Polak suggested the Administrator distribute the Council packet to the Council members electronically. The Council members concurred this was a good idea to try and Mr. Eriksen will implement the suggestion with the October packet.

Mr. Eriksen noted former Rep Mike Smith passed away on August 9, 2014. Rep Smith sponsored the initial drycleaner trust fund legislation in 1997 and was a staunch supporter of the Fund.

Mr. McCarthy provided a brief update on HH Coleman’s appeals of the administrative law judge decisions on the assessment of civil penalties by the Council for delivering solvent to unlicensed drycleaners.

Mr. Daniel Kim commented he has been receiving negative comments from drycleaners who have recently been inspected by Cook County environmental inspectors.  Mr. Kang commented he has recently helped 13 drycleaners who have been assessed fines by Cook County or the City of Chicago.  Mr. Eriksen said he would make inquiries to try and determine why the recent increase in inspections/violations is occurring.
  PUBLIC COMMENT PERIOD
 

Mr. Polak asked if there were any comments from the public. There were none.

  CLOSED SESSION
 

Mr. Eriksen noted there were no issues for discussion in Closed Session.

There being no further business, on a motion by Mr. Bredenkamp and a second by Mr. Lewicki, the Council meeting adjourned at 3:15 p.m.
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