HomeMy WebLinkAbout2010-09-07 City Council Continued Minutes Approved G8. O-411112,41
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City Council Minutes—September 13, 2010
At 7:30 p.m. Mayor Maxwell called the continued Anacortes City Council meeting of September 7, 2010 to
order. Roll call found present: Nick Petrish, Erica Pickett, Brad Adams, Bill Turner, Cynthia Richardson
and Brian Geer. Kevin McKeown was excused.
Planning Commission Chairwoman Laurie Gere called the Planning Commission continued meeting of
September 8, 2010 to order for a joint study session. She recognized Planning Commissioners Bertis
Rasco, Lin Folsom, Clay Leming, Stuart Janke, Larry Nelson and Marty Laumbattus as present.
Mayor Maxwell thanked the Wastewater Treatment Plant operators for their hard work over the past year.
He reported that the plant recently won a Partners for Clean Air Platinum Award from the NW Clean Air
Agency for excellence in promoting cleaner air. The Mayor said the plant has significantly reduced the
use of diesel in its operations thereby reducing particulate matter in the air. He said the plant also won an
outstanding performance award from the Department of Ecology for protecting Washington State waters.
Review and Approval: Agreement Regarding Water Service
Mayor Maxwell introduced the agreement by explaining that in addition to providing conventional
governmental services the City of Anacortes also owns and operates the largest water utility in Skagit and
Island Counties and provides safe and affordable water to over 58,000 residences and businesses as
well as the Skagit PUD, Swinomish Tribal Community, La Conner, Oak Harbor, NAS Whidbey, and the
Tesoro and Shell refineries. The Mayor noted that the City's water treatment plant on the Skagit River has
supported local economies for fifty years. He recalled that in 1996 Anacortes signed a monumental public
policy Memorandum of Agreement regarding water rights to the Skagit River. The agreement gives
Anacortes rights to 54.9 million gallons per day (MGD); in contrast, the average daily demand currently is
21 MGD. The Mayor said the agreement anticipates the future water needs of the community and
includes a Water Shortage Response Plan that activates during low flow periods. The Mayor asked
Council to support the proposed water service agreement with Tethys which will fit with the City's long
range water planning and has the potential to add jobs to the community. The Mayor then introduced Mr.
Steve Winter, CEO of Tethys Enterprises, Inc.
Mr. Winter summarized his credentials and provided some background on his firm. He stated that the
firm's goal is to encourage growth and prosperity in the north Puget Sound region with job creation in the
manufacturing sector as its primary aim. He said their 2008 research and feasibility study determined
which resources were available in the region and which industries needed those resources. They then
worked on attracting those industries to the region and discussing the business plan with suitable
municipalities. Mr. Winter said Anacortes has abundant water, low cost high volume rail access, a skilled
work force, a attractive and desirable community, and available industrial land. Their research showed
that food and beverage manufacturing had the highest correlation to needing those resources. Tethys
determined that a large scale multi-line beverage manufacturing facility here could transform the
environmental footprint and efficiency of the United States beverage industry. It would be built with private
funding and would require no local concessions but to secure clients and investors Tethys would need to
demonstrate the contractual ability to provide water up to 5 MGD. Mr. Winter said Anacortes has sufficient
water resources and rights to meet this need and that its actual capacity will support all projected demand
including Tethys through 2100. Tethys will contribute to new capital improvements to water and
wastewater treatment facilities and will help lower the capital allocation for all other Anacortes water
users. He said beverage manufacturers are eager to respond and the business plan is timely. He said
small bottling plants are no longer efficient and that manufacturers want to consolidate and to take the
shipping savings that rail distribution offers. He said the state of the art LEED-certified facility will feature
the latest in green energy and water saving technology and will be a model for environmentally sound
beverage manufacturing. Biodegradable PET bottles will be used. Tethys expects the 1 million SF facility
to create 500-1000 new jobs with an average salary of$59,000. Construction spending will be over
$300M in the short term. Mr. Winter concluded that the proposed contract was the result of four months of
negotiations with the City and said Tethys is eager to begin, suggesting that the ecologically superior
plant can be part of Anacortes's bright future. He requested Council approval of the contract.
Anacortes City Council Minutes September 13, 2010 1
Mayor Maxwell then introduced Steve DiJulio of Foster Pepper, the City's special counsel regarding
utilities for over 15 years. Mr. DiJulio noted that municipal water utilities are operated in a proprietary
capacity as a business activity. He then highlighted aspects of the proposed water agreement. The
property to be served must be located in the city or be subject to annexation by the city in a timely
fashion. Noting that 90% of the City's water is purchased by contractual customers, Mr. DiJulio said the
proposed agreement is modeled on the contracts already in place for those other customers: customers
pay for the utility's operations and maintenance expenses based on water use and pay a pro rata share
for capital expenses based on the City's commitment to meet a particular projected level of demand.
Contract rates are adjusted every 3-5 years. Mr. DiJulio said that under the proposed agreement, if
Tethys is able to site and build the facility the cost to take the water treatment plant to the next level, from
21 MGD to 32 MGD, would be borne by Tethys. He noted that the City retains all rights to withhold
service during low flow periods or if bills are not paid. He concluded that comments received from Mrs.
Richardson will be incorporated into the revised final contract.
Mr. Petrish asked if the water will be fluoridated. Mr. DiJulio said no, fluoride is only added when the
water enters the City. Mr. Petrish asked about Item 13.7 regarding waiver of immunity under industrial
insurance. Mr. DiJulio explained that worker's compensation law holds employers responsible for worker
injuries; if someone else is responsible for an injury the City wants to be able to look to that party for
liability and State law says that if there is a waiver of immunity the contract must explicitly state that it's
been mutually negotiated. Mr. Petrish noted that Tethys may not own and operate the proposed facility.
Mr. DiJulio agreed that it could be operated by a successor entity but observed the agreement provides
for City control of assignment of contract for the first three years and City approval after that time.
Mrs. Richardson said it is the City's responsibility to encourage economic growth and that the Growth
Management Act provides for urban growth areas assuming the city will grow in appropriate ways. Noting
that March Point is in the urban growth area, she said expanding industry there is appropriate regardless
of whether a company wants to purchase water and said the City anticipates annexing parts of the urban
growth area over time. Mr. DiJulio agreed and said the City's 2003 agreement with Skagit County
projected annexation including in this proposed area. He added that the proposed water service
agreement includes a framework for providing water if the project is built outside the current service area.
Mr. Petrish observed that the proposed water agreement is the first piece of the puzzle that allows Tethys
to start putting the rest of the project together. Mr. DiJulio agreed. Mr. Turner asked what annexation "in a
timely manner" means. Mr. DiJulio said if annexation is required both parties want it to happen sooner
rather than later but the plant location has to be determined first. Mr. Adams asked if Tethys is committing
to using the full 5 MGD or only up to 5 MGD and asked where the contract says Tethys is part of the
water plan and will share the cost of capital improvements. Mr. DiJulio said Tethys is not obligated to use
any particular amount of water but like other contractual customers once they commit to an amount their
rates will reflect their share of the system cost. He said the water system plan provides for service to this
area so no update is needed for this facility if it is built. Mrs. Pickett clarified that"up to 5 MGD" means
Tethys will have to pay for a fraction of the capital cost to support that amount. Mr. DiJulio said they will
pay a capital cost based on forecast demand for each contract period once they commit to a quantity.
Turner reminded the audience that the City is about to undertake a$60M upgrade to the water treatment
plant and said the refineries may not always need the water Anacortes has available to sell so having
another large customer is a great thing for the city. Mrs. Richardson responded to emailed concerns from
citizens that the 5 MGD will cause salmon spawning streams to run dry, pointing out that the water
treatment plant takes water out of the river far below the spawning grounds. Mr. Adams agreed citizens
have been concerned about effects on the environment and salmon habitat but said the proposed
agreement provides for low flow scenarios. Mayor Maxwell reiterated that is part of the 1996 water rights
Memorandum of Agreement. Mr. DiJulio added that all water rights are subject to prioritized uses in low
flow conditions. Mr. Geer praised the opportunity to create jobs and moved, seconded by Mrs.
Richardson, to approve the agreement with Tethys. Mayor Maxwell read a brief statement from Mr.
McKeown supporting moving forward with the agreement. Vote: Ayes— Petrish, Pickett, Adams, Turner,
Richardson and Geer. Motion carried.
Anacortes City Council Minutes September 13, 2010 2
Task Order: MWH - Heat Exchanger Design
Assistant City Engineer Matt Reynolds asked Council to award a task order to MWH Americas, Inc. for
engineering services related to replacement of the Wastewater Treatment Plan's sludge incinerator heat
exchanger. He said the existing exchanger is showing signs of fatigue and needs to be replaced to
support continued operations. The task order provides for a life cycle cost analysis to size the exchanger,
preparation of bid documents for both procurement and installation, and investigation of other potential
uses for the waste heat. The amount of the task order is$81,311. Mayor Maxwell emphasized that re-use
of the heat is a key design piece of the task order. Mr. Turner asked if the unit can be made more
efficient. Mr. Reynolds said MWH will investigate that potential. Mr. Turner moved, seconded by Mr.
Adams, to award the task order. Vote: Ayes— Pickett, Adams, Turner, Richardson, Geer and Petrish.
Motion carried.
There being no further business, at approximately 8:13 p.m. Mayor Maxwell adjourned the continued
Anacortes City Council meeting of September 7, 2010. City Council and Planning Commission then
convened in a joint study session for an informational presentation on Hearing Examiners.
Anacortes City Council Minutes September 13, 2010 3