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Council approves $4.5 million note to satisfy DNR landfill closure assurance
Summary
The Common Council approved a taxable note anticipation note to backstop long-term landfill closure and care obligations after updated DNR liability estimates; one councilor voted no.
The Superior Common Council on Aug. 20 approved a resolution authorizing the issuance and sale of a $4,497,754 taxable note of 2013 to create a debt-service account and provide a standby source of funds related to landfill closure and long-term care requirements.
"We are required by the DNR to be able to prove on any day that we have enough funds set aside for closure of our landfill and for 40 years of long term care," a finance staff member, Jean, told the council during discussion, explaining why the city sought the note. Jean said auditors asked the city to update its liability calculation after the 2012 audit because the last calculation dated from 2010 and operational changes (new cells, capping) can increase or decrease the liability.
Jean said that earlier 2010 estimates for capping and long-term care were roughly $5 million, while a more recent estimate exceeded $7 million. She described the instrument before the council as a contingent liquidity arrangement, not a plan to draw on the funds: the note would be held by National Bank of Commerce and would be available only if the DNR required immediate closure actions that exceeded the city's cash-on-hand.
Jean emphasized that the stated 4.75 percent interest rate applies only if the city were to draw on the note and that the city did not plan to draw on it. "This isn't debt that we're drawing on," Jean said. "It's a note with National Bank of Commerce that ... would be able to authorize that note be drawn on" only in an unlikely emergency, she explained.
The council approved the resolution after discussion. Councilor McKenzie recorded a "no" vote; other roll-call responses were recorded as in favor. The resolution also directed the necessary execution and delivery documents and the establishment of a debt-service account as described in the resolution.
The note was described in the agenda as taxable and intended to create a credit facility to meet a DNR requirement that the city demonstrate adequate funds for landfill closure and 40 years of post-closure care. Staff said the note followed auditor recommendations and updated DNR-calculated liability figures; exact drawing conditions and account balances that would trigger a draw were described as contingent on DNR findings and the note terms.
No additional implementation timetable for drawing on the note was adopted; staff said the note was a precautionary financial assurance measure and that the city is not planning to use the funds except as a contingent resource.
