07-22-1997 Council MinutesApPROVED BY THE CITY COUNCIL ON AUGUST 12, 1997
CITY COUNCIL MINUTES
OF A REGULAR MEETING
ORANGE, CALIFORNIA
July 22, 1997
The City Council ofthe City of Orange, California convened on July 22, 1997 at 4:30 P.M. in a
Regular Meeting in the Council Chambers, 300 E. Chapman Avenue, Orange, California.
4:30 P.M. SESSION
1. OPENING
1.1 PLEDGE OF ALLEGIANCE TO THE FLAG
Led by Mayor pro tem Slater
1.2 ROLL CALL
PRESENT - Murphy, Slater, Mayor Coontz, Spurgeon, Alvarez ABSENT -
None 1.3
PRESENTATIONSI ANNOUNCEMENTS/ INTRODUCTIONS Bobbie Druilhet,
Sister City coordinator, introduced Estudiantina de la Universidad Autonome de
Queretaro, from Queretaro, Mexico, who entertained the Council with a musical performance.
Mayor Coontz
announced the City received good news today on its long-standing legal battle
against Refco Securities. The City will recover approximately $5.7 million in investment
losses, plus interest losses, caused by the fraudulent activities of Steven Wymer,
a former outside investment advisor for the City. Refco Securities must pay the City
of Orange $4,253,000.00 for their role in the four year massive fraud scheme which resulted
in over $100 million in losses to nineteen different cities and states across the nation.
The City Attorney's office is reviewing the decision, which is subject to appeal,to
determine the net amount which will be received by the City. It is not known whether Refco
Securities intends to file an appeal. The City Attorney will put out a press release on
this issue. NOTE: This announcement was made again at the 7:00 p.m. session.The
City Manager presented an Employee Recognition Service Award to Christine Ludlow
for her 10 years of service with the City.The
President of the City of Orange Chapter of the National Management Association NMA)
presented a Certificate of Recognition to Lori Benicky, the Chapter's Manager of the
Year.1.
4 PROCLAMATIONS A
proclamation was presented to Cy Bauman, Director of the Christmas in April Organization,
for its service to residents of the City of Orange. Also recognized were Randy
Vannoy, Rich Panitz, Chris Gorman, Tamara Organ, and Ann McEneany.PAGE
1
CITY COUNCIL MINUTES July 22, 1997
2. CONSENT CALENDAR
2.1 Declaration of City Clerk, Cassandra J. Cathcart, declaring posting of City Council
agenda of a regular meeting of July 22, 1997 at Orange Civic Center, Main Library,
Police facility at 1107 North Batavia and the Eisenhower Park Bulletin Board and
summarized on Time Warner Communications; all of said locations being in the City of
Orange and freely accessible to members of the public at least 72 hours before
commencement of said regular meeting.
ACTION: Accepted Declaration of Agenda Posting and authorized its retention as a
public record in the Office of the City Clerk.
2.2 Request Council confirmation of warrant registers dated July 8, 11 and 17, 1997.
ACTION: Approved.
2.3 Request approval of City Council Minutes, Regular Meeting, July 8, 1997.
ACTION: Approved.
2.4 Consideration to waive reading in full of all ordinances on the Agenda.
ACTION: Approved.
BIDS
2.5 Request Council approve plans and specifications and authorize advertising for bids for
improvements to various bus stops within the City (Bid No. 978-05). (S4000.S.3.1.
4)FISCAL IMPACT: $58,232 from OCTA Bicycle Pedestrian Funds are allocated to
the City for this project from Account No. 550-5032-483399-
1332 (ADA Bus Retrofit).ACTION: Approved plans and specifications and authorized
advertising
for Bid No.978-05.2.6 Request Council approve plans and specifications and
authorize advertising for bids for Community Development Block Grant sewer
improvements on Main Street from Sycamore Avenue to Alvarez Avenue and Shaffer
Street from Walnut Avenue to Oakmont
Avenue (S-189). (S4000.S.7)FISCAL IMP ACT: Funds are budgeted
in the Capital Improvement Program
and available in the following account:509,033.00 - Account
No. 310-6059-483200-1815 (CDBG Sewer Construction)ACTION: Approved
plans and
CITY COUNCIL MINUTES July 22, 1997
2. CONSENT CALENDAR (Continued)
CLAIMS
2.7 CLAIMS FOR DAMAGES FROM: (C3200.0)
a. Sandra Falk
b. Lindle Willey
ACTION: Denied claim for damages and referred to City Attorney and Adjuster.
CONTRACTS
2.8 Request Council approve Amendment No.1 to Contract AGR-0332.B for traffic
signal maintenance between the City of Orange and Peek Traffic/Signal Maintenance,
Inc.SMH). (A2lO0.0 AGR-0332.
B.1)FISCAL IMPACT: $85,000 for this contract is available in Gas Tax
Exchange Account No. 273-
5032-427100 (
Contractual
Services).ACTION: Approved.PERMITS 2.9 Request Council approve NO FEE parking permits in the
South Orange Municipal Parking lot for the Assistance League of Orange (10), and First United
Methodist Church (2) and to review this feewaiver annually. (S4000.
S.3.1.1)FISCAL IMPACT: Loss of$1,440
annual parking
permit
fees.ACTION: Approved.RESOLUTIONS 2.
10 RESOLUTION NO. 8778 A Resolution of the City Council of the City of Orange
expressing appreciation to Carol A. Allender of the Finance Department, Business License
Division, and commending her for sixteen years of loyal and dedicated
service. (C2500.
J.l)ACTION: Approved.2.
11 RESOLUTION NO. 8800 A Resolution ofthe City Council ofthe City of Orange
amending Resolution No. 8766 nunc pro tunc. 205-235 W. La Veta Avenue -
Condemnation of Walker
Property C2500.
M.14)
CITY COUNCIL MINUTES July 22, 1997
2. CONSENT CALENDAR (Continued)
REMOVED AND HEARD SEP ARATEL Y)
2.12 RESOLUTION NO. 8801
A Resolution of the City Council of the City of Orange establishing the procedures, rules
and regulations for the Investment Advisory Committee. (OR1800.0.27.13)
Mayor Coontz recommended the last paragraph, Section 3, be amended to include
wording, "that no member ofthe Committee shall be financially interested in any
contract, or otherwise conduct any business with any member ofthe City Council, the
Finance Director, the City Manager, or the Treasurer, the City, or any of its agencies,
either on an individual basis or as a partner, major shareholder, member, or employee of
any firm."
MOTION - Mayor Coontz SECOND -
Spurgeon AYES - Murphy,
Slater, Mayor Coontz, Spurgeon, Alvarez ACTION: Approved with
amendments.REMOVED AND HEARD
SEPARATELY)2.13 RESOLUTION
NO. 8802 A Resolution of
the City Council of the City of Orange establishing an Audit Committee and setting forth
procedures, rules and regulations for said Committee. (OR1800.0.27.17)Mayor Coontz recommended
the last paragraph, Section 3, be amended to include wording, "that no
member of the Committee shall be financially interested in any contract, or otherwise
conduct any business with any member of the City Council, the Finance Director, the
City Manager, or the Treasurer, the City, or any of its agencies,either on an
individual basis or as a partner, major shareholder, member, or employee of any firm."MOTION -
Mayor Coontz
SECOND - Spurgeon AYES - Murphy,
Slater, Mayor Coontz,
Spurgeon, Alvarez ACTION: Approved with amendments.SPECIAL EVENTS
2.14 Request from
Arrowhead Pond
and River Complex of Anaheim to conduct a special event/pageant, Jet Jam '97, in
the Santa Ana River north of Katella Avenue on August 15,16 and 17, 1997. (p1300.0.
9)PAGE 4
CITY COUNCIL MINUTES July 22, 1997
2. CONSENT CALENDAR (Continued)
FISCAL IMP ACT: There will be no activity on the east side of the river this year with
minimal City services anticipated. A check for $2,000 has been submitted as a bond if
City services should be required.
ACTION: Approved, subject to conditions.
TRACT MAP
2.15 Request Council approve for recordation final Tract Map Nos. 15371 and 15443, Hewes
Avenue and Rancho Santiago Boulevard - Polygon Communities, Inc. (T4000.0 TRM-15371)
NOTE:
A request was received from Polygon Communities, Inc. that this item be postponed.
FISCAL
IMPACT: None.ACTION:
Postponed.TRAFFIC
ISSUES 2.
16 Request to remove Villareal Drive from the City's Speed Zone Ordinance and have it posted
for a prima facie 25 MPH speed limit that is enforceable. (S4000.S.3.4)FISCAL
IMP ACT: Funds are available in Gas Tax Exchange Funds Acct. No. 273-5032-
427100 (Contractual Services).
ACTION: Approved.
2.17 Re-evaluation of a request to install an 'All-Way' STOP at the intersection
of Walnut Ave. and Lincoln St. (S4000.S.
3.3)FISCAL
IMPACT: None.ACTION: Received
and filed.MOTION -
Spurgeon SECOND - Alvarez
AYES - Murphy, Slater, Mayor Coontz, Spurgeon, Alvarez Item
Nos. 2.12 and 2.13 were removed and heard separately. Item No. 2.15 was postponed.
The remainder ofthe Consent Calendar was approved as recommended.END
OF CONSENT CALENDAR PAGE
5
CITY COUNCIL MINUTES July 22, 1997
3. REPORTS FROM MAYOR COONTZ
Mayor Coontz reported the Mayor and the City Council has been extremely concerned about the
criminal and civil investigation of the City's recycling contractor. No one has yet been charged,
and the Council has yet to see the final determination of the lost revenue. The City has acted to
meet its key objectives since the investigation began, to keep rates low, to provide uninterrupted
service, and to get any lost revenue back. A few of the actions that Council has taken since the
investigation began include: 1) the formation of an audit committee that would report to the
City Council on matters concerning internal City controls; 2) direction to staff to propose an
independent internal audit function within the City; and 3) direction to staff to propose a waste
management committee to help with the oversight ofthe City's trash and recycling contracts.
Several weeks ago staff began to prepare tonight's agenda item containing rate adjustments and
denying extensions to the Orange Disposal Service (ODS) and Orange Resource Recovery
Systems (ORRS) contracts. The City contracted with Hilton Farnkopf and Hobson to review all
aspects of collection, recycling and disposal services. Earlier this month, the City Attorney
issued a Notice to Cure Default to ODS and ORRS for alleged violations ofthe contracts.
The Hambarian's have agreed to put $1 million in the bank as security, that the City can use, if
needed, to recover any salvaged revenue losses. Money cannot be withdrawn from the account
without the signature of the Mayor and with City Council approval. The amount oftime the City
can make a claim against ORRS has been extended. A press release was made at 4 p.m. today
about the escrow account. A background report which includes the proposed actions for the
7:00 p.m. Session is available to the public in the City Clerk's office.(A2lO0.0 AGR-2188.
1)NOTE: Item No. 6.1, Report from the City Manager, was heard at this
time.4. REPORTS FROM
COUNCILMEMBERS 4.1 Mayor pro tem Slater - Status of Old Towne National Register Historic District and
potential tax implications.
Mayor pro tem Slater indicated it is his understanding that the Mills Act benefits residential
homes, whether owner occupied or income producing property. It was requested that staff
explore and report back in the near future information on setting up a Mills Act Program for
residential neighborhoods that may result in adopting a policy for historic property preservation
agreements. This would accomplish tax relief and encourage rehabilitation of historic structures,
with indirect positive impacts on local businesses, and increase community pride. Several other
communities, and the City of Tustin, most recently, implemented a similar type program.
Council discussion ensued relative to whether the Mills Act includes commercial properties; how
applicable the Mills Act is in the City of Orange on a percentage basis and what monies are
available in the state; the benefit it would or would not have to the City or historic structures in
commercial redevelopment areas; and the benefits of the Act to property owners having
contributing properties to the district, and to non-profit
organizations.PAGE
CITY COUNCIL MINUTES July 22, 1997
4. REPORTS FROM COUNCILMEMBERS (Continued)
Carole Walters, 534 N. Shaffer, expressed disappointment with Mayor pro tem Slater for placing
the item on the agenda and speaking in favor of the historic district; indicated not everyone in
Old Towne wanted the historic designation; asked that Steve McHarris not be appointed to his
taxpayer paid position on the Design Review Board because he serves on the Old Towne
Preservation Association's Board and gathered names for the historic list; and asked how much
the Ageis Report cost.
Barbara DeNiro, (address on file), commented that Old Towne Preservation Association will
conduct an information meeting in mid-September, indicating she hopes they have
more adequate facilities and parking to accommodate everyone than they did last time, and
all attending will be allowed to speak without time
constraints.Corinne Schreck, 446 N. James, asked if the people who apply for the program have to
get blessings from the City and the County because of the loss of taxes that would be
received,indicating it goes by percentages. Ms. Schreck commented it is unethical to promote a
program that could put money in your pocket on property you might own or manage. This could
benefit Mayor pro tem Slater ifhe
voted.Mayor Coontz indicated all questions will be addressed when a review by the
Community Development Department is completed on CEQA and the Mills
Act.5. REPORTS FROM BOARDS, COMMITTEES, AND
COMMISSIONS 5.1 Re-designate Mayor pro tem Slater as the voting board member to
the Orange County-City Hazardous Materials Emergency Response Authority (
OCCHMERA) and the Fire Chief as the alternate boardmember. (OR1800.0.
3.3.1)
MOTION - Spurgeon SECOND -
Murphy AYES - Murphy, Slater, Mayor Coontz, Spurgeon, Alvarez
Moved to approve.
5.2 Authorize the City Manager to re-assume the appointment responsibilities for
the Staff Home Improvement Committee. (OR1800.0.3.
2)MOTION - Mayor Coontz
SECOND - Slater AYES -
Murphy, Slater, Mayor Coontz, Spurgeon, Alvarez Moved to
approve.PAGE 7
CITY COUNCIL MINUTES July 22, 1997
6. REPORTS FROM CITY MANAGER
6.1 Update on the Orange Disposal Service/Orange Resource Recovery Systems.
The City Manager reported the escrow agreement is a significant step in protecting the City's
interest in meeting key objectives. Actions taken by staff since the last Council meeting include:
1) met twice with ODS/ORRS representatives to review outstanding contract issues; 2) provided
ODS/ORRS with the proposed rate adjustments, which are from the 1996 rate analysis developed
by ODS/ORRS auditor and approved by their Board of Directors; 3) rotated City staff in direct
contact with ODS/ORRS; and 4) met again with Arthur Andersen to discuss the scope of any
auditing ofthe ODS/ORRS rate analysis. The City's goal is to assure the accuracy and
completeness of the previous audits and the rate analysis, and to assure the implementation and
execution of sufficient internal control procedures. The City will continue to research the issues
and potential consequences of any early termination ofthe contracts. Any premature action on
the City's part could expose the City to unnecessary financial liability, which would be an
additional financial burden for the City's rate payers.
In response to questions and issues raised by Councilmembers, the City Attorney indicated he
has not completely reviewed the response received on July 21st to the City's Notice to Cure
Default. The review should be completed in a day or two and will be made available. The $1
million escrow account was set up in good faith. It is not an admission of liability on the part of
ORRS nor is the City admitting that the revenue shortfall is limited to that amount. The City will
be able to access those funds if a judgment or resolution is reached that there is a revenue
shortfall.
Carole Walters, 534 N. Shaffer, commented it is illegal under Proposition 218 to combine City
service charges; the charges must be in separate accounts; and requested a change within 30
days. A separation of charges was requested on residential bills. It was indicated that a
surcharge must go into the particular service account and not to the general account, and that the
City should not charge for recycling services. It was requested that the $3.00 charge on the
recycling bins be investigated and taken off the bill.
Barbara DeNiro, (address on file), asked: 1) if all the audits come to the same conclusion; 2) if
Council received her letter of July 17th with an attached letter to the L. A. Times; 3) why the City
continues payment on the MRF loan for the recycling facility and does not declare foreclosure,
asset seizure, or apply a lien ifthe allegations of wrongdoing prove true, and remove the
surcharge; 4) when the request for the 36% rate hike increase came about and where is it
addressed; 5) if the alleged breaking of a contract in any form is reason to terminate the contract
regardless of pay back, or an escrow account; and 6) why would the City threaten to shut offher
water for three non-payments of$2.00 each for waste management services not
rendered?Nick Lall, 6231 Mabury Avenue, asked if there is any current update on when it is
anticipated the investigation will be completed, and if there are any convicted felons on the Board
of Directors of ORRS or
ODS?PAGE
CITY COUNCIL MINUTES July 22, 1997
6. REPORTS FROM CITY MANAGER (Continued)
In response to questions raised by the public, the City Manager responded that the issues raised
by Ms. Walter's will be researched and the information provided. There are no audit results at
this time as the City is currently in the audit process. Payment continues on the MRF loan as
business must be conducted as usual and the investigation of ODS/ORRS continues. The rate
increase was from a rate analysis prepared by ORRS's auditor, Alder, Green and Hasson, which
the City has not accepted without further analysis. The City does not have a date when the
investigation will be completed, and indicated he has no knowledge of any convicted felons on
the Board of Directors ofORRS or ODS.
Corinne Schreck, 446 N. James, asked why she pays four times per unit for the four units she
owns on Orange Street on the recycling portion of her water bill; requested a breakdown of
services provided for tree trimming, street sweeping, and sewer hook-up, and an
understanding ofthe sanitation
charges.The Director of Public Works reported rate structures vary with single-family,
commercial or multiple uses. The City Manager indicated he would research the information, as well
as issues directly related to Proposition 218, and provide it to the Council and the public at a
later date.Council discussed the need to revisit problems associated with City service charges and
that the charges be itemized once the research
is completed.Z. Harry Astor, 333 City Blvd. West, Orange, Counsel for ODS and ORRS,
commented a mischaracterization of the problem is that somehow the citizens of the City of Orange,
or maybe the City itself, has in some way been harmed. The Hambarian family and ORRS/
ODS have become victims of a problem that has arisen which they discovered through the
audit performed by their auditor. Private funds were placed into the corporation. It is believed that
all items identified as curable defaults in the City's Notice of Default have been cured. ODS/
ORRS has complied. To the best of their knowledge, there are no other funds missing. Because
there might be, which ORRS/ODS is unaware of, the family has put up $1 million. It was indicated
that he would have to review with the Hambarian family whether there is anyone on the
Board of Directors at ORRS/ODS with a criminal record; there is a possibility there is a record with
one of the members. Jeff Hambarian has not received any salary since his termination, except
for a
separation compensation.6.2 Report on the establishment of City Internal Audit Function and the
related budget for personnel
and operations.FISCAL IMP ACT: Appropriation of $194,400 from General Fund Reserves is
requested to establish this
new function.MOTION - Mayor
Coontz SECOND - Alvarez
AYES - Murphy, Slater, Mayor Coontz, Spurgeon, Alvarez PAGE
9
CITY COUNCIL MINUTES July 22, 1997
6. REPORTS FROM CITY MANAGER (Continued)
Moved to continue to August 12, 1997.
7. ADMINISTRATIVE REPORTS
7.1 Treasurer's Report for the period ending June 30, 1997. (Report on file in the City
Clerk's Office.) (C2500.F)
The Finance Director presented the Treasurer's Report.
MOTION - Mayor Coontz SECOND -
Slater AYES - Murphy,
Slater, Mayor Coontz, Spurgeon, Alvarez Moved to receive
and file the report.7.2 Report
from the Director of Public Works on the adoption of a policy for the implementation of a
Neighborhood Parking Permit Program and a proposed reduction of the Permit Parking
Program Application Fee from $1500 to $400 for an initial study continued from July
8, 1997). (Report on file in the City Clerk's Office.) (S4000.S.3.1.2)The Director of
Public Works reported staff is recommending a $400 fee be required and collected at the
time the petitions are presented to the City. The intent ofthe fee is to cover processing through the
system. The detailed parking study was removed.Gary R. Meserve,
153 S. Cambridge, asked why citizens have to pay a fee for staffto study traffic conditions, and
addressed the traffic problems and permit parking fees as it pertains to residents on Cambridge
Street.Dean Lippi, 144
S. Cambridge, asked if $400 covers the complete cost ofthe application?The City Manager
responded there is no correlation for requests from Cambridge Street to an increase in fees.
The Director of Public Works explained the proposed fee does not recover the full costs of
processing, but confirmed $400 is the cost of the entire process.Carole Walters, 534
N. Shaffer, stated that PJ Mead's does not have enough parking and it is a non-conforming use.
Mayor Coontz
suggested when a parking permit is requested, the resident(s) be provided with a simple sheet
of information which outlines what the program entails, and they should not be assured they
will obtain the permit because the $400 fee is paid. Councilman Murphy suggested the form
act as a petition to make sure council receives all the information.PAGE 10
CITY COUNCIL MINUTES July 22, 1997
7. ADMINISTRATIVE REPORTS (Continued)
MOTION - Murphy SECOND -
Slater AYES - Murphy,
Slater, Mayor Coontz, Spurgeon, Alvarez Moved to adopt
the policy for the implementation of a 'Neighborhood Parking Permit Program'and reduce the
Permit Parking Program application fee from $1500.00 to $400.00, with the suggestions duly noted
per discussion.7.3 Request
from Richard R. Carlson, 159 S. Cambridge, for waiver of the $1,500 parking permit application
fee. (S4000.S.3.1.2)NOTE: Mayor pro
tem Slater indicated he would abstain from voting due to a property interest on this block.
The applicant was
not present.FISCAL IMPACT: Reduction
of $1 ,500 in revenue for costs of conducting neighborhood permit parking program.MOTION -
Murphy SECOND -
Alvarez AYES - Murphy,
Mayor Coontz, Spurgeon,
Alvarez ABST AIN- Slater Moved to continue.
8. LEGAL AFFAIRS -
None 9. RECESS
TO THE MEETING OF THE
ORANGE REDEVELOPMENT AGENCY 10. ORAL PRESENTATIONS Carole Walters, 534 N.
Shaffer, asked how
much the City has paid the last few years in attorney fees for the Wymer case, the Orange
County bankruptcy, and the Bonneville lawsuit, indicating the residents ofthe City should know.The
City Attorney responded attorney fees are
listed in the annual budget. Regarding the Bonneville lawsuit, a calculation would need to
be completed to determine the City's net if arbitration is upheld.Corinne Schreck, 446 N.
James, commented on
the announcement that will be made at the 7:00 p.m. session on the Historic Register,
and read a recent newspaper article on erosion of freedom.PAGE 11
CITY COUNCIL MINUTES July 22, 1997
10. ORAL PRESENTATIONS (Continued)
Nick Lall, 6231 Mabury Avenue, indicated big problems to citizens are not perceived as big
problems by the Mayor or the Council; commented and requested clarification on the word
personal attack. It was stated that a democracy needs good communication, interaction with its
citizens, dialogue, and respect, indicating healthy debates are needed, and dictatorship is not
wanted.
Mayor pro tem Slater announced that Orange's YMCA, which serves Orange, Anaheim Hills,
and Villa Park, is having their 75th Anniversary Picnic, Saturday, August 9th at Irvine Lake from
3 p.m. - 9 p.m.URGENT
ITEM The
City Attorney recommended the City Council also consider in Closed Session this urgent item
in order to provide direction to the attorneys in the City of Orange v. Refco Securities.MOTION -
Spurgeon SECOND - Slater
AYES - Murphy, Slater,
Coontz, Spurgeon, Alvarez Moved that the need
for a Closed Session arose after the posting ofthe agenda and that there is a need for immediate action.
11. RECESS The City
Council recessed
to Closed Session at 6:32 p.m. to consider the urgent closed session item and for the
following purposes:a. Conference with Legal
Counsel pursuant to Government Code Section 54956.9 - existing litigation: Michelle Hughes vs. City
of Orange, Orange County Superior Court Case No. 75 9299.:b. To consider and
take
possible action upon such other matters as are orally announced by the City Attorney, City Manager, or
City Council prior to such recess unless the motion to recess indicates any of the matters
will not be considered in Closed Session.The City Council reconvened from
Closed Session at 7:00 p.m. No announcements were made.7:00 P.M. SESSION
12.1 INVOCATION Given by
Pastor Barela, Household
of Faith Family Church 12.2 PLEDGE OF ALLEGIANCE
TO THE FLAG Led by Mayor pro tem
Slater PAGE 12
CITY COUNCIL MINUTES July 22, 1997
12.3 ANNOUNCEMENTS
Joan Crawford, President of Old Towne Preservation Association announced the Keeper notified
OTPA the entire residential area of Old Towne has been added to the National Registry of
Historic Locations. Steve McHarris, who compiled the 426 page application, commented on the
significance ofthe nomination to Old Towne.
Barbara DeNiro, (address on file), commented Old Towne could not survive without the rest of
the City's support; and expressed her views on OTPA's role in the City.
Councilman Spurgeon announced the Council would be adjourning tonight's meeting in memory
of Chester McKowan, a 25 year employee with the City. Diana Seeley, daughter of Mr.
McKowan, accepted the acknowledgment.
12.4 INTRODUCTIONS
Charles F. Wilson was acknowledged for his heroic efforts on behalf of Vern 1. Salzburnn
12.5 PROCLAMATIONS
Leadership Orange Class of 1997 was recognized for their $3,000 donation to City's Mobile
Recreation Program.
12.6 PRESENTATIONS - None.13.
REPORTS FROM CITY MANAGER 13.
1 Proposal to reduce trash and recycling processing rates. (Report on file in the City Clerk'
s Office.)Background -
The annual adjustment oftrash and recycling processing rates is presented for City Council
consideration. This action is independent and separate from the current City Police Department investigation
of the City's trash and recycling contractors.Description - The
City Manager proposes that the City Council reduce City payments to Orange Disposal Services (ODS)
and Orange Resource Recovery Systems (ORRS), to lower trash pick up and processing
rates, to authorize two one-time refund credits to City sanitation customers; to direct the
City Manager to negotiate for independent outside CPA assistance in examining the most recent
ODS and ORRS rate reviews, and to direct the City Manager to deny an ODS contract extension
request and to notify ORRS ofthe termination ofthe automatic extension provision in
the ORRS contract. (A2lO0.0 AGR-2188)Fiscal
Impacts:The
proposed reduction in payments to ODS and ORRS will benefit ratepayers through reduced rates.
Proposed City payment reductions to ODS and ORRS are accompanied by proposed PAGE
13
CITY COUNCIL MINUTES July 22, 1997
13. REPORTS FROM CITY MANAGER (Continued)
reductions in charges to City sanitation customers. Thus, there is a neutral fiscal impact on the
City's Sanitation Fund of these concurrent ongoing reductions.
One time refund credits totaling $25.18 per City residential customer from the sale of recyclable
materials and from the increased number of customers over which fixed Materials Recovery
Facility (MRF) debt service payments are spread, together with a one-time credit of $12.12
per City non-residential customer from the increased number of customers over which
fixed MRF debt service payments are spread, will reduce the fund balance in the City's Sanitation
Fund by approximately $1.1 million over the next
two months.The estimated expense of printing and mailing the proposed insert in the water bill is $1,
000, to be paid out of the
Sanitation Fund.A. Recommendations for Reduced City Sanitation
Customer Rates:
Recommendation A-I:Effective August 1, 1997, direct the Finance Director to reduce the portion
of the "State Mandated Program" rate that residential customers pay to the City for the cost
of recycling and disposal from the currentrate of $5.39/month to $5.29/month to reflect the
reduction in County landfill gate fees
to $22/
ton.Recommendation A-2:Effective August 1, 1997, direct the Finance Director to reduce the
portion of the "Waste Management Program" rate that customers pay to the City for
Orange Disposal Services' (ODS)cost of trash collection from the current rate of$3.29/month to the proposed rate
of $2. 89/month.This reduction reflects reductions recommended in the Rate Study
prepared by ODS' former Auditor Steven Nakada, approved by the ODS Board, and submitted to the
City by ODS on March 10, 1997. The City reserves the right to authorize additional
reductions in the event independent CPA analysis subsequently determines that any such
further
reductions may
be required.Recommendation A-3:Effective August 1, 1997, direct the Finance Director to reduce the
portion of the rate that customers pay to the City for MRF debt service costs from the current rate of $
2.25/month to the proposed rate of $1.95/month to reflect the larger customer base
over which fixed
debt service
payments are spread.Recommendation A-4:Effective August 1, 1997, authorize the Finance Director to
implement the application of a one-time credit in the amount of $13.06 to Orange
residential customers to rebate revenue received by the City to date from the sale of salvaged recyclable materials, and
a $12.
CITY COUNCIL MINUTES July 22, 1997
13. REPORTS FROM CITY MANAGER (Continued)
all City customers to rebate MRF debt service revenues received from an expanded customer
base from program inception through June 30, 1997. The City reserves the right to authorize
further one-time rebates from the sale of salvaged recyclable materials in the event the
Police Department criminal investigation, independent CPA analysis, and other City actions lead
to recoveries of revenues from the sale of salvaged recyclable materials which may be
due
ratepayers.B. Recommendations for Reduced City Payments to ODS and
ORRS:Recommendation
B-1:Reduce the rate the City pays to Orange Resource Recovery Systems for gate fee
expenses from the current rate of $20.25/ton to the proposed rate of $ 16.50/ton for services rendered
after July 1, 1997, to reflect the reduction in County landfill gate fees from $27/ton to $
22/ton.
Recommendation B-2:Reduce City payments to ODS for trash pick up services from the
current rate of 4.20/meter/month to the proposed rate of $3.88/meter/month for services rendered
after July 1,1997. This reduction reflects recommendations in the Rate Study prepared
by ODS' former Auditor, Steven Nakada, approved by the ODS Board, and submitted to the City
by ODS on March 10, 1997. The City reserves the right to make further payment reductions
in the event independent CPA analysis subsequently determines that such further reductions
may be required.C. Recommendation for Reduced ODS Charges to
ODS-Direct
Billed Customers:Recommendation C-l :Effective August 1, 1997, require ODS to reduce charges
to ODS-direct billed customers as shown in "Exhibit A" of the Background Report
accompanying this agenda item, and adopt Resolution No. 8804. These reduced rates reflect the
reduction in gate fee expenses effective July 1, 1997 and the ODS-direct billed customer
share of ORRS revenue received through June 30, 1995 from the sale of salvaged recyclable materials.
The City reserves the right to direct further rate reductions in the
event the Police Department criminal investigation, independent CPA analysis, and other City actions lead to recoveries
of revenues from the sale of salvaged recyclable materials
which may be
due ODS-direct billed customers.RESOLUTION NO. 8804 A Resolution of the City Council of the
City
of Orange
CITY COUNCIL MINUTES July 22, 1997
13. REPORTS FROM CITY MANAGER (Continued)
D. Other Recommendations:
Recommendation D-
l :Direct the City Manager to negotiate a scope of work and a contract for outside independent
CPA auditing services for the June 30, 1996 ODS Financial Statements and Rate Review prepared
by ODS' former auditor, Steven Nakada, and the June 30, 1996 ORRS Financial Statements
and associated Rate Review prepared by ORRS's auditors Alder, Green & Hasson. The primary
goal ofthis work is to ascertain the accuracy of the audits and to recover any funds which may be
due the City, its sanitation customers, and ODS-direct
billed customers.
Recommendation D-2:Direct the City Manager to deny ODS's 1985 contract extension request.
Direct the City Manager to notify ORRS of the City's termination of the March 10,
1998, automatic extension clause in
the
1994 agreement.Discussion The City Manager recommended Council approve the following proposed
motions:: 1) Adopt all staff recommendations relating to reducing customer trash and
recycling processing rates,namely recommendations A-I, A-2, A-3, A-
4 and C-1, together with implementing Resolution No. 8804. Proposed Motion 2: Adopt staff
recommendations B-1, B-2, D-l and D-2 relating to
reduced City payments to Orange Disposal Services and Orange Resource Recovery Systems,preparation
of a contract for outside independent auditing services, denial ofthe ODS contract
extension request and notice of termination of the ORRS automatic contract extension.In response to
Council questions, the City Manager advised there is no correlation between the criminal investigation and
any subsequent reductions and/or increases. It is a separate item based upon the rate
analysis provided by the Company, approved by their Board of Directors and passed on to the
City. It would be imprudent to recommend the termination of any contract before any result comes
from the criminal investigation. This could place the City in a situation that
would cause financial liability that would ultimately be borne by the ratepayers.The City
Attorney recommended that Council not consider termination of the contracts at this time. That decision must be
made at a public hearing where the City would be required to provide
evidence which shows the contractors have defaulted on the contracts. The contractor would get the opportunity
to rebut that evidence. At this time, Council, ODS, nor the Police Department have all the facts.
Allegations have been made in the press, and the evidence that the City has
does not support those allegations. When the criminal investigation is
completed, a report will be prepared for Council's review and decision.The
City Manager answered the following questions by Councilmembers: This rate analysis is late. The one received prior to this (1994/
95) was status quo for the cost of operations vs. cost of existing service, so no action
was taken.
CITY COUNCIL MINUTES July 22, 1997
13. REPORTS FROM CITY MANAGER (Continued)
Rate Study prepared by Steven Nakada does contain enough validity to recommend to Council
the decrease in operational cost and rate reductions outlined in the report. The Board of
Directors ofODS/ORRS approved this rate reduction. It is prudent to have the City's auditor
analyze that audit. The Arthur Andersen audit, which has not been released to the public, is an
audit of certain areas of the ORRS financial work papers of Mr. Nakada and a review of internal
controls at the ORRS facility. The audit gave the City grave concerns which is why the issue
was brought forward as a criminal investigation. The money used for rebates is in existing
accounts.
The following people spoke in opposition:
Carole Walters, (address on file), submitted a petition with approximately 342 signatures, plus
more pages, from Orange residents asking the Mayor and Councilmembers to immediately break
all contracts with ODS, ORRS and the Hambarian family.
Barbara DeNiro, (address on file), asked how this situation came about; too much confusion over
this issue; talking about an alleged abuse; do citizens get one rebate per household; what happens
with multiple units; and has the residential customer been subsidizing commercial accounts?
NOTE: The City Manager will compile all speakers questions and return to the next Council
meeting with answers.
Herman Martinez, 2034 W. Orchard, commented everyone should resolve these problems
together. The books should be opened and ifthere are any shortages, they should be covered. It
is time to move on.
Nick Lall, 6231 Mabury Ave., commented in 1996, there was no rate increase and no one noticed
there was a problem with the books. It was never brought to Council's attention, which would
have been a red flag. The 1995 rate reduction was acted upon promptly. This could be a way of
soothing the publics' nerves over the scandals alleged in the press.
Gary Meserve, 153 S. Cambridge, questioned the timing ofthe rebate; asked Mayor pro tem
Slater ifhe knew John Lortscher and Philip Pierce, were quoted somewhere, "If you want to
know where the money is, look in JeffHambarians' pockets." How did they know that?
Mayor pro tem Slater commented it was in the press as part of the investigation into a rumor
about problems at ODS and ORRS. Those were comments they made as part of the staff report.
Mayor pro tem Slater indicated he first learned of this on June 3, 1997.
Richard Carlson, 159 S. Cambridge, asked why was there an investigation ordered on who was
blowing the whistle instead of investigating the allegations into the trash.
NOTE: The City Attorney advised, since these issues directly affect the financial interests of Mr.
Astor's clients, he is not limited to the three minute time limit.
PAGE 17
CITY COUNCIL MINUTES July 22, 1997
13. REPORTS FROM CITY MANAGER (Continued)
Z. Harry Astor, Attorney, 333 City Parkway West, Orange, commented on the two rate review
petitions, one which was submitted late by the new auditor Alder, Green and Hasson. City staff
is recommending action that affects both contracts, but there has not been a full analysis of the
rate review submitted on behalf ofORRS. Mr. Astor's interpretation of the ORRS contract as to
what rates are allowed is different from staff s interpretation. It would be prudent for the
Council, City Attorney and Mr. Astor to meet and discuss this issue before any action is taken by
Council. One of the problems with the proposed rate reduction and some rebates to
commerciallindustrial customers involves those rebates taking placing in the months of August
and September causing approximately $400,000 cash shortfall within a two month period. The
past rate adjustments have been amortized over a twelve month period. Some of the
considerations that support rate adjustments involve salvage revenue. To the best knowledge of
ORRS, there is no shortage of salvage revenues to that corporation. It was suggested that the
data to support staffs recommendation is flawed substantially in terms of dollars. Mr. Astor felt
their interpretation of the ORRS contract was correct, there would be a shortfall of deficiencies in
1995 of approximately $348,000 and for 1996, $1,589,000.
Mr. Astor distributed a letter from Alder, Green and Hasson, auditors, that details responses to
the agenda items recommending Council take no action to reduce hauling and MRF rates unless
further study and dialogue take place between the company and the City staff.
Mr. Astor gave the following recommendations in correlation to the agenda items:
A-I - No major problem with that - it is a minor amount.A-
2 - B-2 - Matter should be subject to review.A-
3 - No problem.A-
4 - Misinterpretation of the contract. Contract calls for ORRS getting lO% of the recyclable or salvage
revenues. The analysis did not include that.B-
1 - Appropriate recommendation, but subject to the interpretation of the 25% diversion.C-
l Incongruous to ask ODS to operate for the months of August and September with an
approximate shortfall of $400,000. Any adjustments should be made on an annual basis. Further
discussion with staff is needed.
D-1 No
comment.D-2 Only observation regarding the ODS contract, there is no information that shows they
are in default, no evidence they are aware that anything at ODS isn't correct. Ifthere
is an interpretation problem regarding schedules or expenses, those adjustments would be
made during the rate review. Mr. Astor further commented if Council took action to deny the
request for extension, Council would presuppose and take a position without knowing all the facts
as to whether they are entitled to the extension of
the contract.Mr. Astor remarked ODS rate reductions for direct billing customers will cause, if
carried out,tremendous financial burden. Under no obligation whatsoever Sam and Alyce
Hambarian have put up $1,000,000 worth of equities guaranteed until this salvage shortfall issue
is complete.They have placed into ORRS bank accounts approximately $494,000. If Council
takes these
CITY COUNCIL MINUTES July 22, 1997
13. REPORTS FROM CITY MANAGER (Continued)
steps, without meeting with staff for the true interpretation of these contracts, it would
unnecessarily expose citizens of the City to problems in the future.
The following people spoke in favor:
Neil Mason, 2702 E. Riding Way, commented if the misappropriated money was done by one
family member, do not convict the whole family. The Police Department is dealing with the
allegations the proper way.
Jane Mason, 2702 E. Riding Way, blames pressure on newspapers, Carole Walters and her
followers; spoke on a discrepancy when asked to sign the petition; people at the table gave out
misleading information; and thanked ODS and the Hambarians for their service and low rates.
Rudo1fOd'Ablaing Van Gressenbury, 336 E. LaVeta, commented he was proud to be in this
City; and other cities only have one trash can.
Jerry Coker, 1616 Silverwood, cautioned Council to take no action during the criminal
investigation, disastrous results could occur; people that want termination of the trash contract do
not represent all the people in Orange.
Michael Fischer, 923 E. Cumberland Rd., asked how or who intercepted the 1994/95/96 personal
funds from the Hambarian family to cover the shortfall; why did Steve Nakada, auditor, walk
away from the ORRS audit; would like to see a financial expert representing the City ratepayers
attend meetings with Mr. Astor and the City.
Robert Hill, 975 N. Citrus St., spoke in a neutral position, asked for clarification of the breach of
contract; inquired about the relationship between the City and the trash company and that due
process is adhered to as well as issues regarding informal affirmative action.
The City Attorney commented there is no evidence at this time to support a breach of evidence.
Councilman Spurgeon responded the City has contracted with the Hambarians since 1955.
Mr. Astor responded to questions: No one knows who intercepted funds; suspicion is a family
member who is no longer with the firm. The corporation cooperated with Mr. Nakada. Mr.
Nakada contacted salvage buyers who did not respond and he was also understaffed.
The City Manager stated the issue of rate adjustments should not be negotiated at Council
meetings. A major issue of concern to the City and in debate with the company is the $300,000
plus of hauling fees. The City has found it prudent to discuss this separately. The City will
analyze the company's most recent analysis, but to ignore the rate analysis that calls for a
reduction would be cause for justified criticism on the part of the staff and City, and give others
opportunity to accuse favoritism. Staff acknowledged they may be subject to additional
criticisms of recommending rebates and reductions at this time, but so be it. The recommended
adjustments are proper when the contract obliges the City to such recommendations.
PAGE 19
CITY COUNCIL MINUTES July 22, 1997
13. REPORTS FROM CITY MANAGER (Continued)
Council discussion:
Councilman Spurgeon wanted assurance the City was on fIrm legal ground.
The City Attorney explained the rate adjustments are based upon the company's own analysis
and reviewed the contract provisions.
Councilman Murphy commented the rate adjustments are long overdue to citizens and when the
investigation is complete, decisions will be made at that time.
Mayor Coontz felt staff has done a prodigious job on this issue, making every effort to bring this
to the public.
Mayor pro tem Slater remarked when staff proposed rate reductions, it was the worst possible
timing and everyone would think the City was trying to soothe taxpayers, but that is not the case.
It is wrong to sit on funds since they belong to the taxpayers.
Councilman Alvarez felt it was important to point out the City Manager's recommendations
reserving a certain right the citizens may have to either further payment reductions or monies that
would be discovered during the investigation.
MOTION
SECOND
AYES
Murphy Slater
Murphy, Slater,
Mayor Coontz, Spurgeon, Alvarez Moved to adopt
all staff recommendations relating to reducing customer trash and recycling processing rates, namely
recommendations A-I, A-2, A-3, A-4 and C-l,
together with implementing Resolution
No.
8804.
MOTION
SECOND AYES Mayor
Coontz Alvarez
Murphy, Slater, Mayor Coontz, Spurgeon, Alvarez Moved
to adopt staff recommendations B-1, B-2, D-1 and D-2 relating to
reduced City Payments to Orange Disposal Services and Orange Resource Recovery Systems, preparation
of a contract for outside independent auditing services, denial of the ODS contract
extension request, and notice of termination ofthe ORRS
automatic contract extension.14. PUBLIC
HEARINGS - None 15. PLANNING AND ENVIRONMENT -
None PAGE
CITY COUNCIL MINUTES July 22, 1997
16. ORAL PRESENTATIONS
Richard Carlson, 159 S. Cambridge, expressed frustration regarding PJ Meads' operation and the
permit parking issue dropping his property values; submitted a document to the City Manager
requesting to be placed on the agenda and has not received an answer.
The City Manager responded he had received a three page letter and spoke to Mr. Carlson on the
phone and asked for the 400 pages of documentation which has not been delivered. The Director
of Community Development has responded to the three page document and provided
recommendations which were reviewed this afternoon, but it has not been decided that it will go
on the agenda because it appears Council did take action in 1994. The three page letter is being
transmitted to the City Attorney.
Gary Meserve, 153 S. Cambridge, read a letter from the former property owner, Mariola
Szeglowska at 143 S. Cambridge, who indicated she was forced to sell the house because they
could not get any other buyers. Going to City Hall did not solve the problems.
Carole Walters, (address on file), felt it is wrong when people in the audience receive personal
attacks and nothing is said, and commented Council does not speak up for anyone.
Adele Graves,(address on file), commented this latest scandal is the third time the City has
suffered a financial loss. Citizens have lost out and suffered from these losses by having the City
Hall closed on Friday and laying off employees. Orange CARES, which is Orange Citizens
Against Repeated Errors, in a span of four hours gathered 189 signatures, some additional that
have not been copied. The petition read: "Ask Mayor Coontz to step down from position as
Mayor, as well as a member of the Orange City Council. We no longer have confidence that you
are doing what is best for the citizens of Orange." The petition was submitted to the City Clerk.
C2500.D.l)
Mayor Coontz, for the record, as a matter of personal privilege, gave the following statement:
This is not a matter for the City Council, it is actually a matter between me and some frequent
and frustrated mayoral candidates who would like to make ODS their vehicle to drive a personal
political agenda and anything else they can fmd. If I could indulge the Council like I have, I
would like to offer my thoughts. Recall petitions are a part of public life and public leadership.
Leadership is pulling together in a crisis. It always means approaching issues with a caution they
deserve which I think I and the rest ofthe Council have demonstrated. For me leadership means
seeing this issue that we've been discussing through and then letting the Mayor and Council
make the final decision on the issues in the future when the revelations come out. It means
completing the work we started with the same determinations that has been our hallmark of the
City Council. It means holding to our key objectives since the investigation began, and we
already talked about that, to keep rates low, to provide uninterrupted services to the City, and to
get our revenues back. Serving the City of Orange has been and will continue to be my highest
priority. I happen to love the City of Orange. I have been here for a long time. I work very hard
for the community and for the City. I will close my remarks with the statement that I will
continue to work on the many, many issues, this is but one facing the City residents, with pride
in the City that I live in, with confidence in the City Council and staff and the community
PAGE 21
CITY COUNCIL MINUTES July 22, 1997
16. ORAL PRESENTATIONS (Continued)
members who do understand what this City is all about and are proud of it. There are many of
them. Thank you."
Councilman Spurgeon left the Council meeting at 10:00 p.m.
Charles Williams, , 2945 N. Hearthside St., praised the City Council.
David Casselman, (address on file), requested Oral Presentations be extended from three minutes
to ten minutes; and asked ifCouncilmembers had observed the property at the end of Wanda at
Collins which was addressed at a previous council meeting. Mr. Casselman provided Council
with his phone number and asked Council to be pro-active to resolve the problems in that
area.Judy Sollee, 821 E. VanBibber, addressed the Council with supportive
comments.Bob Bennyhoff, 10642 Morada Dr., asked about the 10% penalty the State would impose if
the City did not meet the 25% diversion for recycling in
1995.The City Manager indicated the contract provides ORRS will take care of any penalties.
The State has agreed to work with the City, analyzing whether good faith efforts were
made.Barbara DeNiro, address on file, announced she was the grandmother of twin baby
grandsons.Robert Hill, 975 N. Center St., expressed comments on freedom of speech and his beliefs
in honor and
ethics.17.
ADJOURNMENT The City Council adjourned at 10:25 p.m. in memory of Chester McKowan, a 25 year
employee with the Department of Community Development. (C2500.
G)4d~~
Ccbk~~CASSANDRA J. THCART,
CMC CITY
CLERK JOANNE
COONTZ
MAYOR PAGE