L committee meeting.

We are joined by Alderman Scott Spyker.

Alderwoman Malayle Cox is on virtually.

Alderman Peter Bergellis, the vice chairperson is here, and Alderwoman Charlotte Morris here.

That provides us the quorum to handle our business today.

We had a later start today due to the celebration of Juneteenth.

For anyone listening, congratulations and happy Juneteenth day.

We'll be at celebrating all day tomorrow.

City hall is closed for business, but open for celebration because it's a great day.

Alright.

With that, we'll start with item number one.

252089.

Communication from the Department of Public Works and the Comptroller relating to an historical counting of payouts from the disposal of the materials recycling facility and the segregation of final insurance payout from a negotiated depreciation settlement.

This is sponsored by Alderman Bergellis, and we're joined by Department of Public Works, Rick Myers.

We'll first go to the sponsor, Alderman Bergales.

Thank you, Madam Chair.

Thank you for picking this file up.

I know negotiated depreciation settlement is how we all want to start our first um sip of coffee in the morning.

So uh but this is an important file that really uh helps the public, and after some discussions that I caught in the public works committee, uh there was a lot going on with the electrical services building that alders weren't aware of that the public may not be aware of.

Uh and it's it's a massive piece of city infrastructure.

Uh, the project to replace it has been many years in the making already.

Uh we had uh some robust discussions and robust budget amendments in our last budget uh regarding that project.

Uh, that wasn't quite ready for prime time yet, but now uh I wanted to with the last file we had in the previous cycle cycle before there was a um negotiated depreciation settlement that will segregate funds specifically from the materials recycling facility um payouts after that fire damaged a lot of equipment.

Uh DPW wants to reuse those funds for the electrical services building, but uh it's I think it's important to understand what the MERF has cost the city uh and what kind of revenue uh the cities received for it that will be uh earmarked for a specific purpose.

Uh so I appreciate the department being present to help uh run us through the numbers.

Okay, thank you so much.

Alderman Bergellis, good morning.

Um we got Rick Myers here.

Good morning.

Good morning, uh, Sanitation Services Manager uh Rick Myers.

Um, so uh that was a good background.

Uh again that fire that um the city had uh for many decades had our own publicly publicly owned materials recovery facility where curbside recyclables were sorted uh and its latest iteration uh was uh through an intergovernmental agreement um with Walkshaw County since um where that MERF had been operating with all new um equipment since uh 2015, March of 2015 is when we um started operating the the uh the latest equipment that we had that was in place uh when the fire uh happened uh May 31st of 2023.

Um so um with that um the uh insurance um for that law and it was a complete loss on the equipment.

Uh the building was um uh was not a a complete loss, but I can get into kind of the values of various components, but um uh basically we had the highest value was the personal property, which was the processing equipment itself, and so um that was the piece that um that was jointly owned with Waxha County and City of Milwaukee.

So the proceeds related to that property um were effectively split 50-50.

There were different layers of the insurance claim that um went towards the building loss, um the uh personal property or the processing equipment loss, um, that was largely the you know capital dollars that would have been um available if we had rebuilt MERF.

Um and that at the time of the our 2025 um budget uh request and and ultimate approval that was the idea as we were still studying um details of whether or not you know the business case was there to remain to rebuild remain in the the space of of public ownership of the assets private operation um and so that the 2025 budget had allocated the initial um city portion of proceeds um to uh MERF uh building repairs um and um and again just kind of backed up so the idea was we were either going to rebuild or potentially had started looking at alternative sites as there was interest um you know by mayor council there's discussion about you know would it maybe there maybe it's time for a different chapter in the valley those kind of discussions and so we were also investigating alternative locations ultimately to kind of fast forward on that piece um the uh walkshaw county and city milwaukee that jointly studied economics of reinvesting uh the the business case for it was not nearly as strong as it was uh when we first entered that intergovernmental agreement um and uh and this and aside from that there's uh a great deal more risk in the business from when we first invested uh largely fires um it's just a reality in solid waste facilities recycling facilities with um uh that since about 2018 um there there's a tremendously higher risk and we saw that in our modeling economics the if we could get insurance again it was going to be um it was going to be 10 feet I think we were going if we would have gone from paying 6.7 cents per hundred dollars of value to over a dollar per hundred dollars so um anyway just giving you a sense of like the the risk in the economics um at the same time um we had more regional capacity at this time than we did uh back when we invested so there's a little more competition um we didn't think that the public investment would have yielded as much cost savings as it actually did the first time around um I uh and I I apologize for interrupting um but I was looking in the file for kind of a breakdown of the historical payouts but I don't is there something that was submitted late or the no I think that we because it would city or because I think that we intend with Controller's office to to do that yet but we we want to we we don't have that attached to the file presently because we wanted to kind of have the numbers or I do I or should we just pull the file to the next next cycle well let me go I'll I'll go to the numbers now all right and then we want to keep the finance focused because we're not public works we're just here for the money.

Yes.

Thank you right you know telling the story for those yes okay so with the insurance claim um the total gross loss um was uh 21.4 million that that's between all these buckets so I mentioned the building property um personal property the equipment and then there also we incurred extra expenses from managing the material um um the in the manner we did had to without the MERF getting it farther places uh and then there was uh loss revenue because we didn't have the same revenue generation we did with our old contract so between the different um and then there's the line item for data claim data expense that helped like city attorney had resources to help put all the um data together to work with the insurers so between all of those um it was 21.4 million less the deductible of 500,000.

So the net payable from travelers insurance ended up being like 20.9 million dollars.

Now remember of that um the walkshaw county had uh had five million nine hundred thirty-three thousand three hundred sixty-three so uh that left the the city's portion of uh round numbers called well 14,971,702.

So of that 14 um nearly 15 million, um, basically 11.2 million of it was capital.

Um we had uh the 3.7 was the portion that went to the general fund to uh account for the added costs and the the loss revenue.

So um 11.2 million in capital that that again theoretically was going to be used to replace the capacity of this facility.

Um remember again of that the the 9.3 something that was um allocated for that purpose was the 2025 budget.

Um so by my numbers at this time that that leaves like 1.8 million that we've received that has yet to be allocated.

Um and then well, I'll stop there and just see if you have any questions or so the so the 1.9 million is that that's the final insurance settlement.

The final uh the final settlement release was it a two million dollar payout that was for held back depreciation of the building.

Um it also included so that was 1.652 million.

It included 348,000 that was intended for the what we would have been able to claim of costs once we remove the equipment.

So the equipment in the building is is a liability on our books right now because um it will cost more than the salvage value, and so um if the claim were still open, we would have finished the project to get it out, and then they would have reimbursed the actual costs as part of the settlement.

Um they took the meet mid-range of estimates of what it will cost.

So we have 344,000 or 348,000 split between city and county to meet our mutual obligation or liability and getting rid of equipment, and then the so the the balance of that uh the last payment under the settlement was one million six hundred fifty-two thousand.

Okay, uh, and we still own the building, yes.

Right.

So um I we're not going to be parking uh uh parking enforcement vehicles there.

We're the intent is to sell it.

Um I think that that is that's the consideration that that is the intent as I understand it.

Um I the only reason I pause that we are still using the the site for certain things that we need to uh well we have active um fuel um pumps there, we we have a working scale, and we use the site for management of fall leaves of where we drop it before it goes.

Right, yeah.