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HomeMy WebLinkAboutAgenda Report - January 7, 2004 J-01AGENDA ITEM J-01 CITY OF LODI COUNCIL COMMUNICATION TM AGENDA TITLE: Ordinance No. 1738 entitled, "An Ordinance of the City Council of the City of Lodi Amending Title 8 — Health and Safety — Chapter 8.24, Comprehensive Municipal Environmental Response and Liability, by Repealing and Reenacting Section 8.24.010 —'Definitions,' Subsection '2,' and 8.24.040 —'Liability,' Subsection 'F,' to the Lodi Municipal Code Relating to Abatement Action Cost and Recovery Issues" MEETING DATE: PREPARED BY: January 7, 2004 City Clerk RECOMMENDED ACTION: Following reading by title, it would be appropriate for the City Council to adopt the attached Ordinance No. 1738. BACKGROUND INFORMATION: Ordinance No. 1738 entitled, "An Ordinance of the City Council of the City of Lodi Amending Title 8 — Health and Safety — Chapter 8.24, Comprehensive Municipal Environmental Response and Liability, by Repealing and Reenacting Section 8.24.010 — `Definitions,' Subsection `2,' and 8.24.040 —'Liability,' Subsection 'F,' to the Lodi Municipal Code Relating to Abatement Action Cost and Recovery Issues" was introduced at the regular City Council meeting of December 17, 2003. Pursuant to state statute, an ordinance may be adopted five days after its introduction following reading by title. This ordinance has been approved as to form by the City Attorney. FUNDING SJB/JMP Attachment None required. APPROVED: council/councom/Ord lnance2.doc Susan J. Blacicston City Clerk ixon`Flynn, City Manager AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LODI AMENDING TITLE 8. m- HEALTH AND SAFETY - CHAPTER 8.24, COMPREHENSIVE MUNICIPAL ENVIRONMENTAL RESPONSE AND LIABILITY, BY REPEALING AND REENACTING SECTION 8.24.010 — "DEFINITIONS," SUBSECTION "2," AND 5.24.040 m "LIABILITY," SUBSECTION "F," TO THE LODI MUNICIPAL CODE RELATING TO ABATEMENT ACTION COST AND RECOVERY ISSUES BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF LODI AS FOLLOWS: ECT'IQN 1. Section 5.24.010 61Definitions" Subsection "2" of the Lodi Municipal Code is hereby repealed and reenacted to read as follows: 2. The terra "abatement action costs" means: A. at or in connection with any site (or any separate subdivision or area within a site) at which the city is not liable under 42 UJ S.C.§ 9607 for the costs of response to site conditions resulting in whole or in part from the release or threatened release of hazardous substances to which the city has responded or is responding under this chapter, any and all legal, technical, or administrative fees and costs, and Interest and other casts of financing incurred by the city in performing or preparing to perform an abatement action in compliance with the requirements of this chapter. The term "abatement action costs" shall specifically include, but shall not be limited to, any and all of the following costs incurred by the city: I. to retain expert assistance in health, law, engineering, and environmental science, expert witness services and legal fees and reasonable costs of litigation (including, but not limited to, internal costs of the city attorney's office or outside legal counsel deemed necessary at the sole discretion of the city to effectively respond to conditions at and emanating from the site) to shady, investigate, abate, remove, remediate, or respondto an actual or threatened environmental nuisance or any endangerment to the public health, welfare, or the environment that may be presented by an actual or threatened environmental nuisance; ii. to investigate or respond to the existence, or threat of an environmental nuisance; iii. to monitor, assess, or evaluate an environmental nuisance or any endangerment to the public health, welfare, or the environment that may be presented by an actual or threatened environmental nuisance; iv. to prevent, minimize, or mitigate an environmental nuisance or any endangerment to the public health, welfare, or the environment that may be presented by an actual or threatened environmental nuisance; V. to oversee and monitor the performance by any responsible party of any investigation or abatement action in response to a condition which is or may be an environmental nuisance; A. to review, comment on, or revise a responsible party's plans and proposals submitted pursuant to Section 5.24.050(E) or to oversee and monitor the performance by any responsible party of any of the monitoring and testing activities which may be required pursuant to Section 5.24,050(E); vii. to prepare for or undertake necessary enforcement activity authorized by this Chapter 0.24, including the recovery of abatement action costs incurred or to be incurred by the city or any injunctive relief authorized by this chapter to respond to an environmental nuisance, including enforcement activity deemed necessary by the city to obtain information and site access authorized by this chapter; and viii. costs of investigation and evaluation, as authorized by the city council, of such financing, With recourse to the maximum e . xten.t avalla. ble solely against the present and future assets. and r . ecoveries pledged to comprehensive municipal environmental response fund or any sub -fund of the comprehensive municipal environmental response fund created by the city council as authorized by Section 8.24.070(A), as may be necessary and proper to accomplish the purposes set forth in this chapter; and ix. costs of issuing, servicing, and retiring of any financing instruments authorized by the city council as provided in Section 8.24.070, with recourse to the maximum extent available solely against the present and future assets and recoveries pledged to the comprehensive municipal environmental response fund or any sub -fund of the comprehensive municipal environmental response fund created by the city council as authorized by Section 8.24.07.0(A); and S. At or in connection with any site (or any separate subdivision or area within a site) to which the city has responded or is responding under this chapter, and at which the city is liable under 42 U.S-Ce§ 9607 for the costs of response to site conditions resulting in whole or in part from the release or threatened release of hazardous substances, all such fees and costs included within the definition set forth in subsection 2(a) of this Section 8.24.010, except that such term shall not for purposes of this chapter include, at or in connection with any site (or any separate subsection or area within a site) to which this subsection 2(b) applies, any attorneys fees and costs, expert witness fees and costs or other litigation costs incurred or to be incurred by the city in the preparation or conduct of any litigation to recover abatement action costs pursuant to this chapter, or to secure judicial abatement of an environmental nuisance pursuant to this chapter. C. Notwithstanding the provisions of subparagraphs (a) and (b) of this subsection 2, the term shall not include any costs incurred to compel compliance with an 'information demand issued pursuant t o Section 8.24,050(B) of this chapter prior to the entry of a judicial order upholding that information demand, in whole or in part. SECTIOPL2. Section 8.24.040 - "Liability' Subsection T" of the Lodi Municipal Code is hereby repealed and reenacted to read as follows: F. Recovery of Attorneys Fees By Prevailing Party Pursuant to California Government Code Section 38773-5. 1. Reasonable litigation expenses, including attorneys and expert witness fees and costs, and litigation costs may. be recovered by the prevailing party in any action or administirative proceeding brought or continued in whole or in part pursuant to this chapter by the city attorney; a. to recover abatement action costs incurred and to be incurred by the City b. to secure or compel compliance with an Abatement Action Order issued pursuant.to this chapter, to enforce an information demand, or an access, inspection or monitoring order, following a judicial order upholding the demand or order in whole or in part; or C. to secure abatement of an actual or threatened endangerment to the public health, welfare, or the environment arising out of, in whole or in part, an actual or threatened environmental nuisance. 2. Notwithstanding Paragraph 1 of this Subsection F, the recovery of such fees and costs, including attorneys' fees, by the prevailing party is strictly limited to those individual actions or a proceeding in which the city elects, at the initiation of that individual action or proceeding, to seek recovery of its own attorneys' fees. SECTION 3e. All ordinances and parts of ordinances in conflict herewith are repealed insofar as such conflict may exist. SECTION 4.. No Mandatory Duty of Gane. This ordinance is not intended to and shall not be construed or given effect in a mariner which imposes upon the City, or any officer or employee thereof, a mandatory duty of care towards persons or property within the City or outside of the City so as to provide a basis of civil liability for damages, except as otherwise imposed by law. SECTION Severability. If any provision of this ordinance or the application thereof to any person or circumstances is held invalid, such invalidity shall not affect other provisions or applications of the ordinance which can be given effect without the invalid provision or application. To this end, the provisions of this ordinance are severable. The City Council hereby declares that it would have adopted this ordinance irrespective of the invalidity of any particular portion thereof. ECTION 60 Effect of On-going Actions. The effect of this Ordinance upon preceding or on- going actions or proceedings shall be determined in accord with the fallowing provisions of this section 6: (A) Notwithstanding the repeal of Section =8.24.010(2) and Section 8.24.040(F) of Title 8 of the Health and. Safety Code by operation of sections 1 and 2 of this Act, any action taken pursuant to those Subsections shall remain in effect, and be subject to Chapter 8.24 (p rnmencing with Section 8. 4..010) of Title 8 of the Health and Safety Code, as including the subsections reenacted by section 1 of this Act. 1 (B) The repeal and reenactment of Section 8.24.010(2) and Secti n 8.24.040(F) of Title 8 of the Health and Safety Code by sections 1 and 2 of this Act shall no terminate, affect, or modify any proceeding, carder, or agreement issued or entered into by the l ity, or any officer or employee of the City pursuant to Chapter 8.24, or any rights or obligations arising out of or pursuant to those provisions, and notwithstanding the effective date of this act, the provisions of Chapter 8.24 (commencing with Section 8.24.010) of Title 8 of the Health and Safety Cade, as including the subsections reenacted by sections 1 and 2 of this Act, shall apply retroactively to those proceedings, carders, or agreements. SE!�L'ION 7. This ordinance shall be published one time in the "Lodi News -Sentinel," a daily newspaper of general circulation printed and published in the City of Lodi and shall take effect thirty days from and after its passage and approval. Approved this 71h day of January, 2004 State of California County::... n Joaquin; ss. 1, Susan. J, Blackstcn, City Clerk of the City of Lodi; do hereby certify that Ordinance No. 1 738 was introduced at a regular meeting of the City Council of the City of Lodi held Decernber 3 2003, and was thereafter passed, adopted and ordered to print at a regular meeting of said Codicil held January 7, 2004, by the following Grote: AYES: COUNCIL MEMBERS - Beckman, Howard, and Land NOES; COUNCIL MEMBERS - Hitchcock and Mayor Hansen ABSENT: COUNC1L.M MBERS - Nene ABSTAIN COUNCIL MEMBERS - None I further certify that Ordinance No. 1733 was approved and signed by the Mayor on the date of its Passage and the same has been published pursuant to law, SUSAN J. BLACKST®N City Clerk Jennifer Perrin From: Ron Bernasconi [Ron@BernasconiCommercial.com] Sent: Wednesday, January 07, 2004 4:45 PM To: Susan Blackston; Susan Hitchcock; Emily Howard; Keith Land; John Beckman; Larry Hansen Subject: We need independent legal advise before we make any changes to MERLO or our Contract with Envision Honorable City Council Members, am very concerned by the actions recently taken in dosed session and would have appeared before the Council tonight. However, I haveto run a practice tonight and therefore request that the City Clerk file thefollowing as my public testimony at tonight's regular meeting of the Lodi City Council. I n 1999 City Attorneys Michael Donovan and Randy Hays expressed no doubt that the city would more than recover all expenses incurred when we relied upon their advise to borrow $16 million dollars from Lehman Brothers at 20 to 300/6. I n fact City Attorney Hays told the SOcramento Bee, "The way the laws are designed, we can't lose'll Then on December 24, 2003 the Sacramento Bee reported that A "Court ruling may put Lodi on the spot for million' after Judge Damrell ruled that portions of the city's cleanup ordinance known as MERLO conflicted with federal lav and was unconstitutional. Asa result, Lodi cannot recover the $22.5 million it spent in legal fees or the $7.5 million in interest financing Envision's ill-conceived legal strategy. In his40 page ruling Damrell removed the portions of MERLO that were unconstitutional and approved the remainder of the ordinance. Now our City Attorneys are asking the Council to consider new additionsto MERLO, which would be ill-advised without an independent legal review. Frankly, 11th hour additions to MERLO on the eve of trial may further anger the Judge if they are viewed as attempts to d rcumvent his regent rul i ng. Another potential threat to our City emanates from the plan to renegotiate our contract with Envision. Now, we would all love to have Envision slash its fees, but can we trust them not to slip in dauses that elevates thei r i interests above those of the City? We should be able to rely on our City Attorney. However, Randy Hays has proven to be nothing more that a rubber stamp to anything Donovan presents and it would be foolish to believe that any member of the City Council can negotiate contract language with an attorney(s) without independent counsel to protect the City's interests. As the sayi ng goes, "Those who act as thei r own attorney have a fool for a dient." 1/8/2004 Moreover, renegotiating our contract with Envision after the Court's recent rebuke of our legal strategy not only makes the City look weak and stupid; it may undermine the City's ability to proceed against Envision for malpractice, which maybe our only way out of this debacle. Apparently, 4 Council members believe it would be too expensive to hire another outside attorney because even though Envision'sfees Ere accruing at an alarming rate, Envision is collecting only what they can squeeze out of our insurer, USF&G. ronically, this is how it should have been from the start. H aving to be accountable to USF&G would have stemmed the overbilling that occurred while Hayswasasleep at the SNitch as Envision burned through the $16 million dollar Lehman Loan before they even got to trial. Now after spending dose to $30 million dollars on a lawsuit that is basically being thrown out of court on the eve of trial, it should be painfully apparent to everyone that there is nothing more expensive than bad legal advise and that falling to secure independent legal counsel would beafalse economy. Why doesn't the City use the firm it has already retained to review Envision'sLegal Bills especially since that expenditure has already paid for itself. Clearly, we need independent legal counsel to deal with Hays and Envision. This what Redding did when they suspected H ays of malfeasance. Accordingly, I respectfully request that the City Cound1; 1) Secure independent legal counsel to review, the conduct of our City Attorney(s) and make sure any contract with Envision requires Envision to maintain Lawyer's professional liability insurance to protect the city from Envision's errors and omissions. 2) Secure independent legal counsel to review any changes to the City's Contract with Envision. I an also making a public records request for the City's current contract with Envision and I am requesting a copy of the proposed replacement contract with Envision at least 5 days prior to any vote by the City Council to approve the replacement contract. 3) Table any changes to MERLO until you have secured independent legal counsel to review and approve our Attorneysi proposed changes to ME RLO. Thank you for your consideration, Ron Bernasconi Court ruling may put Lodi on the spot for millions By Cameron Jahn -- Bee Staff Writer Published 2.15 a.m. PST Wednesday, December 24, 2003 Two key Lodi city off idals reacted in shock Tuesday to afederal judge's ruling that they say guts the dty's high-stakes toxic deanup lawsuit, leaving the taxpayers potentially Iiablefor millions of dollars in legal costs. 1/8/2004 US District Judge Frank C. DamrelI Jr. on Monday ruled that the city'sdea up ordinanceconfIicts with federal law and is unconstitutional. DamrdI said the city's legal strategy -- winning - winning money f rom insurance carriers of pol l uti ng busi nesses -- is set up to benef it attorneys and investors rather than speed up environmental cleanups as Congress i ntended. Asa result, Lodi cannot recover the estimated $22.3 million it has spent in legal expenses since 1996 or the more than $7.5 million in interest costs on f i nand ng those Expenses. The city has invested $6.3million of itsown money in lawsuits agai nst several downtown busi nesses and thei r i nsurers. The bal ance of $16 million spent on legal outlayswas borrowed at credit-card interest rates from the investment banking firm Lehman Brothers of New York. Lawyers for the city had pitched the loan as a no -risk way of financing a legal battle it otherwise could not afford. They said Lehman would be repaid only from insurance money won in settlements or j udgments. Some city officials now believe Lehman is not going to walk avay from the loan and will try to recover the money f rom the city. Lodi, with apopulation of 59,000, has an annual budget of about $29 million. "The way it appears to me, everything we've worked on for the last eight years has been thrown out," Councilwoman Susan Hitchcock said. "The people who are losing are the citizens of Lodi." Lori Gualco, lead attorney for Guild Cleaners, one of the defendants, called thejudge'sruling "the death knell -- it's ail over for the city, basically." But Michael Donovan, the head of the city's legal team, disputed Damrell'sruling. He said Monday's decision would not be a significant setback. "I would say that the strategy is sound," Donovan said. "The trial judge has given us his opinion, and it's far from the final judgment on the matter." The 40 -page ruling was Darnrell's harshest yet in the city's 3 -year-old suit to compel dry cleaners and other businesses to remove industrial solvents that tainted an estimated 600 acres in the central business district. 1/8/2004 In his ruling this week, Damrell granted two insurance companies, Fireman's Fund and Unigard, a permanent injunction preventing Lodi from enforcing adeanup ordinance the city enacted in 1997. DamrelI agreed with an appellate court that said Lodi can't legislate its way out of liability in the cleanup because the city also is partly responsible for the contamination: The city's leaky sewer system may have allowed the pollutants to seep into the ground. He also said the ordinance is the polar opposite of what Congress intended decades ago when it passed the federal toxic cleanup act, known asthe,perfund law. The laAt d lows for limited cost recovery in cleanups but not "an opportunity to profit at the expense of the environment," Damrell said. Lodi's ordi nance compels businesses found responsible for the pollution to paynot onlythecost of the cleanup but also to reimburse the city for all itslegai and finandai costsin bringing enforcement action. The city's "cost recovery scheme generates the opportunity for a fi nanciai wi ndfal I for some few fortunate professionals, aswell as Lehman Brothers, Inc., an investment bank, which has no interest in cleaning up the contaminated site," Damrell said. Thejudgesaid Lodi'sattorneys "hate often produced unnecessarily voluminous or redundant filings and imaginative ploys that havesent this litigation needlessly down paths." That means"important remediation efforts have been brought to a grinding halt." Lodi has a Jan. 12 trial date before Damrell, but some city off idais now wonder whether to risk trial. "I is as if the judge said, 'We've given you enough dues along the way but you haven't followed them, and wdretelling you onceand for all don't go this route because you'll bewasting your money,'" Hitchcock said. The Lodi City Council will meet in dosed session Dec. 30 to decidewhat to do. Lodi Mayor Larry Hansen said thecity isnow in "limbo," suspiciousof its Expensive legal team and their risky strategy yet entirely reliant on thosela yersfor advice. "I try not to have knee-jerk reactions, but their credibility isdefinitely in question," he said. "I feel like we're losing control of the strategy." Lodi cannot fire Donovan without consent of the Lehman Brothers investors, who remain anonymous. Meanwhile, thedty has launched an audit of Donovan'sbills, which total morethan $14 million. Hitchcock on Tuesday said she had already heard from a number of Lodi residents outraged by the city's legal quanday and looking to point fingers. "This is reel ly a travesty of poor management and poor leadership," shesaid. "I definitelythink the publicwill hold people accountable" at thebailot box. 1/8/2004