HomeMy WebLinkAbout06 REQUEST TO INCREASE REVENUE BUDGET AND APPROPRIATIONDocuSign Envelope ID: FEB221E4-DB85-410A-94CA-4DD2CBB8D33F
Agenda Item 6
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Reviewed:
AGENDA REPORT City Manager
Finance Director �K
MEETING DATE: MARCH 5, 2024
TO: NICOLE BERNARD, ACTING CITY MANAGER
FROM: JENNIFER KING, FINANCE DIRECTOR/CITY TREASURER
SUBJECT: REQUEST TO INCREASE REVENUE BUDGET AND APPROPRIATION
BASED ON THE THIRD AMENDMENT TO THE COOPERATIVE AGREEMENT
WITH THE NAVY AS RELATED TO THE NORTH HANGAR FIRE INCIDENT
SUMMARY
The City expects to enter into a third amendment to the Cooperative Agreement with the
U.S. Department of the Navy (Navy) to implement an emergency response related to the
North Hangar Fire Incident. Staff is requesting the City Council's approval to increase
revenue budget and related appropriation by the Navy's reimbursement amount specified
in the third amendment. The City expects the third amendment will increase the
reimbursement amount pledged by the Navy by approximately $13 million — for a current
not to exceed total of approximately $24 million. The City expects the balance of costs,
currently estimated at more than $50 million, the City is incurring on the Navy's behalf to
be pledged for reimbursement by the Navy in subsequent amendments.
RECOMMENDATION
It is recommended that the City Council increase revenue budget and related appropriation
by the Navy's reimbursement amount outlined in the third amendment to the Cooperative
Agreement.
FISCAL IMPACT
The approved appropriation will be funded from the Navy's partial reimbursement identified
in the third amendment to the Cooperative Agreement.
BACKGROUND
DocuSign Envelope ID: FEB221 E4-DB85-410A-94CA-4DD2CBB8D33F
City Council Agenda Report
March 5, 2024
Supplemental Appropriation — Navy North Hangar Fire Incident
Page 2
On November 7, 2023, a fire broke out at the Navy's North Hangar at the former Marine
Corps Air Station, Tustin. The fire caused asbestos -containing debris and other matter
from the Navy North Hangar to be released and to spread into surrounding private and
public properties. The debris impact zone covers approximately 6.5 square miles around
the Navy North Hangar.
Since the start of the fire, City staff, the Orange County Fire Authority, and multiple
emergency service providers retained to assist the City in handling and managing this
unprecedented emergency have worked closely with Federal, State, and local health and
environmental agencies to take all necessary and appropriate emergency measures to
protect public health and safety.
DISCUSSION
Navy North Hangar Financial Impacts
To date, the City has incurred over $74 million in contracted costs for this incident comprised
of debris clearance, air monitoring, hangar door deconstruction, consulting, and project
management, supplies and equipment, and City/agency costs. Staff expects the total
response cost to continue to escalate. However, the true fiscal impact on the City, County,
and region remains unknown at this time and will continue to be assessed.
Recovery Funding Sources, Reimbursement, and Supplemental Appropriation
On November 10, 2023, the City Council approved a Cooperative Agreement with the Navy
pursuant to which the Navy authorized the City to take all appropriate emergency measures
necessary to protect against the imminent and substantial endangerment to human health
or the environment related to the Navy North Hangar fire. Two amendments to the
Cooperative Agreement have been executed since then and to date, the City has received
$11 million in partial reimbursement payments from the Navy.
A third amendment to the Cooperative Agreement is expected to be signed soon. Council
action is required to increase the incident -related revenue budget and supplemental
appropriation by the specific reimbursement amount outlined in the third amendment.
Future reimbursements will require a similar action by the City Council.
DocuSign Envelope ID: FEB221 E4-DB85-410A-94CA-4DD2CBB8D33F
City Council Agenda Report
March 5, 2024
Supplemental Appropriation — Navy North Hangar Fire Incident
Page 3
DDoocuuSSiig(nned by:
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Jennifer King
Finance Director/City Treasurer