HomeMy WebLinkAbout08 REQUEST TO INCREASE REVENUE BUDGET AND APPROPRIATION BASED ON FOURTH AMENDMENT TO NAVY NORTH HANGERDocuSign Envelope ID: 13A3210E-57C9-4C98-89FD-81FA6EA8B41C
Agenda Item 8
Reviewed: Ds
AGENDA REPORT
City Manager
Finance Director
MEETING DATE: APRIL 16, 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 FOURTH AMENDMENT TO THE COOPERATIVE
AGREEMENT WITH THE NAVY AS RELATED TO THE NORTH HANGAR FIRE
INCIDENT
SUMMARY
The City entered into a fourth 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 $36,924,796.28 for a current not -to -exceed
reimbursement total of $61 million from the Navy. The City estimates the remaining
balance of the emergency response costs that the City is incurring on the Navy's behalf,
currently at more than $18 million, will be addressed in subsequent Cooperative
Agreement amendments.
RECOMMENDATION
It is recommended that the City Council increase revenue budget and related appropriation
by $36,924,796.28 as outlined in the fourth amendment to the Cooperative Agreement
between the City and Navy.
FISCAL IMPACT
The approved appropriation will be funded from the Navy's reimbursement of up to $61
million as identified in the fourth amendment to the Cooperative Agreement.
BACKGROUND
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.
DocuSign Envelope ID: 13A3210E-57C9-4C98-89FD-81FA6EA8B41C
City Council Agenda Report
April 16, 2024
Supplemental Appropriation — Navy North Hangar Fire Incident
Page 2
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
Naw North Hangar Financial Impacts
To date, the City has incurred over $79 million in contracted costs as of March 14, 2024 for
this incident comprised of debris clearance, air monitoring, community outreach, residential
air dust and soil sampling, hangar door deconstruction, consulting, project management,
security, 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 Appropriations
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. Three amendments to the
Cooperative Agreement have been executed since then and to date, the City has received
$24 million in reimbursement payments from the Navy.
A fourth amendment to the Cooperative Agreement was executed on April 11, 2024 which
raises the Navy's pledged reimbursement to the City to $61 million. City Council action is
required to increase the incident -related revenue budget and supplemental appropriation by
$36,924,796.28. This increase, plus the previously received $24 million from the Navy, totals
$61 million as outlined in the fourth amendment to the Cooperative Agreement. Future
Cooperative Agreement amendments and Navy reimbursements will require a similar action
by the City Council.
Jennifer King
Finance Director/City Treasurer