HomeMy WebLinkAbout11 REQUEST TO INCREASE REVENUE BUDGET & APPROPRIATION BASED ON FIFTH AMENDMENT OF COOPERATIVE AGMT WDocuSign Envelope ID: FA3E7752-63FE-4EB1-A90B-946043B897C0
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AGENDA REPORT
MEETING DATE: JUNE 4, 2024
TO: NICOLE BERNARD, ACTING CITY MANAGER
Agenda Item 11
Reviewed: DS
?ZB
City Manager
Finance Director
FROM: JENNIFER KING, FINANCE DIRECTOR/CITY TREASURER
SUBJECT: REQUEST TO INCREASE REVENUE BUDGET AND APPROPRIATION
BASED ON THE FIFTH AMENDMENT TO THE COOPERATIVE AGREEMENT
WITH THE NAVY AS RELATED TO THE NORTH HANGAR FIRE INCIDENT
SUMMARY
The City anticipates entering into a fifth 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 $27 million for a current not -to -exceed
reimbursement total of $88 million from the Navy. The City estimates that this fifth
amendment will address the emergency response costs that the City has contracted and
incurred on the Navy's behalf so far. Additional work related to the incident will be
addressed in subsequent Cooperative Agreement amendments.
RECOMMENDATION
It is recommended that the City Council increase revenue budget and related appropriation
by $27 million as outlined in the fifth 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 $88
million as identified in the fifth 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: FA3E7752-63FE-4EB1-A90B-946043B897C0
City Council Agenda Report
June 4, 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
Navy North Hangar Financial Impacts
To date, the City has incurred over $85 million in contracted costs 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
accumulate. However, the true total 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. Four amendments to the
Cooperative Agreement have been executed since then and to date, the City has received
$33.5 million in reimbursement payments from the Navy.
A fifth amendment to the Cooperative Agreement is expected to be executed this month,
which will raise the Navy's pledged reimbursement to the City to $88 million. City Council
action is required to increase the incident -related revenue budget and supplemental
appropriation by $27 million. This increase, plus the previously committed $61 million from
the Navy, totals $88 million as outlined in the fifth amendment to the Cooperative
Agreement. Future Cooperative Agreement amendments and Navy reimbursements will
require similar action by the City Council.
DocuSigned by:
Jenni�ers�iig 773
Finance Director/City Treasurer