CITY COUNCIL AGENDA MEMORANDUM

CITY COUNCIL AGENDA MEMORANDUM City and County of Broomfield, Colorado To: From: Prepared by: Mayor and City Council Charles Ozaki, City and County Manager Kevin Standbridge, Deputy City and County Manager David Allen, Public Works Director Ken Rutt, Wastewater Division Superintendent Meeting Date Agenda Category Agenda Item # November 15, 2016 Consent 7 (e) Agenda Title: Proposed Ordinance 2037, Authorizing and Approving a Lease Agreement with Lambland, Inc. (dba A-1 Organics, Inc.) for the City and County of Broomfield s Farm in Weld County, Colorado Summary Biosolids are a byproduct of the wastewater treatment process that must be disposed of according to federal, state, and local laws and regulations. Broomfield s Biosolids Program ensures that biosolids generated at the Wastewater Reclamation Facility (WWRF) meet the requirements to protect public health and the environment. The program also promotes the beneficial reuse of biosolids by creating a high nutrient content fertilizer that can be added to improve soil conditions. Broomfield purchased a 1,328-acre farm in Gilcrest, Colorado, (Weld County Farm) to provide for ongoing biosolids disposal in 1996. Broomfield has been applying biosolids to the farm since June 2000. Lambland, Inc., dba A-1 Organics, Inc. (Lambland) is the current tenant farmer, as well as the contractor who hauls and applies Broomfield s biosolids. Significant agreements pertaining to the past operations of Broomfield s Weld County Farm are summarized below under Prior Council Action. Since the Broomfield farm was purchased for the beneficial reuse of biosolids, and knowledge of the regulatory oversight of the biosolids program is critical to ensure compliance, staff determined that the best approach for ongoing operations after the existing agreements expire was to solicit a firm capable of meeting the demands of both the farming and the biosolids hauling programs. Staff directly negotiated the terms and conditions of a five-year lease agreement to operate the Weld County Farm with Lambland, Inc., as provided for in Section 3-20-150(B) of the Broomfield Municipal Code, which exempts revenue-generating agreements from the solicitation and bidding process. Staff from Public Works, Finance, and the City and County Attorney s Office evaluated Lambland s financial status, technical abilities/characteristics, schedule/availability, supportability, prices and fees, and past performance. Based on staff s review, it was determined that Lambland is financially sound and has the requisite experience to operate Broomfield s Weld County Farm and provide biosolids transportation, processing, and hauling services. The rental rate for the farm lease exceeds the rate published in an April 2016 United States Department of Agriculture report. Section 31-15-713(1)(c) of the Colorado Revised Statutes authorizes the governing body of any municipality to lease any real estate owned by the municipality when such lease is deemed to be in the best interest of the municipality. Leases greater than one year shall be approved by ordinance. Offering a multiple-year lease term, with an option for renewal, for the Weld County Farm is necessary to provide an incentive for a tenant farmer to have a vested interest in the annual operations and maintenance activities at the farm, and any lease term of less than five years would be difficult to negotiate. In addition, a multiple year lease term and optional renewal of the Weld County Farm provides a tenant farmer flexibility to make annual operating decisions based on long-term weather patterns, commodity market trends, and the availability of multi-year contracts with local feedlots and dairies. Proposed Ordinance 2037 would approve an agreement with Lambland, Inc. (dba A-1 Organics, Inc.) for a five-year lease of the Weld County Farm commencing on January 1, 2017, and terminating on December 31, 2022. The agreement includes a provision to add a second five-year term solely based upon the City s discretion, subject to annual appropriation, budgeting, and availability of funds to discharge such obligation. The five-year term provides enough flexibility in today s economy to allow for successful farm operations to grow feed crops. An agreement with Lambland, Inc. for the transportation, processing, and application of biosolids for the Weld County Farm will be reviewed by City Council concurrent with the second reading of Ordinance 2037. Prior Council Action On November 28, 2000, City Council approved Resolution 2000-272 authorizing an agreement with Peppler Farms for a lease to operate Broomfield's Weld County Farm. On February 10, 2004, City Council approved Resolution No. 2004-42 authorizing an agreement with Peppler Farms for transportation of the biosolids from Broomfield s WWRF to the Weld County Farm. On June 24, 2008, City Council approved Resolution No. 2008-94 authorizing an agreement with Lambland, Inc. for the transportation and processing of biosolids. On March 8, 2011, City Council approved Resolution No. 2011-55 authorizing an agreement with Mount Farms LLC, the United States Department of Agriculture, and Joli Lofstedt, Chapter 7 Trustee for the Bankruptcy Estate of Robbin Lynn Peppler and Gwyn Marie Peppler, for the assumption of the 2000 lease to operate the Weld County Farm. On October 11, 2011, City Council approved Resolution No. 2011-142 authorizing a lease agreement with Lambland to operate Broomfield s Weld County Farm, and Resolution No. 2011-143 authorizing an agreement with Lambland for the transportation, processing, and application of biosolids generated at the WWRF. Financial Considerations Lambland will make annual payments to Broomfield in an amount up to $166,425 to lease the farm for agricultural purposes. The annual lease payment may be reduced by an amount up to $105,000 for lands taken out of production for Broomfield s Biosolids Program. The revenues generated from the lease will be applied toward the Sewer Activity Fund. Alternatives Do not approve the farm lease agreement. This will eliminate projected 2017 farm lease revenues and increase 2017 operating costs for biosolids disposal. Proposed Actions/Recommendations Based on the above, it is recommended That Ordinance No. 2037 be adopted on first reading and ordered published in full; That a public hearing on Ordinance No. 2037 be scheduled for 6:00 p.m. on December 6, 2016, in the Council Chambers of the City and County Building; and That the second and final reading of Ordinance No. 2037 be scheduled for December 6, 2016, following the public hearing. 7 (e) - Page 1

Weld County Farm Lease Agreement Page 2 BACKGROUND Biosolids are a byproduct of the wastewater treatment process, primarily organic in nature that must be processed and disposed of in accordance with federal, state, and local regulations. The primary biosolids management practice involves land application, which can include the use of compost or other highly treated biosolids, as well as other beneficial uses such as landfill cover. Other biosolids management options include landfilling and other forms of surface disposal or incineration. Biosolids are, in effect, a slow-release nitrogen fertilizer. In addition to significant amounts of nitrogen, biosolids also contain phosphorus, potassium, and essential micronutrients such as zinc and iron. Key benefits of adding biosolids to soil, when managed properly, include: providing additional organic matter; improving water-holding capacity; improving soil structure, and air and water transport; and decreasing top soil erosion. Biosolids provide an economic benefit, in addition to their environmental benefits, when applied at agronomic rates (the rates at which plants require nitrogen during a defined growth period). Colorado State University agronomists have shown that applying three dry tons of biosolids per acre every other year to dry land wheat produces comparable yields, higher protein content, and larger economic returns than lands that use 50 to 60 pounds per acre of commercial nitrogen fertilizer. Historical Biosolids Handling and Disposal From 1979 through the early 1990 s, Broomfield worked with several farmers in the Broomfield area for the application of biosolids to enhance their farming operations. During this period, staff transported and land applied all biosolids generated at the Wastewater Reclamation Facility (WWRF) on the permitted farms. In 1994, Broomfield developed a Biosolids Master Plan to address short- and long-term program needs for biosolids disposal. Broomfield subsequently purchased in 1996 a 1,328-acre farm (Weld County Farm), of which 951 acres are irrigated land suitable to farm, located in Weld County between the towns of Gilcrest and LaSalle. The farm consists of six parcels located between Weld County Roads 44 and 42 (north to south) and Weld County Roads 45 and 53 (west to east). Broomfield has been applying biosolids to the Weld County Farm since 2000. The following map shows the general location of the farm in relation to Broomfield. 7 (e) - Page 2

Weld County Farm Lease Agreement Page 3 WELD COUNTY FARM LEASE AGREEMENTS In 2000, City Council approved a lease agreement with a tenant farmer who had requested to spread biosolids from Broomfield s WWRF on the property. Broomfield staff was responsible for hauling the biosolids to the farm during the first several years of operation with the tenant farmer. From 2004 through 2008, Broomfield outsourced the transportation of the biosolids to the tenant farmer. In 2008, the tenant farmer notified Broomfield that they would no longer have the necessary equipment to provide the transportation services. Lambland, Inc., dba A-1 Organics, Inc. (Lambland), was hired to provide transportation and processing of Broomfield s biosolids, while the tenant farmer handled the application services. This arrangement continued until the tenant farmer filed for bankruptcy in December 2010. In March 2011, City Council approved an agreement with Mount Farms, LLC, to assume the farm lease through December 2011. On October 11, 2011, City Council approved a lease agreement and a biosolids transportation, processing and application agreement between the City and County of Broomfield and Lambland. The lease allowed Lambland to farm the excess acreage that wasn t committed for biosolids application. During the past five years, Lambland has effectively managed and maintained the financial, technical, and regulatory abilities of the two agreements. They met all performance expectations without any pricing increases throughout the duration of the two agreements, which expire at the end of 2016. To minimize Broomfield s future financial exposure related to both the lease of the Weld County Farm and the transportation, processing, and application of Broomfield s biosolids, staff representatives from Public Works, Finance, and the City and County Attorney s Office identified two options for moving forward in 2011. The two options included (1) keeping the lease of the Weld County Farm separate from the biosolids transportation, processing, and application or (2) retaining a firm that has the financial, technical, and regulatory abilities to manage both aspects of the biosolids program. Since the Broomfield farm was purchased for the beneficial reuse of biosolids and knowledge of the regulatory oversight of the biosolids program is critical to ensure compliance, staff determined that the best approach was to solicit a firm capable of meeting the demands of both. Staff from Public Works, Finance, and the City and County Attorney s Office evaluated Lambland s financial status, technical abilities/characteristics, schedule/availability, supportability, prices and fees, and past performance. Based on staff s review, it was determined that Lambland is financially sound and has the requisite experience to operate Broomfield s Weld County Farm and provide biosolids transportation, processing, and hauling services. Staff directly negotiated the terms and conditions of a five-year farm lease agreement with Lambland as provided by Section 3-20-150(B) of the Broomfield Municipal Code, which exempts revenue-generating agreements from the solicitation and bidding processes. A five-year lease term was established to provide an incentive for a tenant farmer to have a vested interest in the annual operations and maintenance activities at the farm. Lease terms less than five years would be difficult to negotiate. The five-year term provides the tenant farmer with more flexibility to make annual operating decisions based on commodity market trends and to create the opportunity to enter into multi-year contracts with local feed lots and dairies. The five-year term also accommodates changes in weather patterns that are typical in Colorado. These weather changes play a major role in determining the types of crops grown, yields, and the value received at harvest. 7 (e) - Page 3

Weld County Farm Lease Agreement Page 4 Section 31-15-713(1)(c) of the Colorado Revised Statutes authorizes the governing body of any municipality to lease any real estate owned by the municipality when such lease is deemed to be in the best interest of the municipality. Leases greater than one year shall be approved by ordinance. Due to this statutory requirement, the five-year farm lease will be presented to Council for consideration of approval as an ordinance. A second agreement with Lambland, Inc. for the transportation, processing, and application of biosolids for the Weld County Farm will be reviewed by City Council concurrent with the second reading of the ordinance. FINANCIAL CONSIDERATIONS The annual lease payment is based on a unit charge of $175 per acre times the 951 acres of irrigated land. The lease rate exceeds the rate published in the most recent United States Department of Agriculture report dated April 2016 for cropland rental. The report states that the average rent in Colorado for irrigated land is $142 per acre, and the national average is $128 per acre. Lambland will make annual farm lease payments to Broomfield in an amount up to $166,425. The annual payment may be reduced by an amount of $175 per acre up to a total of $105,000 for lands taken out of production for Broomfield s Biosolids Program. The agreement will allow Broomfield to receive lease payments from 2017 through 2022. The agreement also includes a provision to extend the term for a second five-year period solely based upon the City s discretion, subject to annual appropriation, budgeting, and availability of funds to discharge such obligations. COMPHEHENSIVE PLAN IMPLEMENTATION Contracting the transportation and beneficial reuse application of the WWRF biosolids is consistent with, and promotes, the following policies in Broomfield s 2005 Comprehensive Plan: Policy S-A.4: Establish and use standards, policies and practices that encourage and support the preservation and enhancement of land. Policy S-A.5: Establish and use standards, policies and practices that encourage and support the enhancement of water quality. Policy UT-A.2: Develop and manage all utility systems to increase reliability on a daily basis and in times of need. Policy UT-G.3: Continue to explore opportunities for joint use of regional utility infrastructure that will provide more cost-effective means of servicing Broomfield. PROPOSED ORDINANCE NO. 2037 Proposed Ordinance No. 2037 contains the necessary actions to approve a lease agreement with Lambland, Inc. (dba A-1 Organics, Inc.) in the annual amount of $166,425. The lease agreement designates Lambland as the tenant farmer for Broomfield's Weld County Farm. The proposed ordinance also authorizes the City and County Manager to renew the agreement for one additional five-year term solely based upon the City s discretion, subject to annual appropriation, budgeting, and availability of funds to discharge such obligations. 7 (e) - Page 4

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