HomeMy WebLinkAbout1996-05-21 - AGENDA REPORTS - STUDY SESSION (3)CITY OF SANTA CLARITA
INTEROFFICE MEMORANDUM
TO: Mayor Boyer and Members of the City Council
FROM: George Caravalho, City Manager
DATE: May 21, 1996
SUBJECT: BEYOND 50 PERCENT WASTE REDUCTION BY 2000
BACKGROUND
This fiscal year the City Council was presented with a number of complicated and significant waste
management decisions which were discussed at the February 6, 1996 Study Session. The decisions
are related to service expansions, adjustment of residential refuse collection rates and compliance with
the California Integrated Waste Management Act of 1990, commonly known as AB 939. At the
February Study Session, it was determined that the existing refuse/recycling franchise arrangements
directly affected these decisions. Council directed staff to prepare a report that provides a detailed
evaluation of the City's existing refuse/recyclable collection arrangements as related to service, rates
and AB 939 compliance..
The requested report, entitled Beyond 50 percent Waste Reduction by 2000, is attached. This
document is designed to provide the Council with substantive analysis of the City's existing waste
management arrangements which can guide the development of a comprehensive strategy for
exceeding the state mandated goal of 50 percent waste reduction within the next four years while
maintaining stable refuse collection rates.
This report was prepared by City staff with the cooperation of the franchisees. The City Attorney's
Office and other public agencies have provided valuable information that has also been incorporated
into the document. This comprehensive study draws upon a wide range of professional resources
including: industry publications, agency documents, independent survey data, personal interviews,
workshops and cumulative staff experience.
RECOMMENDATION
Receive staff presentation, discuss concepts described in Beyond 50 Percent Waste Reduction by
2000, and develop consensus on optimum approach to meet City Council objectives
ATTACHMENT
Beyond 50 Percent Waste Reduction by 2000F:w AGEN A\SS521%.8E8
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City of Santa Clarita
Study Participants and Acknowledgments
Research
Hazel Joanes, Waste Management Coordinator; City of Santa Clarita
Jon Emerson, Waste Management Analyst; City of Santa Clarita
Bryan E, Boeskin, Waste Management Analyst, City of Santa Clarita
Karl McCarthy, General Manager; Blue Barrel Disposal Company
Denise Kane, Recycling Coordinator: Blue Barrel Disposal Company
Dennis Verner, General Manager; Santa Clarita Disposal Company
Jay Julien, Recycling Coordinator; Santa Clarita Disposal Company
Charlie Caspary, Proprietor; Atlas Refuse Removal Company
Jerry Goodman, Financial Analyst; Atlas Refuse Removal Company
Preparation
Lynn M. Harris, Deputy City Manager/Public Works Department; City of Santa Clarita
Hazel Joanes, Waste Management Coordinator; City of Santa Clarita
Jon Emerson, Waste Management Analyst; City of Santa Clarita
Bryan E. Boeskin, Waste Management Analyst; City of Santa Clarita
Review
Ken Pulskamp, Assistant City Manager
Lynn M. Harris, Deputy City Manager/Public Works Department; City of Santa Clarita
Anthony Nisich, City Engineer
Rick Putnam, Director of Parks, Recreation and Community Services
Steve Stark, Director of Administrative Services
Mike Murphy, Intergovernmental Relations Officer; City of Santa Clarita
Karl McCarthy, General Manager; Blue Barrel Disposal Company
Denise Kane, Recycling Coordinator: Blue Barrel Disposal Company
Dennis Verner, General Manager; Santa Clarita Disposal Company
Jay Julien, Recycling Coordinator; Santa Clarita Disposal Company
Charlie Caspary, President; Atlas Refuse Removal Company
Jerry Goodman, Financial Analyst, Atlas Refuse Removal Company
Support
Carol Rodriguez, Administrative Intem; City of Santa Clarita
Vicki Johnson, Secretary; City of Santa Clarita
Diane Salyer, Executive Secretary; City of Santa Clarita
Pat O'Hara, Administrative Clerk: City of Santa Clarita
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PTABLE OF CONTENTS
BEYOND FIFTY PERCENT WASTE REDUCTION BY 2000
EXECUTIVE SUMMARY
I. INTRODUCTION AND PURPOSE.............................................................................. 1
C.J II. BACKGROUND.............................................................................................................1
III. CITY PROGRESS TOWARD AB 939 COMPLIANCE ............................................. 2
IV. FIFTY PERCENT BY 2000: PROGRAM, SYSTEMS AND SERVICE
REQUIREMENTS......................................................................................................... 3
AB 939 DIVERSION PROGRESS CHART
V. ARRANGEMENTS FOR PROVIDING SERVICE.....................................................5
VI. ANALYSIS OF EXISTING ARRANGEMENTS IN OUR COMMUNITY
RESIDENTIAL RATE HISTORY CHART
RATE TREND COMPARISON CHART
VII. SUMMARY AND CONCLUSIONS.............................................................................9
VIII. APPENDICES
APPENDIX A -Integrated Waste Management: What is it?......................................A-1
APPENDIX B - Open Market/Competitive Arrangements.........................................B-1
APPENDIX C - Refuse Collection by a Municipal Agency.........................................0-1
APPENDIX D - Discussion of the Advantages/Disadvantages of Individual Unit Pricing
Systems..................................................................................................D-1
APPENDIX E - Additional Comments from Santa Clarita Disposal .......................E-1
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BEYOND
FIFTY PERCENT WASTE REDUCTION BY 2000
EXECUTIVE SUMMARY
The City Council has been presented with a number of complicated and significant waste management decisions
during fiscal year 1995/96. The decisions were related to service expansions, steadily increasing residential
refuse rates, and compliance with the California Integrated Waste Management Act of 1990, commonly known
as AB 939. The existing franchise arrangements directly affected each of these decisions. Staff was directed
to prepare a detailed evaluation of the effectiveness of the existing refuse collection arrangements. This report
is intended to provide the Council with substantive analysis of the agreements which can guide the development
of a comprehensive strategy for exceeding the state mandated goal of 50 percent waste reduction within the next
four years while maintaining stable refuse collection rates.
The report finds that a franchise arrangement for Citywide refuse collection remains the most cost-effective
alternative for our community to comply with the established waste reduction goal of 50 percent by 2000. The
study also indicates that the existing agreements may require streamlining and/or updating. Analysis indicates
opportunities to modernize the existing franchise agreements by focusing on the following key areas; residential
rate stabilization, changes and additions to existing service requirements, increasing franchisee accountability
and modifying agreements for consistency with statutory and case law.
FINDINGS
• Residential Rate Stabilization: the five-year trend of residential refuse indicates rates have steadily
increased since the franchises were adopted in 1991. Surveys and studies conducted by city staff,
consultants and the franchisees, demonstrated that several surrounding communities provide residential
rates that are consistently less than rates in this community. In addition to lower rates, many of the
communities also provide additional services such as weekly curbside and yard trimming recycling.
• Expanding Service for Increased Diversion: based on official disposal/diversion data from the County
of Los Angles and the State's approved calculation methodology, the City reduced the amount of waste
being sent to landfills by about 30 percent in 1995. To exceed the state mandated goal of 50 percent
waste reduction by 2000, an additional 20 percent diversion is required. Expanded waste management
services will be required to meet this challenge.
• Increased Franchisee Accountability and Quality Control: while overall service performance has
been satisfactory, there are certain areas that need improvement including; responsiveness to customers'
requests, timely submittal of reporting documents, prompt payment of required franchise fees, consistent
conformance with insurance, bonding and all other routine requirements of the franchise agreements.
C Consistency with Statutory and Case Law: statutory changes and recent court decision affecting local
government control over waste management have occurred since the agreements were adopted. Detailed
review of the franchise agreements and municipal refuse code indicates some inconsistencies with new
laws.
CONCLUSIONS
Analysis of the findings provided several conclusions and alternative courses of action that may be pursued
J within the framework of the existing agreements. The identified alternatives can be considered as a
comprehensive package as well as mutually exclusive options. It is suggested that alternatives be combined to
I l integrate service requirements with rate stabilization alternatives.
II
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Options for Residential Rate Stabilization
• Amend AutomaticPass-Through Provisions: current agreements allow for an automatic pass -through
of annual Producer Price Index (PPI), all landfill tip fee increases and all other "extraordinary" costs.
Competitive industries seldom have automatic pass-through of nearly all operational costs to the
customer. These provisions of the agreement require revision or deletion.
• Amend Rate Adjustment Methodology: the current methodology is based on a set of static variables
that no longer exist. For example, the disposal cost index is based partially on disposal tonnages from
1994. Disposal tonnages are not a static variable, in fact these figures will theoretically decrease each
year as diversion increases. The existing methodology does not account for the dynamic nature of
certain variables.
• Amend Commercial Rate Band and Franchise Temporary Bin Services: by incorporating the
remaining refuse collection market share of the City into the franchise, economies of scale are
maximized_ Franchisee control of an entire market share, combined with restructuring commercial rates,.
can result in additional franchisee revenues that may be used to offset program implementation costs in
other areas.
• Residential Unit Pricing System: residential unit pricing systems can ultimately stabilize residential
rates by providing the customer with increased control over household disposal costs. A unit -based
system creates economic incentives for waste reduction by charging less to those who dispose less, and
more to those who dispose more: Because of the weight density and volume of yard trimmings, it would
be a prime material for recycling in unit -pricing system.
Options for Expanding Services to Increase Diversion
Expand Residential Curbside Program: heightened resident awareness and program participation has
resulted in increased demand for extra container space and/or weekly collection of recyclable materials.
Expanding the program to provide weekly collection provides added customer convenience, participation
and subsequently increases waste diversion.
Commercial Recycling: a recent survey of the haulers indicates that the City's commercial recycling
program is marginally successful with only eight to 24 percent of commercial accounts recycling. The
agreements require revision to include more detailed performance standards which target recovery of
key materials and encourage recycling arrangements that allow smaller businesses to initiate viable
recycling programs.
City -Wide Yard Trimmings Recycling: the City's Source Reduction and Recycling Element indicate
that yard trimmings account for 10 percent of the City's entire waste stream, and currently, it is not
being recovered. Though costs have impeded implementation of the program to this point, research
indicates that these costs may be minimized or be more equitably distributed through the simultaneous
implementation of a unit pricing system.
Enhanced Franchisee Accountability and Consistency with Existing Codes and Case Law
To facilitate improved responsiveness and accountability, the agreements should require provisions which make
customer service training for franchisee employees mandatory, enhanced enforcement provisions for failure to
comply with routine requirements, and deletion of the agreement's automatic term extensions. Amendment of
the existing agreements and the municipal refuse code is also necessary to modernize the documents and to ensure
consistency with statutory and case law.
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10
BEYOND FIFTY PERCENT
WASTE REDUCTION BY 2000
I. INTRODUCTION AND PURPOSE
The City Council has been presented with a number of significant waste management issues during
(� fiscal year 1995/96., These issues included requests to initiate new service in the form of a yard
U trimmings recycling program and franchisee requests for rate adjustments related to new county
�; landfill taxes. In addition to these issues, 1995 was also the milestone year for local compliance
I with the California Integrated Waste Management Act of 1990; commonly known as AB 939.
0 The City Council determined that this myriad of complex issues required detailed analysis to place
them into a coherent context. At the November 28, 1995 meeting of the City Council, staff was
directed to evaluate the effectiveness of the existing franchise agreements and rate adjustment
methodology to achieve a stable rate structure and to meet the goals of AB 939 by the year 2000.
This directive was reiterated in Mayor Boyer's top ten policy priorities.
At a study session held on February 6, 1996; staff presented an extensive list of proposed options
for achieving rate stabilization while meeting the state mandated requirements. City Council
direction was to prepare a comprehensive document that provides a detailed evaluation of each of
these options. In cooperation with the three franchisees Atlas Refuse Removal, Blue Barrel
Disposal, and Santa Clarita Disposal, this document has been developed to provide substantive
analysis which can guide the Council in developing a comprehensive strategy for cost-effectively
achieving the 50 percent disposal reduction goal within the next four years.
II. BACKGROUND
The field of municipal waste management has experienced significant legal, operational and
technological changes since the City entered into residential franchise agreements with Atlas Refuse
Removal, Blue Barrel Disposal, and Santa Clarita Disposal in April of 1991 ( August 1993 for
commercial agreements). The community itself has also changed significantly in terms of economic,
geographic and demographic growth.. The combined effect of these changes on the City's ability
to effectively manage solid waste collection and disposal has been profound. The goal of providing
quality refuse and recyclable collection service at a reasonable cost to residents and businesses while.
meeting the state mandated goals of the California Integrated Waste Management Act of 1990,
remains the central mission of the City's Waste Management Division. AB 939 mandates
municipalities to reduce the amount of waste being sent to landfills by 50 percent by the year 2000
or face fines of up to $10,000 a day. The Waste Management Division's mission has become
increasingly complicated by new challenges and opportunities.
AB 939 itself profoundly impacted waste managements practice in California. Prior to AB 939,
refuse collection primarily entailed picking up trash and taking it to the local landfill. Passage of
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939 required cities to follow an established "waste management hierarchy." Attempting to conform
to the established "hierarchy" has caused disposal and collection functions to become increasingly
specialized into a complicated array of diverse services and facility destinations. Instead of one refuse
company servicing each household, a residence may now be serviced by one company for trash, one
for co -mingled recyclables, one for yard trimmings, and yet another company for the disposal of
household hazardous waste. Once the materials are collected, they may be taken to a material
recovery facility, a transfer station, an intermediate processing facility, a composting facility, a landfill
or many other intermediary or final destinations. A detailed explanation of the integrated waste
management hierarchy is included in Appendix A.
III. CITY PROGRESS TOWARD AB 939 COMPLIANCE
The City's initial decision to franchise its refuse collection services was primarily the result of the
impending legal pressure of AB 939 to commence local recycling, source reduction and composting
programs. To achieve the state mandated goal of 25 percent diversion by 1995, the City needed to
evaluate its existing waste collection system and its disposal practices. In 1990, staff contacted the
waste hauling companies that where already operating in the City to assess the existing arrangements.
These companies, which are now the current franchisees, had been servicing the area prior to City
incorporation and had a proven track record of dependable service in the Santa Clarita Valley_ The
decision to franchise was largely predicated on existing circumstances, available information, trends
of other cities and internal time constraints.
These franchise agreements enabled the City to quickly implement a successful citywide residential
curbside recycling program. In 1993, the City entered into commercial franchise agreements with
the same three haulers for the collection of waste and recyclables in the commercial sector. In
addition to the two major programs for residential curbside and commercial recycling, several
supplemental programs have also been implemented since 1991 including:
• Curbside Christmas Tree Recycling
• Educational Outreach
• Yard Trimmings Recycling (Pilot)
• Certified Oil Recycling Collection Centers
• Participation in the HHW Roundup Program
• Home Composting Program
• City Facilities Recycling Program
• City Facilities Procurement Policy
• Curbside Oil and Filter Recycling
• Earth Month and Earth Day Activities
The City has initiated a home composting program which will include training classes, discounted
compost bins and a mobile chipper that will be available to residents to chip their bulky yard materials
into mulch. Composting demonstration sites are currently being developed at Canyon Country Park
and the Senior Center.
The combined result of the current waste reduction programs is very substantial. Disposal tonnage
data indicates that the City has achieved a waste reduction rate of 3 0 percent for the year 1995. This
exceeds the state required goal for the 1995 milestone by 5 percent. The challenge now is to reduce
even more waste in the community in order to reach the state mandated goal of 50 percent in the next
four years.
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U IV. FIFTY PERCENT BY 2000: SERVICE AND PROGRAM EXPANSIONS
(� Key system and service issues that will require strong emphasis to meet the 50 percent diversion goal
1, by the year 2000 have been identified. These issues include; yard trimming recycling, increased
commercial recycling, expanded curbside and rate structures that provide financial incentives to
(� recycle. See the chart titled AB939, Diversion Progress, on next page. To address these issues the
LI City and franchisees are working jointly to develop innovative diversion programs, which will offer
residents and businesses incentives to reduce waste. These programs will need to be added into the
1 J scope of the existing franchise agreements. As innovative programs and technologies emerge, the
1 J franchise agreements should reflect the flexible and dynamic nature of the rapidly merging waste
C management and recycling industries. In particular, the arrangements will require greater emphasis
on operational efficiencies and broader, more cost-effective services.
Residential Curbside Recycling Program: Continued Expansion
As previously mentioned, current data indicates that the City has achieved a 30 percent diversion rate
for the year 1995. The 30 percent diversion rate does not include the impact of the curbside recycling
program expansion of 1996. Reliable data is not yet available on the effect of the recent expansion
(� on local waste reduction. However, by adding several additional material types, which include mixed
paper, milk and drink cartons, catalogs and magazines, staff anticipates that residential waste
r I diversion will be slightly increased.
LJ Residential curbside recycling collection is currently available twice a month. When the curbside
program began in 1991 and residents were less aware of the necessity to recycle, the bi-monthly
LJ collection schedule appeared adequate. Curbside program expansions, such as the one mentioned
LJ above, increased resident awareness and program participation has resulted in greater customer
demand for larger recycling containers, extra containers and more frequent collection of recyclable
materials. Most curbside recycling programs in Los Angeles County, including the adjacent
unincorporated County areas, provide weekly collection.
(] Expanding the City's curbside program to provide for weekly collection would provide customer
convenience and subsequently further increase customer participation in the program. Another option
is to provide additional recycling containers to customers who request them at no additional charge.
The barrier to these program expansions is, of course, the increase in the costs of providing the
additional services or containers. The sale of additional recyclables could offset some of these costs.
r� Whichever options are chosen, the continued expansion of the curbside program is a necessary step
U in modernizing the City's existing waste management system to comply with the year 2000 goals of
n AB 939.
l! Yard Trimmings Recycling Program
To ensure that the City reaches the 50 percent state mandated goal, the City will be required to
L I expand existing programs and introduce new ones. The additional 20 percent diversion required to
meet the goal is likely to prove the most difficult to achieve. A large segment of the municipal waste
a stream that is not currently being recovered is yard trimmings. The City's Source Reduction and
Recycling Element (SRRE) and Household Hazardous Waste Element (HIIWE) (the City's Solid
Waste and Hazardous Waste Management Plan required by AB939) indicates that yard trimmings
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AB 939 -Diversion Progress
94.
1990
43
70.
.0%
2000
1995
30.0%
30.0%
Weekly Curbside
New Commercial
Unit -Pricing
Yard Trimmings
M Landfilled =Diverted
1990 Data Based on Diversion/ 1995 Data based on Disposal Reduction/ 2000
Data is Proiected
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alone account for 10 percent of the City's entire waste stream.
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To determine costs and collection systems necessary to implement a Citywide yard trimmings'
collection and recycling program, the City introduced a pilot program in September 1993. The yard
trimmings' pilot program allows 2,250 residents to separate yard trimmings, leaves and grass from
their regular household trash and set them out at the curb in separate containers. Staff conducted
Uresearch of several comparably sized cities' yard trimmings recycling programs and hired a consultant,
Hilton, Farnkopf and Hobson (F1F'H), to study the economic effects of implementing a yard
trimmings' collection program. The findings of these multiple research endeavors indicated that to
L� divert the maximum amount of yard trimmings it is necessary to establish a weekly yard trimmings'
L collection program. Customers would be provided with 64 -gallon semi -automated containers with
a 30 -pound collection limit. The advantages of this program being customer convenience and
1� maximum diversion. On the other hand, capital costs to purchase and finance the new containers are
high and would result in significant rate increases to residents. These costs have impeded
implementation of the program. Staff has determined that these costs may be minimized or equitably
redistributed through the simultaneous implementation of a unit pricing system.
Unit Pricing Systems
In regard to integrated waste management, the City is faced with the classic public sector dilemma:
how can additional, mandated services be provided while stabilizing or reducing costs to residents?
J The City Council has expressed its resolve to stabilize residential refuse collection rates, which have
continued to increase each year since the franchises were adopted.
A unit pricing system is a refuse collection pricing structure in which residents are charged according
to how much garbage they set out for collection. This type of rate structure provides economic
incentives, in the form of lower rates, to customers that place less refuse at the curb. In essence,
households that are effective at recycling and source reductions are rewarded with lower rates
According to a 1995 study by Skumatz Economic Research Associates, many communities
substantially increased their diversion and recycling after implementation of unit pricing systems.
Moreover, the State oflowa Implementation Guide for Unit -Based Pricing, reports that most of the
communities that implemented unit pricing systems saw average increases in recycling greater than
50%, along with a decrease or no increase in overall system costs.
The key consideration in the selection of a unit pricing system for waste management is whether to
measure waste by weight or volume. Unit pricing systems include a bag, tag, variable container sizes
and weight -based systems. A weight -based system uses containers provided by the hauler to collect
and weigh waste placed at the curb; the resident is charged a rate based on the amount placed each
week. A bag system requires that all trash be placed in specially marked bags that residents must
purchase beforehand. A tag system requires that each bag or container left at the curb must have an
official tag; tags similar to bags must be purchased before collection. A variable container system
offers residents the choice of several different sized containers provided by the hauler; they pay
according to the size of the container they use. An in depth discussion of the advantages and
disadvantages of each individual system, is addressed in Appendix D.
It is implicit in the discussion of yard trimmings' collection and unit pricing that these two programs,
if implemented simultaneously, would be complimentary. To reduce disposal costs, residents will be
more likely to recycle yard trimmings, which can often fill an entire container. Staff estimates that
if these programs are implemented jointly customers will realize cost benefits in the form of rate
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reductions, if they take advantage of the recycling programs. According to the City's SRRE the
anticipated diversion rate from the combined implementation of the yard trimmings program and a
unit pricing structure is 18-20 percent.
V. ARRANGEMENTS FOR PROVIDING SERVICE
The programs and service expansion necessary to comply with AB 939 while attempting to reduce
collection rates have been articulated. The final sections of this document will describe, analyze and
evaluate the primary ways that cities can arrange for waste management services. The emphasis of
the analysis will be to determine which type of arrangement can most
cost-effectively accomplish the City's waste management goals of maximum diversion, reasonable
rates and expanded service.
Discussion, to this point, indicates that the management of municipal solid waste (MSW) has become
an extremely complicated business. Corollary amendments to AB 939, and various state and federal
court decisions have further complicated, and in some cases, inhibited local government's abilities to
cost effectively manage refuse and recycling services. Local collection and disposal arrangements,
and City codes that may have been completely effective only five years ago may now be antiquated
and require modification and renovation. The remainder of this section will examine the way in which
the City of Santa Clarita has chosen to arrange for the collection and disposal of refuse and recyclable
material, according to a Franchise/Contract Arrangement. The efficiencies and deficiencies of this
type of arrangement will be closely examined.
It should be noted that there at least two other primary types of arrangements for municipal refuse
collection; open -market, competitive arrangements and public collection arrangements. These
arrangements are addressed in Appendices B and C respectively. It is instructive to understand the
merits and deficiencies of each type of arrangement, particularly when confronted by inquisitive
consumers.
Contract and Franchise Arrangements
Government contracts and franchises for a refuse collection service attempt to combine the
efficiencies of the private sector with the accountability and service orientation of the public sector.
Research indicates that of the primary arrangement types, the franchise/contract type is most likely
to produce lower rates and quality service for the customer. Contracting and franchising is very
similar in function and process. However, there are some substantive differences:
A contract service agreement solicits a private hauler to provide collection services to a community under local
government direction. Local government is also responsible for billing and collecting payment from households, and
is also responsible for paying the firm for services provided. Collection is mandatory for all residents in a community
covered by a contract, just as if provided by a public entity.
A franchise agreement awards a private hauler the right (exclusive or nonexclusive) to collect solid waste from a
specific geographic area. The franchised firm (rather than local government) is responsible for billing and collecting
payment from the customer, and often keeps most or all of those proceeds as payment for services rendered. With
franchises, service is usually not mandatory, as residents may choose to deliver their own garbage to the appropriate
management facility.
These definitions are fairly consistent throughout the literature on municipal solid waste management.
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InFrequently, in a contract arrangement, the hauler will be required to pay established administrative
fees to the local government for services related to the billing and collection of the contractor's
customers. In a franchise arrangement, the franchisee is usually required to pay a franchisee fee which
n is an established percentage of gross billing or receipts in exchange for the exclusive or nonexclusive
right to operate within a designated geographic area.
The key advantage of contract/franchise arrangements is that it offers local government a high level
of local control and accountability, while largely freeing itself from the challenges of day-to-day
operations and responsibilities. Local government can effectively control and enforce these types of
arrangements by setting local rates and requiring detailed performance and service standards, while
at the same time, requiring stringent liability and indemnification requirements, which are written into
the contract or agreement. The ability to set service standards has proven to be extremely valuable
to cities that have been required to implement a wide range of recycling, source reduction and
composting programs as a result of AB 939, Administrative and/or franchise fees also generate local
revenue that can be used to offset related program implementation costs.
When exclusive or semi -exclusive arrangements exist, service -providers operational costs can be
minimized by taking advantage of all the factors that work against haulers operating in an open
competitive market environment, i.e., economies of scale, contiguity, and information_ Ideally, the
maximization of these factors creates circumstances that are ultimately advantageous to the local
government, the contracted service-provider(s )and above all, the ratepayer. Minimization of
operational costs combined with diligent contract negotiation by city staff, and the city's ultimate
ability to set actual collection rates, should result in lower rates to the consumer.
From a local government perspective, two other advantages arise, particularly from franchise
agreements. The first is that franchise fees can often generate considerable revenue for a
municipality. The revenue is usually significant enough to easily finance the administrative
requirements of contract management and oversight, while leaving enough revenue to finance
required maintenance and repairs to the infrastructure damaged by refuse collection vehicles.
The second advantage is greatly simplified reporting and monitoring. It is more viable for City staff
to ensure that a handful of local contractors or franchisees conforms to required regulations than to
try and police numerous haulers that are under no contractual obligation, to comply with local, state
or federal regulations_
An exclusive or even nonexclusive agreement largely shelters a hauler from any outside competition,
essentially providing the grantee with a guaranteed stream of revenue. The grantee is freed from the
burdens of advertising and battling door-to-door for residential and commercial accounts. The
market share within the franchised or contract area is usually complete and not subject to a variance.
Refuse collection agreements usually have terms of no less than five years. This provides grantees
with considerable leverage when negotiating business loans for capital purchases. Haulers that have
succeeded in securing agreements with "evergreen provisions" (agreements which automatically
renew themselves each year) are in an extremely strong financial position with respect to negotiating
business loans for additional capital purchases related to equipment replacements or upgrades.
The primary disadvantage of contract/francbise arrangements is the limitation, or in some cases,
elimination of hauler competition and, ultimately, customer choice. Particularly in the case of
granting exclusive franchises, city officials are frequently faced with the awkward public appearance
of granting a "government-sponsored monopoly." Local government's power to enter into
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exclusive franchise arrangements for refuse collection is explicitly articulated in Section 40059 of the j 7
California Public Resources Code (PRC). Section 40059 A(2) of the PRC goes even further by
empowering cities to grant exclusive refuse collection franchises or contracts " .. either with or
without competitive bidding". The public appearance of exclusive franchises as a "government-
sponsored monopoly" is usually diffused when a competitive bid process is used to select the
grantee(s)- This public misconception is most easily diffused by offering rates to customers that are
less than rates they would be subjected to under other types of arrangements. ('
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Another disadvantage of the franchise/contract arrangement is that once a long term agreement is
executed it can be very difficult to amend. Effective contracts should always be consistent with local
ordinances, state and federal laws. However, laws and regulations are frequently created, amended
and reversed. Over the term of a long-range contract, service requirements, industry technologies;
applicable laws and regulations may change dramatically.
VI. ANALYSIS OF CITY'S EXISTING ARRANGEMENTS
Existing Residential Collection Arrangements v
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In April of 1991, residential franchises were granted to Atlas Refuse Removal, Blue Barrel Disposal
and Santa Clarita Disposal. Each agreement contains the same language, verbatim. The terms of the
agreements are six (6) years with an automatic annual term extension each year ( "evergreen
provision")- Each franchisee was designated a respective geographic service area that roughly
correlated to the existing territory that was serviced by the respective hauler prior to City
incorporation and franchising. The standard monthly rate for a single family household in 1991 was
$17.81. The agreement allows for the residential rate to be adjusted annually to reflect changes in
the Producer Price Index (PPI) and to reflect any changes in landfill tipping fees. Other
"extraordinary costs" experienced by the hauler can also activate rate adjustments. The preparation !
of rate schedule and the ultimate authority to adjust rates always lies with the City: The current rate L
being charged for standard monthly service for a single family residence is $20.63. Each franchisee
also provides a discount on senior citizen rates. All haulers are required to perform curbside
commingled recycling every other week, and in 1993 a pilot yard trimmings recycling program was
implemented that continues to service approximately 2,250 households. A chart titled Residential
Rate History can be found on the following page..
i
In February of 1996, the curbside co -mingled recycling program was expanded to collect several
additional types ofrecyclables such as magazines, mixed paper and paper milk and juice cartons. This
program expansion was implemented at no cost to residents. In April of 1996, the City Council
implemented a policy that would require a public hearing to be held annually, prior to the activation rj
of the automatic one year term extension of the residential franchise agreements. t J
Existing Commercial Collection Arrangements 0
In August of 1993, the commercial franchise agreements were awarded to Atlas, Blue Barrel and
Santa Clarita Disposal. Each commercial agreement contains the same language, verbatim. The term LS
of the agreement is seven (7) years with a three (3) year "evergreen provision" that automatically L S
activates a year prior to the expiration of the seven-year term. Franchisees were not granted
exclusive geographic franchise areas, in an effort to maintain limited competition within the
commercial sector, Franchisees are allowed to compete with each other for commercial accounts
as long as they operate within the provisions established in the commercial agreements. This decision
F;MMEWLWASMSPPROJ\WCEORAF_= 7
RESIDENTIAL RATE HISTORY
$25.00
$15.00
Standard Single Family Service
MCouncil Approved
M*Hauler Pass Through
$20.63
1990
1991 1992
1993
1994 1995
1996
*Franchise
provides for pass through
of certain
costs w/o City Council
approval.
r,
r 1 was based on input from the franchisees and local business stakeholders that participated in the
u original commercial franchising process in 1992 and 1993.
The agreement establishes a commercial rate band that allows the haulers to charge ratepayers any
amount that falls within the band. The " rate band" concept was s also the result of recommendations
from local business stakeholders who participated in the original commercial franchising process_ The
(j rate band is designed to allow for limited service provider competition while still allowing the city to
exercise regulatory control over rates, service performance standards and adherence to local, state
and federal law.
CA rate band is also used for commercial recycling bins.. However, commercial recycling bins are to
be offered to all business accounts at a rate 30 percent less than would be charged for a standard
Orefuse bin of equal size. The range of the rate band varies according to bin size and frequency of pick
ups_However, the band does allow for extreme elasticity at all service levels. Businesses also have
the option of contracting with private recyclers that charge nothing or provide compensation for their
recyclables. The commercial rate band has not been adjusted since the original agreement became
effective in August of 1993. This is illustrated by a chart on the following page titled Rate Trend
L, Comparison
A State Supreme Court decision, Waste Management of the Desert vs. Palm Springs Recycling
Center, commonly known as the Rancho Mirage decision, effectively prohibits local governments
C from granting exclusive franchises for commercial recycling services. In effect, any private recycler
can offer and provide recycling service to a commercial account as long as the recycler is not being
{� paid by the generator to provide the service. Some legal experts (primarily advocates for the private
t ,I recycling industry) even argue that private recyclers are legally allowed to pick up commercial
recyclables even if they are paid for the service.
1. The City's commercial recycling program, operated by the franchised haulers, has proven to be only
marginally successful. A recent survey of the haulers indicated that only eight to 24 percent of their
lJ commercial accounts are involved in City/hauler sponsored recycling programs. It appears that many
lJ of the City's largest enterprises, which create recyclable commodities in volume, have chosen to
process and market their own materials or use private recycle companies that will pick up and pay
for the materials. For example, many supermarkets process there own cardboard for reuse or resale.
At least one local supermarket markets its own scrap produce to be processed and made into compost
a in a facility in Sun Valley. The local office of a regional newspaper is an example of a large, local
waste generator that has chosen to use a private recycling company to process and market its
recyclable paper products.
Temporary Bin Services
Currently haulers that provide temporary bin service, such as roll -off bins for construction projects
or standard size bins for cleanup projects, are not regulated by the City. In May of 1994, Waste
Management Staff implemented a Bin Replacement Service (BRS) Program in an attempt to regulate
a haulers that were providing this service. The franchised haulers felt it was unequitable for them to
be charged franchise fees and granting fees when other haulers were operating within the same
service areas at no cost. After numerous meetings with the franchised haulers, non -franchised haulers
(j and the Chamber of Commerce, staff developed a program that was a hybrid of a nonexclusive
l franchise agreement and permit program. The program was based on model programs being utilized
in the City of Long Beach and the City of Pasadena. The program required each of the participating
OFMOME\SOLWASMMPPROJNW MR .BEB 8
RATE TREND COMPARISON
Commercial Rate Band Compared to Residential Rates
1993
1994
1995
— Resident Comm. Low — *Adjusted Low
—Comm. High —*Adjusted High
Hypothetical rate scenarios based on PPI and Tip fee adjustments
commensurate to annual residential adjustments
$90.48
$48.81
1996
Commercial
Rate
Band
1993
1994
1995
— Resident Comm. Low — *Adjusted Low
—Comm. High —*Adjusted High
Hypothetical rate scenarios based on PPI and Tip fee adjustments
commensurate to annual residential adjustments
$90.48
$48.81
1996
haulers, there were 11 in all, to enter a nonexclusive franchise agreement with the City. All grantees
were able to provide temporary bins to any area of the City and each hauler was allowed to compete
with the others to provide temporary bin services. All agreements were identical and each was
limited to a one year term. Haulers that did not enter an agreement with the City were prohibited
from legally operating in Santa Clarita:
While staff made every effort to include all interested parties in the BRS Program process, invariably
certain parties were inadvertently excluded. The excluded parties asserted that the franchising
process was not equitable and certain parties had been purposefully excluded. Unfortunately, this
incident was occurring at almost precisely the same time C & A Carbone vs. Clarkstown case was
being decided by the U.S. Supreme Court. The broad impact of this decision is that it invokes
constitutional issues related to the Commerce Clause, which provides the legal foundation for
challenges to local government's ability to grant exclusive franchises or contracts, particularly when
an all-inclusive competitive bidding process is not utilized. In light of the existing circumstances, the
City Attorney's office indicated that it would be in the City's best interest to cease enforcement of
the BRS permit program. Granting fees and franchise fees were collected from the perrrvtted haulers
for short period of time. The City has retained some of the fees.. The term of the BRS agreements
expired in May of 1995, and currently temporary bin services for refuse collection is unregulated in
the City of Santa Clarita.
VII. SUMMARY AND CONCLUSIONS
Based on the compiled research, staff concludes that a franchise/contract arrangement for Citywide
refuse collection remains the most viable and cost-efficient alternative for our community: Staffs
detailed evaluation also indicates that the existing agreements are in need of modification,
streamlining and updating.
Analysis indicates opportunities to renovate the existing franchise agreements by focusing on the
following key issues; residential rate stabilization; expanding service for increased diversion,
increasing franchisee accountability and streamlining franchise agreements to be consistent with
Cl statutory and case law. Addressing each of these issues through the maintenance of a modified
franchise/contract service arrangement can serve to accomplish the City's waste management goals
of AB 939 compliance, stable collection rates and expanded refuse/recyclable collection service
Options for Residential Rate Stabilization
( As noted in the previous section, residential rates have steadily increased since the agreements were
(� adopted in 1991. While service levels have also increased somewhat, data does not support the fact
the rise in service is commensurate to the increase in rates. For example, several other communities
0 in Los Angeles and Ventura County, including the adjacent unincorporated areas, are able to provide
additional services such as weekly curbside recycling at rates that are comparable, or less, than our
community.
QIn June of 1995 the financial consulting group of Hilton, Farnkopf and Hobson distributed a Solid
o Waste Services Survey that included 185 cities from the five surrounding counties; Los Angeles,
Orange, Riverside, San Bernardino, Riverside and San Diego. The survey indicated the average
monthly residential refuse rate in Los Angeles County was $12.38. San Diego County had the highest
paverage residential rate at $16.23. These rate averages included franchise fees, AB 939 fees;
administrative fees and any other fees retained by cities. Santa Clarita residents are currently being
charged a monthly refuse rate of $20.63.
CF1HOMt LWA5F,%SPPR01\WfEDRAFZ.BEB 9
As part of an ongoing biennial Systems and Service Review, the franchisees themselves conducted
a rate and services survey of 10 comparably sized cities in Los Angeles and Ventura County in March
of this year. The survey indicated that Santa Clarita's residential rates where higher than each of the
survey respondents. The survey also indicated that eight; of the 10 cities offered weekly curbside
recycling collection, and six of the 10 cities also offered yard trimmings recycling collection.
The following options may effectively be used to stabilize residential collection rates.
• Amend Automatic Pass -Through Provisions
The existing franchisee agreements allow for nearly every cost increase contingency to be passed
directly onto the ratepayer: While many city franchise agreements have provisions that allow
automatic tip fee pass through and annual CPI or PPI increases, these types of incentives should not
be granted without serious consideration; The PPI adjustment is designed to account for industry
specific operational costs' increases such as labor, fuel and insurance. The "extraordinary costs"
provision is effectively a "catch all" to pass on any costs that are not covered by tip fees or the PPI.
Very few other industries or businesses have guaranteed revenue streams combined with a
guaranteed pass through of all operational costs to the customer. Our existing agreements allow the
service provider to be effectively insulated from all external business costs, while placing the primary
burden of cost increases on the ratepayer.
• Amend Rate Adjustment Methodology
The rate adjustment methodology used by the City to determine annual refuse rate adjustments also
requires modification. The methodology was based on set of static variables that existed at the time
of the study but do not currently exist. For example, the disposal cost index was partially based on
disposal tonnages from 1994. Disposal tonnages are not a static variable, in fact these figures will
theoretically decrease each year as result of recycling, source reduction and composting: The
existing methodology does not take into account the dynamic nature of the chosen variables.
Amend or Eliminate Commercial Rate Band and Incorporate Temporary Bin Services into
Franchise
By incorporating the remaining refuse collection market share of the City into the franchise,
economies of scale are maximized. Franchisee control of an entire market share combined with
restructuring commercial rates can result in additional franchisee revenues that may be used to offset
program implementation costs in other areas.
• Residential Unit Pricing System
Residential unit pricing systems can ultimately stabilize residential rates by providing the customer
with increased control over household disposal costs. A unit -based system creates economic
incentives for waste reduction by charging less to those who dispose less, and more to those who
dispose more. Because of the weight density and volume of yard trinunings, it would be a prime
material for recycling in unit -pricing system.
F:U OMEWLWASI PPROAMRAF2.REB 10
Expanding Service for Increased Diversion
jAs mentioned earlier to meet the AB 939, year 2000 goal of 50 percent diversion, additional
u programs and/or program expansions will be required.. These program requirements were discussed
in Section III of this document.. The identified program requirements for the medium term, 1995 to
C2000 are:
n • Expand Curbside Recycling; Weekly Collection
• Expand Commercial Recycling; Target Key Materials for Recovery
• City -Wide Yard Trimmings Recycling
• Residential Unit Pricing System
Each of these requirements would require modifications to the existing agreements. It should be
n emphasized that the identified program requirements should be considered as a "program package,"
L not necessarily as mutually exclusive program options. Agreement modifications must integrate
service requirements with rate stabilization alternatives.
r' Increased Franchisee Accountability
l A service -related area in the existing franchise agreements that could be made more effective is
L customer service which includes; responsiveness to service requests from City staff, residents and
businesses and accountability for timely compliance with established performance standards. The
options to facilitate improved responsiveness and accountability are; provisions requiring mandatory
customer service training for franchisee employees, stringent enforcement provisions for failure to
comply with performance standards and termination of the agreements existing "evergreen'
provisions.
• Fixed Agreement Term
Staff and legal counsel analysis conclude that " evergreen provisions" of existing agreements are
� unnecessary and effectively serve to reduce franchisee accountability, and provide no incentive for
L J franchisee to renegotiate or amend existing agreements to maintain consistency with new technologies
(} Consistency with Statutory and Case Law
(J The final opportunity for improvement in the existing agreements is related legal precedent that have
(1 emerged since the adoption of the agreements. Amendment of the existing agreements and the
l J municipal refuse code is required to modernize the documents to ensure that the two are consistent
with statutory and case law.
OFollowing completion of this study, the franchised haulers were given a final opportunity to comment
�q on the contents of this document.. All additional comments are attached as Appendix E of this
f document.
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PE:WOMEWLWASCE PROAHTEORA _M 11
rAPPENDIX A
INTEGRATED SOLID WASTE MANAGEMENT: WHAT IS IT?
Integrated waste management is a combination of practices and systems to manage municipal waste.
�1 Municipal waste is made up of numerous distinct material types. Each of these materials can be
collected, processed and marketed as a commodity. An integrated waste management system
incorporates a combination of waste management practices that retrieve recyclable materials from the
n waste stream and properly handle the non-recoverable material.
AB 939 facilitated the development of local integrated waste management programs. The act
establishes comprehensive planning requirements and plan implementation objectives for cities and
counties to manage their waste streams
through an integrated waste management
(j a p p r o a c h. SOURCE REDUC73)
Specifically, the Act
UU required that all city and c o u n t y
governments send 25% RECYCLING less waste to landfills by
( 1995 and 50% by the year 2000. This law
establishes the hierarchy of preferred solid waste
COMPOSTING
management practices. These are, in order of priority: 1)
lJ Source Reduction, 2) Recycling, Composting, 4)
lJ Transformation, and 5) Landfilling. TRANSFORMATIO
CSource Reduction DISPOSAL
The Environmental Protection Agency's Solid Waste Dilemma: An Agenda for
Action, defines source reduction as "the design, manufacture, and use of products so as to
reduce the quantity and toxicity of waste produce when the products reach the end of
n their useful lives," In other words, source reduction is an approach that precedes waste management
and takes into account how products are manufactured, purchased and used. On a local level, source
reduction is achieved through educating the public of product reuse, and decreased consumption.
rl On a regional and state level, source reduction can be accomplished by providing manufacturers with
u the incentives to reduce material volume in their packaging and increasing their product's useful life.
Though source reduction is the most preferred waste management practice, it is also the most difficult
(j practice to accurately quantify waste diversion.
�J Recycling
Recycling is a fundamental part of any municipal integrated waste management plan because it offers
the municipality an alternative to the rising costs and environmental consequences of waste disposal.
aRecycling is more than the separation of materials from the waste stream. For recycling to have an
impact in the waste stream, the materials which are collected must also be reprocessed or
O remanufactured into usable products. It is only when the collected materials are reused that the
recycling loop is complete. While recycling diverts a significant portion of the waste stream, it must
be implemented in conjunction with source reduction programs. Planning for recycling involves
O understanding of the different material markets at the local and global levels and encouraging public
participation: Elements of a recycling program included sources separated curbside collection,
material recovery facilities, traditional mixed waste curbside collection and full mixed waste
n processing to retrieve renewable materials.
I F:WOMEWLWASCE�SPPR011WPEDRAF2.BEB A-1
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APPENDIX (CONTINUED)
Composting
Typically, more than 25 percent of a municipal waste stream is attributed to organic materials such
as yard trimmings and food wastes. In recent years composting these materials has become a popular
waste management option for many communities. Composting is a degradation process which
involves the action of microorganisms on organic materials such as yard trimmings and food wastes.
The weight and volume of these organic materials can be reduced to more than half of their original
size by weight and volume. The finished product of the degradation process is a dark brown
substance known as humus or compost. Compost is nutrient rich and can be used by the agricultural
industry and the general public as a soil amendment. Cities can comply with this practice by
implementing yard waste programs, back yard composting programs and mulching programs.
Transformation
According to the California Code of Regulations the principal function of transformation is to
convert, combust, or otherwise process solid waste by incineration, pyrolysis, destructive distillation
or gasification too chemically or biologically process solid wastes for the purpose of volume
reduction, synthetic fuel production or energy recovery. Incineration facilities are currently
operational in the cities of Long Beach and Commerce. The other types of technologies are currently
being used on a small scale, but large-scale processing applications for municipal solid waste are still
in its nascent stage. The California Integrated Waste Management Board, the agency responsible for
enforcement of AB 939, seeks to discourage transformation by disallowing full diversion credit for
this type of waste management practice.
Land filling
Land filling is a method of disposing refuse on land by burying it daily under layers of soil. Landfills
are the most widely used waste management method in the United States. However, many
communities are having difficulties siting new landfills. The difficulty in siting new landfills has
resulted largely from lack of suitable sites, increased concern among the public about the adverse
impacts related to public health, soil contamination, air and water quality. There are many instances
in which communities were compelled to commit considerable resources for the cleanup of past
disposal practices.
A — 2
F:WOMEWLw'ASC WPROAWr®RAFZXER
CAPPENDIX B
Open Market/Competitive Arrangements for Collection of Refuse/Recyclables
1 J The most frequently asked question from residents or businesses that have become dissatisfied with
their refuse collection rates or service is Why can't I choose my own service provider? The key
( advantage of an open competitive arrangement is that it ideally maximizes service provider efficiency
Land customer choice, and potentially offers the best rates to customers. In an atmosphere of true,
unregulated competition, companies that do not offer quality service at a reasonable rate can easily
I a be replaced by a competitor that will. Ideally, competition also stimulates technological and
operational innovation in an effort to gain a market share through comparative advantage.
Unfortunately, the ideal atmosphere of true, open market competition seldom, if ever exists. Staff
Iresearch indicates, that on an average, refuse rates in market systems tend to be higher than any other
U type of collection arrangement.
G Consumers find it ironic that a competitive market system is the least likely to produce lower
collection rates, but there are several important factors that illustrate why unregulated competition
is seldom efficient in the refuse collection industry. The primary reasons are related to "economies
L' of scale and contiguity." These factors place small haulers at a particularly serious competitive
L disadvantage. If one hauler has only small clusters of accounts widely scattered throughout a city and
another hauler has accounts densely concentrated in contiguous geographic areas the first hauler will
U not be able to efficiently compete with the second. It follows that the second hauler could initially
afford to offer lower rates than the first, and at some point, the first hauler would probably be driven
out of business, leaving an increasingly larger market share to the first hauler. Once smaller haulers
have been eliminated and consumer choices have been minimized, the remaining haulers can demand
higher rates from their customers.
Another factor that hinders lower rates in a "competitive market" is what can be referred to as the
economics of information. When consumers purchase services that are commonly held to be public
t , utilities such as water, electricity and refuse collection, they are seldom aware that they may have
L choices of different service providers. Utilities are often viewed by residents and businesses as fixed
costs that must be paid without question. Even in cases where individual residents or businesses are
�j aware that they may have choices, they often are not effective at negotiating a better rate with other
lJ service providers because they have no knowledge of the utility's true cost of doing business.
{ A factor that makes open competition undesirable from a local government perspective is lack of
u regulatory control over rates, service performance and conformance to established laws and
regulations. When service providers are subject to minimal regulatory oversight there is a tendency
0 to ignore established rules. For example contracted or franchised haulers are subjected to strict
liability and are frequently required to indemnify local governments from any litigation resulting from
the collection of hazardous waste. Because unregulated haulers are frequently not faced with specific
l contractual requirements, they often find it convenient to escape existing legal requirements. In
essence, unregulated haulers seldom exercise the same diligence in complying with established law
a as contracted haulers that are under close government scrutiny. In an open, competitive
arrangement, a jurisdiction is also usually not in a position to demand or enforce any sort of
performance or service standard from haulers such as weekly curbside recycling or bulky item pick
ups. Finally, in the market system rates may fluctuate widely from household to household and
business to business for the same type of service.
`J F:U OME\SOLWASFE\SPPROJ\WTEDRAF2.BU 1�-1
APPENDIX B (CONTINUED)
Open market arrangements also do not allow for collective negotiation of community services such
as senior citizen discounts or annual spring clean ups.
Cities that have refuse collection arrangements that provide for market competition are increasingly
diminishing. Staff is only aware of six cities within Los Angeles County that provide for open market
competition for residential refuse collection. Open market systems tend to deteriorate local
infrastructures, depending on the number of competitors operating in a given jurisdiction. In extreme
cases, as many as 18 to 20 separate collection vehicles may be servicing the same streets and
neighborhoods. The heavy truck traffic damages existing roadways, creates additional air pollutants
and disturbs residential neighborhoods by creating excessive noise. Staff research was unable to
identify any examples of municipal refuse collection arrangements in which open competitive markets
are allowed to operate completely free of at least limited government regulation. In nearly all cases
where municipalities use market competition, the city requires some form of permitting or business
licensing and adherence to related refuse codes.
The unincorporated areas of Los Angeles County, with the exception of six garbage disposal districts
located mainly in central Los Angeles, also utilize a market system for providing refuse and
recycling services. The County Department of Public Works has recently issued a public statement
indicating that it may soon be issuing five-year notices of its intent to franchise or contract for
services in the remaining areas of the County.
Applicability to Santa Clarita
Santa Clarita currently allows regulated competition among the three franchised haulers in the
commercial sector. As of May 1995, the City has also allowed open competition for temporary bin
services providers, which constitutes a relatively sizeable share of the local market. Staff is aware
of at least l l haulers that currently provide temporary bin services in Santa Clarita.
IN
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APPENDIX C
Refuse Collection by A Municipal Agency
Just as most full-service cities provide direct police and fire services, many also provide direct refuse
collection service through a Bureau of Sanitation or a Solid Waste Removal Division. In most cases,
cities that provide refuse collection as a direct service are very large and operate thew own disposal
facilities. In essence, they control the entire waste management chain including collection,
transportation and disposal. In nearly all cases, where refuse is collected by a public entity the utility
benefits from economies of scale and economies of contiguity which is seldom experienced in open
competitive arrangements. Essentially, these are key advantages of public refuse collection from an
organizational perspective, that is the city's ability to maintain direct control over all financial and
operational aspects of the utility. Another advantage is that once the utility is operational it becomes
an enterprise that can generate city revenue: The key advantage from a ratepayer's perspective is that
frequently citizens are not required to pay directly for refuse collection service because the utility is
financed through the general fund, and even in cases where residents are required to pay, the rate is
usually heavily subsidized by the local government.
The key disadvantages of public refuse collection is initial capital outlay, general inefficiency, lack of
competition, and elimination of residents and businesses ability to choose their preferred service
provider. The initial expenditures required for the purchase of vehicles, equipment, yard and
maintenance facilities and labor is usually phenomenal as would be expected from any type of large-
scale field service, and the larger the City the greater the equipment and labor demands and
consequently the greater the initial outlay. Financing of a refuse collection utility usually requires a
bond measure or financing arrangement that is linked to the operation of a locally operated disposal
facility. The second type of financing arrangement has become increasingly difficult for local
governments due to the recent court decisions on "flow control,"
The other primary disadvantages of public collection are all closely interrelated. Numerous studies
indicate that refuse collection by public entities is consistently less efficient than all other types of
municipal collection arrangements. The operational focus of public entities has historically been to
provide service. The focus has traditionally neglected cost containment. A commonly cited cause of
public service inefficiency is reduced productivity resulting from resistance to technological
innovation and an over reliance on antiquated labor intensive collection systems. These types of
inefficiencies are often linked to powerful local labor unions who do not want employees being
replaced by " automated" collection systems and senior level government managers who are hesitant
to "experiment" with new, often expensive collection systems technologies. However, the most
frequently cited cause of inefficiency is lack of competition and service provider choices for
ratepayers. All research indicates that in cases where City's refuse collection services are exclusively
provided by the local government and not subjected to any form of outside competition, the
collection cost per household is consistently higher than most other types of municipal collection
arrangements. It should be reemphasized that in many cases' residents do not directly experience
these higher costs because the utility is financed through the general fund and rates are nearly always
heavily subsidized. However, this fact does not solve the efficiency problem for local government
decision makers who are faced with increasingly dwindling operating budgets.
F:WOMEWLWASfE�PPRWJWTEDR FIBU
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APPENDIX C (CONTINUED)
Local/Regional Models
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A recent study by the consulting firm of Hilton, Farnkopf and Hobson indicates that only 12 of the
88 municipalities in Los Angeles County provide public refuse collection services. However, these l l
twelve cities serve roughly 60 percent of the population of Los Angeles County. Three relatively
familiar examples are the Cities of Los Angeles, Glendale and Pasadena. The Los Angeles and L1
Glendale examples closely illustrate the attributes of the type of City that typically provides public 1
refuse collection. Each City is a large, full-service City that operates its own landfill and provides its
residents with artificially low -rates achieved by heavy subsidies through large General Fund
expenditures and additional revenue generated through landfill tipping fees.
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rAPPENDIX D
(� Discussion of the Advantages/Disadvantages of Individual Unit Pricing Systems
Weight -based
The key advantages of a weight -based system are that it provides the most effective source reduction
and recycling incentive and strongly reinforces customer rate equity. Residents can place trash they
Cgenerate each week and are billed for the exact amount of refuse they place on the curb. This would
have two distinct advantages. For waste reduction, residents would see a clear incentive to reduce
n their waste, and for convenience, they would be able to set out the occasional extra refuse without
�J requesting special accommodations.
{ i An additional advantage is detailed weight reports that would provide excellent data to help waste
I management analysts target modifications to waste diversion programs. This would help make the
(� diversion program as efficient as possible by targeting materials that residents consistently overlook.
U Weight -based systems are still an emerging technology without a proven track record; this
disadvantage weighs heavily on all of the components of the program because the problems and
(j inefficiencies of the different technological systems have not been modified and improved over time.
u A weight -based system would require a significant capital outlay for a truck -based scaling and data
collection system to weigh and record each household's refuse before it is combined with the general
n disposal stream. Another formidable obstacle is the certification of the truck scales on hills with
LLJJ grades exceeding 10 percent. All available systems have been certified on streets where the grade is
C` 10 percent or less. In Santa Clarita approximately 1 l percent of the streets have a grade steeper than
J10 percent. Additionally, Radio Frequency Identification Transponders must be attached to the
customer's existing refuse cans to identify the owner. Finally, a new, complex and expensive billing
process extending from the function of scales and identification tags to the final printing of bills would
need to be implemented.
Bag and Tag
The advantages of the bag and tag systems are low implementation costs. Standardized bags or tags
can be designed and placed in outlets with very little preparation and there is no new hauling or data
management equipment to install. The disadvantages of the bag and tag systems are the lack of
convenience offered to residents and the incompatibility with automated or semi -automated collection
O systems. Santa Clarita residents are accustomed to convenient roll-out waste containers, and
residents would have to make extra trips to locate specific retail or municipal outlets to purchase their
bags or tags. The lack of an automated or semi -automated system would create more costs in the
Ofuture due to worker injuries caused by excessive lifting of heavy bags and collection inefficiency.
nVariable Container System
` The key advantages of variable container systems (VCS) are the proven track record and
^ compatibility with automated and semi -automated collection systems. VCS technology is not limited
by a lack of testing and innovation nor is sophisticated equipment required to measure and calculate
data from each household as are required in weight -based programs. VCS are the most common
unit pricing system on the West Coast. The compatibility with automated and semi -automated
collection systems would allow the City to modernize the collection system.
FFMOME LWA EMMOA\ MRAFIBEB o-1
APPENDIX D (CONTINUED)
Discussion of the Advantages/Disadvantages of Individual Unit Pricing Systems
This modernization would decrease worker injuries and increase the collection efficiencies.
An additional advantage is that a VC ideally provides several service options designed to encourage
waste reduction and provide rate equity. 'Rates are usually set in increasing blocks that charge the
least for the first block of service, with charges increasing for higher blocks of service. This
approach, similar to electric and water billing strategies, creates a low charge for essential "lifeline
service levels and creates an increasing incentive to reduce waste at higher disposal levels: The
service blocks correspond to varying container sizes. Ideally, 32, 64 and 90 -gallon containers appear
to allow for maximum diversion and rate savings. Customers are usually allowed to switch service
levels once a year free of charge. 'Finally, variable container systems are usually accompanied by a
policy that establishes a, price for extra; trash that will not fit in the container size chosen by the
customer, and requires that residents"request extra service before their collection day.
The key disadvantages of VCS are the cost of purchasing initial startup materials, developing and
maintaining a rate scheduling process. The primary cost would be the purchase, inventory and
distribution of the various containers. This type of system would increase the need for enhanced
communications between the service providers, the City and rate payers. This need would create
additional costs for training and possibly hiring new customer service representatives and drivers.
A variable container system requires a complicated rate scheduling process to create a system that
is sensitive to the City and hauler's financial needs, while still creating the desired array of customer
incentives. Original design of the details of such a system can require significant staff time. Issues
that staff or a consultant would need to address include generation projections, cost projections, cost
allocation analysis and analysis of the impact of price incentives on waste generation levels.
Implementation would require customers to estimate their typical refuse generation, understand the
payment policy for extra trash, and understand the nexus between rates and household disposal
patterns. Since most residents are seldom concerned with issues related to refuse collection, a
significant public relations effort would be necessary to explain both the reasons for, and the function
of the new system. This effort may require substantial staff and/or consultant time in preparing an
effective public education campaign.
A secondary disadvantage is that residents would not be induced to reduce their waste beyond the
capacity of their container. Residents that reduce their waste below the container capacity perhaps
would feel that they were paying for service they do not use.
D-2
FAHOME L,WASTEWPROA [EDRAFIBEB
rl jj„} A1PPENjlYF 'E O _ 9
0.
l�POST OFFICE BOX 1247
L CANYON COUNTRY, CALIFORNIA 91386
(805) 252-8208 • (818) 362.4002
Comments on "White Paper Report"
L Page 3: Under heading "Residential Curbside Recycling Program: Continued Expansion"
middle paragraph; Add: Haulers will collect unlimited recyclables, provide extra
�) containers or stickers for customers containers.
Page 4: Top paragraph 64 gallon cart will have 64 pound weight limit not 30 pounds.
lJ Page 4: Under heading "Unit Pricing Systems" Consider the following: Until all new
programs are online it will be difficult to stabilize rates.
r�
`-i Page 9: Under heading "Options for Residential Rate Stabilization" -First paragraph,
1 Second sentence: Rates have increased due to landfilling fees and inflation, not for
I increasing service levels.
Page 9 Under heading "Options for Residential Rate Stabilization" First paragraph,
second to last sentence; Santa Clarita Disposal charges more outside city for identical
services minus franchise fees. Also the amount of customers receiving weekly collection
of recyclables out side the City is minimal compared to the amount of customers receiving
by -weekly service in side the City.
Page 9: Under heading "Review and Amend Automatic Pass Through Provisions"
Consider adding the following: Haulers have never used their right to pass through
"extraordinary cost" onto the residents and in the past have cooperated with the City in
holding off several raises due them until the City felt it would be a more appropriate time
to notify residents of increases:
(l Page 10: Under heading "Review and Amend Commercial Rate Band....:" Consider
�J adding the following to end of paragraph: (Such as Yard Trimmings Program).
aPage 10: Under heading "Changes in Service Requirements" Consider adding the
following to end of paragraph: Once these programs are implemented rate stabilization can
Ooccur.
Page 11: Very top of page add: On several occasions haulers have invited City staff
members to come in and listen in on their conversations with customers and make
[� comments. Haulers in the past have paid for formal customer service training for their
employees.
Page 11: Under heading "Responsiveness to Routine Performance Standards" Please note
Santa Clarita Disposal prides it's self on timely payments of franchise fees.
SATISFACTION GUARANTEED OR DOUBLE YOUR RUBBISH BACK
rcra we
E-1
J
APPENDIX E (cont)
SANTA CLARITA DISPOSALCO,
POST OFFICE BOX 1247
CANYON COUNTRY, CALIFORNIA 91386
(805) 252.8208 • (818) 362-4002 �-
. J
Page 11: Under heading "Responsiveness to Customer Service Requests" It has been J
noted in the past that sometimes customers will "play" Hauler against City. Haulers
collect refuse and recycling from more than 30,000 individual accounts per week. l�
Page 11: Under heading "Fixed agreement term" Please note; The haulers feel there is F,
more incentive to re -negotiate or add new technologies with an "evergreen" than with a 1
fixed term. It is to the haulers benefit to keep the City happy on an on going basis as
opposed to maybe having 3 or 4 years left on a contract with no guarantee of renewal. If
haulers can lower cost with new technologies they will. For example; Santa Clarita
Disposal is using state of the art bar coding systems for their billing. However most new
technologies are expensive and not yet proven plus their cost may not be able to be
absorbed by the haulers. This does not mean haulers are not willing to try new programs.
Page 20: Under heading "Options for Residential Rate Stabilization" First paragraph,
Second sentence: Rates have increased due to landfilling fees and inflation, not for
increasing service levels.
Page 20: Under heading "Options for Residential Rate Stabilization" First paragraph, CJ
second to last sentence; Santa Clarita Disposal charges more outside city for identical
services minus franchise fees. Also the amount of customers receiving weekly collection
of recyclables out side the City is minimal compared to the amount of customers receiving
by -weekly service in side the City.
Page 21: Under heading "Increased Franchise Accountability......" Last part of last
sentence; Do not recommend this to the counsel until we have further discussed the new
programs that need to come on line by the year 2000.
SATISFACTION GUARANTEED OR DOUBLE YOUR RUBBISH BACK
n n