HomeMy WebLinkAbout2003-11-20 - AGENDA REPORTS - SOLID WASTE FRANCHISE AGMT (2)Agenda Item :I
CITY OF SANTA CLARITA
AGENDA REPORT
UNFINISHED BUSINESS City Manager Approval:
Item to be presented by: Jill Fosselma
DATE: November 20, 2003
SUBJECT: RESIDENTIAL AND COMMERCIAL SOLID WASTE FRANCHISE
AGREEMENTS -- REVIEW AND AWARD
DEPARTMENT: City Manager's Office
RECOMMENDED ACTION
City Council to receive presentation and award the contract for Residential Solid Waste
Management Services to USA Waste of California, Inc. dba Blue Barrel Disposal and award the
contract for Commercial Solid Waste Management Services to Burrtec Waste Industries.
BACKGROUND
At the October 2, 2003 Special Council meeting, staff returned to the City Council with finalized
franchise agreements based on the proposals submitted by Burrtec Waste Industries (Burrtec),
Consolidated Disposal Services, and USA Waste of California, Inc. dba Blue Barrel Disposal
(Blue Barrel). After evaluating the agreements, Council instructed staff to enter into negotiations
period with Blue Barrel for the residential solid waste franchise agreement and with Bun -tee for
the commercial solid waste franchise agreement. The Council desired staff to "get it all," and
directed staff to seek to obtain all of the benefits offered to the City by each hauler were they to
be awarded both contracts.
In addition, Council directed staff to explore a partnership with Blue Barrel, Burrtec,
Consolidated, and the City to cite and construct a materials recovery facility (MRF) that the City
could later consider purchasing. Council requested that staff obtain terms for the City to
purchase the MRF that were similar to the terms that were proposed in Burrtec's October 2, 2003
MRF proposal.
Agreement Enhancements
Staff met with both Blue Barrel and Burrtec on three separate negotiation sessions to discuss the
Council's direction provided by the Council at the October 2 meeting. As desired by the
Council, final agreements were obtained with Blue Barrel for residential services and Burrtec for
commercial services, and reflect an overall increase in value provided to the City over the two
terms of the franchise agreements.
Residential Franchise — Several enhancements to the residential franchise agreement were
obtained through negotiations with Blue Barrel. In addition to the October 2, 2003 contract
Ado*iocs° o� �. (o
terms offered by Blue Barrel for the residential franchise, the City has now obtained the
following additional enhancements that were requested by the Council:
• An immediate rate reduction of $3.49 beginning January 1, 2004 (which reduces the current
rate from $22.13 to $18.64 per month) for all City customers, and will be maintained until
April 14, 2006;
• Beginning on April 15, 2006, the single family residential rate will be $16.25 per month, and
this rate is subject to increase annually beginning in 2007;
• New 90 -gallon greenwaste and commingled recycling bins delivered to all single-family
homes by June 30, 2004;
• An increase in the fee collected from recyclables from $2.50 per ton to $5.50 per ton of for
the Santa Clarita Beautification Grant Program (estimated at over $470,000 for the City
throughout the life of the agreement based on current recycling numbers);
• Specific language in the franchise agreement requiring plastic bags recycling;
• An increase from $125,000 to $150,000 in administrative fees that will be provided to the
City to offset the cost of preparing the RFP;
• Production and distribution of an educational brochure to multi -family customers, both
owner/managers and tenants, by April 1, 2004 and waste audits and presentations to fifteen
multi -family complexes and homeowner's associations per year until all have been
contacted;
• Distribution of quarterly, instead of semi-annual, newsletters to all residential customers and
will promote quarterly recycling workshops;
• A pilot program for in-home food waste containers prior to a Citywide rollout of the
program, plus providing containers to all homes that request them at no additional cost;
Upon the advice of the City's attorney and in concurrence with the hauler, Blue Barrel agreed to
work with each of the school districts separately to provide discounted rates for all of the school
districts, regardless of the location of the individual schools. Blue Barrel will be prepared to
share the nature of these agreements with the Council at the City Council meeting.
Commercial Franchise — Several enhancements to the commercial franchise agreement were
obtained through negotiations with Burrtec. In addition to the October 2, 2003 contract terms
offered by Burrtec for the commercial franchise, the City has now obtained the following
additional enhancements that were requested by the Council:
• Decreased commercial rates by approximately 3%, which results in reducing the estimated
first year rate revenue by approximately $103,000 (this reflects the lowest commercial rates
offered by any proposer throughout this process);
• Burrtec will continue to provide mixed waste processing for 50 — 65% of its commercial
customers;
• An increase from $2.50 per ton collected of recyclables to $5.50 per ton collected of
recyclables for the Santa Clarita Beautification Grant Program (estimated at over $171,000
for the City throughout the life of the agreement based on current recycling numbers);
• The City's waste will be taken to either the Chiquita Canyon Landfill or the Antelope Valley
Landfill and will not be directed to the Sunshine Canyon Landfill (Burrtec still has the
Orange County Landfill System as an option, but provides the City with a capacity guarantee
with the aggregate three landfills and not with one specific landfill);
• Specific language in the franchise agreement requiring plastic bags recycling; and
• An increase from $125,000 to $150,000 that will be provided to the City to offset the cost of
the RFP.
Materials Recovery Facility — Council requested that staff explore developing a partnership
between the City, Blue Barrel, Burrtec and Consolidated for the citing and construction of a
MRF. Through staff's negotiations with Blue Barrel and Burrtec along with a separate meeting
conducted between staff and Consolidated Disposal Services, staff discovered that a three way
partnership between the haulers at Chiquita Canyon Landfill, and through which the City would
be able to obtain ownership of the facility, was highly unlikely. Therefore, staff continued
negotiations with Blue Barrel and Burrtec for the citing and construction of a MRF. Through
these negotiations, Blue Barrel agreed to cooperate with Burrtec for Burrtec to cite and construct
the MRF. As a result, the MRF is now in Burrtec's commercial agreement, and Blue Barrel has
agreed to utilize Burrtec's MRF.
The MRF is consistent with Burrtec's October 2, 2003 proposal in both scope of services, design,
and option for the City to purchase. Burrtec will develop a MRF/Transfer Station that will have
recyclables and commercial mixed -waste equipment, a transfer component for residual and other
waste, and educational facilities, and will provide it to the City at the end of the contract term for
a defined price (payment of the remaining debt service on the MRF). Burrtec's agreement
contractually requires the company to commence construction of the MRF by April 15, 2005 and
that construction of the MRF be completed by February 15, 2006. If Burrtec fails to meet the
deadlines, the City has the option to find them in default of the franchise and to terminate their
agreement. The value provided to the City through this option is approximately $1.8 million.
Staff Recommendation
At the October 2, 2003 Council meeting, Council directed staff to "get it all" and obtain all of the
benefits offered by each of the haulers for both contracts while only negotiating individual
contracts with for Blue Barrel for residential and Burrtec for commercial services. Both haulers
worked in good faith with staff, and were successfully able to offer the City the enhancements
requested by the Council.
The staff recommendation before the Council offers rate reductions for residents and businesses,
early programs and rate decreases for residential customers, enhanced education and outreach,
and defined terms for construction and ownership transfer of a MRF. This recommendation
provides the best overall long-term value to the City. Compared to the staff recommendation on
October 2, 2003, overall, ratepayers will save an estimated $1,366,706 over the terms of the
agreements. Blue Barrel decreased residential rates over the term of the agreement by an
estimated $367,856, and Burrtec lowered their commercial rates by an estimated $998,850
compared to the October 2, 2003 staff recommendation.
In addition, Santa Clarita residential will benefit from lower residential rates beginning January
2004, large commingled recycling and green waste containers by June 2004, and enhanced
educational programs and outreach. Commercial customers will benefit from the lowest
commercial rates offered. Recycling revenue from the sale of residential and commercial
recyclables was increased from $2.50 to $5.50 per ton, which will result in an estimated
$641,000 (based on existing recycling levels) in grant funds available to the community over the
contract terms for beautification programs.
Burrtec will build a residential and commercial MRF and transfer station with the same defined
options for the City to purchase it at the end of the contract term as was presented on October 2,
2003. The value to the City of this option is approximately $1.8 million. During negotiations,
Blue Barrel made independent arrangements with Burrtec to utilize Burrtec's MRF on a lonb
term basis, which enabled Burrtec to size the MRF according to the City's desires to maximize
the programs and technology made available through the facility that the City would have an
option to purchase.
Although determined outside the scope of the City's franchise agreement, during negotiations
Blue Barrel indicated to staff that the company would honor the commitment made to offer
discounted services to the school districts. Blue Barrel will be prepared to present to the Council
the nature of these outside arrangements at the Council meeting.
Next Steps
Upon Council award of Residential Solid Waste Management Services to Barrel Disposal and
the Commercial Solid Waste Management Services to Burrtec Waste Industries, staff will
immediately commence coordinating roll-out of new the programs with the haulers. Staff will
begin meeting with Burrtec to discuss site selection regarding the MRF, and on a regular basis
will meet with the haulers approximately twice a month or as much as necessary to insure that
the programs are on track and that the haulers are meeting their minimum thresholds in the
appropriate amount of time. Staff will also meet with the Solid Waste Committee on a regular
basis to provide updates on the haulers progress and the implementation of the new programs
proposed by the haulers. The new commercial franchise will be in effect on August 1, 2004 and
the new residential franchise services will be in effect on April 16, 2006.
FISCAL IMPACT
The franchise fee for both the residential and commercial franchise agreements is 10% of the
haulers' gross receipts. Based on staff's recommendation to award the residential franchise to
Blue Barrel and the Commercial Franchise to Burrtec (total estimated gross receipts of
$102,890,221), the City will receive an estimated $10,289,00 in franchise fees throughout the
terms of the two contracts. Additionally, since Blue Barrel's agreement will provide City
residents with a discounted rate starting on January 2004, which is 27'/2 months prior to the start
of the new franchise agreements, City residents will save a total of $1,618,000 which equates to
$161,800 less in franchise fees over the 271/2 months. Although overall this represents a decrease
in franchise fees collected by the City (due to lowered rates throughout the terms of the
agreements), the City will receive additional financial benefits that offset the reduction in
franchise fees.
• One time reimbursement of $300,000 for the costs that were incurred by the City
through the RFP process ($150,000 per franchise agreement which are payable to the
City within seven days of execution of the franchise documents),
• Funding for a Project Development Coordinator ($35,000 per year per franchise
agreement or 50% of the total personnel costs for this position, which will increase
annually based on the City's approved COLA rates) for an overall total estimated
value of $560,000,
• Funding to assist with the City's outreach programs ($3,000 per year per franchise)
for a total overall value of $48,000,
• Funding from a $5.50/ton recycling fee on residential and commercial recycling
collected for a special grant program for organizations that provide benefits to the
community and/or the environment for an estimated $641,000, and
• Expenditure savings over the terms of the agreement of $688,708 for services that
will be provided in-kind to the City (including City facilities' trash and recycling,
City parks' trash and recycling, and collection of the City's street litter trash and
recycling carts).
ATTACHMENTS
• Hilton Famkopf & Hobson, Enhancements and Contract Changes to Blue Barrel and Burrtec
Solid Waste Collection Agreements Memorandum
• Signed USA Waste of California, Inc. dba Blue Barrel Disposal Residential Franchise
Agreement (November 7, 2003)
• Signed Burrtec Waste Industries Commercial Franchise Agreement (November 7, 2003)
MEMORANDUM
To: Jill Fosselman, Assistant to the City Manager
From: Laith Ezzet and Lisa Keating, Hilton Farnkopf & Hobson, LLC
Date: November 17, 2003
Subject: Enhancements and Contract Changes to Blue Barrel and Burrtec Solid
Waste Collection Agreements
Blue Barrel signed a contract dated September 2, 2003 to provide residential solid waste
collection services to the City of Santa Clarita. Burrtec Waste Industries signed a
contract dated September 3, 2003 to provide commercial solid waste services to the City
On September 23, 2003, the Santa Clarita City Council directed City staff to further
negotiate with Blue Barrel Disposal and Burrtec Waste Industries to enhance these
agreements. Listed below are enhancements and other significant changes to the
agreements:
A. Significant Changes to the Burrtec Commercial Contract from the September 3,
2003 draft:
1. Administrative Fee, Section 3.1 — The administrative fee has been increased from
$125,000 in the previous draft to $150,000.
2. Recycling of Plastic Bars, Section 4.2.1 — The requirement to collect and process
plastic bags has been highlighted.
3. Revenue Sharing from the Sale of Recyclable Materials — Burrtec will pay the City
$5.50 per ton for commercial recyclables collected, instead of the $2.50 per ton as
required under the RFP.
4. Construction and Ownership Transfer of a MRF, Section 4.2.7 — Burrtec will build a
material recovery facility and has offered the City an option to purchase the facility at
the end of the contact tetra for the unamortized principle balance, estimated at $4.7
million to $6.4 million. Reporting requirements have been added to track the
unamortized principle balance on the MRF option. Facility specifications are
included in Section 4.2.8 and the transfer agreement is included in Exhibit S.
Previously, the agreement to build the MRF was in Burrtec's residential agreement
and was contingent upon the award to Burrtec of both the commercial and residential
agreements. In exchange for providing the City with an option to acquire the MRF,
the rate adjustment formula in Exhibit 4 will not apply if the City constructs its own
MRF.
The benefit to the City of this option is that the City will be able to first review how
well the MRF serves the needs of the City and determine whether it is still the
preferred technology in the future before committing to purchase it. Further, the City
will be able to acquire the facility at less than its replacement cost or market value.
5. Disposal Site, Section 4.8 —The primary disposal sites are the Antelope Valley Public
Landfill, owned by Waste Management, Inc., and the Chiquita Canyon Landfill,
owned by Republic Services, Inc. The Orange County Landfill System is a secondary
site.
6. Lower Maximum Commercial Rates, Exhibit 2 — Burrtec lowered its commercial bin
rates. Estimated first year rate revenue is reduced by approximately $103,000 (3%)
from the previous draft.
B. Significant Changes to the Blue Barrel Residential Contract from the September
2. 2003 draft:
1. Administrative Fee, Section 3.1 — The administrative fee has been increased from
$125,000 in the previous draft to $150,000.
2. Refuse Carts, Section 4.1.2 — Blue Barrel will be permitted to continue using existing
refuse carts throughout the contract. However, Blue Barrel must provide customers
with new carts upon request. Recycling and green waste carts will be new.
Recycling and Green Waste Carts, Sections 4.2.1 and 4.3.1 — New recycling and
green waste carts will be distributed by June 30, 2004 to residential customers.
4. School District Discount — Blue Barrel's agreement to provide a discount to schools
will be handled through a separate contract between Blue Barrel and School Districts,
and is outside the scope of this agreement.
5. Recycling of Plastic Baas, 4.2.1 —The requirement to collect and process plastic bags
has been highlighted.
6. Revenue Sharing from the Sale of Recyclable Materials, Section 4.2.5 —Blue Barrel
will share revenue equal to $5.50 per ton of recyclables recovered with the City. The
original requirement was $2.50 per ton.
In -Home Food Waste Containers, Section 4.3.5 — Blue Barrel will implement a pilot
program for in-home food waste containers prior to a Citywide rollout of the
program. In-home food waste containers will be provided at no additional cost to
customers that request them.
8. Construction and Ownership Transfer of a MRF, Section 4.3.6 —Blue Barrel will not
build a material recovery facility for the City. Section 4.3.6, Section 4.3.7 and
Exhibit 8 have been deleted. Blue Barrel has made independent arrangements with
Burrtec to use Burrtec's MRF.
9. Multi -Family Brochure and Outreach, Section 5.3.3 — Blue Barrel will produce and
mail an educational outreach brochure to multi -family customers, both
owner/managers and tenants by April 1, 2004. Blue Barrel will perform waste audits
and make presentations to 15 multi -family complexes and homeowners' associations
until all have been contacted.
10. Public Outreach, Section 5.3.3 — Blue Barrel will send out a quarterly, instead of
semi-annual, newsletter to all residential customers and will promote and conduct
quarterly recycling workshops.
11. Lower Current Single Familv Rates Prior to Commencement Date — Blue Barrel will
lower current rates from $22.13 to $18.64 per home per month as of January 1, 2004.
The $18.64 rate will be maintained until April 14, 2006 when the new services
commence under the new agreement (Exhibit 2). Blue Barrel is responsible for
arranging for this same rate adjustment to customers currently serviced by
Consolidated. Beginning April 15, 2006, the rate will be further lowered to $16.25
per month for single family three -cart service. Blue Barrel will be entitled to its first
regularly scheduled rate adjustment on July 1, 2007, and every year thereafter. This
is one year earlier than in the previous draft and was a condition for lowering the
current rates prior to commencement of the new contract.
R
C. Lower Costs for Enhanced Contracts
Overall cost to the rate payers will be lowered under the new agreements by $1,068,422
(from $103,958,643 to $102,890,221) compared to the prior Blue Barrel and Burrtec
agreements signed in September 2003. Single family customers receive enhancements
and cost reductions as early as January 1, 2004.
September 2003 Agreements November 7, 2003 Agreements
Residential Rate
Revenue - Per Year
Blue Barrel (9/2/03)
Single
Family Increase % Rate Revenue
Rate
Pre -Contract Savings to
Single Family Customers
$
3,626,712
2005-06
0.0%
2006-07
$
16.25
N/A
$ 9,300,720
2007-08
$
16.25
0.0%
$ 9,300,720
2008-09
$
16.67
2.6%
$ 9,542,539
2009-10
$
17.10
2.6%
$ 9,790,645
2010-11
$
17.54
2.6%
$ 10,045,202
2011-12
$
18.00
2.6%
$ 10,306,377
2012-13
$
18.47
2.6%
$ 10,574,343
Residential Subtotal
Total Rate Revenue
$ 68,860,546
Commercial Rate
Revenue - Per Year
Burrtec (9/3/03)
°% Increase Rate Revenue
2004-05
N/A
$
3,626,712
2005-06
0.0%
$
3,626,712
2006-07
2.6%
$
3,721,007
2007-08
2.6%
$
3,817,753
2008-09
2.6%
$
3,917,015
2009-10
2.6%
$
4,018,857
2010-11
2.6%
$
4,123,347
2011-12
0.0%
$
4,123,347
2012-13
0.0%
$
4,123,347
Commercial Subtotal
$
$
35,098,097
Total Rate Revenue
I
$
103,958,643
D. Additional Rate Revenue Savings from Negotiated Blue Barrel/Burrtec
Agreements Compared to Previously Negotiated Burrtec Residential and
Commercial Agreements
Contracting Arrangements
Burrtec
Blue Barrel
Single
Family
Rate
Increase %
Rate Revenue
$
3,523,500
0.0%
$ (1,618,128)
$
16.25
N/A
$ 9,300,720
$
16.67
2.6%
$ 9,542,539
$
17.10 1
2.6%
$ 9,790,645
$
17.54
2.6%
$ 10,045 202
$
18.00
2.6%
$ 10,306,377
$
18.47
2.6%
$ 10,574,343
$
18.95
2.6%
$ 10,849,276
$
102,890,221
$ 68,790,974
D. Additional Rate Revenue Savings from Negotiated Blue Barrel/Burrtec
Agreements Compared to Previously Negotiated Burrtec Residential and
Commercial Agreements
Contracting Arrangements
Burrtec
Proposed Blue Barrel/Residential and Burrtec/Commercial Agreements
% Increase
Rate Revenue
N/A
$
3,523,500
0.0%
$
3,523,500
2.6%
$
3,615,111
2.6%
$
3,709,104
2.6%
$
3,805,541
2.6%
$
3,904,485
2.6%
$
4,006,002
0.0%
$
4,006,002
0.0%
$
4,006,002
$
34,099,247
$
102,890,221
D. Additional Rate Revenue Savings from Negotiated Blue Barrel/Burrtec
Agreements Compared to Previously Negotiated Burrtec Residential and
Commercial Agreements
Contracting Arrangements
Rate Revenue
Over Term
Proposed Blue Barrel/Residential and Burrtec/Commercial Agreements
$ 102,890,221
Prior Bun -tee Residential and Commercial Agreements
$ 104,256,927
Savings to Ratepayers
$ 1,366,706
9
Conclusion
The latest phase of negotiations has yielded agreements offering lower rates to the
ratepayers than the previous agreements presented at the September 23, 2003 City
Council meeting. The new agreements include enhanced services above those previously
offered, with certain service improvements being implemented sooner. Retaining two
different haulers would spread operating risk between two companies and preserve waste
hauling competition in the Santa Clarita Valley. We recommend approving this
arrangement.
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