HomeMy WebLinkAbout2006-05-23 - AGENDA REPORTS - BURRTEC WASTE RATE ADJUSTMENT (2)CONSENT CALENDAR
DATE:
SUBJECT:
DEPARTMENT:
Agenda Item: Zo_
CITY OF SANTA CLARITA
AGENDA REPORT
City Manager Approval:
Item to be presented by:
May 23, 2006
BURRTEC WASTE INDUSTRIES, INC. ANNUAL RATE
ADJUSTMENT
City Manager's Office
RECOMMENDED ACTION
Adopt resolution for the third amendment to the Agreement Between City of Santa Clarita and
Burrtec Waste Industries Inc for Commercial Solid Waste Management Services allowing
Burrtec to increase rates by 4.94 percent based on the formula outlined in the Franchise
Agreement. Burrtec is entitled to the rate increase pursuant to Section 6.3 of the Commercial
Franchise Agreement.
BACKGROUND
In November of 2003, the City Council selected Burrtec Waste Industries, Inc., as the exclusive
solid waste hauler for commercial services. As part of the Agreement Between City of Santa
Clarita and Burrtec Waste Industries Inc for Commercial Solid Waste Management Services
(Franchise Agreement) Burrtec agreed to lock in their maximum rates from August 1, 2004 until
June 30, 2006. Pursuant to Section 6.3 of the Franchise Agreement, Burrtec may request a rate
increase for the third Rate Year (July 1, 2006 through June 30, 2007) if they submit a request for
the increase by April 1, 2006 and follow the specific guidelines for a rate increase as outlined in
Section 6.4 of the Franchise Agreement.
Attached is an outline of the Method of Adjustment for a rate increase described in Section 6.4,
the resulting calculations following the formula, and a matrix outlining the resulting maximum
rate changes. Based on the formula, the rate increase will be 4.94 percent, which is less than the
annual rate cap of five percent. Once approved by Council, staff will work with Burrtec in
providing proper notification of the rate increase to its customers and will begin the new rate
structure on July 1, 2006. The rate increase will not affect the free commingled recycling
services provided by Burrtec.
ALTERNATIVE ACTIONS
No alternative actions have been identified.
FISCAL IMPACT
Please see the attachment for changes to the commercial rates.
ATTACHMENTS
Bureau of Labor Statistics Information available in the City Clerk's Reading File
Attachment A - Burrtec's Request for a Rate Increase
Attachment B - Rate Adjustment Methodology
Attachment C - Third Amendment Resolution
Attachment D - Third Amendment to Franchise Agreement
AAac h r cpi+ A
BURRTEC
WASTE INDUSTRIES, INC.
"We'll Take Care Of It"
March 31, 2006
Mr, Travis Lange
Environmental Services Manager
City of Santa Clarita
23920 Valencia Blvd
Santa Clarita, CA 91355
Dear Travis:
0,,r= CE
McNTN$ENV CE pEn
IS
MAR 31 2006
CIRDFSAM MABRA
Burrtec Waste Industries has complied with Article 6 of the City of San Clarita's
Agreement for Commercial Solid Waste Management Services, referencing
company compensation and rates. As per Section 6.3 of the Agreement, we
respectfully request an annual adjustment to the initial rates effective July 1, 2006.
Burrtec has enclosed a current and proposed rate component worksheet based on
the adjustment methodology called out in Section 6.4 of the Agreement utilizing the
cost categories, weighting and adjustment indices required. This year's adjustment
calculates within the annual rate cap of 5% excluding any extraordinary adjustments
at this time.
Burrtec reserves the right to request an adjustment to the maximum customer rate
under Section 6.6 Extraordinary Adjustments. Further discussions with City staff are
needed to review circumstances and prepare a schedule documenting extraordinary
costs. However, as part of the Supporting Information we have supplied Financial
Statements including an Independent Accountant's Compilation Report and
Statement of Income.
Burrtec is confident that the rate adjustment process outlined by the City of Santa
Clarita has been followed and that the requested rate adjustment meets the
requirements of the Agreement.
On behalf of Burrtec Waste Industries we would like to thank the City of Santa Clarita
for their time and consideration on this issue and look forward to more detailed
discussions.
Vice
guin
nt
9890 Cherry Avenue • Fontana, California 92335 • 909-429-4200 • FAX 909-429-4290
Burrtec Waste Industries, Inc.
City of Santa Clarita
Rate Component Worksheet
Current
Rate Components
Proposed
7/1/06
4.94%
10.00%
CPI
10.00%
Bin
Net to
Franchise
Total
Net to
Franchise
Total
Size
Freg
Burrtec
Fee
Rate
Burrtec
Fee
Rate
1.5
1
$47.48
5.28
$52.76
$49.83
5.54
$55.37
1.5
2
$92.59
10.29
$102.88
$97.16
10.80
$107.96
1.5
3
$137.70
15.30
$153.00
$144.50
16.06
$160.56
1.5
4
$182.33
20.26
$202.59
$191.34
21.26
$212.60
1.5
5
$226.96
25.22
$252.18
$238.17
26.46
$264.63
1.5
6
$271.59
30.18
$301.77
$285.01
31.67
$316.68
1.5
7
$316.22
35.14
$351.36
$331.84
36.87
$368.71
2
1
$49.43
5.49
$54.92
$51.87
5.76
$57.63
2
2
$96.38
10.71
$107.09
$101.14
11.24
$112.38
2
3
$143.34
15.93
$159.27
$150.42
16.71
$167.13
2
4
$189.80
21.09
$210.89
$199.18
22.13
$221.31
2
5
$236.26
26.25
$262.51
$247.93
27.55
$275.48
2
6
$282.72
31.41
$314.13
$296.69
32.97
$329.66
2
7
$329.17
36.58
$365.75
$345.43
38.38
$383.81
3
1
$54.05
6.01
$60.06
$56.72
6.30
$63.02
3
2
$105.41
11.71
$117.12
$110.62
12.29
$122.91
3
3
$156.75
17.42
$174.17
$164.49
18.28
$182.77
3
4
$207.57
23.06
$230.63
$217.82
24.20
$242.02
3
5
$258.38
28.71
$287.09
$271.14
30.13
$301.27
3
6
$309.19
34.36
$343.55
$324.46
36.05
$360.51
3
7
$360.01
40.00
$400.01
$377.79
41.98
$419.77
4
1
$67.92
7.55
$75.47
$71.28
7.92
$79.20
4
2
$132.45
14.72
$147.17
$138.99
15.44
$154.43
4
3
$196.97
21.89
$218.86
$206.70
22.97
$229.67
4
4
$260.82
28.98
$289.80
$273.70
30.41
$304.11
4
5
$324.67
36.07
$360.74
$340.71
37.86
$378.57
4
6
$388.51
43.17
$431.68
$407.70
45.30
$453.00
4
7
$452.36
50.26
$502.62
$474.71
52.75
$527.46
6
1
$86.86
9.65
$96.51
$91.15
10.13
$101.28
6
2
$169.37
18.82
$188.19
$177.74
19.75
$197.49
6
3
$251.89
27.99
$279.88
$264.33
29.37
$293.70
6
4
$333.54
37.06
$370.60
$350.02
38.89
$388.91
6
5
$415.19
46.13
$461.32
$435.70
48.41
$484.11
6
6
$496.84
55.20
$552.04
$521.38
57.93
$579.31
6
7
$578.48
64.28
$642.76
$607.06
67.45
$674.51
32G Can
1
$30.37
3.38
$33.75
$31.87
3.54
$35.41
95G Can
1
$33.97
3.78
$37.75
$35.65
3.96
$39.61
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BURRTEC WASTE INDUSTRIES, INC.
SANTA CLARITA DIVISION
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 2005
BURRTEC WASTE INDUSTRIES, INC.
SANTA CLARITA DIVISION
FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31., 2005
CONTENTS
Page
Independent Accountants' Compilation Report .......................................1
Statement of Income...........................................................................2
GREEN HASSON & JANKS LLP
BUSINESS ADVISORS AND CPAs
INDEPENDENT ACCOUNTANTS' COMPILATION REPORT
Board of Directors
Burrtec Waste Industries, Inc.
Santa Clarita Division
We have compiled the accompanying statement of income of Burrtec Waste Industries, Inc. Santa
Clarita Division for the year ended December 31, 2005 in accordance with Statements on Standards
for Accounting and Review Services issued by the American Institute of Certified Public Accountants.
A compilation is limited to presenting in the form of financial statements information that is the
representation of management. We have not audited or reviewed the accompanying statement of
income and, accordingly, do not express an opinion or any other form of assurance on it.
Management has elected to omit substantially all of the disclosures required by generally accepted
accounting principles. If the omitted disclosures were included with the statement of income, they
might influence the user's conclusions about the Company's results of operations. Accordingly, this
statement of income is not designed for those who are not informed about such matters.
March 25, 2006
Los Angeles, California
A Member of ® International
A world-wide organization of accounting firms and business advisers
10990 Wilshire Boulevard Sixteenth Floor I Los Angeles, CA 90024-3929
TEL: (310) 873-1600 I FAX: (310) 873-6600 1 www.ghdadvisors.com
BURRTEC WASTE INDUSTRIES, INC.
SANTA CLARITA DIVISION
STATEMENT OF INCOME
Year Ended December 31, 2005
REVENUES:
% of Net
Amount Revenues
Gross Revenues
$ 4,148,519
100.0
Less: Disposal Fees
(1,390,001)
(33.5)
Less: Franchise and Administrative Fees
(423,099)
(10.2)
TOTAL OTHER EXPENSE
NET REVENUES ,
$ 2,335,419
56.3
$ (281,494)
NET REVENUES
$ 2,335,419
100.0
DIRECT COSTS
1,816,901
77.8
GROSS PROFIT
518,518
22.2
OPERATING EXPENSES:
Selling Expenses 90,761 3.9
General and Administrative Expenses 598,889 25.6
TOTAL OPERATING EXPENSES 689,650 29.5
LOSS FROM OPERATIONS (171,132) (7.3)
OTHER EXPENSE:
Interest Expense
(88,348)
(3.8)
Amortization of Debt Issuance Costs
(1,289)
(0.1)
Amortization of Administration Fee
(20,725)
10.9)
TOTAL OTHER EXPENSE
(110,362)
(4.8)
NETLOSS
$ (281,494)
(12.1)
See Independent Accountants' Compilation Report
-2-
ATTACHMENT B
Rate Adjustment Methodology
Section 6.4 of the Commercial Franchise Agreement provides a formula for determining
the maximum rate adjustment that may be requested by Burrtec. The following is a table
of the rate components taken into consideration and their respective weighting in
determining a rate adjustment:
Cost Category
Weighting
Rate Adjustment Index
Labor
30%
Producer Price Index, PCU4212#2, Local trucking
without storage, Waste collection
Fuel
5%
Producer Price Index, WPU057303 not seasonally
adjusted, Fuels and related products and power, #2 diesel
fuel
Equipment
15%
Producer Price Index, PCU3713#139, Truck and bus
bodies, Refuse and garbage(packer type)
Disposal
25%
Consumer Price Index for All Urban Consumers, all items
index (CPI -U) — U.S. city average
All Other
25%
50% of change in Consumer Price Index for all Urban
Consumers, all items index (CPI -U) — U.S. city average
Total
100%
Pursuant to the instructions in the Franchise Agreement, the differences in the indices are
determined based on the period of December 2004 through December 2005. According
to the Franchise Agreement, the resulting percentage change caps at five percent.
Change in Classification System
Since the Franchise Agreement was written more than two and a half years ago, some
changes had to be incorporated in the rate adjustment calculation. It appeared as if the
United States Department of Labor — Bureau of Labor Statistics made a change in how
they labeled certain Producer Price Indices. In the past they used the Standard Industrial
Classification (SIC) system to label the indices, but recently, have made the shift from
SIC codes to the North American Industry Classification System (NAICS). Therefore,
the Producer Price Index (PPI) for Labor and the PPI for Equipment no longer existed in
the format outlined in the Franchise Agreement.
After researching the issue, staff determined the factors most appropriate for replacing
the previous ones. The PPI labeled as PCU4212#2, Local trucking without storage,
Waste collection was replaced with PCU336211336211 Solid Waste Collection. The PPI
labeled as PCU3713#139, Truck and bus bodies, Refuse and garbage (packer type) was
replaced with PCU5621111562111 Motor Vehicle Body Manufacturing.
Rate Increase Calculations
Using the revised indices and the system outlined by the franchise agreement, staff
calculated the proposed rate increase to verify Burrtec's proposed new rates as outlined in
their rate increase request. Staff's calculation, based on the data provided by the Bureau
of Labor Statistics, has been summarized in the following table:
Cost Category
Dec. 2004
Dec. 2005
Chane
Weighting
Percent
Labor
101.5
103.5
1.97%
30%
0.59%
Fuel
135.3
198.0
46.34%
5%
2.32%
Equipment
184.8
I
194.1
5.03%
15%
0.75%
Disposal
190.3
196.8
3.42%
25%
0.85%
All Other
190.3
196.8
1.71%*
25%
0.43%
Total
1
100%
4.94%
Calculated at 50% of CPI change.
Impact to Solid Waste Collection Rates
Once staff found the appropriate proposed rate increase, staff went on to calculate the
impact the proposed rate increase would have on the current maximum rates. The
maximum rates will be increased as follows:
r) tETtr��i}r ar �, a o I`�iEr'�tTt� + ti Pts(( ,k'a. i','tl
'ha'isi t. �t 4liu ti : d) d,Eiit i:(hiN d tN di ,iiia j Olil f:oi ��(} ( i;;fii E't..: �i: fE.^di..,ai.,
t i xri{:dEd�a
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90- al ('05) $37.75 $67.95 $113.25 $151.00 $188.75 $226.50
...
$264.25
:.fi §N'l.g}
32 -gal ('05) $33.75 $60.75 $101.25 $135.00 $168.75 $202.50
$236.25
�. k� td�Fls; �t:.. u
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'rMBe��iit
«d
1.5 ('05) $52.76 $102.88 $153.00 $202.59 $252.18 $301.77
$351.36
n' t r
2 d ('05) $54.92 $107.09 $159.27 $210.89 $262.51 $314.13
$365.75
"MI
3 , d, ('05) $60.06 $117.12 $174.17 $230.63 $287.09 $343.55
$400.01
„
.91 l '. 'i EE 1,; �i& �� iE,.�e9 �" i�', i (!{� a E,(,. .Ii 3tt :,.•` � {±+1i�h ,4`Ma� .' ;' E I? n.��� i .. .. d. E �. i".;:
4 d ('OS) $75.47 $147.17 $218.86 $289.80 $360.74 $431.68
$502.62
ENTER .. 0,111 6N )
Px„E��.,i rttL.
e :.
6 ydj(105) $96A.51 $1`88.19 $�j27b9.88 $370.60 1 $46+1.32 $552.)04
$642.76
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4.
lh6
Other Rates
Free commingled recycling services and all special rates, except for two, for the services
provided by Burrtec will not be affected by the rate increase. The two rates that will be
affected by the rate change are rates that are directly correlated with the solid waste
collection rates; therefore, an increase in collection rates would also create an increase in
the other two rates. The two additional rates are the Compactor Rates and the
Greenwaste Collection Rates. As written in the Franchise Agreement, the Compactor
Rates are two times the comparable solid waste collection rate. Therefore, if a business
has a three cubic yard compactor bin being collected once per week, their rate would
increase from $120.12 per month to $126.06 per month.
The Greenwaste Collection Rate is no more than 75 percent of the solid waste collection
rate. With the change in the solid waste collection rate, if a business had a three cubic
yard bin being collected once per week, their rate would increase from $45.05 per month
to $47.27 per month. The service will still be offered at a discounted rate in comparison
to regular trash collection services.
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S:\ENVSRVCS\SOLWAS1'2\COUNCR,\2006\BurrtM Rate Adjustment Methodology.doc