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Home My WebLink About2007-05-22 - AGENDA REPORTS - COMMERCIAL RESID WASTE AGMT (2)Agenda Item: CITY OF SANTA CLARITA AGENDA REPORT CONSENT CALENDAR City Manager Approval: Item to be presented by: Travis Lange DATE: May 22, 2007 SUBJECT: ANNUAL RATE ADJUSTMENT FOR COMMERCIAL AND RESIDENTIAL SOLID WASTE FRANCHISES DEPARTMENT: Public Works RECOMMENDED ACTION City Council adopt a resolution for an amendment to the Agreement Between the City of Santa CMta and Burrtec Waste Industries, Inc. for CommercialSolid Waste Management Services allowing an increase in rates by 2.29 percent based on the formula outlined in their Franchise Agreement. 2. Adopt a resolution for the second amendment to the Agreement Between the City of Santa Clarita and USA Waste of California, Inc. (dba Blue Barrel Disposal) for Residential Solid Waste Management Services allowing an increase in their rates by 2.29 percent based on the formula outlined in their Franchise Agreement, subject to City Attorney approval. BACKGROUND In November 2003, the City Council selected Burrtec Waste Industries, Inc., as the exclusive solid waste hauler for commercial services and USA Waste of California, Inc. (dba Blue Barrel Disposal) for residential services. Pursuant to Section 6.3 of the Agreement Between the CiMoof Santa Clarita and Buntec Waste Industries Inc for Commercial Solid Waste Management Services and the Agreement Between the City of Santa Clarita and USA Waste of California, Inc. (dba Blue Barrel Disposal) for Residential Solid Waste Management Services (Franchise Agreements), Burrtec and Blue Barrel may request rate increases for their next Rate Year (in this case July i, 2007 through' June 30, 2008) if they submit a request for the increase by the first of April and follow the specific guidelines for a rate increase as outlined in Section 6.4 of the Franchise Agreements. Pursuant to Section 6.3 of the Franchise Agreements, Council's discretion for regular rate increases is limited to determining, based on substantial evidence, whether the requested maximum rate adjustment meets the requirements as set forth in the Franchise Agreements. &7-arl Adopted:07-dY Attached is a summary of the Method of Adjustment for this 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 for Fiscal Year 2007/2008 will be 2.29 percent, which is less than the annual rate cap of five percent. Once approved by Council, staff will work with the haulers in providing proper notification of the rate increase to their customers and will begin the new rate structure on July 1, 2007. The rate increase will not affect the diversion programs currently being provided by the haulers. Additionally, each hauler requested an Extraordinary Adjustment to pursue a supplemental increase. Staff is currently evaluating both requests and will present the requests in detail to the Solid Waste Diversion Subcommittee before presenting an item to the City Council for consideration during a subsequent City Council meeting. ALTERNATIVE ACTIONS Other action as determined by the City Council. FISCAL IMPACT See the attachments for changes to the commercial and residential collection rates. ATTACHMENTS Resolution - Burrtec Fifth Amendment . Burrtec Fifth Amendment Resolution - Blue Barrel Second Amendment Blue Barrel Second Amendment 2007 Commercial and Residential Waste Haulers Rate Adjustment Request Methodology List of Amendments - Solid Waste Franchise Agreements 2007 COMMERCIAL AND RESIDENTIAL WASTE HAULERS RATE ADJUSTMENT REQUEST METHODOLOGY In compliance with Section 6.3 of the Franchise Agreements, both the Residential and Commercial waste haulers have requested a rate increase for the 2007/2008 fiscal. year. The formula for determining a rate increase is outlined in Section 6A of.the Franchise Agreements as follows: Cost Category Weighting Rate Adjustment Index Labor 30% Producer Price Index, PCU4212#2, Local trucking without stora e, 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, PCU37134139, 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 Agreements, the differences in the indices are determined based on the period of December 2005 through December 2006. According to the Franchise Agreements, the resulting percentage change caps at five percent. CHANGE IN CLASSIFICATION SYSTEM Since the Franchise Agreements were written, 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 exists in the format outlined in the Franchise Agreement. Per Waste Management's request, Hilton Farnkopf & Hobson contacted the Department of Labor to determine the most appropriate factors for replacing the previous ones. The PPI labeled as PCU4212#2, Local trucking without storage, Waste collection was . replaced with PCU56211-56211 Waste Collection (last year we recommended PCU336211336211 Solid Waste Collection). The PPI labeled as PCU3713#139, Truck and bus bodies, Refuse and garbage (packer type) was replaced with PCU336211336211 Motor Vehicle Body Manufacturing (last year we recommended PCU5621111562111 Motor Vehicle Body Manufacturing). There were no differences between what we recommended last year and what was recommended for this year and all subsequent years. RATE INCREASE CALCULATIONS Staff calculated the proposed rate increase based on the above information and came up with the following results: Cost Category Dec. 2005 Dec. 2006 Chane Weighting Percent Labor 103.4 105.2 1.74% 30% 0.52% Fuel 198.5 203.0 2.27% 5% 0.11% Equipment 194.0 203.0 4.64% 15% 0.70% Disposal 196.8 201.8 2.54% 25% 0.64% All Other 1196.8 1201.8 1 1.27%* 25% 10.32% Total I I 1 1100% 12.29% * Calculated at 50% of CPI change. There have been some discrepancies between staff's calculations and both of the haulers calculations. Waste Management failed to calculate "All Other" as 50 percent of the value and therefore, calculated a 2.60 percent increase. Burrtec used the values that were used for last year's rate increase calculation for December 2005 although the numbers were further refined a short period after the information was taken to Council and also used the wrong value for determining the CPI increase for Disposal and All Other. The following table outlines what their rate increase would be like if we went with the values used last year for December 2005. Cost Category Dec. 2005 Dec. 2006 Chane Weighting Percent Labor 103.5 105.2 1.64% 30% 0.49% Fuel 198.0 203.0 2.53% 5% 0.13% Equipment 194.1 203.0 4.59% 15% 0.69% Disposal 196.8 201.8 2.54% 25% 0.64% All Other 1 196.8 1201.8 1 1.27%* 1 25% 0.32% Total I I 1 1100% 12.27% 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: Commercial Rntes Container Number of Weekly Pickups Size 1 2 3 4 5 6 7 te,lpp�sP1 4 rd \i itajaji ��dt' -'p '11�1W 1�. {p i[}'raj(+Q°}`°aE°il t n1�1x,.tY Gf'e{B 3. 1I �, .Kr 1^r 90-gal 0- alp(('07� $4jrv0.52 $72.93 $121.545 $162.07 $202.60 $243.11 $283.63 k4�C��.�5 Y� is {Vol ' '. t [.L 4 L { Fl r' �I i;: i 41 �( v�14 t h 41 17210491 x� 1' 32 -gal '07 $36.23 $65.20 $108.67 $144.89 $181.12 $217.35 $253.61 9t 4 iS b yf, nn .py�ip .i N � ,�,� A y# ( . fdy p f � ! g N �^ a r o f `� p ! ♦ Yf 2 4 v � e W, { 1.5 d ('.t07) $56.63 1 $11}�0.42$x(1164.22 $217.45 y,.y$;!2![„70.67 $323.90 $377.12 &��, "�A9 ijQQ td��}d'+i�lil �t�ffl4� �LY �i*F•'h FtyMvr �j k'l�a i�y tf tFi yy��`�},�,(a p d \bf'�" 7{ �k�"��+`�t f y�t� A yyo rlk>prt 2 d ('07) $58.95 $114.94 $170.95 $226.36 $281.76 $337.17 $392.57 `�,�INAy (n�'� $a�•Iv><dd+b 1±l&4� � 3 yd3 (',0�7) $64.46 $125.70 $186.95 $247.54 $308.14 t$368.75 $429.34 rXi0;3C11 rFl�7�yit�}�t19{`jf^j8�{yj W°�}II{��yj1�JJ��A ,x'qy. gf"y('��Wt jdy7J �'�jq+, pQ1J�n dpi tr4�e �'y/itF 9�C�. �1'p "" Ji4.'R ALIS i � ��t Sl tp%. '. N 5' rW'IS j�[v'�{��T �It� �('iIn'r i.CiM��)4 P ��...x.✓Y.MA'`I t-F�{k� .i(I�� ,'M M�S�1�'n�� ✓fit{J�)�� e�.'� ��i�A�`f 4 yd ('07) $81.00 $157.97 $234.91 $311.05 $387.19 $463.33 $539.48 OEM y,C -':' s { I �y�iy, ftr [� �j�k <y jR'e Thr i�,� ®n (�{�u�ax a� �':�y�('��',��^ I �y�� e ° raj �y'�F f } aj'1 Y ;{F� �+ Y ��'},�, d �;.p, t��#rl �d?+5�� " ?�..��.'.S"�Y�.� ��I' O,9Fr'3 N k�lfi:'{ d�.0 � '�=G'{'i � uf?�I?%`!�`1.Sf� �} WI- %0.ydF�S if,=� iKi 4:f."k�'^� {��5r�fiaia{f�.'Aa 6 d '07 $103.59 1 $202.00 1 $300.41 1 $397.78 $495.14 $592.53 $689.89 Residential Rates The Standard Service Rate (one refuse container, one commingled recycling container, and one greenwaste container) will increase from $16.25 per month to $16.62 per month. This will also increase the rates for residents with no greenwaste container, residents with the senior/lifeline discount rate, and mobile home resident rates to $14.62; $13.30; and $12.47 per month respectively. The multi -family rates will be changed as follows: Container Number of Weekly Pickups Size 1 2 3 4 5 6 7 $� sx rr ((��y( s � 4 { Gt p �yyJ C' pS��q 1 U �r�� '.�' Y iJ�pf.l� i yr �/v/f��y}`P1y�+ t 11 �yyy�� A��^,,^��ffyyyyyy��°p a T -I �,•' })})++��rprpt�.pppppp. }i� �, .aqqyay'r_ (, � [yy[ .. ��j�� $..�Y� �r�, iR. � I'av'ei�t��{n ��SXN� •r. I� �.e.�R:iRi � ��f hV }n�1W.rvrbe� e �M+1h�� is>Fd+Ti��_Cli:i yd' ('07) $50.24 $100.48 $1t�50.72 $200.96 $3y�01.44 $�351.68Y �?1.5 y�$251.20 2.',,A��v w ! ai• b t4 _460'?s!4+tEF 2 d ('07) $53.55 $107.10 $160.65 $214.20 $267.74 $321.28 $374.83 m IT:��yyjj xa gf Y 5 . "9 . Y� s�;�� o.�(q' dtl r � rty��'S uiY {fp+ �S 3'"� F �q{y��Yyy{� j v �� p ^' .��Q34 id1 4 N.1 "i; �z 5 Y"� FVA S� 4rr fm� 11 . �L:K �� "C"7 Y��A��N ' 4�e 3 d ('07) $60.17 $120.32 $180.49 $240.65 $300.81 $360.98 $421.14 �f t 'NflL2 t t� e d 5Yx ' r T' r a ., w,(�pa e �r appt t. p t 3 x .�`.� d v�,�.� ��lct�. �«��.� $�.,� %`�>ti �� `�,€ ..�'. 'I f ,�`� 4 d '07 $66.77 $133.56 $200.33 $267.11 $333.88 $400.67 $467..44 TIMELINE The new rates will take effect on July 1, 2007. Since the haulers must provide at least thirty days notice (Section 51.1) prior to implementing the new rates, the rates must be approved by Council prior to June 1, 2007. TL: BAL S:\LNVSRVCS\SOLWAS7'2\COUNCIL.\2007\Haulers Rate Adjustment Methodology.doc LIST OF AMENDMENTS TO THE COMMERCIAL AND RESIDENTIAL SOLID WASTE FRANCHISE AGREEMENTS Since the commencement of the Residential and Commercial Solid Waste Franchise Agreements, staff has worked with the City's haulers to ensure that the programs and services outlined in the Agreements are implemented in a timely fashion. The matrix below summarizes existing amendments to both Franchise Agreements that have been approved by Council. The primary goal of the amendments was to set new deadlines for the implementation of new waste diversion programs and to adjust maximum collection rates. Existing Amendments to the Commercial Franchise Agreement Amendment Franchise Amendment Description Approved Signed Number Agreement use of Alternative Fuel Vehicles by Council 1 Burrtec Time Extension to implement the 6/10/05 Yes use of Alternative Fuel Vehicles and the construction of a MRF 2 Burrtec Time Extension to set new 4/25/06 Yes deadlines for the construction and completion of a MRF 3 Burrtec Adjust maximum rates 5/23/06 Yes 4 Burrtec Time Extension to meet minimum 11/14/06 Yes diversion goals of 25% and 50% Existing Amendment to the Residential Franchise Agreement 1 Blue Barrel Time Extension to implement the 11/28/06 No use of Alternative Fuel Vehicles and a Volume -Based Rate Structure Program. In addition, extend the deadline to meet minimum diversion requirements. Currently, there are four existing amendments to the Franchise Agreement between the City and its Commercial Solid Waste Hauler, Burrtec Waste Industries. The amendments have extended deadlines on two occasions to construct a Materials Recovery Facility (MRF), extended the deadline to implement the use of Alternative Fuel Vehicles, set new dates to meet minimum diversion requirements, and adjust the maximum collection rates. The Franchise Agreement between the City and the Residential Solid Waste Hauler, Blue Barrel Disposal, has also been amended to extend deadlines to implement Alternative Fuel Vehicles, a Volume -Based Rate Structure Program, and meet minimum diversion requirements. S:\ENVSRVCS\SOLWAST2\COUNCtWO07\List of Amendments to the Franchise agreements.doc