HomeMy WebLinkAbout2011-05-24 - AGENDA REPORTS - SOLID WASTE FRANCHISE FEE (2)Agenda Item: 14
CITY OF SANTA CLARITA
AGENDA REPORT
UNFINISHED BUSINESS City Manager Approval:
Item to be presented by: Robert Newman
DATE: May 24, 2011
SUBJECT: RESOLUTION ADJUSTING RATES FOR RESIDENTIAL SOLID
WASTE FRANCHISE SERVICES AND APPROVAL OF
PROPOSED AMENDMENTS FOR COMMERCIAL AND
RESIDENTIAL FRANCHISE AGREEMENTS TO ADDRESS THE
FINDINGS OF THE FINANCIAL AUDIT INCLUDING AN
EXTRAORDINARY RATE INCREASE AND TERM EXTENSION
DEPARTMENT: Public Works
RECOMMENDED ACTION
1. City Council adopt a resolution for the Sixth Amendment to the Agreement between the City
of Santa Clarita and USA Waste of California, Inc., (Waste Management) for residential solid
waste management services, allowing an increase in their rates by 2.64 percent based on the
formula outlined in their Franchise Agreement.
2. Authorize the City Manager to execute the amended and restated commercial and residential
Franchise Agreements, which include all previously approved amendments, an extraordinary
rate increase, and new programs as described in this staff report, subject to City Attorney
approval.
BACKGROUND
In November 2003, the City Council selected USA Waste of California, Inc., (Waste
Management) as the exclusive solid waste hauler for residential waste services. Pursuant to
Section 6.3 of the Franchise Agreement, Waste Management may request a rate increase for the
next rate year (in this case, July 1, 2011, through June 30, 2012). The hauler may only request a
rate increase if a request is made in writing by the first of April, and follows specific guidelines
for a rate increase as outlined in Section 6.4 of the Franchise Agreement. The City received a
written request on March 29, 2011, from Waste Management (attached), illustrating a proposed
adjustment to the residential collection rates. Pursuant to Section 6.3 of the Franchise
Agreement, City 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 Agreement. Burrtec's Franchise Agreement for commercial solid
waste services does not provide for annual rate adjustments for rate years that begin in 2011 and
2012.
Attached is a summary of the Rate Adjustment Methodology for this rate increase described in
Section 6.4, calculations following the formula, and a matrix outlining maximum rate changes.
Based on the formula, the rate increase for Fiscal Year 2011-12 will be 2.64 percent, which is
less than the annual rate cap of 5 percent. If approved by City Council, staff will work with
Waste Management in providing proper notification of the rate increase to residential customers.
The new rate structure would begin on July 1, 2011, and would not affect the diversion programs
they currently provide.
In 2008, the franchise waste haulers approached the City with concerns that they were losing
revenue. At that time, the haulers requested an extraordinary rate adjustment and hired a
third -party consultant. Under the City's management, Hilton Farnkopf & Hobson (HF&H)
conducted a third -party audit during 2009 and 2010. City Council finalized the audit report in
October 2010, and staff has been meeting with representatives of both haulers to determine
solutions to address the findings of the financial audit.
During the audit process, staff focused on the following three goals.
• Maintain low rates
• Increase diversion rates
• Keep and maintain a high level of customer service for businesses and residents
Waste Management offers various recycling programs for Santa Clarita residents including the
sharps home delivery program, curbside pickup, manure, green waste, and clothing, bulky item
pickup, and e -waste removal. Burrtec offers a free comprehensive commingled recycling
program to Santa Clarita businesses, along with food waste recycling, mix waste processing, and
litter abatement.
HF&H determined through their audit process that both haulers demonstrated an annual loss
while providing services to residents and businesses in the City. During 2007 and 2008, Burrtec
lost 14 percent and 10 percent respectively. During 2007 and 2008, Waste Management lost
22 percent and 17 percent respectively.
The haulers also provided 2009 and 2010 financial data. The, two years of data have not been
verified by a third party, but they are consistent with the third -party audit results performed by
HF&H. The data shows losses of 11 percent in 2009 and 13 percent in 2010 for Burrtec and
21 percent in 2009 and 20 percent in 2010 for Waste Management.
In addition to reviewing the third -party financial data, staff also analyzed customer service since
each franchise went into effect. Since Burrtec's franchise commenced in August 2004, there has
been an average of less than one complaint a month from over 2000 businesses that operate in
the City. Since Waste Management's franchise commenced in April 2006, there has been an
average of eight complaints a month received among 36,000 single-family homes and 75
multifamily complexes, which house over 188,000 residents. Waste Management conducted a
random survey of over 150 households for overall customer satisfaction. The findings identify
that 93 percent of the respondents are either satisfied or extremely satisfied with Waste
Management's service.
Lastly, staff evaluated residential and commercial rates compared to the rest of Los Angeles
County's jurisdictions. The City's single-family residential rate was ranked the 26th lowest rate
among 88 cities in Los Angeles County in 2009 based on a third -party report. Staff conducted
additional research and determined the City's rate in 2010 dropped to the 24th lowest rate among
88 cities in Los Angeles County. Burrtec's rate for a three cubic yard container with one
collection per week was ranked the lowest commercial rate in Los Angeles County among 88
cities.
Staff worked with Waste Management and Burrtec to develop amendments to the Franchise
Agreements for City Council's review and consideration for approval. The Waste Diversion
Subcommittee met on May 3, 2011, to receive information on the proposed amendments. The
proposed amendments for each hauler are as follows:
Waste Management's Proposed Amendments
Term: Extends term of the franchise by 10 years to end June 30, 2023.
Extraordinary Rate Increase: Allows two extraordinary rate increases of 1.5 percent beginning
July 1, 2011, and July 1, 2012, and four extraordinary rate increases of 2.5 percent for rate years
beginning on July 1, 2013, 2014, 2015, and 2016. During the years of the extraordinary rate
increase, the rate cap will be limited to 6 percent. The existing language of the Franchise
Agreement would be modified for extraordinary rate adjustments.
Annual Rate MethodolM: Modifies the existing rate formula by substituting new indices for the
Fuel, Disposal, and All Other categories. For the Fuel category, substitute a Department of
Energy formula for compressed natural gas (CNG) in place of a diesel formula. For Disposal and
All Other categories, substitute a Solid Waste Consumers Price Index (CPI) in place of a national
All Urban Consumers CPI.
New Programs: Provides collection and disposal of illegally dumped items in the City's
rights-of-way or on public property by creating a fixed bulky item collection route. The
collection route will be for areas where abandoned items are illegally dumped most often and
will enhance response time.
Enhanced Litter Abatement: Provides 8 hours of litter abatement per week. This increased
service will help address litter in the public right-of-way.
Split Recycling Containers: Offers multifamily complexes with limited space three -yard split
containers. The compact split container has a partition to house both waste and recycled material
to help residents increase their recycling. In addition, the multifamily rates would be aligned with
the commercial rate of the same size container by July 1, 2013. Waste Management will then
process the waste at a nondisposal facility and assist the City with increasing the diversion rate at
multifamily complexes.
Super Saver Rate: Allows residents the option to use a 35 -gallon cart in place of their current
96 -gallon cart. Residents who use this option will receive a 20 percent discount to their monthly
collection rate and still be eligible for unlimited recycling carts.
Collection Vehicles: Extends the age of their collection vehicles from 10 to 15 years on the
condition the hauler meets all federal, state, and regional fleet requirements relating to clean air
standards.
Audit: Agrees to pay for a third -parry audit of their financial records after a local recycling
facility is operating for one year to evaluate the facility's impact on their profitability.
Lowest Rate: Residential rates must remain lower than all cities and unincorporated areas with
franchise residential services in the North Los Angeles County area as defined by Southern
California Association of Governments (SLAG).
Burrtec's Proposed Amendments
Term: Extends term of the franchise by 5 years to end June 30, 2018. If Burrtec completes the
recycling facility during that period, the term of the contract would extend an additional 15 years
to June 30, 2033; otherwise, Burrtec would receive only a 5 -year extension to June 30, 2023.
Extraordinary Rate. Increase: Allows an extraordinary rate increase of 1.875 percent beginning
July 1, 2012, and three extraordinary rate increases of 2.475 percent for rate years beginning on
July 1, 2013, 2014, and 2015. During the years of the extraordinary rate increase, the rate cap
will be limited to 6 percent. The existing language of the Franchise Agreement would be
modified for extraordinary rate adjustments.
Modify Rate Methodology: Modifies the existing rate formula by substituting new indices in line
with Burrtec's operations. This includes reweighting the disposal component to 34 percent of the
rate adjustment from 25 percent in line with findings in HF&H's audit. Lowering the All Other
category from 25 percent to 16 percent of the formula. Substitute a Department of Energy
formula for CNG in place of a diesel formula because Burrtec's trucks operate on CNG, and use
a Solid Waste CPI for disposal in place of a National All Urban Consumers CPI.
New Programs: Provides 90 -gallon carts for recycling to small businesses with limited space on
their property. This new feature will allow businesses to divert more into recycling and
potentially lower their monthly waste collection fee.
Enhanced Litter Abatement: Provides 16 hours of litter abatement per month. This increased
service will help address litter in the public right-of-way.
Collection Vehicles: Extends the age of their collection vehicles from 10 to 15 years on the
condition the hauler meets all federal, state, and regional fleet requirements relating to clean air
standards.
Audit: Agrees to pay for a third -party audit of their financial records after a local recycling
facility is operating for one year to evaluate the facility's impact on their profitability.
Assembly Bill 32 Compliance: Burrtec will comply with AB 32 mandatory commercial recycling
requirements that are consistent with the Franchise Agreement.
Recycling Fg acility: The Franchise Agreement would be modified to include the actual cost of the
recycling facility based on fair -market value. Additionally, the ownership transfer would be
adjusted to a 15 -year time frame.
Lowest Rate: Commercial rates must remain lower than all cities and unincorporated areas with
franchise commercial services in the North Los Angeles County area as defined by SLAG.
Staff recommends the City Council authorize the City Manager to execute amended and restated
commercial and residential Franchise Agreements that includes all proposed amendments and
new programs described in this staff report.
ALTERNATIVE ACTIONS
1. Authorize the appropriation of $250,000 from the General Fund to Expenditure Account
14601-5161.002, which will be used to hire a solid waste consultant to assist the City with
preparing a new Franchise Agreement for commercial and residential services and direct staff
to release a Request for Proposals for franchise commercial and residential solid waste
collection services.
2. Other action as determined by the City Council.
FISCAL IMPACT
There is no fiscal impact associated with the recommended actions.
ATTACHMENTS
Resolution
Sixth Amendment for Waste Management
Waste Management's Request for Annual Rate Adjustment
Rate Adjustment Methodology
Proposed Amendment for Waste Management's Franchise Agreement
Proposed Amendment for Burrtec's Franchise Agreement
RESOLUTION 11-
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
SANTA CLARITA, CALIFORNIA, APPROVING THE SIXTH AMENDMENT TO
THE AGREEMENT BETWEEN THE CITY OF SANTA CLARITA AND USA WASTE
OF CALIFORNIA, INC., (WASTE MANAGEMENT) FOR RESIDENTIAL
SOLID WASTE MANAGEMENT SERVICES
WHEREAS, the City is empowered under Section 7 of Article 11 of the California
Constitution to make and enforce, within its limits, all police and sanitary ordinances and
regulations not in conflict with general laws; and
WHEREAS, in partial implementation of Section 7 of Article 11 of the California
Constitution, California Public Resources Code Section 40059 authorizes the City to determine
all aspects of handling of solid waste that are of local concern, including the frequency of
collection, means of collection and transportation, level of services and nature, location, and
extent of waste handling services; and
WHEREAS, on November 20, 2003, the City and USA Waste of California, Inc.,
(Waste Management) entered into that certain "Agreement Between the City of Santa Clarita
and USA Waste of California, Inc., for Residential Solid Waste Management Services" (the
Agreement); and
WHEREAS, pursuant to Section 6.3 of the Agreement, Waste Management is entitled
to pursue -an annual adjustment to its maximum rates for the rate year commencing on
July 1, 2011, to June 30, 2012; and
WHEREAS, the City and Waste Management desire to amend the Agreement by
increasing the maximum rates as outlined in Sections 6.3 and 6.6 of the Agreement.
NOW, THEREFORE, the City Council of the City of Santa Clarita, California, does
hereby resolve as follows:
SECTION 1. The City Council does hereby find, determine, and declare pursuant to
California. Public Resources Code Section 40059(a)(1) and Section 7 of Article 11 of the
California Constitution that the public health, safety, and well-being require approval of that
certain "Sixth Amendment to Agreement Between the City of Santa Clarita and USA Waste of
California, Inc., for Residential Solid Waste Management Services" (the.Sixth Amendment), a
copy of which is attached. The City Manager is authorized to execute the Sixth Amendment on
behalf of the City and such Sixth Amendment is hereby approved.
SECTION 2. The City Clerk shall certify to the adoption of this Resolution.
PASSED, APPROVED, AND ADOPTED this day of 2011.
MAYOR
ATTEST:
ACTING CITY CLERK
DATE:
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss.
CITY OF SANTA CLARITA )
I, Kevin Tonoian, Acting City Clerk of the City of Santa Clarita, do hereby certify that the
foregoing Resolution was duly adopted by the City Council of the City of Santa Clarita at a
regular meeting thereof, held on the day of 20115 by the following voter
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: -- COUNCILMEMBERS:
2
ACTING CITY CLERK
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss.
CITY OF SANTA CLARITA )
CERTIFICATION OF
CITY COUNCIL RESOLUTION
I, , Acting City Clerk of the City of Santa Clarita, do
hereby certify that this is a true and correct copy of the original Resolution 11- adopted by the
City Council of the City of Santa Clarita, California on , 2011, which is now on file in my
office.
Witness my hand and seal of the City of Santa Clarita, California, this day of
2011.
Acting City Clerk
By
Deputy City Clerk
3
SIXTH AMENDMENT TO AGREEMENT
BETWEEN THE CITY OF SANTA CLARITA AND
USA WASTE OF CALIFORNIA, INC., (WASTE MANAGEMENT) FOR
RESIDENTIAL SOLID WASTE MANAGEMENT SERVICES.
This SIXTH AMENDMENT TO AGREEMENT BETWEEN THE CITY OF
SANTA CLARITA AND USA WASTE OF CALIFORNIA, INC., (WASTE
MANAGEMENT) FOR RESIDENTIAL SOLID WASTE MANAGEMENT
SERVICES, (Sixth Amendment) is entered into this day of 20111
between the City of Santa Clarita, California, a California municipal corporation (City)
and USA Waste of California, Inc., a California corporation to amend that certain
"Agreement Between the City of Santa Clarita and USA Waste of California, Inc., for
Residential Solid Waste Management Services" (the Agreement), dated November 20,
2003.
RECITALS
WHEREAS, the City is empowered under Section 7 of Article 11 of the
California Constitution to make and enforce, within its limits, all police and sanitary
ordinances and regulations not in conflict with general laws; and
WHEREAS, in partial implementation of Section 7 of Article 11 of the California
Constitution, California Public Resources Code Section 40059 authorizes the City to
determine all aspects of handling of solid waste that are of local concern, including the
frequency of collection, means of collection and transportation, level of services and
nature, location, and extent of waste handling services; and
WHEREAS, on November 20, 2003, the City and USA Waste of California, Inc.,
(Waste Management) entered into that certain "Agreement Between the City of Santa
Clarita and USA Waste of California, Inc., (Waste Management) for Residential Solid
Waste Management Services" (the Agreement); and
WHEREAS, pursuant to Section 6:3 of the Agreement, Waste Management is
entitled to pursue an annual adjustment to its maximum rates for the rate year
commencing on July 1, 2011, to June 30, 2012.
NOW, THEREFORE, the City and Waste Management in consideration of their
mutual promises, amend the Agreement as follows:
9
SECTION 1. Exhibit "2" of the Agreement, entitled "Initial Maximum Rates"
shall be amended to contain the following maximum rates starting on the rate year
commencing on July 1, 2011, and ending June 30, 2012:
• Standard Service Rate $18.37 per month
• Reduced Rate for no Greenwaste Services $16.37 per month
Y Reduced Rate for Senior/Lifeline Customers $14.70 per month
• Mobile Home Service Rate $13.78 per month
The multifamily rates will be as follows:
Container
Costs
Street Litter Carts
Number of Weekly
Pickups
$16.57
Refuse Overage Extra Pickup
Size
1
2.
3
4
5
6
7
1.5 yd
$55.38
$110.79
$166.17
$221.55
$276.93
$332.34 1
$387.72
2 yd
$59.05
$118.07
$177.12
$236.16
$295.18
$354.21
$413.26
3 yd
$66.35
$132.64
$199.00
$265.32
$331.64
$397.98
$464.31
4 yd'
$73.61
$147.26
$220.86
$294.47
$368.11
$441.74
$515.35
Special Services
Costs
Street Litter Carts
$16.29 per set per month
Restart Charge
$16.57
Refuse Overage Extra Pickup
$5.53 per pickup
Locking Bin
$11.05 per bin per month
Bulk Billing Discount
8%
Extra Bulky Item Pickup
$22.10 per pickup
Additional Bin Cleanings
$38.67 per cleaning
Extra Bin Empties
$38.67 per empty
Compactor Rates
2x comparable bin rate
Late Fees
1.5% per month
Emergency Services
$77.36 per hour
Manure Collection
100% of comparable multifamily bin refuse rate
Prepayment Discount
TOne month free with 11 months prepaid
(Signatures on next page)
2
f0
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
CITY OF SANTA CLARITA
A California Municipal Corporation
Ken Pulskamp, City Manager
ATTEST:
Kevin Tonoian
Acting City Clerk
APPROVED AS TO FORM:
Joe Montes
City Attorney
3
State of California
County of
On
Date
Place Notary Seal Above
WASTE MANAGEMENT
[CEO, President, Chairman of the Board or
any Vice President]
And By:
[The Secretary, any assistant secretary, CFO
or any assistant treasurer]
before me,
Here Insert Name and Title of the Officer
Name(s) of Signer(s)
who proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s) is/are
subscribed to the within instrument and
acknowledged to me that he/she/they executed the
same in his/her/their authorized capacity(ies), and that
by his/her/their signature(s) on the instrument the
person(s), or the entity upon behalf of which the
person(s) acted, executed the instrument.
I certify under PENALTY OF PERJURY under the
laws. of the State of California that the foregoing
paragraph is true and correct.
WITNESS my hand and official seal.
Signature
4
Signature of Notary Public
I
t k
March 29, 2011
Mr, Robert Newman
Public Works Director
City of Santa Clarita
23290 Valencia Boulevard Ste. 300
Santa Clarita, CA 91355
RE: 2011 Rate Adjustment Review
Dear Mr. Newman:
Pursuant to Article 6 of our. current franchise agreement, Waste Management
respectfully requests an adjustment of the service rates based on the rate adjustment
methodology outlined in the agreement. While we are submitting this request
consistent with contractual requirements, we are hopeful that this adjustment will be
included in the overall resolution package related to the third party financial audit
completed in 2008 that will bring additional value and sustainability services to
ratepayers and the City while solidifying our long term partnership.
Waste Management is proud to be a sustainability partner to the City of Santa Clarita
and we are committed to assisting the City in complying with State mandates, increasing
diversion, being stewards of the environment and being active participants in the
community.
We would like to take this opportunity to highlight just a few of our mutual successes in
2010 accomplished in partnership with City Staff.
Through enhanced public education and the implementation of
innovative new programs, diversion in the residential 'waste sector
increased six percent in the past two years. WM and the City have
paved the way for a future zero waste city by providing free programs
to residents to eliminate waste such as commingled recycling, the WM
Sharps Home Delivery Program, Clothes for Community and the City of
Santa Clarita Green Guide.
o Waste Management has worked very closely with the City to develop an
effective, sustainable Multi -Family program that is easy for residents to
use and for property managers to administer. This comprehensive
program has not only provided savings to property managers through a
reduction in disposal costs but has also earned the City recognition from
key organizations including CalRecycle and the American Publics Works
Association. This program has resulted in more than 100 site visits,
recycling consultations, and workshops as well as new and enhanced
multi -family recycling programs at more than sixty complexes in the
City.
/3
THINKGREEW
® Waste Management helped schools increase recycling up. to 50% ;as a
result of district audits to save thousands of dollars in associated
maintenance costs. In addition to regular recycling support and
outreach, Waste Management actively seeks and receives grant funding
to support school sustainability efforts. Examples include the WM —
Keep America Beautiful funding recently received to support local
school districts.
over the years, Waste Management has provided valuable programs
including Santa Clarita Valley's First Sharps and Medical Waste Round -
Up event, to meet the unique needs of senior citizens. Senior citizens
continue to receive additional value through special drop off programs
along with the Sharps Home Delivery Program providing residents with
a convenient way to responsibly dispose of needles, lancets, syringes
and other sharps, as well as a significant senior discount on waste and
recycling collection services.
Waste Management has participated in many community and business
events each year and has targeted efforts towards increasing diversion,
public education, sustainability and community safety. Some highlights
of this involvement include the Santa Clarita River Rally, Santa Clarita
Earth Arbor Day Celebration, Neighborhood Clean Up Events,
sponsorship and support for the Santa Clarita Sheriffs Boosters, Gibbons
Conservancy, the SCV Food Pantry and the Santa Clarita Valley Senior
Center.
As a company, we are dedicated to making a difference for the environment and the
communities that we serve. Thank you for your favorable consideration. We look
forward to discussing this request in further detail.
Sincerely,
Sandra Pursley
Public Sector Services Manager
Waste Management
Enclosures: Rate Calculations
Distribution:
Travis Lange
Mark Patti
Susan Moulton
Ci$y of Banta Clarlta Waste fiflariamment Rat®Adiustment Cal
Watldns201112012
---_------ - - ..... ....
Cost C
Wet iottno Rate Adjustment Index
Deo -09
C+ec-90
Chan
Percent
Cha Chan
Labor
Fuel
3036 PCU58211.55211-
116.1
117.9
': 1.8
1.550%
Equipment
5% WPU057303... ..: ::..
i53'o PCU33621133621 1
205.1
261.7:
. 56.6.27.596°,6
`.;1.38%
Dis sal::
.
25°�6 CPI = All ::.
215.7
15.949 .
218:5
:219179
::' ..::: 2.8 .:
3 23
,1.298% 0.1996 :. ...
i 496% 0 3796
All Other
Total
25% CPI'- All:
215.949
219.179
:;. 3.23 <:
1.49696 :",0.19%
100%
.W%
---_------ - - ..... ....
Lahr Producer Price Index Ind ustr + Data
Series, Catalog
oam enacted on March 2011(1:44:12 PM)
Producer Prtoe index IndustryData
Fuel - Producer Price Index Industry Data
Series Catalog:
Oats exbaded on: March 22, 2011(1:56:44 PM)
..............
All Other;. Consumer Price Index -All Urban Consumers
Data extracted on March 10, 2010 (6:01:02 PM)
Series Id: CUUR0000$A0
Not Seasord y Ad*ted
Area: U.S. CRY everape
item: AD Mems
Base Period: 1982.84=100
. ,,
YeOr Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual HALF!, HALF2
2009 211.143 212.193 212:709 213.240 213.856 215.693 215.351 215.834 215.969 216:.1 T7 21H 330 215 949< 214.537 213.139 215.935
2010 216.687 216.741 217:631 218.009 218.478 217.985 218.011 218.312 218.439 218.711 218 803 X219 1.79 218,056 217.535 218.576
2011 220:223 _,,,:: : :., µ .:.:.-::, .._
Equipment - Producer Price Index Industry Data
Data extrW , on: Mardi 1:, 2011(4:35:53 PM)
Producer Price Index Industry Data
Series id: PCJ336211336211
Industry: Molar vehicle body maudactu"
Product Motor vehicle body maradactu ft
Base Gale: 198212
Year Jan Feb Mar Apr May Jun
12009 217.5 217.2 218.8 216.0 216.2 216.3
.2010 216.5 216.6 216.6 2173 21 TT 218.2
:2011 218.9
P.: Preftnary. AD Indexes are sub)ect tD revision four mmwths ager o ing P A*zt
rd Aug Sep Oct Nov Dec .::. Annum
216.9 216:5 216,5 215.7 215 7 2 5" 216.
218.6 216.2 218.3 218..3 216.4.12165; 217
2011 ANNUAL RESIDENTIAL WASTE HAULER
RATE ADJUSTMENT METHODOLOGY
The formula for determining a rate increase is outlined in Section 6.4 of the Franchise Agreement
as follows:
Cost Category
Weighting
Rate Adjustment Index
Labor
30%
Producer Price Index, PCU4212#2, local trucking without
a�r�enf
storage, waste collection
Fuel
o
5 /o
Producer Price Index, WPU057303 not seasonally adjusted,
0.0189
30%
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
Fuel
(CPI -U) — U.S. city average
All Other
25%
50% of change in Consumer Price Index for all urban
0.2638
5%
consumers, all items index (CPI -U) — U.S. city average
Total
100%
CHANGE IN CLASSIFICATION SYSTEM
Since the Franchise Agreements were written, some changes had to be incorporated in the rate
adjustment calculation. 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. The PPI labeled as PCU3713#139 —" Truck and Bus
Bodies, Refuse and Garbage (packer type)" was replaced with PCU336211336211 — "Motor
Vehicle Body Manufacturing." To calculate the labor component, the PPI index labeled
PCU56211-56211 - "Waste Collection" was used.
2011 Annual Rate Adjustment
Cashat+�gnry
iec 2009
llQQ
change
�4'+�gtlEt�ng
a�r�enf
116.1
118.3
0.0189
30%
0.57%
(PCU5Labor -5621 1)
Fuel
205.1
259.2
0.2638
5%
1.32%
(V1IPU057303)
Equipment
215.7
218.4
0.0125
15%
0.19%
(PCU336211336211)
Disposal
215.949
219.179
0.0150
25%
0.37%
(CPI -U US City Average)
All ther
OC
215.949
219.179
0.0150
25%
0.19%
(CPI -U US ty Average)
Total
100%
2.64%
/7
Proposed Amendment for Waste Management's Franchise Agreement
Term of Contract 10 -year agreement extension to June 30, 2023
Extraordinary Rate Increase Extraordinary Rate Increases
i 1.5% increase for rate years 2011 and 2012
C 2.5% increase for rate years 2013, 2014, 2015, and 2016
O 6% rate cap for rate years with extraordinary rate increases
• Modify Extraordinary Rate language as outlined in Section 6.6 in
the Franchise Agreement
Rate Adjustment Method Modify the existing annual rate methodology in the following areas
• Fuel -DOE Clean Cities CNG Formula
• Disposal and 50% of the All Other -Solid Waste CPI index
• Calculate change for each index using annual averages
New Collection Programs Implement New Programs
• Fixed bulky item collection route for areas with abandoned items
• 8 hours per week of litter abatement
• Offer 3 -cubic -yard split recycling and trash containers for
multifamily complexes with limited space for recycling
Super Saver Cart Provide a Super Saver Cart (35 -gallon cart) for residents that generate
minimal trash. The rate will be 20% lower than the standard
rate
Late Fees Adjust late fee language to require resident to pay their quarterly bill
within 15 days after the end of the service period. Customers will
be charged standard late fees of 1.5% or a minimum of $3.00. After an
additional 15 -day period, the customer's account will be suspended
Multifamily Container Rates Align multifamily rate with the commercial rate of the same size
container by July 1, 2013, and require waste loads from multifamily
complexes to be taken to a permitted nondisposal facility for select
load processing to maximize diversion
Multiple Discount Program New customers will be eligible for one discount unless they are a
Senior/Lifeline Customer, which may have one additional discount
Collection Vehicles Waste Management will replace their vehicles every 15 years if they
meet the alternative fuel requirements as set forth in the existing
Franchise Agreement
Future Audit Waste Management will pay for an audit after the recycling facility is
operating for one year to evaluate the facility's impact on their
profitability
Future Rates Residential rates must remain lower than all cities and unincorporated
areas with franchised residential services in the North Los Angeles
County Area as defined by Southern California Association of
Governments IF
Proposed Amendment for Burrtec's Franchise Agreement
Term of Contract Extend the term of the agreement
• 5 -year extension to June 30, 2018
• If recycling facility is not completed, an additional 5 -year
extension: to June 30, 2023
• If recycling facility is completed, an additional 15 -year extension
to June 30, 2033
Extraordinary Rate Increase Extraordinary Rate Increase
• 1.875% increase for rate year 2012
• 2.475% increase for rate years 2013, 2014, and 2015
• 6% rate cap for rate years with extraordinary rate increases
• Modify Extraordinary Rate language as outlined in Section 6.6 in
the Franchise Agreement
Rate Adjustment Method Modify the existing annual rate methodology in the following areas
• Fuel -DOE Clean Cities CNG Formula
• Disposal and 50% of the All Other -Solid Waste CPI index
• Reweight the Disposal and All Other Categories to 34% and 16%
respectively
• Calculate change for each index using annual averages
New Collection Programs Implement the following new programs
• 16 hours per month of litter abatement
• Offer 90 -gallon recycling carts for businesses with limited space
Collection Vehicles Burrtec will replace collection vehicles every 15 years if they meet
alternative fuel requirements as set forth in the existing Franchise
Agreement
Recycling Facility Modify Franchise Agreement language
• Actual cost of the recycling facility based on fair -market value
• Adjust ownership transfer to a 15 -year time frame
AB 32 Compliance Burrtec will comply with AB 32 mandatory commercial recycling
requirements that .are consistent with the Franchise Agreement.
Future Audit Burrtec will pay for .an audit after the recycling facility is operating
for one year to evaluate the facility's impact on their profitability
Future Rates Commercial rates must remain lower than all cities and unincorporated
areas with franchised commercial services in the North Los Angeles
County Area as defined by Southern California Association of
Governments
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