HomeMy WebLinkAboutStaff Report 7.B 05/02/2005HILTON FARNICOPF & HOBSON, LLC
Advisory Services to
_� Municipal Management
MEMORANDUM
Page 1 of 6
7.B
May 2, 200.E
To: Michael Bierman
From: Robert Hilton
Date: April 28, 2005
Subject: Summary of Negotiations with Empire Waste Management for Solid
Waste, Recyclable Materials, Organic Materials, Street Sweeping, and
Disposal Services
On February 23, 2005, the City Council in the City of Petaluma (City) directed staff to negotiate
with Empire Waste Management (EWM) for collection, street sweeping, and disposal services
with the goal of achieving 60% diversion. Over the past two months, the City, Hilton Farnkopf
& Hobson, LLC (HF&H), and EWM have been negotiating the final terms and conditions of two
agreements: a Franchise Agreement, which addresses collection and street sweeping services,
and a Disposal and Composting Agreement for services at Redwood Landfill. In addition,
EWM has been conducting negotiations with representatives of the Operating Engineers.
In this memorandum, HF&H summarizes the status of the negotiations process. The
memorandum presents:
• List of key contract issues and resolution of each issue
• Summary of changes to the Franchise Agreement agreed upon by the City and EWM
• Proposed terms and conditions of the Disposal and Composting Agreement and
identification of outstanding items
KEY CONTRACT ISSUES
Franchise Agreement
Issue, Status, ,Comments
Goal of 60% diversion ✓ EWM wanted the calculation of diversion to reflect
diversion performed by EWM as well as diversion
performed by other licensed and unlicensed service
providers based on supporting documentation
provided by EWM; however, the City staff felt this
was too broad. Therefore, the City and EWM agreed
to count: (i) drop box materials and other recyclables
collected and diverted through the City's future non-
exclusive franchises; (ii) drop-off and buy-back
recyclables documented by Department of
Conservation; and (iii) materials handled and
diverted at County facilities.
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HILTON FARNKOPF & HOBSON, LLC Northern California
Advisory Services to Southern California
—�' Municipal Management
MEMORANDUM
Page 2 of 6
Tssue ^ : Status 7-
- :Comments
Consider achieving more ✓
The City has the right to change the scope of services
than 60% diversion
at any time during the term (per Section 4.5 of the
Franchise Agreement).
Biodiesel vehicles ✓
Included in the Franchise Agreement at no additional
cost (per Section 9.3.2 of the Franchise Agreement).
Consideration of Sonoma ✓
HF&H and City staff met with Sonoma Compost, and
Compost
did not pursue the option further for the following
reasons:
• Food waste composting is not currently
permitted. It may be considered when the
facility permit is renewed in 2006.
• Sonoma Compost will stop accepting material
July 2010, five years prior to the expiration of
the Franchise Agreement (which expires June
2015 excluding extensions).
• EWM requested a $200,000 annual increase to
its costs to: (i) reflect the lost cost benefit of
processing at Redwood Landfill, (ii) lost
revenue associated with the sale of compost,
and (iii) the loss of the material as a bulking
agent for the commercial food waste program.
• EWM wants 100% of materials handled by
Sonoma Compost to count as diversion (even
though residue will be disposed).
• County may add new fees or raise the existing
$6 per ton fee.
• County can terminate Sonoma Compost
agreement if space is need for landfilling.
Reserve right to redirect ✓
City reserves the right to change organic materials
green waste in the future so
processing site with one-year advance notice and an
the City has the option of
adjustment to compensation (per Section 6.2.1) of
using it as fuel for the sewer
Franchise Agreement and Section 4.06.13 of the
treatment facility
Disposal and Composting Agreement).
Recycling for all mobile ✓
EWM to provide service to all complexes; initial
home/multi-family
implementation steps and annual site assessment
complexes
requirements specified in the Franchise Agreement;
recycling free for up to 3 cubic yards once per week.
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HILTON FARNKOPF & HOBSON, LLC
Advisory Services to
Municipal Management
MEMORANDUM
Page 3 of 6
Disposal and Composting Agreement
Northern California
Southern California
Issue,' Sta_ tus _ ,' Comments -
Three 5 -year options with ✓ EWM proposed the following per -ton disposal rate
specified disposal fees options:
• 5 year term - Proposed rate of $36.87 per ton
for Year 1 plus annual CPI for Years 2 to 5;
negotiate in good faith thereafter
• 5 -year term plus 5 -year extension - Proposed
rate of $36.87 per ton for Year 1 plus annual
CPI for Years 2 to 5; Year 6 then -current rate
plus CPI plus $5 per ton; then -current rate
plus annual CPI for Years 7 to 10
• 10 -year term - Proposed rate of $36.87 per ton
for Year 1 plus annual CPI for Years 2 to 10;
negotiate in good faith thereafter
• 10 -year term plus 5 -year extension - Proposed
rate of $36.87 per ton for Year 1 plus annual
CPI for Years 2 to 10; Year 11 then -current rate
plus CPI plus $2.50 per ton; then -current rate
plus amlual CPI for Years 12 and 13
We recommend accepting the proposal for a 10 -year
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term with an option to extend 5 years.
If Redwood cant accept
✓
EMW agreed to cover costs of going elsewhere for
waste, EWM to cover costs
events within their control (per Section 4.16 of the
of going elsewhere
Disposal and Composting Agreement).
Petaluma's solid waste
✓
EWM confirmed that Redwood Landfill has adequate
should not be the
capacity to serve Petaluma under its current permits
justification for the
(documented in Section 4.15 of the Disposal and
Redwood landfill expansion
Composting Agreement); and that the expansion is
plan/permit modification
not motivated by Petaluma's solid waste.
Compost give -back
✓
EWM agreed to give the City up to 10% of compost
product (per Section 4.06.H of the Disposal and
Composting Agreement).
Marin JPA fees come to
✓
The City can apply to Marin County Hazardous and
Petaluma for City use
Solid Waste Authority (Authority) for a waiver of the
Authority's $3.68 -per -ton fee; although the outcome of
this waiver request is uncertain.
Indemnification for
✓
Redwood has agreed to indemnification (per Section
closure/post-closure
6.01 of the Disposal and Composting Agreement).
liabilities
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AdjbjHILTON FARNKOPF & HOBSON, LLC Northern California
Advisory Services to Southern California
Municipal Management
MEMORANDUM
Page 4 of 6
issue Sfat is - _ :Comments
Improve bird protection ✓ EWM provided a brief description of its bird
policy - discontinue use of management policies. The Local Enforcement Agency
cannons; shield lights, etc. indicated that adequate bird control measures are
needed because birds are a hazard to planes at the
nearby airport.
AGREED-UPON FRANCHISE AGREEMENT CHANGES
The City staff and EWM agreed to the following changes to the draft Franchise Agreement to
reflect EWM's proposed scope of services and diversion programs.
1. Revisions to description of diversion programs to reflect single stream residential
recyclables collection (Section 5.2.2), weekly residential yard waste collection (allowing
some materials to be used as ADC) (Sections 5.3 and Section 6.2), multi -family recycling
(Section 5.2.4), and commercial recycling (Section 5.2.5)
2. Implementation of weekly residential yard trimming services within one week of
execution of the Franchise Agreement (Section 5.3.2)
3. Single stream recycling implementation requires 90 days from the execution date of the
Franchise Agreement (and thus is likely to occur in August 2005)
4. Implementation of residential and commercial food scraps collection January 1, 2006
5. Residential organic materials composting at Redwood Landfill; allowed use of up to
20% of compost product as ADC or soil erosion control material; contingency to use Z -
Best at no additional cost (Article 6)
6. Commercial food waste composting at Z -Best (Section 6.2)
7. Recyclables processing in Santa Rosa at Waste Management's facility (Section 6.1)
8. 60% diversion calculation to include construction and demolition debris and commercial
drop -box tonnage, Department of Conservation drop-of/buy-back center tonnage, and
County tonnage
9. Disposal at Redwood Landfill (Section 6.3)
10. Enhanced street sweeping services: (Section 8.1 and Exhibit J)
a. After special events such as Butter and Egg Day Parade
b. Year-round weekly residential street sweeping service
c. Additional street sweeping route from October to December
11. Expanded list of recyclable materials to include non -CRT e -scrap; small appliances;
polystyrene and textiles (Article 1, Recyclable Materials Definition)
12. Elimination of leaf clean-up crew requirement (Exhibit J) and staffed pay station in town
(Section 7.4.1.A)
13. Free Ni -cad battery drop-off at Santa Rosa MRF (Section 5.4.I)
14. Drop-off for a fee for TV, computer CRTs drop-off at Santa Rosa MRF (Section 5.4.1)
15. Servicing of up to 200 additional refuse containers in downtown area (Exhibit J)
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Aifilk HILTON FARNKOPF & HOBSON, LLC Northern California
Advisory Services to Southern California
Municipal Management
MEMORANDUM
Page 5 of 6
In addition, the City and EWM agreed to the following changes to the compensation section of
the Franchise Agreement:
1. Simplification of the annual rate adjustment process
2. Documentation of $2.5 million "integrated services and materials sales credit" proposed
by EWM (Article 12) through Year 10; and agreement to negotiate the amount of the
credit in any extension period (with a guaranteed minimum of $1.25 million annually)
3. Incorporation of a used equipment depreciation schedule for 10 -year term (Article 12;
Exhibit C)
4. Free disposal for annual clean-up of bulky items (Section 5.4.E, add to non -allowed costs
in Section 12.4.2.D.1)
5. Inclusion of AB 939 and FH -IW fee of $250,000 annually for fPA-related programs
(Section 11.3)
6. Allowance for a cost increase in Year 4 to reflect annual costs of $140,000 (for public
education and contract management expenses) that are not accurately reflected in
EWM's proposed costs.
7. Elimination of market test of rates
8. Documentation of customer rates that reflect a 3.8% rate increase over current rates
PROPOSED DISPOSAL AND COMPOSTING AGREEMENT
EWM is reviewing a draft Disposal and Composting Agreement provided by HF&H. The key
terms and conditions of the draft agreement include:
1. 10 -year term plus optional extension of 5 -years at City's discretion (Article 2)
2. Reporting of any diversion activities (Section 4.03)
3. Landfill operations obligations (Section 4.05)
4. Composting obligations at Redwood Landfill and Z -Best Composting Facility including
right for City to redirect organic materials to alternative site (Sections 4.04 and 4.06)
5. Guaranteed capacity for solid waste and organic materials for 15 -years (Section 4.15)
6. Obligation to provide a yard and wood waste drop-off area for self haulers (Section 4.07)
7. Landfill franchise fee rebate mechanism of $7.50 per ton (Add to Article 5)
8. Documentation of disposal fees and composting fees and annual adjustment process
(Article 5)
9. General, hazardous material, and environmental indemnification including
indemnification related to closure and post -closure (Section 6.01)
10. Performance bond of $3,000,000 (Section 6.03)
We are waiting for responses from EWM on the following matters related to the Disposal and
Composting Agreement:
Comments on the Draft Disposal and Composting Agreement - EWM is reviewing the
draft Disposal and Composting Agreement and agreed to provide comments the week
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AINNIkHrLTON FARNICOPF & HOBSON, LLC Northern California
Advisory Services to Southern California
.-Municipal Management
MEMORANDUM
Page 6 of 6
of April 25. To date, they have stated that they will not share the burden of any Marin
County or Marin County Hazardous and Solid Waste Authority fee increases and will
pass all such costs onto the rate payers. This pass-through of governmental fees is
common. EWM states that it has an economic interest in minimizing any governmental
fees so it can competitively price disposal services at the Redwood Landfill.
2. Organic materials processing costs at Z -Best - City staff requested a commitment from
EWM that the annual per -ton processing cost adjustment for commercial food waste at
Z -Best Composting Facility is limited to a CPI adjustment, and that Z -Best provide
indemnification to the City. EWM is discussing these matters with Z -Best.
OTHER
An agreement with the Operating Engineers has not been reached.
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