HomeMy WebLinkAboutStaff Report 5.B 03/19/2018Agenda Item #5.B
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DATE: March 19, 2018
TO: Honorable Mayor and Members of the City Council through City Manager
FROM: Dan St. John, F.ASCE — Director, Public Works and Utilities Department
Jason Earl — Management Analyst
SUBJECT: Report Regarding Setting Citywide Maximum Refuse and Recycling Rates
RECOMMENDATION
It is recommended that the City Council Accept the Report Regarding Setting Citywide
Maximum Refuse and Recycling Rates.
BACKGROUND
On February 22, 2018, the City Council adopted Ordinance number 2636 N.C.S. and
conditionally approved the transfer of the Franchise Agreement for Solid Waste, Recyclable
Materials and Yard Trimming Services from Petaluma Refuse and Recycling, Inc. (PR&R) to
Recology Sonoma Marin (Recology). The Franchise Agreement requires Recology to provide
services in a professional manner; comply with the terms of the Franchise Agreement, and the
City's operational expectations. The fees charged by Recology are the same as charged by
PR&R. Rates will be adjusted by approximately 4.22% on July 1, 2018 based on the RRI
adjustment for this year.
The existing maximum rates for refuse and recycling were approved on February 6, 2013 by
Ordinance number 2448 N.C.S., as part of the Franchise Agreement between the City of
Petaluma and Petaluma Refuse and Recycling, Inc. Section 9.2.1 of the Franchise Agreement
requires the contractor to bill all customers at rates not to exceed City -Approved Maximum
Service Rates. As per Section 10 of the Franchise Agreement, every July the City -Approved
Maximum Service Rates shall be adjusted by the Refuse Rate Index (RRI). The RRI is composed
of a weighted percentage change for all of the RRI listed component costs including for
Disposal, Organic Waste Processing, Fuel, Labor, and Other Operating Expenses. The Franchise
Agreement was amended by Council on December 18, 2017 to add a Trash Capture Fee to the
franchise fees collected by the City as a condition of granting the exclusive franchise and to
allow that additional cost to the contractor to be recovered in the annual RRI adjustment process,
which is based on the change in the indices or costs from each calendar year. For example, the
RRI adjustment for the maximum refuse and recycle rates beginning on July 1, 2018 will be
based on the percentage change of the RRI components from December 31, 2016 to December
31, 2017. The contractor must notify the City by March 1 of the changes in the indices so the
City may review and verify the proposed changes before they become effective on July 1 each
year.
The City will to follow the Proposition 218 procedure for the establishment of the maximum
refuse and recycle rates.
DISCUSSION
Maximum refuse and recycling rates are adjusted annually based on the RRI comprised of the
weighted percentage change for the following: The Trash Capture Fee, the Disposal Fees,
Organic Waste Processing Fees and the annual change for the Consumer Price indices related to:
labor, fuel, vehicle replacement, vehicle maintenance, and all other item expenses. The
calculation of the RRI is defined by the Franchise Agreement and Amendments and has
generally ranged from 3 to 3.5% for the past 4 years. Except for the RRI adjustments, rates for
refuse and recycling services are capped until June 30, 2020. Recology may request a Detailed
Rate Review every three years beginning on November 1, 2019. If the Detailed Rate Review
fails to justify a rate change, the rates will not be increased except as allowed by the RRI method.
Cost of compliance with the Trash Capture Program as required by the State Phase II MS4
(municipal separate storm sewer systems) permit is a property -related cost of providing refuse
services for the community as documented in the aforementioned Ordinance 2636 approved by
Council on December 18, 2017. Therefore, such costs are eligible for recovery in accordance
with Proposition 218 through the refuse and recycling fee structure including increased costs
addressed by the annual refuse rate adjustment process outlined in the Franchise Agreement. The
trash capture costs were anticipated in the Franchise Assignment Agreement and the related
Franchise Agreement Amendment that incorporated these costs into the subject rates and the
annual RRI adjustment process. The addition of the Trash Capture Program costs to the RRI
process will have a small impact on overall rates. Beginning on July 1, Petaluma residents with a
20 -gallon container, currently paying $9.75 per month for the service, will see a 1.95 % increase
of 19 cents per month on their rates, related to the Trash Capture fee. Other users will see the
same percentage increase in their rates. The overall RRI analysis for 2018, including the new
trash capture costs, is projected to be 4.22%. The estimated trash capture costs are summarized in
Attachment 2 while the RRI calculation for 2018 is included as Attachment 3 Although it is not
entirely clear the City must.
The City has opted to follow the Proposition 218 public notification and protest vote process for
the establishment of the maximum rates. Public noticing of the proposed rates will be mailed 45
days or more prior to a public hearing scheduled for a protest voting procedure. All customers
are invited to review the details of the annual rate adjustment on line at the City's website and to
lodge a protest vote on or before the date of the public hearing. The Council would have the
ability to approve the proposed rates unless it receives 50% plus 1 protest votes from its
customers. A copy of the notice is included as Attachment 1. It would be anticipated that this
process would result in adoption of rates on May 7' and implementation of those rates for refuse
and recycling services billed on or after July 1, 2018. Recology would be responsible for
notifying customers of any changes.
Oil
FINANCIAL IMPACTS
Should the Council choose to follow through on setting the maximum rates as proposed, the City
would receive a new Trash Capture Fee in the amount of $178,991 during FY 18/19, as
summarized in Attachment 2, to assist with meeting Trash Capture Program expenses. In
addition, the other City franchise fees under the agreement which are calculated as a percentage
of gross revenues would increase by about $35,000 based on the projected increase in gross
revenue due to the trash capture fee.
ATTACHMENTS
1. Notice of Intent to Increase Maximum Allowable Charges for Solid Waste Services Flyer
2. Trash Capture Program Costs
3. RRI Adjustment Calculation
3
NOTICE OF INTENT to Increase Maximum Allowable Charges for Solid Waste Services
a t 7 in the City of Petaluma for 2018 and Notice of Public Hearing
Attachment 1
A4Q
The City Council of the City of Petaluma hereby gives public notice of its intent to increase the maximum allowable rates for customers
within the City of Petaluma for the collection, processing, and disposal of landfilled waste, recyclable, and organic materials. Subject to
the maximum allowable rates set by the City, the City's exclusive refuse and recycling franchisee, Recology, may charge rates to
Petaluma customers to cover the cost of operating franchise programs effectively in accordance with all State and Local Regulations. The
City sets limits to the maximum allowable charge that Recology can charge customers within the City's service area for the garbage,
recycling, and organics collection services that they provide under an exclusive franchise agreement with the City. Recology sets the
actual rates for their collection services and can charge up to the maximum allowable rate established by the City Council. The charged
rate can be can be lower than the maximum allowable rate, depending on the cost of providing collection service to the City of Petaluma;
however, it cannot be any higher. As the operating costs increase, the maximum allowable rates also increase to assure that revenues for
these services can cover the costs of operation at the standards of services defined in the franchise agreement. The process for annual
maximum rate adjustments using a refuse rate index is addressed below and defined in detail in the franchise agreement. A partial rate
schedule for the maximum allowable charges for solid waste services is shown below, or visit https://www.recoloRy comJrecology-
sonoma-marin/petaluma for more information and a complete rate schedule of all services provided by Recology within the City of
Petaluma.
The City Council will consider these maximum rate increases at a public hearing on May 7, 2018 at 7:00 p.m. at:
Petaluma City Hall Council Chamber
11 English Street
Petaluma, CA 94952
If approved, these maximum rate increases will be effective on July 11 of each year from 2018 to 2023. Any interested person may
present verbal or written input to the City Council regarding the proposed action to approve maximum rate increases. See the bottom of
the reverse side of this notice for details on how to submit a formal response or protest. If written protests are presented regarding a
majority of properties receiving City refuse and recycling services prior to the close of the public hearing, the City Council will not
increase the maximum rates, as a matter of law.
Solid Waste Collection, Processing and Disposal Monthly Maximum Service Rates
Please note that the current Collection Rates set under the City's refuse and recycling franchise, for both Residential and Commercial
customers, will remain in effect until June 30`h, 2018. Complete rate sheets and a detailed listing of the new maximum proposed monthly
base rates, including all rates for multi -family residential and commercial customers for each year and all supplemental services can be
found online at https://www,recology.com/recology-sonoina-marin/petaluma
Single -Family Residential
Table 1 shows the proposed maximum monthly rates for single-family residential customers for each year by cart size.
The base monthly rates include the following solid waste services:
• Weekly pick-up of Garbage, Recyclables, and Organic Material.
• Residential Recycling program (blue cart) for items such as clean glass, clean metal cans, clean aluminum, clean cartons, clean
paper and cardboard, small scrap metal, and clean plastics.
• Residential Organics program (green cart) for items such as meat, cheese, fruits and vegetables, and food soiled paper
products, such as pizza boxes, paper drink cups, paper plates, and paper napkins.
Table 1: Single Family Residential Collection Maximum Rates
Standard Collection Service includes Recycling and OrganicCollection
Description
20 Gallon
30-35 Gallon
60-65 Gallon
90-96 Gallon
Current Rates
$9.75
$17.26
$32.73
$53.99
(Valid throughlune 30'h, 2018)
$75.05
$256.35
$301.16
$402.95 $442.71 $605.88
Proposed Rates
$10.16
$18.00
$34.13
$56.30
(Effective J my 111, 2018)
Garbage
Commercial and Multi -Family Residential
The Table 2 shows the proposed maximum monthly rates for commercial and multi -family residential customers for 2018 by container
size for once weekly collection of landfilled, recyclable, and compostable materials. The base rates for these services are determined not
only by the type of service, but also the service frequency.
Table 2: Commercial Business &'Multi -Family Maximum Collection Rates
Standard Collection Includes Recycling Collection; the listed rates are for once -per -week collection.
Description
35 Gallon
68 Gallon
95 Gallon
1.5 CY
2 CY
3 CY 4 CY 6 CY
Current Rates
$30.28
$52.64
$75.05
$256.35
$301.16
$402.95 $442.71 $605.88
(Valid through lune 301h, 2018)
Garbage
Proposed Rates
$31.58
$54.89
$78.26
$267.32
$314.04
$420.20 $461.65 $631.81
( Effective July 1't, 2018)
Current Rates
$22.71
$39.49
$56.29
$192.26
$225.87
Organic
(Valid through lune 301h, 2018)
Waste
Proposed Rates
$23.68
$41.18
$58.71
$200.49
$235.53
(Effectiveluly 13t, 2018)
Petaluma Maximum Collection Rates
The City of Petaluma customers pay much less than customers in most of the surrounding Counties. With the exception of the 90-96
Gallon Commercial Collection Cart, Petaluma Commercial customers also pay a lower rate than the surrounding counties. Within our
home county of Sonoma, Petaluma customers, both residential and commercial pay some of the lowest rates, while receiving similar
levels of collection service.
Table 3: Petaluma Collection Rates vs Surrounding County's Averages
Commercial Collection Containers
Residential Carts
(once -per -week rates listed)
Jurisdiction
20
30-35
60-65
90-96
90-96
1.5 Cubic
2 Cubic
3 Cubic
4 Cubic
6 Cubic
Gallon
Gallon
Gallon
Gallon
Gallon
Yards
Yards
Yards
Yards
Yards
Petaluma
(Current - valid
$9.75
$17.26
$32.73
$53.99
$75.05
$256.35
$301.16
$402.95
$442.71
$605.88
through June 30'^, 2018)
Petaluma
$10.16
$1.8.00
$34.13
$56.30
$78.26
$267.32
$314.04
$420.20
$461.65
$631.81
(July V, 2018)
Sonoma County
$18.43
$25.93
$43.03
$64.47
$74.00
$257.80
$312.50
$416.21
$500.61
$696.20
Average
Marin County
$27,54
$37.07
$71.17
$106.13
$106.35
$261.34
$357.93
$486.31
$659.51
$727.99
Average
Napa County
$21,65
$30.76
$59.40
$89.37
$84.95
$329.31
$351.31
$620.78
$652.50
$955.89
Average
How Maximum Rates Are Calculated
The City annually adjusts maximum Waste, Recycling, and Organic Collection rates that the City's refuse and recycling franchisee can
charge to Residential and Commercial Businesses using a Refuse Rate Index (RRI) method. As described in the Franchise Agreement, the
RRI is the sum of percentage changes of all eight RRI indices defined in the franchise agreement. The eight operating costs categories,
each with an index, are: Labor, Fuel, Vehicle Replacement, Maintenance, Disposal Fee, Organic Processing Fee, Trash Capture Fee, and All
Other. Indices are based on US Department of Labor or other standardized inflation indices, changes in actual operating cost for a
specific category, or increases in the rates charged to Recology by the landfill and recycling companies that take the waste materials. A
trash capture fee of approximately $179,000 was included in the 2018 RRI adjustment. Each index is weighted by the categories
percentage of the overall operating cost. The calculated percent change for all eight indices are added together and the total percentage
change is used to calculate the maximum waste, recycling, and organic collection rates for the next year. It should be noted that
Recology's financial records are reviewed annually and are considered when determining potential Increases to the customer's maximum
collection service rates. In accordance with Section 53756 of the Government Code, the City will adjust the maximum refuse and
recycling rates automatically each year using the RRI method effective each July 1st for a 5 -year period starting July 1, 2018.
What Does This Mean Moving Forward?
Although it is difficult to determine the exact cost of operating, collection, disposing and recycling the City's waste in future years, it is
anticipated that rates will continue to increase with inflation. Additionally, there are newly enacted state laws that focus on recycling,
organic diversion, climate change, and greenhouse gas reduction that are increasing the cost of refuse and recycling operations. It is the
City's intention to keep Petaluma customer's rates low while ensuring Recology is receiving appropriate compensation to operate safely,
lawfully, and in an environmentally sound manner. For more information, call the Department of Public Works and Utilities at 707-778-
4303 option 9, or email us at publicworks@ci.petaluma.ca.us.
City of Petaluma
k n ? 11 English Street
a )' Petaluma, CA 94952
I8fi$
PRSRT STD
U.S. POSTAGE
PAID
PETALUMA, CA
PERMIT NO. 255
Instructions to file formal response to Public Hearing
Customers may file written protests against the proposed maximum rate increases. Pursuant to California law, protests must be
submitted in writing and must:
a) Identify the affected property or properties, such as by address, Assessor's Parcel Number, or customer account number;
b) Include the name and signature of the property owner or customers submitting the protest; and
c) Indicate opposition to the proposed waste, recycling, and organic rate increases.
Protests submitted by e-mail, facsimile or other electronic means are not considered valid written protests. The proposed maximum
rates cannot be adopted if written protests are received regarding a majority of affected parcels, with one written protest counted
per parcel. Written protests can be mailed or delivered to:
Attn: City Clerk, City of Petaluma
11 English Street
Petaluma, CA 94952
All protests must be submitted prior to the close of the Public Hearing.
Any person interested, including all solid waste and recycling collection customers of the City of Petaluma, may appear at the public
hearing and be heard on any matter related to the proposed increase in rates.
For questions or more information, please email pub9icworks(a'c's petaluma.ca us or call 707-778-4303 option 9 or via mail at 202 N.
McDowell Blvd Petaluma, CA 94952.
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Attachment 2
Attachment 3
Recology Sonoma Marin
Pelahnna Reltilse Rate Index Calculation
For Rale Year 2019 (July 1, 2018 to June 30, 2019)
Cost Categong•
2017
Operating
Expenses
Expense 9b
Weight
Index 00
Change for
2017
Weighted
Percentage
Labor
8 2.826,719
34.1340
0.05016
0.024h
Fuel
379,718
4.589$
15,7840
0.7246
Vehide Re InCetlleni
35,448
0.4396
0.9690
0.0046
Vehicle Alandenanee
223,637
2.7095
INN
0.0690
Disposal Fee
2,975,304
15.929bi
2.2595
0.8140
Organic Aialetials Processing Fee
561,451
6.Mbi
2AY3
0.1645
All Other til
1.279.652
1 1 5.45461
3.2205
0.50@0
Total Weighted Percentage Inerease Before Trash Capture Fee
8,281,988
1 100.00°0
2,2746
Plos: Trash Capture Fec
1.959b
Total Weighted Percentage Increase i i
4.224'0