HomeMy WebLinkAboutStaff Report 11/07/2011 4.A A .8.t II'V # Y s1 •
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DATE: November 7, 2011
TO: Honorable Mayor and City Council
FROM: John C. Brown, City Manag-
SUBJECT: Ordinance. Amending Municipal Code Chapter 8.16, Garbage and Rubbish •
Disposal by Amending Section 8.16.060, Temporary Contracts, Adding Section
8.16.065, Award of Franchises without Competitive Bidding, Amending Section
8.16.070, Award of Franchises with Competitive Bidding and Amending Section
8.16.080, Renewal of Competitively Bid Contract.
RECOMMENDATION
It is recommended that the City Council introduce and adopt the attached Ordinance Amending
Municipal Code Chapter 8.16, Garbage and Rubbish Disposal by Adding Section 8.16.065,
Award of Franchises without Competitive Bidding, and Amending Section 8.16.060, Temporary
Contracts, Section 8.16.070, Award of Franchises with Competitive Bidding and 8.16.080,
Renewal of Competitively Bid Contract.
BACKGROUND
The City currently contracts with Petaluma Refuse & Recycling, Inc., an affiliate of The Ratto
Group of Companies, Inc. ("PR&R") for exclusive solid waste hauling franchise services
covering all waste collection, hauling and disposal services in the City, except debris box
services and as otherwise permitted by Chapter 8.16 of the Municipal Code. The City Council
approved assignment of the prior competitively bid contract with Greenwaste to PR &R by
Ordinance No. 2361 N.C.S., on January 4, 2010. The current ten year contract is in its sixth
year, and expires on June 30, 2016.
In conversations with City staff, PR &R has indicated a strong interest in increasing the length of
its franchise term and would, in exchange, provide benefits to the , City that are not available
under the current agreement. This is consistent with similar actions "the Ratto Group of
Companies has taken in the recent past with several other Marin and Sonoma County
jurisdictions' which have extended the lengths of franchises in those jurisdictions for periods
from 10 to 20 years, in exchange for financial incentives.
Section 51 of'the City Charter, however, prohibits renewal of an existing franchise prior to one
year before its expiration. In. addition, Petaluma Municipal Code, Chapter 8.16, currently
requires a competitive bidding process for the award of an exclusive garbage collection and
Agend Review
City Attorney Finance Director City Manager
disposal franchise. The proposed amendments to the Municipal Code would add Section
8.16.065 and provide an alternate process for anon- competitive award of the refuse franchise for
a period of fifteen years or less. Text amendments are also suggested to Sections 8.16.060,
Temporary Contracts to clarify that provision, to Section 8.16.070, Permanent Contracts
(currently requiring competitive bidding) and 8.16.080, Renewal of Contract, to accommodate
the new alternative award process and to conform the text of the latter sections with City Charter
requirements. The maximum period for a contract awarded by competitive bid is increased from
thirteen years to fifteen years to match the new Section 8.16.065. These changes would permit
the City to terminate the existing franchise agreement and enter into a new, more beneficial,
fifteen -year franchise. This new franchise, including an entirely new franchise agreement, would
not constitute "renewal" of the existing franchise prohibited by City Charter Section 51.
DISCUSSION
PR &R has indicated interest in extending the term of their existing franchise. This would
provide them greater financial certainty for planning purposes and when making equipment
purchases and other capital investments in their business. This certainty is of value to PR &R,
and for that certainty the firm has offered financial and programmatic incentives that are of
greater benefit to the City than those which are received under the existing franchise. In part
these incentives include increasing the amount of the franchise fees paid to the City, without
passing that cost on to ratepayers. They may also include increasing the amounts paid by the
franchisee to offset its vehicle impact to City streets and could, if the City Council is interested,
include a food waste composting program for Petaluma customers. This would be a cost item,
and would require the City to direct green and food waste to the Redwood Landfill where this
program is currently operating. Benefits to the City might also include a small write down of
tipping fee costs at Redwood Landfill, which would not be passed on the Petaluma customers. In
addition, a revised contract would allow the City to strengthen franchise language related to
indemnifying the City from landfill closure and post closure costs at any landfill to which PR &R
may direct any portion of the City's waste stream, and would allow the City to exercise control
over delivery to those locations. It would also allow the City to revise and simplify rate
adjustment methodology, and to incorporate diversion requirements expressed in new federal and
State legislation.
The Council will note these benefits are discussed as possibilities, rather than as specific deal
points. This is indicative that negotiations are still ongoing with PR &R, and agreement on the
set °of'deal points thatwould be recommended to the Council has not been reached. Before these
negotiations can be completed, however, legislative obstacles to providing PR &R with a new
franchise will need to be removed.
As discussed in the background section, the City Charter precludes an extension of the existing
franchise for four more years. If the City is to receive the benefit of extending the franchise
with PR &R now, however, the old agreement will need to be terminated and a new franchise
agreement would need to be executed. The franchise agreement allows the City to terminate the
existing franchise before the term is concluded. To insure continuity of service, however, the
City would need another operator and, under the current delivery model, another franchise would
need to be granted. Pursuant to'the Municipal Code provisions cited in the Background section
of this report, new franchises are currently subject to a competitive bidding process.
The Ratto Group provides residential collection services throughout Sonoma County. As such,
it's questionable whether a competitive bidding process will net any other companies capable of
meeting the City's needs and criteria that would be willing and able to operate in the area
Further, PR &R has indicated its offer is not made in contemplation of a competitive bidding
process; its offer to provide additional benefits is contingent on treatment as a sole source for the
purposes of granting a new franchise.
If the City is to take advantage of" this opportunity, revision of the municipal code to allow the
granting of a franchise, for up to 15 years, without competitive bidding, is necessary.
Accordingly, the attached legislative changes are recommended for your consideration and
approval. At this time, the policy choice to allow for the granting of a new franchise without
competitive bidding is all that is before your Council. Should you agree to this legislative
change, the policy choices attendant to a new solid waste hauling franchise would be brought
back to you once the deal points have been negotiated.
The Municipal Code changes are required to be made by ordinance, with separate meetings for
introduction and adoption, plus a 30 day period after adoption before the changes to the Code are
effective. Accordingly, any modification to allow anon - competitive process will not be
effective until December 21, 2011 if introduced November 7 and adopted November 21. Charter
§46 requires that franchises be approved by ordinance, and Charter §51 requires that an
ordinance approving a franchise have 30 days between introduction and adoption, meaning that a
subsequent ordinance approving termination of the existing franchise and award of anew
franchise to PR &R would not be effective until approximately mid- March, 2012 at the earliest.
FINANCIAL IMPACTS
The full financial benefit of the recommended course of action will depend on the final deal
points of a new franchise agreement At a minimum, however, providing PR &R with 15 years
of financial certainty will increase, at the company's cost and not to be passed on to the
customer, franchise fees paid to the City. As a point of reference, discussions are in the five
percent range, which could result in approximately $500,000 per year for each year of the
franchise period. A full listing of all benefits, including their monetary value, if any, will, based
on Council approval of this item, be discussed with Council in the future.
ATTAC- HMENTS
1. Draft Ordinance
2 Redlined version of Kraft Ordinance, showing changes proposed.
® Items listed below are large in volume and are not attached to this report, but may be viewed in the
City Clerk's office.
1. Franchise Agreement between the City of Petaluma and Greenwaste Recovery, Inc. for Solid
Waste, Recyclable Materials and Yard Trimming Services, dated September 13, 2005, with First
Amendment effective October 28, 2009, and Second Amendment, dated March 1, 2010.
' I
EFFECTIVE DATE ORDINANCE NO N.C.S.
OF ORDINANCE
Introduced by Seconded by
ORDINANCE OF THE. CITY COUNCIL OF THE CITY OF PETALUMA AMENDING
CERTAIN PROVISIONS OF CHAPTER 8.16 OF THE PETALUMA MUNICIPAL
GARBAGE AND RUBBISH DISPOSAL AMENDING SECTION 8.16.060, TEMPORARY
CONTRACTS; ADDING SECTION 8.16.065, AWARD OF FRANCHISES WITHOUT
COMPETITIVE BIDDING; AMENDING SECTION 8.16.070, AWARD OF
FRANCHISES WITH COMPETITIVE BIDDING; AND AMENDING SECTION
8.16.080, RENEWAL OF COMPETITIVELY BID CONTRACT
WHEREAS, the City of Petaluma Charter establishes certain requirements for the award
of city franchises, in Charter sections 46, 51 and 75; and
WHEREAS, the City of Petaluma Municipal Code, Chapter 8.16, establishes procedures
for awarding garbage and rubbish disposal franchises; and
WHEREAS, pursuant to said requirements of the City Charter and Municipal Code, the
City currently contracts with Petaluma Refuse & Recycling, Inc.,, an affiliate of The Ratto Group
of Companies, Inc. ( "PR &R ") for exclusive solid waste hauling franchise services covering all
collection, hauling and disposal services in the City, except debris box services, and as otherwise
permitted in. Chapter 8.16 of the Municipal Code; and
WHEREAS, PR &R is in year six of the current ten year contract, which expires on June
30, 2016; and
WHEREAS, Section 51 of the City Charter prohibits renewal of a franchise prior to one
year before its expiration; and
WHEREAS, neither Section 51 nor other provisions of the City Charter or Chapter 8.16
prohibit termination of a franchise and issuance of a new franchise upon voluntary agreement of
the parties; and
WHEREAS, Petaluma. Municipal Code, Section 8.16.070 currently requires a
competitive bidding process for the award of a perrnanent.exclusive franchise for the removal
and disposal of garbage and rubbish, other than for non - exclusive debris box franchises pursuant
to Section 8.16.115; and
WHEREAS, PR &R has proposed a new exclusive waste franchise agreement with
revised terms that will provide financial and programmatic benefits to the City greater than the
terms of the existing exclusive franchise agreement; and
WHEREAS, PR&R's offer to negotiate the provision of additional benefits is contingent
upon the City's ability to voluntarily terminate the existing exclusive franchise and grant a new
franchise for a fifteen period without putting the franchise out to competitive bid; and
•
WHEREAS, the City Council may in its discretion modify the provisions of Chapter
8.16 to permit award of an exclusive franchise without competitive bidding.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
PETALUMA AS FOLLOWS:
Section 1. Section 8.16.060, entitled "Temporary contracts" of Chapter 8.16, "Garbage
and Rubbish Disposal," of the Petaluma Municipal Code is amended to read as follows:
8.16.060 Temporary contracts.
The city council may, by resolution, based upon findings that preservation of the public
health, safety and welfare so require, enter into a contract for the collection and disposal of
garbage and rubbish for a contract -period of not more than six months without competitive
bidding upon such terms, with respect to payments to the city therefore and other terms, as the
city council may approve. This section is intended to satisfy the requirement in Section 46 of the
city charter that award of franchises be taken by ordinance, unless the council takes action
pursuant to , a general law of the state, and to authorize by ordinance temporary contracts for
and disposal of garbage and rubbish. Preservation of the public health, safety and
welfare may be deemed to require a temporary contract pursuant to this section when
introduction of an ordinance and passage 30 or more days later, followed by elapse of a 30 day
referendum period before the ordinance takes effect, pursuant to Section 51 of the city charter,
would result in a lack of authorized garbage and rubbish collection services in the city of seven
consecutive calendar days or more. (Ord. 173 NCS §8: prior § 13.7.)
Section 2. Section 8.16.065, entitled "Award of franchises without competitive bidding"
of Chapter 8.16, "Garbage and Rubbish Disposal," of the Petaluma Municipal Code is added to
Chapter 8.16 to read as follows:
8.16.065 — Award of franchises without competitive bidding.
The city council may, by ordinance adopted in accordance with Sections 46, 51 and 75
of the city charter, and based upon findings that the benefits to the public of doing so outweigh
the potential benefits to the public of following the competitive bidding procedure in Section
8,16.070, enter into a franchise agreement without a competitive bidding process for the
exclusive right, as the official garbage and rubbish collector of the city, to collect and dispose of
garbage and rubbish within the city in accordance with the provisions of this chapter for a period
not to exceed fifteen years, subject to the rights of holders of permits granted by the city council
pursuant to Section 8.16.120 and the rights of non - exclusive debris box franchisees pursuant to
section 8.16.115.
Section 3. Section 8.16.070; entitled "Permanent contracts" of Chapter 8.16, "Garbage
and Rubbish Disposal," of the Petaluma Municipal Code is amended to read as follows:
8.16.070 Award of franchises with competitive bidding.
The city council may, by ordinance adopted in accordance with Sections 46, .51 and 75 of
the city charter, and pursuant to the following procedure, enter into !a franchise agreement for a
term not to exceed fifteen years for the removal and disposal of garbage and rubbish.
The city council shall adopt a resolution directing the city clerk to cause a notice to be
published in the official newspaper of the city by two insertions therein not less than five days
apart, the last of which shall not be less than twenty days before the time fixed for opening the
bids, inviting sealed bids for a contract for the exclusive right, as the official garbage and rubbish
collector of the city, to collect and:dispose of garbage and rubbish within the city in accordance
with the provisions of this chapter and the specifications and' requirements; set forth in the
resolution, subject to the rights of holders of permits granted by the city council, and the rights of
non - exclusive debris box franchisees pursuant to section 8.16.115. The resolution and notice to
bidders shall specify:
A. The time fixed for receiving and opening the bids;
B. Each bid shall be accompanied by a cashier's check, in the sum of fifty thousand
dollars or such other amount, or in such other form, as;may be required by the city council,
which sum shall be forfeited by the bidder to whom the contract is awarded, as liquidated and
unascertainable damages to the city, if thereafter the bidder fails or refuses to enter into a
contract within thirty days after receiving notice of the award;
C. Each bid shall specify the amount the bidder will pay the city monthly, as
consideration for the contract;
D. The council may reject any and all bids, including the highest bid, if it determines
that, because of experience, financial responsibility or reputation or some other factor, the
acceptance of a lower bid is for the best interest of the city;
E. The bidder shall agree to perform and comply with and be bound by all terms,
conditions and provisions required by this chapter and the other specifications set forth in or
referred to by the resolution and notice.
By its resolution calling for bids, the city council shall prescribe such additional terms
and conditions to be included in the contract to be awarded for the collection and disposal of
garbage and rubbish, as it shall determine, and require that the same be set forth in the notice to
bidders, or filed with the city clerk and referred to in the notice as being available for
examination by prospective bidders.
(Ord. 2140 NCS §1, 2002: Ord. 173 NCS §9: prior code § 13.8.)
Section 4. Section 8.16.080, entitled "Renewal of contract" of Chapter 8.16, "Garbage
and Rubbish Disposal," of the Petaluma Municipal Code is.amended to read as follows:
8.16.080 Renewal of competitively bid contract.
Subject to Section 46, 51 and 75 of the city charter, the city shall have the right to renew
any contract entered into pursuant to the competitive bidding procedures described in Section
8.16.070 of this chapter with the person who then holds a contract for the removal and disposal
of garbage and rubbish, for periods not to exceed ten years for each renewal; provided, however,
that the contractor shall file a written request for such renewal of contract not less than two years
prior to the expiration of the termination of the contract existing at the time of giving such notice.
The city council shall also have the right, by resolution, to waive the requirement that the notice
of request for renewal be filed with the city within the two -.year period. (Ord. 562 NCS' §1: prior
code § 13.9.)
Section 5. The City Council finds that adoption of this ordinance is not subject to the
California Environmental Quality Act ( "CEQA "), because it is not a "project" for CEQA
purposes as defined in Public Resources Code Section.21065 and Sections 15060(c)(3) and
15378 of the CEQA Guidelines (Title 14, Chapter 3 of the Code of Regulations);
adoption of this ordinance has no potential for causing a direct physical change or a reasonably
foreseeable indirect physical change in the environment.
Section 6. If any section, subsection, sentence, clause; phrase or word of this ordinance is
for any reason held to be unconstitutional, unlawful or otherwise invalid by a court of competent
1
jurisdiction or preempted by state legislation, such decision or legislation shall not affect the
validity of the remaining portions of this ordinance. The City Council of the City of Petaluma
hereby declares that it would have passed and adopted this ordinance and each and all provisions
thereof irrespective ,ofthe fact that any one or more of said provisions be declared
- unconstitutional, unlawful or otherwise invalid.
Section 7. This ordinance shall become effective thirty (30) days after the date of its
adoption by the Petaluma City Council.
Section 8. The City Clerk is hereby directed to publish or post this ordinance or a
synopsis for the period and in the manner provided by the City Charter-and any other applicable
law.
INTRODUCED and order posted/published this day of , 2011.
ADOPTED this day of 2011 . by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
David Glass, Mayor
ATTEST: APPROVED AS TO FORM:
Claire Cooper, City Clerk Eric Danly, City Attorney