CCMIN121614 - Laserfiche WebLink

Assistant City Manager Bocian presented the staff report, including a brief background on the City's current Franchise Agreement with Pleasanton Garbage Service (PGS). As allowed by the rate setting process outlined in the Agreement, in August 2014 PGS submitted a 5.47% rate request to take effect January 1, 2015. The latest increase of 7.8% which was approved in April of this year included both an expense component and a true-up of previously incurred deficits. The current adjustment request is expense based only. The City contracted with the consulting firm of Crowe Horwath to prepare a rate analysis. After reviewing the analysis prepared by both staff and Crowe Horwath, the City Council's Refuse & Recycling Subcommittee indicated that it accepted the analysis of the rate application, requested exploration of a rate option that provides some cost relief to 35-gallon cart customers, and directed staff to report to PGS that as a result of this review it could support a 3.26% rate increase. PGS accepted this analysis. Mr. Bocian provided a summary of current and projected revenues and expenses for PGS, demonstrating how the 3.26% rate is supported. He discussed the rate options requested by the subcommittee, noting that a 3.26% increase across the board would result in a monthly increase ranging from 91 cents to $1.28 depending on the service. As already noted the subcommittee directed staff to look at variable rate adjustment options with a focus on driving down the 35-gallon cart price relative to that of the 96-gallon cart. Currently, the city charges only 18.6% more for the larger cart. He explained that it has become a more common trend in many communities to increase this gap in order to incentivize residents to shift to the smaller refuse can, maximizing use of their recycling can and reducing the amount of material being taken to the landfill. While there are benefits to this approach, it does move away from an actual cost of service model, increases the potential for refuse to be placed in the recycling carts when refuse carts are full, and increases the likelihood of emigration to a smaller cart which would skew the rate base. Currently users are split approximately 50/50 between the 35 and 96-gallon carts. Under the new variable rate proposal, residential 35-gallon customers would see a rate increase of 2.5% versus that of about 5.8% for 96-gallon cart customers. He presented a slide demonstrating how both current and proposed rates compare to those of surrounding jurisdictions, noting that Pleasanton has historically been higher than average on the 35- gallon carts and lower than average on the 96-gallon carts. Mr. Bocian stated that the Council had recently directed staff to attempt to negotiate an amendment to the Franchise Agreement with PGS while simultaneously working to prepare an RFP to potentially bid the project. At this time, both the city and PGS have conceptually agreed on the major points of the amendment and plan to meet again within the next few weeks to finalize a term sheet. Assuming the Council finds the term sheet acceptable, staff will prepare and amend the Franchise Agreement for consideration by the subcommittee and then the Council. Alternatively if the Council has concerns, it could direct staff to move in the direction of the RFP process to rebid the franchise. He provided a brief overview of the key terms, which include moving away from a return on equity basis and towards a cost plus profit model based on an operating ratio for setting rates and elimination of the true-ups. As currently drafted, the Agreement entitles PGS to reimbursement if expenses outpace revenues during a given rate period. Other key terms include reexamination of how related parties are handled, a 5-year extension to the franchise term, ongoing reporting, alternative rate structures, and potential modification of revenue shares from the recycling program. He then provided an update on the city's commercial recycling program, reporting that has opted into Phase 1 of Stopwaste.org, which includes dry material from commercial customers with bins of 4 cubic yards or larger and multi-family residences with 5 or more units. This program is in addition to the current program through PGS, which both the city and PGS needs some improvements to better serve the needs of the community. The city has opted out of Phase 2 of Stopwaste.org's program which deals with organics and requires the inclusion of organic waste for all commercial accounts. Alternatively, City Council Minutes Page 14 of 18 Dec 16, 2014