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THE CITY OF 2 3 '"` CITY COUNCIL AGENDA REPORT pLEASANTON. June 19, 2018 City Manager TITLE: ADOPT A RESOLUTION TO APPROVE RATES FOR SOLID WASTE, RECYCLABLE MATERIALS, AND ORGANIC MATERIALS COLLECTION SUMMARY Implementation of a new refuse and recycling franchise agreement and rate structure is a City Council priority. On March 20, 2018, the City Council approved entering into a new Franchise Agreement with Pleasanton Garbage Service (PGS) for solid waste, recyclable materials, and organic materials collection services which will commence on July 1, 2018. The new Agreement resulted in a 13.3% reduction in overall annual costs to the City, which upon City Council approval will be applied to PGS customer rates effective July 1, 2018. Per the new franchise agreement terms, the City will set collection rates annually. In this first year of implementation, the 13.3% reduction in annual operating costs resulting from recent negotiations requires the City to apply the reduction throughout various residential and commercial rate categories. In proposing the new rates, the City's policy objectives was to achieve regional rate competitiveness with Dublin and Livermore and to incentivize residential recycling. The proposed rate resolution achieves this objective. City staff and the Council subcommittee also acknowledge that it is critical to establish a rate structure that generates sufficient revenue to operate the company on an annual basis. PGS is understandably concerned that the proposed residential rate may cause excessive customer migration from the 96 gallon weekly service to the 35 gallon weekly service. Assuming no other operating revenue increases in the coming year resulting from residential and commercial growth, transfer station enhancements, etc., it is possible that migration could result in a shortfall in operating revenue to cover the first year of annual operating expenditures. While the new franchise agreement does shift operating risk from rate payers to the company, one of the City's minimum obligations is to set rates at levels that ensure implementation of the new franchise terms. Conversely, PGS also has an obligation to operate the company efficiently to minimize future rate increases. To ensure that ratepayers and the company are "insured" in the first year of implementation of the new rates, this staff report also outlines a process for evaluating operating franchise revenues and expenditures at the 6 and 12 month time period.