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