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AGENDA BILL Agenda Item No. 6(A) Date: November 19, 2013 To: El Cerrito City Council From: Garth Schultz, Operations + Environmental Services Manager Yvetteh Ortiz, Interim Public Works Director/City Engineer Subject: Proposed Integrated Waste Management Fees and East Bay Sanitary Garbage & Green Waste Collection and Processing Rates Effective January 1, 2014 ACTIONS REQUESTED 1. Conduct a public hearing and upon conclusion adopt a Resolution setting Integrated Waste Management (IWM) Fees, effective January 1, 2014. 2. Conduct a public hearing and upon conclusion adopt a Resolution setting maximum allowable East Bay Sanitary (EBS) garbage and green waste collection, disposal and processing rates, and stipulating a 15% EBS Franchise Fee, effective January 1, 2014. BACKGROUND & ANALYSIS Integrated Waste Management Fee In 1990 the City of El Cerrito established IWM Fees to cover integrated waste management services. Services funded by IWM Fees include the City-run operations of the El Cerrito Recycling + Environmental Resource Center, curbside collection of recyclable materials, and other waste collection, reduction, recycling and environmental programs currently operated by the Department of Public Works, Operations + Environmental Services Division (OESD). IWM Fee revenues are collected by EBS as a component of the charges for solid waste collection, processing and disposal services, via EBS’s regular billing cycle. After collection, these revenues are transferred to the City of El Cerrito’s IWM Fund. Over the past seven years, the City Council has considered and adopted annual increases to the IWM Fees. As part of the Fiscal Year 2013-14 (FY14) Operating Budget the City Council approved a 10-year Financial Plan (Plan) for the IWM Fund that included increasing IWM Fee revenue from $1,679,318 in 2013 to $1,805,266 in calendar year 2014. Though the IWM Fund will incur greater than budgeted expenses in the amount of $75,400 for fleet maintenance services as authorized by the Council on October 15, 2013 (Resolution 2013-57), staff is currently projecting that these expenses will be offset by a combination of additional revenues and some decreased expenses. Proceeding to increase IWM Fee revenues as proposed in the FY14 Operating budget ---PAGE BREAK--- Agenda Item No. 6(A) Page 2 would result in a 7.5% increase in IWM Fee revenue, effective January 1, 2014. The proposed 2014 IWM Fees rates are included in Attachment 1. East Bay Sanitary Garbage and Green Waste Collection Rates In contrast to IWM Fees (which the City sets and EBS collects), EBS sets and charges the rates for garbage and green waste collection based upon maximum rates authorized by the City, pursuant to City of El Cerrito Municipal Code Chapter 8.12. EBS rates have been adjusted annually for many years. Most recently, EBS rates were increased effective January 1, 2011 and 2013; there was no adjustment in 2012. In late 2012, the City and EBS completed a Rate and Operations Review that culminated in Council’s adoption of a Fifth Amendment to the Franchise Agreement (Resolution 2012-86, November 20, 2012). The Amendment provided for lower rates, greater services, and an extension of the Franchise Agreement through December 31, 2025. The Review process resulted in the development of an annual adjustment to EBS’s annual revenues via a Refuse Rate Index (RRI). The RRI stipulates EBS expenses that can be funded via the rates, the sum of which total to a 2014 Revenue Requirement (for collection operations) of $3,979,331. This figure is 3.71% over the 2013 Revenue Requirement, including an indexed adjustment of 2.55% plus a 1.16% adjustment due to under-collection of rate revenues in 2013, due to persistent migration towards smaller garbage container sizes1. Proposal to Increase the EBS Franchise Fee from 12% to 15% In addition to the scheduled RRI calculated rate adjustment, staff is proposing that East Bay Sanitary’s Franchise Fee be increased from 12% to 15% of applicable rate revenues. Adjusting the Franchise Fee to this level would result in approximately $127,000 in additional General Fund revenues in FY14 (from a projected $607,000 in 2013 to $734,000 in 2014). Approving the 15% Franchise Fee would increase EBS’s 2014 Revenue Requirement by $127,000, to a total of $4,106,331. This increase to the Franchise Fee is being proposed because there is a projected deficit in the NPDES (National Pollution Discharge Elimination System) Fund, which pays for the City’s compliance activities per the Municipal Regional Stormwater Permit (MRP). MRP related activities, which are the regional implementation of the federal Clean Water Act, include trash and litter collection activities such as street sweeping and other trash mitigation efforts, totaling $125,000 to $150,000 in expenses annually. The actual FY14 starting balances were lower than budgeted for various Special Funds used for operations by Public Works and the FY14 revenues are also projected to be lower than budgeted. For the NPDES Fund in particular, this has resulted in a projected deficit of approximately $139,000 in FY14; as such, additional revenue sources need to be identified in order to continue to provide these services. 1 Per the RRI, any under (or over) collection of rate revenues will increase (or offset) the next year’s rate revenue requirement via the Balancing Account established by the Fifth Amendment. In 2013, EBS is projecting under-collection of rate revenues in the range of at least $35,000, and staff is proposing that the projected under-collection be added to the Balancing Account and recovered via the 2014 rate year. ---PAGE BREAK--- Agenda Item No. 6(A) Page 3 NPDES Fund revenues are not sufficient to meet MRP provisions primarily because of the significant expenses associated with requirements to reduce the amount of litter and trash in the City’s municipal storm drain system. A 2012 mail ballot effort initiated by the Contra Costa Clean Water Program (of which the City is a member) to raise Storm Water Utility Assessment revenues that would have covered deficits like this for all Contra Costa districts did not pass on a County-wide level. Though the funding measure failed across the County, it would have passed with a 2/3 majority had the measure been specific to El Cerrito. Staff is currently exploring the feasibility of a future Clean Water measure in El Cerrito that would create sufficient funding for compliance with current and future MRP provisions. If such a measure were successful, the EBS Franchise Fee could be reduced back to prior levels or remain to offset other General Fund activities. Until that time, staff proposes that the additional $127,000 in EBS Franchise Fee revenue be budgeted to cover street sweeping collection and disposal expenses in the NPDES Fund, effective January 1, 20142 (staff is exploring other ways of addressing the remaining $12,000 deficit in the NPDES Fund in FY14). The proposed 2014 EBS Collection Rates have been calculated to meet the $4,106,331 Revenue Requirement (adjusted to account for the 3% increase to the Franchise Fee) at current subscription levels for each garbage container size. These rates are detailed in Attachment 1. East Bay Sanitary Post-Collection Rates: Processing and Disposal Prior to 2014, processing and disposal rates – which fund solid waste transfer, transport, processing, disposal, household hazardous waste, and other post-collection services – were set by the West County Integrated Waste Management Authority (RecycleMore). RecycleMore has historically set these rates for El Cerrito because the City is party to the Integrated Resource Recovery Facility Agreement (IRRF Agreement), which is administered by RecycleMore. To cover the costs of processing and disposal services in the IRRF Agreement, the RecycleMore Board of Directors annually set IRRF Rates that EBS would charge on solid waste collection bills. As previously reported to the Council, the IRRF Agreement is set to expire on December 31, 2013. On September 17, 2013, the City Council approved the Post- Collection Agreement between the City and Republic Services for processing and disposal services (Resolution 2013-54). The nature of the new Agreement removes the need for the RecycleMore Board of Directors to set an IRRF Rate for El Cerrito. As such, staff is proposing that the El Cerrito City Council set Post-Collection Rates to cover the costs of processing and disposal of El Cerrito’s applicable waste streams. These rates will be charged by EBS to cover for the costs of all post-collection services, 2 Staff explored two other options for funding and performing these street sweeping collection and disposal expenses. The other options would have established these efforts as functions of EBS’s or the City’s solid waste collection operations. Though the parallels between these solid waste operations and the MRP’s trash mitigation efforts are apparent, staff ultimately ruled out these options due to concerns about liability and risk. ---PAGE BREAK--- Agenda Item No. 6(A) Page 4 and will otherwise be functionally identical to the previous IRRF Rates. The proposed 2014 Post-Collection Rates are detailed in Attachment 1. Total Revenue Requirement: 2013 vs. 2014 In reports to the Council in September and October 2013, staff stated that 2014 solid waste rates were projected to be between 0% and 1% higher than the 2013 solid waste rates. This statement was accurate in that the total rate revenue to be collected from El Cerrito solid waste subscribers (at the proposed 2014 rates, before taking into account the proposed increase to the Franchise Fee) is projected to be $16,000 less than was collected in 2013. When taking into account the proposed increase in the Franchise Fee, total 2014 solid waste revenues will be $111,000 over 2013 revenues, a 1.6% increase overall. As such, though ratepayers on-the-whole will pay 1.6% more in solid waste rates in 2014, individual subscription rates are proposed to increase to varying degrees due to the effects of migration. As reported to the Council a number of times in recent years, migration – which refers to the ongoing trend for solid waste subscribers to utilize smaller and smaller garbage containers, and thus pay lower rates – has an adverse impact on EBS’s (and the City’s) ability to collect the revenues necessary to meet the costs of running solid waste collection operations. It is important to note that migration trends have continued in 2013, including substantial container size decreases in the commercial sector due to successful efforts to increase commercial participation in recycling and composting programs. STRATEGIC PLAN CONSIDERATIONS Adoption of the IWM Fees, EBS Collection Rates, and Post-Collection Rates would help fulfill the following goals and strategies as detailed in the City of El Cerrito Strategic Plan (adopted March 2013): • Goal B I Achieve long-term financial sustainability - Continue to pursue opportunities for new funding. The proposed increase to the Franchise Fee generates additional General Fund revenues to fund necessary City programs. • Goal F I Implement the City’s Climate Action Plan, including reducing the amount of waste generated in El Cerrito. The proposed rates and fees will support continued reductions in the amount of El Cerrito waste sent to landfills. ENVIRONMENTAL CONSIDERATIONS The services being funded by the proposed 2014 IWM Fees, EBS Collection Rates and Post-Collection Rates will enable El Cerrito to continue to reduce its environmental impact via further decreases in the number of tons of solid waste sent to the landfill. Specifically, the proposed rates and fees will enable the OESD and EBS to continue expanding and improving the range of commercial diversion services offered via curbside collection and at the Recycling + Environmental Resource Center – including paint and other household hazardous waste (HHW) materials in FY14. ---PAGE BREAK--- Agenda Item No. 6(A) Page 5 FINANCIAL CONSIDERATIONS The proposed IWM Fees and EBS Collection and Post-Collection Rates are included in Attachment 1 (2014 Garbage, Green Waste, and Recycling Rates) and, respectively, in Attachments 2 and 3 (Resolutions). Adoption of the proposed combined IWM Fees and EBS Rates, will result in total cost increases of $0.30 for 20 gallon customers (36% of cart subscriptions), $0.40 for 35 gallon customers (59% of cart subscriptions), and $0.80 for 64 gallon customers of cart subscriptions). Bulk commercial col- lection costs will increase $25.45 for one cubic yard and $50.09 for two cubic yards per month for once weekly pickup of garbage (including recycling fees). Collection of commercial green waste (and collection of residential green waste over the 64 gallons per week included in the base residential rates) will increase by $2.50 per month for once weekly pickup (94 subscriptions total). The primary reason for the proportionately larger increase to commercial rates – as compared to residential rates – is that commercial subscriptions migrated further towards reduced container sizes than was anticipated this year. This is largely attributable to concerted outreach efforts initiated by EBS and OESD that resulted in significant increases in recycling and composting participation in the business sector; these efforts contribute to commercial sector and City compliance with the requirements of AB341 (Commercial Recycling). Though commercial subscribers will pay a proportionately larger increase in total solid waste costs in 2014 (as a result of the proposed fees and rates) they also continue to have the greatest potential for diversion and migration towards smaller container sizes. Adopting the rates as proposed both supports the recovery of rate revenue from the appropriate waste sectors3, but also provides incentives to reduce waste generation while also mitigating the effects of continued migration (due to higher rates). As noted elsewhere in this staff report, the proposed 2014 EBS Collection Rates include an increase in the EBS Franchise Fee from 12% to 15% of applicable revenues. Approval of this increase in the Franchise Fee will generate approximately $127,000 in additional General Fund Revenues annually, and is intended to cover the costs of street sweeping collection and disposal. LEGAL CONSIDERATIONS The City Attorney has reviewed proposed actions and found that legal considerations have been addressed. Notices of public hearing were publicly posted per Ordinance 84- 5 and Resolution 84-29 on November 9, 2013 and were published in the November 9, 2013 and November 14, 2013 editions of the West County Times. 3 The proposed 2014 EBS rates ensure that the commercial sector pays its fair share of post-collection costs, based on overall tonnage and the post-collection disposal fees. Additionally, on a gallon per gallon basis, commercial subscribers pay less than residential subscribers. ---PAGE BREAK--- Agenda Item No. 6(A) Reviewed by: w Scott Hanin, City Manager Attachments: 1. 20 14 Garbage, Green Waste, and Recycling Rates 2. Resolution 2013-XX (IWM Recycling fees) 3. Resolution 2013-YY (EBS Collection and Post-Collection rates) Page6 ---PAGE BREAK--- Container Size EBS Rate Disposal IWM Fee 2014 Total Cost 2013 Total Cost $ Change in Cost 20 Gallon "Mini-can" $ 17.88 $ 3.56 $ 8.85 $ 30.29 $ 29.99 0.30 $ 35 Gallon Cart 24.12 6.27 10.00 40.39 39.99 0.40 $ 64 Gallon Cart 48.55 12.62 19.62 80.79 79.99 0.80 $ Container Size EBS Rate Disposal IWM Fee 2014 Total Cost 2013 Total Cost $ Change in Cost 35 Gallon Cart $ 26.53 Included $ - 26.53 $ $ 25.22 $ 1.31 64 Gallon Cart 51.30 Included - 51.30 48.80 2.50 Weekly Collection of Additional Green Waste Containers (one 64 gallon container serviced weekly included in above rates) Cost based on size of additional green waste container(s) Integrated Waste Management (IWM) Fee: The IWM Fee covers curbside recycling collection for El Cerrito residents and businesses and supports the daily operations of the El Cerrito Recycling Center. The Fee is set and assessed on each trash container collected by East Bay Sanitary Company, based on trash container size. The City of El Cerrito 2014 Solid Waste Collection, Processing and Disposal Rates Residential Rates I Single Family Homes and Multi-family Dwellings up to 4 units Residential Solid Waste Services include weekly collection of recycling (grey), green waste (green), garbage (blue); limited free on-call collection of larger quanities from your home; free access to the regional Household Hazardous Waste (HHW) Facility, and free access to most services at the El Cerrito Recycling + Environmental Resource Center. Additional recycling carts are available at no extra cost. Weekly Collection of Recycling, Green Waste, and Garbage Cost based on garbage container size Agenda Item No. 6(A) Attachment 1 ---PAGE BREAK--- Container Size EBS Rate Disposal Rate IWM Fee 2014 Total Cost 2013 Total Cost $ Change in Cost 20 Gallon "Mini-can" $ 17.88 $ 3.56 $ 8.85 $ 30.29 $ 29.99 0.30 $ 35 Gallon Cart 24.12 6.27 10.00 40.39 39.99 0.40 64 Gallon Cart 48.55 12.62 19.62 80.79 79.99 0.80 One Cubic Yard 164.02 32.28 70.42 266.72 241.27 25.45 Two Cubic Yards 312.36 64.56 140.84 517.76 467.67 50.09 Container Size 1 2 3 4 5 6 20 Gallon "Mini-can" $ 30.29 $ 60.58 $ 90.87 $ 121.16 $ 151.45 $ 181.74 35 Gallon Cart 40.39 80.78 121.17 161.56 201.95 242.34 64 Gallon Cart 80.79 161.58 242.37 323.16 403.95 484.74 One Cubic Yard 266.72 502.41 738.10 973.79 1,209.48 1,445.17 Two Cubic Yards 517.76 989.14 1,460.52 1,931.90 2,403.28 2,874.66 Container Size 1 2 3 4 5 35 Gallon Cart 26.53 53.06 79.59 106.12 132.65 64 Gallon Cart 51.30 102.60 153.90 205.20 256.50 Container Type EBS Rate Disposal Rate IWM Fee Total Compacted Rates (per yard) 66.04 14.90 16.25 97.19 Roll-off (Debris Box) Market Rate (per load) $167.75 (per ton) $75.00 (per load) Pickups per week Integrated Waste Management (IWM) Fee: The IWM Fee covers curbside recycling collection for El Cerrito residents and businesses and supports the daily operations of the El Cerrito Recycling Center. The Fee is set and assessed on each trash container collected by East Bay Sanitary Company, based on trash container size. On-Call Bulk Collection (Debris Boxes and Compactors) Rates listed are per pickup, and are not inclusive of all charges for these services. Please call East Bay Sanitary for complete rates and fees at [PHONE REDACTED]. Varies - Call East Bay Sanitary at [PHONE REDACTED] for price quote. Multiple Weekly Collections of Garbage Cost based on garbage container size and number of pickups per week Pickups per week Green Waste Collection Cost based on green waste container size and number of pickups per week The City of El Cerrito 2014 Solid Waste Collection, Processing and Disposal Rates Commercial Rates I Businesses and Multi-family Dwellings over 4 units Commercial Solid Waste Services include collection of recycling (grey), green waste (green), garbage (blue) and most services at the El Cerrito Recycling + Environmental Resource Center. Additional recycling carts are available at no extra cost. Once Weekly Collection of Garbage Cost based on garbage container size ---PAGE BREAK--- Agenda Item No. 6(A) Attachment 2 RESOLUTION 2013–XX A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO FIXING AND SETTING THE INTEGRATED WASTE MANAGEMENT FEES EFFECTIVE JANUARY 1, 2014 WHEREAS, the City of El Cerrito has established Integrated Waste Management Fees (IWM Fees) for Integrated Waste Management Services provided by the Department of Public Works Operations + Environmental Services Division (OESD), including operation of the El Cerrito Recycling + Environmental Center, curbside collection of recyclable materials, and other waste collection, reduction, recycling and environmental programs; and WHEREAS, the City Council of the City of El Cerrito sets and charges the IWM Fees, and the Fees are collected by East Bay Sanitary Company as part of the garbage bills and transferred in whole to the City of El Cerrito’s Integrated Waste Management fund; and WHEREAS, the City has reviewed and considered financial information as a part of the regular budget process to determine whether increases to IWM Fee revenues are warranted and justified, and has also reviewed the Integrated Waste Management fund 10-year Financial Plan; and WHEREAS, the City Council intends to adopt IWM Fees to be effective January 1, 2014, thus keeping the OESD’s Integrated Waste Management functions as an on-going concern; and WHEREAS, the City Council finds that setting IWM Fees is exempt from the California Environmental Quality Act (Public Resources Code 21000 et seq., “CEQA,” and 14 Cal. Code Reg. 15000 et seq., “CEQA Guidelines”) under the general rule that CEQA applies only to projects that have the potential for causing a significant effect on the environment, and in this case it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment (CEQA Guidelines § 15061(b)(3). Additionally, setting IWM fees provides a government funding mechanism (CEQA Guidelines section 15378(b)(4) and is categorically exempt from CEQA under CEQA Guidelines section 15308 (Protection of the Environment). NOW THEREFORE BE IT RESOLVED, by the City Council of the City of El Cerrito that the rates for the IWM Fee shall be as follows, effective January 1, 2014: Garbage Container Size IWM Fee 20 Gallon Cart $8.85 35 Gallon Cart 10.00 64 Gallon Cart 19.62 One Cubic Yard 70.42 Two Cubic Yards 140.84 35 Gallon Green Waste 0.00 64 Gallon Green Waste 0.00 Compacted (per yard) 16.25 ---PAGE BREAK--- Agenda Item No. 6(A) Attachment 2 Roll-off (per load) 75.00 BE IT FURTHER RESOLVED, that this Resolution shall become effective immediately upon passage and adoption. I CERTIFY that at a regular meeting on November 19, 2013, the City Council passed this resolution by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: IN WITNESS of this action, I sign this document and affix the corporate seal of the City of El Cerrito on November XX, 2013. Cheryl Morse, City Clerk APPROVED: Gregory B. Lyman, Mayor ---PAGE BREAK--- Agenda Item No. 6(A) Attachment 3 RESOLUTION 2013 – XX A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO ESTABLISHING MAXIMUM ALLOWABLE RATES FOR THE COLLECTION OF GARBAGE AND GREEN WASTE EFFECTIVE JANUARY 1, 2014 AND SETTING THE CITY’S FRANCHISE FEE AT A RATE OF 15% WHEREAS, the City of El Cerrito and East Bay Sanitary Company (the “Company”) have entered into that certain Franchise Agreement dated September 2, 1997 (as amended, the “Franchise Agreement”); and WHEREAS, the Company has submitted a request for rate increases to be effective January 1, 2014, and that such increases were calculated pursuant to the methodology established in the Fifth Amendment to the Franchise Agreement, dated December 14, 2012; and WHEREAS, the rate adjustments submitted to the City have been reviewed for accuracy, consistency with the adjustment methodology, and reasonableness by the City’s Operations and Environmental Services Manager and R3 Consulting Group, Inc.; and WHEREAS, the City and the Company agree that the City’s Franchise Fee shall be 15% of the gross revenue derived by the Company from the collection and disposal of garbage and green waste collected within the City, in order to generate revenues to cover the costs of street sweeping collection and disposal in the City. WHEREAS, the City Council finds that setting IWM Fees is exempt from the California Environmental Quality Act (Public Resources Code 21000 et seq., “CEQA,” and 14 Cal. Code Reg. 15000 et seq., “CEQA Guidelines”) under the general rule that CEQA applies only to projects that have the potential for causing a significant effect on the environment, and in this case it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment (CEQA Guidelines § 15061(b)(3). Additionally, setting IWM fees provides a government funding mechanism (CEQA Guidelines section 15378(b)(4) and is categorically exempt from CEQA under CEQA Guidelines section 15308 (Protection of the Environment). NOW THEREFORE, BE IT RESOLVED by the City Council of the City of El Cerrito that the maximum rates that East Bay Sanitary Company may charge, effective January 1, 2014, are as follows: Garbage Container Size EBS Collection Rate Post-Collection Rate 20 Gallon Cart 17.88 3.56 35 Gallon Cart 24.12 6.27 64 Gallon Cart 48.55 12.62 One Cubic Yard 164.02 32.28 Two Cubic Yards 312.36 64.56 35 Gallon Green Waste 26.53 0 ---PAGE BREAK--- Agenda Item No. 6(A) Attachment 3 64 Gallon Green Waste 51.30 0 Compacted Rates (per yard) 66.04 14.90 Roll-off (per ton) NA – Market Rate 167.75 BE IT FURTHER RESOLVED, that the City’s Franchise Fee shall be 15% of the gross revenue derived by the Company from the collection and disposal of garbage and green waste collected within the City, in order to generate revenues to cover the costs of street sweeping collection and disposal in the City. BE IT FURTHER RESOLVED, that this Resolution shall become effective immediately upon passage and adoption. I CERTIFY that at a regular meeting on November 19, 2013, the City Council passed this resolution by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSTAIN: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: IN WITNESS of this action, I sign this document and affix the corporate seal of the City of El Cerrito on November XX, 2013. Cheryl Morse, City Clerk APPROVED: Gregory B. Lyman, Mayor