Document elcerrito_gov_doc_e48f130073

AGENDA BILL Agenda Item No. 7(A) Date: November 20, 2012 To: El Cerrito City Council From: Garth Schultz, Environmental Analyst Melanie Mintz, Environmental Services Division Manager Karen Pinkos, Assistant City Manager Scott Hanin, City Manager Subject: Solid Waste Rate and Operations Review and Extension of the Garbage and Green Waste Collection Franchise Agreement with East Bay Sanitary Company, Inc. ACTION REQUESTED Receive a presentation and report from Staff regarding the 2011/2012 Solid Waste Rate and Operations Review and adopt a resolution approving the Fifth Amendment to the Franchise Agreement between the City of El Cerrito and East Bay Sanitary Company, Inc. extending the Franchise Agreement by seven years, through December 31, 2025. BACKGROUND East Bay Sanitary Company is a privately held family business that has been the City’s franchised hauler of garbage and green waste since 1941. The current Franchise Agreement with the Company was entered into in 1997, with an original termination date of December 31, 2009. In 2009, per the Company’s right in the Agreement to request an extension, the Agreement was extended by the City Council (Resolution 2009-82) to December 31, 2017. In July 2011, the Agreement was extended by one year, terminating December 31, 2018, in order to facilitate the City directed implementation of the weekly green waste collection program and the financing of new collection trucks (Resolution 2011-53). Per the terms of the Second Amendment to the Franchise Agreement, the Company generally requests annual index-based adjustments to the garbage and green waste collection rates. In 2010, the Company requested that the City Council consider an additional rate adjustment to address the fact that a large proportion of El Cerrito’s residents had “migrated” to smaller garbage container sizes due largely to increased recycling. This migration to smaller container sizes has had an adverse impact on EBS’s revenues because collection rates are set by an incentive-based “pay-as-you-throw” model wherein collection service on larger garbage containers cost more than collection service for smaller garbage containers. This incentive-based model was not related to the actual costs-of-service and resulted, industry-wide, in a revenue problem. The Council granted an additional increase – above the normal index-based adjustment – to the Company’s collection rates in order to mitigate the financial effects that migration has on the Company’s business, effective January 2011 (Resolution 2010-80). At that ---PAGE BREAK--- Agenda Item No. 7(A) Page 2 time, the City and Company agreed to do further analysis of the migration issue while also taking the opportunity to ensure that the Company’s expenses remain within agreed upon limits, address the company’s pension liability, and evaluate solid waste collection operations in order to identify opportunities for increased efficiency. In July 2011, the City Council adopted a resolution authorizing the City Manager to execute a contract with R3 Consulting Group, Inc. (R3) to perform a detailed review of the Company’s rates and operations (Resolution 2011-52). The scope of work also included a review of the City’s recycling collection operations and an analysis of the City’s readiness to implement mandatory commercial recycling required by the State. On May 30, 2012, as an outcome of the detailed review process, and to fulfill the City’s goal to provide cost-effective rates and operational efficiency, the Company proposed extending the Franchise Agreement through December 31, 2025. DISCUSSION Rate and Operations Review R3 conducted the rate and operations review between July and December 2011. The objectives of the review, as specified in the City’s RFP for the project, were to: • Determine revised rates for garbage and green waste collection services, effective January 1, 2012 • Establish a revised rate setting methodology for future rate adjustments to account for and mitigate the effects of future container migration • Review and identify potential operational efficiencies for the City’s franchised garbage and green waste hauler • Evaluate potential revisions to the indexed rate adjustment methodology to address ongoing account migration • Evaluate potential changes to services and service levels • Assess the efficiency of the Company’s current operations and review proposed equipment purchases and operational changes • Assess opportunities for increased efficiencies The review involved detailed examination of the Company’s expenses, operations, accounts and services. All of the objectives of the review were met, and are detailed in the Final Report (included as Attachment 2a). To summarize the highlights, R3 reported that: • The Company has made incremental changes to maximize operational efficiencies in recent years such that there does not appear to be any significant additional opportunities for increased efficiency in collection operations • The Company operates its routes, customer service, and billing operations safely, effectively and efficiently • Some of the Company’s expenses should be reduced and/or disallowed from the rate base • There is potential for greater customer services duties related to recycling ---PAGE BREAK--- Agenda Item No. 7(A) Page 3 • There is potential for the Company to incorporate routine maintenance of the City’s recycling collection fleet into its own maintenance operations Based on a completed draft review in December 2011, R3 recommended that the Company’s collection rates be increased 0.81% from 2011 to 2012. However, due to the fact that the entire review process included allowing the Company to have an opportunity to respond to R3’s recommendation, no adjustments to the Company’s collection rates were considered by the City for 2012 (Agenda Item No. 6, December 19, 2011). As a result, all residential solid waste rates have remained unchanged since January 1, 20111. In May 2012, the Company provided its response to R3’s recommendations, which included a proposal to extend the Franchise Agreement. Due to the potential for greater short and long-term cost savings, increased services and more rate stability, staff met with the Company throughout 2012 to determine if an extension agreement would leverage and result in adequate benefits to the City. Negotiated Extension Proposal Attachment 2 is the proposed Fifth Amendment to the Franchise Agreement that details all of the proposed extension terms. These terms represent the culmination of several months of good faith negotiations by the City and the Company. If approved by the City Council, the Fifth Amendment to the Franchise Agreement will serve to establish a greater level of partnership between the Company and the City, and by taking away the revenue losses associated with migration to smaller cans, the partnership includes the Company being an active partner in encouraging greater participation in recycling, green waste and other diversion programs. Amending the agreement per these terms reinforces El Cerrito’s progress towards providing cutting edge solid waste services at a competitive price. In summary, the extension terms that result in these benefits include: 1. The Company increasing its operating ratio from 89% to 90.5% (a decrease in the Company’s profit margin); 2. The Company reducing the rate cost of officer wages, and freezing those wages in 2013; 3. The Company lengthening the amortization time of all trucks and equipment; 4. The Company providing regular preventative maintenance of the City’s recycling collection fleet using existing staffing, which will save thousands per year in City maintenance costs and provide for better fleet performance and safety’ 5. The Company agreeing to designate a Commercial Account Representative to conduct in-depth site visits focused on recycling and diversion of waste sent to landfills for all commercial subscribers; 1 Solid waste rate components include: the Company’s collection rates for garbage and green waste collection; the RecycleMore rates for processing of green waste, garbage and hazardous waste, and the City’s rates for collection and processing of recyclables (both curbside collection and the Recycling + Environmental Resource Center). The total of these three rate components have remained the same since January 1, 2011. ---PAGE BREAK--- Agenda Item No. 7(A) Page 4 6. The Company conducting an annual customer service and recycling training for its employees, with the objective of providing consistent high-level customer service, as well as a tri-annual Customer Satisfaction Assessment and Survey; 7. The Company increasing its customer service hours via phone, email, and walk-in to its El Cerrito offices and running a website with online bill payment by checking accounts; 8. The Company providing other new services, including container cleaning and labeling, brochure distribution, electronic waste collection, and increased on-call services; 9. The Company agreeing to a performance review with respect to all existing and new services, indentifying and remedying any deficiencies, by December 31, 2014; 10. The City and Company establishing a balancing account that will mitigate the effects of migration and provide for greater rate stability (by including over- or under-collection of revenues in the rates); 11. The City and Company agree to annual rate adjustments per a Refuse Rate Index (Attachment 2c) that adjusts costs of depreciation and interest to actual annual figures (potentially reducing future rate increases); 12. The City designating rate share coverage (78.5%) of the Company’s unfunded pension liability; 13. The City removing language from the Franchise Agreement that limits the Company’s ability to sell2 14. The City extending the Franchise Agreement through December 31, 2025; and 15. The City increasing the Company’s annual Franchise Fee from 10% to 12%, effective January 1, 2013. Extension in 2012 vs. Bidding in 2018 In negotiating the terms of the proposed extension agreement, staff and R3 Consulting considered whether the near-term benefits of extending the agreement outweigh the potential benefits of putting the garbage and green waste collection services out to bid in 2018. One of the main factors considered was the cost of El Cerrito’s solid waste services compared to the costs seen in neighboring East Bay communities. Figure 1 (Comparison of 2012 East Bay Solid Waste Collection rates) illustrates that El Cerrito’s solid waste rates – when adjusted to account for the incomparable services offered by the El 2 Section 5 of the Agreement includes several references to the Agreement term reverting to two years upon transfer or sale. The Company has expressed that this limitation will limit its ability to sell the Company if it desires (and the City approves); staff agrees with the Company’s assessment, and recommends deletion of these references. ---PAGE BREAK--- Agenda Item No. 7(A) Page 5 Cerrito Recycling + Environmental Resource Center3 – are competitive with the rates and services offered elsewhere in the East Bay. For example, El Cerrito’s adjusted collection rate for 20 gallon garbage customers (30% of El Cerrito residents) is more than $4.00 per month less than the average collection rate in cities where green waste and recycling is collected weekly; the 65% of El Cerrito residents using a 35 gallon garbage container pay almost $1.00 per month more for equivalent services in other cities. City Service Providers Services Included / Notes 20 gal 32/35 gal 64 gal 96 gal El Cerrito (all services included) East Bay Sanitary Company, City of El Cerrito Weekly garbage, green waste and recycling. Local full service recycling center. Local and regional HHW programs included. $ 27.09 $ 38.10 $ 74.57 NA Albany Waste Management Weekly garbage, green waste and recycling. Regional HHW program included. $ 33.97 $ 38.04 $ 65.75 $ 93.45 El Cerrito Adjusted (less 1/2 of IWM fee for cost of Recycling Center) East Bay Sanitary Company, City of El Cerrito Weekly garbage, green waste and recycling. Regional HHW program included. $ 22.82 $ 33.78 $ 65.93 NA $ 26.63 $ 32.82 $ 60.93 $ 89.27 Alameda / San Leandro Alameda County Industries Weekly garbage, green waste and recycling. Regional HHW program included. $ 23.80 $ 33.02 $ 54.25 $ 75.78 $ 26.37 $ 32.27 $ 57.96 $ 85.20 Orinda Allied Waste Weekly garbage, green waste and recycling. Regional HHW program included. $ 27.41 $ 31.60 $ 61.28 $ 91.67 West Contra Costa County (Unincorporated) Richmond Sanitary Service Weekly garbage, bi-weekly green waste and recycling. Regional HHW program limited. $ 25.50 $ 31.01 $ 59.42 $ 88.50 West Contra Costa County Average (Incoporated) Richmond Sanitary Service Weekly garbage, bi-weekly green waste and recycling. Regional HHW program included. Average of Richmond, San Pablo, Pinole, Hercules. $ 26.23 $ 31.34 $ 56.28 $ 81.95 Berkeley City of Berkeley Weekly garbage, green waste and recycling. Local recycling center. Regional HHW program included. *Rates subsidized by Transfer Station revenues. $ 18.09 $ 28.93 $ 57.83 $ 86.72 Oakland Waste Management / California Waste Solutions Weekly garbage, green waste and recycling. Regional HHW program included. $ 21.34 $ 28.63 $ 62.43 $ 96.19 Figure 1 - Comparison of 2012 East Bay Solid Waste Rates Average of Weekly Services (Albany, Alameda / San Leandro, Oakland, Orinda) Average (without El Cerrito and Berkeley) Shown in descending order by 32/35 gallon rate Even when collection rates in cities that do not have weekly recycling and green waste (e.g. the rest of West County) are included, El Cerrito’s adjusted rates for 20 gallon customers are $2.77 less than the regional average, while the 35 gallon rate is $2.55 more. However, it is important to note that El Cerrito’s residential collection rates went up by $1.65 per month in January 2011 to implement weekly collection of green waste; if the cities with bi-weekly collection of 3 In Figure 1, the rates used for “El Cerrito Adjusted” are equal to the actual collection rates less one half of the Integrated Waste management (IWM) Fee on all solid waste subscriptions. The IWM fee covers curbside collection of recyclables (½of the Fee) and the operations of the Recycling + Environmental Resource Center (the other ½ of the Fee). ½ of the Fee has been subtracted for the purposes of demonstrating an equivalent service comparison. ---PAGE BREAK--- Agenda Item No. 7(A) Page 6 recycling and green waste were to increase collection frequency for recycling and green waste, it can be assumed that collection rates in these cities would go up by at least $1.65 per month, bringing the regional averages up by about $1.00 each. The best overall comparative level of service locally is provided to Albany by Waste Management (the largest solid waste company in North America), which has one of the highest landfill diversion levels in the state, weekly collection services for all waste streams, and a variety of additional curbside services for hard-to-recycle materials. While not a complete apples-to-apples comparison (because Albany doesn’t have a recycling center) the level of service provided to solid waste subscribers in Albany is relatively on par with those provided in El Cerrito. To provide for increases in service levels, Albany’s solid waste collection rates have increased in recent years and now, on average, are greater than El Cerrito’s collection rates for residential subscribers. Overall, the data indicates that El Cerrito’s costs for solid waste services, including those provided by the East Bay Sanitary Company, are in-line with what should be expected in our region given the high level of services available. In regards to the franchise extension, several other cities in our region have also opted to extend their current franchise agreements with their solid waste haulers. This includes Albany, Clayton, Martinez and Pittsburg. Reasons vary, but among the factors that are considered are the costs of conducting a bidding process and uncertainties and risks inherent in making a switch to another provider. If the City Council decides to extend the franchise agreement to December 31, 2025, El Cerrito’s franchise agreement will be scheduled to co-terminate with the franchise agreements currently in place in Richmond, San Pablo, Pinole and Hercules. Staff believes that, because of the much greater service base that would be involved, regional level competitive bidding for solid waste collection services would be much more likely to yield positive cost and service benefits for El Cerrito than would be possible if El Cerrito were to seek bids on its own at an earlier date. ENVIRONMENTAL CONSIDERATIONS Extending the Franchise Agreement with East Bay Sanitary Company is an important tactic in reducing the amount of solid waste sent to landfills by El Cerrito’s residents and businesses. As the Agreement stands now, the Company has a disincentive to promote solid waste diversion, such as increased recycling and green waste participation, because these activities directly impact the Company’s bottom line. The terms of this extension agreement, including provision of a commercial account representative, recycling customer services training and increased no- cost on-call collection services are all ways in which the Company is committing to partner with the City to reduce landfill waste and decrease the community’s environmental impact. Additionally, the terms of the agreement include establishment of a revenue balancing account that eliminates the Company’s disincentive to proactively encourage participation in recycling and green waste programs. Ultimately, having the Company as a waste diversion partner will better – and more cost-effectively – enable the City to meet greater waste diversion and GHG- emissions reduction goals, as proposed in the soon-to-be released Climate Action Plan. FINANCIAL CONSIDERATIONS Extending the Franchise Agreement will have positive financial impacts for El Cerrito’s residents and businesses. First, extending the Agreement keeps the Company’s 2013 (and future) collection rates about 2% lower than they would have been without the extension, based ---PAGE BREAK--- ---PAGE BREAK--- Agenda Item No. 7(A) Page 8 2. Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc., with Attachments a. Rate and Operations Review conducted by R3 Consulting Group, Inc. b. 2013 Base Year Rate Model c. Refuse Rate Index ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 1 RESOLUTION 2012–XX A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF EL CERRITO EXTENDING THE GARBAGE AND GREEN WASTE COLLECTION FRANCHISE AGREEMENT WITH EAST BAY SANITARY COMPANY, INC. BY SEVEN YEARS VIA A FIFTH AMENDMENT TO THE FRANCHISE AGREEMENT WHEREAS, the City of El Cerrito (City) and East Bay Sanitary Company, Inc. (EBS) have entered into that certain Franchise Agreement, dated September 2, 1997 and amended most recently on July 21, 2011; and WHEREAS, pursuant to Section 3.A of the Franchise Agreement (via the Fourth Amendment) the exclusive franchise granted to EBS shall terminate on December 31, 2018; and WHEREAS, on July 18, 2011 the City Council authorized a detailed review of EBS, with the City and EBS agreeing to review the cost-effectiveness of EBS’s rates and the efficiency of its operations; and WHEREAS, no increase to EBS collection rates was adopted for the 2012 calendar year pending completion of the review process; and WHEREAS, on May 30, 2012, as an outcome of the detailed review process and in response to the City’s requests for more cost-effective rates, improved services and improved operational efficiencies, the Company proposed an extension of the Franchise Agreement through December 31, 2025; and WHEREAS, EBS and the City have met in good faith to negotiate the terms of an extension agreement that provides for cost-effective and stable rates, efficient operations, and more services for El Cerrito solid waste subscribers; and WHEREAS, City staff and R3 Consulting Group, Inc (R3), the City selected contractor that performed the detailed review, have reviewed the terms of the proposed extension, including value to the City and impacts on total solid waste collection rates and in comparison to other communities accounting for all services being provided in El Cerrito; and WHEREAS, extending the Franchise Agreement to December 31, 2025 means that the City’s agreement with EBS will co-terminate with the franchise agreements currently held by other haulers with other west Contra Costa County cities, which introduces the potential for greater economies of scale via joint procurement than would otherwise be possible if El Cerrito were to bid its franchised solid waste services on its own. NOW THEREFORE BE IT RESOLVED, by the City Council of the City of El Cerrito, that it hereby approves the Fifth Amendment to the Franchise Agreement between the City of El Cerrito and East Bay Sanitary Company, Inc. (attached hereto as Exhibit 1) which extends the Agreement by seven years, through December 31, 2025, and ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 1 that the City’s franchise fee shall be 12% of the gross revenue derived by EBS from the collection and disposal of garbage and green waste within 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 20, 2012 the City Council of the City of El Cerrito 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, 2012. Cheryl Morse, City Clerk APPROVED: William C. Jones III, Mayor ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 1 of 12 FIFTH AMENDMENT TO FRANCHISE AGREEMENT BETWEEN CITY OF EL CERRITO AND EAST BAY SANITARY COMPANY, INC. This Amendment to the Franchise Agreement is entered into as of the X day of November, 2012 by and between the CITY OF EL CERRITO, a municipal corporation (City) and EAST BAY SANITARY COMPANY, INC. a California corporation (Company). Preamble WHEREAS, City and Company have entered into that certain Franchise Agreement dated September 2, 1997 (the “Franchise Agreement”); and WHEREAS, pursuant to Section 3.A of the Franchise Agreement (via the Fourth Amendment) the exclusive franchise granted to the Company shall terminate on December 31, 2018; and WHEREAS, the City and Company have been engaged in a Rate and Operations Review since 2011; and WHEREAS, as a result of the Rate and Operations Review there was no adjustment made to the Company’s collection rates between 2011 and 2012; and WHEREAS, the Company agrees to forego any rate revenue adjustment in 2012 and any associated 2012 revenues; and WHEREAS, as a further result of the Rate and Operations Review the Company has requested to extend the Franchise Agreement through December 31, 2025 and has proposed several service changes that the City believes will result in superior services for El Cerrito rate payers; and WHEREAS, the City and Company have met in good faith to discuss the terms of extending the Franchise Agreement; and WHEREAS, in consideration of an extension of the Franchise Agreement, the Company agrees to increase its operating ratio from 89% to 90.5%; and WHEREAS, in consideration of an extension, and based on the results of the Rate and Operations Review (Attachment the City and Company agree to the 2013 rate year application (Attachment 2) negotiated by the Company and the City; and WHEREAS, the 2013 rate year application will serve as the Base Year Rate Model and for future rate adjustments; and WHEREAS, in consideration of an extension of the Franchise Agreement, the City agrees that the rate base will cover 78.5 percent of the Company’s unfunded pension liability and establish a ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 2 of 12 balancing account to capture the over/under collection of revenues per the Collection Revenue Requirement; and WHEREAS, by agreeing to this extension, the Company is committing to working as a willing partner with the City to continually reduce the amount of waste sent to landfills, maximize the amount of materials that can be reduced, reused, recycled, composted, or otherwise diverted; THEREFORE, IN CONSIDERATION OF THE COVENANTS AND CONDITIONS CONTAINED HEREIN, THE CITY AND COMPANY DO HEREBY AGREE AS FOLLOWS: 1. The foregoing recitals are hereby incorporated into this Agreement. 2. Section 3 (Franchise Term and Extensions) of the Franchise Agreement is hereby replaced in its entirety as follows: A. The exclusive franchise granted to the Company under the terms and conditions of this Agreement shall be extended seven years upon execution of this Agreement and shall terminate on December 31, 2025. B. Prior to December 31, 2014, the City shall review the Company’s performance with respect to all existing services and all new services established by this Amendment. Upon completion, the City will draft a written report of performance review and transmit that written report to the Company and the City Council. This report will detail any deficiencies in Company performance per the terms of the amended Franchise Agreement. If any aspects of the Company’s performance are found to be in default of its obligations under the Agreement, then the City shall take action as per Section 20 of the Franchise Agreement. E. If at any time prior to the last two years of this Agreement the Company notifies the City of its desire to pursue an extension beyond the expiration of this agreement, the Company and the City will meet in good faith to discuss the possibility of extending this Agreement. Nothing in this Section shall obligate the City or the Company to extending this Agreement. 3. Section 5 (Transfer or Assignment of Franchise) is hereby amended as follows: A. [This entire provision to be deleted.] C. [This entire provision to be deleted.] F. [This entire provision to be deleted.] G. [This entire provision to be replaced as follows:] Any change in control of the Company without prior City approval, or any attempt to assign or subcontract this Agreement or any part hereof, or any obligation hereunder, without City consent, shall constitute a material breach of this Agreement. Such a breach shall confer on ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 3 of 12 the City the right to terminate this Agreement in its entirety without the utilization of the procedures set forth in Section 20 of this Agreement. “Change in control” shall mean any sale, transfer, or acquisition of the Company resulting in the effective management of the Company being in the control of persons or entities who are not shareholders on the date of the execution of this Agreement. I [This entire provision to be deleted.] 4. Section 11 (Company Provided Services) is hereby amended to include: I. Maintenance of the City’s Recycling Collection Fleet: Starting December 1, 2012, the Company shall perform regular preventative maintenance service of the City’s recycling collection fleet at the Company’s maintenance facility, such service to include: 1. Brake Checks and BIT Inspections (LD 1) a. Inspection and adjustment of all brake slack adjusters on front and rear axles for all collection vehicles b. Check air compressor system, brake pads, and all other components of braking system and repair as needed c. Full BIT inspection of all collection vehicles d. Provide complete report of all brake checks, adjustments, and BIT inspections to the City 2. Quarterly Preventative Maintenance Services (LD 2) a. Complete vehicle inspection b. Oil change and oil crankcase filter replacement c. Fuel filter replacement d. Coolant filter replacement e. Hydraulic filter replacement f. Air filter replacement (as needed) g. Provide complete report of all services to the City The Company agrees to provide the above services with existing staffing levels at no charge to the City, and schedule all other required maintenance, to the extent feasible, so that additional maintenance labor costs overtime) are not incurred and included in the rate base unless formally authorized in writing by the City. The Company will charge the City for parts at cost. In the event that the above maintenance services directly result in overtime costs, despite the City’s and Company’s best efforts to schedule those services such that overtime costs are not incurred, those costs will be charged to the City on a per over-time labor hour basis. The Company shall notify the City ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 4 of 12 via phone and email within 48 hours of the overtime costs being incurred. The Company shall invoice the City for the overtime charges on a basis and shall include details about the days, times, and services which were the cause of the overtime charges. Payments to the Company for these services shall not be considered rate revenue. 3. Full Service Vehicle Maintenance Program The Company and City agree to meet in good faith to discuss and develop a proposal for a full service vehicle maintenance program for the City’s recycling collection fleet (and/or other City fleets) that will provide for greater safety, efficiency, and cost effectiveness with respect to the maintenance and performance of the City’s recycling collection fleet (and/or other City fleets). The proposal shall include the services listed below as well as other services necessary to the establishment of a full service program and the total annual labor cost of the proposed program, as well as estimates for other non-labor costs. Upon Company and City agreement regarding the scope, services, and cost of the program, the City will consider how best to initiate the program if it so desires. a. Lubrication and greasing of all zerk points on body and chassis b. Check PTO pump mechanism and repair/recommend as needed c. Check coolant system/radiator and repair/recommend as needed d. Check welds and repair/recommend as needed e. Check and change oil and filters of automatic transmission when required or need and recommend interval for this service f. Check exhaust system, DPF filter and related components and repair as needed g. consultation, recommendation, and repair of mechanical breakdowns, at a minimum of one repair of a breakdown as requested, including but not limited to the following: i. Damaged components in engine compartment ii. Damaged components, missing parts in chassis iii. Damaged components in hydraulic system, including hoses, pumps, switches, leaks and oil changes, packer blades, operating handles, wear-and-tear iv. Troubleshoot electrical issues and codes from on-board computers, and repair/recommend as needed v. On-road emergencies as requested vi. Provide complete report of all repairs to the City ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 5 of 12 J. Commercial Subscription Profile By January 31st of 2013 and annually thereafter the Company shall provide the City with a digital commercial customer subscription profile that lists all commercial accounts and the weekly solid waste, recycling (City to provide), green waste and food waste service levels by account. The commercial customer subscription profile will also document: a. All annual in-depth diversion site visits the Company proposes to conduct during the current calendar year (see Item below) and, b. All in-depth diversion visits conducted during the prior calendar year, and all prior years by commercial customer along with the date so as to provide a complete record of all in-depth diversion visits conducted during the term of the Agreement. Prior to January 31, 2013, the City and Company will meet to establish the criteria for determining the proposed list of annual site visits and to develop a plan for tracking and implementing the annual in-depth diversion site visits. K. Commercial Account Representative and Annual In-Depth Diversion Site Visits (LDs 3 & 9) The Company shall designate a commercial account representative to perform in- depth diversion site visits with all El Cerrito food service businesses and all commercial accounts including all debris box customers. The Company shall work with the City to create, maintain and annually update the list of businesses and commercial accounts that shall be visited (see Commercial Subscription Profile above) by the Company and the Company shall enlist the City and/or a consultant to establish protocols to make these site visits as effective as possible at decreasing the amount of waste sent to landfills. The commercial account representative shall conduct no less than 30 in-depth diversion site visits per calendar quarter. Furthermore, the Company shall provide the City with digital quarterly in-depth diversion site visit reports that include: a. The total number of site visits performed each quarter; b. The name and address of each customer visited, including customers who the company aggressively attempted to contact, without success; c. Full contact information for each business including an on-site contact; d. The subscription levels (garbage and green waste) for each customer; e. The action items/changes resulting from the site visit; and f. Other information to establish progress towards diversion as requested by the City. ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 6 of 12 Reports shall be due no later than the end of the month immediately following the end of each calendar quarter April 30th; July 31st, October 31st and January 31st). The City reserves the right to require reasonable changes to the content and/or format of this and any and all other reports that the Company is required to provide to the City. The City also reserves the right to require the Company to provide any other information that it deems necessary for effectively administering its franchise with the Company in a complete and timely manner, with the understanding that determination of additional information does not impose addition costs on the Company. L. Annual Customer Service Training The Company shall establish annual customer service and recycling training for all Company personnel with the objective of providing consistent high-level customer service. The Company shall provide a copy of the proposed training materials annually, no later than January 31st of each year along with documentation of all staff who received the prior year’s training. M. Tri-Annual Customer Satisfaction Assessment and Survey (LD 4) The Company shall establish a tri-annual customer satisfaction assessment and survey, with the first tri-annual survey completed by December 31, 2013. The customer satisfaction assessment will include an improvement plan, and the Company shall report the results of the assessment and the improvement plan to the City once finalized. The Company shall submit a draft of the survey to the City for approval by April 1st of each year that the survey is to be conducted. N. Brochure Distribution The Company shall collaborate with the City in the development of solid waste brochures for residential and commercial customers, and split the cost (50/50) to design and print all solid waste brochures. The Company also agrees to attach a full service brochure to each residential cart in the City, at the City’s discretion, beginning at the earliest in Calendar year 2013 and at a maximum of every three years thereafter, at no additional cost to the rate base. O. Increased Company Customer Service and Office Hours The Company shall increase customer service hours at the Company’s offices from 9 a.m. to 3 p.m. to 7:30 a.m. to 3:30 p.m. during which customer service representatives will be available via walk-in after 8:00 a.m., phone after 7:30 a.m., and email after 7:30 a.m. ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 7 of 12 P. Company Website, Online and Email Bill Payment (LD 5) The Company shall establish a website with standard customer service functions including direct emailing to Company customer service representatives, , and online bill payment via checking accounts. The Company’s website shall be fully functioning no later than January 31, 2013. Q. Cart and Bin Cleaning as Requested The Company shall provide for cleaning of Company collection containers, including carts at a rate of $25 per cart, bins at a rate of $50 per bin, and roll-off containers at a rate of $100, as requested by residents, businesses, or the City. There shall be no cost to the City for the cleaning of containers in use at City owned or operated facilities. Revenue generated by cart and bin cleaning shall be considered rate revenue and contribute toward the Company’s revenue requirement, but not subject to the franchise fee. R. Cart and Bin Labeling / Lid Replacement (LD 6) At the City’s request, the Company shall ensure that all company containers are labeled with durable full color labels and / or lid imprints that illustrate and spell out the range of items that are and are not acceptable within all containers (including garbage, green waste, debris boxes, and other Company provided services). If the City directs the Company to label all containers per this provision, the Company will be allowed to recover the cost of producing the labels in the collection rates. The Company will complete installation of the labels and/or lids without cost to the rate base, and shall complete installation within one year of the City’s decision to do so. Prior to procuring any lids or labels the Company shall seek and be granted City approval for the design and content of the lids and labels. Labels / lids shall be replaced as needed to ensure that the appropriate use of each container is readily understandable to the Company’s subscribers. S. E-Waste Collection The Company shall aggressively promote and provide e-waste collection to residents twice per year at no additional cost to the City or its ratepayers. Materials to be collected shall include, but not necessarily be limited to all electronic items (and peripherals) accepted at the City’s Recycling and Environmental Resource Center. These materials will be hauled to the Recycling Center for transfer to the City’s contracted e-waste handler. T. Increased On-Call Annual Collections The Company shall provide on-call collection of up one and a half (1.5) cubic yards of Garbage as defined by the City’s municipal code and on-call collection ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 8 of 12 of up one and a half (1.5) cubic yards of Green Waste as defined in the most current green waste processing agreement between the City and its designated green waste processor. Collection for each on-call service (one Garbage and one Green Waste) shall be available to each residential account receiving cart service at no additional cost to the City or its ratepayers. On call collections shall be scheduled within 10 working days of the customer’s request for such service, unless the customer requests otherwise. The Company shall also provide on-going promotion of this service to all applicable accounts. All materials shall be put out for collection by residents in a manner agreed to by the Company and City. Prior to June 30, 2013, the Company agrees to review the performance of the on- call annual collections program with the City in order to identify and implement changes to the service that will maximize the landfill diversion of this program and provide the widest range of on-call services available, as compared to the best on-call collection operations in our region. U. Drop-box Service at the Recycling Center and Corporation Yard (LD 7) The Company shall provide drop-box service as needed for all drop-box service requests from the City of El Cerrito Recycling and Environmental Resource Center and Corporation Yard. Drop-box service shall be provided at the same level of frequency as per the average weekly service from November 2010 through October 2012. Additional drop-box services greater than the above mentioned average weekly service frequency that directly result in overtime costs will be charged to the City on a per over-time labor hour basis. The Company shall notify the City via phone and email within 48 hours of the overtime costs being incurred. The Company shall invoice the City for the overtime charges on a basis and shall include details about the days, times, and loads that were the cause of the overtime charges. Payments to the Company for these services shall not be considered rate revenue. V. Covered Roll-offs for The City Transfer Station At the City’s discretion, the Company shall provide up to four covered steel roll-off containers for the City’s solid waste transfer station, as specified by the City. The costs of the roll-off containers shall be recovered via the Company’s depreciation schedule, at a recovery term that shall be mutually agreed upon by the City and the Company. W. Detailed Digital Operational Quarterly Reports to the City (LD 8) The Company shall provide detailed quarterly reports to the City in Excel format no later than the end of the month immediately following the end of each calendar quarter. Reports shall include the following: ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 9 of 12  Total solid waste tonnage collected broken out by line of business (residential, commercial, roll-off);  All garbage and green waste subscription details by line of business;  Total green waste tonnage collected by line of business and also;  Total number of targeted commercial food waste accounts and number of participating accounts, with full service details. The City reserves the right to request additional operational and / or financial information to be included as part of the quarterly reports. X. Ownership of Containers Ownership of cans and carts shall rest with Company, except that ownership of cans or carts in the possession of a customer at the end of this Agreement shall rest with City. At its sole discretion, City may elect not to exercise its rights with regards to this Section and in such case the cans and carts shall remain the property of Company upon termination of this Agreement. In this event Company shall be responsible for removing all cans and carts in service from the service area and reusing or recycling such cans and carts. At timer of transfer, Company will be reimbursed for the net book value of items being transferred. Y. Liquidated Damages 1. $250 for each failure to conduct and accurately document brake checks and BIT inspections of City vehicles within any given month. 2. $250 for each failure to conduct and accurately document quarterly preventative maintenance services of City vehicles within any calendar quarter. 3. $50 each for failure to conduct any of the 30 required quarterly in-depth diversion site visits within each calendar quarter. 4. $1,000 for failure to conduct the required tri-annual customer satisfaction assessment and survey and report the results as required by December 31st, 2013, 2016, 2019, 2022 and 2025. 5. $100 per day for failure to have a fully functioning Company website no later than January 1, 2013. 6. $1,000 for failure to provide the required cart and bin labeling on all carts within one-and-half years of the City’s initial request to do so, and an additional $50 per day for each day after that date that required labeling is not completed. 7. $250 for each failure to provide drop-box hauling service from the City of El Cerrito Recycling and Environmental Resource Center and Corporation Yard within 5 working days of the service being requested. 8. $50 per working day for quarterly reports submitted later than the end of the month following the end of each calendar quarter. ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 10 of 12 9. $50 per working day for quarterly in-depth diversion site visit reports submitted later than the end of the month following the end of each calendar quarter. 10. $50 per working day for audited financial statements submitted after July 1st of each calendar year (Section 16.B). 5. Section 12 (Service Rates) is hereby amended to replace and include: E. The Company shall provide the City will annual audited financial statements no later than July 1st of each year (LD 10). F. The City and Company agree to adjust the collection rate annually on January 1st, starting on January 1st 2014 based on the Refuse Rate Index (RRI) methodology provided in Attachment 3. That adjustment shall also account for the impact of the rate revenue Balancing Account, as described in Section 12 G, below. G. The City and Company agree to establish a Balancing Account to address over or under collection of rate revenues compared to the revenue requirement and mitigate the rate impact of changes to solid waste subscription levels and provide for greater rate stability. H. City reserves the right to conduct a detailed rate review no more frequently than every three years during the remaining term of the agreement for resetting rates. The methodology to be followed, including allowable and non-allowable expenses and expense limitations is to follow the most recent detailed rate review. Company to pay cost of rate review that will be an allowable expense to be recovered during the following rate year and then removed from rate base. Company reserves the right to request a detailed rate review if variance arises in total actual costs as compared to total indexed costs by greater than 5% in any year. 6. Section 23 (General Provisions) is hereby amended to include: L. The City and Company agree that, absent other agreements pertaining to flow control for El Cerrito’s franchised waste stream (garbage and green waste), the City shall retain the ultimate right to direct the entirely of that flow. M. The City and Company agree to increase the City’s Franchise Fee from 10% to 12% of all collection, disposal and maintenance service and other revenues received by the Company excluding rental fees and revenues from City of Richmond accounts serviced by the Company. All franchise fee payments are due to the City on a schedule by the end of the month following the end of each period. N. The Company shall request City approval for all purchases of equipment over $50,000. ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 11 of 12 O. The Company shall depreciate all trucks and containers over 10-years or greater for the duration of the franchise term. P. The Company agrees to change its operating ratio from 89.0% to 90.5% effective January 1, 2012. Q. The City agrees that the rate share of the Company’s pension liability will be 78.5%, pending managerial review of the pension fund and investment strategy. The Company agrees that the annual rate revenue share of the Company’s pension liability shall not exceed $45,885 per year, until a time when the pension becomes fully funded when the amount will be removed from the rate base. If the rate base share (78.5%) of the annual pension liability contribution exceeds (or does not meet) $45,885, then the amount owed (saved) that year shall be debited (or credited) against the balancing account. If at the end of the franchise term there remains an unfunded pension liability, the City will compensate the Company that unfunded pension liability over a period of no more than five years. R. The City and Company agree to meet in good faith at a future date to update and/or rewrite this Franchise Agreement in order to amend, restate, and modernize the Franchise Agreement in ways that are comparable with other local/regional franchise agreements. 7. Franchise Agreement. Except as expressly set forth herein, the Franchise Agreement remains in full force and effect. 8. Entire Agreement. This Fifth Amendment is executed in three duplicate originals, each of which is deemed to be an original. This Fifth Amendment includes twelve (12) pages of text and three attachments. IN WITNESS WHEREOF, the parties hereby have executed this Agreement on the day first above written: City Company Signature Signature Printed Name Printed Name Title Title Date Date ---PAGE BREAK--- Agenda Item No. 7(A) Attachment 2 Fifth Amendment to Franchise Agreement between City of El Cerrito and East Bay Sanitary Company, Inc. Page 12 of 12 APPROVED AS TO FORM: City Attorney ATTEST: City Clerk ---PAGE BREAK--- November 6, 2012 Final Report Franchised Garbage and Green- Waste Hauler Rate and Operations Review Consulting Group, Inc. Resources, Respect, Responsibility Resources, Respect, Responsibility Resources, Respect, Responsibility Submitted to: City of El Cerrito Agenda Item No. 7(A) Attachment 2a ---PAGE BREAK--- ---PAGE BREAK--- 1512 Eureka Road, Suite 220 Roseville, CA 95661 Tel: [PHONE REDACTED] Fax: [PHONE REDACTED] www.r3cgi.com R i c h a r d J . H u t c h i n s o n Œ R i c h a r d T a g o r e - E r w i n Œ W i l l i a m S c h o e n Resources Responsibility Respect Consulting Group, Inc. November 6, 2012 Mr. Garth Schultz Environmental Analyst City of El Cerrito 7501 Schmidt Lane El Cerrito, CA 94530 Subject: Final Report – Franchised Hauler Garbage and Green Waste Hauler Rate and Operations Review Dear Mr. Schultz: R3 Consulting Group (R3) is pleased to submit the attached Final Report of our Franchised Hauler Garbage and Green Waste Hauler Rate and Operations Review to the City of El Cerrito (City). We wish to thank East Bay Sanitary Company (EBS) and its Consultant Armanino McKenna for their cooperation during our review. EBS responded to information requests in a timely manner, provided us with access to staff, facilities and operations, and worked cooperatively with us throughout the course of our review. As you are aware, R3 completed its review in November 2011 and issued its Draft Report to the City on November 30, 2011. Since that time a number of events have occurred including: ƒ EBS requested an extension to its existing franchise with the City and submitted: o A revised rate adjustment calculation reflecting various proposed adjustments to the rate adjustment calculation in R3’s Draft Report in exchange for the requested contract extension; and o A list of various service enhancements in exchange for the requested contract extension. ƒ EBS requested, and the City agreed to an adjustment to its proposed revised rate adjustment to reflect lower than anticipated 2011 year-to-date revenues associated with account migration; ƒ EBS provided a revised rate adjustment calculation to reflect a January 1, 2013 rate adjustment rather than the original intended January 1, 2012 rate adjustment; and ƒ The City reviewed the various financial and operational terms of EBS’s proposed contract extension and submitted a counter proposal to EBS. The attached report is based on the analysis that was completed in November 2011 and has not been updated to reflect any of the events that have occurred since then. The calculated rate adjustment reflected in the attached Final Report, however provided the basis for the subsequent negotiations which occurred. As part of those negotiations R3 was retained by the City to assist it with its review of various contractual terms and conditions and rate impacts and the development of its counter proposal to EBS. ---PAGE BREAK--- Mr. Garth Schultz November 6, 2012 Page 2 of 2 We appreciate the opportunity to be of service to the City. Please free to contact me at (916) 782- 7821, or by e-mail at [EMAIL REDACTED], if you have any questions or comments regarding our Final Report. Sincerely, R3 Consulting Group William Schoen Principal ---PAGE BREAK--- Table of Contents TOC - i Introduction 1 Project Objectives 2 Summary Findings and Recommendations 2 FY 2012 Recommended Rate Adjustment 2 Operational Efficiencies 2 Background 3 City Operated Recycling Program 3 East Bay Sanitary Company 5 Account Migration 7 Franchise Fees 8 Variance 8 Rate Review 10 FY 2012 Detailed Rate Application 10 Review of Allowable and Non-Allowable Expenses 11 Review of EBS’s Pension Liability 13 Operations Review 14 Assessment of EBS’s Current and Planned Equipment and Routing and Opportunities for Increased Efficiency 14 Review of Proposed Equipment Purchases and Operational Changes 17 Identify and Analyze Potential Service Changes 17 Billing Audit 18 Safety 18 Assessment of the Capacity of the City’s Recycling Collection Operations 20 ---PAGE BREAK--- Table of Contents TOC - ii Tables Table 1 City Recycling Route Configuration 4 Table 2 City Staffing Schedule 5 Table 3 EBS Current and Proposed Routing Structure 7 Table 4 Pension Funding Information 14 Table 5 Yard Waste Collection Productivity Data 16 Table 6 Comparison of 4x10 and 5x8 Staffing Schedules 22 Figures Figure 1 Experience Modification Factor 20 Appendices Appendix A – Organizational Chart Appendix B – Account Migration Appendix C – Variance Analysis Appendix D – Base Year Rate Adjustment Calculation Appendix E – Non-Allowable Expenses Appendix F – Pension Liability Information Appendix G – EBS Route Productivity Data ---PAGE BREAK--- R:\Projects\111026 City of El Cerrito Rate and Ops Review\Reports\Final Report\El Cerrito Final Report 110612.doc 11/6/2012 10:36 AM Page 1 of 23 Final Report Introduction The City of El Cerrito (City) has an exclusive franchise agreement (Agreement) with East Bay Sanitary Company (EBS) for the collection of residential and commercial garbage and green waste, as well as debris box/roll off container collection services. The Agreement expires on December 31, 2018.1 Residential and commercial recycling services are provided by the City. EBS bills City residents and businesses for garbage and green waste collection services based on maximum rates established by resolution of the City Council. In addition to those rates, EBS also collects the following fees: ƒ The Integrated Waste Management (IWM) Fee, which is set by the City Council, to cover the cost of the City’s recycling collection programs; and ƒ The Integrated Resource Recovery Facility (IRRF) Fee, which is set by the West Contra Costa County Integrated Waste Management Authority (RecycleMore). The last review of EBS’s garbage and green waste collection rates, completed in 2003, included the development of rate setting guidelines (Guidelines), which were used to set “base year” rates for 2004.2 In 2005 the City Council passed the Second Amendment to the Agreement with EBS, which established an indexed methodology, which has been used to adjust EBS’s rates annually from 2006 through 2010. The Total Rate charge to customers is comprised of the following four components: ƒ Collection Rate ƒ Integrated Waste Management (IWM) Fee ƒ Integrated Resource Recovery Facility (IRRF) Fee ƒ Container Rent (commercial containers only) In 2010, the City and EBS negotiated an adjustment to EBS’s 2011 rates above the amount calculated via the indexed rate adjustment methodology. This was in response to EBS’s claim, and City’s verification, of less than anticipated collection revenue due to significant account migration to smaller garbage container sizes. Those rates include new services for City residents, 1 Per the Fourth Amendment to the Agreement. 2 While the Guidelines were used as the basis for adjusting EBS’s rates for FY 2002, 2003 and 2004, they were never formally adopted as an amendment to the Agreement. ---PAGE BREAK--- Page 2 of 23 Final Report including weekly green waste collection services that started in February 2011 and incorporated food scraps and food-soiled paper, new collection trucks and financing for construction of the City’s new recycling center. As a result of rate adjustment negotiations in 2010, EBS and the City agreed to conduct a detailed rate review for purposes of setting “base year” rates for 2012. That detailed rate review was the primary focus of this project. In addition, the following tasks were also undertaken: ƒ Evaluate potential revisions to the indexed rate adjustment methodology to address an ongoing account migration; ƒ Evaluate potential changes to services and service levels 10-gallon rate); ƒ Assess the efficiency of EBS’s current operations and review proposed equipment purchases and operational changes; and ƒ Assess opportunities for increased efficiencies. Project Objectives The primary project objectives included the following: ƒ To determine revised rates for garbage and green waste collection services effective January 1, 2012; ƒ To establish a revised rate setting methodology for future rate adjustments; and ƒ To review and identify potential operational efficiencies for the City’s franchised garbage and green waste hauler. Summary Findings and Recommendations FY 2012 Recommended Rate Adjustment Based on our review we recommend that the FY 2011 Collection Rate and Container Rent portion of the Total Rate be increased by 0.81 percent for purposes of establishing the FY 2012 Base Year rates. As part of any rate adjustment the City may wish to consider increasing the 20-gallon rate by a greater amount to bring that rate more in line with the cost of service. Operational Efficiencies EBS With the proposed transition to fully automated collection vehicles for residential solid waste and yard waste, EBS plans to eliminate ---PAGE BREAK--- Page 3 of 23 Final Report one of the six residential routes it currently operates. This represents a 17 percent reduction in residential routes. Based on a review of current and projected productivity, there does not appear to be any additional significant opportunities for increased operational efficiencies. It is possible, however, that EBS may be able to respond to customer service inquires related to recycling services that the City currently handles with its existing customer service staff, allowing the City to reduce its staff time dedicated to this task. Additionally, as agreed to as part of EBS’s Maintenance Facility Terms and Conditions of Approval, current maintenance staffing capacity should enable EBS’s maintenance operation to effectively provide required preventative maintenance for the City’s recycling vehicles and potentially some portion of other non- scheduled maintenance requirements that may arise. City Recycling Operations We recommend that the City discontinue the current 4-day per week 10-hour per day schedule for its recycling operations and replace it with a standard 5-day per week 8-hour per day schedule. This should allow for significant improvements in system capacity and efficiencies in staff scheduling. Background The City is a member agency of the West Contra Costa Integrated Waste Management Authority (Authority), which was formed through a joint powers agreement between the cities of El Cerrito, Hercules, Pinole, Richmond and San Pablo. The Authority has the sole power of “direction” over “franchised” waste materials, is responsible for setting the Disposal Rates (IRRF Fee) for these materials, and oversees the operations of the IRRF, which was built to serve as a garbage transfer station and processing center for curbside recyclables. The Authority sets Disposal Rates annually (effective January 1st); these rates are passed through to the ratepayers without modification and require no approval by the City Council. Disposal Rates are assessed on a per-can basis for cart accounts, a per-yard basis for commercial accounts and a per-ton basis for debris box accounts. Because the City’s recycling programs pre-date the joint powers agreement, the City is free to direct its own recyclables, and is not required to fund recycling related expenses incurred by the IRRF as part of the garbage rates. Subscription to garbage collection service within the City is mandatory. City Operated Recycling Program Services and Routes The City of El Cerrito provides weekly recycling collection for all homes, apartments, and businesses in El Cerrito. All recyclables, ---PAGE BREAK--- Page 4 of 23 Final Report including paper, cardboard, cans, bottles, plastic containers and bags are collected commingled in grey recycling carts. The City currently operates the following three daily recycling routes, as shown in Table 1: ƒ Two 1-person residential fully automated curbside recycling side-loader routes;3 and ƒ One 2-person mixed residential / commercial rear loader route.4 Table 1 City Recycling Route Configuration The City also operates a Recycling Center that provides drop-off recycling and other diversion services. The Recycling Center also includes a processing facility that processes all recyclable materials collected at the Recycling Center. Materials collected by the City’s residential and commercial recycling routes are delivered to a third party processor.5 Funding for the City’s Recycling Program is obtained through the assessment of the IWM Fee. The IWM Fee is assessed on a per-can basis for cart accounts, and a per-yard basis for container and debris box accounts. Staffing Staffing of the City’s residential and commercial recycling operation and Recycling Center is scheduled on a 4-day per week 10-hour per day schedule (4x10 schedule). Route drivers work from 4:00 am until 2:00 pm and Recycling Center staff work from 3 The City estimates that 60% to 70% of residential accounts are compatible with fully-automated service while the driver must exit the vehicle to service the remaining 30-40% due to restricted access as a result of on street parking. 4 The rear loader crew consists of a driver and a “helper” who is a temporary employee provided through an employment agency. 5 The City currently delivers curbside recyclables to the Rock-Tenn (formerly Smurfit) facility at 800 77th Avenue in Oakland. Vehicle Routes Crew Residential Recycling Fully/Semi‐auto SL 2 1‐person Commercial Recycling Rear Loader 1 2‐person LINE OF BUSINESS ROUTE CONFIGURATION ---PAGE BREAK--- Page 5 of 23 Final Report 8:00 am until 6:00 pm.6 The current weekly staffing schedule is provided in the Table 2 below. Table 2 City Staffing Schedule Route trucks typically collect one load per day. Material collected on any given day is held overnight at the Recycling Center and delivered to the processor (Rock-Tenn in Oakland – formerly Smurfit) first thing in the morning to avoid traffic. Routes are typically completed by 11:30 a.m. and return to the Recycling Center. Route drivers are then assigned work at the Recycling Center for the remainder of their shift. Drivers are provided with a 37.5 minute unpaid lunch and receive 37.5 minutes of paid break time each day. Vehicles The City has two side-loading vehicles and two rear-loading vehicles with one of those rear loading vehicles serving as a spare. East Bay Sanitary Company EBS is a family owned business that has served the City for approximately sixty years. Its office is located in El Cerrito. EBS’s shop facility is located in Richmond and is leased from a minority stockholder of the company. There are four officers of the company that are active in day-to-day operations. A fifth retired 6 The Recycling Center is open Monday - Friday: 8:00am to 5:45pm and Saturday - Sunday: 9:00am to 4:45pm Mon Tue Wed Thur Fri Sat Sun 4 3 3 4 3 3 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 8 5 6 7 6 5 1 1 Notes: The Operations Supervisor, Lead Worker and all Drivers have Class B licenses. The Lead Worker Position is currently vacant. Totals Lead Worker Operations Supervisor Temp Labor (Rear Loader) Temp Labor (Recycling Center) Staff Staffing Schedule Total Drivers ---PAGE BREAK--- Page 6 of 23 Final Report officer currently serves as a paid advisor. An organizational chart is provided in Appendix A. EBS reported that, with the retirement of Clyde Figone in 2004, duties performed by the other owners remain essentially the same. Mark Figone acquired the roles of CEO and CFO. All of the active owners perform essentially the same daily customer service, account management and administration and banking roles. Cara Figone and Mark Figone manage the computer system along with EBS’s outside computer programmer. In addition to his administrative role, Richard Figone also handles has various other responsibilities, including supervising union employees and outside customer service, including cart delivery.7 Services, Routes and Staffing EBS provides the following services to the City under the terms of an exclusive franchise agreement (Agreement) with the City that expires on December 31, 2018:8 • Weekly residential garbage collection; • Weekly residential organics collection (green waste and food waste); • Commercial solid waste collection; and • Industrial (roll-off) service. EBS also provides the following non-franchised services: • Collection of 60 residential accounts in the Unincorporated County.9 The current truck and crew configurations used by EBS to provide franchised services are shown in Table 3 below. EBS has proposed to purchase four new fully automated side loading vehicles to replace four existing side loaders.10 It also plans to convert one residential solid waste route to a yard waste route, which it is able to do largely because of available capacity within the existing system and efficiencies that can be realized with fully automated collection. This proposed new routing structure, which is also shown in Table 3, is expected to be implemented at the end of 2011. 7 Source: November 16, 2010 email from M. Figone to W. Schoen (R3). 8 Per Fourth Amendment to the Franchise Agreement 9 These accounts are in Richmond Sanitary Service’s (RSS) service area (Wildcat Canyon, Vista Heights) but are picked up by the Company under an informal agreement with RSS due to their location. These accounts are serviced by the Company’s residential routes and also receive green waste and recycling services. 10 Existing side loaders are model years 1999, 1999, 2000 and 2002. ---PAGE BREAK--- Page 7 of 23 Final Report Table 3 EBS Current and Proposed Routing Structure With minor exceptions, single-family residential solid waste (cart) accounts are serviced exclusively by the residential solid waste routes, and commercial solid waste (cart and container) accounts are serviced exclusively by the commercial solid waste route. Multi-family solid waste cart accounts are serviced primarily by the residential solid waste routes, although the commercial route does pick up several multi-family cart accounts. Several commercial accounts participate in the green waste program and are collected by the residential green waste route. Solid Waste Facilities EBS delivers garbage and green waste directly to the Golden Bear Transfer Station (an affiliated Company of Richmond Sanitary Service, a subsidiary of Republic Industries) located at the West Contra Costa County Landfill in Richmond. Garbage is transferred to the Keller Canyon Landfill in Contra Costa County, while green waste and food waste is composted on-site. Both the disposal and compost processing contracts are made by the Authority through a competitive bid process. Account Migration The City’s solid waste management system is currently facing a problem similar to that many other jurisdictions are facing. Specifically reduced solid waste rate revenue due to accounts reducing service levels account migration), in part due to the success of the City’s diversion programs. Appendix B provides an analysis prepared by EBS that projects an annual loss in revenues of approximately $26,000 in 2010 and $49,000 in 2011 due to account migration. In response, the City made a specific adjustment to the rates for FY 2011 to address the lost revenue due to account migration. EBS has reported that accounts have continued to “downsize” which will impact future revenues. Vehicle Routes Crew Vehicle Routes Crew Residential Solid Waste Semi‐auto SL 4 1‐person Fully‐auto SL 3 1‐person 1‐person Fully‐auto SL 1 1‐person 1‐person Semi‐auto RL 1 1‐person Commercial Solid Waste Semi‐auto RL 1.5 1‐person Semi‐auto RL 1.5 1‐person Roll‐Off Roll‐off 1 1‐person Roll‐off 1 1‐person Total Staffing 8 7 Roll‐off driver covers the 0.5 commercial routes CURRENT LINE OF BUSINESS PROPOSED Green Waste Semi‐auto RL 2 ---PAGE BREAK--- Page 8 of 23 Final Report Franchise Fees EBS reported that it pays a franchise fee on all gross revenues, with the exception of the 60 accounts that it services in the City of Richmond and the revenue associated with the rental charges for debris boxes and commercial containers.11 Variance Analysis As part of our review of the reasonableness of EBS’s expenses, a review of historical revenues and expenses was conducted. Appendix C provides a variance analysis of EBS’s major line item Revenues & Expenses for 2005 through 2010 based on audited financial statements, as well as a more detailed variance analysis of the General & Operating expense line item category. Findings of the variance analysis include the following: Revenues • Between 2009 and 2010 overall Revenues increased by 4% (~$174,000), with City of El Cerrito revenues (residential and commercial revenues) increasing by 3% (~$139,000) and Debris Box Collection revenues increasing by 13% (~$36,000). • Between 2005 and 2010 overall Revenues increased by 14% (~$590,000), with City of El Cerrito revenues increasing by 20% (~$730,000) and Debris Box Collection revenues decreasing by 28% (~$122,000). Expenses ƒ Between 2009 and 2010 Operating Expenses decreased 2% (~$112,000). o Employee Benefits decreased by 43% (~$240,000)12 o Disposal Expense increased by 10% (~$124,000) o Insurance decreased by 4% (~$3,000), which EBS attributed to a competitive market; o General and Operating costs decreased by 2% 11 The Rate Adjustment Guidelines specify that “The Franchise Fee for the Rate Year shall be calculated by multiplying the Revenue Requirement less Rental Fees by 10%” (page 15) 12 There was a $239,000 adjustment related to the FASB 158 accounting of the Accrued Pension Benefit Obligation. The change in the audited numbers is a result of actuarial calculations that follow GAAP guidelines. This number is not the same number that needs to be paid in order to fund the pension, but rather the number calculated that shows the Accrued Pension Benefit Obligation change. ---PAGE BREAK--- Page 9 of 23 Final Report ($~11,000) ƒ Diesel increased by 20% (~16,000) ƒ Parts decreased by 23% (~7,000) ƒ Pension and Profit Sharing decreased by 35% (~$4,000) ƒ Repairs decreased by 28% (~5,000) ƒ Tires and Tubes decreased by 14% (~$2,000) ƒ Travel and Entertainment decreased by 98% (~$17,000) ƒ Between 2005 and 2010 Operating Expenses increased by 14% (~$538,000) an average annual increase of approximately o Salaries and Wages increased by 23% (~$287,000), which EBS attributed to increased union wages annually) and officer compensation taken as salary rather than stockholder distributions;13 o Employee Benefits decreased by 37% (~$186,000, largely due to the decrease in this expense in 2010); o Disposal Expense increased by 39% (~$378,000); o Insurance decreased 10% (~$8,000); and o General & Operating expense increased by 2% (~$11,000). ƒ Bad Debt Expense increased by 132% (~$8,000); ƒ Legal, accounting and other professional services increased 34% (~$36,000), which EBS attributed in part to increased accounting expense; ƒ Travel and Entertainment decreased by 98% (~$17,000) ƒ Pension and Profit Sharing decreased by 63% (~$11,000) ƒ Parts decreased by 35% (~14,000) ƒ Repairs decreased by 43% (~9,000) 13 The Company reported that it did not add any staff during this period, but that Officers took salary instead of distributions. ---PAGE BREAK--- Page 10 of 23 Final Report ƒ Tires and Tubes decreased by 17% (~$3,000) Rate Review FY 2012 Detailed Rate Application At the City’s direction, R3 assisted EBS with preparing a detailed base year Rate Application for FY 2012 (effective January 1, 2012). The Rate Application was prepared using the following general process, as documented in the Rate Adjustment Guidelines, with noted adjustments: Forecasting Expenses ƒ Adjust Actual Costs for the Prior Year (FY 2010) to account for Non-Allowable Expenses and any additional expenses that may be allowed or disallowed adjustments for impact of weekly green waste collection); ƒ Forecast Allowed Costs for the Current Year (FY 2011) for Direct Labor, Vehicle Expense, General and Administrative Expense based on the percentage change in the specified indices;14 ƒ Forecast Allowed Costs for the Rate Year (FY 2012) for Direct Labor, Vehicle Expense, General and Administrative Expense based on the percentage change in the specified indices. ƒ Set Depreciation/Interest Expense for the Rate Year (FY 2012) to EBS’s FY 2012 projected depreciation expense;15 ƒ Calculate Profit; and ƒ Calculate the Total Revenue Requirement by adding FY 2012 expenses as established above to the Pass-Through Expenses (Franchise Fee, IWM Fee and Dump Expense), as established per the Guidelines. Forecasting Revenues ƒ Project Collection Rate Revenues for the Rate Year by multiplying the Current Year Collection Rates by the most current subscription levels number of accounts by each service level / rate code); 14 The Second Amendment to the Franchise Agreement established an annual Indexed Rate Adjustment Process using specified indices to adjust various components of EBS’s expenses. For purposes of forecasting FY 2011 and FY 2012 expenses, we have used the index adjustment methodology specified in the Second Amendment, with the exception of depreciation expense, which has been set to the “projected actual” expense for 2012. 15 Current depreciation schedule adjusted as appropriate. ---PAGE BREAK--- Page 11 of 23 Final Report ƒ Set Disposal Rate Revenues to the Rate Year Dump Expense projected by the Authority; and ƒ Add Other Franchised Income. The calculated Rate Adjustment based on the above Guidelines is provided in Appendix D, and accounts for the various identified adjustments that are discussed in the following sections. The rate adjustment calculation is shown for 7-year term consistent with the remaining term under the existing Agreement. As shown, based on our review and accounting for the various expense adjustments discussed in the following sections we recommend that the FY 2011 Collection Rate and Container Rent portion of the Total Rate be increased by 0.81 percent for purposes of establishing the FY 2012 Base Year rates. As part of any rate adjustment the City may wish to consider increasing the 20-gallon rate by a greater amount to bring that rate more in line with the cost of service. Review of Allowable and Non-Allowable Expenses The Guidelines identify specific Non-Allowable Expenses to be excluded as part of the Actual Costs used to determine the appropriate rate adjustment (Appendix They also provide for disallowing “unreasonable expense in kind or amount”. In addition: ƒ While not specifically identified in the Guidelines the allowable FY 2000 travel expense was set at $5,780;16 and ƒ The allowable rent expense for EBS’s maintenance facility was set at $10,655 as of the start of operations.17 While the Guidelines provided a starting point for the review of the reasonableness of EBS’s expenses, a thorough review of the general reasonableness of all expenses was conducted that included: ƒ A review of 2010 General Ledger entries; ƒ A review of the depreciation schedule including the reasonableness of depreciated assets and changes to the depreciation expense to reflect the elimination of any one- time expenses that would be fully depreciated as of July 1, 2011 (the start of the Base Year); ƒ A review of a sample of officer credit card statements; 16 Exhibit 2 of Hilton, Farnkopf and Hobson’s December 19, 2003 report; Review of East Bay Sanitary Company’s FY 2000 Revenues and Expenses and FYs 2002, 2003 and 2004 Rate Adjustment Calculations. 17 May 6, 2003 Letter from City Manager to East Bay Sanitary Company Re: Maintenance Facility Terms and Conditions of Approval. ---PAGE BREAK--- Page 12 of 23 Final Report ƒ A comparison of the limits established for certain expenses to the actual expenses incurred to determine if the limits had been exceeded; and ƒ Reconsideration of the reasonableness of the limits established for certain expenses and consideration of any other expenses that could be considered unreasonable and therefore disallowed for purposes of setting rates. Based on our review, we are recommending the following adjustments to EBS’s audited FY 2010 expenses and FY 2012 projected expenses to account for non-allowable expenses, updated depreciation expenses and its proposed changes to the residential collection system. Expense Adjustments Based on review of EBS’s 2010 expenses, and in consultation with City staff, we recommend that the following expenses be disallowed: ƒ Reduce Wages Officers by $135,354 to reflect: o $99,897 in combined officer wages above allowed expense limit; o $35,457 to reflect retirement of former General Manager;18 and ƒ Reduce Employee Benefits by $18,018 to reflect Health Insurance associated with retired partner; ƒ Reduce Insurance Expense by ($4,360 in 2010);19 ƒ Set Depreciation Expense at $277,883 (7-year remaining term) for FY 2012 reflecting: o FY 2012 depreciation on new assets acquired in 2011, including four new side loaders; o Adjusted FY 2012 depreciation to reflect reduced depreciation of existing assets; and o Elimination of FY 2012 depreciation expense for two owner company cars (sedans). ƒ Reduce Contributions by $2,800 in 2010 associated with CRRC PAC contributions); ƒ Reduce Dues and Subscriptions by $4,188 to be consistent with the 2010 adjusted limit of $17,914 ($22,102 in 2010); ƒ Reduce Employee Gifts ($1,958 in 2010); 18 The lowest of the five allowed salaries for the five owners. 19 For purposes of equity acquisition by remaining partners if a partner dies. ---PAGE BREAK--- Page 13 of 23 Final Report ƒ Reduce Legal, Accounting and Other Professional Services associated with Director Fees for outside director ($6,388 in 2010); ƒ Reduce Promotional Expenses be disallowed in full ($1,155 in 2010); ƒ Reduce Rent by $3,900 to adjust for 2 months of additional office rent ($1,950/month) applied to 2010;20 and ƒ Increase Travel by $6,612, reflecting an increase from the $313 2010 expense to the 2010 adjusted limit of $6,925. Adjustment for Weekly Yard Waste Program The following adjustments to expenses were made to account for the projected impact of the full implementation of EBS’s weekly yard waste collection program and related operational changes: ƒ Reduce Wages-Drivers & Helpers by $64,525 in 2012; ƒ Reduce Employee Benefits by $51,055 in 2012; and ƒ Increase Licenses by $3,000 in 2012. Adjustment for Officer 401K Contributions Set 401K contributions for four officers at $21,600 as a pass- through expense not subject to profit, reflecting 5 percent of allowed officer compensation. Review of EBS’s Pension Liability Current Pension Liability and Associated Assumptions EBS reported that through 2008 it provided a defined benefit pension plan to shareholders, teamsters, employees and one office employee. That plan was to be paid out based on an average of an employee’s last 3 years of salary, with the maximum payout based on 60 percent of that average salary, at 30-years of service per year). That plan was “frozen” in September 200921 and was replaced with a 401K plan and has an unfunded liability of approximately $584,000 as of September 1, 2011, as shown in Table 4 below. By freezing the plan, no new participants are eligible for the pension benefits as of the effective date. However, this does not change an employer’s obligation to provide retirement benefits to plan participants prior to the effective date. EBS is currently funding the 401K plan as well as the unfunded liability portion of the pension plan and reported that shareholders have not accrued any pension benefits since the pension plan was 20 Total Rent = $13,898 ($11,498 for Maintenance Facility and $1,950 for office) = $166,776 per year vs. Financial Statement Rent expense of $170,676; difference = $3,900. 21 Per August 23, 2011 email from M. Figone to W. Schoen. ---PAGE BREAK--- Page 14 of 23 Final Report frozen. Appendix F contains a brief explanation of the Pension Liability issue provided by EBS. Table 4 Pension Funding Information As part of the FY 2012 rate adjustment the City has agreed to fully fund 78.5 percent of the Company’s pension liability, pending managerial review of the pension fund and investment strategy. The annual rate revenue share of that pension liability shall not exceed $66,565 per year. This annual funding will be removed from the rate base when the pension becomes fully funded. Operations Review Assessment of EBS’s Current and Planned Equipment and Routing and Opportunities for Increased Efficiency In general, we found EBS’s current routing structure and route productivity to be reasonable. With EBS’s proposed transition to fully-automated collection vehicles for residential solid waste and yard waste, it plans to eliminate one of the six residential routes it currently operates; amounting to a 17 percent reduction in residential routes. Based on a review of current and projected productivity there does not appear to be additional significant opportunities for increased operational efficiencies. Current Residential Solid Waste Collection System - Residential collection services are organized in a distinct area of the City each day and “sweep” across the City over the course of the week. This is a common and effective routing strategy. Total Liability $ 2,457,547.00 As of 9/1/2011 Current Assets $ 1,873,206.40 As of 8/11/2011 Unfunded Liability $ 584,340.60 Minimum Required Funding 2009 $ 255,349 2010 $ 44,000 2011 $ 110,000 Pension Fund plus interest through the date of last deposit ---PAGE BREAK--- Page 15 of 23 Final Report Appendix G provides an account of the number of accounts and containers for each of the four existing residential solid waste routes. As shown, under the current system the residential solid waste routes average 403 accounts per route per day and service a total of 453 containers, with the majority of multiple-container accounts belonging to commercial or multi-family accounts. An on-route review of collection operations found that the drivers were working at a reasonable and consistent pace. The efficiency of collection operations is dictated in large part by the semi- automated collection system that requires the driver to exit the vehicle at every account to provide service. Given the productivity limitations of the semi-automated collection system and the existing work load, we believe the use of four daily routes to provide residential collection services is reasonable and appropriate. Proposed Residential Solid Waste Collection System - Under its proposed system, to be implemented at the end of 2011, EBS will be reducing the number of residential solid waste routes from four to three and converting those routes to fully-automated vehicles. This decrease in the number of routes will increase the individual route work load significantly, from approximately 400 accounts per route per to approximately 540 on average (a 33% increase in daily workload). While the workload is increasing, the use of fully-automated collection vehicles will increase productivity and should allow for effectively completing the daily workload with three routes. Beyond that change, however, it is unlikely that additional route savings can be realized. Attention should, however be focused on opportunities to limit any overtime that may be required to complete the system workload. EBS reported that it anticipates that the net impact of a reduction of one solid waste route and the implementation of a fully- automated collection system will be a longer work day, although there is sufficient capacity within the system to accommodate the change without incurring overtime. Current Yard Waste Collection System – Residential accounts are provided with weekly yard waste services. Under the current system two semi-automated routes provide collection service. Table 5 below, provides an analysis of the productivity of the residential yard waste routes for various weekly set-out rates. As shown, at a 50 percent set-out rate each route averages approximately 500 accounts per day. ---PAGE BREAK--- Page 16 of 23 Final Report Table 5 Yard Waste Collection Productivity Data As with the residential solid waste routes, our on-route review of the yard waste routes found that drivers were operating at a reasonable and consistent pace. Yard waste work load is generally more variable than solid waste, given changes in yard waste generation over the course of the year. Based on our review of collection records and our on route observations we believe the use of two daily routes to provide residential yard waste collection services is reasonable and appropriate. Proposed Yard Waste Collection System – Yard waste routes would be expected to gain some productivity with the replacement of one semi-automated vehicle with a fully automated vehicle. This will increase the capacity of the yard waste collection system. The fully automated vehicle should be used in those areas of the City most conducive to fully automated collection wider streets with limited on-street parking), and the system rerouted if necessary to optimize the use of the fully-automated vehicle in the most appropriate areas. Commercial Solid Waste – Appendix G includes a breakdown of the daily workload for EBS’s commercial collection system. As shown, there is an average of 90 stops and 287 containers (lifts) each day. EBS currently operates one full-time 2-person commercial rear loader route with roll-off staff providing coverage for an additional 0.5 routes. At this staffing level the workload for one commercial route is approximately 60 stops per day and 189 lifts, which falls within what we consider to be a reasonable range for commercial rear-loader productivity. Roll-Off Services – The City provides roll-off services on a scheduled and as-needed basis. Roll-off services by their nature are impacted by the economy and also tend to experience seasonal fluctuations. EBS currently has one roll-off driver, which is the minimum necessary to provide roll-off service with the available roll-off capacity currently used to supplement commercial collection routes. Overtime - EBS reported that prior to 2010 it incurred virtually no overtime. The only exception was for Saturday service, which is provided with overtime hours.22 With the shift to weekly green 22 The City may wish to consider charging a premium for weekend service. 33% 50% 67% 9,967 1,993 329 498 668 Total Accounts Account per Day Accounts Per Route (2 Routes) Set Out Rate ---PAGE BREAK--- Page 17 of 23 Final Report waste service prior to the introduction of the fully-automated vehicles it has been incurring several hours of overtime each week. Once the fully-automated vehicles are implemented, however, EBS expects that overtime will be eliminated. Review of Proposed Equipment Purchases and Operational Changes EBS’s proposed transition from semi-automated to fully- automated residential solid waste and yard waste collection makes operational sense and will result in significant increased solid waste collection efficiencies, as discussed above. A review of EBS’s associated equipment capital and depreciation projections found, as follows: ƒ All existing route vehicles are depreciated on a straight line basis over ten (10) years, consistent with the Maintenance Facility Terms and Conditions of Approval. ƒ Pickup trucks are depreciated on a straight line basis over five years; ƒ EBS’s yard waste analysis assumed a seven year depreciation period for both the proposed vehicles and carts consistent with the remaining term of the Agreement. o A preliminary invoice supports a cost of approximately $300,000 per vehicle. o EBS has proposed $120,000 in cart purchases as part of the capital cost projection for the new system; o Increasing the depreciation term from seven to ten years would reduce the net depreciation and interest expense by approximately $43,000 annually for the first seven years of the term, which would lower the associated rate revenues by approximately one percent o Over a ten year term, net depreciation and interest expense would be approximately $110,000 higher than if the equipment were depreciated over seven years due to higher interest payments. Identify and Analyze Potential Service Changes Other than the planned change in the residential collection system routes and vehicles, we do not recommend any changes to EBS’s basic operational structure or services. We also do not recommend that the City implement a mini-can rate category at this time a 10-gallon or 13-gallon mini can). Mini can service is not compatible with fully-automated collection at this time to our knowledge there are no fully-automated compatible containers of that size commercially available at this time). ---PAGE BREAK--- Page 18 of 23 Final Report Additionally, this would potentially increase revenue loss due to account migration, likely with little if any increase in diversion (assuming 20-gallon customers are currently maximizing waste diversion opportunities). We do, however, suggest that the City consider adjusting rates this year and potentially in subsequent years so that the rates, in particular the 20-gallon rate relative to the 35 gallon-rate, are more representative of the cost of service. This will hopefully mitigate some of the revenue loss associated with account migration without an associated decrease in diversion. Billing Audit R3 conducted a billing audit of a sample of residential accounts to assess the accuracy of EBS’s billing with the service levels provided. The audit included: ƒ Comparing billing records to actual service levels in the field; and ƒ Comparing the charges from a recent billing cycle to the approved rate schedule. The audit found that the Company’s rates were consistent with the approved rate schedule. We did, however, identify a total of nine accounts out of a sample of 166 accounts where the billing record did not match the actual service levels provided in the field. Of those differences: ƒ Six had 20-gallon containers and were being billed for 35-gallon service (EBS reported that five of these accounts had reduced from 35- to 20-gallon service since the last billing cycle and that one was still under review); ƒ One had a 35-gallon container and was being billed for 65-gallon service (EBS reported that it had discovered this error in May and corrected the billing); ƒ One had 65-gallon service and was being billed for 35- gallon service (EBS reported that this account was incorrectly billed and that an adjustment has been made); and ƒ One had 35-gallon container and was being billed for 20-gallon service (EBS reported that this account was still under review). Safety The consideration of “Safety First” is central to effective operations. As with other aspects of operations, there needs to be clear standards for safety performance, and policies and procedures supporting those standards that are regularly communicated to staff at all levels. Safety performance measures ---PAGE BREAK--- Page 19 of 23 Final Report (benchmarks) should be established and tracked to enable management to effectively monitor, assess and improve performance through, among other things, effective and routine diagnostic review in support of efforts for continuous improvement. Experience Modification Factor One way of assessing the safety record of a company is by reviewing its experience modification factor. The Compensation Insurance Rating Board (CIRB) develops experience modification factors for employers who have workers compensation annual premiums of $5,000 or more. An experience modification factor adjusts an employer's premium to reflect the difference between the employer's loss experience and the average experience that is expected for its classification(s) and size. The Experience Rating Plan places an emphasis on the number (frequency) of claims and (to a lesser extent) the severity of workplace accidents. If an employer has better experience than is expected for an average employer in the same industry with the similar payroll, the employer receives a premium credit. On the other hand, if the employer's experience is worse than the comparable average, the employer receives a premium debit. The ability of the employer to directly affect his/her premium in this manner serves as an incentive to control or eliminate workplace injuries.23 Figure 1 below provides EBS’s Experience Modification Factor for 2000 through 2011. As shown, with the exception of 2008, EBS’s experience modification factor has been less than the industry average, which is good and for which EBS should be commended. It would not be unreasonable to expect that the proposed implementation of fully-automated collection vehicles would have a positive impact on worker safety and injuries. 23 New York State Workers Compensation Board. http://www.wcb.state.ny.us/content/main/Employers/experModFactor .jsp ---PAGE BREAK--- Page 20 of 23 Final Report Figure 1 Experience Modification Factor Management of Overweight Vehicles EBS reported that all routes collect one load each day. EBS also reported that it manually enters weight tags every day and that it is extremely rare that a vehicle is overweight. Assessment of the Capacity of the City's Recycling Collection Operations Capacity of City’s Existing Recycling Collection Operations The capacity of the City’s recycling collection operations is limited by the fact that all routes are only able to effectively collect one load per day. As previously discussed, the City’s residential and commercial recycling drivers and Recycling Center staff operate on a 10-hour per day, 4 day per week schedule (4x10). Route drivers work from 4:00 am until 2:00 pm and Recycling Center staff work from 8:00 am until 6:00 pm. Route trucks collect one load per day and complete their route by 11:30 (7.5 hours). They are then assigned various duties at the Recycling Center. The loads are held overnight in the truck and then delivered to the recycling facility in Oakland the following morning to avoid traffic and reduce travel time. Given that routes can only effectively collect one load per day, there is only available capacity within the system to service additional accounts to the extent that they can be collected as part of the one load per day without exceeding legal vehicle load weight). Additional capacity can, however, be achieved by changing from the current 4x10 schedule and replacing it with a ---PAGE BREAK--- Page 21 of 23 Final Report standard 5-day per week, 8-hour per day (5x8) schedule as discussed below. Pros and Cons of 4-day per Week Versus 5-day per Week Schedule The City is considering changing from the current 4x10 schedule to a 5x8 schedule. The major benefit of a 10-hour day is the potential to increase productivity by maximizing load weights without requiring an additional load. Typically there are perhaps five hours per day of productive on-route time during the course of an 8-hour day (~60% daily productivity hours), with pre- and post-trip requirements and travel time to and from the processing facility and route all requiring time that is not available for collection. If, however, additional time is available to service more accounts and collect more material without requiring another load (which generates additional non-productive time) that additional collection time is 100 percent productive (as compared to 60% average daily productive hours). The City’s current 4x10 schedule however, does not provide for increased productivity as compared to an 8-hour day. This is due to the fact that routes are completing a full load within an 8-hour time window and cannot effectively collect another load within the remaining available time. While drivers are assigned various tasks around the Recycling Center to utilize their remaining time within the 10-hour schedule, that is not a cost effective use of driver time. In fact, given that routes are able to complete a full load within a standard 8-hour work schedule, it seems clear that changing from a 4x10 to a 5x8 schedule will result in increased system capacity. The following tables compare staff availability for the 4x10 and 5x8 schedules. As shown, with the 5x8 schedule the system realizes an increase of 6 staff-days over the 5 day work week (a 20% increase in staffing capacity). This provides for significant increased staffing coverage over the course of the work week, without impacting the ability of drivers to complete their daily workload assignments within the available 8-hour schedule. ---PAGE BREAK--- Page 22 of 23 Final Report Table 6 Comparison of 4x10 and 5x8 Staffing Schedules Any additional Recycling Center work load requirement that is currently being provided by drivers after they complete their routes can be handled in any number of ways, including with the additional available staff days, through some level of overtime or potentially with temporary part time staffing. ƒ At this point it does not appear that EBS’s residential routes will have significant (if any) available capacity; however this assumption should be reviewed after the new routes have been implemented. Mon Tue Wed Thur Fri Weekday Staffing Subtotal Sat Sun 4 3 3 4 3 3 16 1 1 1 1 1 4 1 1 1 1 1 4 1 1 1 1 1 1 5 1 0 1 1 8 5 6 7 6 5 29 1 1 Mon Tue Wed Thur Fri Weekday Staffing Subtotal Sat Sun 4 4 4 4 4 4 20 1 1 1 1 1 1 5 1 1 1 1 1 1 5 1 1 1 1 1 1 5 1 0 1 1 8 7 7 7 7 7 35 1 1 Notes: The Operations Supervisor, Lead Worker and all Drivers have Class B licenses. The Lead Worker Position is currently vacant. Operations Supervisor Temp Labor (Rear Loader) Temp Labor (Recycling Center) Totals Staff Total Staffing Schedule Full Time Equivalent Employees (5‐day per week 8‐hours per day) Drivers Lead Worker Staff Totals Lead Worker Operations Supervisor Temp Labor (Rear Loader) Temp Labor (Recycling Center) Staffing Schedule Full Time Equivalent Employees (4‐day per week 10‐hours per day) Total Drivers ---PAGE BREAK--- Page 23 of 23 Final Report ƒ It is not clear what (if any) capacity may exist within EBS’s commercial collection system after mandatory recycling is implemented. ƒ We recommend that EBS conduct a comprehensive commercial route audit that includes verifying the accuracy of billing data, assessing the potential for increased recycling (in conjunction with City staff) and reducing collection frequency. To the extent that collection frequency can be reduced, additional capacity will become available. ---PAGE BREAK--- ---PAGE BREAK--- Appendix A Organizational Chart ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- ---PAGE BREAK--- Appendix B Account Migration ---PAGE BREAK--- ---PAGE BREAK--- 2005 2006 2007 2008 2009 2010 1/1/2011 7/1/2011 20 1,531 1,526 1,565 1,637 1,750 1,928 2,131 2,494 35 7,836 7,805 7,744 7,730 7,560 7,471 7,223 6,952 40 9 9 12 12 11 11 6 ‐ 45 9 8 6 6 6 6 4 ‐ 64 774 843 833 775 721 620 561 521 Total 10,159 10,191 10,160 10,160 10,048 10,036 9,925 9,967 Note: 20 1,531 15% 1,928 19% 2,131 21% 2,494 25% 35 7,836 77% 7,471 74% 7,223 73% 6,952 70% 40 9 0% 11 0% 6 0% ‐ 0% 45 9 0% 6 0% 4 0% ‐ 0% 64 774 8% 620 6% 561 6% 521 5% Total 10,159 100% 10,036 100% 9,925 100% 9,967 100% Cart Size Cart Size 25‐Jul 2005 2010 2011 1‐Jan Accounts EBS has eliminated the 40 and 45 gallon can as an option. There are still 2 customers using them that are charged the 35 gallon can rate. ‐ 2,000 4,000 6,000 8,000 10,000 2005 2006 2007 2008 2009 2010 1/1/2011 7/1/2011 Number of Accounts Year Account Migration 20‐gallon 35‐gallon 40‐gallon 45‐gallon 64‐gallon ---PAGE BREAK--- ---PAGE BREAK--- Appendix C Variance Analysis ƒ Revenues & Expenses ƒ General & Operating Expenses ---PAGE BREAK--- ---PAGE BREAK--- Appendix C VARIANCE ANALYSIS (Revenues & Expenses) 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 A E F G H I J K L M N S T 2005 2006 2007 2008 2009 2010 Revenues Refuse Collection City of El Cerrito 3,588,855 $ 4,037,601 $ 4,015,970 $ 4,158,840 $ 4,179,989 $ 4,319,061 $ Schools Debris box collection 439,206 $ 421,572 $ 329,092 $ 301,977 $ 281,220 $ 316,906 $ Rental fees 111,321 $ 113,441 $ 134,170 $ 115,235 $ 103,747 $ 96,545 $ Maintenance services and other 28,582 $ 22,189 $ 20,259 $ 20,035 $ 19,091 $ 25,481 $ Total revenues 4,167,964 $ 4,594,803 $ 4,499,491 $ 4,596,087 $ 4,584,047 $ 4,757,993 $ Operating expenses Salaries and wages 1,229,652 $ 1,247,849 $ 1,296,806 $ 1,426,297 $ 1,496,753 $ 1,516,637 $ Employee benefits 509,613 $ 477,283 $ 549,039 $ 566,525 $ 563,114 $ 323,570 $ Disposal expense 964,391 $ 1,353,319 $ 1,088,828 $ 1,114,271 $ 1,218,479 $ 1,342,577 $ City franchise fee 397,810 $ 446,061 $ 433,515 $ 452,035 $ 450,758 $ 458,729 $ Insurance 82,558 $ 63,190 $ 69,859 $ 71,065 $ 76,965 $ 74,128 $ Depreciation and amortization 123,091 $ 127,841 $ 140,654 $ 185,949 $ 124,574 $ 114,527 $ General and operating 652,962 $ 665,556 $ 690,274 $ 782,613 $ 678,876 $ 667,493 $ Total operating expenses 3,960,077 $ 4,381,099 $ 4,268,975 $ 4,598,755 $ 4,609,519 $ 4,497,661 $ Income / (Loss) from operations 207,887 $ 213,704 $ 230,516 $ (2,668) $ (25,472) $ 260,332 $ Other income (expense) Investment income 5,377 $ 2,845 $ 6,207 $ 5,588 $ 953 $ 354 $ Loss/Gain on disposal of assets (14,738) $ (3,041) $ (13,997) $ N/A N/A 1,000 $ Director's Fees Other income (expense), net (20,184) $ 6,571 $ (39,809) $ 8,307 $ (1,329) $ (1,685) $ Interest expense (20,064) $ (17,106) $ (29,972) $ (34,826) $ (25,423) $ (19,352) $ Total other income (expense), net (49,609) $ (10,731) $ (77,571) $ (20,931) $ (25,799) $ (19,683) $ R:\Projects\111026 City of El Cerrito Rate and Ops Review\Draft Report\Appendices\Appendix C ‐ Variance Analysis 113011Appendix ‐ Variance Analysis 11/30/2011 / 9:39 AM 1 of 4 ---PAGE BREAK--- Appendix C VARIANCE ANALYSIS (Revenues & Expenses) 2 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 A Revenues Refuse Collection City of El Cerrito Schools Debris box collection Rental fees Maintenance services and other Total revenues Operating expenses Salaries and wages Employee benefits Disposal expense City franchise fee Insurance Depreciation and amortization General and operating Total operating expenses Income / (Loss) from operations Other income (expense) Investment income Loss/Gain on disposal of assets Director's Fees Other income (expense), net Interest expense Total other income (expense), net U V W X Y Z AA AB AC AD AE AF AG 448,746 $ 13% (21,631) $ 142,870 $ 4% 21,149 $ 1% 139,072 $ 3% 730,206 $ 20% (17,634) $ (92,480) $ ‐22% (27,115) $ (20,757) $ 35,686 $ 13% (122,300) $ ‐28% 2,120 $ 2% 20,729 $ 18% (18,935) $ ‐14% (11,488) $ ‐10% (7,202) $ (14,776) $ ‐13% (6,393) $ ‐22% (1,930) $ (224) $ (944) $ 6,390 $ 33% (3,101) $ ‐11% 426,839 $ 10% (95,312) $ 96,596 $ 2% (12,040) $ 0% 173,946 $ 4% 590,029 $ 14% 18,197 $ 1% 48,957 $ 4% 129,491 $ 10% 70,456 $ 5% 19,884 $ 1% 286,985 $ 23% (32,330) $ 71,756 $ 15% 17,486 $ 3% (3,411) $ (239,544) $ ‐43% (186,043) $ ‐37% 388,928 $ 40% (264,491) $ ‐20% 25,443 $ 2% 104,208 $ 9% 124,098 $ 10% 378,186 $ 39% 48,251 $ 12% (12,546) $ 18,520 $ 4% (1,277) $ 0% 7,971 $ 2% 60,919 $ 15% (19,368) $ ‐23% 6,669 $ 11% 1,206 $ 2% 5,900 $ 8% (2,837) $ (8,430) $ ‐10% 4,750 $ 4% 12,813 $ 10% 45,295 $ 32% (61,375) $ ‐33% (10,047) $ (8,564) $ 12,594 $ 2% 24,718 $ 4% 92,339 $ 13% (103,737) $ ‐13% (11,383) $ 14,531 $ 2% 421,022 $ 11% (112,124) $ 329,780 $ 8% 10,764 $ 0% (111,858) $ 537,584 $ 14% 5,817 $ 3% 16,812 $ 8% (233,184) $ ‐101% (22,804) $ 855% 285,804 $ ‐1122% 52,445 $ 25% (2,532) $ ‐47% 3,362 $ 118% (619) $ ‐10% (4,635) $ ‐83% (599) $ ‐63% (5,023) $ ‐93% 11,697 $ ‐79% (10,956) $ 360% 13,997 $ ‐100% N/A N/A NA N/A 15,738 $ ‐107% 26,755 $ ‐133% (46,380) $ ‐706% 48,116 $ ‐121% (9,636) $ ‐116% (356) $ 27% 18,499 $ ‐92% 2,958 $ ‐15% (12,866) $ 75% (4,854) $ 16% 9,403 $ ‐27% 6,071 $ ‐24% 712 $ 38,878 $ ‐78% (66,840) $ 623% 56,640 $ ‐73% (4,868) $ 23% 6,116 $ ‐24% 29,926 $ ‐60% 2010 vs. 2005 2006 vs. 2005 2007 vs. 2006 2008 vs. 2007 2009 vs. 2008 2010 vs. 20009 R:\Projects\111026 City of El Cerrito Rate and Ops Review\Draft Report\Appendices\Appendix C ‐ Variance Analysis 113011Appendix ‐ Variance Analysis 11/30/2011 / 9:39 AM 2 of 4 ---PAGE BREAK--- Appendix C VARIANCE ANALYSIS (General & Operating Expenses) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 A B C D E F G H I 2005 2006 2007 2008 2009 % of Total Auto and truck expense 7,269 $ 4,792 $ 2,019 $ N/A N/A N/A Bad dept expense 5,759 $ 10,439 $ 6,868 $ 5,121 $ N/A 13,371 $ 2% Billing expense 18,057 $ 10,514 $ 27,127 $ 21,438 $ 25,614 $ 18,073 $ 3% Communications 5,926 $ 10,926 $ 6,256 $ 6,484 $ 5,831 $ 4,454 $ 1% Computer 10,726 $ 22,033 $ 17,280 $ 14,424 $ 19,391 $ 13,484 $ 2% Contributions 10,490 $ 11,498 $ 8,835 $ 11,433 $ 9,255 $ 8,210 $ 1% Damage claims N/A 6,002 $ 1,000 $ 1,000 $ 1,450 $ 500 $ 0% Diesel 75,360 $ 96,968 $ 98,144 $ 126,532 $ 82,021 $ 98,348 $ 15% Dues and subscriptions 17,271 $ 19,806 $ 20,742 $ 21,804 $ 19,203 $ 22,102 $ 3% Employee gifts 3,126 $ 5,752 $ 2,269 $ 4,725 $ 1,669 $ 1,958 $ 0% Equipment rental 6,495 $ 1,509 $ 1,359 $ 2,530 $ 2,646 $ 2,212 $ 0% Gas and oil 22,532 $ 23,835 $ 23,089 $ 6,541 $ 70 $ 236 $ 0% Uniforms, laundry and linen 1,881 $ 3,799 $ 4,065 $ 2,749 $ 6,059 $ 2,960 $ 0% Legal, accounting and other professional services 107,243 $ 81,236 $ 73,601 $ 130,364 $ 139,605 $ 143,358 $ 21% Licenses 15,151 $ 14,527 $ 18,177 $ 22,463 $ 18,485 $ 18,196 $ 3% Miscellaneous 17,645 $ 12,320 $ 19,462 $ 27,838 $ 23,415 $ 16,094 $ 2% Office supplies 9,978 $ 8,967 $ 8,930 $ 15,951 $ 18,154 $ 18,157 $ 3% Parts 39,385 $ 61,637 $ 60,540 $ 74,994 $ 32,915 $ 25,422 $ 4% Pension and profit sharing 17,500 $ 10,060 $ 25,881 $ 28,630 $ 10,146 $ 6,552 $ 1% Postage 3,033 $ 5,924 $ 2,610 $ 2,430 $ 3,611 $ 5,007 $ 1% Promotion 1,803 $ 606 $ 1,381 $ 857 $ 1,008 $ 1,155 $ 0% Rents 159,474 $ 140,302 $ 154,371 $ 161,688 $ 162,876 $ 170,676 $ 26% Repairs 20,994 $ 12,520 $ 21,173 $ 14,700 $ 16,442 $ 11,920 $ 2% Security 3,590 $ 3,981 $ 3,776 $ 5,046 $ 3,940 $ 4,068 $ 1% Supplies 1,574 $ 1,482 $ 2,441 $ 3,087 $ 808 $ 966 $ 0% Taxes 14,825 $ 19,099 $ 15,285 $ 8,122 $ 20,382 $ 21,453 $ 3% Telephone 15,368 $ 16,410 $ 14,415 $ 15,361 $ 14,900 $ 15,280 $ 2% Tires and tubes 18,329 $ 22,447 $ 23,676 $ 17,270 $ 17,496 $ 15,129 $ 2% Travel and entertainment 17,043 $ 18,951 $ 18,287 $ 21,492 $ 14,274 $ 313 $ 0% Utilities 5,135 $ 7,214 $ 7,215 $ 7,539 $ 7,210 $ 7,839 $ 1% Total general and operating expenses 652,962 $ 665,556 $ 690,274 $ 782,613 $ 678,876 $ 667,493 $ 100% 2010 R:\Projects\111026 City of El Cerrito Rate and Ops Review\Draft Report\Appendices\Appendix C ‐ Variance Analysis 113011Gen. + Opr. Expenses 11/30/2011 / 9:39 AM 3 of 4 ---PAGE BREAK--- Appendix C VARIANCE ANALYSIS (General & Operating Expenses) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 A Auto and truck expense Bad dept expense Billing expense Communications Computer Contributions Damage claims Diesel Dues and subscriptions Employee gifts Equipment rental Gas and oil Uniforms, laundry and linen Legal, accounting and other professional ser Licenses Miscellaneous Office supplies Parts Pension and profit sharing Postage Promotion Rents Repairs Security Supplies Taxes Telephone Tires and tubes Travel and entertainment Utilities Total general and operat J N O P Q R S T U V W X Y $ % $ % $ % $ % $ % (2,477) $ ‐34% (2,773) $ ‐58% 2,019 $ 100% N/A N/A N/A (7,269) $ ‐100% 4,680 $ 81% (3,571) $ ‐34% (1,747) $ ‐25% (5,121) $ ‐100% 13,371 $ #VALUE! 7,612 $ 132% (7,543) $ ‐42% 16,613 $ 158% (5,689) $ ‐21% 4,176 $ 19% (7,541) $ ‐29% 16 $ 0% 5,000 $ 84% (4,670) $ ‐43% 228 $ 4% (653) $ ‐10% (1,377) $ ‐24% (1,472) $ ‐25% 11,307 $ 105% (4,753) $ ‐22% (2,856) $ ‐17% 4,967 $ 34% (5,907) $ ‐30% 2,758 $ 26% 1,008 $ 10% (2,663) $ ‐23% 2,598 $ 29% (2,178) $ ‐19% (1,045) $ ‐11% (2,280) $ ‐22% 6,002 $ 100% (5,002) $ ‐83% ‐ $ 0% 450 $ 45% (950) $ ‐66% 500 $ 100% 21,608 $ 29% 1,176 $ 1% 28,388 $ 29% (44,511) $ ‐35% 16,327 $ 20% 22,988 $ 31% 2,535 $ 15% 936 $ 5% 1,062 $ 5% (2,601) $ ‐12% 2,899 $ 15% 4,831 $ 28% 2,626 $ 84% (3,483) $ ‐61% 2,456 $ 108% (3,056) $ ‐65% 289 $ 17% (1,168) $ ‐37% (4,986) $ ‐77% (150) $ ‐10% 1,171 $ 86% 116 $ 5% (434) $ ‐16% (4,283) $ ‐66% 1,303 $ 6% (746) $ (16,548) $ ‐72% (6,471) $ ‐99% 166 $ 237% (22,296) $ ‐99% 1,918 $ 102% 266 $ 7% (1,316) $ ‐32% 3,310 $ 120% (3,099) $ ‐51% 1,079 $ 57% (26,007) $ ‐24% (7,635) $ 56,763 $ 77% 9,241 $ 7% 3,753 $ 3% 36,115 $ 34% (624) $ 3,650 $ 25% 4,286 $ 24% (3,978) $ ‐18% (289) $ 3,045 $ 20% (5,325) $ ‐30% 7,142 $ 58% 8,376 $ 43% (4,423) $ ‐16% (7,321) $ ‐31% (1,551) $ (1,011) $ ‐10% (37) $ 0% 7,021 $ 79% 2,203 $ 14% 3 $ 0% 8,179 $ 82% 22,252 $ 56% (1,097) $ 14,454 $ 24% (42,079) $ ‐56% (7,493) $ ‐23% (13,963) $ ‐35% (7,440) $ ‐43% 15,821 $ 157% 2,749 $ 11% (18,484) $ ‐65% (3,594) $ ‐35% (10,948) $ ‐63% 2,891 $ 95% (3,314) $ ‐56% (180) $ 1,181 $ 49% 1,396 $ 39% 1,974 $ 65% (1,197) $ ‐66% 775 $ 128% (524) $ ‐38% 151 $ 18% 147 $ 15% (648) $ ‐36% (19,172) $ ‐12% 14,069 $ 10% 7,317 $ 5% 1,188 $ 1% 7,800 $ 5% 11,202 $ 7% (8,474) $ ‐40% 8,653 $ 69% (6,473) $ ‐31% 1,742 $ 12% (4,522) $ ‐28% (9,074) $ ‐43% 391 $ 11% (205) $ 1,270 $ 34% (1,106) $ ‐22% 128 $ 3% 478 $ 13% (92) $ 959 $ 65% 646 $ 26% (2,279) $ ‐74% 158 $ 20% (608) $ ‐39% 4,274 $ 29% (3,814) $ ‐20% (7,163) $ ‐47% 12,260 $ 151% 1,071 $ 5% 6,628 $ 45% 1,042 $ 7% (1,995) $ ‐12% 946 $ 7% (461) $ 380 $ 3% (88) $ 4,118 $ 22% 1,229 $ 5% (6,406) $ ‐27% 226 $ 1% (2,367) $ ‐14% (3,200) $ ‐17% 1,908 $ 11% (664) $ 3,205 $ 18% (7,218) $ ‐34% (13,961) $ ‐98% (16,730) $ ‐98% 2,079 $ 40% 1 $ 0% 324 $ 4% (329) $ 629 $ 9% 2,704 $ 53% ‐ $ 12,594 $ 2% 24,718 $ 4% 92,339 $ 13% (103,737) $ ‐13% (11,383) $ 14,531 $ 2% 2010 vs. 20009 2010 vs. 2005 2007 vs. 2006 2008 vs. 2007 2009 vs. 2008 2006 vs. 2005 R:\Projects\111026 City of El Cerrito Rate and Ops Review\Draft Report\Appendices\Appendix C ‐ Variance Analysis 113011Gen. + Opr. Expenses 11/30/2011 / 9:39 AM 4 of 4 ---PAGE BREAK--- Appendix D Base Year Rate Adjustment Calculation ---PAGE BREAK--- ---PAGE BREAK--- APPENDIX D Base Year Rate Adjustment Calculation 2010 2011 2012 Prior Year Current Year Rate Year Actuals Adjusted Index Forecasted Index Forecasted Total Adjustments Total Adjustment Total Adjustment Adjustments Total REVENUES Refuse Collection City of El Cerrito 4,319,061 $ 4,540,651 $ Schools Debris Box Collection 316,906 $ 316,906 $ Rental fees 96,545 $ 96,545 $ Maintenance services and other 25,481 $ 25,841 $ Total Revenues 4,757,993 $ 4,979,943 $ EXPENSES Salaries and wages 1,516,637 $ Wages-Drivers & Helpers 769,573 $ $769,573 103.64% $797,608 103.68% (64,525) $ $762,453 Wages-Officers 558,830 $ (135,354) $ $423,476 101.23% $428,683 101.85% $436,604 Wages-Office 188,235 $ $188,235 101.23% $190,549 101.85% $194,070 Employee benefits 323,570 $ (18,018) $ $305,552 101.23% $309,309 101.85% (51,055) $ $263,969 Insurance 74,128 $ (4,360) $ $69,768 101.23% $70,626 101.85% $71,931 Depreciation and amortization 114,527 $ $114,527 per Dep Sch $114,527 per Dep Sch $277,883 General and operating 101.23% 101.85% Bad dept expense 13,371 $ $13,371 101.23% $13,535 101.85% $13,785 Billing expense 18,073 $ $18,073 101.23% $18,295 101.85% $18,633 Communications 4,454 $ $4,454 101.23% $4,509 101.85% $4,592 Computer 13,484 $ $13,484 101.23% $13,650 101.85% $13,902 Contributions 8,210 $ (2,800) $ $5,410 101.23% $5,477 101.85% $5,578 Damage claims 500 $ $500 101.23% $506 101.85% $515 Diesel 98,348 $ $98,348 115.50% $113,597 117.47% $133,443 Dues and subscriptions 22,102 $ (4,188) $ $17,914 101.23% $18,134 101.85% $18,469 Employee gifts 1,958 $ (1,958) $ $0 101.23% $0 101.85% $0 Equipment rental 2,212 $ $2,212 101.23% $2,239 101.85% $2,281 Gas and oil 236 $ $236 115.50% $273 117.47% $320 Interest 19,352 $ $96,747 Uniforms, laundry and linen 2,960 $ $2,960 101.23% $2,996 101.85% $3,052 Legal, accounting and other professional services 143,358 $ (6,388) $ $136,970 101.23% $147,454 101.85% $150,178 Licenses 18,196 $ $18,196 101.23% $18,420 101.85% 3,000 $ $21,760 Miscellaneous 16,094 $ $16,094 101.23% $16,292 101.85% $16,593 Office supplies 18,157 $ $18,157 101.23% $18,380 101.85% $18,720 Parts 25,422 $ $25,422 101.23% $25,735 101.85% $26,210 Pension and profit sharing 6,552 $ $6,552 101.23% $6,633 101.85% $6,755 Postage 5,007 $ $5,007 101.23% $5,069 101.85% $5,162 Promotion 1,155 $ (1,155) $ $0 101.23% $0 101.85% $0 Rents 170,676 $ (3,900) $ $166,776 101.23% $168,826 101.85% $171,946 Repairs 11,920 $ $11,920 101.23% $12,067 101.85% $12,290 Security 4,068 $ $4,068 101.23% $4,118 101.85% $4,194 Supplies 966 $ $966 101.23% $978 101.85% $996 Taxes 21,453 $ $21,453 101.23% $21,717 101.85% $22,118 Telephone 15,280 $ $15,280 101.23% $15,468 101.85% $15,754 Tires and tubes 15,129 $ $15,129 101.23% $15,315 101.85% $15,598 Travel and entertainment 313 $ 6,612 $ $6,925 101.23% $7,010 101.85% $7,140 Utilities 7,839 $ $7,839 101.23% $7,935 101.85% $8,082 Total Operating Costs 2,715,708 $ (171,509) $ $2,524,847 $2,595,927 (130,083) $ $2,821,722 Operating Ratio 89.0% $335,649 $348,752 Pass-Through Expenses Franchise Fees 10.00% 458,729 $ 490,488 $ Dump Expense 1,342,577 $ 1,272,204 $ Officer 401K Contributions - $ 21,600 $ City of El Cerrito Balancing Account Funding - $ - $ Pension Liability Payments - $ 65,551 $ Subtotal 4,852,663 $ $5,020,317 Income / (Loss) from Operations = (94,670) $ (40,373) $ Other income (expense) Investment income 354 $ Loss/Gain on disposal of assets 1,000 $ - $ Director's Fees - $ Other income (expense), net (1,685) $ - $ Interest expense - $ Total other income (expense), net (331) $ - $ Total Revenue Requirement 4,852,994 $ $5,020,317 Revenue Surplus / (Shortfall) = (95,001) $ Revenue Surplus / (Shortfall) = (40,373) $ Rate Revenue = 4,954,102 $ Required COLLECTION Rate Adjustment = 0.81% Calculated Target Profit ---PAGE BREAK--- ---PAGE BREAK--- Appendix E Non-Allowable Expenses ---PAGE BREAK--- ---PAGE BREAK--- R:\Projects\111026 City of El Cerrito Rate and Ops Review\Rate Adj Guidelines complete 062404.doc Page 12 of 33 STEP 2 - ADJUSTMENT OF ACTUAL COSTS The Actual Costs for the Prior Year determined above shall be adjusted for each of the following (unless otherwise noted) to determine the Allowed Cost of Operations for the Prior Year: A. Related Party Entities Costs related to any related party entities shall be identified by the Company as part of its Detailed Rate Adjustment Application. Payments to affiliates of the Company other than reasonable compensation for goods and services rendered shall not be allowed. Where costs are allocated to or from a related party, the allocation method used shall be clearly identified and supporting calculations provided with the Application. B. Non-Franchised Operations Costs related to non-franchised operations shall be identified by the Company as part of its Detailed Rate Adjustment Application. Where costs are allocated to or from non-franchised operations the allocation method used shall be consistent with the procedures described in these guidelines and clearly identified. Supporting calculations shall also be provided with the Detailed Rate Adjustment Application. C. Non-Allowable Expenses Non-allowable expenses shall be identified by the Company as part of its Detailed Rate Adjustment Application and excluded as part of the adjustment of Actual Costs. Non- allowable expenses include the following (FY $2004): • Promotion expenses above allowed annual cap of $2,024; • Contributions above allowed annual cap of $7,354; • Legal expenses above allowed annual cap of $33,745; • Dues and Subscriptions above allowed annual cap of $15,869; • Officer salaries (Wages-Officers) above an allowed annual cap of $249,867 • Director Fees; • Fines and Penalties; • Liquidated damages; • Income taxes; • Political donations; • Rental or lease charges for collection vehicles which are greater than the cost of acquisition plus prime rate over 7 years; ---PAGE BREAK--- R:\Projects\111026 City of El Cerrito Rate and Ops Review\Rate Adj Guidelines complete 062404.doc Page 13 of 33 • Goodwill; • Payments to affiliates of the Company other than reasonable compensation for goods and services rendered; • Expenses not associated with solid waste operations franchised under the Agreement; • Unreasonable expense in kind or amount; and • The principal portion of any loan repayments. D. Reasonable and Necessary Costs Prior Year Actual Costs should be reduced by the Company to exclude and/or reduce any costs that were not reasonably and necessarily incurred in the performance of the services provided in accordance with the City’s franchise agreement, or are in excess of those previously agreed to by the Company. For example, costs for personnel during the implementation of new services greater than the expense assumed in the Contractor’s proposed cost for that service might be disallowed. E. Other Expenses Allowed/Disallowed in Company’s Allowed Cost of Operations Additional expenses, not set forth in the guidelines, may be allowed or disallowed for purposes of determining the Company’s Prior Year Allowed Cost of Operations, such as when City directs the Company to perform additional services or when the Company incurs additional costs for which it is solely responsible. ---PAGE BREAK--- Appendix F Pension Liability Information ---PAGE BREAK--- ---PAGE BREAK--- R:\Projects\111026 City of El Cerrito Rate and Ops Review\Draft Report\Appendices\Appendix F - pensionfunding111810.docx 11/30/2011 9:59 AM Page 1 of 1 Appendix F PENSION LIABILITY Through 2008, East Bay Sanitary provided a defined benefit pension plan to shareholders, Teamsters employees and one office employee. The plan was to be paid out based on an average of an employees last 3 years salary. The employee would receive 60% of that average as a or lump sum payment upon retirement. An actuarial analysis of the plan was performed annually. We were then provided a funding contribution amount for the year that was necessary to maintain the required cash balance in the plan. With the market collapse in 2008 we were notified of an unfunded liability to the plan in excess of $1.5M and informed that the 2009 funding requirement would be approximately $250K. No longer able to manage this risk going forward, we elected to freeze the plan and began directing contributions to a 401k plan. So we are now funding both the 401k as well as a current unfunded liability from the old defined benefit plan which currently amounts to approximately $1.08M. The amount being contributed to the 401k on behalf of our drivers and per the union agreement is currently $4.13 per hour. This comes to approximately $65K per year. In addition, we have 2 mechanics in the Machinist union who represent another $14.9K of pension obligation annually. We did not begin making 401k contributions until 2010. So the amount reflected in the 2009 audit as pension expense only includes funding to the old defined benefit plan as well as to the Machinist plan. Our total pension requirement going forward will consist of the annual requirement for the unfunded liability ($85K in 2010), the Teamsters obligation of approximately $65K per year, and the Machinist obligation of approximately $14.9K per year. In addition, since the plan was frozen, shareholders are currently not accruing any pension benefit whatsoever. So we are requesting that this be a consideration in this rate review going forward as well. I have submitted a request to our actuary to determine what percentage of the annual funding requirement actually accrues to shareholders. I should hear within the week. ---PAGE BREAK--- ---PAGE BREAK--- Appendix G EBS Route Productivity Data ---PAGE BREAK--- ---PAGE BREAK--- RESIDENTIAL ROUTE WORKLOAD Route Day Accts Containers Accts Containers Accts Containers Accts Containers Mon 5 5 2 4 522 523 529 532 Tue 435 437 435 437 Wed 2 2 28 138 357 360 387 500 Thur 378 379 378 379 Fri 1 1 28 123 308 311 337 435 Total 8 8 58 265 2,000 2,010 2,066 2,283 Average 3 3 19 88 400 402 413 457 Mon 5 6 1 2 536 538 542 546 Tue 422 425 422 425 Wed 10 10 11 41 429 436 450 487 Thur 386 391 386 391 Fri 4 10 17 63 430 432 451 505 Total 19 26 29 106 2,203 2,222 2,251 2,354 Average 6 9 10 35 441 444 450 471 Mon 7 13 55 236 231 240 293 489 Tue 1 1 3 8 444 444 448 453 Wed 16 77 361 362 377 439 Thur 1 2 343 346 344 348 Fri 1 1 3 3 501 501 505 505 Total 9 15 78 326 1,880 1,893 1,967 2,234 Average 3 5 16 65 376 379 393 447 Mon 2 2 78 340 179 187 259 529 Tue 11 38 382 387 393 425 Wed 6 19 344 347 350 366 Thur 346 349 346 349 Fri 3 4 36 131 385 392 424 527 Total 5 6 131 528 1,636 1,662 1,772 2,196 Average 3 3 33 132 327 332 354 439 Average 4 5 19 80 386 389 403 453 System Total 41 55 296 1,225 7,719 7,787 8,056 9,067 includes 60 Richmond accounts 4 route daily route average = 403 453 3 route daily route average = 537 604 Multi/Apts Residential Total 1 2 3 4 Commercial R:\Projects\111026 City of El Cerrito Rate and Ops Review\Draft Report\Appendices\Route Workload 082911 ‐ whsResidential 1 of 2 ---PAGE BREAK--- COMMERCIAL ROUTE WORKLOAD Route 5 Stops Containers Stops Containers Stops Containers Stops Containers Mon 97 135 6 178 1 1 104 314 Tue 61 99 10 155 6 6 77 260 1 1 Wed 81 116 7 159 1 1 89 276 1 1 Thur 74 96 9 213 83 309 1 1 Fri 88 137 7 138 1 1 96 276 1 1 Total = 449 1,435 Average = 90 287 Sat 61 85 3 94 64 179 1 1 Saturday service is covered through overtime Commercial Multi/Apts Residential Total Additional Listed as "Total" R:\Projects\111026 City of El Cerrito Rate and Ops Review\Draft Report\Appendices\Route Workload 082911 ‐ whsCommercial 2 of 2 ---PAGE BREAK--- 2010 Actual Expenses per Audited Financials 2011 Actual Expenses per Audited Financials 2012 R3 Rate Calculation based on 2010 Audited Financials - No Extension 2013 Forecast based on 2012 R3 Rate Calculation and 2011 Actuals - No Extension 2013 Negotiated Rate Application - 7 Year Extension Revenues Residential and Commercial Collection $ 4,319,061 $ 4,644,836 $ 4,540,651 $ 4,500,493 4,500,493 $ Debris Box 316,906 272,755 316,906 272,755 272,755 Rental Fees 96,545 102,248 96,545 102,248 102,248 Maintenance and Other Services 25,481 29,467 25,841 29,467 29,467 Total Revenues 4,757,993 5,049,306 4,979,943 4,904,963 4,904,963 Expenses Driver Wages 769,573 824,017 762,453 817,885 817,885 Officer Wages 558,830 428,683 436,604 445,161 463,342 Office Wages 188,235 190,549 194,070 197,874 194,851 Total Wages 1,516,638 1,443,249 1,393,127 1,460,920 1,476,078 Employee Benefits 323,570 309,309 263,969 269,143 269,131 Insurance 74,128 67,204 71,931 73,341 69,784 Total Personnel 1,914,336 1,819,762 1,729,027 1,803,404 1,814,993 Depreciation and Amortization 114,527 126,396 277,883 277,883 200,523 Bad debt expense 13,371 - 13,785 15,108 7,500 Billing 18,073 17,249 18,633 17,911 17,911 Communications 4,454 4,762 4,592 4,945 4,945 Computers 13,484 15,175 13,902 15,758 15,758 Contributions 8,210 6,674 5,578 5,813 5,813 Damage claims 500 2,500 515 2,596 2,596 Diesel 98,348 135,499 133,443 173,730 173,730 Dues and subscriptions 22,102 19,498 18,469 19,198 19,198 Employee gifts 1,958 1,904 - - - Equipment rental 2,212 1,864 2,281 1,936 1,936 Gas and oil 236 720 320 923 923 Interest - - 96,747 96,747 96,747 Uniforms, laundry, and linen 2,960 2,495 3,052 2,591 2,591 Legal, accounting, professional services 143,358 149,326 150,178 156,482 156,482 Licenses 18,196 16,137 21,760 19,815 19,815 Misc. 16,094 17,053 16,593 17,708 17,708 Office supplies 18,157 16,981 18,720 17,633 17,633 Parts 25,422 39,543 26,210 41,061 41,061 Pension and profit sharing 6,552 7,990 6,755 8,297 8,297 Postage 5,007 3,237 5,162 3,361 3,361 Promotion 1,155 1,126 - - - Rents 170,676 164,136 171,946 170,438 170,438 Repairs 11,920 15,242 12,290 15,827 15,827 Security 4,068 4,187 4,194 4,348 4,348 Supplies 966 1,191 996 1,237 1,237 Taxes 21,453 20,845 22,118 21,645 21,645 Telephone 15,280 14,168 15,754 14,712 14,712 Tires and tubes 15,129 19,584 15,598 20,336 20,336 Travel and entertainment 313 12 7,140 7,047 7,047 Utilities 7,839 7,749 8,082 8,047 8,047 Pension Liability - - - - - Total Operations 782,020 833,243 1,092,696 1,163,133 1,078,165 Total Operating Expenses 2,696,356 2,653,005 2,821,723 2,966,537 2,893,158 Prev New Operating Ratio 89.0% 90.5% 333,257 327,899 348,752 366,651 303,702 Pass Through Expenses Prev New Franchise Fees 10% 12% 458,729 487,691 490,488 506,984 602,101 Disposal / Processing 1,342,577 1,343,816 1,272,204 1,272,204 1,272,204 Officer 401k - - 21,600 21,600 21,600 Pension Liability - - 65,551 65,551 45,885 Balancing Account - - - - - Grand Total Expenses 4,830,919 4,812,411 5,020,318 5,199,527 5,138,650 Income (Loss) (72,926) 236,895 (40,375) (294,564) (233,687) Other Income (331) (11,995) - - - Revenue Requirement 4,831,250 4,824,406 5,020,318 5,199,527 5,138,650 Rate Revenue 4,732,512 5,019,839 4,954,102 4,875,496 4,875,496 Rate Revenue Increase % 0.81% 6.04% 4.79% 6.91% East Bay Sanitary 2013 Collection Rate Application No increase adopted for 2012. Draft effective increase if extension not agreed to. Agenda Item No. 7(A) Attachment 2b ---PAGE BREAK--- H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A - Refuse Rate Index 111212 Updated.doc 11/13/2012 10:21 AM 1 of 4 Attachment A Refuse Rate Index The Refuse Rate Index (RRI) adjustment shall be calculated in the following manner: 1. The expenses for the required franchised services for the designated fiscal period (January – December) shall be prepared in the format set forth in the Operating Cost Statement - Description on the following page of this Attachment. 2. The expenses for the required franchised services shall be broken down into the following seven cost categories: Union Labor; Non-Union Labor, Diesel Fuel; Vehicle Maintenance, All Other, Depreciation and Interest and Pension Liability. Each cost category is assigned a weighted percentage factor based on that cost category's proportionate share of the total of the costs shown for all cost categories. 3. The following indices published by the United States Department of Labor, Bureau of Labor Statistics (BLS) and the United States Energy and Information Administration (Diesel Fuel), the actual adjustment to union wage rates, the actual change in the Depreciation and Interest Expense, and a set annual amount of $45,885 in Pension Liability funding are used to calculate the adjustment for each cost category. The change in each index shall be calculated using the change in the 12-month average of RRI index values between the base period, which shall be the prior preceding 12-month period ending August 31st, and the preceding 12-month period ending August 31st as contained in the most recent release of the source documents listed. The change in Depreciation and Interest expense shall be based on the actual expense for the prior calendar year compared to the actual expense for the immediately preceding calendar year. In the event any index is discontinued, a successor index shall be selected by the City. Successor indices shall be those indices that are most closely equivalent to the discontinued indices as recommended by the BLS. Cost Category Index Union Labor The applicable annual adjustment to the wage rates and benefits specified in the Company’s applicable Union Agreement Non-Union Labor Series ID: ceu6056210008 Professional and business services – waste collection Diesel Fuel Series ID: cuusa422setb01 Consumer Price Index, All Urban Consumers, Gasoline (all types) – Bay Area Vehicle Maintenance Series ID: pcu333924333924 Industrial truck, trailer and stacker mfg. All Other Series ID: cuura422sa0 Consumer Price Index, All Urban Consumers, All Items – Bay Area Depreciation and Interest The actual change for the most recently completed calendar year compared to the prior year Pension Liability Set at $45,885 without adjustment until fully funded. 4. The percentage weight for each cost category is multiplied by the change in each appropriate index to calculate a weighted percentage for each cost category. The weighted percentage changes for each of the seven cost categories are added together to calculate the “collection component” of the Refuse Rate Index. Agenda Item No. 7(A) Attachment 2c ---PAGE BREAK--- H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A - Refuse Rate Index 111212 Updated.doc 11/13/2012 10:21 AM 2 of 4 Operating Cost Statement - Description Union Labor: (Adjustment to account for weighting of any differing adjustments to wages and / or specific benefit accounts) List all union labor salary and benefit accounts. List payroll tax accounts directly related to the above salary accounts. List employee group medical and life accounts directly related to the above salary accounts. List employee retirement or profit sharing contributions accounts directly related to the above salary accounts. Non-Union Labor: List all non-union labor salary and benefit accounts. List payroll tax accounts directly related to the above salary accounts. List employee group medical and life accounts directly related to the above salary accounts. List employee retirement or profit sharing contributions accounts directly related to the above salary accounts. Diesel Fuel: List all diesel fuel accounts. Depreciation and Interest: List all depreciation and interest accounts Vehicle Maintenance: List all collection or collection related vehicle parts accounts. Pension Liability Funding: Set at $45,885 without adjustment until fully funded. All Other: List all other expense accounts related to the services provided under this Agreement not including any disposal related expenses that are covered through the IRRF Rate. This category includes all insurance including general liability, fire, truck damage, and extended coverage; rent on property, truck licenses and permits; real and personal property taxes; telephone and other utilities; employee uniforms; safety equipment; general yard repairs and maintenance; non-diesel fuel; office supplies; postage; trade association dues and subscription; advertising; and miscellaneous other expenses. ---PAGE BREAK--- H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A - Refuse Rate Index 111212 Updated.doc 11/13/2012 10:21 AM 3 of 4 RRI Example In this example, the Refuse Rate Index is 1.35% rates would be increased by 1.35%). One-Time or Ongoing Additional Expenses Additional adjustments may be made for the addition of any one-time or ongoing expenses approved by the City. To calculate the additional percentage increase required for any such additional expenses, the amount of additional expense will be divided by the total operating costs for the seven RRI cost categories. For example, if the amount of additional expense is $50,000, and the Company’s operating costs for the seven cost categories total $2,939,043, the additional required rate increase would be $50,000 / $2,939,043 = 1.70%. Using the example above, this would result in a total RRI adjustment of 1.35% + 1.70% = 3.05%. If this adjustment is made for a one-time additional expense, there will need to be a negative adjustment to the RRI percentage in the following year in order to remove the one-time expense from the rate base. This negative adjustment will be calculated by dividing the total amount of one-time expense by the adjusted total operating costs for the year in which the one-time addition was incorporated. For example, if the additional expense of $50,000 (used as an example above) was a one-time expense, the negative adjustment to the RRI percentage in the following year would be -$50,000 / ($2,939,043 x (1+3.05%)) = -1.65%. It should be noted that this negative adjustment is not “additive” to the regularly calculated RRI increase in the subsequent year the adjustment must be applied separately by multiplication) (see Attachment A-1 for calculation). Attachment A-1 provides an example of a one-time additional expense added to the RRI calculation. Item # Category Data Source Percent Change Category Costs Category Weight Weighted Percentage Change 1 Union Labor The applicable annual adjustment to the wage rates and benefits specified in the Company's applicable Union Agreement 5.00% $817,885 27.83% 1.39% 2 Non-Union Labor Series ID: ceu6056210008 Professional and business services – waste collection 1.77% $1,161,887 39.53% 0.70% 3 Diesel Fuel Series ID: cuusa422setb01 Consumer Price Index, All Urban Customers, Gasoline (all types), Bay Area -27.68% $173,730 5.91% -1.64% 4 Vehicle Maintenance Series ID: pcu333924333924 Industrial truck, trailer and stacker mfg. 10.26% $77,224 2.63% 0.27% 5 All Other Series ID: cuura422sa0 Consumer Price Index, All Urban Customers, All Items, Bay Area 0.99% $365,162 12.42% 0.12% 6 Depreciation and Interest Set to actual 5.00% $297,270 10.11% 0.51% 7 Pension Liability Funding No annual adjustment to Pension Funding Liability - Existing rates set to generate $45,885 annually. 0.00% $45,885 1.56% 0.00% $2,939,043 100.00% 1.35% Assumes these are the percentage changes in the indices from year to year. Assumes the categories represent these percentages as a total of CONTRACTOR’S operating costs. Represents the product of Percentage Change x Category Weight. RRI ---PAGE BREAK--- H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A - Refuse Rate Index 111212 Updated.doc 11/13/2012 10:21 AM 4 of 4 Revenue Balancing Account In addition to the above RRI Collection Rate adjustment, an additional adjustment will be made to account for any difference between the projected rate revenues and the actual rate revenues received. As an example, a January 1, 2014 RRI rate adjustment of 3.05% is projected to generate $3,713,325 in collection rate revenues (not including IRRF Rate Revenues). If the 2014 audited financial statements submitted as part of the RRI application due October 1, 2015 report total rate revenues of $3,700,000 there is a shortfall of $13,325. Therefore, a Revenue Balancing Account adjustment would be in an amount equal to the amount of shortfall divided by the total operating costs for the seven cost categories submitted on October 1, 2015. For example, if the amount of shortfall is $13,325, and the Company’s operating costs for the seven cost categories total $3,500,000, the additional required rate increase would be $13,325 / $3,500,000 = 0.38%. It should be noted that this adjustment is not “additive” to the regularly calculated RRI increase in that year the adjustment must be applied separately by multiplication). A negative adjustment will be made in instances where a rate revenue surplus is realized. For example, if instead of a shortfall there is a surplus of $13,325, and the Company’s operating costs for the seven cost categories total $3,500,000, the required negative adjustment would be -$13,325 / $3,500,000 = -0.38%. It should be noted that this adjustment is not “additive” to the regularly calculated RRI increase in that year the adjustment must be applied separately by multiplication). Attachment A-2 illustrates how the revenue shortfall/surplus is determined by projecting the Company’s revenue and comparing to actual revenues received. ---PAGE BREAK--- ATTACHMENT A-1 Item # Category Data Source Percent Change Category Costs Category Weight Weighted Percentage Change Adjusted Category Costs Percent Change Category Costs Category Weight Weighted Percentage Change Adjusted Category Costs Percent Change Category Costs Category Weight Weighted Percentage Change Adjusted Category Costs 1 Union Labor The applicable annual adjustment to the wage rates and benefits specified in the Company's applicable Union Agreement 5.00% $817,885 27.83% 1.39% $858,779 5.00% $858,779 28.83% 1.44% $901,718 5.00% $901,718 29.44% 1.47% $946,804 2 Non-Union Labor Series ID: ceu6056210008 Professional and business services – waste collection 1.77% $1,161,887 39.53% 0.70% $1,182,428 -0.04% $1,182,428 39.69% -0.02% $1,181,975 0.49% $1,181,975 38.59% 0.19% $1,187,804 3 Diesel Fuel Series ID: cuusa422setb01 Consumer Price Index, All Urban Customers, Gasoline (all types), Bay Area -27.68% $173,730 5.91% -1.64% $125,643 15.97% $125,643 4.22% 0.67% $145,704 17.14% $145,704 4.76% 0.82% $170,677 4 Vehicle Maintenance Series ID: pcu333924333924 Industrial truck, trailer and stacker mfg. 10.26% $77,224 2.63% 0.27% $85,147 0.90% $85,147 2.86% 0.03% $85,911 0.79% $85,911 2.81% 0.02% $86,589 5 All Other Series ID: cuura422sa0 Consumer Price Index, All Urban Customers, All Items, Bay Area 0.99% $365,162 12.42% 0.12% $368,777 1.37% $368,777 12.38% 0.17% $373,815 2.05% $373,815 12.21% 0.25% $381,489 6 Depreciation and Interest Set to actual 5.00% $297,270 10.11% 0.51% $312,134 5.00% $312,134 10.48% 0.52% $327,740 5.00% $327,740 10.70% 0.54% $344,127 7 Pension Liability Funding No annual adjustment to Pension Funding Liability - Existing rates set to generate $45,885 annually. 0.00% $45,885 1.56% 0.00% $45,885 0.00% $45,885 1.54% 0.00% $45,885 0.00% $45,885 1.50% 0.00% $45,885 $2,939,043 100.00% 1.35% $2,978,792 $2,978,792 100.00% 2.82% $3,062,748 $3,062,748 100.00% 3.29% $3,163,375 Assumes these are the percentage changes in the indices from year to year. Assumes the categories represent these percentages as a total of CONTRACTOR’S operating costs. Represents the product of Percentage Change x Category Weight. Category One-Time? Cost One-Time? Cost One-Time? Cost Union Labor Non-Union Labor Diesel Fuel Vehicle Maintenance All Other Yes $50,000 Depreciation and Interest Pension Liability Funding Total Additions to Rate Base $50,000 Total Additions to Rate Base $0 Total Additions to Rate Base $0 Total Adjusted Costs $3,028,792 Total Ending Costs $3,062,748 Total Ending Costs $3,163,375 Additional Required Rate Increase 1.70% Additional Required Rate Increase 0.00% Additional Required Rate Increase 0.00% Total Rate Increase 3.05% Total Rate Increase 2.82% Total Rate Increase 3.29% If previous year's Additions to Rate Base were one-time additions: If previous year's Additions to Rate Base were one-time additions: Adjustment to Remove Prev. One-Time Additions to Rate Base -1.65% Adjustment to Remove Prev. One-Time Additions to Rate Base 0.00% Scenario: Grand Total Rate Increase 1.12% Grand Total Rate Increase 3.29% Example Rate: 10.00 $ 10.00 $ RY1 Increase: 3.05% 10.305 1.35% 10.135 RY2 Increase: 1.12% 10.421 2.82% 10.421 Check: OK One-Time Adjustment IMPORTANT NOTE: The "Total Rate Increase" and the "Adjustment to Remove Prev. One-Time Additions to Rate Base" are NOT additive. The Adjustment to Remove Prev. One-Time Additions to Rate Base must be applied separately. The resulting "Grand Total Rate Increase" calculation is: (1+"Adjustment") x (1+"Total Rate Increase) - 1 IMPORTANT NOTE: The "Total Rate Increase" and the "Adjustment to Remove Prev. One-Time Additions to Rate Base" are NOT additive. The Adjustment to Remove Prev. One-Time Additions to Rate Base must be applied separately. The resulting "Grand Total Rate Increase" calculation is: (1+"Adjustment") x (1+"Total Rate Increase) - 1 No One-Time Adjustment If previous year's Additions to Rate Base were ongoing additions, the amount of those additions should be added to the appropriate Category Cost above. If previous year's Additions to Rate Base were ongoing additions, the amount of those additions should be added to the appropriate Category Cost above. EXAMPLE Example One-Time Addition to Rate Base Additions to Rate Base Additions to Rate Base Additions to Rate Base Description Description Description RRI RATE YEAR 1 RATE YEAR 2 RATE YEAR 3 In Rate Year 2, Category Costs can either be reestablished using new financial information, or they can be taken as the previous year's "Adjusted Category Costs" (as shown here). If the latter method is used, any "ongoing" Additions to Rate Base from Rate Year 1 must be added to this year's Category Costs ("one-time" aditions do not need to be added). The Adjustment to Remove Prev. One-Time Additions to Rate Base 1.65%) is not exactly equal to the Additional Required Rate Increase (1.70%) from the prior year. This is because the one-time expense must be removed from the Total Adjusted Costs from the previous year, rather than the original Category Costs. For example: Original adj. to add expense = $50,000 / ($2,939,043) = 1.70% Adj. to remove expense = -$50,000 / ($2,939,043 x (1+3.05%)) = -$50,000 / ($3,028,792) = -1.65% In Rate Year 3, Category Costs can either be reestablished using new financial information, or they can be taken as the previous year's "Adjusted Category Costs" (as shown here). If the latter method is used, any "ongoing" Additions to Rate Base from Rate Year 2 must be added to this year's Category Costs ("one-time" aditions do not need to be added). H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / A-1 RRI Calc 11/13/2012 10:21 AM 1 of 9 ---PAGE BREAK--- ATTACHMENT A-2 2013 Negotiated Rate Application - 7 Year Extension RRI Cost Category 2014 Revenues Projected by RRI Actual 2014 Revenues Difference Revenues Rate Revenues (incl. Rental Fees) 3,603,292 +3.05% 3,713,325 3,700,000 13,325 IRFF Rate Revenues 1,272,204 Maintenance and Other Services 29,467 Total Revenues 4,904,963 Expenses Driver Wages 817,885 Union Labor Officer Wages 463,342 Non-Union Labor Office Wages 194,851 Non-Union Labor Total Wages 1,476,078 Employee Benefits 269,131 Non-Union Labor Insurance 69,784 Non-Union Labor Total Personnel 1,814,993 Depreciation and Amortization 200,523 Depreciation and Interest Bad debt expense 7,500 All Other Billing 17,911 All Other Communications 4,945 All Other Computers 15,758 All Other Contributions 5,813 All Other Damage claims 2,596 All Other Diesel 173,730 Diesel Fuel Dues and subscriptions 19,198 All Other Employee gifts - All Other Equipment rental 1,936 All Other Gas and oil 923 All Other Interest 96,747 Depreciation and Interest Uniforms, laundry, and linen 2,591 All Other Legal, accounting, professional services 156,482 Non-Union Labor Licenses 19,815 All Other Misc. 17,708 All Other Office supplies 17,633 All Other Parts 41,061 Vehicle Maintenance Pension and profit sharing 8,297 Non-Union Labor Postage 3,361 All Other Promotion - Non-Union Labor Rents 170,438 All Other Repairs 15,827 Vehicle Maintenance Security 4,348 All Other Supplies 1,237 All Other Taxes 21,645 All Other Telephone 14,712 All Other Tires and tubes 20,336 Vehicle Maintenance Travel and entertainment 7,047 All Other Utilities 8,047 All Other Pension Liability - Pension Liability Total Operations 1,078,165 Total Operating Expenses 2,893,158 Prev New Operating Ratio 89.0% 90.5% 303,702 Pass Through Expenses Prev New Franchise Fees 10% 12% 602,101 Disposal / Processing 1,272,204 Officer 401k 21,600 Pension Liability 45,885 Balancing Account - Grand Total Expenses 5,138,650 Income (Loss) (233,687) Other Income - 817,885 Union Labor 1,161,887 Non-Union Labor 173,730 Diesel Fuel 77,224 Vehicle Maintenance 365,162 All Other 297,270 Depreciation and Interest - Pension Liability Divide this value by the total operating costs for the seven cost categories in the year the Revenue Balancing Account adjustment takes place in order to determine the additional % adjustment required. East Bay Sanitary 2013 Collection Rate Application H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / A-2 Summary 11/13/2012 10:21 AM 2 of 9 ---PAGE BREAK--- Series Id: Super Sector: Industry: NAICS Code: Data Type: Years: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Average % Change 2002 13.88 13.84 14.00 14.27 14.38 14.52 14.87 14.81 14.67 14.66 14.76 14.79 14.48 2003 14.91 14.74 15.05 15.21 15.20 15.39 15.54 15.56 15.33 15.67 15.87 15.43 15.33 15.04 2004 15.25 15.18 15.11 15.26 15.35 15.34 15.51 15.46 15.34 15.27 15.10 15.06 15.27 15.40 2.37% 2005 14.90 14.71 14.83 15.38 15.45 15.64 15.76 15.90 15.84 15.97 15.92 16.09 15.54 15.28 -0.77% 2006 16.07 16.09 16.32 16.18 16.39 16.64 16.58 16.73 16.33 16.61 16.37 16.59 16.41 16.24 6.26% 2007 16.55 16.66 16.94 16.59 16.81 16.63 16.97 16.71 16.91 16.86 17.28 17.06 16.83 16.65 2.54% 2008 17.04 17.12 17.22 17.19 17.17 17.27 17.19 17.02 17.11 17.00 17.67 17.66 17.22 17.11 2.79% 2009 17.73 17.86 17.72 17.32 17.32 17.09 17.21 17.27 17.69 17.37 17.22 17.38 17.43 17.41 1.77% 2010 17.28 17.19 17.22 17.21 17.42 17.68 17.45 17.77 17.94 17.86 17.46 17.48 17.50 17.41 -0.04% 2011 17.31 17.38 17.22 17.44 17.37 17.68 17.49 17.28 17.41 17.15 17.33 17.10 17.35 17.49 0.49% 2012 17.18 17.14 17.18 17.44 17.58 17.37 17.47 17.31 17.24 17.31 -1.07% Not Seasonally Adjusted Employment, Hours, and Earnings from the Current Original Data Value CEU6056210008 Professional and business services Waste collection 5621 AVERAGE HOURLY EARNINGS OF PRODUCTION AND NONSUPERVISORY EMPLOYEES 2002 to 2012 NON-UNION LABOR % Change for years 2009, 2010 and 2011 used for purposes of illustration on Attachment A-1. For a RRI rate adjustment effective January 1, 2014, the % change between average value for the 12- month period ending August 2012 and the average value for the 12- month period ending August 2013 would be used. H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / RRI Indices 11/13/2012 10:21 AM 3 of 9 ---PAGE BREAK--- Series Id: Area: Item: Base Period: Years: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Average % Change 2002 98.8 98.8 111.8 126.4 123.2 125.3 127.6 126.1 124.8 122.5 128.0 125.3 119.9 2003 131.1 146.4 164.2 161.4 146.7 140.9 143.3 147.4 160.7 142.6 130.9 125.3 145.1 140.17 2004 128.0 141.7 161.7 163.1 171.3 175.7 168.2 160.1 159.9 178.0 178.5 163.2 162.5 152.44 8.76% 2005 147.7 155.3 173.7 199.0 194.8 183.0 195.3 205.8 226.3 222.1 195.0 168.5 188.9 177.85 16.67% 2006 177.1 188.8 193.1 220.1 249.8 242.2 241.1 236.5 213.5 191.1 186.1 193.6 211.1 213.38 19.98% 2007 199.904 208.115 235.535 251.848 262.584 249.699 240.699 225.521 222.381 234.636 258.004 254.849 236.981 221.52 3.81% 2008 248.986 246.717 272.803 288.467 303.504 340.526 339.158 311.970 292.294 264.723 182.948 141.060 269.430 276.83 24.97% 2009 153.240 167.998 164.472 174.782 190.478 222.585 219.897 228.031 236.840 231.912 226.980 220.962 203.181 200.21 -27.68% 2010 229.403 222.820 232.235 235.070 235.684 234.512 239.427 240.257 230.378 235.786 241.123 245.781 235.206 232.18 15.97% 2011 254.001 263.781 296.965 316.808 313.826 294.033 287.194 283.951 294.641 289.849 284.870 269.894 287.484 271.97 17.14% 2012 279.256 301.685 327.044 317.016 324.627 300.519 285.116 309.893 314.814 298.70 9.83% DIESEL FUEL Consumer Price Index - All Urban Consumers Original Data Value Not Seasonally Adjusted San Francisco-Oakland-San Jose, CA Gasoline (all types) CUUSA422SETB01 1982-84=100 2002 to 2012 H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / RRI Indices 11/13/2012 10:21 AM 4 of 9 ---PAGE BREAK--- Series Id: Industry: Product: Base Date: Years: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Average % Change 2002 155.4 155.5 155.5 154.6 154.4 154.5 155.4 155.5 155.5 155.5 155.5 156.1 155.3 2003 156.1 156.3 156.5 156.2 156.2 157.0 157.0 157.1 157.1 157.2 157.2 157.3 156.8 156.25 2004 157.8 158.5 159.0 160.1 160.9 161.2 161.9 162.2 162.3 163.2 163.9 164.0 161.2 159.20 1.89% 2005 165.2 165.4 165.6 169.0 169.4 169.7 170.0 170.1 170.2 170.7 170.8 171.2 168.9 166.48 4.57% 2006 171.6 172.1 172.3 173.1 173.8 174.6 176.1 176.4 176.6 177.5 177.6 177.6 175.0 172.74 3.76% 2007 178.4 178.5 179.1 179.8 179.8 179.8 180.3 180.3 180.3 180.3 180.6 180.0 179.8 178.78 3.49% 2008 182.6 182.8 182.9 184.2 185.4 187.0 198.0 198.3 202.1 202.5 202.4 202.6 192.6 185.20 3.59% 2009 203.0 203.0 203.0 205.9 205.8 205.8 207.0 207.3 207.3 207.4 207.4 207.8 205.9 204.20 10.26% 2010 205.0 205.0 205.0 206.0 207.0 204.2 205.1 205.2 205.1 205.1 205.9 205.9 205.4 206.03 0.90% 2011 206.3 206.7 206.9 209.5 209.4 209.9 210.6 210.6 210.8 210.9 210.8 210.9 209.5 207.66 0.79% 2012 213.6 215.8 214.6 215.2 215.5 218.1 217.4 218.1 218.2 214.31 3.20% VEHICLE MAINTENANCE PCU333924333924 Industrial truck, trailer, and stacker mfg Industrial truck, trailer, and stacker mfg [PHONE REDACTED] to 2012 Original Data Value Producer Price Index Industry Data H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / RRI Indices 11/13/2012 10:21 AM 5 of 9 ---PAGE BREAK--- Series Id: Area: Item: Base Period: Years: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual Average % Change 2002 191.3 193.0 193.2 193.5 194.3 193.2 193.0 2003 197.7 197.3 196.3 196.3 196.3 195.3 196.4 195.85 2004 198.1 198.3 199.0 198.7 200.3 199.5 198.8 197.62 0.90% 2005 201.2 202.5 201.2 203.0 205.9 203.4 202.7 201.28 1.86% 2006 207.1 208.9 209.1 210.7 211.0 210.4 209.2 207.52 3.10% 2007 213.688 215.842 216.123 216.240 217.949 218.485 216.048 213.88 3.07% 2008 219.612 222.074 225.181 225.411 225.824 218.528 222.767 221.45 3.54% 2009 222.166 223.854 225.692 225.801 226.051 224.239 224.395 223.64 0.99% 2010 226.145 227.697 228.110 227.954 228.107 227.658 227.469 226.70 1.37% 2011 229.981 234.121 233.646 234.608 235.331 234.327 233.390 231.35 2.05% 2012 236.880 238.985 239.806 241.170 237.75 2.76% ALL OTHER Consumer Price Index - All Urban Consumers 2002 to 2012 CUURA422SA0 Not Seasonally Adjusted San Francisco-Oakland-San Jose, CA All items 1982-84=100 Original Data Value H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / RRI Indices 11/13/2012 10:21 AM 6 of 9 ---PAGE BREAK--- Contract begins 1/1/2014 Contractor submits financial info for CY 2013 10/1/2014 CY 2013 info not availa Rate adjustment approved by City Council (approx.) 11/1/2014 Rate adjustment takes effect 1/1/2015 Contractor submits financial info for CY 2014 10/1/2015 Rate adjustment approved by City Council (approx.) 11/1/2015 Rate adjustment takes effect 1/1/2016 Contractor submits financial info for CY 2015 10/1/2016 Rate adjustment approved by City Council (approx.) 11/1/2016 Rate adjustment takes effect 1/1/2017 Adjust all dates up/down in increments of one year depending on contract start date. RATE ADJUSTMENT SCHEDULE H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / Rate Adj Schedule 11/13/2012 10:21 AM 7 of 9 ---PAGE BREAK--- lable H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / Rate Adj Schedule 11/13/2012 10:21 AM 8 of 9 ---PAGE BREAK--- ATTACHMENT A-1 Item # Category Data Source Percent Change Category Costs Category Weight Weighted Percentage Change Adjusted Category Costs 1 Union Labor The applicable annual adjustment to the wage rates and benefits specified in the Company's applicable Union Agreement 5.00% $817,885 27.83% 1.39% $858,779 2 Non-Union Labor Series ID: ceu6056210008 Professional and business services – waste collection 1.77% $1,161,887 39.53% 0.70% $1,182,428 3 Diesel Fuel California No 2 Diesel Ultra Low Sulfur (0-15 ppm): http://www.eia.gov/dnav/pet/hist/LeafH andler.ashx?n=PET&s=EMD_EPD2DX L0_PTE_SCA_DPG&f=M #REF! $173,730 5.91% #REF! #REF! 4 Vehicle Maintenance Series ID: pcu333924333924 Industrial truck, trailer and stacker mfg. 10.26% $77,224 2.63% 0.27% $85,147 5 All Other Series ID: cuura422sa0 Consumer Price Index, All Urban Customers, All Items Bay Area 0.99% $365,162 12.42% 0.12% $368,777 6 Depreciation and Interest Set to actual 0.00% $297,270 10.11% 0.00% $297,270 7 Pension Liability Funding No annual adjustment to Pension Funding Liability - Existing rates set to generate $45,885 annually. 0.00% $45,885 1.56% 0.00% $45,885 Revenue Impact to Company $2,939,043 100.00% #REF! #REF! #REF! Assumes these are the percentage changes in the indices from year to year. Assumes the categories represent these percentages as a total of CONTRACTOR’S operating costs. Represents the product of Percentage Change x Category Weight. Item # Category Data Source Percent Change Category Costs Category Weight Weighted Percentage Change Adjusted Category Costs 1 Union Labor The applicable annual adjustment to the wage rates and benefits specified in the Company's applicable Union Agreement 5.00% $817,885 31.51% 1.58% $858,779 2 Non-Union Labor Series ID: ceu6056210008 Professional and business services – waste collection 1.77% $1,161,887 44.76% 0.79% $1,182,428 3 Diesel Fuel California No 2 Diesel Ultra Low Sulfur (0-15 ppm): http://www.eia.gov/dnav/pet/hist/LeafH andler.ashx?n=PET&s=EMD_EPD2DX L0_PTE_SCA_DPG&f=M #REF! $173,730 6.69% #REF! #REF! 4 Vehicle Maintenance Series ID: pcu333924333924 Industrial truck, trailer and stacker mfg. 10.26% $77,224 2.97% 0.31% $85,147 5 All Other Series ID: cuura422sa0 Consumer Price Index, All Urban Customers, All Items Bay Area 0.99% $365,162 14.07% 0.14% $368,777 6 Depreciation and Interest Set to actual 0.00% $0 0.00% 0.00% $0 7 Pension Liability Funding No annual adjustment to Pension Funding Liability - Existing rates set to generate $45,885 annually. 0.00% $0 0.00% 0.00% $0 Revenue Impact to Company $2,595,888 100.00% #REF! #REF! #REF! Assumes these are the percentage changes in the indices from year to year. Assumes the categories represent these percentages as a total of CONTRACTOR’S operating costs. Represents the product of Percentage Change x Category Weight. RRI RATE YEAR 1 RRI RATE YEAR 1 H:\Garbage, Fees and Rates\2012 EBS Rate Review and Extension\RRI\Attachment A-1 and A-2 - Copy of Final Summary of Negotiations 11-20-12 - updated 111212 / A-1 RRI Calc (test sheet) 11/13/2012 10:21 AM 9 of 9