2025 Solid Waste Rate
Adjustment & New Rate
Adjustment Methodology:
City of Arroyo Grande
November 12, 2024
Garth Schultz
SLIDE
1 Receive presentation on recommended
adjustments to solid waste rates effective
January 14, 2025
Set a public hearing for January 14, 2025,
pursuant to Article XIIID of the California
Constitution (Proposition 218)
Provide direction to issue 45-day notices to solid
waste customers regarding rate adjustment
public hearing and protest instructions
Recommended Action
SLIDE
2 Executive Summary
Solid waste services are critical services and are
required for health and safety as well as compliance
with State laws
The City’s solid waste collection operations are
contracted out to South County Sanitary Service
(SCSS) and are funded through solid waste rates
Rate revenues are adjusted per the City’s rate
setting methodology – every 3 years based on
SCSS’ actual costs and otherwise annually by CPI
The City may authorize up to 5-years of solid waste
rate adjustments at a time – there are no ongoing
automatic adjustments outside of Council
authorization
SLIDE
3 Executive Summary
Existing rate adjustment methodology was established
in 1994 and is outdated
The last cost-based adjustment occurred in 2022, with CPI adjustments in 2023 and 2024
SCSS submitted a cost-based rate adjustment
application for 2025 per existing methodology and
schedule
The City along 9 other Agencies in San Luis Obispo
County and SCSS’ parent company (Waste
Connections) all see benefit in a new approach to
annual rate adjustments
SLIDE
4 2025 Cost-Based Rate Adjustment
⎻ Projects future costs based on recent actual costs per audited financial statements
⎻ Increases in organics processing costs
⎻ Increases in landfill disposal costs
⎻ Inflation-related increases in collection costs
⎻ Removal of prior limitations on corporate overhead
⎻ Updated profit allowance
2025 Rate Adjustment and New Methodology
SLIDE
5 2025 Cost Projections
2025 Rate Adjustment and New Methodology
City of Arroyo Grande Original
Adjustment
Revised
Adjustment
Collection Services $2,611,578 $2,640,547
Profit Allowance 227,094 237,649
Post-Collection Services 1,485,678 1,485,678
Agency Fees 462,296 462,296
Total Cost Projections 4,786,646 4,826,170
Revenue at Current Rates 4,621,616 4,621,616
Surplus / Shortfall (165,030) (204,555)
Franchise Fee Adjustment Factor 0.4% 0.49%
Rate Adjustment Factor 3.97% 4.92%
SLIDE
6 2025 Rate Adjustment Outcomes
2025 Rate Adjustment and New Methodology
Original Adjustment per 1994 Rate Manual 3.97%
Revised Depreciation Schedule -1.33%
Remove Limitation on Corporate Overhead 1.51%
Service Enhancements 0.45%
Updated Profit Allowance 0.23%
Recalculated Fees 0.09%
Revised Adjustment for New Methodology 4.92%
SLIDE
7 2025 Monthly Residential Rates
2025 Rate Adjustment and New Methodology
Service Level 2024 2025 Change
32-gallon $ 27.33 $ 28.67 $ 1.34
64-gallon 35.52 37.27 1.75
96-gallon 43.73 45.88 2.15
SLIDE
8 Service Enhancements
⎻ Customer Assistance Program: 20% low-income
discount provided to residential customers using 32-gallon cart service (or below) and using existing District practices on low-income relief for their offered utility type services ⎻ Free Bulky Waste Collections: No charge collection for one bulky item during clean-up weeks
⎻ Annual Cart Exchange: Once annual exchange of a
residential garbage, recycling, or organics cart per
customer account
2025 Rate Adjustment and New Methodology
SLIDE
9 2025 Rate Adjustment and New Methodology
Overall Look at Solid Waste Costs
Collection
Services
54%
Profit Allowance
5%
Post-Collection
Services
31%
Franchise Fee
10%
SLIDE
1 0
New Rate Adjustment Methodology
⎻ Enhances rate stability, predictability, fairness,
transparency, ease of administration, and cost- effectiveness ⎻ Capped CPI adjustments to MCD Collection and Post- Collection Services – 2% floor, 5% ceiling with roll-overs ⎻ Revenue balancing mechanism – surplus or shortfall
revenues carries forward to future years
⎻ Less frequent cost-based adjustments – no more
frequently than every 5 years
⎻ Extraordinary Adjustments – E.g., CARB fleet
electrification mandate
2025 Rate Adjustment and New Methodology
SLIDE
1 1
Regional Comparison
Monthly 32-Gallon Cart Rates
$0
$10
$20
$30
$40
$50
$60
SLIDE
1 2
Regional Comparison
Monthly 64-Gallon Cart Rates
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
SLIDE
1 3
Regional Comparison
Monthly 96-Gallon Cart Rates
$0
$20
$40
$60
$80
$100
$120
$140
SLIDE
1 4
$0
$50
$100
$150
$200
$250
$300
$350
Regional Comparison
Monthly 2-CY Bin Rates
SLIDE
1 5
Recommended Action
Receive presentation on recommended
adjustments to solid waste rates effective January
14, 2025
Set a public hearing for January 14, 2025, pursuant
to Article XIIID of the California Constitution
(Proposition 218)
Provide direction to issue 45-day notices to solid
waste customers regarding rate adjustment public
hearing and protest instructions