To the members of the:
CITY COUNCIL
Date t /2/24-cA ✓ ccL
CM _~VDCM(3)V
August 8, 2024
Coun cil Me moran dum
To:
From:
Honorable Mayor Blackburn and Members of the City Council Paz Gomez, Deputy City Manager, Public Works
Via:
Re:
Geoff Patnoe, Acting City Manager ~
Waste Hauler Rate Increase for Fisc'arfear 2024-25 (Districts -All ) {city of
Carlsbad
Memo ID# 2024058
This memorandum provides background and information on the recent waste hauler rate increase for fiscal year 2024-25 by Republic Services.
Background
On April 6, 2021, the City Council adopted Resolution No. 2021-075, approving a new franchise agreement for waste hauling services with Republic Services. The franchise agreement, effective July 1, 2022, was developed t o ensure compliance with recent st atewide solid waste legislation, including organics recycling. The franchise ag reement requires Republic Services to provide the required organic waste recycling infrast ructure capacity that is verifiably available to the City of Carlsbad .
The franchise agreement expires on June 30, 2032. Within the franchise agreement there are negotiated mechanisms that allow for amendments and extensions under cert ain circumstances.
Discussion
As provided in the franchise agreement, a rate increase for residential and commercial accounts within the city, went into effect on July 1, 2024. This increase is based on an approved formula, considering factors such as t he Consumer Price Index, disposal rat es, fuel index and city fees.
The chart below provides the history of rate increases for residents for t he combined services provided by Republic Services :
Residential Rate 2022-23 2023-24 2023-24 2024-25 2024-25 (bimonthly) Rates Rates Tota l $ Rates Total $
Increase Increase
35-gallon cart $25.54 $26.82 $1.28 $27.96 $1.14
64-or 96-gallon cart $28.02 $29.42 $1.40 $30.67 $1.25
Consistent with the procedure provided in the franchise agreement, requests for rate increases are submitted by Republic Services, reviewed by city staff and then presented in a rate sheet for City Council approval each year, as part of the city's budget.
Public Works Branch
Envi ronmental Sustainability Department
1635 Faraday Avenue I Carlsbad, CA 92008 I 442-339-2646 t
Council Memo -Waste Hauler Rate Increase for Fiscal Year 2024-25 (Districts -All) August 8, 2024
Next year (i.e., Year 4 of the franchise agreement), and then again in Year 8, rates will be adjusted using a cost-based rate adjustment, which is the method provided in the franchise agreement. The cost-based adjustment involves a review of Republic Services' actual cost of operations and operational statistics (e.g., staffing levels, routes, route hours, customers and service levels, etc.) to determine the "Actual Allowable Total Annual Cost of Operations" based on the most-recently completed rate period and then to forecast the "Total Contractor's Compensation" for the upcoming rate period.
The difference (measured as a percentage) between the Total Contractor's Compensation for the upcoming Rate Period and the Projected Gross Rate Revenues (which is calculated based on the most-recent customer subscription levels at then-current Rates) is the "Rate Adjustment Factor." The Rate Adjustment Factor is then applied to the then-current rates to adjust the rates for the upcoming rate period, though only in Years 4 and 8 of the franchise agreement. This methodology was agreed upon during the franchise agreement negotiations to ensure that rate increases are periodically assessed to be appropriate and fair.
Additionally~ city staff recently completed a capacity planning requirement, mandated by the California Department of Resources Recycling and Recovery (Cal Recycle), which shows that under the franchise agreement the City of Carlsbad has capacity for all needed organics recycling to comply with Senate Bill 1383. Based on the capacity planning process, staff determined there is little access to facilities and infrastructure, other than Republic Services, to sufficiently process organic waste in the San Diego region.
Next Steps
Staff will continue to ensure that future rate increases are reviewed and approved in compliance with the franchise agreement, and state and local law.
cc: Scott Chadwick, City Manager
Cindie McMahon, City Attorney
Gary Barberio, Deputy City Manager, Community Services
Laura Rocha, Deputy City Manager, Administrative Services Gina Herrera, Assistant City Attorney
Zach Korach, Finance Director
Kristina Ray, Communication & Engagement Director
James Wood, Environmental Sustainability Director
Avecita Jones, Sen ior Program Manager