CITY OF COMMERCEAGENDA REPORTCITY OF COMMERCEAGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
CITY OF COMMERCE
AGENDA REPORT
Item No. Item No.
Item No.
Item No.
TO: Honorable City Council
FROM: City Manager
SUBJECT: Second Amendment to Agreement with Athens Services for Residential Refuse and Recycling Services Meeting Date: June 27, 2023
RECOMMENDATION:
The City Council will consider approving a Resolution to:
Approve a Second Amendment to the Agreement with Athens Services for residential and recycling services that includes the following terms:
New 5-year term effective July 1, 2023 with a one-time 5-year extension to be approved by City Council upon mutual consent of both parties; and Rate increase of 6.19% for both CPI and disposal increases; and Basis of annual rate increase Section 17. Compensation (B) and (C) of existing Agreement to be replaced with a Trash CPI +1% instead of existing language which separates increases, one for CPI (B) and one for tipping fees (disposal cost increases) (C) as approved by City Council for future rate adjustments.
BACKGROUND:
On July 1, 2014, the City Council entered into an Exclusive Franchise Agreement with Calmet Services (Calmet) for refuse and recycling services or residential units and City facilities. On October 16, 2018, the City approved a First Amendment to the Agreement between the City and Calmet to extend the Agreement term by four years to June 30, 2023. On January 11, 2022, the City Council approved the Assignment of the Exclusive Franchise Agreement between the City and Calmet to Athens Services (Athens).
The Agreement allows for an annual contract review and rate adjustment based on CPI with a not to exceed amount of 5% and a separate adjustment for disposal costs. On April 12, 2022, the City received a letter from Calmet requesting a rate increase of 9.57% for both CPI and disposal cost increases, which equates to $86,383.53 from the prior monthly rate of $78,839.36 and was subsequently approved effective July 1, 2022.
On January 17, 2023, Athens submitted a letter to the City Manager requesting an extension of the term of their contract due to expire on June 30, 2023. On February 21, 2023, City Council directed staff to engage in negotiation discussions to potentially return to the City Council with a Second Amendment to the Agreement in the near future. Further, on April 14, 2023, Athens submitted a letter to the City Manager requesting an annual rate adjustment of 6.19% per the current Agreement allowances.
Since this time, staff and Athens representatives have been discussing the City’s needs, CalRecycle’s unfunded mandate SB 1383 for residential organics recycling and the cost of services. In 2016, California adopted stringent goals for reducing the amount of organic material deposited into landfills. Using 2014 as a baseline, the legislation required a reduction of 50 percent by 2020 and 75 percent by 2025. The purpose was to reduce methane emissions to make near-term improvements to climate change. Landfills are the largest point source of methane emissions in California Initially, staff and Athens considered the following for a potential amended agreement:
Athens offered to not charge the City for added costs associated with SB 1383, which they estimate at $18,600 per month for ten years in exchange for a 10-year rolling term through June 30, 2033. The term of the contract would automatically renew each year through June 30, 2033 unless terminated earlier by the City.
An alternative would be to enter into a shorter 5-year term with a one-time 5-year extension with a monthly increase of $5,000 for SB 1383 compliance that includes public education, auditing/data monitoring/waste characterization, reporting, and disposal and processing of materials. Athens is willing to enter into a 5-year agreement at a discounted cost for SB 1383, but would like some assurance that should the City not approve the one-time 5-year extension, the City would make a lump sum payment of $558,000 to Athens to recoup discounted SB 1383 costs. (Recommended) Another alternative would be to execute a one-year extension and approve Athens’ request for an adjustment based on current contractual terms of CPI + disposal increases, which equates to 6.19% effective July 1, 2023 to further negotiate contract terms.
However, on June 8, 2023, the Hoover Commission released a report regarding SB 1383. The Commission has broad and independent authority to evaluate the structure, organization, operation and function of every department, agency and executive branch of state government, along with the policies and methods for appropriating and administering funds. It consists of current and former bipartisan policymakers and has affected change in policy in the past. Ultimately though, the state legislature makes the final decision.
The Commission reported that California is falling short of its goals and missed its 2020 target and is unlikely going to meet its 2025 target. It further indicates that successfully achieving the goals will require changes in law and regulation, additional funding, and creating a more holistic approach to reducing landfill methane emissions. Local jurisdictions must be given a fair and realistic amount of time to make necessary changes. They recommend temporarily suspending CalRecycle’s SB 1383 implementation until the following steps be achieved during the temporary pause:
Educate Californians about the importance of the goals.
Improve coordination among state agencies.
Create a multidisciplinary team to expand market opportunities for recycled organic waste.
Reconfigure the relationship between state agencies and local governments to better reflect shared responsibility for solid waste management.
Exempt low-population, low-waste counties from procurement requirements.
Separate edible food recovery from SB 1383 implementation.
Invest in repairing and upgrading the super-emitter facilities that produce the majority of landfill methane emissions.
Develop a realistic financing plan based on holistic cost-benefit analysis understood and supported by Californians.
Due to these recommendations and the State’s pending response, staff recommends addressing a term extension, implementing a rate increase of 6.19% and modifying the agreement terms for future rate increases based on a Trash CPI +1% and not include any SB 1383 costs at this time.
ALTERNATIVES:
Approve staff recommendation
Disapprove staff recommendation and approve alternative terms such as #1 or #3 listed previously.
Provide further direction to staff
FISCAL IMPACT:
The total requested increase to the residential rate is 6.19% effective July 1, 2023, which equates to $91,726.41 per month from the current monthly rate of $86,383.53, an increase of $5,342.88 per month or $64,114.56 per year.
RELATIONSHIP TO STRATEGIC GOALS:
The agenda item relates to the 2016 Strategic Plan
Community Quality of Life
Guiding Principle #5:
Foster environmentally conscious initiatives and continue to identify and develop city codes that support a clean, well-maintained, sustainable community.
Prepared by: Gina Nila, Department of Public Works
Reviewed by: Vilko Domic, Assistant City Manager
Approved as to form: Noel Tapia, City Attorney
Respectfully submitted: Edgar P. Cisneros, City Manager Attachments:
Resolution
Second Amendment