Cotati City Council
Agenda Staff Report
Item type: REGULAR AGENDA (ACTION)
To: City Council
Subject: Recology SB 1383 Franchise Agreement Amendment & Waste Delivery Agreement Amendment
Date: June 28, 2022
Written by: Damien O'Bid, City Manager
Recommendation
It is recommended that the City Council of the City of Cotati adopt a resolution:
1. Authorizing the City Manager to sign the First Amendment to the Franchise Agreement for Collection, Disposal, and Processing of Solid Waste, Recyclables, and Compostable Materials and Related Activities Pursuant to Chapter 8.08 of the Cotati Municipal Code to implement SB 1383 and extend the franchise agreement by 5 years; and
2. Approving the proposed Omnibus Amendment to Waste Delivery Agreement and Franchised Hauler Agreement.
Background
SB 1383
Senate Bill 1383, the Short-lived Climate Pollutant: Organic Waste Methane Emissions Reduction Act of 2016 (SB 1383) required Cal Recycle to develop regulations to reduce organics in landfills as a source of methane by 2030. SB 1383 contains numerous requirements which have already begun to go into effect. The bill, which can be summed up as a requirement to divert food waste from being landfilled, is necessitating operational changes and capital improvements including where solid waste is hauled, expansion and modification of existing facilities, and new programs such as food waste recovery, education, and enforcement. The new regulations required the City to update its municipal code, and compliance will be facilitated by an amendment to the Franchise Agreement between the City and its solid waste hauler, Recology Sonoma Marin (Recology), and the previously approved memorandum of understanding (MOU) with ZWS.
On November 23, 2021, City Council adopted the changes to its municipal code for compliance with SB 1383 and approved the MOU with ZWS.
Amendment to the Waste Delivery Agreement
On March 27, 2013, the City Council entered into a franchise agreement with Redwood Empire Disposal, Inc. (RED), for the exclusive right to provide refuse collection, including construction and demolition debris, in the City of Cotati (City). RED was owned by the Ratto Group. On December 23, 2017, Recology Sonoma Marin (Recology) officially purchased Ratto’s assets and took over the remainder of the Franchise Agreement with the City of Cotati. The City’s current Franchise Agreement (Agreement) with Recology expires on June 30, 2023.
The cities of Cotati, Cloverdale, Healdsburg, Rohnert Park, Santa Rosa, and Sebastopol are all party to a Waste Delivery Agreement with Republic (WDA), and a Franchised Hauler Agreement with Republic Services (Republic) and Recology (FHA). Republic and Recology are parties to an Agreement for Operations of Sonoma County Transfer Stations and Materials Recovery Facility (Prime Subcontract), pursuant to which Republic subcontracted to Recology certain of Republic’s obligations under the Amended and Restated Agreement for Operation of the Central Landfill and County Transfer Stations (MOA) between the County of Sonoma and Republic. Historically, Republic Services has been obligated through the Master Operating Agreement (MOA) to provide a Commercial Food Waste program to urban areas, including incorporated areas, as reasonably necessary to meet the diversion goals of the MOA. Republic subcontracts with Recology, to deliver these programs, which are delivered only as cost considerations allow. The MOA and the Prime Subcontract do not require Republic or Recology to perform all duties required by SB 1383 (i.e., route reviews, contamination monitoring, etc.).
Analysis/Discussion
SB 1383
The proposed amendment to the City’s franchise agreement with Recology requires the Citys’ hauler to offer organic service to all customers, perform route reviews, contamination monitoring, noticing, education and outreach, and reporting services. The amendment includes the following scope added to City services:
1. Expansion of Three-Container Organic Waste Collection Services a. Organic collection routes are to be expanded to several commercial and multifamily customers. Part of this effort involves new collection trucks and properly labeled and colored waste containers to satisfy the requirements of the SB-1383 regulations.
2. Route Reviews
a. At least once annually, beginning in 2022, Recology must conduct a route review for each route in the City and issue a Notice of Contamination to any customer that has prohibited materials in the organic bins. The notice is a way to correct and educate the users about items that may be in the incorrect bin.
3. Compliance Reviews
a. At least once annually, beginning in 2022, Recology must review the records of its commercial and multi-family customers to determine whether such customers are subscribed for organic collection service or have an applicable waiver and report the results to the City.
4. Education and Outreach
a. Recology must assist in an education program to provide customers the information needed to properly separate their food waste, such as:
i. Information on the requirements to properly separate materials in appropriate containers.
ii. Information on methods for: prevention of organic material generation, recycling organic material on-site, sending organic material to community composting, and any other local requirements regarding organic material. iii. Information regarding the methane reduction benefits of reducing the landfill disposal of organic material and the methods of organic material recovery contemplated by the Agreement.
iv. Information regarding methods for recovering organic material. v. Information related to the public health and safety and environmental impacts associated with landfill disposal of organic material.
5. Reporting
a. Beginning January 1, 2022, Recology must provide the following information to the City as part of the regularly scheduled quarterly reports under the Agreement:
i. Copies of all such information related to education and outreach including the date(s) the outreach activities were conducted as well as the type and number of accounts that received the information.
ii. Route and Compliance Review information including descriptions and results of each review.
iii. Documentation relating to observed prohibited container contaminants, whether observed during route reviews or otherwise including copies of Notice of Contamination issued to customers.
In order for Recology to perform these required actions, a special adjustment to the regularly scheduled 2023 rate increase must be adopted to account for the additional annual expenses incurred and capital resources needed by Recology. The special adjustment would increase rates sufficient to cover all costs of the organics collection and diversion program mandated under SB 1383 and would be applied January 1, 2023 in addition to the regularly scheduled annual rate adjustment. The proposed rate increase for these additional services is 6.40%.
Staff and the City’s consultant have reviewed the proposed amendment to the Franchise Agreement between the City and Recology as well as the subsequent rate increase and determined the changes to be justified.
Franchise Term Extension
Staff is also proposing to extend the franchise agreement by 5 years, in accordance with the terms of Section 3.2 of the Franchise agreement. If the City Council approves the extension, Recology has 20 working days to accept. Recology is meeting all of the terms of the Franchise Agreement, except total diversion, but has been working proactively to address this. When Recology assumed the Franchise Agreement from Ratto, diversion numbers were being misreported. Once Recology corrected the numbers, the diversion rate in Q1 2018 was only 33% (50% diversion is the requirement). The latest numbers from Q1 2022 show that diversion is at 47%, and Recology continues to diligently work to improve that.
Lastly, the proposed extension also includes a one-time negotiation reimbursement fee of $15,000 to reimburse the City’s out of pocket expenses. The current state of Recology’s Franchises in the North Bay are detailed in the table below.
Amendment to the Waste Delivery Agreement
Senate Bill 1383 (SB 1383) requires changes to the City’s solid waste program. The scale and quality of the programs required by SB 1383 is greater than what the existing agreements contemplated and as such, the City cannot rely exclusively on the MOA-based program to achieve SB 1383 compliance. In lieu of attempting compliance through a patchwork of agreements managed independently by all of the cities, the County, Recology, and Republic have negotiated amendments to the MOA and Prime Subcontract to eliminate the existing commercial food waste program historically delivered by Republic through Recology. Instead, SB 1383 compliant programs will be delivered directly by Recology for the City.
The proposed amendments to the MOA and Prime Subcontract agreements retire the existing commercial food waste/dry waste program and eliminate the associated $4.21/ton gate fee that funds this program. The $4.21/ton rate will instead be funded on the City’s rates and annually reviewed and adjusted via the City’s Refuse Rate Index (RRI) process. This results in a di minimis change in costs. Retirement of the existing program under the MOA will allow all jurisdictions to manage their SB 1383 obligations directly with the haulers through their franchise agreements. In addition, the MOA diversion goal has been adjusted to reflect that commercial food waste and dry commercial diversion will be accomplished through the Agreement with the City.
The proposed amendments to the MOA were the subject of extensive negotiations between the County of Sonoma, Republic Services, and Recology. Therefore, any edits by the cities are strongly discouraged.
Financial Considerations
There will be a small increase in franchise revenue to the City’s General Fund due to the increase in Recology rates for 2023. The current Agreement requires Recology to provide garbage service to all City facilities at no cost to the City. The is no fiscal impact to the City of adopting the Omnibus Agreement.
Environmental Issues
SB 1383 will reduce harmful emissions of short-lived climate pollutants. City staff is committed to meeting the requirements of this law at a minimum and will exceed these requirements whenever and wherever possible. This action is exempt from the California Environmental Quality Act (CEQA) because it is not a project which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, pursuant to CEQA Guideline section 15378.
Attachments:
SB 1383 Solid Waste Franchise Agreement + WDA Presentation (PDF) R3 Review of Agreement Amendments and Rate Adjustment Request (PDF) Attachment 1 - SB 1383 Costs for Year 1 of Implementation (PDF)