414 13th Street, Suite 350, Oakland, CA 94612 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com Executive Summary
On June 27, 2025, Recology Sonoma Marin (Recology) formally requested a detailed rate review (DRR) to the City of Cotati that would increase solid waste collection service rates as outlined in Section 6 of the Franchise Agreement (Agreement) between the City and Recology. The effective date of the increase would have been January 1, 2026. The initial requested rate increase was
23.8%, or a 34.7% increase if Recology were to purchase an electric solid waste collection vehicle for dedicated service within Cotati City limits.
R3 Consulting Group, Inc. (R3) was engaged by the City to conduct a thorough review and analysis of Recology’s DRR request. R3 reviewed and completed our analysis of Recology’s financial statements, records, and rate adjustment calculations, which identified potential reductions to Recology’s rate adjustment request.
Given that magnitude of Recology’s requested rate adjustment (even after adjustments identified by R3) and further given that the Agreement is set to expire in just over two years, on June 30, 2028, R3 advised the City to consider engaging in negotiations with Recology to reduce the amount of rate adjustment, extend the term of the Agreement, and secure other enhancements.
After a series of constructive negotiations with Recology, an amendment to the Agreement (Amendment) was drafted to detail the negotiated outcomes and to clarify and improve existing contract language. Following potential City Council adoption of the proposed Amendment, the City and Recology intend to develop an amended and restated Agreement in late 2026 or early 2027 that will update other terms and conditions of the Agreement.
Negotiation Outcomes
City staff entered into negotiations with Recology with a goal of a lower rate adjustment in 2026 and more predictable future rate adjustments. City staff, with the support of R3, negotiated with Recology to achieve mutual agreement on terms and conditions resulting in beneficial outcomes including:
》 A lower 9% rate adjustment effective June 1, 2026 (rather than a 23.8% adjustment effective January 1, 2026).
》 Fixed increases of 8% on January 1, 2027, 7% on January 1, 2028, 6% on January 1, 2029, and 6% on January 1, 2030.
To: Damien O’Bid, City Manager, City of Cotati
From: Garth Schultz, Principal, R3 Consulting Group
Alex Soulard, Managing Consultant, R3 Consulting Group
Date: May 14, 2026
Subject: Review of Recology’s Detailed Rate Review and Negotiations for Additional Services and Extension
City of Cotati | Review of Recology Detailed Rate Review and Negotiations for Additional Services and Extension
》 A revised rate adjustment methodology to support more predictability and costeffectiveness in solid waste rates, including:
o Removal of the existing periodic and hard-to-predict DRR methodology. o Starting January 1, 2031, adjusting the annual Refuse Rate Index (RRI) to use 100% of CPI (rather than the existing 70% of CPI) and add 1% to the RRI result, with a cap that sets a maximum allowable annual rate increase of 5%. o Allowing Recology to request extraordinary adjustments for extenuating circumstances a maximum of twice during the extended term for unforeseen events such as legislative changes but not including changes in labor costs or equipment purchases.
》 Extension of the Agreement through June 30, 2038, which is a ten-year extension past the existing expiration date of June 30, 2028, with an option for an additional five year extension upon mutual agreement.
Without this extension, the City would need to initiate a process to secure solid waste services effective July 1, 2028, after the expiration of the existing term. Such a process should conclude no later than June 2027 (to allow for a recommended 1-year transition period) and typically takes nine to twelve months to complete. Therefore, if the City does not approve the proposed Amendment, R3 recommends that the City immediately initiate a competitive request for proposals (RFP) process.
》 A commitment to amended and restate the Agreement in the near future and to include updates to City programs and services, including the level of services for City events.
R3 and City staff thoroughly evaluated the financial implications of the negotiated outcome in comparison to the original DRR request, including projections of future rate adjustments under the status quo and the new rate adjustment terms. R3 found that the negotiated stepped-in rate adjustments are more favorable to the City’s ratepayers in the near-term and also for the projected future term of the extended agreement.
Recommendation
R3 thoroughly reviewed the negotiated terms in the proposed Amendment and has conducted financial analysis of projected rate increases. The negotiated outcome benefits Cotati ratepayers by keeping rates lower than would normally be necessary to fund the costs of providing solid waste services including a reasonable profit to Recology in the near term and over the life of the proposed extension to the Agreement.
Annual adjustments to solid waste rates in the future (starting in 2031) will include an additional 1% in order to allow Recology to adequately fund the cost of providing services without the need for periodic detailed rate reviews of their costs, which regularly result in double-digit increases in rates.
This additional 1% adjustment to RRI is fair and reasonable to allow Recology to recover revenues sufficient to meet the projected costs of providing service plus a reasonable profit over the life of the extended Agreement.