Fremont City Council Meeting: 03/19/24 07:00 PM
3300 Capitol Avenue Div/Dept: Environmental Services
Fremont, CA 94538 Category: Agreements and Contracts
SCHEDULED
Sponsors:
COUNCIL STAFF REPORT (ID # 5101) DOC ID: 5101
Updated: 3/15/2024 3:01 PM by Susan Gauthier Page 1
SOLID WASTE COLLECTION CONTRACT PREVAILING WAGE ADJUSTMENT - Approve Payment of $252,647 to Settle Retroactive Component of Prevailing Wage Extraordinary Adjustment Claim with Republic Services Contact Persons:
Name: Kathleen Cote-Guarnieri LaShawn Butler
Title: Environmental Services Manager Interim Community Services Director
Div/Dept: Environmental Services Community Services
Phone: 510-494-4583 (510) 494-4329
E-Mail: [email protected] [email protected]
Executive Summary: The City has a franchise agreement with Republic Services for the collection of all municipal solid waste, recycling and organic waste generated within the City.
A significant component of solid waste collection costs is driver labor, and Republic Services is required to pay prevailing wage. The prevailing wage rates that went into effect in July 2022 (7.2%) and subsequently increased in July 2023 (5.35%) were higher than the CPI allowance that had been incorporated in the biennial rate setting calculations . Republic Services submitted a request for an extraordinary compensation review to address this discrepancy and staff recommended settling the extraordinary claim in two segments. A prevailing wage component was incorporated into the 2024-2025 rate setting calculations to ensure collection rates would be sufficient to cover driver labor costs incurred from January 1, 2024, forward.
As indicated in the rate setting City Council report, staff is returning to the City Council with a recommendation on the retroactive component of Republic Service’s extraordinary cost claim for July 1, 2022, through December 31, 2023. Staff is recommending a lump sum payment of $252,647 to settle the claim. This payment would be funded from the Integrated Waste Management Unallocated Fund Balance (Fund 115) maintained expressly for one time or unexpected solid waste costs occurring between rate setting periods. There would be no General Fund impact.
Staff is recommending the City Council authorize the City Manager or her designee to execute the Second Amendment to the Amended and Restated Agreement for the Collection, Processing, and Disposal of Municipal Solid Waste, Recyclables, and Organic Waste to settle Republic Service’s extraordinary claim and make the required updates to the impacted provisions of the contract.
BACKGROUND:
Prevailing Wage Adjustment: Republic Services is required to pay prevailing wages to its collection drivers who are represented by International Brotherhood of Teamsters Local 70 (Teamsters Local 70). Solid waste collection driver classifications are not included in the general prevailing wage determinations published by the Department of Labor Relations so prevailing wage is therefore determined by collective bargaining agreements. Waste Management employs the largest number of drivers in any single driver wage classification Council Staff Report (ID # 5101) Meeting of March 19, 2024 Updated: 3/15/2024 3:01 PM by Susan Gauthier Page 2
in Alameda County; therefore, the Collective Bargaining Agreement between Waste Management and Teamsters Local 70 establishes the prevailing wages applicable to all solid waste providers operating in Alameda County. The prevailing wage increase that went into effect in July 2022 (7.2%), and subsequently increased in July 2023 (5.3%), was higher than the variable component adjustment incorporated in the biennial rate setting calculations.
Variable Component Adjustment: The biennial rate setting calculations specified in the Republic Services Agreement includes a variable component designed to capture CPI and labor cost increases for collection services. Historically, the adjustment has used a blended index consisting of 88% CPI and 12% US City Average Health Insurance Index. For the 2024-2025 rate setting calculations, the blended index was modified to 45% CPI, 12% US City Average Health Index, and 43% prevailing wage adjustment, to address prevailing wages moving forward and calculate increases more accurately. Staff is recommending revising the contract language to incorporate this refinement into the biennial rate setting process.
Commercial Recycling Rates: Commercial recycling rates are set at 75% of the commercial refuse rate for each bin size and frequency level. Historically, the City has not offered 6-day per week recycling services. After the 2024-2025 rates were adopted by the City Council, Republic Services received several customer requests for 6-day per week recycling service.
To respond to customer demand in a timely manner, staff recommends adding a 6-day per week commercial recycling service level to the rate matrix as part of the second amendment rather than deferring the item to the 2026-2027 rate setting cycle.
Health Insurance Index: Staff discovered an inconsistency with the Health Insurance Index language between the City’s franchise agreements. Language clarifying that the biennial adjustment will be no less than the CPI was inadvertently omitted from the City’s Restated Agreement with Republic Services. Staff recommends updating the language as part of the second amendment to provide consistency with the City’s other franchise agreements.
DISCUSSION/ANALYSIS: The portion of labor expense eligible for extraordinary compensation review is limited to the difference between the prevailing wage increase (as determined by the Collective Bargaining Agreement) and the CPI increase. Therefore, the prevailing wage extraordinary costs for the period of July 2022 through December 2023 were calculated as described below:
• Summarized labor operating costs for the period of July 2022-June 2023, and July 2023–December 2023 ($22,232,528 and $11,330,154 respectively) • Calculated Fremont’s labor operating costs using the driver hours allocation for the two periods (70.00% or $15,562,769 and 69.35% or $7,857,253 respectively) • Calculated the CBA increase above the CPI (eligible percentage) for the two periods (0.401% and 2.421% respectively)
• Applied the eligible percentage to Fremont’s labor cost for the two periods ($62,442 and $190,205 respectively)
Using this methodology, the recommended compensation payment for prevailing wage extraordinary costs for July 2022-December 2023 is $252,647.
Council Staff Report (ID # 5101) Meeting of March 19, 2024 Updated: 3/15/2024 3:01 PM by Susan Gauthier Page 3
FISCAL IMPACT: The recommended lump sum payment would be funded from the Integrated Waste Management Unallocated Fund Balance (Fund 115) maintained expressly for one-time or unexpected solid waste costs occurring between rate-setting periods. There would be no General Fund impact.
ENVIRONMENTAL REVIEW: The proposed action is exempt from and not subject to review under the California Environmental Quality Act (CEQA) because, without limitation, it is not a “project” as defined in CEQA Guidelines Section 15378(b)(2) and/or 15378(b)(5) and it has no possibility of a significant effect on the environment, as specified in CEQA Guidelines Section 15061(b)(3), each as a separate and independent basis for CEQA compliance.
ATTACHMENTS: None.
RECOMMENDATIONS:
1. Authorize the City Manager, or her designee, to execute the Second Amendment to the Amended and Restated Agreement for the Collection, Processing, and Disposal of Municipal Solid Waste, Recyclables, and Organic Waste.
2. Appropriate $252,647 from the Integrated Waste Management Fund Unallocated Fund Balance for the lump sum settlement payment.