STAFF REPORT TO THE CITY COUNCIL
DATE: Special Meeting of November 9, 2022
TO: Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Michael Roberts, Public Works Director/City Engineer SUBJECT: Solid Waste Collection Franchise Agreement – Preliminary Recommendation to Adjust Republic Services’ Rate +3.52% effective January 1, 2023 RECOMMENDED ACTION:
Receive the Recommendation of the City Manager regarding the Public Works Director’s report and recommended order following his November 8, 2022 Public Hearing on Republic Services’ request for a base year rate adjustment of +3.52% effective January 1, 2023.
EXECUTIVE SUMMARY:
Following the process required by the Hercules Municipal Code, Republic Services’ solid waste franchise rate adjustment request was reviewed by the City’s consultants, R3, a noticed public hearing was convened by the Public Works Director on November 8, the Public Works Director’s report was forwarded to the City Manager, and the City Manager’s recommended order will be reported out at the City Council meeting tonight. This report to the City Council tonight will trigger a 15-day objection period, with final approval of any proposed new rates to come before the Council at the December 13, 2022 Council meeting. Any approved rate adjustments would go into effect January 1, 2023.
FISCAL IMPACT OF RECOMMENDATION:
Adjusting the rate +3.52% is in accordance with the established terms of the franchise agreement. It will change the collection fee for a residential customer using a 35-gallon garbage can, which is the service level chosen by residents approximately 85% of the time, from $29.29 to $30.32, an increase of $1.03 per month. The collection fee is just one component of the rates charged to solid waste rate payers – the complete set of fees for all service levels is shown in the Table below. The collection fee includes weekly collection of trash, organics and recycling as well as the provision of other community-wide programs. The proposed rate adjustment will also increase the franchise fee collected by the City by approximately $20K per year.
DISCUSSION:
In 1986 the City and Republic Services entered into a Franchise Agreement which provides Republic Services the exclusive right for solid waste collection and disposal services within Hercules. Since that time the Agreement has been amended multiple times. In accordance with Amendment No. 5, 2019 and 2023 are base years for rate review and adjustment. In other years the refuse collection rates are adjusted annually in accordance with the San Francisco-Oakland-San Jose Metropolitan Area Consumer Price Index (CPI).
On June 28, 2022 Republic Services submitted a base year rate adjustment request for +4.92% to be effective January 1, 2023 as provided for in Amendment No. 5. As described below, the rate increase recommended by consultants retained by the City is +3.52%.
The Rate Review Process. Under the rather complex rate adjustment procedure pursuant to Hercules Municipal Code Chapter 5-2A “Adjustment of Refuse Collection Rates”, the Public Works Director/City Engineer is required to review the rate increase request from Republic Services including completing any necessary studies and, after providing a 20-day notice, conduct a public hearing. The noticed public hearing is scheduled to take place on Monday, November 8. The findings and recommended action resulting from the Public Works Director/City Engineer’s public hearing are then compiled into a recommended order that is submitted to the City Manager, who will forward his final recommendation to the City Council. The final recommendation from the City Manager will be presented to the City Council at the November 9th council meeting as a supplement to the agendized item. The recommendation must be presented to Council no sooner than 25 days from the rates going into effect. Submission of the findings and recommended action to the Council on November 9th triggers a 15-day objection period to which 10 addition days are required to provide notice to the applicant (i.e. Republic Service), after which City Council at the regular meeting of December 13th can take final action on the rate setting after consideration of any comments or objections that were received during the 15-day objection period.
The submittal of the above described recommended order is coordinated with the rate increase being considered by RecycleMore (further discussion below) which administers the post collection agreement (recycling) so that the City Council can evaluate the total cost increase to residents while considering the City collection component of the total rate increase.
Consultant’s Assistance. To be as cost effective as possible and maximize available resources, Hercules jointly hired R3 Consulting Group Inc. (R3) along with Pinole and San Pablo, who are also undergoing base year rate adjustments, to perform a high level, desktop review for all 3 Cities. R3 is a Bay Area solid waste management consulting firm and satisfactorily completed the last rate reviews for Hercules back in 2013 and 2019 and has done business in the State of California for 20 years.
R3 reviewed Republic’s rate adjustment applications for 2023 with regards to mathematical accuracy, consistency with industry standards, allocations between franchise areas, and consistency with the franchise agreements. They are recommending a base rate adjustment for Hercules of +3.52% which includes meeting Republic’s established operating ratio of 0.88 under the franchise agreement. R3 subsequently confirmed the +3.52% adjustment with Republic, who has agreed with the findings. This adjustment of +3.52% is lower than the most recent change in CPI, which is tracking at 5.7% as of August 2022.
The base rate adjustment of +3.52% recommended by R3 which would be effective January 1, 2013 and which has been agreed to by Republic Services is illustrated in the table below:
Rate Tables
2022
Base Year
2023
City
2023
2023
Collection
Rate Adj
Collection
Waste
Post-Collection
Monthly
Rate
3.52%
Rate
Program
Charge
(Estimated)
TOTAL (Estimated)
35-gallon
$29.29
$1.03
$30.32
$2.08
$12.85
$45.25
65-gallon
50.52 1.78
52.30 3.79
23.89 79.98
95-gallon
71.85 2.53
74.38 5.60
35.85 115.83
20-gallon
28.25 0.99
29.24 1.40
7.32 37.96
Sr. 35-gal
27.29 1.03
28.32 2.03
12.85 43.20
2023 Commercial Collection Service Rates
Bin
Times per Week
Size
1 2
3 4
5 1 Yard
$267.59
$457.67
$647.93
$ 838.02
$1,028.27
2 Yard
427.77
766.60
1,105.40
1,444.22
1,782.86
3 Yard
575.43
1,051.56
1,527.26
2,002.96
2,478.67
4 Yard
716.44
1,323.90
1,931.19
2,538.48
3,145.71
5 Yard
853.90
1,590.22
2,326.35
3,062.67
3,798.81
6 Yard
989.41
1,853.48
2,717.96
3,582.22
4,446.69
7 Yard
1,123.65
2,116.06
3,108.65
4,101.07
5,093.47
*Does not include separate per yard/per month/per pick-up per week (RecycleMore IRRF Surcharge) RecycleMore post-collection proposed Rate Changes. The rate tables also include fees for the City’s solid waste program and post-collection waste processing administered by RecycleMore. RecycleMore is a joint powers agency in West County (and the City of Hercules is a member) and is charged with processing the waste stream once it has been collected, including recycling, composting, operating the solid waste transfer facility, and ensuring the region meets the State’s waste diversion requirements. On November 10, 2022 RecycleMore is scheduled to consider an increase to their post-collection processing rate for residential customers of 4.6%, which would increase the post-collection rate for 35-gallon residential customers by $0.57 per month. RecycleMore’s post-collection rates for commercial customers are projected to decrease by 6.3%.
The City’s solid waste program helps fund street maintenance and storm water activities related to solid waste, such as street repairs due to the wear and tear of garbage trucks, removal of trash from streets and storm drains, and street sweeping to remove waste debris.
ATTACHMENTS:
Public Works Director’s Recommended Order (To be provided at the meeting) Financial Impact
Description:
Increase the franchise fee collected by the City approximately $20K per year Funding Source:
Budget Recap:
Total Estimated cost: $0 New Revenue: $20,000
Amount Budgeted: $0 Lost Revenue: $
New funding required: $0 New Personnel: $
Council Policy Change: Yes No
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