STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of June 13, 2023
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Michael Roberts, Public Works Director/City Engineer SUBJECT: Expiration of Solid Waste Collection Franchise Agreement in 2025 and Discussion Regarding Potential Strategies Moving Forward RECOMMENDED ACTION:
Receive a report from staff regarding the expiration of the City’s solid waste collection franchise agreement with Republic Services in 2025, discuss procurement alternatives to secure future solid waste services, provide direction to staff on next steps to take, and authorize staff to secure the services of a solid waste consultant to provide expertise and strategic guidance.
EXECUTIVE SUMMARY:
The City’s solid waste collection franchise agreement with Republic Services, which was entered into in 1986, is set to expire on June 30, 2025. Options moving forward include negotiating an extension or new franchise agreement with Republic Services or proceeding with a competitive procurement Request for Proposals (RFP) process.
Other West County cities, whose collection franchise agreements with Republic Services are also expiring at the same time, have begun similar discussions given an RFP process could take up to 2 years. Recyclemore’s solid waste post-collection franchise agreement with Republic Services is also set to expire on June 30, 2025. Hercules is a member agency of Recyclemore which serves West County cities and has direct representation on their Board of Directors.
As the City of Hercules considers the next steps to take, action taken by other West County cities and Recyclemore could impact any decisions made given Republic Services’ role in providing collection and post-collection services in broader West County.
In consideration of the dynamic nature and complexity of this issue, staff is recommending a discussion occur tonight regarding strategies moving forward including securing the services of a solid waste consultant to provide expertise and guidance through this process.
BACKGROUND:
Solid waste service agreements, which include garbage, recycling, and green waste, are divided into collection and post-collection activities. Collection includes the curbside (or on-property) collection of solid waste material and hauling to a processing facility, such as a transfer station, recycling facility, or composting facility. Post-collection services involve either the hauling and disposal of non-reusable solid waste material into a landfill or the processing of this material to be used on after-market products (such as compost or recycled products). In West County, individual cities administer collection franchise agreements while Recyclemore administers the post-collection agreement.
Franchise-Collection Agreement
The City of Hercules has had a Franchise Collection Agreement with Richmond Sanitary Services, a subsidiary of Republic Services, since 1986. Over the years, it has been amended 5 times. The agreement gives Richmond Sanitary Services (hereby Republic Services) the exclusive right to collect all solid waste in the City through June 30, 2025, when the agreement expires.
Other cities in West County including San Pablo, Richmond, and Pinole have similar collection agreements with Republic Services, which are also set to expire on June 30, 2025. Richmond secured the services of R3, a solid waste consulting firm, to provide expertise and guidance moving forward. R3 recommended Richmond begin the process of securing a new franchise agreement given the length of time needed to undergo an RFP process, if that option is chosen, and implement a new agreement.
The Richmond and San Pablo city councils recently directed their staff to issue requests for proposals (RFPs) to seek proposals from all interested vendors for their next solid waste and recyclables franchise agreements. San Pablo in addition directed staff to coordinate with other West County jurisdictions regarding a joint competitive process for their respective franchise agreements. At their June 6, 2023, meeting the City of Pinole directed Staff to proceed with negotiating with Republic Services and if not successful then to proceed with an RFP.
Republic Services
Under the current collection franchise agreement, Republic Services has provided solid waste collection services to the City of Hercules for 37 years. Republic Services has a long-standing history of successful performance in the City and West County. Republic Services has a local presence, history, knowledge, and facilities to meet the City’s needs at competitive rates and compensation.
Republic Services initially submitted a May 23, 2023 letter requesting to meet and discuss the benefits of an extension of their current franchise agreement. Staff subsequently met with Republic Services, discussed their letter, and notified them that an item would be brought to Council on June 13, 2023 for discussion. Based upon the meeting that occurred with staff, Republic Services then submitted a second letter on June 6, 2023 providing additional background on their company and more in-depth information which they believe favors a contract extension.
Post-Collection Agreement
The City of Hercules is a member of WCCIMA (Recyclemore), which is a joint powers authority comprised of Hercules, San Pablo, El Cerrito, Richmond, Pinole, and parts of unincorporated Contra Costa County. On behalf of its member agencies, Recyclemore administers a post-collection agreement with Republic Services for the post-collection processing and disposal of solid waste. This Post-Collection Agreement has been in effect since 2013 and is also set to expire on June 30, 2025. As a member agency, Hercules has direct representation on the Board of Directors.
At the May 11, 2023 RecycleMore board meeting, the Board of Directors formed an Ad Hoc Committee to assist the Executive Director determine whether to negotiate with Republic for either an extension of the current post-collection agreement or a new post-collection agreement; or put the post collection services out to bid in an RFP for a new post-collection agreement. The Executive Director will meet with the Ad Hoc Committee and return with the committee’s recommendation for the Board’s consideration in either June or July.
ANALYSIS:
The City has several options to consider for securing collection services following the expiration of the current Franchise Agreement on June 30, 2025. These include the following:
An extension or new Franchise Agreement with Republic;
An initial negotiation with Republic and if an agreement cannot be reached followed by a competitive procurement; A competitive RFP procurement process for the City of Hercules exclusively; and A competitive RFP procurement process for Hercules and some combination of other West County cities.
The California Public Resources Code section 40059 authorizes the City to secure solid waste collection services through either a competitive or non-competitive selection process. The City has a sole source policy which allows for a non-competitive process with certain findings.
There are several considerations for the City when deciding which procurement process to undertake, including those listed below:
If the City would like to negotiate an extension or new Franchise Agreement with Republic, it should do so early enough to allow time for a competitive bid process in case the negotiation results are unsatisfactory to the City.
There is no guarantee that the City will achieve a better agreement through a competitive selection process as opposed to a negotiated agreement with Republic Services. Republic Services previously constructed and has exclusive rights to solid waste processing facilities strategically situated at the closed West Contra Costa Sanitary Landfill complex, their West County Composting Facility and Golden Bear solid waste transfer station. Recyclables are processed at the Integrated Resource Recovery Facility (IRRF) in North Richmond, which is owned and operated by West County Resource Recovery, a division of Republic Services.
They also have a fleet of garbage trucks that would otherwise have to be secured.
The City has not experienced any performance issues with Republic and there has been a long-standing history of successful performance in the City. The City does not have experience with other service providers. Service transitions can be disruptive to customers. Although bidders would be required to submit detailed transition plans, transitions can nonetheless be disruptive to customers as contact information, billing addresses and accounts, collection days, and other things may change.
An open, competitive RFP process would maximize transparency for rate payers. New regulations coming on-line, including the electrification of the garbage truck fleet, mandate to switch to new garbage can colors, and composting and other SB 1383 requirements, will be challenging to implement without passing on rate increases to customers, who will expect accountability.
Based upon bargaining power and economy of scale, joining other cities in a joint RFP may result in the best rates to customers. The City of Richmond generates a disproportionate amount of waste by City (i.e. not by size or population) and joining their efforts with San Pablo would be more likely to result in a single service provider over a larger service area, which is conducive to lower rates. However, with Pinole proceeding with negotiations, this may be less of a concern.
Council can direct staff to begin negotiations with Republic, follow a competitive procurement process, and/or continue discussions to further explore and clarify the next steps to take. Staff is recommending securing the services of a solid waste consultant to provide expert guidance through this process.
FISCAL IMPACT:
While there is no fiscal impact directly related to the consideration of the procurement process for the future collection franchise agreement, City Council may wish to consider new terms such increasing the franchise fee higher than the 10% currently stipulated, mitigation funding for damage to City streets caused by the garbage trucks, and additional services such as bulky item pickup.
ATTACHMENTS:
Attach 1- Republic Letter of May 11, 2023
Attach 2- Republic Letter of June 6, 2023
Attach 3- 2017 Recycling Update of March 21, 2017
Attach 4- Original Franchise Agreement dated September 10, 1986