1512 Eureka Road, Suite 220, Roseville, CA 95661 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com
February 18, 2025
Christine Crowl
City Attorney
City of Hercules
submitted via email: [email protected]
SUBJECT: Solid Waste Franchise Fee Study – R3 Report
Dear Ms. Crowl,
R3 Consulting Group, Inc. (R3) is pleased to submit this report of Solid Waste Franchise Fee Study (Study) to the City of Hercules (City). This report presents our analytical methodology, results and findings, and recommendations regarding the solid waste Franchise Fee paid by the City’s contracted solid waste collection service provider, Republic Services (Contractor), per the Franchise Agreement for Residential, Multi-Family, and Commercial Discarded Materials Management Collection Services (Agreement) between the City and the Contractor.
The purpose of this Study was to comprehensively analyze and calculate the following:
City’s Costs: The annual costs to the City for performing its management, administration, regulatory compliance and enforcement, solid waste collection and clean-up, and other obligations associated with the Contractor’s Agreement and the sanitation system.
Property Use Charges: The annual use charge to the Contractor for its special and lasting access to use government property in the public right-of-way for placement of solid waste containers and collection of the solid waste contents.
Pavement Impacts: The annualized costs for pavement repair, maintenance, and rehabilitation resulting from the unique impacts to City street pavement caused by the Contractor’s solid waste collection vehicles during the course of providing sanitation service.
We then compared the calculated values to the annual Franchise Fee paid by the Contractor to the City per the Agreement. We found that the City’s current and projected Franchise Fee revenues are less than the sum of the City’s Costs and government Property Use Charges calculated in this Study. Based on these results, we conclude that the City’s fee amount is not more than necessary to cover the City’s costs in managing and administering the Agreement and the sanitation system plus the value of the Contractor’s use of the public right-of-way.
We appreciate the opportunity to be of service to the City. If you have any questions regarding this report or need additional information, please contact me.
Sincerely,
Garth Schultz | Principal
R3 Consulting Group, Inc.
510.292.0853 | [email protected]
TABLE OF CONTENTS
City of Hercules | Solid Waste Franchise Fee Study – R3 Report toc - i
1. Executive Summary
page 1
2. Methodology & Calculations
page 3
3. Findings & Conclusions
page 19
4. Recommendations
page 20
1. EXECUTIVE SUMMARY
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 1 of 20 Background
The City’s Agreement with the Contractor is for the collection, processing, and disposal of solid waste from Contractor’s solid waste service subscribers in the City. The Agreement provides the Contractor with the exclusive right to provide critical aspects of the City’s sanitation system, including solid waste collection and the other services and programs included in the Agreement. The Agreement specifies that the Contractor will charge solid waste service subscribers, with the Contractor billing and collecting revenues from subscribers and the City authorizing the maximum rates that the Contractor may charge pursuant to the rate adjustment methodology included in the Agreement.
Per the Agreement, the Contractor pays the City a Franchise Fee. For the purposes of this Study, the Franchise Fee is considered to be a fee that pays the costs incurred by the City in managing, administering, enforcing, and supplementing the services provided in the Agreement, as well as the charge for the use of the public right-of-way for the special and lasting access to use it for set-out and collection of solid waste containers.
Purpose
The purpose of this Study is to identify the amounts that may be considered for recovery through the Franchise Fee paid by the Contractor to the City and that may be exempt from consideration as taxes.
The Franchise Fee is a fee with three potential components. The first component includes the City’s proportionate costs (City’s Costs). The second component includes the proportionate charges for the Contractor’s use of the public right-of-way (Property Use Charges). The third is the City’s proportionate costs associated with pavement impacts (Pavement Impacts).
Methodology and Findings
To complete this Study, R3 reviewed and analyzed information provided by the City and the Contractor pertaining to the City’s Costs, Property Use Charges, and Pavement Impacts. Using that information, we then calculated the proportionate amounts necessary to cover the City’s costs, including staffing and other costs; use of government property in the public right-of-way; and pavement repair, maintenance, and rehabilitation costs caused by the Contractor’s solid waste collection vehicles during the course of providing sanitation service. All calculated amounts in this Study are in Fiscal Year (FY) 2023-24 dollars.
City’s Costs
The annual costs for management, administration, regulatory compliance and enforcement, solid waste collection and clean-up, and other obligations associated with the Contractor’s Agreement and the sanitation system includes: staffing salary and benefits, contracted services, capital and equipment depreciation, operations and maintenance, supplies, and overhead for distributed costs including but not limited to property, utilities, insurance, human resources, payroll administration, accounts payable and receivable, and other finance functions.
Staffing costs are calculated based on estimated time allocations (based on historical experience and the assessment of current City employees) and other costs are calculated based on estimated share allocations associated with the sanitation system, with distributed overhead applied to both.
The calculation results are $295,226 in staffing costs and $126,800 in other costs, for annual proportionate City’s Costs totaling $422,026.
Property Use Charges
The annual charge to the Contractor for use of government property in the public right-of-way is calculated as a function of estimates for the number of solid waste accounts setting out solid waste collection containers in the right-of-way, the set-out area used, the amount of time it is used, and the market value for the per square foot use of the public right-of-way.
Executive Summary
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 2 of 20 The calculation result for the use of the public right-of-way is a proportionate annual total Property Use Charge of $432,958.
Pavement Impacts
The annualized costs for pavement repair, maintenance, and rehabilitation are calculated based on the proportionate impact to pavement from solid waste collection vehicles compared to other sources of impacts. This calculation accounts for annual repair costs, five-year projections for capital improvement costs, and five-year projections for growth in deferred maintenance. The calculation also accounts for the high loading and slow speed impacts on pavement associated with solid waste collection vehicles.
The calculation result for the proportionate Pavement Impacts caused by Contractor’s solid waste collection vehicles during the course of providing sanitation service is an annualized total repair, maintenance, and rehabilitation cost of $1,018,474.
Conclusions
Franchise Fee and Fund 291 Revenues
The FY 2022-23 Franchise Fee paid by the Contractor to the City was $407,965 and the projection for FY 2023-24 is $419,225. The Fund 291 revenues paid by Contractor to the City were $176,184. The sum of FY 2023-24 annual City’s Costs and amounts for Property Use Charges calculated in this Study is $854,984, which is $259,759 (44%) higher than the projected FY 2023-24 Franchise Fee plus Fund 291 revenue. The Franchise Fee is, therefore, not more than the sum of the City’s Costs and Property Use Charges.
Limitations
This Study relies on information provided by the City and the Contractor, which we have reviewed and analyzed for reasonableness and accuracy but did not independently audit or verify. It was necessary to estimate certain values for information that the City did not have, and for which reasonable ranges are known to exist. When it was necessary to establish estimates or assumptions for those values, R3 relied on decades of professional experience working with dozens of local government agencies in California on solid waste utility and other local government public administration matters. Because changes to estimates and other underlying assumptions could change calculations, R3’s approach to this Study was to establish reasonable estimates and assumptions such that changes to them would minimize the potential for different ultimate findings. We have reviewed estimates and assumptions with City staff and legal counsel and have mutual concurrence on applicability and reasonableness of estimated and assumed values in this Study.
2. METHODOLOGY & CALCULATIONS
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 3 of 20 City’s Costs
Methodology
R3 reviewed and analyzed information provided by the City pertaining to the General Fund costs incurred for management, administration, regulatory compliance and enforcement, solid waste collection and clean-up, and other obligations associated with the Contractor’s Agreement and the sanitation system.
These costs include and may not be limited to:
Staffing costs, including salaries and benefits.
Contracted services.
Capital and equipment depreciation.
Capital and equipment operations and maintenance.
Supplies and materials.
Overhead for distributed costs such as property, utilities, insurance, human resources, payroll administration, accounts payable and receivable, and other finance functions.
Using the total annual salary, benefits, and other cost information provided by the City, we estimated the proportion of costs associated with management and administration of the agreement and the sanitation system. We then calculated the proportionate totals and categorized them by the functions listed in the sections below.
Variables, Estimates and Assumptions
Staffing Costs
Variables associated with salaries and benefits include the allocation of time that positions are dedicated to management and administration of the Agreement and the sanitation system (including time supervising others with primary responsibility for these duties), the amount by which funding of salaries and benefits is paid by the General Fund, and the applicable amount of General Fund overhead.
The estimated time allocation by position category used in this Study (and based on historical experience) is shown in Table 1, below and on the following page, along with the explanation for the allocation values.
Table 1: Allocations of Staffing Time by Position
Positions Time
Allocation Explanation
City Manager, City Attorney, City Clerk, Public
Works Director, M&O Superintendent, Code
Enforcement Officer
10.4%
Estimated allocation representing
proportion of staff time spent on solid
waste Agreement and sanitation
utility management and
administration. This estimated
allocation is informed by our prior
work experience in local
governments as well as our
experience conducting similar
studies for local governments in
California.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 4 of 20 Positions Time
Allocation Explanation
MW II 50%
Estimated allocation based on Illegal
Dumping Response, Clean-up,
Mitigation, & Prevention.
R3 verified with City staff that the salaries and benefits included in this Study are paid by the General Fund – any non-General Fund portions of positions included in Table 1 have been excluded from the calculations. A General Fund overhead rate of 20% (for the for distributed costs such as property, utilities, insurance, human resources, payroll administration, accounts payable and receivable, and other finance functions) is also applied to the total allocated costs. The 20% General Fund overhead rate used in this Study is an assumption informed by our prior work experience in local governments as well as our experience conducting similar studies for local governments in California. In our experience, when a City does calculate a General Fund overhead rate on its own, the result tends to be higher than the 20% used for the purposes of this Study (e.g., higher than 25%).
Other Costs
Variables associated with the City’s other (i.e., non-salary and benefit) costs include the proportionate allocation of those costs that are for management and administration of the Agreement and the sanitation system, the amount by which these costs are paid by the General Fund, and the applicable amount of General Fund overhead.
The estimated time allocation by cost category used in this Study is shown in Table 2, below, along with the explanation for the allocation values.
Table 2: Allocations of Other Costs by Category
Cost Category Cost
Allocation Explanation
Public Works Maintenance Crews responsible for
Street Sweeping, Catch Basin Waste Removal. 80%
Estimated allocation based on
proportion of waste generation in
City.
Consulting costs for direct management and
administration of Agreement and sanitation
system.
100%
All these costs are directly
associated with management and
administration of the Agreement
and the sanitation system.
Recovered Organic Waste Product Procurement. 100%
Purchase of compost or mulch
product for compliance with State
law.
R3 verified with City staff that the other costs included in this Study are paid by the General Fund – any non-General Fund portions of these costs as included in Table 2 have been excluded from the calculations. A General Fund overhead rate of 20% (for the for distributed costs such as property, utilities, insurance, human resources, payroll administration, accounts payable and receivable, and other finance functions) is also applied to the total allocated costs.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 5 of 20 Analysis
Direct Management and Administration
This category includes City staffing and consulting costs for direct management and administration of the Agreement and the sanitation system. Staffing costs include allocated costs for the City’s Public Works Director and M&O Superintendent, for a calculated $77,758 in annual staffing costs. Other costs include solid waste consulting services provided by R3, for $4,800 in annualized consulting costs for the cost of performing this Study. The total calculated cost for this category is $82,558.
Indirect Management and Administration
This category includes City staffing costs for indirect management and administration, including supervision of those responsible for direct management and administration of the Agreement and the sanitation system and associated responsibilities. Allocated costs for the City Manager, City Clerk and City Attorney are calculated for total annual costs in this category of $100,610.
CalRecycle and SB 1383 Compliance
This category would include City staff costs and other costs for various activities associated with the City’s need to implement Senate Bill 1383 (Short-Lived Climate Pollutants Act) as well as annual reporting to the State agency CalRecycle. Recovered Organic Waste Product Procurement costs of $50,000 were estimated. No costs other associated with this category were identified by the City during completion of this Study. Though no such costs were identified, that does not mean that these costs do not exist. Future updates to this Study could result in identification of such costs.
Code Enforcement
This category includes City staffing costs for enforcing the solid waste provisions of the City’s Municipal Code, which includes illegal solid waste accumulations, illegal dumping, littering, improper waste collection setouts, nuisances, and the associated investigations, warnings, notices of violation, and administration of penalties. No costs other associated with this category were identified by the City during completion of this Study. Though no such costs were identified, that does not mean that these costs do not exist. Future updates to this Study could result in identification of such costs.
Street Sweeping
When the Contractor or individual waste generators do not properly manage the collection of solid waste, that mismanaged solid waste tends to end up in the public right-of-way and on streets, where it must be removed by the City. Street sweeping captures solid waste that ends up in public streets because of improper collection. Most, if not all, of the solid waste that ends up in the streets is generated by properties that receive solid waste collection services from the Contractor.
For the purposes of this Study, we do not assume that all mismanaged solid waste that ends up on the City’s streets is generated by properties receiving solid waste services. Rather, because there is the possibility that some solid waste collected by street sweeping operations was originally generated by other sources, this Study estimates that only 80% of the solid waste collected by street sweepers was generated by properties receiving solid waste services. This assumption is consistent with other studies conducted by R3 (e.g., for the cities of Garden Grove and San Bruno) wherein street sweeping activities were allocated between 77.4% and 90% to the sanitation system. This category includes City staffing, capital equipment, and operations and maintenance costs for the City’s street sweeping operations. Costs for street sweeping were estimated by the City to be $65,000, and accounting for overhead and allocating as described above, the calculated total in this category is $62,400.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 6 of 20 Catch Basin Waste Removal
As with street sweeping, solid waste that is not properly managed by waste generators or the Contractor, and not otherwise captured by street sweeping operations, accumulates in catch basins and other trash capture devices in the City’s storm drain system. As with the street sweeping category, we do not assume that all mismanaged solid waste that ends up in catch basins or trash capture devices is generated by properties that receive solid waste services; the 80% estimate used for street sweeping costs is also applied here, and for the same reasons. This category includes City staffing, capital equipment, and operations and maintenance costs for the City’s catch basin waste removal operations. Costs for catch basin waste removal operations were estimated by the City to be $10,000, and accounting for overhead and allocating as described above, the calculated total in this category is $9,600.
Illegal Dumping Clean-up
The City’s Public Works maintenance crews also clean up solid waste materials that are illegally dumped throughout the City. This category includes City staffing costs for illegal dumping clean-up as well as costs for outside contractors and service providers for clean-up of un-housed encampments. Allocated staffing costs for the Public Works maintenance crews are calculated to be $106,576 annually, for a calculated total in this category of $116,857.
Public Waste Containers
This category would include City staff costs and other costs for collection of waste deposited in public waste containers in the public right-of-way and other public locations in the City. No costs associated with this category were identified by the City during completion of this Study. Though no such costs were identified, that does not mean that these costs do not exist. Future updates to this Study could result in identification of such costs.
Waste Collection at City Events
This category would include City staff costs and other costs for collection of waste generated and disposed of at City public events. No costs associated with this category were identified by the City during completion of this Study. Though no such costs were identified, that does not mean that these costs do not exist. Future updates to this Study could result in identification of such costs.
Tree Trimming for Vehicle Access to Public Right-of-Way This category would include City staff costs and other costs for trimming of the City’s street trees to provide safe clearance for collection vehicles to collect solid waste from the public right-of-way. No costs associated with this category were identified by the City during completion of this Study. Though no such costs were identified, that does not mean that these costs do not exist. Future updates to this Study could result in identification of such costs.
Annual Total of City’s Costs
Table 3, on the following age, shows the total of the City’s Costs for management and administration of the Agreement and the sanitation system as calculated in this Study, by category.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 7 of 20 Table 3: City’s Annual Costs by Category and in Total
Category Staffing Costs Other Costs Total
Direct Management and
Administration $77,758 $4,800 $82,558
Indirect Management and
Administration $100,610 $- $100,610
CalRecycle & SB 1383
Compliance $- $50,000 $50,000
Street Sweeping $- $62,400 $62,400
Catch Basin Waste Removal $- $9,600 $9,600
Illegal Dumping Clean-up $116,857 $- $116,857
Total Annual City’s Costs $295,226 $126,800 $422,026
Property Use Charges
Methodology
R3 reviewed and analyzed information provided by the City and the Contractor pertaining to Property Use Charges for Contractor’s use of the public right-of-way for collection of solid waste collection containers.
They then calculated the annual Property Use Charges based on:
The setout area used for collection of solid waste containers (in square feet).
The amount of time that the area is used.
The market value for use of the public right-of-way (in dollars per square foot).
The number of solid waste subscribers setting out collection containers in the public right-of- way.
Using these values, we calculated the market value for the Contractor’s use of government property in the City.
Variables, Estimates, and Assumptions
Setout Area
Standard residential solid waste collection setouts include three solid waste collection containers, usually carts with wheels and lids, with one each for garbage, recycling, and organics waste streams. The setout area needed for placement of these containers is inclusive of the width of each container (typically two feet) as well as minimum required space between the containers and other objects such as cars (minimum of one feet). The set-out area also takes up available parking space and is, thus, assumed to extend six feet out from the curb. Taken altogether, the area for residential setouts is calculated as three Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 8 of 20 containers that are each two feet wide, plus one foot between each container and other objects, for a total area ten feet wide times six feet in depth. The result is 60 square feet of setout area per serviced single- family residential property.
The amount of area used for commercial setouts (in this Study, use of the term commercial also always includes multi-family) can vary widely, as there is no standard commercial subscription size profile – each commercial solid waste subscriber can select from a range of container sizes, with most of them being larger than the containers used in residential areas. Given this complexity, this Study assumes that the average commercial setout area is twice that of the residential setout area, for 120 square feet. This estimate is likely lower than the average setout area needed in commercial areas and is, therefore, conservative.
Setout Time Usage
Standard residential solid waste collection is performed once weekly. Most residential containers are set out the evening prior to collection and are removed from the public right-of-way the following afternoon.
Thus, for the purposes of this Study, we assume that collection containers are in the public right-of-way for an average of 18 hours per day, one day per week, which amounts to approximately 10.71% of the time (18 hours divided by 24 per day divided by 7 days per week).
Commercial solid waste subscription setout times can vary widely – just as there is no standard commercial subscription size profile, likewise there is no standard collection frequency. Commercial solid waste subscribers can select collection frequency between once and six times per week, and with different frequencies for different waste streams. Given this complexity, this Study assumes that the average commercial collection frequently is twice weekly, for 21.43% of the time. As with the setout area, this estimate is likely lower than the average commercial collection frequency and is, therefore, conservative.
Market Value for Use of Public Right-of-Way
To establish the market value for use of the public right-of-way, R3 conducted an online survey of recent purchases of bare land in the City and locally in Contra Costa County. R3 sampled thirty recent sales of bare land in the City, which were sold for a median value of $20.62 per square foot. To that value, R3 added the per square foot value of the City’s street pavement, which is calculated as a function of the total replacement value of the City’s streets ($196,879,000) divided by the area of the streets in square feet (10,810,335) both of which are contained in the City’s 2022 PTAP/PMP (see next section).
The resultant value of the street improvements is $18.21 per square foot, which, when added to the $20.62 market value of bare land, yields $38.84 per square foot. This value is then divided a rental realization rate of 4.45 (based upon a survey of 24 local rates for parking space rentals) and multiplied by the same 20% general fund overhead rate described earlier in the Study to account for distributed costs including but not limited to property, utilities, insurance, human resources, payroll administration, accounts payable and receivable, and other finance functions, for a total annual per square foot use charge for the public right-of-way of $10.48. R3 believes this value to be conservative – other methodologies that could have been applied would have resulted in a higher estimated market value for the use of the public right-of-way. For example, had this Study used “parklet rental fee” charges established in other California communities, with an approximate average annual per square foot value of $15.00 per square foot, the results from this Study would be higher than estimated herein.
Number of Subscriptions Setting Out Containers
The Contractor reports that there are 7,124 residential and 74 commercial solid waste service subscribers in the City. However, not all subscribers set out their containers in the public right-of-way for collection all the time. To account for non-setouts (either because subscribers don’t have waste materials to set out or because they receive on-premises service) we assume that only 90% of residential solid waste Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 9 of 20 subscribers set out containers on a regular basis, for a resulting total of 6,412 average residential setouts.
This 90% assumption is informed by our work overseeing solid waste collection operations for local governments throughout California; from that experience, we know that almost all residential solid waste customers set out their solid waste containers for collection each week (with the exceptions being when residents are on vacation or generate exceptionally low amounts of waste). The City’s Contractor provides weekly collection of solid waste containers to all residents.
It is also understood that most commercial subscribers do not set out containers in the public right-of-way, and therefore we conservatively assume that only 5% of commercial subscribers set out containers on a regular basis, for a resulting total of 4 average commercial setouts. The assumed 5% set-out rate for commercial customers is almost certainly low – were one to take field observations for these values, we believe that the actual rates of set-out would be higher than used for the purposes of this Study. However, we use the 5% set-out assumption for commercial subscribers in this Study as data regarding use of the public right-of-way by commercial subscribers in the City is not available.
Analysis and Total Annual Property Use Charges
Calculating the total annual Property Use Charges using the variables, estimates, and assumptions from the prior section is a function of multiplication, as shown in Table 4, below.
Table 4: Calculation of Total Annual Property Use Charges Variable Category Residential Commercial
Grand Total Annual
Property Use Charge
Setout Area 60 SF 120 SF
Setout Time Usage 10.71% 21.42%
Annual Use Charge $10.48 per SF $10.48 per SF
Number of Setouts 6,412 4
Total Annual Property
Use Charges $431,880 $1,078 $432,958
Pavement Impacts
Methodology
R3 reviewed and analyzed information provided by the City pertaining to Pavement Impacts from the Contractor’s solid waste collection vehicles. We then calculated estimates of the proportionate share of the average annual pavement repair, maintenance, and rehabilitation costs associated with solid waste collection vehicles based on the proportionate impact to pavement from solid waste collection vehicle compared to other sources of impacts.
The calculation accounts for the City’s annual repair costs, five-year projections for capital improvement costs, and five-year projections for annualized growth in deferred maintenance. The calculation also accounts for the high loading and slow speed impacts on pavement associated with solid waste collection vehicles.
The calculation proportionately allocates the average annual pavement management costs to solid waste vehicles based on:
The equivalent single-axle load and proportionate impacts from speed for those vehicles compared to other vehicles.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 10 of 20 The number of vehicle trips on City streets.
The proportion of vehicle trips that are made by trucks versus automobiles.1
Variables, Estimates, and Assumptions
The weight, loading, slow speed, and frequent stops that characterize solid waste collection vehicle operations impose unique and quantifiable impacts on the City’s street pavement. It is important to understand that, while calculation of vehicle impacts to pavement can be precise for individual vehicles, out of necessity we made certain assumptions about overall blended pavement impacts associated with several categories of vehicle types for the purposes of this Study. This is because we sought to calculate estimated impacts to all street pavement in the City, covering all vehicle uses, and precise traffic information at that scale is not currently available. Thus, we make informed assumptions regarding several variables necessary for this Study.
For each of these variables, there is a range of potentially reasonable values that may be used. We have selected values at the low end of the range to present findings that conservatively calculate estimated values of the pavement impacts associated with the Contractor’s solid waste collection vehicles during the course of providing sanitation service. Assumptions used are described in the following subsections, which reference sources supporting the summary provided here. We must note that changes in assumptions may result in material changes in calculation results and findings.
Factors Impacting Pavement Conditions
Street pavement repair, maintenance, and rehabilitation needs and their resulting costs are affected by several factors, including vehicle usage and utility cuts (for maintenance and repairs to underground utilities). Environmental conditions such as light and water also contribute to pavement repair, maintenance, and rehabilitation needs in combination with the primary impacts from vehicles and trench cuts and are thus not separately accounted for . This Study only focuses on the impacts to street pavement from vehicles, and the proportion of those impacts that are attributable to the Contractor’s solid waste collection vehicles as they perform sanitation service.
City’s Costs for Pavement Repair, Maintenance and Rehabilitation The City regularly projects its costs for repair, maintenance, and rehabilitation of pavement resulting from degradation due to use. These projections, and the basis for them, are documented in Pavement Management Program Update (P-TAP) reports which the City commissions with engineering consultants.2 Per the City’s March 2023 P-TAP report, the City’s projected average annual pavement maintenance and rehabilitation costs from 2023 through 2027 for its entire street network are approximately $3.6 million.
City’s Costs Related To Deferred Maintenance
The City regularly projects its costs for repair, maintenance, and rehabilitation of pavement resulting from degradation due to use. These projections, and the basis for them, are documented in the City’s P-TAP.
1 Our analysis accounts for the distribution of vehicles among the 13 Federal Highway Administration vehicle classifications, which include passenger cars, SUVs/pick-ups, buses, and multiple truck and truck/trailer axle combinations.
2 The City’s current P-TAP report dated March 2023 was prepared by Pavement Engineering Inc., a consulting firm with expertise in pavement engineering. Broadly speaking, a P-TAP is designed to provide objective information and useful data for analysis so that managers can make more consistent, cost-effective, and defensible decisions related to the preservation of a pavement network.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 11 of 20 Per the P-TAP, deferred pavement maintenance on the City’s streets3 (which is the result of degrading pavement conditions associated with the impacts of vehicles and that is not funded for repair during the planning term) is projected to increase by $12.1 million between 2023 and 2027.4 Deferred maintenance is the result of impacts to pavement that should be subject to repair or rehabilitation, but for which such repair or rehabilitation is not planned due to funding constraints. Though repair or rehabilitation of the deferred maintenance impact is not planned, the pavement condition is impacted, in part due to solid waste collection vehicles, and the City must address the deferred maintenance eventually. If deferred maintenance were never to be funded and addressed via repair and rehabilitation, pavement conditions would degrade to the point of being unnavigable by vehicles.
Axle Loading
Our methodology for calculating the proportionate amount of pavement maintenance, and rehabilitation impacts for the Contractor’s vehicles is grounded in the fact that all vehicles, including solid waste collection vehicles, degrade pavement during use. Measurement of that impact – also known as “vehicle loading” – can be estimated, quantified, and expressed as an Equivalent Single Axle Load (ESAL), which is a function of the vehicle’s weight and the distribution of that weight over the vehicle’s axles.
It is important to note that heavier vehicles (including solid waste vehicles) have more impacts on pavement and have a higher vehicle loading ESAL value. It is also important to note that ESAL values are associated with vehicle loading only, and not the speed of the vehicle; it is therefore assumed that relative ESAL values between vehicle types are based on vehicles travelling at the same rate of speed. For this analysis, R3 used the vehicle categories and average ESAL values shown in Table 5, on the following page. Table 5 explains and cites supporting information for how the ESAL for each vehicle type was determined. It should be noted that solid waste collection vehicles are much heavier than most other typical vehicles on City roadways.
Table 5: ESAL Value Assumptions by Vehicle Type
Vehicle Type ESAL
Value Source
Automobiles (Passenger Cars) 0.0008
AASHTO (American Association of State Highway and
Transportation Officials) Design Guide with ESALs by
Vehicle Type
Average of All Other Trucks5 0.0171
Calculated Value Using AASHTO Design Guide with
ESALs by Vehicle Type, Federal Highway Administration
ESALs by Vehicle Type, Comparative Traffic Counts
Solid Waste Vehicle (Garbage) 1.0000
Calculated Values by Type Using Example Axle Weights
and AASHTO Axle Load Equivalency Factors Solid Waste Vehicle (Organics) 1.0000 Solid Waste Vehicle (Recycling) 0.7500
3 Deferred maintenance is planned maintenance that gets delayed and backlogged because of a lack of funding.
Deferred maintenance costs remain on the books until they are funded and the work is completed and recategorized in the City’s P-TAP.
4 Our analysis assumes funding based on the City’s budgeted pavement maintenance costs as presented in the P- TAP under Scenario 2 “Maintaining PCI 62”.
5 “All other trucks” means all vehicles with high loading and impact on street pavement other than solid waste vehicles, including pickup trucks, vans, box trucks, and a variety of other trucks with a lower average ESAL than solid waste collection vehicles.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 12 of 20 Given the assumed ESAL values in Table 5, a solid waste vehicle collecting garbage has 1,250 times the impact of an automobile. We are aware of other research concluding that the impacts of solid waste collection vehicles may be as high as 8,000-9,000 times the impact of passenger cars; thus, our assumed ESAL of “1” for garbage collection vehicles is on the low end of the range of ESALs for such vehicles.
Speed Impact
Impacts to flexible pavements (which are typical for residential streets) are also influenced by vehicle speeds, with impacts being exponentially higher when a load carrying vehicle is moving at a very slow speed.6 This is demonstrated in Chart 1, below.
Chart 1: Exponential Relationship Between Speed and Pavement Impacts
Unlike typical traffic on residential streets, which tends to travel at or near the posted speed limit (25 miles per hour [mph] in the City), solid waste vehicles slow and stop for collection in front of each household, averaging approximately 4 mph to 8 mph.7 At these low speeds, and as shown in Chart 1, vehicles have approximately 2.2 to 2.6 times the impact to the pavement than they would travelling only at the 25 mph speed limit.
In this Study we conservatively assume that solid waste vehicles in the City may be travelling at a faster 10 mph average speed, and we thus assume that the relative impact of speed is a factor of 2, not the higher
2.2 to 2.6 factors corresponding with slower speeds as noted above. We apply this speed factor of 2 as a multiplier to the ESAL loading for solid waste collection vehicles in our analysis of impacts to residential streets only; the factor is not applied to the ESAL loading for arterial and collector streets, as those streets are not typically comprised of flexible pavements, solid waste collection vehicles stop less frequently on those streets (and thus have a higher average speed).
6 Effect of truck speed on the response of flexible pavement systems to traffic loading; International Journal of Pavement Engineering, July 2020; Michael R. S. Mshali and Wynand JvdM. Steyn. 7 Real-world activity, fuel use, and emissions of heavy-duty compressed natural gas refuse trucks; Science of the Total Environment 761, 2021; Gurdas S. Sandhu, H. Christopher Frey, Shannon Bartelt-Hunt, Elizabeth Jones.
0.000.501.001.502.002.503.003.500 2 4 6 8 10 12 14 16 18 20 22 24 26Relative ImpactAverage Speed (MPH) Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 13 of 20 Vehicle Passes Per Day
By estimating the number and type of vehicles (i.e., solid waste collection vehicles, automobiles, and all other trucks) that travel on a street, and the average pavement impacts (measured in ESAL loading) associated with each vehicle type (described in the prior subsection), the total impacts that the pavement will experience can be estimated in a mathematical calculation. Our analysis makes informed assumptions about the number of vehicle passes (meaning trips down streets) by type for the two major types of streets identified by the City in its P-TAP. Those two types of streets are: high-traffic-volume streets (namely arterial and collector streets) and low-traffic-volume streets (residential streets). Specific data for the City relating to the number of vehicle passes per day and the proportion of those passes that are comprised of trucks was not available for this Study.
For the low-traffic residential streets, we used an estimate of 2,500 vehicle passes per day. We also estimated that 5% of residential traffic trips were made by trucks, which we believe to be a conservative assumption – in communities where traffic trip information by vehicle type is available, the result is less than 5%, which yields a greater proportionate impact from solid waste vehicles. For arterial and collector streets, we used an estimate of 25,000 passes per day. For the percentage of those trips that are trucks, we used a calculated value based on comparative traffic counts from the City of Torrance in 2023 and which is the same dataset that we used to estimate the average ESAL for “All other trucks” in Table 5. That analysis calculates the average daily traffic counts for all vehicles on commercial streets in that city, with
87.7% of the average daily traffic count being comprised of passenger cars and motorcycles and the remaining 12.3% being comprised of trucks.
For the purposes of this Study, we have assumed an even higher percentage of arterial and collector street traffic being trucks, at 15% of the average daily traffic. As with the prior assumptions, this value is conservative in that it returns a low proportionate value for the impacts to streets from the Contractor’s solid waste vehicles. Table 6, on the following page, is a summary of the assumptions used in this Study related to average daily vehicles passes and the percentage that are trucks assumptions used in this Study.
Table 6: Vehicle Passes Per Day by Street Type
Street Type Vehicle Passes Per Day Percentage of Vehicle Passes That Are Trucks
Residential 2,500 5%
Arterial and Collector 25,000 15%
Vehicle Passes By Vehicle Type
The variables described in the prior subsection provide the overall number of vehicle passes per day, and the percentage of those passes that are trucks. To isolate the vehicle loading impacts to pavement associated with solid waste collection vehicles, we need to determine the number of passes that those vehicles make per day. This is a relatively simple calculation based on the weekly schedule of collections for solid waste collection services.
For the low-traffic residential streets, solid waste collection operations are on a weekly schedule. Since weekly collections are on both sides of the street, each street is driven twice (once in each direction) by a minimum of one of each type of solid waste collection vehicle. For the purposes of this Study, we assume that each solid waste collection vehicle makes two passes per week, or 0.286 passes per day, on residential streets. This value does not account for the fact that some streets are driven on during non- Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 14 of 20 route days so that collection vehicles can access streets on a given route, meaning that the actual average passes per week in the City must be higher than stated above.
Using the lower passes per week is conservative in that it returns a lower result for the street impacts from the Contractor’s solid waste vehicles. For the high-traffic arterial and collector streets, which are primarily commercial, the schedule for solid waste collection can vary. Solid waste collection services may be provided up to five or six times a week for larger waste generators and may be as low as weekly for smaller generators. Additionally, because solid waste generators in commercial areas are not all on the same collection schedules as residential accounts are, vehicles in commercial areas pass over the same streets multiple times to serve accounts with different collection schedules.
For the purposes of this Study, for arterial and collector streets, we assume that solid waste collection vehicles collecting garbage for landfill disposal pass over each street two times per day (once in each direction), while solid waste collection vehicles for organics and recycling pass over each street once per day (one half in each direction). Total passes for organics and recycling collection vehicles are less because it is generally the case that service levels for garbage are at least twice those of the corresponding organics or recycling service level. As with the number of passes on residential streets, this value does not account for the fact that some streets are driven on during non-route days so that collection vehicles can access streets on a given route, meaning that the actual average passes per week in the City must be higher than stated above. Using the lower passes per week is conservative in that it returns a lower result for the pavement impacts from the Contractor’s solid waste vehicles.
The number of passes per day for the remaining vehicle types – automobiles and other trucks – are simply calculated as a function of the total number of daily passes, the total number of those that are trucks (based on the percentages discussed in the prior section), and the number of passes for solid waste collection vehicles. For example, for the City’s residential streets, given the assumed 2,500 passes per day and 5% (125) of those being trucks, there are 2,375 automobile passes per day (2,500 x 95%).
With three types of solid waste collection vehicles each passing 0.286 times per day (as described above), the total passes per day are 0.857 (3 x 0.286). The number of passes for all other trucks is 124.143 (150 minus 0.857). Table 7, below, provides a summary of vehicle passes per day by street type.
Table 7: Vehicle Passes Per Day by Vehicle Type and Street Type Vehicle Type Residential Streets Arterial and Collector Streets Automobiles (Passenger Cars) 2,375.000 21,250.000
Average of All Other Trucks 124.143 3,747.143
Solid Waste Vehicle (Garbage) 0.286 1.429
Solid Waste Vehicle (Organics) 0.286 0.714
Solid Waste Vehicle (Recycling) 0.286 0.714
Total 2,500 25,000
Percentage of Streets by Type
A final variable that needs to be addressed in the percentage of streets by type. This information is included in the City’s P-TAP, including the relative area by street type, as shown in Table 8, next page.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 15 of 20 Table 8: Percentage of Streets by Type
Street Type Area (Square Feet) Percentage of Area
Residential 6,029,369 55.8%
Arterial 1,774,941 16.4%
Collector 3,006,025 27.8%
Total 10,810,335 100%
Analysis
Percentage Impact for Solid Waste & Street Sweeping Vehicles by Street Type With the variables for ESAL by vehicle type, the multiplication factor for the relative impacts of speed for solid waste collection vehicles on residential streets, and the number of passes by vehicle type established, we then calculate the relative percentage impact associated with each vehicle type. This is calculated as a function of ESAL multiplied by speed factor (residential streets only) multiplied by the number of weekly passes, multiplied by ESAL, with the product being the total vehicle loading pavement impact by vehicle type per week.
Totaling the weekly total vehicle loading by vehicle types yields the total estimated loading experienced by each street type (residential vs. arterial and collector). From there, we calculate the percentage contribution to total vehicle loading for solid waste collection vehicles, which is the total weekly ESAL loading associated with solid waste collection vehicles divided by the total ESAL loading for the street.
Table 9 and Table 10, on the following page, show these calculations and the results.
Table 9: Calculation of Solid Waste Pavement Impacts – Residential Streets
A B C D E F
Vehicle Type
Average
ESAL /
Vehicle
(Per Table
5)
Relative
Impact
from
Speed
Passes /
Day /
Vehicle
Type
(Per Table
7)
Passes /
Week /
Vehicle
Type
(C x 7)
Total
Weekly
ESAL
Loading
(A x B x D)
Percent of
Total
ESAL
Loading
(E / 39.16)
Automobiles 0.0008 1x 2,375.000 16,625 13.30 33.96%
All Other Trucks 0.0171 1x 124.143 869 14.86 37.95%
Garbage Vehicles 1.0000 2x 0.286 2 4.00 10.21%
Organic Material Vehicles 1.0000 2x 0.286 2 4.00 10.21% Recycling Vehicles 0.7500 2x 0.286 2 3.00 7.66%
Total 2,500 17,500 39.16 100%
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 16 of 20 As shown in Table 9, for the City’s residential streets we calculated the percentage impacts for solid waste vehicles to be 28.09% of total impacts to residential street pavement (10.21% times 2 plus 7.66%).
Table 10: Calculation of Solid Waste Vehicle Impacts – Arterial and Collector Streets
A B C E F
Vehicle Type
Average
ESAL /
Vehicle
(Per Table 5)
Passes /
Day /
Vehicle Type
(Per Table 7)
Passes /
Week /
Vehicle Type
(B x 7)
Total Weekly
ESAL
Loading
(A x C)
Percent of
Total ESAL
Loading
(E / 586.28)
Automobiles 0.0008 21,250.000 148,750 119.00 20.30%
All Other Trucks 0.0171 3,747.143 26,230 448.53 76.50% Garbage Vehicles 1.0000 1.429 10 10.00 1.71%
Organic Material Vehicles 1.0000 0.714 5 5.00 0.85%
Recycling Vehicles 0.7500 0.714 5 3.75 0.64%
Total 25,000 175,000 586.28 100%
For the City’s arterial and collector streets, Table 10 calculates the percentage impact from solid waste vehicles to be 3.20% of the total impacts (1.71% plus 0.85% plus 0.64%).
Average Annual Pavement Expenses
Per the P-TAP report, the City is projected to spend $3.6 million per year on pavement repair, maintenance, and rehabilitation.
Average Annualized Deferred Maintenance
In addition to contributing to annual pavement maintenance and rehabilitation costs, solid waste vehicles also contribute to deferred maintenance. The P-TAP report projects that deferred maintenance will increase by $12.1 million from 2023 to 2027, which is $3,025,000 annually.
Sources of Pavement Impacts
The City’s projected pavement maintenance repair needs are assumed to include impacts to pavement caused by and utility cuts. This Study assumes that the impacts of utility cuts on the City’s streets to be 10% of all pavement repair, maintenance, and rehabilitation needs. Thus, this Study allocates 90% of the average annual pavement repair, maintenance, and rehabilitation needs to vehicle impacts.
The 10% assumption for the value of impacts related to utility cuts is, in part, based on experience working in local government street maintenance operations, wherein pavement repair and rehabilitation needs for utility cuts were a fraction of overall pavement repair and rehabilitation needs. The 10% assumption is further informed by the Federal Highway Administration’s Manual for Controlling and Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 17 of 20 Reducing the Frequency of Pavement Utility Cuts8 which references a case study from the District of Columbia in 1996 wherein “the combined area of the utility cuts in the District was over one percent of the total pavement surface area.” This Study further considers that the costs to repair and rehabilitate pavement that has been impacted by utility cuts is approximately double the costs to repair and rehabilitate pavement without utility cuts.9 Taken together, the 10% assumption for the pavement repair and rehabilitation amount associated with utility cuts used in this Study contemplates up to 5% of pavement service area being affected by utility cuts (nearly five times the area cited in the Federal Highway Administration Manual) at double the repair and rehabilitation costs for pavement not affected by utility cuts. The results of the 10% assumption for the impacts of utility cuts is demonstrated in Table 11 below. 10
Table 11: Average Annual Pavement Impacts from Vehicles Category Amount of Impacts
from All Sources
Reduction for
Subsurface Activities
Amount of Impacts
from Vehicles
Average Annual
Pavement Expenses $3,600,000 -10% $3,240,000
Average Annualized
Deferred Maintenance $3,025,000 -10% $2,722,500
Total $6,625,000 -10% $5,962,500
Table 12, below, shows the breakdown of the average annual pavement impacts from all vehicles by street type, using the total from Table 11.
Table 12: Total Pavement Impacts from Vehicles by Street Type Variable Residential Arterial and Collector Total
Percentage of Streets
by Type (From Table 8) 55.8% 44.2% 100%
Total $3,325,532 $2,636,968 $5,962,500
8 https://www.fhwa.dot.gov/utilities/utilitycuts/man01.cfm 9 Analysis of the Impact of Utility Cuts on Rehabilitation Costs in Santa Cruz County, CA; November 2002; Shahin & Associates Pavement Engineering.
10 R3 is aware of a Study conducted by another consultant that found a higher percentage for the impacts of trench cutting (i.e., 25%). R3 has not had opportunity to review that study or the basis its conclusion. However, if this Study were to have used a 25% factor for the impacts of trench cutting, rather than 10%, the result would not change our ultimate findings. This is because using a 25% factor rather than a 10% factor would result in a reduction in the value of the total pavement impacts from Contractor’s vehicles shown in Table 13 by $393,594.
Even with that reduction in the value of the total pavement impacts from Contractor’s vehicles, this Study would still conclude that the amounts calculated in this Study are higher than the projected FY 2023-24 Franchise Fee payments.
Methodology & Calculations
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 18 of 20 Total Annual Pavement Impacts
Calculating the total annual Pavement Impacts using the variables, estimates, and assumptions from the prior section is a function of multiplication, as shown in Table 13, on the following page.
Table 13: Calculation of Total Pavement Impacts from Contractor’s Vehicles Variables Residential Arterial and Collector
Grand Total
Annual Pavement Impacts
from Vehicles (From
Table 12)
$3,325,532 $2,636,968
Percentage Impacts from
Contractor’s Vehicles
(From Tables 9 and 10)
28.09% 3.20%
Total $934,141 $84,333 $1,018,474
3. FINDINGS & CONCLUSIONS
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 19 of 20 Franchise Fee
The FY 2022-23 Franchise Fee paid by the Contractor to the City was $407,965 and the projection for FY 2023-24 is $419,225. The Fund 291 revenues paid by Contractor to the City were $176,184 and the projection for FY 2023-24 is $176,000.
R3 calculated estimates of the City’s Costs and Property Use Charges based on actual and estimated cost information provided by the City, and with conservative assumptions for estimated values.
The sum of FY 2023-24 annual City’s Costs ($422,026) and Property Use Charges ($432,958) amounts calculated in this Study is $854,984.
Where assumptions were necessary to complete the analysis in this Study, attempts were made to apply conservative assumptions given a range of possible inputs.
The calculated amounts bear a reasonable relationship to the Contractor’s burdens on the City resulting from the management and administration of the Agreement and the sanitation system, and the value of the Contractor’s use of the public right-of-way. The City’s Costs have been reviewed and confirmed by City staff as being representative of the actual time and costs incurred for these activities. Amounts of Property Use Charges are proportionately allocated to the Contractor with due recognition of the realities of the Contractor’s operations.
The amounts calculated in this Study are $259,759 (44%) higher than the projected FY 2023- 24 Franchise Fee and Fund 291 payments. It is highly unlikely, given the justification provided herein, that FY 2023-24 Franchise Fee payments will exceed the amounts calculated in this Study.
The Franchise Fee and Fund 291 payments are therefore is not more than necessary to cover the City’s costs incurred in managing and administering the Agreement and the sanitation system plus the value of the Contractor’s use of the public right-of-way.
R3 calculated estimates of the Pavement Impacts from Contractor’s solid waste collection vehicles based on quantifiable impacts from such vehicles. The amount of Pavement Impacts calculated in this Study is $1,018,474.
The amount calculated Pavement Impacts bear a reasonable relationship to the Contractor’s burdens on the City resulting from the pavement impacts caused by Contractor’s solid waste collection vehicles. Calculations of Pavement Impacts have been proportionately allocated to the Contractor with due recognition of the impacts from loading, speed, number of trips, and other causes of pavement repair, maintenance, and rehabilitation needs.
4. RECOMMENDATIONS
City of Hercules | Solid Waste Franchise Fee Study – R3 Report 20 of 20 Restate Franchise Fee
The current franchise fee payments from the Contractor to the City are calculated as a percentage of gross revenues collected from Contractor. While these payments do not exceed the City Costs and Property Use Charges values calculated in this Study, the City would be better served by restating the Franchise Fee to be a dollar value instead of a percentage of gross revenues.
We recommend that the City consider amending the Agreement with the Contractor to set the Franchise Fee at a dollar value not to exceed the sum of the City Costs and Property Use Charges values calculated by this Study.
Annual Adjustments
All values calculated in this Study are in current FY 2023-24 dollars. Given that the City’s Costs, Property Use Charges, and Pavement Impacts will all tend to change over time in response to changing staffing, benefits, and other costs, it would be appropriate for the City to implement an annual adjustment to the Franchise Fee.
R3 recommends the City consider including an automatic annual adjustment that would change the fees in proportion to the percentage change in the Consumer Price Index (CPI).
We recommend the CPI for All Urban Consumers (CPI-U) for the San Francisco Bay Area (U.S. Bureau of Labor Statistics series ID: CUURS49BSA0).
Sources and Uses Accounting
Currently, the City’s Costs and Property Use Charges are not tied to Franchise Fee revenues in the City’s accounting system. The City could implement project code accounting and/or enterprise fund accounting for the Franchise Fee to better track source revenues and their uses. In either case, allocated and/or direct staffing and other costs could be tied to source revenues, while the Property Use Charges could be transferred out for general use.
R3 recommends the City consider implementing sources and uses accounting practices for Franchise Fee revenues, City’s Costs, and Property Use Charges.
Periodic Recalculation
Over time, the City’s Costs associated with the Agreement and the sanitation system, the value of Property Use Charges for use of the public right-of-way, and the annualized costs associated with Pavement Impacts from the Contractor’s solid waste collection vehicles may change in ways that vary from the annual change in the CPI. Additionally, changes in City policies, programs, procedures, organization, geopolitical boundaries, laws, regulations, court rulings, and/or other factors may also trigger a need for recalculating fees.
R3 recommends the City consider updating this Study periodically (e.g., every five years) or more frequently if needed to recalculate fees in response to other factors.