STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of March 25, 2025
TO: Mayor and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Jeff Brown, Interim Public Works Director/City Engineer SUBJECT: Resolution Approving the Restated Solid Waste Franchise Agreement between the City of Hercules and Richmond Sanitary Service, Inc. dba Republic Services RECOMMENDATION:
Staff recommends that the City Council adopt a Resolution of the City Council of the City of Hercules:
Authorizing the City Manager to Execute an Agreement with Richmond Sanitary Services, Inc. dba Republic Services for Solid Waste Collection Services and Direction to Staff to Set a Proposition 218 Hearing, and Accepting the Final Franchise Fee Study, and
Authorizing City Manager to Execute a Side Letter Agreement Regarding Use of City Rate Stabilization Funds to Offset Maximum Service Rates Effective July 1, 2025, through December 31, 2026 BACKGROUND:
The City of Hercules holds a Franchise Agreement with Richmond Sanitary Service, Inc. dba Republic Services (Republic), which expires on June 30, 2025. The agreement currently in place is an amended version of the same agreement that was executed in 1986. The City Council authorized staff to commence negotiations on September 12, 2023, for an extension of the term of the agreement and a restatement of the agreement. City Council requested that Republic provide multiple rate scenarios aligning with various term lengths, 10-, 15-, and 20-year terms. Staff also proposed potential service improvements, including the addition of a bulky item collection program for single family residents.
The franchise agreement with Republic is for collection services only. Many legislative compliance functions are served by the West Contra Costa Integrated Waste Management Authority (RecycleMore), a JPA that Hercules is a member of. Post-collection services, including other associated activities such as outreach and education, is dictated by the terms of the Post-Collection Agreement held by RecycleMore and Republic.
The City receives revenue from two fees in the existing agreement: the franchise fee, which is deposited in the general fund, and the City Waste Program Fee, which is deposited into a dedicated fund.
ANALYSIS:
Staff has completed negotiations with Republic for a fifteen-year term length. This term length is typical for modern franchise agreements and matches the term length negotiated by nearby City of San Pablo. Republic provided an alternative cost proposal for the 10-year term length, but declined to offer cost savings for a 20-year term length. The 15-year term length is recommended by City staff. The negotiated agreement, if approved by City Council, would be effective on July 1, 2025 and expire on June 30, 2040.
City fees in this restated Agreement are simplified and combined into a single annual City Franchise Fee, paid in monthly installments and set at the initial amount of $805,000 annually. This fee will increase by the same percentage as rates increase in each subsequent year of the agreement.
The solid waste collection rates paid by Hercules residents and businesses are comprised of many different rate components, including the post-collection portion of the rate which is set by RecycleMore and not dictated by the City. Setting that portion of the rate aside, Republic has requested an increase in their portion of residential rates and commercial rates. The City has also negotiated the addition of a single-family bulky item collection program at the cost of $2.62 per month to all single-family ratepayers, which will fund the collection of bulky items on an on-call basis up to two times per year with no additional cost to the ratepayer. The City will now regulate industrial rates, enhancing transparency for the service which is already exclusive to Republic. Finally, the City Fee component of the rates will be removed, as the payment is made from the hauler to the City under the terms of the proposed Agreement.
The negotiated rate increase would be effective July 1, with the next rate increase scheduled for January 1, 2027 (18-month rate freeze). The City has funded a one-time offset for the initial rate increase paid by the City Waste Program Fee (in the total amount of $243,000) equating to a discount of $2.04 for 20-gallon customers and $2.12 for 35-gallon customers, which will also discontinue on January 1, 2027. Republic has also offered a good will discount for 35-gallon customers of $0.50 per month as a part of negotiations.
Table 1, next page, summarizes the rate components.
Table 1: Residential Rate Components
Container Size
7/1/2025
2025
2025
2025
1/1/2025
Adjustment
Good Will
Bulky Item
*Rate Stability
* Post-Collection
Total Rate
Discount
Rate
Fund
Charge
20-gallon
3.26 2.62
-2.04
7.56 39.73
35-gallon
3.38 -0.50
2.62 -2.12
13.27 47.25
35-gallon (seniors)
3.38 -0.45
2.62 -2.12
13.27 45.20
65-gallon
5.84 2.62
24.66 83.47
95-gallon
8.30 2.62
37.02 120.88
This adjustment to rates was negotiated over several months and is justified due to increased costs for hauling operations above the regular indexed increases in recent years, as well as future planning for other increased costs moving forward. The subsequent rates compare favorably to neighboring cities, as shown in the rate survey provided as Tables 2 and 3, below.
The total monthly rates shown in Tables 2 and 3 and Chart 1 include:
All rates are 2024 rates shown with an escalation factor for Tables 2 and 3.
The 2025 approved San Pablo rates associated with their negotiated franchise agreement approved late 2024. 2025 post-collection rates approved by RecycleMore.
The current and proposed Hercules rates.
All rates increased by 3% in Table 3, except San Pablo for which we used the published rate projection, and Hercules which was increased by 3% plus the removal of the Rate Stabilization Fund amounts.
Both tables and the chart are sorted by the 32-gallon container size.
Table 2: Rate Survey, Residential, 2026 Estimated
20-Gallon
32-Gallon
64-Gallon
96-Gallon
Pleasant Hill
$ 33.31
$ 38.31
$ 51.75
$ 76.98
Martinez
$ 31.06
$ 44.50
$ 54.67
$ 104.15
Benicia
$ 38.61
$ 45.38
$ 56.43
$ 77.36
San Pablo (new)
$ 37.76
$ 46.30
$ 87.78
$ 130.61
Pinole*
$ 38.97
$ 47.23
$ 84.23
$ 122.54
Hercules (current)
$ 39.73
$ 47.25
$ 83.47
$ 120.88
Richmond*
$ 38.90
$ 47.66
$ 90.25
$ 134.13
Vallejo
N/A
$ 50.00
$ 81.11
$ 112.23
Hercules (proposed)
$ 43.57
$ 50.63
$ 91.93
$ 131.80
Concord
N/A
$ 53.18
$ 71.91
$ 88.18
Oakland
$ 57.07
$ 64.79
$ 114.30
$ 171.76
Berkeley
$ 51.30
$ 67.66
$ 93.60
$ 112.47
Albany
$ 62.93
$ 70.46
$ 121.78
$ 173.07
El Cerrito
$ 55.00
$ 72.00
$ 142.96
N/A
Average
$ 44.02
$ 53.24
$ 87.58
$ 119.71
Difference between Hercules and Average
$ (0.44)
$ (2.61)
$ 4.34
$ 12.10
* Pinole and Richmond are currently negotiating new solid waste collection agreements Table 3: Rate Survey, Residential, 2027 Estimated
20-Gallon
32-Gallon
64-Gallon
96-Gallon
Pleasant Hill
$34.31
$39.46
$53.30
$79.29
Martinez
$31.99
$45.83
$56.31
$107.28
Benicia
$39.76
$46.74
$58.13
$79.69
San Pablo (new)
$41.27
$50.36
$95.50
$142.09
Pinole*
$40.14
$48.65
$86.76
$126.22
Richmond*
$40.07
$49.09
$92.96
$138.15
Vallejo
N/A
$51.50
$83.54
$115.60
Concord
N/A
$54.78
$74.06
$90.82
Hercules (proposed)
$46.92
$54.27
$94.69
$135.76
Oakland
$58.78
$66.74
$117.73
$176.91
Berkeley
$52.84
$69.69
$96.41
$115.84
Albany
$64.82
$72.57
$125.44
$178.26
El Cerrito
$56.65
$74.16
$147.25
N/A
Average
$46.14
$55.68
$90.93
$123.83
Difference between Hercules and Average
$0.78
$(1.41)
$3.76
$11.93
Chart 1: Rate Survey, Residential, 2026 Estimated
Commercial rate comparison was conducted for the 1 Cubic Yard container size, with outcomes as shown in Table 4, next page.
Table 4: Commercial Rate Comparison
City
1 Cubic Yard
Berkeley
$187.50
Martinez
$230.63
Pleasant Hill
$276.97
Albany
$280.72
Richmond*
$312.70
Oakland
$316.54
Pinole*
$339.34
San Pablo (new)
$345.44
Hercules (current)
$359.39
Hercules (proposed)
$378.54
Vallejo
$453.68
El Cerrito
$499.63
Negotiated Outcomes
Given that Republic’s franchise agreements in nearby cities are all expiring at the same time, Hercules staff took a more flexible approach on agreement improvement language such that Republic’s obligations under its agreement with Hercules were ideally aligned with those imposed by the other agencies.
The most significant outcomes of negotiations, as described above, are as follows:
Franchise agreement effective on July 1, 2025 and expiring on June 30, 2040.
Addition of the single-family bulky item collection program. Residents may call twice per year to schedule a pickup amounting to the equivalent of (a) three (3) Large Items, (b) fifteen (15) 35-gallon bags with a maximum weight of 50 pounds per each bag, (c) four (4) 95-gallon bags with a maximum weight of 50 pounds per each bag, (d) five (5) E-Waste items, or (e) up to 1.8 cubic yards of Garbage or Organic Waste per SFD Service Unit at no additional cost and expense. The cost per household for adding this program is $2.62 per month.
Programs and services required under SB 1383 and full legislative compliance coverage including recycling and organics service as a bundled rate, contamination monitoring, outreach and education, and reporting as required by recent state law.
City fee increase with an annual payment from Republic to the City of $805,000, escalated by CPI annually, and paid in monthly installments.
The City sets industrial rates.
Other improvements that City staff negotiated as a part of the franchise agreement restatement include the following:
Annual rate adjustment cap of 5% with a roll-over.
Annual adjustments to collection service rates based upon the Consumer Price Index for Water, Sewer, and Trash collection (CPI).
Limitations on future changes in rates due to change in law.
Updated Agreement including up to date performance and legal standards.
Up to fifty (50) cubic yards of compost or mulch provided to the City annually.
Adjustments to the list of City street cans serviced and free City services including up to four events per year.
Language describing the impact of potential future changes to the post-collection agreement such that changes may be accounted for without further amendments, within the contemplated limits.
Reimbursement for consultant cost for negotiations ($35,000).
The City staff considered transitioning to electric vehicles in Hercules, but ultimately did not request this change, which would have resulted in a higher rate increase.
Franchise Fee Study
As part of the new solid waste collection agreement negotiations, City staff contracted with R3 Consulting Group to conduct a Franchise Fee Study (Attachment 3). The study analyzed and calculated:
The City’s costs for performing the required management, administration, regulatory compliance and enforcement, solid waste collection and clean-up, and other obligations associated with the Republic Agreement and sanitation system.
An annual use charge to Republic for special and lasting access and use of government property in the public right-of-way for placement of solid waste containers and collection of their contents.
The annualized costs of payment repair, maintenance and rehabilitation resulting from the unique impacts on City street pavement caused by Republic’s collection vehicles during the course of providing service.
The City fee of $805,000 annually is fully justified by this study, and the study concluded that the City’s current and projected franchise fee revenues do not exceed the City’s actual reasonable costs as outlined above.
Proposition 218 Hearing
In order to adopt the fees contained in the agreement, the City must hold a Proposition 218 hearing. Proposition 218 was a California voter initiative from 1996 which requires that local governments provide property owners with notice and an opportunity to protest proposed changes to fees and assessments. Upon approval of the agreement, staff will prepare Proposition 218 notices and a hearing will be set for the City Council to formally adopt the fees.
Side Letter Agreement
In order to offset the residential rates for the first 18 months, the City can expend Rate Stabilization funding. This offset would be in the form of payments from the City to Republic. In authorizing the City Manager to execute the proposed side letter agreement, City Council will also be committing the City to pay $243,000 to Republic in monthly installments through December of 2026 and also offsetting the impact of part of the proposed increase to residents by $2.04 for 20-gallon and $2.12 for 35-gallon container subscriptions.
FISCAL IMPACT:
An increase in annual payments to the City from Republic Services is expected to be approximately $195,000. The City will be responsible for monthly payments from July 2025 to December 2026, totaling $243,000, to smooth the impact of the initial rate increase. There are sufficient funds available in the Solid Waste and Recycling fund to fulfill this obligation, and this appropriation will be incorporated into the FY 2025-2026 Annual Budget.
ATTACHMENTS:
Resolution approving the Restated Solid Waste Franchise Agreement between the City of Hercules and Richmond Sanitary Service, Inc. dba Republic Services.
Franchise Agreement.
Franchise Fee Study.
Side Letter Agreement Regarding Use of City Rate Stabilization Funds to Offset Maximum Service Rates Effective July 1, 2025, through December 31, 2026