July 15, 2024
Mr. Bruce Moe
City Manager
City of Manhattan Beach
1400 Highland Avenue
Manhattan Beach, CA 90266
Dear Mr. Bruce Moe,
We hope this letter finds you well. As you are aware, WM has previously requested an extraordinary increase due to significant and unforeseen wage increases. In your response letter dated June 26, 2024, staff declined our request and recommended that WM seek a contract amendment for an extraordinary increase. WM respectfully disagrees with the need for a contract amendment for an extraordinary rate adjustment related to an unforeseen labor increase and is seeking immediate relief from the City Council. Under Section 5.5, the Agreement grants the Council the sole judgment and absolute discretion as to whether an adjustment to the maximum rates is to be made. As such, WM requests an extraordinary adjustment of 4.01% to service rates equal to $256,098 annually. This equates to an average estimated $0.63 per home, per month.
In respond to the June 26, 2024 letter (letter), we want to stress that our extraordinary request is not due to inaccurate assessments of our processing costs in our response to the City’s RFP; instead, it is due to unforeseen and uncontrollable circumstances outside our immediate control.
Since the COVID-19 pandemic, the waste and recycling industry has continued to suffer from an acute shortage of qualified employees – particularly commercial driver's license (CDL) drivers – due to the closure of driving schools, resulting in fewer certified and skilled drivers in the talent pipeline and changes in the law regarding driving records. To ensure we can recruit and retain quality talent, WM has made considerable wage and benefit enhancements in support of the unionized drivers servicing Manhattan Beach. These are covered under a Collective Bargaining Agreement (CBA).
The most recent CBA covering Manhattan Beach's drivers includes an average increase of 25%. This unprecedented increase greatly exceed the annual cost changes calculated by the yearly rate adjustment formula. Council consideration on a labor increase will allow WM to keep up with the rising cost of doing business in Manhattan Beach while maintaining the same great level of service.
Also in response to the letter, WM will submit a formal request to amend the Agreement to address some areas of concern, including but not limited to the 50% minimum diversion requirement. To provide the Council with some context, we describe the issues below.
Ongoing Diversion Challenges
One of the significant challenges we face is the recent change in law, specifically Assembly Bill 1857 (AB 1857), which has made it impossible for us to meet the 50% diversion requirement. The removal of diversion credit for transformation facilities has significantly impacted our ability to achieve the required diversion rate. HF&H, in their recent Contract Year 2021 audit, HF&H recommended that the City and WM meet and confer regarding compliance with the diversion requirement in future years due to transformation no longer counting as diversion.
One potential solution is reducing the minimum diversion requirement from 50% to 40% and allowing WM to capture and report third-party recycling data and construction and demolition tonnage towards the diversion requirement. Our research has revealed an average of 247.62 monthly tons that are being self-hauled or recycled by third parties in Manhattan Beach but have yet to be previously reported to CalRecycle.
In our contract amendment request, we will not only request that the diversion requirement be addressed but also request the revision of service rates related to commercial organics collection, container roll-out service, and other contractual items now outdated in this Post SB 1383 implementation era.
We appreciate your immediate consideration of our extraordinary labor rate adjustment. Our goal is to find mutually beneficial solutions that will allow us to continue delivering industry- leading waste, recycling, and organics services to the City.
As stated in our current contract, the expiration date is set for June 2027. We understand that this decision may require further discussions and consideration, and we are open to engaging in a meaningful dialogue if necessary. If we are unable to find an equitable resolution and considering the significance of the circumstances, we respectfully request that the city goes out to bid. We believe this course of action will be in all parties' best interest.
We greatly appreciate your understanding and support. Please do not hesitate to reach out to us if you have any further questions. Thank you in advance for your attention to this matter.
Sincerely,
Kim Ohrt
Public Sector Territory Manager
CC:
Honorable Mayor Franklin
Honorable Mayor Pro Tem Howorth
Honorable Councilmember Lesser
Honorable Councilmember Napolitano
Honorable Councilmember Montgomery
Erick Lee, Public Works Director
Anna Luke-Jones, Public Works Senior Management Analyst
Attachments: A, B, C, and D
WM
1970 E 213th St
Long Beach, CA 90810
March 22, 2024
Erick Lee, Director of Public Works
City of Manhattan Beach
1400 Highland Avenue
Manhattan Beach, CA 90266
Re: 2024/2025 Rate Adjustment Request
Dear Mr. Lee,
Pursuant to Sections 5.3 and 5.4 of the Franchise Agreement between USA Waste of California, Inc. dba Waste Management (WM) and the City of Manhattan Beach, we respectfully request an adjustment of service rates effective July 1, 2024.
Summary of Adjustments Requested:
• Calculated adjustment due to changes in CPI: 7.3%
• Requested extraordinary adjustment to residential rates: 2.51% • Requested extraordinary adjustment to commercial rates: 5.4%
Extraordinary Rate Adjustment Request to Offset Increased Labor Costs As summarized above, WM is requesting an extraordinary adjustment to service rates in accordance with Agreement Section 5.5 to offset significant increases in labor costs.
Since the COVID-19 pandemic, the waste and recycling industry has continued to suffer from an acute shortage of qualified employees – particularly commercial driver’s license (CDL) drivers. To ensure we can recruit and retain quality talent, WM has made considerable wage and benefit enhancements in support of the unionized drivers servicing Manhattan Beach. These are covered under a Collective Bargaining Agreement (CBA).
The most recent CBA covering Manhattan Beach’s drivers includes an average wage increase of 21.58%; an increase in company contributions to the union pension fund of 100%; and a 9.62% increase in the company's contribution towards each employee's monthly health and welfare premium, which is controlled by the union-sponsored health fund and is not within WM’s ability to control costs. These unprecedented percentage increases greatly exceed the annual cost changes calculated by the annual rate adjustment formula.
Considering these significant, unavoidable, and uncontrollable increases to the cost of providing service in Manhattan Beach, an extraordinary rate adjustment would be an appropriate remedy. As such, we are respectfully requesting an additional adjustment of
2.51% to residential rates and 5.4% to commercial rates. Approving this request will alleviate the financial strain placed on the franchise and allow WM to retain the trained, courteous drivers your residents and businesses know and trust. If approved by the City, WM will submit an updated rate sheet with the above-mentioned adjustments.
Clarification of Services and Rates for Manhattan Beach’s Commercial and Industrial Customers
Chargeable Commercial Organic Waste Collection
From the introduction of commercial organic waste collection under Assembly Bill (AB) 1826 to the current regulations today under Senate Bill (SB) 1383, the number of customers required to subscribe to such services has increased from 10 to 653, an increase well over 6,000%. This increase in customer demand for service, coupled with the increased cost of collection, and the rising costs of processing has led to commercial organic services no longer being viable to offer without charge. To sustain this service, we propose commercial organic waste collection be added as a chargeable service at a rate of $42.00 per month per 64-gallon organics cart serviced one time per week. This proposed rate reflects the cost of providing this value-added service and is in keeping with the current rates for similar service in surrounding jurisdictions.
Jurisdiction Service Level Organics Rate
City of Los Angeles
(Playa Del Rey & San
Pedro)
64-gallon cart serviced
1x/week $111.03
Lomita 64-gallon cart serviced
1x/week $102.79
Redondo Beach 35-gallon cart serviced
1x/week $46.26
Manhattan Beach
(Proposed)
64-gallon cart serviced
1x/week $42.00
Palos Verdes Estates 64-gallon cart serviced
1x/week $40.83
Marina Del Rey 64-gallon cart serviced
1x/week $38.76
Manhattan Beach
(Current)
64-gallon cart serviced
1x/week $0
Commercial Roll-out Service
With its high density and narrow alleyways, certain Manhattan Beach’s commercial customers require additional time and labor to safely and properly service. Known in the
industry as “roll-out” service, this refers to the physical relocation of waste and recycling containers between enclosures and the point of service. In some cases, this distance can reach up to 40 feet in length, which means that many of our routes require a driver and helper to provide service. Adoption of rates applied only to those customers that require specialized service, maintains the lowest possible rate and maximum value to those customers that do not require specialized services. To properly account for this labor- intensive, value-added service, we respectfully request the addition of the proposed roll- out rates as follows:
Roll-out
Distances
Charge Per Container x
Collection Frequency
0 to 5 ft. $0
6 ft. to 25 ft. $10
26 ft. to 40 ft. $20
WM is proud to be a sustainability partner with Manhattan Beach and is dedicated to assisting the City in compliance with state mandates and maximizing diversion. We thank you for taking the time to review our request.
Respectfully,
Erick Quintero
Sr. Account Executive, Public Sector
January 31, 2024
M
r. Erick Lee, Public Works Director
City of Manhattan Beach
3621 Bell Avenue
Manhattan Beach, CA 90266
Re
: Contract Amendment Request Follow-Up
D
ear Mr. Lee,
A
s a continuation of our ongoing discussion related to the hauler diversion requirement, and in light of HF&H’s recommendation in their recent audit of the franchise agreement, we respectfully request your approval to include the impact of third-party recycling within the contractual diversion reporting and overall diversion percentage. Pursuant to Section
3.8.1, WM requests that the City allow for the inclusion of third -party recycling and construction and demolition tonnage and that the minimum hauler diversion percentage be amended to 40%.
Th
ird-Party Recycling Process & Findings
As a follow to your June 13 th request to provide third- party and back -hauling tonnage data collected, WM conducted site visits with all businesses to identify reuse and recycling efforts outside of what we collect. We found that an average of 247.62 tons per month are diverted from businesses that neither WM nor the City are reporting to CalRecycle. These recycling efforts include recycled cardboard bails by Ralphs and Vons, recycled grease by Ralphs, and recycled electronics by Target.
To
quantify the average monthly tonnage, WM used a volume-to-weight conversion factor file produced by the U.S. Environm ental Protection Agency Office of Resource Conversation and Recovery. CalRecycle has accepted the use of this publication and the conversion methodology in lieu of physical weight tickets in other jurisdictions. In addition to the initial data gathering, WM continues to visit each property to quantify any changes in recycling activity or tonnage on a monthly basis.
Manhattan Beach has always been a leader in sustainability in the region, and we want to ensure those efforts are highlighted at the state level. Even with the loss of diversion credit from transformation facilities due to the passage of Assembly Bill 1857, including third-party and back-hauling efforts will increase diversion from 36.2% to 41.2% for calendar year 2023. This 5% increase in diversio n is currently going unre ported by the City to CalRecycle. Including third -party recycling data will provide CalRecycle an accurate view of recycling efforts in the City.
Construction and Demolition
WM requests that temporary construction and demolition t ons be in cluded in our diversion reporting. Including third-party recycling and construction and demolition data will provide CalRecycle with an accurate view of recycling efforts in the City and would increase diversion by approximately 5.3%.
Enclosed with this request is the supporting monthly data for WM's ongoing site visit efforts to quantify third-party and back-hauling efforts in the City of Manhattan Beach and an amended 2023 hauler diversion report inclusive of these tons. We look forward t o reviewing this request and supporting data in the near future.
Respectfully,
E
rick Quintero
Senior Account Executive – Public Sector
A
ttachments:
Initial Site Visit Report
Monthly Reports
City of Manhattan Beach Section I – Executive Summary
Solid Waste Contract Compliance Audit
HF&H Consultants, LLC 4 February 5, 2024
Objective 2: Confirm that WM diverted a minimum of 50% of hauler-collected waste during calendar year 2021 as required in Section 3.8.1.
Finding:
Finding 2: WM was assessed liquidated damages due to diverting 43.2% of tons collected in the City in 2021, short of the 50% requirement. However, WM revised its “Tonnage/Diversion Report 2021,” subsequent to the assessment of liquidated damages, resulting in additional liquidated damages of $3,765.50.
Recommendation: We recommend the City and WM meet and confer regarding compliance with the diversion requirement in future years due to transformation no longer counting as diversion.
Objective 3.1: Confirm WM maintained and provided the City its complaint documentation summary on a monthly basis, as required by Section 4.2.3, for the period from July 1, 2020 – June 30, 2021, and responded to complaints within one business day of receipt.
Findings:
Finding 3.1a: WM maintained all information required for customer service complaints.
Finding 3.1b: HF&H noted errors in the number of complaint call-ins included in the Monthly Service Summary Report for three of the four months tested.
Recommendation: HF&H recommends WM review its process for tabulating complaints for the Monthly Service Summary Report to ensure the reported numbers accurately reflect the detail Compliments & Complaints Report.
Objective 3.1: Confirm WM maintained and provided the City its complaint documentation summary on a monthly basis, as required by Section 4.2.3, for the period from July 1, 2020 – June 30, 2021, and responded to complaints within one business day of receipt.
Findings:
Finding 3.2a: The 21 missed pick-up call-ins from January 2023 detail tested by HF&H were collected in the recovery time.
Finding 3.2b: WM asserted it will report all missed pick-up calls, including those WM collected within the recovery period.
Summary of WM Requests to City of Manhattan Beach
Contract Issue RFP Response Contract Language Requested Amendment Staff Response Unforeseen Collective
Bargaining Agreement Labor
Wage and Benefit Increase
Y1 increase approx. 21%
(approx. 25% blended value of
wages/health/pension)
Uncontrollable and unforeseen
event due to drivers’ shortage,
closure driving schools, change
in law of driver records, and
post pandemic issues.
N/A Extraordinary rate increase
language. The contract states
that company may request
extraordinary rate adjustments
no more than once per year.
City Council has the sole
judgement and absolute
discretion on making a final
determination as to where an
adjustment to the maximum
rates will be made.
1) Approve the rate increase
request for Teamsters 395
wage and benefit increase
retroactive to July 22.
(Attachment A – dated March
22, 2024)
Denied
Commercial Organic Rates In the Pre-SB 1383
implementation era, WM
requested flexibility from the
City to allow for extraordinary
adjustments related to
change in processing costs
for recyclables and organic
waste.
Section 3.3.2.1 states that
commercial organic waste
carts and bins are to be at no
additional charge to the
customer.
1) Allow WM to add charges
to commercial organics
collection. Rate based on
surrounding market
average. Rather than seek
an extraordinary rate
adjustment for increased
organics processing costs
we are requesting a
charge for commercial
organics collection.
(Attachment A – dated March
22, 2024)
Denied
Commercial Roll-out Service N/A Section 3.1.3.4 states that company may not charge an
additional fee for scout service
or push-out service.
1) Allow WM to add charges
for commercial scout and
roll-out services.
(Attachment A – dated March
22, 2024)
Denied
Diversion Requirement of 50%.
The material sent to SERFF is
no longer counted as diversion
due to a change in law that was
uncontrollable.
WM proposed a 46%
diversion with 50% being a
"stretch goal” that clearly
stated SERRF be one of the
diversion strategies that will
allow WM to meet a 50%
minimum diversion goal.
Section 3.8.1 of the Agreement
defines the minimum diversion
requirement as 50% of hauler
collected material and states
that WM shall divert material
through recycling, organics
collection, mixed waste
processing, and transformation
facilities.
1) Amend the diversion
requirement of 50% due to
change in law.
(Attachment B) – dated March
31, 2023
(Attachment C) – dated
January 31, 2024
Denied all requests.
HF&H submitted
their audit findings
and made the
recommendation to
address the
diversion
requirement.
Summary of WM Requests to City of Manhattan Beach
2) Offer alternative diversion
solution to send material
to OREX.
(Attachment B) – dated March
31, 2023
(Attachment D) –
February 5, 2024
Diversion Requirement of 50%.
The contract does not consider
third-party diversion towards
the minimum diversion rate.
WM collects the MSW but is not
allowed to count the diversion
from these same customers.
While WM did not address
the limitation of including 3rd
party diversion in the RFP
diversion, through site visits
they have learned that there
is a significant amount of 3rd
party diversion.
The agreement clearly states,
“third-party diversion shall not
be considered towards the
minimum diversion rate.”
1) Allow for third-party and
back-hauling tonnage to
be counted towards the
minimum diversion
requirement, improving
overall diversion reporting
to Cal Recycle.
(Attachment B) – dated March
31, 2023
(Attachment C) – dated
January 31, 2024
Denied
Example of Alternative Solutions to Reduce WM Costs
1) Remove the Annual Contract Compliance Audits for the rest of the contract term based on the latest audit findings. a. Contract Language allows the city to decide if an audit should be completed. b. Cost $80,000 first audit, subsequent audits adjusted by CPI annually. This cost is passed on to the hauler for 3rd party consultant HF&H conducts.
i. Contract Year 2020-2021, completed 2022.
1. Findings nominal, 99.5% accuracy
ii. Contract Year 2022-2023, completed 2023.
1. Initial findings nominal
c. The costs of the audits are not warranted every year because there have been no findings. 2) Eliminate Distribution of lunch boxes annually
3) Minimize Free Services (City Facilities, Roll Off Services & Free Recycling to all Schools) 4) Eliminate Green Business Certification & Composting Classes