A new paragraph shall be added at the end of Section u, as follows; "COLLECTOR shall notify CITY of its intent to cease providing service within the City of Modesto no less than 18 months prior to ceasing to provide services."
All of the other current terms and conditions of the 2001 Agreement, (as previously amended), will remain in full force and effect. A copy of the Council Resolution is attached for your reference. Please execute in triplicate the attached pages consenting to this Letter Amendment and return them to the City Clerk by no later than December 20, 2006.
We look forward to continuing to work with Bertolotti Disposal Service in a cooperative business relationship that will ensure our community's residents and businesses the highest level of service. Should you have any questions, please contact Jocelyn Reed, Solid Waste Manager, at (209) 577-5492.
Sincerely,
-~~~ George W. Britton
/ City Manager
cc: City Attorney
Parks, Recreation and Neighborhoods Director
Attachments: Consent Form
Council Resolution
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CONSENT TO LETTER AMENDMENT TO 2001 SERVICE AGREEMENT
(AS PREVIOUSLY AMENDED)
This Letter Amendment to the 2001 Service Agreement (as previously amended) shall go into effect and be in full force and operation on January 1, 2007.
IN WITNESS WHEREOF, the parties have agreed to this Letter Amendment to the 2001 Service Agreement (as previously amended) this . 8th day of November ,2006. by the City Council and attested by the City Clerk on November 8, 2006 by Resolution No. 2006-708. CITY OF M ESTO, a munic" I coq:?o ation Ge
By~~~~ ~ . ~~"'------_
COLLECTOR*
ATIEST:
Jean Morris, City Clerk
(SEAL)
APPROVED AS TO LEGAL FORM:
BY Susana Alc~~ ~
APPROVED AS TO ISK MANAGEMENT FORM:
By _---'--~·-=:;:-"--vJ----'-'~=______ _ _____'~'_____rz-- __ Mary Akin, Risk Manager
*Corporations - signature of two (2) officers required or one (1) officer plus corporate seal.
Partnership - signature of a partner required
Sole Proprietorship - signature of proprietor require
Approved
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AMENDMENT TO SERVICE AGREEMENT
This Amendment to Service Agreement is made and entered into in the City of 13 d f November Modesto, County of Stanislaus, State of California, this ___ ay 0 . ____ _ 2003, by and between Bertolotti Modesto Disposal, Inc., a California Corporation, hereinafter referred to as "COLLECTOR", and the CITY OF MODESTO, a municipal corporation, hereinafter referred to as "CITY".
This Amendment to Service Agreement is made with reference to the following recitals:
WHEREAS, a Service Agreement was entered into on the 18th day of September, 2001, between CITY and COLLECTOR for the collection of solid waste in the CITY of Modesto, including the collection of garbage/recyclables, recyclables, industrial garbage, containerized yard waste, and salvageable waste, and WHEREAS, on September 25, 2003, the City Clerk received a request from Bertolotti Disposal Inc. for an Assigrunent and Extension of their Service Agreement to collect commercial/residential garbage/recyclables, containerized yard waste, and industrial garbage, salvageable waste, and recyclables in the City of Modesto, and WHEREAS, Bertolotti Disposal Inc., wishes to assign its rights and interests under said agreement to its newly formed affiliate company, Bertolotti Modesto Disposal, Inc., and
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WHEREAS, in accordance with Modesto Municipal Code section 5-5.24, a public hearing was held on Thursday, November 13, 2003, at 5:30pm in the Tenth Street Place Chambers located at 1010 loth Street, Modesto, California, to consider COLLECTOR's request, and
WHEREAS, by unanimous vote, the Modesto City Council approved the TwoYear Extension of the Service Agreement between the City of Modesto and Bertolotti Disposal, Inc. and the assignment of the Service Agreement to Bertolotti Modesto Disposal, Inc., and authorized the City Manager, or his designee, to execute the assigrunent and extension.
NOW, THEREFORE, the parties hereto mutually agree that the above referenced Service Agreement be amended as follows:
1. Pursuant to Section a of the Service Agreement, the term of the Agreement is hereby extended for an additional two (2) years, through September 18, 2010.
2. The Service Agreement is hereby assigned to Bertolotti Modesto Disposal, Inc. , a California Corporation.
Except as otherwise provided herein, each and every and all of the tenns and conditions of the Service Agreement between CITY and COLLECTOR dated September 18,2001 shall continue in full force and effect. #6..
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IN WITNESS WHEREOF, the City of Modesto, a municipal corporation, has authorized the execution of this Amendment to Agreement in duplicate by its City Manager and attestation by its City Clerk under authority of Resolution No., 2003-603 adopted by the Council of the City of Modesto on the 13 day of _N_o_v_e_m_h_e_r __ , 2003, and CITY has caused this Amendment to Agreement to be executed.
ATTEST:
BY ~c:Ln ~!t./ J Z~ City Clerk
(SEAL)
APP~ED AS TO FORM~ ~
By ~~\~~ S
MICHAEL D. MILICH
City Attorney
CITY OF MODESTO, a
llllUlicipai corporation <...
G1City CKManager ~
COLLECTOR*
By
* Corporations - signature of two (2) officers required, or one (1) office Partnership - signature of a partner required
Sole Proprietorship - signature of proprietor required
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SERVICE AGREEMENT BETWEEN THE CITY OF MODESTO
AND BERTOLOTTI DISPOSAL, INC., A CALIFORNIA
CORPORATION, FOR THE COLLECTION OF SOLID WASTE IN
THE CITY OF MODESTO, INCLUDING THE COLLECTION OF
GARBAGEffiECYCLABLES, RECYCLABLES, ll{DUSTRIAL
GARBAGE, CONTAINERIZED YARD WASTE, AND
SALVAGEABLE WASTE.
THIS SERVICE AGREEMENT is executed pursuant to the authority provided in, and pursuant to, all of the provisions, terms, and conditions of, Article XIV of the Charter of the City of Modesto and Chapter 5 of Title V of the Modesto Municipal Code.
THIS SERVICE AGREEMENT is hereby made and entered into in the City of Modesto, State of California, this lL day of Sept emb~lty and between the City of Modesto, a municipal corporation of the State of California, hereinafter referred to as "CITY", and Bertolotti Disposal, Inc., a California Corporation, hereinafter referred to as "COLLECTOR".
THIS SERVICE AGREEMENT is made with regard to the following recitals:
WHEREAS, the Legislature of the State of California, by enactment of the California Integrated Waste Management Act of 1990 ("AB 939"), has declared that it is within the public interest to authorize and require local agencies to make adequate provisions for handling solid waste, including garbage, garbage/recyclables, recyclables, yard waste, industrial garbage, and salvageable waste handling within their jurisdictions; and
WHEREAS, pursuant to California Public Resources Code Section 40059, the City Council of the City of Modesto has determined that the public health, safety, and well-being require that a service agreement be executed with a qualified firm for the collection, transport, recycling, and disposal of solid waste, including garbage, garbage/recyc1ables, recyc1ables, containerized yard waste, industrial garbage, and salvageable waste in residential, co=ercial, and industrial areas and construction/demolition sites in the CITY; and
WHEREAS, the City Council of the City of Modesto declares its intention of maintaining reasonable rates for the services to be provided within the City limits by COLLECTOR under this Agreement; and
WHEREAS, pursuant to California Public Resources Code Section 49510 (b), the 1 #6..
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City Council ofthe City of Modesto finds that it is in the public interest to foster and encourage solid waste enterprises so that, at all times, there will continue to be competent enterprises willingly and financially able to furnish needed solid waste handling services; and, WHEREAS, before consenting to grant a City Service Agreement to COLLECTOR, the CITY met with representatives of COLLECTOR who represented and warranted that COLLECTOR would agree to a stipulation in its Service Agreement that would prohibit the acquisition of COLLECTOR by either of the two other companies currently holding City Service Agreements, or their subsidiaries or other corporate affiliates; and WHEREAS, representatives of COLLECTOR have represented and warranted that COLLECTOR will agree to contract terms which hold it to certain performance standards; will commit to provide outstanding performance with integrity, both as a service provider and a corporate citizen, to the citizens of Modesto; will guarantee delivery of all the acceptable waste it collects pursuant to the Service Agreement to the Stanislaus Resource Recovery Facility; will cooperate in the implementation of new programs or modifications to existing programs; and, will commit to the inclusion in the Service Agreement of reasonable language regarding the conduct of its representatives.
NOW, THEREFORE, in consideration of this agreement, and the mutual promises, covenants, and stipUlations hereinafter contained, the parties agree as follows:
a. Except as it may be extended by mutual agreement of the parties, this Service Agreement shall automatically expire on September 18, 2008, subject to satisfaction of the preconditions provided in Paragraph b, unless terminated earlier pursuant to the provisions of this Service Agreement or the provisions of Chapter 5 of Title V of the Modesto Municipal Code. Upon successful performance of two (2) years of services under this Agreement, and every two (2) years thereafter, COLLECTOR may submit a request for extension of the term of this Agreement for an additional two (2) years. Upon any such request, CITY shall hold a public hearing to consider whether it mayor may not extend the term of this Agreement for an additional two (2) years, at CITY's sole discretion. Nothing herein shall be deemed or construed to impair or affect in any way the right of the CITY to acquire the equipment and assume the operations of COLLECTOR at any time during the initial term of this Service Agreement or any extensions thereof by purchase of COLLECTOR'S equipment at a fair and just market value, which shall not include any amount for the Service Agreement itself or for any of the rights or privileges granted by this Service Agreement.
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b. 1. The CITY may t=IDate this Service Agreement on September 18,2006, if COLLECTOR has not reasonably satisfied each of the following preconditions to the sole satisfaction of the CITY, notwithstanding the . provisions of the more general language of paragraph c. making "reasonableness" a requirement of any discretionary decision relating to the performance of this Agreement. The CITY may cause the termination by written notification of the collector prior to September 18, 2006. (a). At all times during the term of this Service Agreement, including extensions, the COLLECTOR shill have timely paid all reasonably undisputed fees and charges owed to CITY under the terms of this Agreement and the Modesto Municipal Code, including without limitation all penalties for violations under the Modesto Municipal Code Section 5-5.33, compensatory and/or liquidated damages hereunder, environmental or other indemnities, and any other sums due and payable to CITY.
(b). At all times during the term of this Service Agreement, including extensions, the COLLECTOR shall have disposed of or recycled all waste collected under the provisions ofthis Service Agreement pursuant to Section x ofthis . Agreement.
(c ) At all times during the term of this Service Agreement, including extensions, the number of unresolved complaints during any given l2-month period that pertain to the operations of the COLLECTOR under this Service Agreement, which number has been substantiated and verified to the reasonable satisfaction of CITY, shall not exceed two and one half tenths of one percent (0.25%) of the total annual stops for the prior year.
(d) At all times during the term ofthis Service Agreement, including extensions, the COLLECTOR shall not have failed materially to comply with any provision of the Modesto Municipal Code, any ofthe terms or conditions of this Service Agreement, or failed to comply with any federal, state or local laws, ordinances, rules or regulations pertaining, directly or indirectly, to the COLLECTOR's operations under this Service Agreement; provided, however, that CITY, in its sole discretion, may waive any failure to comply that it deems to be minor and determines that such waiver is in the public interest.
(e) At all times during the term of this Service Agreement, COLLECTOR shall meet the requirements of Sections x and y pertaining to recycling and yard waste diversion and other City solid waste programs.
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, .
2. Notwithstanding any other provisions herein, the CITY may terminate this Service Agreement for its convenience, without cause, upon a decision by the CITY to assume, with its' employees, performance of the services required of COLLECTOR hereunder. This Service Agreement shall terminate sixty days after CITY gives COLLECTOR written notice of its election to terminate this Service Agreement. Upon such termination by CITY, CITY shall pay to the COLLECTOR the anticipated return on COLLECTOR's capital investment for two years, if such notice is given on or before June 18, 2004; for eighteen months, if such notice is given after June 18, 2004 but on or before June 18,2005; for one year if such notice is given after June 18, 2005 but on or before June 18, 2006; and for six months if such notice is given after June 18,2006.
c. This Service Agreement shall be an exclusive Service Agreement to collect commercial/residential garbage/recyclables and containerized yard waste and a nonexclusive Service Agreement to collect industrial garbage, salvageable waste, and recyclable materials within the areas delineated and marked on that certain map entitled "Service Areas" approved by the City Council on January 23,2001, on file in the office of the CITY Clerk, and to which reference is hereby made.
This Service Agreement replaces and terminates the License dated July 8, 1992, as extended by Council Resolution in June, 1997, between the CITY of Modesto and Bertolotti Disposal, Inc., a California Corporation, for the collection of garbage in the CITY of Modesto, including the collection of industrial garbage, recyclable materials, and salvageable waste.
COLLECTOR waives any right or claim to serve the CITY or any part of the CITY under any prior grant of franchise, contract, license, or permit issued or granted by the CITY, or, in the case of annexations, any other governmental entity.
In consideration of the rights and privileges granted by this Service Agreement, COLLECTOR shall pay quarterly to CITY within thirty (30) days following the close of each calendar quarter an amount equivalent to eight-tenths of one percent (8.0%) of the gross receipts derived from the furnishing of such garbage collection services within the CITY for the preceding quarter. Within thirty (30) days following the close of each quarter, COLLECTOR shall also pay the CITY a business license mill tax of two-tenths of one percent (0.2%) of the gross receipts derived from the furnishing of such garbage collection services within the CITY for the preceding quarter. Calendar quarters shall terminate on March 31 , June 30, September 30, and December 31. CITY further reserves the right to increase said fee in consideration of this Service Agreement to a maximum of 10.3% plus mil tax of two-tenths of one percent (0.2%). COLLECTOR further agrees to pay CITY the sum of Eight Thousand Dollars ($8,000) in consideration of CITY'S reasonable costs to process 4 #6..
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COLLECTOR'S application for said Agreement. Whenever, in this Agreement, either CITY or COLLECTOR is given the right of making a discretionary decision affecting the performance of this Agreement, such decision shall be made in a reasonable and prudent manner.
d. In accepting this Service Agreement, COLLECTOR thereby agrees to serve the areas covered by the Service Agreement for the terms herein specified in compliance with the provisions of this Service Agreement and the provisions of Chapter 5 of Title V of the Modesto Municipal Code.
e. This Service Agreement shall automatically extend to any portion of COLLECTOR'S service area, as shown on the map referred to in Section c, above, which is hereafter annexed to the CITY, except that CITY may permit any person or firm franchised by the County of Stanislaus and then serving such area or portions thereof to continue to serve such area or portions thereof for such period of time, not to exceed five (5) years from the date of annexation, as the CITY deems proper.
COLLECTOR, when required to serve new portions of the CITY, shall promptly extend its routes and services and, when necessary, shall hire additional personnel and obtain additional equipment. CITY reserves the right to revise service areas to improve collection efficiency upon a reasonable determination by the CITY Council, after notice and negotiation with the affected COLLECTOR/COLLECTORS, that such revision is warranted.
f. (1). Maximum rates and charges to be charged by the COLLECTOR for the collection of commercial/residential garbage/recyclables and containerized yard waste shall be established by the Council by resolution, however, COLLECTOR is free to vary its rates and charges for customer classes, but not within customer classes, so long as they remain less than or equal to the then current maximum rate or charge. Service charges and costs of operation of COLLECTOR will be reviewed annually by the CITY and, if deemed necessary by the CITY Council, maximum rate adjustments shall be made to become effective on July 1 of each year. (2) The CITY reserves the right to require adjustments in commercial/residential garbage/recyclables and containerized yard waste operations of the COLLECTOR due to changing community needs, and/or developments in the field of garbage collection and disposal. Maximum rate adjustments will be considered in such cases, and, if determined by the CITY to be reasonable and necessary, will be made.
Which adjustments may be retroactive to the date on which COLLECTOR started to perform the duties involved in the discharge of such obligations, provided that such duties result in additional costs.
(3) Notwithstanding any contrary provision, for purposes of establishing the maximum rate, COLLECTOR shall not be entitled to pass through as an allowable 5 #6..
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business expense, the cost of purchasing or acquiring this Agreement or company or business entity that holds any right or interest to this Agreement. This provision shall be binding upon any and all heirs, legal representatives, successors and assigns, including without limitation any acquiring parent company or subsidiary of such parent company or the COLLECTOR.
g. COLLECTOR shall bill and collect all garbage/recyclables and yard waste service charges, provided, however, that COLLECTOR may contract with the CITY so that all orsome of said garbage/recyclables and yard waste service charges are billed by CITY, COLLECTOR to pay to the CITY fees, to be determined by the CITY, for such billing service. In no event shall CITY use its police power or other governmental power to collect garbage charges for COLLECTOR. h. The CITY reserves the right to revise the provisions of Chapter 5 of Title V of the Modesto Municipal Code, from time to time, as required in order to protect the public health, safety and welfare of the CITY.
!. COLLECTOR shall comply with all existing and future State and Federal laws, and all ordinances and regulations which may in any manner affect COLLECTOR'S operations under the terms and conditions of this Service Agreement.
J. The Engineering and Transportation Director of the CITY of Modesto shall administer and supervise COLLECTOR'S operations under the terms of this Service Agreement and in accordance with the provisions of Chapter 5 of Title V of the Municipal Code.
In the event of any disagreement between COLLECTOR and customers regarding the type or extent of service provided by COLLECTOR, the Engineering and Transportation Director shall make an investigation and determination, and the decision of the Engineering and Transportation Director shall be final. In no event shall COLLECTOR be required to provide or resume collection service to any person who is in arrears on payment for collection services provided by COLLECTOR at the time the service request is made. COLLECTOR may require pre-payment of up to two-month's residential collection rate actually charged by it of any person requesting service who has not established satisfactory credit history with COLLECTOR.
k. COLLECTOR shall establish and maintain an office within the CITY of Modesto, or within two (2) miles of the City limits of Modesto, or other location approved by the CITY Manager, and shall keep said office open for business from 8:00 a.m. to 5:00 p.m. of every day except Saturday, Sunday, and all Jegal holidays observed by the CITY of Modesto.
6 #6..
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(1) COLLECTOR shall keep and maintain in said office at all times during the hours it is required to be open, competent personnel who shall have authority to represent COLLECTOR in its relations with the CITY and with the public, and provide accurate info=ation about collection and disposal/recycling services and programs in the CITY. COLLECTOR shall obtain and keep in said office sufficient listed telephones and personnel to courteously, quickly, and expeditiously receive and answer all telephone and other calls to said office. A daily log of service calls received and the disposition thereof shall be kept by COLLECTOR for all operations hereunder. COLLECTOR shall make this daily log of service calls available for inspection by the CITY upon reasonable advance request no greater than one business day in advance. COLLECTOR shall provide a service to receive calls/complaints at all other times, and an emergency telephone number so that a designated responsible representative of COLLECTOR can be reached by the service/CITY staff 24 hours a day as circumstances warrant. (2) COLLECTOR warrants on behalf of itself and all subcontractors engaged for the perfo=ance of this Service Agreement that only persons authorized to work in the United States pursuant to the Immigration Refo= and Control Act of 1986 and other applicable laws shall be employed in the perfo=ance of the work hereunder.
(3) All employees of COLLECTOR who have routine contact with the public shall be trained in customer service and shall conduct themselves in a helpful, courteous, efficient manner consistent with the CITY'S "Citizens First" Policies as provided to COLLECTOR by the CITY. The CITY shall have the right to monitor the perfo=ance of COLLECTOR'S employees at all times.
In the event that any employee is found to be discourteous or not to be properly performing the services required by this Agreement, COLLECTOR shall initiate necessary corrective measures.
l. COLLECTOR shall maintain full and complete books of account and other records showing all business transacted in connection with this Service Agreement including but not limited to records of all special monthly collections, receipts, expenses, profits, supporting statements and vouchers, balance sheets, profit and loss statements, and other documents, accurately reflecting and showing all business of the COLLECTOR. All such books and records shall be subject to audit and inspection at any and all reasonable times by the CITY and its authorized officers, agents, or employees, and shall be made available at said office for such inspection or audit at any and all reasonable times upon written request or demand of the CITY Attorney, CITY'S independent Auditor, Manager, or Engineering and Transportation Director no less than two (2) business days in advance. 7 #6..
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m. (1)
.•.. _. ,--'
COLLECTOR shall provide the CITY annually, not later than one hundred twenty (120) days after the end of the fiscal year ending June 30th, with five (5) copies of an annual balance sheet and profit and loss statement. The annual financial statement shall include a separate description of costs and revenues resulting from residential/commercial garbage/recyclables, containerized yard waste, detachable container, drop box, recycling and salvage operations hereunder and shall encompass cumulative data from the monthly statistical reports required by Section x, subsection (4), below.
Financial statements submitted by the COLLECTOR to the CITY shall be regarded by the CITY as confidential financial records of the COLLECTOR, and shall not be released as a public record for inspection by any party other than authorized CITY officers, agents, or employees, unless requested in accordance with the provisions of the Public.Records Act. (2) The CITY may require COLLECTOR to provide a complete financial audit prepared by a Certified Public Accountant with his or her opinion attached thereto and such other financial information deemed necessary by the CITY when considering a request for maximum rate adjustments. Such audit shall be an allowable expense recoverable by COLLECTOR in its rates. (3) COLLECTOR shall submit to CITY at its request, which shall not be more than annually: (1) a reviewed balance statement of its parent company, prepared in accordance with Generally Accepted Accounting Principles (GAAP), prepared by an independent certified accountant, and (2) all public financial reports required to be filed by Bertolotti Disposal Services, Inc., with the federal Securities Exchange Commission.
(4) COLLECTOR may utilize services provided by affiliates provided that (1) COLLECTOR identifies all such expense items and (2) the cost of such services do not exceed the market rate charged by unrelated third parties for similar services. If such an allowed item of expense is questioned by CITY, COLLECTOR must submit proof that the item is reasonable. n. COLLECTOR shall collect and remove from any and all customer premises, not later than twenty-four (24) hours after notice, demand or request, any and all garbage/ recyclables and containerized yard waste which COLLECTOR shall have failed to collect and remove at the regularly scheduled time. The customer's failure to 'place garbage/recyclables and containerized yard waste for collection at the regularly scheduled time and place shall not be deemed a missed collection. 8 #6..
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o. COLLECTOR shall collect garbagelrecyclables and containerized yard waste at least once each calendar week, Mondays through Fridays, for residential collections, and on Mondays through Saturdays for co=ercial and industrial collections.
COLLECTOR shall, at no additional charge, provide special pickup procedures beyond the normal services described herein to customers who are unable to place their containers out for collection due to physical handicap or disability as determined by a site visit and/or reasonable investigations, and authorized by CITY'S Engineering and Transportation Director.
(1) For purposes of such collection, COLLECTOR shall divide the CITY into collection routes. Such collection routes shall be each wholly within the CITY limits, and shall be approved by the Engineering and Transportation Director. Upon approval of the proposed routes by the Engineering and Transportation Director, COLLECTOR shall prepare route books or other route documents or a route database which shall indicate the address of each service, number of containers, frequency of collection, and such other pertinent information as the Engineering and Transportation Director may reqUITe. COLLECTOR shall keep route books/route data up to date at all times.
(2) COLLECTOR shall give reasonable written notice to the general public as to the days and times for collection on each route. No changes in collection schedules shall be made without the approval of the Engineering and Transportation Director and reasonable written notice thereof by COLLECTOR to the affected customer. The notice shall include the day or days of the week upon which collection will occur, the name, address, and telephone number of COLLECTOR, and other reasonable information deemed necessary by the CITY.
(3) COLLECTOR is not required to make collections on Sundays or .legal holidays observed by the CITY. COLLECTOR may arrange with co=ercial and industrial customers for Sunday and holiday collections, however. Scheduled collections not made on legal holidays shall be made within twenty-four (24) hours, Sundays excepted.
p. The COLLECTOR shall make garbage collection service available on request to all schools, public agencies, institutions, and other nonresidential premises at the same rates established for business locations, except that COLLECTOR shall provide such services at all facilities as shown in Exhibit A, owned/operated by the CITY of Modesto at no direct charge. In special cases where unusual quantities ofmaterials, special types of materials, or special methods of handling and/or disposing are required, the Engineering and Transportation Director may permit independent arrangements between COLLECTOR and the special customer. 9 #6..
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q. COLLECTOR shall furnish, to all residential customers, a black standard sixty (60) gallon or ninety (90) gallon automated collection container for the collection of garbage/recyc1ables, and a dark green standard sixty (60) gallon or ninety (90) gallon automated collection container for the collection of containerized yard waste.
COLLECTOR shall be responsible for the general repair and upkeep of all the standard automated collection containers furnished to the residential customers.
Containers shall be kept in serviceable condition at all times. (1) Upon consultation with COLLECTOR, if the Engineering and Transportation Director makes a reasonable determination that it is necessary for public information purposes to affix a sticker with instructions on either container or provide another form of notification or public education, to improve the efficiency of either program or to prevent contamination of materials being collected, COLLECTOR shall perform this task at COLLECTOR's expense. (2) When notified ofthe theft of a container, or destruction of a container through an action not the fault of the customer, and following receipt of a Police Report number from customer in the instance of a stolen container or Fire Department Report in the instance of a burned container, where such a Fire Department Report is available, COLLECTOR shall replace the stolen or destroyed container by no later than the customer's next collection day at no cost to the customer or CITY.
(3) COLLECTOR shall have approved detachable containers for apartment, commercial, business and industrial services on a rental basis. COLLECTOR shall be responsible for the general repair and upkeep of all detachable containers. Containers shall be kept in serviceable condition at all times.
COLLECTOR shall provide detachable container cleaning service at a rate approved by the Engineering and Transportation Director. (4) Detachable containers shall be metal and so constructed that no liquid can leak from said containers. However, containers made of materials other than metal may be proposed by COLLECTOR for the approval of the Engineering and Transportation Director during the term of this Service Agreement. No materials may be substituted without prior approval.
(5) Within 45 days of a written request from CITY, COLLECTOR shall submit a plan subject to approval by CITY, detailing how yard waste collection services shall be provided to multi-family dwelling units, businesses, institutions, and other customers with detachable container and/or drop box service, including a cost proposal.Engineering and Transportation Director. 10 .' ."~
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r. COLLECTOR shall supply all occupants or premises in the COLLECTOR's service areas with printed info=ation cards approved by the Engineering and Transportation Director containing info=ation regarding amounts of garbage/recyclables and containerized yard waste which will be collected, complaint procedures, charges, regulations, and days of collection. The info=ation cards will also include the name, address, and telephone number of the COLLECTOR. Such cards shall be distributed as required by the Engineering and Transportation Director, and, in addition, upon request by occupants or owners of any premises and in advance of a change in collection day.
s. COLLECTOR shall not litter any premises or public property in making collections of garbage/recyclables and containerized yard waste, nor shall garbage/recyclables . and containerized yard waste be allowed to leak, blow, or fall from collection vehicles; however, if in spite of no=al precautions against spillage, litter is caused on any premises or public property, COLLECTOR shall immediately remove same and clean up the area of spillage. COLLECTOR shall equip every vehicle used for the collection or transportation of solid waste within the CITY with a broom, shovel, and other equipment as necessary to clean and pick up any debris deposited upon the streets, roads, highways, sidewalks, or private property by reason of the activity of COLLECTOR within the CITY. COLLECTOR shall, without delay, after removing garbage/recyclables and containerized yard waste from any container, replace the container in its designated position on the premises with covers closed on lidded containers, and shall repair or replace at its expense any containers damaged as a result of its handling thereof, no=al wear and tear excepted. (1) COLLECTOR shall close all gates after making collections and shall avoid crossing private or public planted areas and climbing or jumping over hedges and fences. Particular attention should also be given to the location of water meters, transfo=ers, guy wires, utility poles and irrigation structures.
COLLECTOR's personnel shall make all collections in a quiet and orderly manner, shall refrain from making unnecessary disturbances and noise, and shall be courteous and professional in all dealings with the public. If, for any reason, garbage/recyclables and containerized yard waste is not picked up, such as overweight container, not in container, etc., COLLECTOR shall attach a tag to the container explaining the reason therefor, and shall maintain a log or record of such refusals.
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(2) COLLECTOR shall strictly observe and protect the rights of privacy of customers. Info=ation identifYing the individual customers, or the composition or contents of a customer's garbage/recyclables and containerized yard waste, shall not, except upon order of a police officer who is properly identified as such, be revealed to any person, governmental unit, private agency or company, unless upon the authority of a court of law, by statute, or upon valid authorization by the customer. The rights accorded customers pursuant to this Section shall be in addition to any other privacy right accorded customers pursuant to Federal or State law. This provision shall not be construed to preclude COLLECTOR from participating in, or assisting in the preparation of waste characterization studies or waste stream analyses which may be required for the purposes/needs of CITY, or to comply with the requirements of the California Integrated Waste Management Act of 1989.
(3) Collection vehicles shall be operated safely at all times so as not to pose any hazard to school children going to or coming from school. No person shall collect solid waste from any location within two hundred feet (200') of a public or private elementary, junior high, or high school, where such school is shown on an official map of the city, as designated by the Engineering and Transportation Director, as said map shall be periodically updated, during the forty-five (45) minutes before the commencement of the regular school day and forty-five (45) minutes following the conclusion of the regular school day, where such locations are accessible to and used by children as routes to or from school. Notwithstanding the above restrictions, if, following an investigation, the Engineering and Transportation Director makes a determination that additional restrictions should be imposed on the collection of solid waste near a particular school based on the material circumstances as dete=ined by the investigation, COLLECTOR acknowledges that it has a duty to comply with these restrictions as a condition of this Service Agreement.
(4) COLLECTOR shall be responsible for any damage in excess of no=al wear and tear to the CITY's driving surfaces, whether or not paved, resulting from the illegal weight of, or any leakage or spillage of oils, fluids or solids by vehicles providing services under this agreement.
(5) COLLECTOR's collection vehicles shall be inspected as required by the California Highway Patrol and pursuant to the Department of Transportation regulations and operated in full compliance with the California Vehicle Code and this Service Agreement. COLLECTOR shall allow CITY to review inspection records at CITY's reasonable advance request. Vehicles shall be thoroughly washed and disinfected inside the collection body each day, or as 12 #6..
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approved by the Engineering and Transportation Director, and the exterior of each vehicle shall be cleaned and washed at least once a week. (6) COLLECTOR shall not hire or continue to employ any person as a collection vehicle operator if they fail for any reason to have, and/or maintain, a valid, unexpired, unsuspended Class "A" or "B" driver's license as required by the Department of Transportation and the California Highway Patrol as appropriate for the vehicle to be operated by such person. (7) COLLECTOR shall develop, maintain, and enforce a Vehicle Operator TraininglEvaluation program for its drivers who perfo= services under the te=s of this Agreement.
t. All equipment used for the collection and hauling of garbage shall be approved by the Engineering and Transportation Director and shall be so constructed and maintained as to prevent leakage, spillage, or overflow. Trucks shall not be loaded in excess of requirements of the California Vehicle Code.
All trucks and collection equipment shall be clearly identified by an assigned equipment number and with the fi= name and local telephone number affixed thereto. Collection trucks shall be painted white, or another color approved by the Engineering and Transportation Director, and shall be equipped with the safety devices and warning lights required by the California Vehicle Code.
All vehicles and equipment used in the collection of garbage, if kept within the boundaries of the CITY, shall, at all times when not in use in the collection of garbage, be kept on private property in the appropriate zone and not on streets or other public ways.
u. All garbage collection vehicles shall be well maintained, properly identified, painted, clean and in satisfactory mechanical condition. COLLECTOR shall institute a complete and comprehensive system of preventive maintenance on all vehicles and shall keep them lubricated and in good repair. Records in a fo= approved by the Engineering and Transportation Director to provide data on operating, maintenance and repair costs shall be kept on each piece of equipment. v. For purposes of this paragraph the following definitions apply:
(1) "Interruption of service" means:
(a) Any time period during which garbage/recyclables and containerized yard waste collection services by COLLECTOR are interrupted by a labor dispute and scheduled collections are discontinued or 13 #6..
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substantially reduced; or
(b) Any time period after notice by the CITY of the termination of the Service Agreement by reason of a breach or default by COLLECTOR and until other suitable equipment can reasonably be purchased or otherwise acquired by the CITY for such purpose.
(2) "Equipment" means any and all vehicles and equipment used by the COLLECTOR for the purpose of performing the services provided for in the Service Agreement at any time within the ninety (90) days immediately prior to the commencement of the interruption of service.
(3) "Payment for use" has the following meaning:
(a) In the case of equipment subject to a contract, "payment for use" shall mean any installment payment coming due under a contract for such equipment while the CITY is possessing and using such equipment pursuant to this paragraph during an interruption of service. Payment for use shall not be deemed to include any payment coming due under such contract either prior to, or after the expiration of, such period.
Payment for use shall be made by the CITY, from time to time, directly to the person or company to whom the payment is owed under the contract, and the making of such payment or payments shall constitute full compensation to all persons for the CITY's temporary use of such equipment.
(b) In the case of equipment not subject to a contract, "payment for use" shall mean the reasonable rental value of such equipment for such period of time during which the CITY possesses and uses such equipment pursuant to this paragraph during an interruption of service. Such payment shall, at termination of service interruption, be applied against any sums then owed to the CITY by
COLLECTOR, or, if none, shall be paid by the CITY to
COLLECTOR.
(4) "Contract" means any conditional sales contract, mortgage, encumbrance, lease, rental agreement, or other agreement which provides for retention of title to said equipment or grants a security interest therein, that may exist at the commencement of the interruption of service.
(5) "Notice" means written notification actually received by the person to be notified or mailed to him or her by registered or certified mail at the most recent address furnished by him or her to the CITY Clerk of the CITY of 14 #6..
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Modesto. As to the holder of a contract, the CITY shall be required to give notice only if the holder's identity is known to the CITY and the holder has furnished his or her address to said CITY Clerk.
In the event of an interruption of service, the CITY shall be entitled to have the temporary possession of all or any portion of the equipment of COLLECTOR on the condition that the CITY all, from time to time, make the payment for use as provided in Section v, Subsection (3), above. Upon taking such temporary possession, CITY shall forthwith give notice thereof to COLLECTOR and to the holder at that time, if any, of the contract on such equipment. Such temporary use shall not be deemed a breach of the te=s of any contract regarding said equipment, but it shall otherwise be subject to the te=s of such contract which are not in conflict herewith, except that the CITY shall not be required to make any payment other than the payment for use prescribed in Section v, Subsection (3), above. The CITY's payment for use prescribed in Section v, Subsection (3) shall be deemed to be compensation only for the temporary use of such equipment and the CITY shall not thereby acquire any ownership interest in such equipment.
So long as the CITY continues to make the payment for use of equipment when due or within ten (10) days thereafter, such equipment may be retained by the CITY and shall not be repossessed from the CITY. In the event the CITY fails to make a payment for use when due or within ten (10) days thereafter, the CITY's right to continued temporary use of such equipment shall cease, and possession of such equipment may be retaken by COLLECTOR or by the holder of any contract thereon.
At the expiration of the CITY's temporary possession of any such equipment, the CITY shall give written notice of such expiration to COLLECTOR and to the current holder, if any, of a contract on such equipment. In the event COLLECTOR shall fail to take possession of such equipment within ten (10) days after such notice, COLLECTOR shall be deemed to have abandoned such equipment and waived all interest therein, and the CITY shall be free to use and dispose of such equipment without liability or compensation to COLLECTOR, subject to the te=s of any contract that may then exist with regard to such equipment.
All equipment used by COLLECTOR for the purpose of performing the services provided for in this Service Agreement shall be solely owned by COLLECTOR except that COLLECTOR may, with the prior approval of the CITY Manager, enter into contracts as defined in Section v, Subsection (4), above, with respect to such equipment. All such contracts shall provide for 15 #6..
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temporary possession by the CITY as set forth herein and shall provide that such temporary possession shall not be deemed a breach of such contract. w. All vehicles and equipment used by COLLECTOR for the collection and hauling of garbage shall be solely owned by COLLECTOR, except that COLLECTOR may, with the prior approval ofthe CITY Manager, enter into conditional sales contracts, mortgages, encumbrances, leases, rental agreements, and other appropriate agreements for the purpose of purchasing, leasing or renting vehicles and equipment to be used in providing the services provided for in this Service Agreement. All such documents shall provide for temporary possession by the CITY as set forth in Section v, Subsection (5) above and shall provide that such temporary possession shall not be deemed a breach of the agreement.
x. l. COLLECTOR shall guarantee delivery to the Starrislaus Resource Recovery Facility ("SRRF"), 4040 Fink Road, Crows Landing, California, of all waste collected pursuant to the Service Agreement except as noted in the following paragraph.
Should the amount delivered by COLLECTOR to the SRRF fall below the historical average of weekly deliveries from CITY and County sources, CITY shall conduct an investigation of the cause of the tonnage reduction and shall, following consultation with COLLECTOR, determine what corrective actions, if any, shall be taken by COLLECTOR. Upon investigation and determination in its sole discretion that COLLECTOR has willfully failed to deliver all waste collected pursuant to this Service Agreement ("Delivery Default"), the CITY may impose damages as specified in Section x, Subsections 5 and 6 of this Agreement. Should the investigation determine that a diversion program or other activity conducted by the CITY pursuant to AB 939 is the cause of the reduction, the CITY and COLLECTOR agree to meet and determine whether adjustments should be made in the tonnage specified from CITY and County Sources. Wastes that are not acceptable for disposal at the Stanislaus Resource Recovery Facility (SRRF) shall be disposed of at the Fink Road Sanitary Landfill or other sarritary landfill areas as directed by the CITY, depending on the makeup of the waste. CITY further reserves the right to direct the collector to dispose of waste at an alternative facility at City's sole discretion. Disposal of garbage at all facilities will be in compliance with regulations in effect for the same as they now exist or may hereafter be amended.
2. Industrial garbage collected by COLLECTOR shall be lawfully disposed of or recycled in accordance with the provisions of Section 5-5.04 of the Modesto Municipal Code.
16 #6..
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3. Contamerized yard waste collected under the terms of this Agreement will be taken to the CITY's composting facility or such other locations as directed by the Engineering and Transportation Director. COLLECTOR shall be responsible for the removal of contaminants from the yard waste to an acceptable level as determined by the CITY. The cost of said removal, where reasonable and necessary as determined by the CITY, will be made a component of the maximum rate. The CITY reserves the right to reject or direct to alternative disposal any loads determined to be too contaminated to process.
4. On or before the end of each month, COLLECTOR shall furnish to CITY a certified statement verifYing the total number of tons of materials collected during the previous month by COLLECTOR under this Service Agreement, the number of materials separately disposed of at the Stanislaus Resource Recovery Facility, the Fink Road Landfill or other alternate disposal facility, whether or not such facility is or has been approved by CITY. Upon request of CITY, the COLLECTOR shaH provide documentation substantiating the monthly statement, including weigh slips or tickets.
5. For each ton of materials collected by COLLECTOR under this Service Agreement that COLLECTOR fails to deliver pursuant to Section x, Subsection 1 above.("Diverted Tons"), as demonstrated by weigh bills at such other facility or other evidence satisfactory to CITY, including reports of any such monitoring party described in Section x, Subsection 8 below ("Diversion Documentation"), COLLECTOR shall pay CITY within thirty days foHowing receipt of an invoice therefore from CITY, compensatory damages equal to all damages or other payment obligations CITY consequently directly or indirectly incurs under the Amended and Restated Service Agreement for the Supply and Acceptance of Solid Waste Among Stanislaus Waste Energy Company, the City of Modesto and the County of Stanislaus and related agreements (the "SRRF Service Agreement"), including, without limitation:
(1) an amount equal to payments for lost electricity revenues related to such tonnage shortfaH, as provided in Section 8.11(a) of the SRRF Service Agreement; and
(2) an amount equal to the lost Energy Credit, as defined in Section 8.11 (c) of the SRRF Service Agreement; and
(3) an amount equal to the lost tipping fee for the total tonnage of Diverted Tons not delivered by COLLECTOR as required under and 17 #6..
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in accordance with this Service Agreement.
6. In addition to compensatory damages, COLLECTOR acknowledges that SRRF generates less electricity revenue if the proj ected level of tonnage is not delivered to the SRRF and that CITY loses such revenue. COLLECTOR further acknowledges that CITY has consented to a third Service Agreement in consideration and reliance upon COLLECTOR's commitment and promise to provide disposal services at the SRRF. COLLECTOR further recognizes that in the event of a Delivery Default, CITY and its residents may suffer damages in addition to those compensatory damages described above and that it is and will be impracticable and extremely difficult to ascertain and determine the exact amount of such damages.
Therefore, COLLECTOR and CITY agree that in addition to the compensatory damages stipulated in Section x, Subsection 5, above, the following liquidated damages represent a reasonable estimate of the amount of such additional damages, considering all of the circumstances existing on the date hereto, including the relationship of the sums to the range of harm that reasonably could be anticipated and anticipation that proof of actual damages would be costly or inconvenient. In signing this Service Agreement, COLLECTOR and CITY each specifically warrants and represents that it has received independent legal advice from its attorneys or the opportunity to seek such advice and obtain an explanation of this liquidated damage provision at the time that this Service Agreement was made.
Within thirty days from delivery of written notice to COLLECTOR from CITY of a Delivery Default, COLLECTOR shall therefore pay as liquidated damages, in addition to the compensatory damages stipulated by this Service Agreement and not as a penalty, the sum of $1,000.00 for each day that COLLECTOR fails to deliver materials to the SRRF under the terms of this Service Agreement.
7. In the event of a Delivery Default, as demonstrated by Diversion Documentation, in addition to or in lieu of terminating this Service Agreement, assessing compensatory damages or exercising any of its other remedies at law or equity, including specific performance, CITY, in it sole discretion, may retain a third party to monitor COLLECTOR's subsequent disposal services and COLLECTOR shall reimburse CITY for its Direct Costs thereof, plus fifteen percent for overhead and administrative costs, within thirty days of CITY submitting an invoice to COLLECTOR for such costs. For the purposes of this section, "Direct Costs" means the sum of (I) 18 #6..
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weighted payroll costs directly related to the perfo=ance, or management or supervision of any obligation pursuant to the provisions hereof, comprised of compensationand fringe benefits, including vacation, sick leave, holidays, retirement, workers compensation insurance, deferred compensation, federal and state unemployment taxes and all medical and health insurance benefits, plus (2) the costs of materials, services, direct rental costs and supplies, plus (3) the reasonable costs of any payments to subcontractors necessary to and in connection with the perfo=ance hereunder, plus (4) any other cost or expense which is directly or normally associated with the task performed.
Direct Costs shall be substantiated by (1) a certificate signed by an authorized representative of CITY or his or her designee, as the case may be, setting forth the amount of such cost and the reason why such cost is properly chargeable to CITY and stating that such cost is an arms's length transaction and a competitive price, if there are competitive prices, for the service and materials supplied, and (2) if COLLECTOR requests, such additional backup documentation as may be available to reasonably substantiate any such Direct Cost, including invoices from suppliers and subcontractors.
COLLECTOR's liability to pay city any damages or customers any rebates shall survive the termination of the agreement.
8. Specific performance: COLLECTOR acknowledges that CITY's remedy of damages for a breach hereof by COLLECTOR may be inadequate for reasons including:
a. The urgency of timely, continuous and high-quality waste management service hereunder, including:
1. Collection and disposal of materials which may be putrescible and constitute a threat to public health, and
2. CITY's obligation to deliver guaranteed tonnage to the SRRF pursuant to the terms of the Amended and Restated Service Agreement for the Supply and Acceptance of Solid Waste
among Stanislaus Waste Energy Company, CITY and County
of Stanislaus (the "SRRF Service Agreement");
b. The long time and significant investment of money and personnel (both CITY staff and private consultants, including engineers, underwriters, bond counsel, financial advisors and contracts procurement counsel) required to procure, finance and re-finance the SRRF and the SRRF Service Agreement as the case may be; and 19 #6..
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..:..- ,. __ .,:..._ • .:.1. .•• '., ..:.. '. J_"-."'" ,,~ ,~ ' .~.: . ..; ... y .
c. CITY's reliance on COLLECTOR'S waste management experience, references and reputation for complying with the terms and provisions of its agreements;
Consequently, CITY shall be entitled to all available equitable remedies, including injunctive relief.
9. If any clause, sentence or provision of this Paragraph x or any subdivision thereof is determined to be invalid by any court of competent jurisdiction, such clause, sentence or provision shall not be severed from this Service Agreement, but either CITY or COLLECTOR, in its sale discretion, shall have the right to terminate this Agreement upon thirty days written notice thereofto the other party.
1. COLLECTOR shall furnish all labor and equipment required and make any and all modifications to its operations, equipment, or facilities, to sort out and recycle all materials placed in blue bags in the garbage/recyclables collection containers, including garbage/ recyclables collection containers at multifaruily units, subject to the following limitations:
(a) Materials shall be prepared by the residents for recycling as directed by the CITY in public education materials furnished to said residents by CITY;
(b) Materials shall be placed in blue, see-through recycling bags purchased by residents for the purpose of separating recyclables from household garbage.
To the extent the revenues from the sale of recyclables diverted from disposal by this method are less than the costs of sorting and selling such recyclables, the COLLECTOR may account for such excess as an allowable expense item, if determined by the CITY to be reasonable and necessary.
2. The CITY reserves the right to inspect COLLECTOR's vehicles and facilities without prior notice to ensure that such removal of blue bags and recycling of their contents is occurring.
3. Concurrent with the delivery of the yard waste containers to residents, COLLECTOR agrees to deliver an initial supply of blue recycling bags furnished by COLLECTOR/CITY, and promotional materials furnished by CITY, to each new customer.
20 #6..
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4. CITY and COLLECTOR agree to conduct ajoint analysis of the program to determine whether this method is performing adequately to meet the CITY's recycling goals. Should the analysis determine that the above method is not significantly increasing diversion of recyclables above the 2% levels attained in the curbside program, COLLECTOR and CITY agree to work together in a diligent effort to either improve diversion through promotion or other methods, or to develop an alternative method to attain the increased diversion. Should CITY determine that a change in recycling operations is required, the provisions of paragraph f(2) above shall apply.
Should the analysis show that this method of recycling is providing adequate, cost-effective diversion to meet co=unity needs and expectations, the benchmark tonnage to be recycled may be adjusted annually to reflect popUlation growth, technological breakthroughs, or other factors, as determined by the CITY upon consultation with COLLECTOR.
5. COLLECTOR shall file with the CITY written quarterly statistical reports, in a format approved by the CITY, no later than thirty (30) days following the end of each quarter, to report the quantities of recyclables being diverted from the City of Modesto. Reports shaH be sent to the Solid Waste Program Manager or their designee, at P. O. Box 642, Modesto, California, 95353.
The reports shaH include monthly volumes ·diverted for aluminum cans, bimetal/steel cans, PET plastic, glass, newspaper, cardboard, magazines, and other recyclables as determined by the Engineering and Transportation Director. Such reports may be subject to field audits and reviews as deemed necessary by the CITY.
6. COLLECTOR shaH provide reasonable public access to its facility where recyclable materials may be dropped off and where used motor oil may be deposited for recycling.
7. Pursuant to this Service Agreement, COLLECTOR shall coHect and remove for recycling used motor oil that has been placed at the curb of the public street fronting on aH single family residences and from designated locations near multi-family dweHings in an approved container on the scheduled service day. COLLECTOR shaH also replace each one (1) gallon container coHected with a clean container furnished by the CITY. COLLECTOR shall file with the CITY written quarterly statistical reports, no later than thirty (30) days following the end of each quarter, to report the volumes of oil being diverted. Pursuant to the terms and conditions of its Used Motor Oil Block Grants and Used Motor Oil Opportunity Grants, CITY shall use Grant funds to reimburse COLLECTOR for all reasonable costs associated with providing used motor oil collection services as agreed to by CITY. 21 #6..
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__ , __ ,_ . .. ,_ _"· __ M.,_· __ ·_··_· __ -'_. ____ -;-. ___ '.
Such grant funded collection shall continue at a minimum through June 30, 2002. In the event that no further grant funding is received to continue the program past that date, CITY shall notify COLLECTOR a minimum of ninety (90) days prior to the expiration of grant funding to discuss alternative funding of the program, including, but not limited to, a potential charge on the refuse collection fees, and/or termination of the curbside oil collection program.
8. Twice per year, COLLECTOR shall provide five (5) bins for the collection of telephone books for recycling, at CITY'S request. The number, placement, and size of the bins shall be as determined by CITY. COL!--ECTOR shall also accept telephone books at its transfer stations, and shall make a concerted effort to separate telephone books from the commingled garbage/recyclables waste stream. COLLECTOR shall assist CITY in promoting telephone book recycling.
9. COLLECTOR shall provide the equivalent of 800 cubic yards of detachable container/drop box collection and transportation service, including all disposal fees for community and special events, each calendar year as directed by CITY, upon prior consultation with COLLECTOR.
10. COLLECTOR will make available to CITY its facilities for the purpose of conducting waste sorts and will assist CITY in and provide requested waste type/volume information to CITY for the purpose of conducting/preparing waste characterization studies for CITY solid waste planning. COLLECTOR shall not be responsible to indemnify or insure the CITY or any CITY employee, contract employee, and/or volunteer while at COLLECTOR'S facility during waste characterization activity.
11. COLLECTOR shall provide on-call, twice a year bulky item collection services to each single family residence in the City, at CITY'S direction. z. COLLECTOR shall file with the CITY Clerk and maintain during the term of this Service Agreement a corporate surety bond or other form of security satisfactory to the CITY Attorney. The initial amount of this security shall be in the sum of Two Hundred Thousand and no/lOOths ($200,000.00) Dollars to secure said performance.
The amount of said security shall be reviewed annually by CITY on the anniversary date of this Agreement, and shall be increased by Sixty Thousand and no/lOOths ($60,000.00) Dollars for each additional One Thousand (1,000) increase in COLLECTOR'S customer base. Subject to the above requirements for increases in the bond amounts due to increases in the customer base, the performance bond requirements may be met by a bond which is effective for a minimum of three years 22 #6..
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if three months prior to the expiration of that bond, the CITY receives from the surety a letter of commitment that another perfo=ance bond will be issued to become effective immediately upon expiration of the prior perfo=ance bond. Provision of such bond is a material covenant of this Agreement. The cost of a surety bond or other fo= of security required under this provision may be an allowable expense in COLLECTOR's rates in accordance with exiting CITY cost accounting practices. aa. COLLECTOR agrees, in connection with the perfo=ance of all operations under or pursuant to this Service Agreement, to be an Equal Opporhmity Employer and to refrain from discrimination against any employee or applicant for employment because of race, creed, color, national origin, sex, age, or handicap.
1. COLLECTOR agrees that it will undertake a program to ensure that no person shall on the grounds of race, creed, color, national origin, sex, age, or handicap be excluded from participating in any employment activities or opporhmities. COLLECTOR shall ensure that seniority practices, job classifications, work assignments, and other personnel practices, including employment reduction actions, do not have a discriminatory effect by continually monitoring all personnel and employment-related activities to ensure that the equal employment opporhmity actions required by this Service Agreement are being carried out.
2. COLLECTOR agrees to ensure and maintain a working environment free of harassment, intimidation, and coercion at all job locations and in all facilities where COLLECTOR's employees are assigned to work. shall specifically ensure that all foremen and forewomen, superintendents,. and other on-site supervisory personnel are aware of and carry out the COLLECTOR's obligation to maintairi such a working environment.
3. In the event of breach of any of the above nondiscrimination, equal opporhmity, or similar covenants, the Council of the CITY of Modesto shall have the right to revoke this Service Agreement in accordance with the provisions of Section 5-5.33 of the Modesto Municipal Code. abo COLLECTOR and CITY shall cooperate, on such te=s as shall be agreed upon, to support, develop, publicize, expand, and promote the concept and benefits of recycling and compo sting by any reasonable and effective methods. COLLECTOR shall reimburse CITY for its reasonable expenses and mailing costs whenever CITY determines, after consultation with COLLECTOR, that it is in the best interest of the recycling/yard waste collection programs to distribute info=ation and promotional materials to COLLECTOR's customers.
Promotional assistance shall also include, but not be limited to, allowing access for 23 #6..
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tours of facilities by the public/elected officials, supplying "props" and locations for filming of public educational pieces, and other assistance as determined by the CITY.
Tours and/or access shall be limited to areas of operations that are non-proprietary as determined by COLLECTOR. COLLECTOR shall not be responsible to indemnify or insure the CITY or any CITY employee, contract employee, and/or volunteer while at COLLECTOR'S facility during these activities. ac. COLLECTOR shall comply with the IndemnificationlInsurance requirements set forth in Exhibit B, and shall reimburse each of the City's other two service providers for an amount equal to the interest on the difference between the one-half(l/2) of the Two Hundred Twenty Four Thousand Dollar ($224,000) premium for the three year Hazardous Substances Insurance policy required by the CITY that was actually paid by each of the other two service providers, said one-half (1/2) being One Hundred and Twelve Thousand Dollars ($112,000), and what each collector would have paid for one-third (1/3) of the said policy, said one-third (1/3) being Seventy Four Thousand Six Hundred and Sixty Six Dollars ($74,666). COLLECTOR agrees to reimburse said interest amounts of Two Thousand Dollars ($2,000) to Gilton Solid Waste Management, and Two Thousand Dollars ($2,000) to Waste ManagementIModesto Disposal by no later than September 30, 2001. Going forward, COLLECTOR will reimburse CITY per Exhibit B for one-third (1 /3) of such Hazardous Substances Insurance policies as required by Exhibit B. ad. AB 939 Compliance. The scope of this Service Agreement results in the CITY relying on COLLECTOR to implement programs that enable the CITY to meet State mandated diversion goals. COLLECTOR agrees to protect, defend, with counsel approved by CITY, and indemnify CITY against all fines or penalties imposed by the California Integrated Waste Management Board in the event the disposal reduction and diversion mandates or any other requirement of the Integrated Waste Management Act of 1989 as amended, are not met by CITY with respect to the waste stream collected in respective service areas under this Service Agreement, and such failure to meet said mandates has been occasioned by the material failure of COLLECTOR to perform as required and directed by this Service Agreement.
Material failure by the COLLECTOR to provide services required by this Service Agreement that enable the CITY to meet its diversion mandates shall be a breach of this Service Agreement and grounds for termination of the COLLECTOR's agreement by Council. If civil penalties are imposed on the CITY under AB 939, Public Resources Code Section 41850 due to COLLECTOR's failure to perfonn, all penalties shall be paid by the COLLECTOR. COLLECTOR and CITY acknowledge that this provision was not amended or restated, but dates to the original execution of this Agreement.
Federal, State, or local laws enacted after the effective date of this Service Agreement that impact the COLLECTOR's ability to achieve AB 939 goals, shall be taken into 24 #6..
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consideration by the City Council in the event any goals addressed herein, are not achieved. The indemnification and defense provisions contained herein shall not apply if CITY fails to carry out its statutory duties imposed by AB 939 (Public Resources Code Section 40000 et. seq.), as it may, from time to time, be amended. ae. The te=s used in this agreement shall be as defined in Section 5-5.03 of the Modesto Municipal Code.
af. I. No official, officer, or employee of the CITY during his or her tenure or one year thereafter shall have any interest, direct or indirect, in this Agreement or the proceeds thereof.
2. COLLECTOR acknowledges that its obligations to provide services under the Agreement are personal in nature, and that the identification of key personnel responsible for assuring complete and timely perfo=ance of COLLECTOR's services was a significant factor in the CITY's consent to a third Service Agreement and execution of this Service Agreement with COLLECTOR.
Key positions include the COLLECTOR's general manager and Integrated Waste Management Act coordinator, and the local corporate representatives of Bertolotti Disposal. The COLLECTOR promptly shall notify the CITY of any replacement of such key personnel prior to affecting such replacement.
On or before the expiration of six months after the date of such notification, the CITY reasonably may request a substitute or substitutes, which request shall be honored by the COLLECTOR wjthin a reasonable period of time after such request, but in no event later than six months after such request.
3. COLLECTOR shall immediately notify CITY if any of the following have a criminal conviction, criminal restraining order, or fme from a court, public entity, municipality or regulatory agency of competent jurisdiction with respect to the events listed in Section af, Subsection 4, below, or make an admission of guilt with respect thereto:
(a) COLLECTOR;
(b) Any of COLLECTOR's officers, directors or administrative or management employees;
(c) Any corporation having an ownership interest in COLLECTOR, including regional holding company, or any of its officers, directors, or administrative or management employees directly or indirectly responsible for administration and management of COLLECTOR; (d) Bertolotti Disposal Services, Inc. or any of its administrative or 25 #6..
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· ' .. ... ~ ..... -" ..... ,."-... , "- "';" .. --, ..•.... , .. .•....•. " ... _ .• '. ---"-....... .--. __ .. . management employees directly or indirectly responsible for administration and management of COLLECTOR;
4. Events requiring COLLECTOR to notify CITY pursuant to Section af, Subsection 3, above shall include the following:
(a) Fraud or a criminal offense in connection with obtaining, attempting to obtain, procuring or performing a public or private agreement, including this Service Agreement; or
(b) Bribery or attempting to bribe a public officer or employee of a local, state, or federal agency in that officer or director's or COLLECTOR's . employee's official capacity; or
(c ) Embezzlement, extortion, racketeering, false claims, false statements, forgery, falsification or destruction of records, obstruction of justice, receiving stolen property, theft, or misprision (failure to disclose) of a felony; or ,
(d) Unlawful (criminal) disposal of hazardous or designated waste by COLLECTOR; or
(e) Violation of antitrust laws or unfair trade practices, or conspiracy to . eliminate competition or to inflate waste collection, hauling or disposal fees.
Upon the occurrence of such events or circumstances with respect to COLLECTOR, CITY, in its sole discretion, may te=inate this Service Agreement upon thirty days written notice to COLLECTOR, or may impose such other sanctions (which may include financial sanctions, temporary suspensions or any other condition deemed appropriate short of termination) as it shall deem proper. Upon occurrence of such events or circumstances with respect to any corporation having an ownership interest in COLLECTOR or with respect to Bertolotti Disposal Services, Inc. and those persons described in Section af, Subsections 3 (c) and (d) above, the CITY may terminate this Service Agreement following thirty days written notice to COLLECTOR if COLLECTOR does not take action to remove the applicable officer, director or employee from his or her office or employment, and other office or employment, as the case may be with Related Parties, as described in Section af, Subsections 3 (b) and (c) above, and any position of influence and responsibility within such thirty day period. ago COLLECTOR hereby agrees and understands that the provisions ofMMC Section 26 #6..
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'.'.' _. ~~ ... , '-.-.,,, -~ .. , .... -., . ..... _., , .... _-'--_ ...... _ .... : .. . -" --, " ,~- --. 5-5.32 are incmporated as though set forth here in full, and that in addition to all of the proscriptions and requirements of that Ordinance, it shall be for a good and sufficient reason and in the public interest for the City Council to deny any assignment or other transfer of this agreement to any person or entity of any type having any financial interest in or legal or practical control over collector. ab. The provisions of this Service Agreement shall be binding upon and inure to the benefit of the parties and to each party's respective heirs, legal representatives, successors and assigns, including without limitation any acquiring parent company or subsidiary of such parent company or COLLECTOR.
aI. Each party warrants and represents that in executing this Service Agreement, it has received independent legal advice from its attorneys or the opportunity to seek such advice.
aJ. Headings or captions to the provisions of this Service Agreement are solely for the convenience of the parties, are not part ofthis Service Agreement, and shall not be used to interpret or determine the validity of this Service Agreement. Any ambiguity in this Service Agreement shall not be construed against the drafter, but rather the te=s and provisions hereof shall be given a reasonable interpretation as if both parties had in fact drafted this Service Agreement.
ak. Any and all notices required to be given under the provisions of this Agreement shall be given in writing and delivered personally or by deposit in the United States mail, postage paid and addressed as follows:
TO CITY
TO COLLECTOR
Director of Engineering and Transportation
CITY of Modesto
PO. Box 642
801 Eleventh Street
Modesto, California 95353
Bertolotti Disposal, Inc.
Post Office Box 127
Ceres, California 95307
or at such other addresses as the parties may file with each other for such purposes.
Notices, invoices and other correspondence hereunder shall be deemed received on the day following mailing by certified mail.
al. This agreement shall go into effect and be in full force and operation on September 18,2001.
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·~· • . : .. o .• ,.-_ ,
IN WITNESS WHEREOF, the parties have signed this
Agreement
thiS 18tb day of September 2001
Res. 2001-465
JACK CRIST, CITY MANAGER
COLLECTOR*
By pJ ?:> Jdit-;
ATTEST:
BY~Z~
ZARR, ClnC
~ CLERK
(SEAL)
APPR
APPROVED AS TO RISK MANAGEMENT FORM:
"'B)( --'-'l:--[ ===~~~::::::: =: ===~------- DONALD N. NORRIS, RISK MANAGER *Corporations - signature of two (2) officers required or one (1) officer plus corporate seal.
Partnership - signature of a partner required
Sole Proprietorship - signature of proprietor required
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""_., ., ..... -.~ _.- .. '.. . ..•...... --:.-.. ,-. ..: ... .. .--'~' -- EXBlBIT A - CITY FACILITIES
1. City Hall - Modesto Disposal
2. Police Department - Modesto Disposal
3. Legion Hall- Gilton Solid Waste
4. Airport Administration Building - Gillon Solid Waste
5. City Corporation Yard - Bertolotti Disposal
6. Wastewater Treatment Plants (primary and Secondary, including Compost Facility) - Bertolotti Disposal
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EXHIBIT B - INDEMNIFICATIONIINSURANCE PROVISIONS
A. HOLD HARMLESS AND INDEMNIFICATION.
(1). Indemnification of CITY. COLLECTOR agrees that it shall protect, defend with counsel approved by CITY, indemnify, and hold harmless CITY, its officials, officers, employees, representatives, volunteers, and agents from and against any and all losses, liabilities, fines, penalties, claims, damages of whatsoever nature, or judgments, including attorneys fees, arising out of or resulting from the CITY's grant of this Service Agreement to COLLECTOR or from COLLECTOR's exercise of this Service Agreement or omissions of COLLECTOR, its agents, employees, and subcontractors and employees thereof in connection with the performance or nonperformance of this Service Agreement. Subject to the scope of this indemnification and upon demand of the CITY, made by and through the City .
Attorney, the COLLECTOR shall appear in and defend the CITY and its officers, employees, and agents in any claims or actions, whether judicial, administrative, or otherwise arising out of the exercise of this Service Agreement. The COLLECTOR shall thoroughly investigate any and all claims and indemnify the CITY and do whatever is necessary to protect the CITY, its officers, employees, agents, and representatives as to any such claims, lawsuits, liabilities, expenses, or damages. (2). Indemnification of COLLECTOR. The CITY shall indemnify, defend and hold the COLLECTOR, its affiliates and their respective officers, directors, employees, and shareholders harmless from and against any and all liabilities, losses, damages, claims, actions, causes of action, costs, and expenses (including reasonable attorney's fees) arising from or in any manner related to the sole negligence or willful acts of the CITY, its officers, employees, agents, or contractors.
B. INSURANCE REQUIREMENTS
(1). Minimum Coverages - The COLLECTOR shall provide, at its own expense, and maintain at all times the following insurance with insurance companies licensed in the State of California and shall provide evidence of such insurance to CITY as may be required by the City Clerk of the CITY. The policies or certificates thereof shall provide that, thirty (30) days prior to cancellation or material change in the policy, notices of same shall be given to the Risk Manager of the CITY by certified mail, return receipt requested, for all ofthe following state insurance policies. (a). Workers' Compensation - In compliance with the statutes of the State of California, plus employer's liability with a minimum limit of liability of $500,000.
BERTAGT.WPD6.12.01-NEW DRAFT 9/11/01
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EXHIBIT B - INDEMNIFICATIONIINSURANCE PROVISIONS
A. HOLD HARMLESS AND INDEMNIFICATION.
(1). Indemnification of CITY. COLLECTOR agrees that it shall protect, defend with counsel approved by CITY, indemnifY, and hold harmless CITY, its officials, officers, employees, representatives, volunteers, and agents from and against any and all losses, liabilities, fines, penalties, claims, damages of whatsoever nature, or judgments, including attorneys fees, arising out of or resulting from the CITY's grant of this Service Agreement to COLLECTOR or from COLLECTOR's exercise of this Service Agreement or omissions of COLLECTOR, its agents, employees, and subcontractors and employees thereof in connection with the perfonnance or nonperformance of this Service Agreement. Subject to the scope of this indemnification and upon demand of the CITY, made by and through the City Attorney, the COLLECTOR shall appear in and defend the CITY and its officers, employees, and agents in any claims or actions, whether judicial, administrative, or otherwise arising out of the exercise of this Service Agreement. The COLLECTOR shall thoroughly investigate any and all claims and indemnifY the CITY and do whatever is necessary to protect the CITY, its officers, employees, agents, and representatives as to any such claims, lawsuits, liabilities, expenses, or damages. (2). Indemnification of COLLECTOR. The CITY shall indemnifY, defend and hold the COLLECTOR, its affiliates and their respective officers, directors, employees, and shareholders harmless from and against any and all liabilities, losses, damages, claims, actions, causes of action, costs, and expenses (including reasonable attorney's fees) arising from or in any manner related to the sole negligence or willful acts of the CITY, its officers, employees, agents, or contractors.
B. INSURANCE REQUIREMENTS
(1). Minimum Coverages - The COLLECTOR shall provide, at its own expense, and maintain at all times the following insurance with insurance companies licensed in the State of California and shall provide evidence of such insurance to CITY as may be required by the City Clerk of the CITY. The policies or certificates thereof shall provide that, thirty (30) days prior to cancellation or material change in the policy, notices of same shall be given to the Risk Manager of the CITY by certified mail, return receipt requested, for all of the following state insurance policies. (a). Workers' Compensation - In compliance with the statutes of the State of California, plus employer's liability with a minimum limit of liability of $500,000.
BERTAGT. WPD6.12.0 I-NEW DRAFT 9/1J/Ol
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Collector agrees to reimburse City for such insurance as may be provided by insurance company suitable to the City's Risk Manager within thirty (30) days after acquisition of such insurance by City.
(2) Other Provisions - If at any time any of said policies required by subsections B (1) (a), (b), or (c), above, shall be unsatisfactory to the CITY, as to fo= or substance or if a company issuing such policy shall be unsatisfactory to the CITY, the COLLECTOR shall promptly obtain a new policy, submit the same to Risk Manager for approval, such approval not to be unreasonably withheld, and submit a certificate thereof as herein above provided. Upon failure of the COLLECTOR to furnish, . deliver or maintain such insurance and certificates as above provided, this Agreement, at the election of the CITY, may be forthwith declared suspended, or terminated.
Failure of the COLLECTOR to obtain and/or maintain any required insurance shall not relieve the COLLECTOR from any liability under this Agreement, nor shall the insurance requirements be construed to conflict with or otherwise limit the obligations of the COLLECTOR conceming indemnification. The CITY, its agents, officers, employees, and volunteers shall be named as an additional insured on all insurance policies required herein, except Workers' Compensation. The Workers' Compensation insurer shall agree to waive all rights of subrogation against the CITY, its agents, officers, employees, and volunteers for losses arising from work performed by COLLECTOR for the CITY. The COLLECTOR's insurance policy(ies) shall include a provision that the coverage is primary as respects the CITY; shall include no special limitations to coverage provided to additional insured; and, shall be placed with insurer(s) with acceptable Best's rating of AVII or with approval of the Risk Manager.
COLLECTOR shall either require any subcontractor to procure and to maintain during the te= of the subcontract all insurance in the amounts specified above, or shall insure the activities of subcontractors in the policy specified above. The limits of liability required may vary, depending on the type of permit or contract.
BERTAGTWPD6.12.01-NEW DRAFT
9fiJIOl
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Managing Tomorrow’s Resources Today
590 Ygnacio Valley Road, Suite 105 John W. Farnkopf, PE Walnut Creek, California 94596 Laith B. Ezzet, CMC
Telephone: 925/977-6950 Richard J. Simonson
www.hfh-consultants.com Marva M. Sheehan, CPA
Robert C. Hilton
April 17, 2024
Rosene Nguyen
Integrated Waste Program Manager
Public Works
1010 10th Street
Modesto, CA 95354
Subject: City of Modesto 2023 Solid Waste Financial Review and Rate Analysis Dear Rosene Nguyen:
The City of Modesto (City) requested HF&H Consultants, LLC (HF&H) review the annual rate adjustment methodology and related operational and financial documentation for its two franchised solid waste haulers to provide recommendations to modify the rate adjustment methodology. This report provides a summary of our findings and recommendations and is structured into the following sections:
1. Executive Summary
2. HF&H Review and Analysis
3. HF&H Findings
4. HF&H Recommendations
5. Conclusion
EXECUTIVE SUMMARY
The City of Modesto’s residents and businesses have solid waste collection service from either Bertolotti Modesto Disposal Inc. (Bertolotti) and Gilton Solid Waste Management Inc. (Gilton) (collectively the “Haulers”). The City requested HF&H to conduct an analysis of the Haulers’ collection operations, costs, and the current rate setting methodology in order to provide recommendations to modify the rate adjustment methodology. The City was concerned about both the accuracy of and allocation of the Hauler’s costs to service the City’s residents and businesses.
Due to the narrow reporting requirements for the Haulers under the current franchise agreements, there was limited information available to be reviewed. Some information required multiple requests and conversations with the Haulers to clarify the information aligned with the request. Therefore, HF&H determined a scope of work that best met the City’s needs and the information available. ▪ HF&H reviewed each Hauler’s audited financial information for the most recently completed fiscal year and the annual rate adjustment application used to set current rates. We also reviewed the standard rate adjustment methodology to understand the mechanisms with which the annual rates are calculated.
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▪ HF&H evaluated each Hauler’s allocation of costs to the City by reviewing the types of allocation factors applies to the Hauler’s financial statements. HF&H assessed whether the allocation factor was reasonable or standard for the industry.
▪ HF&H benchmarked the residential, commercial, and residential bulky program costs against nearby jurisdictions or jurisdictions that have similar geographic structure and services. We inquired with each Hauler regarding costs that were higher than the benchmarked range. ▪ HF&H examined the current disposal, transfer, and organics pre-processing arrangements for each Hauler, including compensation for these services and their connection with the City’s composting facility.
▪ HF&H recalculated the Haulers’ tonnage reports to the City during the period under review and analyzed detailed general ledgers for certain expenses in the general and administrative categories.
The following discussion summarizes HF&H’s findings and recommendations.
Findings
• Gilton’s general and administrative allocation attributed an additional ~$96,000 in indirect expenses to the City based on an incorrect inclusion of commercial commodity revenue that is not part of the franchise. Because the current rates were set based on an inflation increase and not on this financial information, there is no impact to the current rates. • Bertolotti’s total costs per route are higher than the reasonable range from the benchmarks and the driving factor may be additional labor expenses for overtime. Gilton’s labor costs are higher than the reasonable range due to inclusion of other personnel within the driver labor category instead of the overhead category. Gilton’s overall per route costs, including fuel, are still slightly higher than the reasonable range.
• The Haulers’ annual rate adjustment application included costs that would double-compensate them for organics pre-processing services (firstly in direct costs and secondly through the per month fee). Because the current rates were set based on an inflation increase, the current rates do not double-compensate the Haulers for organics pre-processing.
Recommendations
Based on the above analysis, HF&H has summarized our recommendations for next steps below:
1. Third Party Review of Gilton Allocation: Because Gilton’s software for allocation of costs to the City is integrated with their accounting software, HF&H recommends that the software be reviewed periodically by a third party for accuracy and reasonableness. The cost for this review may be at the City’s or the Haulers’ expense.
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2. City’s Compost Facility Per-Ton Rate: HF&H recommends the City consider creating a separate rate for contaminated organic material. The City visually inspects incoming loads for contamination; if rejected, a load is charged to the Hauler, returned to their transfer station, cleaned, redelivered, and charged again. The additional cost and labor are intended to discourage contamination that should be removed during Hauler pre-processing. If a load is accepted based on visual inspection but is later determined to be too contaminated for processing, as City staff notes happens regularly, the City absorbs the cost of residuals and overs despite paying an additional pre-processing fee to haulers to ensure clean organic material. The City and Haulers should meet and confer to develop a surcharge that addresses this additional cost burden to ratepayers.
3. Amend and Restate the Current Franchise Agreements: HF&H recommends amending and restating the current franchise agreement to address operational, financial, and informational concerns. HF&H also recommends the Haulers resubmit official cost and operations forms to set a baseline to which future operations can be compared for reasonableness. The following two paragraphs provide specific recommendations regarding the amendment:
Modify Annual Rate Adjustment Methodology: The current annual rate adjustment process of using the ‘lowest cost Hauler’ does not provide sufficient guardrails to protect the City’s rate payers. HF&H recommends modifying the current annual rate adjustment process through the amendment to adjust expenses based on local collective bargaining agreements or regional and classification specific CPI indices. HF&H recommends that the new rate adjustment methodology calculate the compensation for disposal and organics pre-processing and delivery based on a build-up of tons multiplied by the rate at the destination facility. HF&H recommends tying the annual increase in the organics pre-processing rate to an index or other annual metrics.
Acceptable Disposal Location Designations: Because the current franchise agreement does not state which landfill the solid waste material should be delivered, HF&H recommends designating the disposal facilities in the franchise agreements to ensures material flow is managed and predictable.
4. Transfer / Organics Pre-Processing Rate Benchmarking: HF&H recommends the City review the transfer/pre-processing rate to ensure it is within the range of acceptable market rates.
5. Future Fee Component Removals: When performing the upcoming annual rate adjustment process, the following fees should be removed to not double-compensate the Haulers: Weekly Organics Collection, SB 1383 Collection Fee, Organics Waste Pre-Processing.
6. Monthly/Quarterly Tonnage Reports: HF&H recommends the City review the current reporting template for additional modifications, as needed during the amendment process, and discuss these modifications with the Haulers.
7. Detailed General Ledger Review: HF&H recommends placing a cap on annual increases to the general and administrative expenses through the annual rate adjustment methodology. #6..
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HF&H REVIEW AND ANALYSIS
Annual Rate Adjustment Application and Rates
Standard Methodology: The Standard Methodology was developed for the City by a previous consultant with the goal of calculating the ‘lowest cost Hauler’. Each Hauler submits audited financial information from the most recently completed fiscal year that is intended to reflect the costs to service the City. The City inputs these costs into the annual rate adjustment spreadsheet which compares Bertolotti’s and Gilton’s ‘per customer cost’ by customer class and determines the ‘lowest cost Hauler’. The lowest ‘per customer cost’ is selected for the hauler component of the rate for both Bertolotti and Gilton (Hauler Component). City fees are layered on top of the Hauler Component for City costs (e.g., landfills maintenance, compost facility improvements, City solid waste cost center).
There may be one additional adjustment made to the Hauler Component to account for anticipated increases in fuel costs based on the price of diesel. There are no adjustments to account for anticipated changes in tonnage, routes, labor, or other costs as the methodology assumes those changes will be reflected in the financial information when the applicable year is utilized for the annual rate adjustment process.
Most Recently Completed Annual Rate Adjustment Methodology: Each Hauler submitted its audited financial information from the most recently completed fiscal year (7/1/2021-6/30/22). The City input these costs into the annual rate adjustment spreadsheet to determine the ‘lowest cost Hauler’. Instead of utilizing the standard methodology with the ‘lowest cost Hauler’, the City enacted an increase to the current Hauler Components similar to the increase in the consumer price index. The City also layered various fees on top of the Hauler Component for City costs (landfills maintenance, non-containerized green waste, compost facility improvements, SB 1383 implementation, and City solid waste cost center) and additional Hauler costs not captured in their financial information (weekly organics collection, collect and process recycling, SB 1383 collection, and organic waste pre-processing). There were two adjustments made to the Hauler Component to account for anticipated increases in expenses: an increase in disposal costs based on consumer price index and an increase in fuel costs based on the price of diesel. The City chose to deviate from the standard methodology this year to account for the additional compensation for services required under SB 1383 and allow time to evaluate the impact of this rate adjustment methodology.
The City is allowed to approve, deny, delay, or enact a different rate increase than what was calculated per the annual rate adjustment applications. During the most recent annual rate adjustment, the City enacted a rate increase that was similar to the increase in the consumer price index rather than the full increase as calculated per the rate adjustment application. The rate adjustment application calculated a Hauler Component of $37.54 for residential services and $46.32 for commercial services; the City approved a $35.72 residential Hauler Component and a $43.57 commercial Hauler Component. #6..
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Hauler Allocation of Costs to Modesto
Bertolotti: Bertolotti reports its Modesto operations as a separate entity from its other corporations and franchises and provided the City with a separate set of audited financial statements. The separate set of financial statements for the City are used in the annual rate adjustment application. Bertolotti stated that all costs associated with serving the City are coded within their internal system directly to the City’s reporting entity. The only allocation that is used in preparation of the financials is related to the corporate service fee for administrative and support services to most parts of Stanislaus County and select areas of the City (further explained in the notes to the financial statements) which is allocated by containers.
Therefore, all direct service-related costs (labor, vehicle, fuel, disposal, etc.) are directly charged to and reflected in the financial statements utilized in the annual rate adjustment application. HF&H did not find any issues with Bertolotti’s allocation of the corporate service fee.
Gilton: Gilton services parts of Stanislaus County, Merced County, San Joaquin County, and various cities, including the City of Modesto. It accounts for its operations and costs as a single entity and provides a combined set of audited financial statements. The City of Modesto’s financial information is a supplemental schedule of costs allocated to the City based on various allocation factors. These allocation factors have been provided to the City and include allocation by percentage of loads, percentage of trucks to a jurisdiction/material, number of containers, customers, and revenue. The allocation calculation agrees to the information presented in Gilton’s Accounting and Supplementary Data, in which the auditor states, “We did not audit or review the financial statements or supplementary information included in the accompanying prescribed form nor we were required to perform any procedures to verify the accuracy or completeness of the information provided by management.” HF&H was unable to review the allocation calculations quantitatively as the spreadsheet calculations were hard-coded and a combination of multiple allocation methodologies. When HF&H requested a formuladriven version of the allocations file, Gilton asserted the spreadsheet provided is not a database export.
Allocation percentages are included in an allocation module in their accounting software which allocates costs held in suspense accounts until year end. This means that all files provided to HF&H include the results of the cost allocations, but the allocation percentages are calculated and applied in Gilton’s accounting software. This methodology is the same as Gilton’s Stanislaus County allocation methodology.
Therefore, if additional quantitative assurance is desired, more direct approaches may need to be considered (e.g., a site visit to Gilton to view the input of these percentages and calculations, a full review of their allocation software). However, HF&H reviewed the allocation methodology qualitatively for reasonableness of the type of allocation to the corresponding expense category and found the allocation types to be reasonable except for the revenue allocation. Revenue allocations for overhead costs are not the most appropriate allocation factor as the revenue from rates set by jurisdictions are not the best indicator of how much overhead costs are incurred.
During HF&H’s general ledger testing (refer to the Hauler Detailed General Ledger Review section below) Gilton provided copies of the general and administrative expenditures and recalculations of the general and administrative allocations. General and administrative expenditures were allocated based on revenue. HF&H reviewed the general and administrative allocation by tying revenue to the financial statements and noted that the commercial revenue was higher than presented in the financial #6..
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statements. HF&H inquired with Gilton to clarify where the additional revenue can be found in the financial information. Gilton’s response was, “this revenue is from specialty commodity bins, that should not have been included in the allocation. Prior to the enactment of SB 1383, our understanding was that we were not required to include this in revenue as recycle bins were open to competition as recycle/reuse streams are outside of the franchise revenue.” The City informed HF&H that recycling service was not an approved service per the franchise agreement, and that Gilton should not be providing this service to customers. The City also informed HF&H that hauling of any waste, including recyclable materials prior to the implementation of the curbside recycling program, is exclusive to service agreements and is not open to competition within the City limits.
Gilton provided a spreadsheet calculating the impact of reducing the City’s general and administrative allocation from 13.82% to 12.35% and its impact on the indirect expenses allocated to the City (approximately $96,000). HF&H estimated that this reduction of indirect expenses could have reduced the commercial per yard rate by $0.73. Gilton noted that this correction would not have impacted the current rates as the City enacted a rate increase assuming an inflation adjustment and not based on the higher rate increase requested based on the financial information in the application. However, HF&H notes that a review of previous year’s allocations would be required to ascertain whether the overallocation of indirect expenses occurred in previous years as well.
Hauler Collection Benchmarking
HF&H requested operational statistics from Bertolotti and Gilton for the most recently completed fiscal year (July 1, 2021 – June 30, 2022). A copy of the operational statistics shall be provided to the City for recordkeeping. HF&H also received a copy of Bertolotti’s and Gilton’s financial statements for July 1, 2021 – June 30, 2022 and the corresponding annual rate adjustment application prepared by the City.
HF&H calculated key operational and cost ratios using the financial and operational information; this allowed HF&H to benchmark the Haulers’ efficiencies and costs for reasonableness. HF&H compiled nearby jurisdictions’ Haulers’ ratios from Stanislaus County or the City of Stockton, or jurisdictions that have similar geographic structure and services in the Central Valley, and compared the key ratios. HF&H focused on cost per route, labor costs, and fuel costs for the residential and commercial sectors. While benchmarks are not always an ‘apples to apples’ comparison due to nuances of each service area, benchmarking allows general comparison and discussion on key areas as a starting point for further conversations. Refer to the tables below for a high-level summary of the benchmarking results.
Table 1. Summary of Benchmark Results - Residential
Benchmark Ratio Bertolotti Gilton
Operating Cost per Route 5% - 10% Higher than Reasonable Reasonable Total Cost per Route 0% - 5% Higher than Reasonable 5% - 10% Higher than Reasonable Total Labor Cost per Route Hour 10% - 15% Higher than Reasonable Reasonable Total Fuel Costs per Route Reasonable 30% - 35% Higher than Reasonable #6..
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Table 2. Summary of Benchmark Results - Commercial
Benchmark Ratio Bertolotti Gilton
Operating Cost per Route Reasonable Reasonable
Total Cost per Route 0% - 5% Higher than Reasonable 0% - 5% Higher than Reasonable Total Labor Cost per Route Hour Reasonable Reasonable
Total Fuel Costs per Route Reasonable Reasonable
Residential route benchmarking indicated the need for further analysis. Refer to the sections below.
Commercial benchmarking indicated an overall reasonableness in costs and was not further analyzed.
Bertolotti Per Route Comparison: Because Bertolotti was higher than reasonable in three of the four residential benchmarking categories, HF&H performed a deeper analysis on Bertolotti’s residential operations. HF&H translated Bertolotti’s financial information by expense category (labor, vehicle, fuel, etc.) into a per route cost. Then HF&H compared Bertolotti Modesto’s per route costs to Bertolotti Stanislaus County’s per route costs as these two jurisdictions are directly serviced by the same hauler and have similar programs, geography, and cost of expenses. The results of this analysis further confirmed the higher than reasonable costs were related to the labor and benefits expense categories.
Bertolotti Residential Route: HF&H inquired with Bertolotti regarding their residential route statistics and financial information specifically related to labor and benefits.
Bertolotti asserted that the residential labor costs included driver supervisor, mechanics, delivery drivers, maintenance workers, and cart assistance wages and benefits. Bertolotti also asserted that the average driver is earning between $150,000 - $160,000 with benefits. Because the benchmarks aim to compare direct driver labor, Bertolotti’s labor costs should be adjusted to remove the estimated wages and benefits related to these positions. HF&H had insufficient information to remove all categories of wages and benefits listed above but was able to remove an estimated amount for supervisor and cart assistance personnel wages and benefits. Then HF&H recalculated the labor ratios and average wage with benefits per driver. The hourly wage before benefits is competitive to benchmarked collective bargaining agreement, however the hourly wage after inclusion of benefits is higher than benchmarked collective bargaining agreements. HF&H recommends additional discussion when negotiating the amendment to the Agreement to tie the labor increases directly to a labor index based on the geographic area as Bertolotti’s divers are not under a collective bargaining agreement. However, the adjusted labor ratio (drivers per route per homes serviced) was still high in comparison to the benchmark’s reasonable range.
Bertolotti asserted that the residential Modesto service area is very dense and is located near the transfer and disposal facilities; they have trucks that are old with low mileage due to this geographic benefit.
Bertolotti also asserted that a large portion of their service area included narrow alleys that require 6- point turns and limit speed due to dust control. Historically, HF&H has seen a reasonable range of residential customers serviced per route per day to be approximately 700-800 customers. However, Bertolotti’s residential routes are servicing on average 900 customers per route per day. This indicates to #6..
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HF&H that Bertolotti is likely needing driversto work some amount of overtime, even with the geographic benefit, to achieve this operating efficiency.
The above point indicated to HF&H that Bertolotti’s operating statistics may require revision surrounding the average hours per route per day. Bertolotti’s operating statistics indicate its drivers are working 10 hour route days, which include two hours of overtime. To achieve a reasonable number of homes serviced per route, HF&H calculated that each driver would work an average of 11 hours per day instead of the asserted 10. It is possible that not all homes set out their containers each week, but it would require a significant number of customers choosing to not participate weekly. Set out information was not provided by Bertolotti in its operating statistics to verify this hypothesis.
In summary, this analysis indicates to HF&H that Bertolotti may have increased full-time employee equivalents through longer route days than reported on its operating statistics and that the additional labor expense for overtime may be the driving factor that is escalating the operating and total costs per route higher than the reasonable range from the benchmarks.
Gilton Per Route Comparison: Because Gilton was higher than reasonable in two of the four residential categories, HF&H performed a deeper analysis on Gilton’s residential operations. HF&H translated Gilton’s financial information by expense category (labor, vehicle, fuel, etc.) into a per route cost. Then HF&H compared Gilton Modesto’s per route costs to Gilton Stanislaus County’s per route costs as these two jurisdictions are directly serviced by the same hauler and have similar programs, geography, and cost of expenses. The results of this analysis further confirmed the higher than reasonable costs were related to operating costs such as labor and fuel.
Gilton Residential Route: Because the operating cost per route hour is within the reasonable range, but the total cost per route is above the reasonable range, it indicates to HF&H that Gilton is beyond the benchmarked range due to pass-through costs such as disposal, processing, and transfer. Pass-through costs are constrained by designated facilities and distances to alternative facilities. Each benchmarked jurisdiction has a unique arrangement of pass-through costs due to local facilities and contract limitations, which means pass-through costs are the least ‘apples to apples’ to compare using benchmarks. Therefore, HF&H understands why Gilton may be above the reasonable benchmark range in this category given the unique specifications of the City’s disposal and processing arrangements.
Gilton’s benchmark for fuel prices is above the reasonable range. Over the past few years, fuel prices have significantly increased. Some of the benchmarks used in HF&H’s analysis are from cost proposals or index reviews before the price increase in fuel was captured, which indicates that the reasonable range of fuel costs per route is lower than the actual current range. However, the Stanislaus County benchmark for Gilton, which uses actual fuel costs, shows the average fuel cost per route at approximately 75% of the fuel cost per route as in Modesto. Additionally, the current Agreement does not designate disposal and processing facilities, which allows the Haulers the option to haul material to facilities that are out of the area and incur additional fuel expenses. Therefore, HF&H believes Gilton’s fuel costs in Modesto may still be higher than reasonable due to increased transportation and fuel prices, but less than the 30%-35% higher than reasonable benchmark.
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In summary, overall per route costs are higher than the benchmark due to disposal, processing, and transfer costs. However, the overall per route costs, including fuel, are still slightly higher than the reasonable range.
Figure 1: City of Modesto Hauler Service Area Map
Hauler Residential Bulky Program Benchmarking
HF&H requested additional operational statistics and financial information for the residential bulky collection program from Bertolotti and Gilton for the most recently completed fiscal year (July 1, 2021 – June 30, 2022). A copy of this information is included as Attachment A and B. HF&H calculated the monthly cost per resident for the residential bulky program by dividing the bulky program costs by the number of residents served: Gilton costs $1.11 per month per resident and Bertolotti costs $1.19 per month per resident. HF&H calculated nearby jurisdictions’ cost per resident for residential bulky programs to compare for reasonableness.
Bertolotti
Transfer Station
Gilton Resource
Recovery
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The benchmarks for monthly residential bulky program costs ranged from $0.79 - $5.32. The higher cost programs have a more complete collection program that includes more types of acceptable items (e.g., tires, e-waste, hazardous materials) and a larger volume of material collected per visit. The lower cost programs have more limitations on the acceptable items and restrict overall volume. The City’s per resident program cost falls within the reasonable range and is in line with expectations due to the restrictions on type of acceptable items. The City’s program does not allow for automobile parts (including tires), household hazardous waste, computer monitors, tv’s, dead animals, C&D, or household garbage.
However, the City’s program does not limit the volume of material collected per visit. Based on a discussion the City had with the Haulers, the cost’s provided for the bulky program include costs for illegal dumping clean-up. Therefore, the true cost of the bulky collection program is less than the per resident calculated above and is more in line with the lower range of the benchmark.
Hauler Transfer and Disposal Review
Based on discussion with the City, both Haulers are required to take all garbage first to the Covanta Wasteto-Energy facility. If the Waste-to-Energy facility is at daily capacity or is shut down for the day, they are to dispose of the material at a landfill. The current agreement does not state which landfill, but the City maintained that the Haulers should use the Fink Road Landfill and are having both Haulers include in the monthly report which landfill they are using. However, the City asserts that the Haulers have been delivering solid waste to Manteca’s, Merced’s, or Livermore’s landfills. The City further explained that they do not know how much each Hauler pays at these facilities. Because the annual rate adjustment process does not include language to limit the disposal component of the adjustment to the rate charged at the Waste-to-Energy facility or the Fink Road Landfill (refer to the Annual Rate Adjustment Application section) there is no protection for the City against increased costs associated with disposal at alternative locations.
HF&H requested a narrative from Bertolotti and Gilton describing their current disposal and transfer arrangements. HF&H intended to perform a build-up of the disposal component of the Haulers’ financial information and assess the reasonableness of this cost. Refer below for a summary from each Hauler.
Bertolotti: Bertolotti asserts that all loads of material (both solid waste and organics) are brought to the transfer station and then taken to their final disposal or processing location. Bertolotti asserted they are required to take all garbage to the Covanta Waste-to-Energy facility or the Fink Road Landfill, unless they are directed to take it to another landfill. The current transfer rate is $22.00 per ton, the Waste-to-Energy facility rate is $49.90 per ton, and the Fink Road Landfill rate is $29.00 per ton. Bertolotti did not provide HF&H with the transfer or disposal costs during the financial period used in the annual rate adjustment application. However, HF&H calculated an estimated cost per ton for disposal of solid waste tonnage based on Bertolotti’s operational statics and financial information and found that it is within a reasonable range of the cost per ton as provided by Gilton who has the same disposal arrangements and additional per ton detail.
Gilton: Gilton asserts that they bring all loads of material (both solid waste and organics) to the Gilton Resource Recovery Transfer Facility (GRR) where the material is weighed on a scale with documentation for route identification for future allocation of costs. GRR accumulates material and hauls it to the Covanta #6..
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Waste-to-Energy facility or the Fink Road Landfill, unless directed to take it to another landfill. Hospital waste is taken directly to the Waste-to-Energy facility. Material is brought first to the Waste-to-Energy facility to increase the City’s diversion, but will be brought to Fink Road Landfill if the Waste-to-Energy facility cannot accept it. The City notes that Gilton’s weekly report indicates that material is also brought to other landfills.
Gilton also provided a breakdown of the per ton cost for transfer and disposal of solid waste material.
Illegal dumping disposal costs was not included in this breakdown. HF&H recalculated the disposal and transfer costs based on the tonnage reported in the operating statistics and found they agree within an immaterial variance to the disposal and transfer costs as reported in Accounting and Supplementary Data used in the annual rate adjustment process. Refer to the table below for a summary of the per ton rates during the time period reviewed.
Table 3. Gilton Transfer and Disposal Per Ton Cost
7/1/21 - 9/30/21 10/2/21 - 6/30/22
Residential, Commercial, and Debris Box Disposal $43.00 $44.00 Bulky Item Disposal $48.00 $53.00
Transfer Station Fee (Any Material) $24.00 $27.00
Hauler Organics Pre-Processing Review
As mentioned previously in the Annual Rate Adjustment Application section above, the City layers on additional fees to the Hauler Component for various programs and services. One of these fees is for residential and commercial organics pre-processing before delivery to the City’s compost facility. The City informed HF&H that all organic material collected by the Haulers within the City limit should be delivered to the City’s compost facility.
Based on the City’s SB 1383 compliance consultant’s (R3) report, the organics’ pre-processing rate was established to pay the Haulers to pre-process organic waste for delivery to the City’s compost facility. The contamination threshold at the City’s compost facility is 1%. The pre-processing rate was based on estimates from the Haulers to begin pre-processing organic material, assuming no pre-processing was currently occurring, to reach 100% clean organic material. The City asserts that neither Hauler was required to pre-processing organic material from July 1, 2021 – June 30, 2022 as it was not part of their contracts; the requirement for pre-processing began July 1, 2022 because of SB 1383 compliance. The additional component was also added to the rates beginning July 1, 2022. The current residential rate includes $1.72 per month and the current commercial rate includes $3.11 per month per cubic yard for organics pre-processing. The amount of this additional fee was based on feedback from both Haulers on the cost of pre-processing and developed by R3.
Bertolotti: Bertolotti’s narrative confirmed that it is required to deliver all organic material to the City’s compost facility. Bertolotti asserted that the transfer rate for solid waste materials is the same for organic materials, which is in alignment with the City’s narrative that Bertolotti was not pre-processing material during this time as the transfer rate for organic material would be higher to account for additional cleaning and grinding.
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However, Bertolotti’s annual rate adjustment application included $157,890 for green waste cleaning.
Therefore, Bertolotti’s annual rate adjustment application included costs that would double-compensate them for organics pre-processing services. Because the rates were set based on an inflation increase, not the Hauler’s applications, Bertolotti was not double compensated for organics pre-processing. However, this indicates to HF&H that the current rate adjustment methodology allows for potential doublecompensation in areas where the Hauler is compensated separately from the Hauler Component of the rates.
Gilton: Gilton’s narrative confirmed that organic waste is delivered to the GRR facility where it is cleaned and ground. Gilton’s breakdown of the per ton cost for transfer and disposal of solid waste included a breakdown of the cost to pre-process and transfer organic materials. HF&H confirmed with Gilton that the transfer rate for organic materials is inclusive of pre-processing and delivery of material to the City’s compost facility. the cost for pre-processing and transfer was $67.00 per ton from 7/1/21-9/30/21 and $71.00 from 10/1/21-6/30/22. Gilton asserts that they have been pre-processing organic material before it was required by the City in 2023 and consider it part of the scope of current services.
The cost to pre-process organics is compensated through the additional per month fee and should not be included in each Hauler’s financial information. Therefore, Gilton’s annual rate adjustment application included costs that would double-compensate them for at least some portion organics pre-processing services. If Gilton was the ‘lowest cost Hauler’, then costs to pre-process organic material would be included twice (firstly in direct costs and secondly through the per month fee). This indicates to HF&H that the current rate adjustment methodology allows for potential double-compensation in areas where the Hauler is compensated separately from the Hauler Component of the rates. This also indicates to HF&H that a reset of the base rate based on all current services and removes all per month fees remitted to the Haulers, would be beneficial.
For the upcoming annual rate adjustment application, the costs to pre-process organic materials will be included in both of the Haulers’ financial information and the per month fee should be removed to avoid double-compensation regardless of which Hauler is the ‘lower cost Hauler’.
City Compost Facility Rate
The City informed HF&H that the City’s compost facility reviews incoming organic material for compliance with the 1% contamination limit through a visual inspection. However, this inspection has been insufficient to identify incoming tonnage that is above the contamination level. The compost facility has been disposing of more organics contamination residue than anticipated and is incurring approximately $600,000 annually in City funds from other programs to dispose of the residue. The organics preprocessing rate was established for the Haulers to fully clean the organic materials collected within the City’s jurisdiction.
The City’s compost facility has two per ton rates: an in-city and out-of-city rate. The facility does not have a separate rate for contaminated material to cover the additional costs for the City to continue to process organic material because the pre-processing rate was established for delivered materials to have no contamination. If a load is identified as having contamination, the City will either reject the load and return #6..
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it to the Haulersfor additional pre-processing before charging a second tip fee upon return or the City will continue to process the material on site at the Compost facility at their own expense. Therefore, the current rates at the facility do not cover all of its costs incurred to process and dispose of organic residue.
Hauler Tonnage Review
The City discussed with HF&H its lack of confidence in the tonnage reports submitted by the Haulers to the City. The City also informed HF&H that the Recycling and Disposal Reporting System tonnage for the City of Modesto does not match the information provided to the City. HF&H performed a recalculation of the tonnage reports for Bertolotti and Gilton by material stream from July 2021 – June 2022. The recalculation found that not only did the annual tonnage disagree with the annual tonnage reported in the operating statistics, but it also did not agree to subtotals within the individualreports. HF&H compared the tonnage reports to the tonnage reported in the operating statistics provided to HF&H and inquired about discrepancies.
HF&H inquired with both Bertolotti and Gilton regarding the tonnage discrepancies and received the following response: The tonnage reports were created by and provided to each Hauler to fill out. The intent of the forms was submission to Cal Recycle but has since changed due to SB 1383. Gilton noticed that some of the formulas on the tabs differed from the summary page but did not modify the form. Both Bertolotti and Gilton mentioned that self-haul and schools were not included in the operating statistics tonnage reported as they are not part of the franchise. Gilton also noted that these reports were revised after June 2022. In summary, the operating tonnage submitted to HF&H should differ from the tonnage reports and Gilton recommends the tonnage per the operating statistics should be used for our review purposes. If the City requires additional information from these reports, the optimal time to modify these templates will be during the agreement amendment process.
Hauler Detailed General Ledger Review
HF&H requested expenditure descriptions from Gilton and Bertolotti for the line items in their annual rate adjustment application. A copy of these descriptions is provided at Attachments C-1 and C-2. These descriptions allowed HF&H to remap the Haulers’ annual rate adjustment applications to compare similar types of expenditures to each other as Gilton and Bertolotti group some categories of expenditures differently. Then, HF&H requested detailed general ledgers from the Haulers for expenditure categories that were of interest to the City or were significantly higher than the other Hauler.
Bertolotti: HF&H reviewed the detailed general ledgers for the following categories: Advertising, Bank Charges, and Rent. Detailed review of these general ledgers confirmed that all expenses in these categories were business-related expenditures that were reasonable to incur in operating the business and did not appear to be related to specifically non-Modesto jurisdictions.
Gilton: HF&H reviewed the detailed general ledgers for the following categories: Bank Charges, Computer, Depreciation, Rent, and Telephone. Detailed review of these general ledger confirmed that all expenses in these categories were business related expenditures that were reasonable to incur in operating a business and did not appear to be related to specifically non-Modesto jurisdictions. #6..
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At the City’s request, HF&H performed a deeper review of the Business Travel expenses incurred by Gilton.
HF&H reviewed the general ledger of Business Travel and noted that 62% of expenses were for travel to attend insurance related meetings, 20% of expenses were for business lunches with employees, vendors, and other business associates, and 18% of expenses were for business meals and travel for purposes of conventions, vendor negotiations, and equipment surveying.
Gilton also provided HF&H with additional background on their Business Travel: The Operations Manager’s duties include equipment/vehicle evaluations and purchases, safety coordinator, employment practices, and insurance insight. The Operations Manager also sits on the Board of Directors for Gilton’s Captive Insurance policies, which includes worker compensation, vehicle, and liability insurances. The Operations Manager attends safety meetings twice a year to ensure Gilton is in compliance and stays on top of industry changes. The Operations Manager and Richard Gilton attend board meetings for Captive Insurance twice a year. As part of the Board meetings there are educational classes regarding loss mitigation and other insurance related subjects.
After HF&H reviewed the general ledger and Gilton’s narrative, HF&H believes these types of business travel expenses appear reasonable to incur in operating a business.
FINDINGS
• Gilton’s general and administrative allocation attributed an additional ~$96,000 in indirect expenses to the City of Modesto based on an incorrect inclusion of commercial commodity revenue that is not part of the franchise. HF&H estimates the impact of this overallocation of expenses to be ~$0.73 per commercial cubic yard. Because the current rates were set based on an inflation increase and not on this financial information, there is no impact to the current rates. A review of prior period allocations would be required to ascertain whether the incorrect allocation was used in previous years.
• Bertolotti’s total costs per route are higher than the reasonable range from the benchmarks and the driving factor may be additional labor expenses for overtime. Gilton’s labor costs are higher than the reasonable range due to inclusion of bulky drivers, customer service reps, and other personnel within the driver labor category instead of the overhead category. The overall per route costs, including fuel, are still slightly higher than the reasonable range. • Bertolotti’s and Gilton’s annual rate adjustment application included costs that would doublecompensate them for organics pre-processing services (firstly in direct costs and secondly through the per month fee). However, because the current rates were set based on an inflation increase, the current rates do not double-compensate Bertolotti or Gilton for organics preprocessing.
HF&H RECOMMENDATIONS
Based on the above analysis, HF&H has summarized our recommendations for next steps below:
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1. Third Party Review of Gilton Allocation: Because Gilton’s software for allocation of costs to the City is integrated with their accounting software, HF&H recommends that the software be reviewed periodically by a third party for accuracy and reasonableness. The cost for this review may be at the City’s or the Hauler’s expense. Additionally, HF&H recommends that the City provide direction to Gilton on appropriate allocators for each overhead cost category, such as customer count or overhead labor hours by jurisdiction.
2. City’s Compost Facility Per-Ton Rate: HF&H recommends the City consider creating a separate rate for contaminated organic material. The City and Haulers should meet and confer to develop a surcharge that addresses this additional cost burden to rate-payers.
3. Amend and Restate the Current Franchise Agreements: Based on discussions with the City regarding past experiences under the current franchise agreements, operational and informational challenges with the Hauler, and the insufficient franchise agreement language to provide the City the guardrails and direction it desires, HF&H recommends negotiating an amendment to and restating the current franchise agreement to address these concerns. HF&H also recommends the haulers resubmit official cost and operations forms to set a baseline to which future operations can be compared for reasonableness.
Initially, HF&H recommends the City and Haulers and discuss how the current franchise agreement is functioning appropriately, and how it can be improved. This process could be navigated through use of a third party, like HF&H, to facilitate a pointed discussion on key points of the franchise agreement and document key issues and alternatives.
Modify Annual Rate Adjustment Methodology: Because the current annual rate adjustment process of using the ‘lowest cost Hauler’ does not provide any guardrails to protect the City from high inflation factors, operational inefficiencies, disposal costs at non-preferred locations, doublecompensation, and other operational issues that impact costs, HF&H recommends modifying the current annual rate adjustment process through the amendment to account for these possibilities. Some possibilities could include linking labor cost increases to local collective bargaining agreements or inflating expense categories based on regional and classification specific CPI indices. HF&H would be happy to discuss with the City the alternative rate setting methodologies used in other jurisdictions and discuss the pros and cons of those alternative methodologies.
Acceptable Disposal Location Designations: Because the current franchise agreement does not state which landfill the solid waste material should be delivered, the Haulers may choose where to bring the material. This may increase the cost of delivery (additional fuel and labor time), and due to the current annual rate adjustment process, increased costs will directly flow to the rate payers. HF&H recommends designating the disposal facilities in the franchise agreements to ensures material flow is managed and predictable.
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Additionally, HF&H recommends that the new rate adjustment methodology calculate the compensation for disposal and organics pre-processing and delivery based on a build-up of tons multiplied by the rate at the destination facility. The ‘clean material’ rate at the City’s compost facility should be used for organics because the Haulers are being compensated to pre-process material to the facility’s standards. If the City’s compost facility enacts a separate charge for contaminated loads, as recommended above, the Haulers would be responsible for covering the additional cost if the organic material does not meet contamination standards.
4. Transfer / Organics Pre-Processing Rate Benchmarking: Because Gilton Resource Recovery and Gilton Solid Waste are affiliated parties, HF&H recommends the City review the transfer/preprocessing rate to ensure it is within the range of acceptable market rates. Additionally, HF&H recommends negotiating with the Haulers to tie the annual increase in this rate to an index or some other annual metric.
5. Future Fee Component Removals: Because certain City fees are for services that the Hauler is currently performing, the costs to perform these services will be reflected in the Hauler’s future financial information. Therefore, these fees should be removed in the upcoming annual rate adjustment process to not double-compensate the Hauler. A list of these fees is included below for reference:
a. Weekly Organics Collection
b. SB 1383 Collection Fee (For collection and processing of recyclable materials) c. Organics Waste Pre-Processing
6. Monthly/Quarterly Tonnage Reports: Because the reporting requirements may change with an amendment to the agreement, HF&H recommends the City review the current reporting template for additional modifications, as needed during the amendment process, and discuss these modifications with the Haulers
7. Detailed General Ledger Review: HF&H’s review of selected general ledger accounts did not yield expenditures that were unallowable in nature. However, certain business-related decisions and practices that are at the discretion of the company (e.g., increasing driver wages to incentivize tenure, attending multiple instead of few industry conferences, purchasing additional IT software/security) will affect the City’s rate payers and the City has no influence on or ability to veto these expenses. A revision to the annual rate adjustment process that places a cap on general and administrative expenses, or limits specific categories of expenses, can provide the City with a general enforcement mechanism while allowing the Haulers the opportunity to make these business decisions at their discretion.
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CONCLUSION
HF&H reviewed the annual rate adjustment process, benchmarked the current programmatic costs and operating statistics, examined the current transfer, disposal, and pre-processing arrangements, and checked general and administrative expenses for reasonableness. HF&H recommends amending and restating the franchise agreement to modify the current rate adjustment methodology to align annual cost adjustments with indices or other third-party sources, include disposal and pre-processing guardrails to direct the flow of and quality of materials, and remove future fee components in the next year’s rates to avoid double-compensation.
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ATTACHMENT A-1:
BERTOLOTTI BULKY PROGRAM STATISTICS
A B
Account Information
1 Customer Annual Collections 2,343 NONE
Labor Information
2 # of route/hourly personnel 2 NONE
3 # of spare personnel 0
4 # of salaried personnel 0
5 Total labor hours/year 2080
A B
# of routes per
6 ONE ROUTE 2 DAYS A WEEK Weekday 1 NONE
7 Saturday
8 Sunday
# of persons/route per
9 Weekday 2
10 Saturday
11 Sunday
# of route hours/day/route per
12 Weekday 20
13 Saturday
14 Sunday
# of route hours/year per
15 Weekday 2080 NONE
16 Saturday 0 0
17 Sunday 0 0
18 Total 2080 0
19 # of FTE routes 1 0
Vehicle Information
20 # of regular collection vehicles 2
21 # of spare collection vehicles
22 Total # of collection vehicles 2
Tonnage Information (annual)
23 Direct Haul
24 Transfer
25 Solid Waste Disposed 0 0
26 Recyclable materials
27 Organic materials
28 Total 0 0
29 Tonnage Disposed
30 Projected Processing Residue %
Pulls = pull and return etc.
Full Time Equivalent (FTE) = 40 hours per week, 2,080 hours per year
STATISTICAL & OPERATIONAL DATA
Modesto
Residential
Bulky
Commercial
Bulky
Residential
Bulky
Commercial
Bulky
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ATTACHMENT A-2:
BERTOLOTTI BULKY PROGRAM COSTS
Expenses
Wages 68,640 NONE
Benefits 18,139
OTHER P/R TAX, W/C INS, UNIFORMS 19,434
Total Labor Related Costs 106,213 -
Fuel 14,300 NONE
Vehicle Related Costs R&M 9,600
Depreciation 62,000
Other Direct Costs LIABILITY INS 2,450
Total Direct Costs 194,563 -
Allocated Costs - Labor, Vehicle & Other Costs
General & Administrative 12,000 NONE
Vehicle & Container Maintenance
12,000 -
Total Annual Cost of Operations 206,563 -
Pass Through Costs
Disposal 65,007 NONE
Transfer 14,402
Interest
Total Pass Through Costs 79,409
Total Contractor Cost before City Fees 285,972 -
Residential Bulky
Collection
Commercial
Bulky Collection
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ATTACHMENT B-1:
GILTON BULKY PROGRAM STATISTICS
A B
Account Information
1 Customer Annual Collections 14712
Labor Information
2 # of route/hourly personnel 3.2937
3 # of spare personnel
4 # of salaried personnel
5 Total labor hours/year 6851.01
A B
# of routes per
6 Weekday
7 Saturday
8 Sunday
# of persons/route per
9 Weekday
10 Saturday
11 Sunday
# of route hours/day/route per
12 Weekday 0
13 Saturday
14 Sunday
# of route hours/year per
15 Weekday 0 0
16 Saturday 0 0
17 Sunday 0 0
18 Total 0 0
19 # of FTE routes 0 0
Vehicle Information
20 # of regular collection vehicles 1.96
21 # of spare collection vehicles
22 Total # of collection vehicles 1.96
Tonnage Information (annual)
23 Direct Haul
24 Transfer 2408.65
25 Solid Waste Disposed 2408.65 0
26 Recyclable materials
27 Organic materials
28 Total 2408.65 0
29 Tonnage Disposed 2408.65
30 Projected Processing Residue %
STATISTICAL & OPERATIONAL DATA
Modesto
Residential
Bulky
Commercial
Bulky
Residential
Bulky
Commercial
Bulky
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ATTACHMENT B-2:
GILTON BULKY PROGRAM COSTS
Expenses
Wages 218,446
Benefits 100,315
Other (Please List) Laundry 1,108
Total Labor Related Costs 319,869 -
Fuel 71,682
Vehicle Related Costs 50,016
Depreciation 53,240
Other Direct Costs 7,736
Total Direct Costs 502,543 -
Allocated Costs - Labor, Vehicle & Other Costs
General & Administrative -
Vehicle & Container Maintenance 99,903
99,903 -
Total Annual Cost of Operations 602,446 -
Pass Through Costs
Disposal 124,106
Transfer 62,931
Interest
Total Pass Through Costs 187,037 -
Total Contractor Cost before City Fees 789,483 -
Residential Bulky
Collection
Commercial
Bulky Collection
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ATTACHMENT C-1:
BERTOLOTTI EXPENSE LINE ITEM DESCRIPTIONS
Expense Line Item
(Modesto Annual Rate Application
Expense Line Item
(Per Financial Statements) Expense Line Item Description Direct Costs:
Wages: Supervisor Wages, Salaries and Wages Salaries and wages for Bertolotti Modesto (BMDI) drivers and mechanics Other Payroll Expenses:
Comp Insurance Workmen's Comp. Workers comp insurance costs for drivers and mechanics Group Insurance Medical / Group Ins. Medical insurance cost for BMDI drivers and mechanics Payroll Taxes Payroll Taxes Payroll taxes for BMDI drivers and mechanics Profit Sharing Profit Sharing Profit sharing for 401K BMDI drivers and mechanics Truck Expenses:
Depreciation Depreciation Depreciation for BMDI fixed assets Fuel Fuel, Oil, & Lube Fuel costs for BMDI trucks
Licenses Licenses / DMV City business licenses and DMV costs for BMDI Repairs Repairs & Maint. All R&M costs (except for fuel and tires) for BMDI trucks/equipment Tires Tires Tires costs for BMDI trucks
Vehicle/Liab Insurance Vehicle Insurance Liability/Physical damage coverage for BMDI vehicles Other Operating Expenses:
Bulky Item Disposal Fee Bulky Item Disposal Fee Disposal fee for Bulky items Green Waste Cleaning Green Waste Cleaning Cleaning costs for sorting and cleaning of organics Green Waste Hauling Green Waste Hauling Hauling costs for organics Green Waste Tip Fee Green Waste Tip Fee Tip fee for organics Laundry Laundry & Uniforms Uniform costs for BMDI employees Transfer Station fee Transfer Fees Hauling fees charged by Bertolotti Transfer Station G&A Expenses:
Accounting Accounting Services Costs paid to outside CPA for audit, financials and tax return prep Advertising Advertising Earth Day 2023 booth and supplies Advertising paid to City Advertising Paid to City Modesto billed advertising fee Bad Debts Bad Debts Write-offs of uncollectible receivables Bank Charges Bank Charges Bank servicing and credit card processing fees City Billing Fees City Billing Fees Modesto billing fees City Pollution Insurance City Pollution Insurance Bertolotti's portion of Modesto's pollution policy Computer Exp Computer / Data Process. Desktop support from outside IT consultant and small computer items Depreciation & Amort. Depreciation Depreciation of fixed assets Employee Benefits (Medical/Group Ins.) Medical/Group Ins. Medical insurance for BMDI office employees Indirect Liability insurance Indirect Liability Insurance General liability coverage Insurance (Workmen's Comp Ins) Workmen's Comp. Ins. Workers comp insurance for BMDI office employees Office Supplies Office Supplies Small Office supplies for BMDI (paper, pens, etc) Other Taxes Other Taxes and Licenses Misc taxes and licenses for BMDI (annual SOS filing, business license) Outside Services/Security Outside Services Outside temps Payroll Taxes Payroll Taxes Payroll taxes for BMDI office employees Postage Postage General postage and freight
Professional Fees/Services Professional Services
Legal costs (corporate minutes, employment liability assessment, defense costs)
Profit Sharing (Def Comp) Profit Sharing Profit sharing for office employees Property Taxes Property Taxes Real and personal property taxes Rent Rent Office and equipment rent
Salaries Salaries & Wages Salaries and wages for BMDI office employees Security Security 3 rotating security guards
Telephone Telephone VOIP Costs, Cell Phones, Radios, Fiber Internet Travel & Enter Meals & Entertainment Travel, meals, and entertainment (conventions, meals for office) Utilities Utilities BMDI utilities (TID, PGE)
Total G&A Exp:
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ATTACHMENT C-2:
GILTON EXPENSE LINE ITEM DESCRIPTION
Expense Line Item
(Modesto Annual Rate Application
Expense Line Item
(Per Financial Statements) Expense Line Item Description Direct Costs:
Wages: Wages
GROSS PAY FOR NON-ADMINISTRATIVE AND NON-MANAGEMENT INCLUDING REGULAR, OVERTIME,
VACATION, SICK, PTO AND HOLIDAY PAY (EXCLUDES SHOP)
Other Payroll Expenses:
Comp Insurance Compensation Insurance
WORKERS COMPENSATION INSURANCE PAID/ACCRUED DURING THE FISCAL YEAR FOR NON-ADMIN AND
NON-MANAGEMENT STAFF
Group Insurance Group Insurance
MEDICAL, DENTAL AND VISION PAYMENTS MADE TO INSURANCE PROVIDERS AS WELL AS SELF-INSURED
PLANS ON BEHALF OF NON-ADMIN, NON-MANAGEMENT STAFF
Payroll Taxes Payroll Taxes
EMPLOYERS SHARE OF SOCIAL SECURITY, MEDICARE, FEDERAL UNEMPLOYMENT INSURANCE, CA STATE
UNEMPLOYMENT INSURANCE AND EMPLOYER TRAINING TAX
Profit Sharing Profit Sharing EMPLOYER MATCH OF SECTION 401 (k) PAYMENTS FOR EMPLOYEE RETIREMENT PLAN Truck Expenses:
Depreciation Depreciation
ANNUAL STRAIGHT-LINE COST OF HAULER'S COLLECTION VEHICLES AND TRAILERS, E.G. AUTOMATED, FRONT LOADER, ROLL-OFF, BULKY ETC.
Fuel Fuel COST OF GAS AND DIESEL EXPENSE RELATED TO HAULER COLLECTION VEHICLES Licenses Licenses
COST OF COLLECTION VEHICLE RELATED FEDERAL AND STATE TAXES, LICENSING, PERMITTING AND
REGISTRATION FOR BOTH INITIAL PURCHASE AND RENEWALS
Repairs Repairs COLLECTION VEHICLE RELATED REPAIRS COSTS INCLUDING OIL, GREASE AND FLUIDS (PARTS AND LABOR) Tires Tires PURCHASE, INSTALLATION AND/OR REPAIR OF HAULER COLLECTION VEHICLE TIRES Vehicle/Liab Insurance Vehicle // Liability Insurance COST TO INSURE HAULER COLLECTION VEHICLES INCLUDING PROPERTY AND VEHICLE RELATED LIABILITY Other Equipment Expenses:
Depreciation Depreciation
DEPRECIATION ON CONTAINERS, LEASEHOLD IMPROVEMENTS AND OFFICE FURNITURE, FIXTURES AND
EQUIPMENT
Other Operating Expenses:
Laundry Laundry LAUNDERED UNIFORMS, MATS, TOWELS
Supplies Supplies CLEANING, JANITORIAL, DRIVER SUPPLIES, AND OTHER MISCELLANEOUS SUPPLIES Transfer Station fee Transfer Station Fee TIPPING FEE AND PROCESSING FEE PAID TO TRANSFER STATION Indirect Costs:
Officer Salaries
Shop Expense Shop Expense
ALL NON-SPECIFIC SHOP OVERHEAD (E.G. WAGES, REPAIRS, FUEL, WC, LAUNDRY, INSURANCE, SUPPLIES, ETC. NOT DIRECTLY ALLOCATED)
G&A Expenses:
Accounting Accounting COST PAID TO EXTERNAL AUDITORS, ACCOUNTANTS AND CONSULTANTS Advertising Advertising GENERAL PROMOTIONAL ITEMS
Bad Debts Bad Debts UNPAID AND UNCOLLECTABLE CUSTOMER BILLS REMOVED FROM ACCOUNTS RECEIVABLE Bank Charges Bank Charges BANK SERVICE CHARGES AND CREDIT CARD AND ELECTRONIC PAYMENT MERCHANT FEES Cash O/S Cash Over / Short MISC. CASH/OVER SHORT FROM CASH DRAWER City Billing Fees Billing Expenses
COST PAID TO THE CITY OF MODESTO FOR BILLING/COLLECTIONS (CITY WITHHOLDS THIS FROM AMOUNT
PAID TO HAULER)
Community Education/Support Public Education Costs INVOICES FROM THE CITY OF MODESTO FOR PUBLIC EDUCATION Computer Exp Computer Expenses
SERVER HARDWARE AND SOFTWARE LICENSING AND MAINTENANCE, REPORT DESIGN, DATA STORAGE,
COMPUTER AND NETWORK RELATED HARDWARE AND SOFTWARE
Contributions Contributions INDUSTRY RELATED NOT-FOR -PROFIT CONTRIBUTIONS Depreciation & Amort. Depreciation and Amortization ANNUAL STRAIGHT-LINE COST OF SUPPORT VEHICLES AND AMORTIZATION OF LOAN FEES Employee Safety Exp Employee Safety Expenses LITERATURE, TRAINING, SAFETY EVENTS AND INCENTIVES Insurance (Workmen's Comp Ins) Insurance HEALTH, DENTAL, VISION AND LIFE INSURANCE, WORKERS COMPENSATION Office Supplies Office Supplies
COPY PAPER, STAPLES, PAPER CLIPS, PENS, CALCULATOR TAPE, OTHER SMALL OFFICE ITEMS, 10-KEY CALCULATORS ETC.)
Other Taxes Other Taxes EMISSIONS COMPLIANCE, PCORI TAX, CITY OF MODESTO ANNUAL BUSINESS LICENSE Outside Services/Security Outside Services FIRE AND SECURITY ALARM SERVICES, PEST CONTROL AND, VEHICLE FUEL SERVICING FEES Payroll Taxes Payroll Taxes
EMPLOYERS SHARE OF SOCIAL SECURITY, MEDICARE, FEDERAL UNEMPLOYMENT INSURANCE, CA STATE
UNEMPLOYMENT INSURANCE AND EMPLOYER TRAINING TAX
Penalties Penalties LATE FEES AND OTHER PENALTIES
Permits/Licenses Permits STATE OF CALIFORNIA MOTOR CARRIER PERMIT FEE Postage Postage COST OF POSTAGE, POSTAGE EQUIPMENT LEASE, MAILING SERVICE AND POSTAGE SUPPLIES Professional Fees/Services Professional Fees LEGAL FEES, DIRECT PAYMENTS TO MEDICAL FACILITIES, 3RD PARTY ADMIN FEES, BROKER FEES Profit Sharing (Def Comp) Profit Sharing EMPLOYER MATCH OF SECTION 401 (k) PAYMENTS FOR EMPLOYEE RETIREMENT PLAN (ADMIN/MGMT) Property Taxes Property Taxes
STANISLAUS COUNTY UNSECURED PROPERTY TAX FOR OPERATING EQUIPMENT (E.G. CONTAINERS) USED
BY THE CITY OF MODESTO
Rent Rent OFFICE LEASE AND/OR TEMPORARY EQUIPMENT RENTALS Repairs (Repair & Maintenance) Repairs REPAIR SERVICES INCLUDING PARTS AND LABOR RELATED TO THE BUILDINGS AND GROUNDS Salaries Salaries
GROSS PAY FOR ADMINISTRATIVE SUPPORT, CSR, IT AND MANAGEMENT INCLUDING SALARY, VACATION,
SICK, PTO AND HOLIDAY PAY
Subscriptions (& Dues) Subscriptions INDUSTRY RELATED MEMBERSHIPS DUES AND FEES Telephone Telephone
CELL PHONE, TABLETS GPS SERVICES, DRIVER/FLEET MANAGEMENT, ANALOG LAND LINES, DEDICATED
FIBER/INTERNET, VOIP PHONE SYSTEM, FIREWALL
Travel & Enter Travel & Entertainment BUSINESS RELATED TRAVEL AND ACCOMPANYING EXPENSES (DOES NOT CONTAIN ENTERTAINMENT) Utilities Utilities WATER, SEWER, GARBAGE, NATURAL GAS, ELECTRICITY FOR OFFICES AND SHOP Vehicle Exp Vehicle Expenses
FUEL, REPAIRS AND MAINTENANCE, TIRES, LICENSING/REGISTRATION AND GENERAL UPKEEP OF SUPPORT
VEHICLES
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CITY OF MODESTO
COMMITTEE AGENDA REPORT
DATE OF MEETING:
December 17, 2025
December 12, 2025
TO: Finance Committee
Rosa Escutia-Braaton, Chair
David Wright, Vice Chair
Nick Bavaro, Member
THROUGH: Joseph P. Lopez, City Manager
FROM: Bill Sandhu, Director of Public Works
SUBJECT: Termination of Agreement with Gilton Solid Waste Management, Inc.
CONTACT: John Chavez, Integrated Waste Program Manager, [email protected], 209-577-5453
DESCRIPTION:
Consider the Termination of the 1997 Service Agreement (as previously amended) held by Gilton Solid Waste Management, Inc., with a termination date to be effective 10 years after the date of notice and forwarding to Council for Approval. (Funding Source: Not Applicable) STRATEGIC PLAN ELEMENT:
The recommended is in conformance with the City of Modesto 2025-2026 Strategic Plan Element: “Service Delivery”, Goal I: “Promote trust and engagement between the community and the City by enhancing responsiveness, communicating broadly about City opportunities and challenges, and increasing public participation in municipal affairs”; Strategy No. One:
“reimagine public sector excellence”.
BACKGROUND:
The City of Modesto has contracts with two private sector companies to collect residential, commercial, and industrial garbage, organics, and recyclables. On January 14, 1997, by Resolution No. 1997-36, Council approved the 1997 Service Agreement between the City of Modesto and Gilton Solid Waste Management, Inc (Gilton). On July 24, 2001, by Resolution No. 2001-394, and on November 8, 2006, by Resolution No. 2006-708, Council approved amendments to the 1997 Service Agreement. The amended 1997 Service Agreement with Gilton has a 10-year term with an automatic renewal (evergreen) clause and is currently in effect.
On June 27, 2023, by Resolution No. 2023-314, Council approved an agreement with HF&H Consultants, LLC., to conduct an audit and performance review of the City’s two solid waste haulers, including Gilton. The performance review included analyzing the current rate setting methodology and testing it for validity, as well as developing a new rate setting methodology. #7..
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Finance Committee, December 17, 2025
Termination of Agreement with Gilton Solid Waste Management, Inc.
On August 13, 2024, by Resolution No. 2024-293, Council approved the final report and recommendations of HF&H Consultants, which provided City staff with next steps for rate methodology development and haulers’ service agreement review. On August 13, 2024, by Resolution No. 2024-289, Council approved the first amendment for consultant services with HF&H Consultants, LLC., to begin Phase Two to include the negotiation of amending and restating the hauler service agreements. Service agreement negotiations between the City and Gilton began January 2025.
DISCUSSION:
City staff value the consistency and reliability of the essential services provided to City of Modesto ratepayers by Gilton since 1997. However, Gilton has not been required to participate in service agreement negotiations since 2006, leaving the current agreement lacking financial and operational protections for the City that are standard in other jurisdictions. The current agreement does not substantially comply with state law, including 14 CCR 18981.2(a) which requires that a “jurisdiction shall adopt enforceable ordinance(s), or similarly enforceable mechanisms that are consistent with the requirements of this chapter, to mandate that organic waste generators, haulers, and other entities subject to the requirements of this chapter that are subject to the jurisdiction’s authority comply with the requirements of this chapter.” Several of the regulatory requirements delegated to Gilton are not sufficiently documented within the amended 1997 Service Agreement. The amended 1997 Service Agreement includes an evergreen clause which is no longer the industry standard for similar agreements in the region and statewide.
Since January 2025, the City and Gilton have engaged in negotiations for an amended and restated service agreement that would increase the level of accountability, transparency and protection provided to the City and ratepayers. Proposed amendments include revisions to insurance requirements, performance bond amounts, reporting requirements, financial audit requirements, termination protocols, liquidated damages, and exclusivity. Language has been added for local purchasing preferences, event participation, single family and multi-family bulky item collection, and ownership of carts. Numerous State mandates related to recycling and organic waste collection have been proposed.
In their 2023 audit, HF&H found Gilton’s costs were up to five to 10 percent higher than reasonable per route and 30 to 35 percent higher than reasonable for fuel.1 A new rate methodology has been proposed by HF&H to address these findings, remove some fee components to avoid double-compensation, and align annual cost adjustments with indices to stabilize future rate changes.
City staff and HF&H do not recommend allowing the evergreen clause to remain in any future or amended solid waste service agreement. Removing the evergreen clause and adopting a fixed term contract helps to ensure efficient service, transparency, and accountability to ratepayers.
Concurrently, City staff value consistency and reliability in the essential services provided to the ratepayers by Gilton. Thus, staff proposed a seven-year agreement with one five-year extension. This proposal was declined by Gilton. Subsequently, a fixed term of 10 years with one five-year extension was proposed by City staff and declined by Gilton. 1 City of Modesto 2023 Solid Waste Financial Review and Rate Analysis #7..
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Finance Committee, December 17, 2025
Termination of Agreement with Gilton Solid Waste Management, Inc.
After repeated unsuccessful attempts to negotiate with Gilton, City staff recommend Council consider Termination of the Amended 1997 Service Agreement with Gilton, to be effective 10 years after the date of notice. This is consistent with the 1997 Service Agreement, which allows the City to terminate the agreement at any time, without cause, upon 10 years notice. City staff intend to continue to work with Gilton on developing a new agreement. If City efforts to adopt a new agreement are unsuccessful, the City will have 10 years to facilitate a competitive bid process for solid waste collection services in Gilton’s service area to ensure ratepayers receive the most competitive rates and best quality of service in accordance with all municipal, state, and federal laws.
The City sets the maximum rate that the collection companies can charge for each type of service. Per the original Service Agreement with the solid waste collection companies, if deemed necessary by the City Council, rate adjustments shall be made to become effective on or near July 1 of each year. City staff has analyzed reports submitted by Gilton and the City’s other contract hauler, Bertolotti Modesto Disposal, Inc. (Bertolotti) for Fiscal Year 24/25 to determine the appropriate adjustment to the Maximum Rate Schedule based on the lowest cost hauler’s submission. In future years, the maximum solid waste rates will be adjusted annually using a multi-index adjustment that consists of Consumer Price Index, All Urban Consumers (CPI-U), and separate indices for fuel, motor vehicle maintenance and repair, and employment expenses. For years three and seven of the agreement, rates will not be adjusted by the multiindex adjustment but instead will be adjusted based on a review of the contractor’s costs. Rates for Gilton’s customers will continue to be reflected on the Maximum Rate Schedule.
FISCAL IMPACT:
Issuing the Termination is administrative in nature, and therefore, does not have a fiscal impact.
RECOMMENDED COMMITTEE ACTION:
Staff Recommendations:
Motion recommending the Termination of the 1997 Service Agreement (as previously amended) held by Gilton Solid Waste Management, Inc., with a termination date to be effective 10 years after the date of notice, and forwarding to Council for approval.
Approved by:
Bill Sandhu, Director of Public Works
Joseph P. Lopez, City Manager
Attachments:
1. 1997 Service Agreement (as previously amended)
2. City of Modesto 2023 Solid Waste Financial Review and Rate Analysis
3. Notice of Termination Letter 1
4. Notice of Termination Letter 2
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Office of
Manager
1010 Tenth Street
Suite 6100
P. O. Box 642
Modesto, CA 95353
2091577·5223
2091571·5128 Fax
Hearing and Speech
Impaired Only
TDD 2091526·9211
December 18, 2006
Richard Gilton, President/Owner
Gilton Solid Waste Management
1722 Mono Drive
Modesto, California 95354
Re: Letter Amendment to 1997 Service Agreement (As Previously Amended) Dear Mr. Gilton:
On November 8th, 2006, the Modesto City Council held a public hearing to consider reallocating Waste Management's service area to Gilton Solid Waste Management and Bertolotti Disposal Service. At that hearing, the Council authorized me to execute a Letter Amendment to the Service Agreements currently held by Gilton Solid Waste Management and Bertolotti Disposal Service to reference the revised service area maps approved by the Council at the hearing.
The companies are to begin serving the newly reallocated areas effective January J; 2007. In addition, the Council directed that language be added to require the beth companies to notify the City of their intent to stop providing collectior services in Modesto no less than 18 months prior to ceasing to provide the services.
This letter constitutes an Amendment to the 1997 Service Agreement (as prev;pu~1y amended) between the City of Modesto and Gilton Solid Waste Mar:t9Q~11ent The following sections of the 1997 Agreement (as previously amended) are hereby amended to read as follows:
Paragraph 1 of Section b shall be amended to read; "This Service Agreement s"jdii be an exclusive Service Agreement to collect commerclill/rE'sider'tJal garbage/recyclables and containerized yard waste and a nonexci Jsive Service Agreement to collect industrial garbage, salvageable waste, and recyciable material, within the areas delineated and marked on that certain map entitled "Option 2: City of Modesto Proposed Two Hauler Districts" dated November 8, 2006, on file in the office of the CITY Clerk, and to which reference is hereby made. COLLEUOR shall commence providing services to existing customers within those portions of the City formerly served by Waste Management and reallocated to COLLECTOR in the abOVe referenced map effective January 1, 2007."
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Letter to Richard Gilton, President/Owner, Gilton Solid Waste Management December 18, 2006 .
Re: Letter Amendment to 1997 Service Agreement (As Previously Amended)
A new paragraph shall be added at the end of Section u, as follows; "COLLECTOR shall notify CITY of its intent to cease providing service within the City of Modesto no less than 18 months prior to ceasing to provide services."
All of the other current terms and conditions of the 1997 Agreement, (as previously amended), will remain in full force and effect. A copy of the Council Resolution is attached for your reference. Please execute in triplicate the attached pages consenting to this Letter Amendment and return them to the City Clerk by no later than December 20, 2006.
We look forward to continuing to work with Gilton Solid Waste Management in a cooperative business relationship that will ensure our community's residents and businesses the highest level of service. Should you have any questions, please contact Jocelyn Reed, Solid Waste Manager, at (209) 577-5492.
Sincerely,
2 1 f -~ ~ UU~;ltj ~""'-/L .. ~V---
'-.? ; "V' eorge W. Britton
(;' City Manager
cc: City Attorney
Parks, Recreation and Neighborhoods Director
Attachments: Consent Form
Council Resolution
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CONSENT TO LETTER AMENDMENT TO 1997 SERVICE AGREEMENT
(AS PREVIOUSLY AMENDED)
This Letter Amendment to the 1997 Service Agreement (as previously amended) shall go into effect and be in full force and operation on January 1, 2007.
IN WITNESS WHEREOF, the parties have agreed to this Letter Amendment to the 1997 Service Agreement (as previously amended) this 8th day of 'November 2006. Approved by the City Council and attested by the City Clerk on November 8, 2006 by Resolution No. 2006-708. CITY 0 . DESTO',a ~Clpal corporation ~~y~~~~~~~~---
ATTEST:
Jean Morris, City Clerk
(SEAL)
APPROVED AS TO LEGAL FORM:
By
Susana
~.~.~ Alcala Wood, Q:itYAOrney
APPROVED AS TO RISK MANAGEMENT FORM:
By _vJ~1 ---.::.-:::..VV~~==----'-'~"'-"--___
Mary Akin, Risk Manager
*Corporations - signature of two (2) officers required or one (1) officer plus corporate seal, Partnership - signature of a partner required
Sole Proprietorship - signature of proprietor require
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AMENDMENT TO SERVICE AGREEMENT
This Amendment to Service Agreement is made and entered into in the City of Modesto, County of Stanislaus, State of California, this 24 t h day of _-,J,,-u~l*-YL-_ 2001, by and between Gilton Solid Waste Management, Inc., a California Corporation, hereinafter referred to as "COLLECTOR", and the CITY OF MODESTO, a municipal corporation, hereinafter referred to as "CITY".
This Amendment to Service Agreement is made with reference to the following recitals:
A. A Service Agreement was entered into on the 14th day of January, 1997, between CITY and COLLECTOR for the collection of solid waste in the CITY of Modesto, including the collection of garbage/recyc1ables, recyc1ables, industrial garbage, containerized yard waste, and salvagable waste.
B. COLLECTOR and CITY now desire to amend certain provisions of said Service Agreement.
NOW, THEREFORE, the parties hereto mutually agree that the above referenced Service Agreement be amended as follows: that Section b of the Service Agreement between the parties, which reads as follows, and is hereby deleted in its entirety, and that a new Section b, be incorporated in the Service Agreement as set forth below.
Section b of the Service Agreement between the City and Collector, as follows, is hereby deleted in its entirety:
b T~ig ~epriGe :6 §feem'i'a,t sllaJl be aQ, eKQlugiF ® ~epriQe '\1¥eeR=:l:e1+t tQ l~v~Ue'2t GQl+l+l=lel;Qial/p~siQeR-tial ga;.l;-age/nve)'sla.bles a;lQ CQmai+l!i:rigeg yOU'd- urast'i' :lll.:l'a a Q.e;I!il:J\tslnsi E ® ~epri'2e ,:'\gvee;.:[email protected] t9 QQlleet ia.g.nstrial garba.,ge, salnageable 'HCu;te, a;].g reeyslabl@ mat~als luithig, tlle eU:eas delmeateQ ~Q maEkeQ 911 tl:J.a.t Gertaia Hlap ~itleQ "Gar-bage DistriGts" dated ~~te;Q.l.Qer 2Q, lQQs; QR. ale lao the GfYse gf tR.e CITY Cl~k3 a+lQ t9 urJaisa t=efereQ,s@ is h/~l;"~Y J.l.leU;ie #7..
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This ~@rriQ@ A W@@R:leat supet=seses :ms te.t1+liRates tae LiQ€tase dated DeQe~et= 2, 1 QQ~, bet;meeR, bwu@@R tl.le CITY 'df} 4gQestg ans QiItQR: ~ glid. UTaste ~ 4aaagem€}Yt, IRQ; a CalilQMa CgFpQratiQR, ;I'Qr ~@ Q911@Qti9R: Qf gargag@ ill tfl-@ CITY Qf }4QQest9, iQ.QPldiR:g tlle QgllestiQQ. Qf iR:Q1lstaiill gar'bage, reQYQla'ble Bliilterials, aR:d sal1tageable ~
COLl:ECTOR llra~yeS im0r rif5l:1.t 9f claim tQ s@pre tJae CITY gf aay part 'elf ~ CITY UlZlser an;yr priQr grant Qf £t:aaQmse, CQt+l;ra.c;t, liQ~se, 9f per:Rait iss'led gf gra.Rt@d by tll@ CITY, g'F; in tae Stu:e gf anaeXtatigRS, any Qtser gQJt@t=f1:n.:leQ.tal eatity.
1.R QQR:siaerati9a gf tl:le rigl.l.ts anQ privileges wanted 'by tais ~er:.vic€ [email protected]:i, CQl.l.ItCTOR sRall pay 'l'liilrt@riy tQ CITY nrithia taia,' {JQ) Q,ays fgllgnil~ di@ QIgse Qf eaQll sal@QQar 'CHarier all a&lQlya.t e'luivaleat t9 six (iUolQ three tet+tas gf QQ.e perceRt (9 394) Qf tl.1e grQfiJS t=eQeipts aerives frgm tae t.iu:g.isaiy,g gf syca garbage cglleQtiga se;ltises pritAiR: tlle CITY wr tl.1e preQeairJ.g 'luarter UlitaiR: tl.1it=ty (:30) says fgl1gnri;tg tRe QIgse gf eaQ't! 'l-Ua1:t~; C01s1sRCTOR gb,a.ll 31sQ pay tQe CITY tl bQsia@€€ liQe:R:se mill ta.x gf pug teR:tlas Qf Qlle peree.m (0 294) gf tQe grQSS receipt.s derives Q:Q1+l tl.1e tur:Rislaig,g gf SHSl:l garBage cQllectigR: services nritlaiR t.R,e CITY wr tlae presesiR:,g:
'Planer. Cal@llaat 'lva;:ters sl:lal1 teflllillate ga ;[)4arQh 31, J:tme JO, ~~t~ber JQ5 and DeQ~er311
VG.lelleU@f; iR tR:is A gt:@eRol@at, eitl:i@r CITY gr COl,.1s~CTOR is giveR taG rig.l:lt gf miilkia,g a giEGretiQllaxy QeGisiQIl afreQtillg tl.1e perfQ;t;.t.:Sa;.}-G@ Qf tlais A gre@R.:l~, sHch geQisiQR sl:lall be mage ill a reasQR:able a+la pnlgeQt mal-lRer A new Section b is hereby added as follows:
"b. This Service Agreement shall be an exclusive Service Agreement to collect commercial/residential garbage/recyclables and containerized yard waste and a nonexclusive Service Agreement to collect industrial garbage, salvageable waste, and recyclable materials within the areas delineated and marked on that certain map entitled "Scenario 2: City of Modesto Proposed Hauler Districts" dated January 23, 2001, on file in the office of the CITY Clerk, and to which reference is hereby made.
This Service Agreement supersedes and tenninates the License dated December 2, 1993, between the CITY of Modesto and Gilton Solid Waste Management, Inc., a California Corporation, for the collection of garbage in the CITY of Modesto, including the collection of industrial garbage, recyclable materials, and salvageable waste.
COLLECTOR waives any right or claim to serve the CITY or any part of the CITY under any prior grant of franchise, contract, license, or pennit issued or granted by the CITY, or, in the case of annexations, any other governmental entity.
In consideration of the rights and privileges granted by this Service Agreement, COLLECTOR shall pay quarterly to CITY within thirty (30) days following the close of each calendar quarter an amount equivalent to seven and fifty-seven one-hundredths of one percent (7.57%) of the gross receipts derived from the furnishing of such garbage collection services within the CITY for the preceding quarter. CITY further reserves the right to increase this amount where cost savings in other areas would pennit such increases without major rate impacts, up to a maximum of ten and threetenths of one percent (10.3%). #7..
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Within thirty (30) days following the close of each quarter, COLLECTOR shall also pay the CITY a business license mill tax of two-tenths of one percent (0.2%) of the gross receipts derived from the furnishing of such garbage collection services within the CITY for the preceding quarter. Calendar quarters shall terminate on March 31, June 30, September 30, and December 31.
Whenever, in this Agreement, either CITY or COLLECTOR is given the right of making a discretionary decision affecting the performance of this Agreement, such decision shall be made in a reasonable and prudent manner." Except as otherwise provided herein, each and every and all of the tenns and conditions of the Service Agreement between CITY and COLLECTOR dated January 14, 1997 shall continue in full force and effect.
IN WITNESS WHEREOF, a the City of Modesto, a municipal corporation, has authorized the execution of this Amendment to Agreement in duplicate by its City Manager and attestation by its City Clerk under authority of Resolution No., 2 ° 0 J 394 adopted by the Council of the City of Modesto on the 24 th day of July. 2001, 2001, and CITY has caused this Amendment to Agreement to be executed.
ATTEST:
By L6h~"",--
ffiiNZAHV
City Clerk
(SEAL)
:hJAS~ MICHAEL D. MILICH
City Attorney
CITY OF MODESTO, a
municipal corporation
~K&?S~5~SP City Manager
COLLECTOR*
By
By ________________ __
* Corporations - signature of two (2) officers required, or one (1) officer plus corporate seal Partnership - signature of a partner required
Sole Proprietorship - signature of proprietor required
#7..
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SERVICE AGREEMENT BETWEEN THE CITY OF MODESTO
AND GlLTON SOLID WASTE MANAGEMENT, INC., A
CALIFORNIA CORPORATION, FOR THE COLLECTION OF
SOLID WASTE IN THE CITY OF MODESTO, INCLUDING THE
COLLECTION OF GARBAGFJRECYCLABLES, RECYCLABLES,
INDUSTRIAL GARBAGE, CONTAINERIZED YARD WASTE,
AND SALVAGEABLE WASTE.
THIS SERVICE AGREEMENT is executed pursuant to the authority provided in, and pursuant to, all of the provisions, tenns, and conditions ot: Article XIV of the Charter of the City of Modesto and Chapter 5 of Title V of the Modesto Municipal Code.
THIS SERVICE AGREEMENT is hereby made and entered into in the City of Modesto, I QCj-1 State of California, this 14t~ay of January, by' ~d between the City of Modesto, a municipal corporation of the State of California, hereinafter referred to as "CITY", and Gilton Solid Waste Management, Inc., a California Corporation, hereinafter referred to as "COLLECTOR".
THIS SERVICE AGREEMENT is made with regard to the following recitals:
WHEREAS, the Legislature of the State of California, by enactment of the California Integrated Waste Management Act of 1990 ("AB 939"), has declared that it is within the public interest to authorize and require local agencies to make adequate provisions for handling solid waste, including garbage, garbagelrecyc1ables, recyclables, yard waste, industrial garbage, and salvageable waste handling within their jurisdictions; and
WHEREAS, pursuant to California Public Resources Code Section 40059, the City Council of the City of Modesto has determined that the public health, safety, and well-being require that a service agreement be executed with a qualified firm for the collection, transport, recycling, and disposal of solid waste, including garbage, garbagelrecyclables, recyc1ables, containerized yard waste, industrial garbage, and salvageable waste in residential, commercial, and industrial areas and construction/demolition sites in the CITY; and
WHEREAS, the City Council of the City of Modesto declares its intention of maintaining reasonable rates for the services to be provided within the City limits by COLLECTOR under this Agreement: and
Gn.TAGT.WPD
12111196 1
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Whereas, pursuant to California Public Resources Code Section 49510 (b), the City Council of the City of Modesto finds that it is in the public interest to foster and encourage solid waste enterprises so that, at all times, there will continue to be competent enterprises willingly and financially able to furnish needed solid waste handling services NOW, THEREFORE, in consideration of this agreement, and the mutual promises, covenants, and stipulations hereinafter contained, the parties agree as follows:
a. This Service Agreement shall be in force for a term of ten (10) calendar years commencing on January 1, 1997. On each anniversary of this agreement the term will automatically be extended one (1) additional year, until such time as either the CITY or the COlLECTOR submits in writing to the other that it is their intent to terminate said agreement. The initial term of this Service Agreement, or any extensions thereof, may be terminated under the provisions of this Service Agreement or the provisions of Chapter 5 of Title V of the Modesto Municipal Code. Nothing herein shall be deemed or construed to impair or affect in any way the right of the CITY to acquire the equipment and assume the operations of COLLECTOR at any time during the initial term of this or any extensions thereof by purchase of COLLECTOR'S equipment at a fair and just market value, which shall not include any amount for the Service Agreement itself or for any of the rights or privileges granted by this Service Agreement.
b. This Service Agreement shall be an exclusive Service Agreement to collect commercial/residential garbage/recyclables and containerized yard waste and a nonexclusive Service Agreement to collect industrial garbage, salvageable waste, and recyclable materials within the areas delineated and marked on that certain map entitled "Garbage Districts" dated September 29, 1993, on file in the office of the CITY Clerk:, and to which reference is hereby made.
GILTAGT.WPD
12118196
This Service Agreement supersedes and terminates the License dated December 2, 1993, between the CITY of Modesto and Gilton Solid Waste Management, Inc., a California Corporation, for the collection of garbage in the CITY of Modesto, including the collection of industrial garbage, recyclable materials, and salvageable waste.
COlLECTOR waives any right or claim to serve the CITY or any part of the CITY under any prior grant of franchise, contract, license, or permit issued or granted by the CITY, or, in the case of annexations, any other governmental entity.
In consideration of the rights and privileges granted by this Service Agreement, COlLECTOR shall pay quarterly to CITY within thirty (30) days following the close 2 #7..
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of the quarter an amount equivalent to six and three-tenths of one percent (6.3 %) of the gross receipts derived from the furnishing of such garbage collection services within the CITY for the preceding quarter. Within thirty (30) days following the close of each quarter, COLLECTOR shall also pay the City a business license mill tax of two-tenths of one percent (0.2%) of the gross receipts derived from the furnishing of such garbage collection services within the CITY for the preceding quarter. Quarters shall terminate on March 31, June 30, September 30, and December 31.
Whenever, in this Agreement, either CITY or COLLECTOR is given the right of making a discretionary decision affecting the performance of this contract, such decision shall be made in a reasonable and prudent manner. c. In accepting this Service Agreement, COLLECTOR thereby agrees to serve the areas covered by the Service Agreement for the terms herein specified in compliance with the provisions of this Service Agreement and the provisions of Chapter 5 of Title V of the Modesto Municipal Code.
d. This Service Agreement shall automatically extend to any portion of COLLECTOR'S service area, as shown on the map referred to in paragraph (b) above, which is hereafter annexed to the City, except that CITY may permit any person or firm franchised by the County of Stanislaus and then serving such area or portions thereof to continue to serve such area or portions thereof for such period oftime, not to exceed five (5) years from the date of annexation, as the CITY deems proper.
COLLECTOR, when required to serve new portions of the City, shall promptly extend its routes and services and, when necessary, shall hire additional personnel and obtain additional equipment. CITY reserves the right to revise service areas to improve collection efficiency upon a reasonable determination by the CITY Council, after notice and negotiation with the affected COLLECTOR/COLLECTORS, that such revision is warranted.
e. Rates and charges to be charged by the COLLECTOR for the collection of commercial/residential garbage/recycIables and containerized yard waste shall be established by the Council by resolution. Service charges and costs of operation of COlLECTOR will be reviewed annually by the CITY and, if deemed necessary by the CITY Council, rate adjustments shall be made to become effective on July 1 of each year.
GILTAGT.WPD
12117/96
The CITY reserves the right to require adjustments in operations of the COLLECTOR due to changing community needs, andlor developments in the field of garbage collection and disposal. Rate adjustments will be considered in such cases, and, if determined by the CITY to be reasonable and necessary, will be made. 3 #7..
- 436 -
Both CITY and COLLECTOR acknowledge that this Service Agreement imposes obligations on COLLECTOR which are not present in the existing license from the City of Modesto to COLLECTOR, and which were not evaluated in the setting of rates and charges which COLLECTOR makes for the collection of commercial/residential garbagelrecyclables and containerized yard waste. In the event COLLECTOR incurs additional costs in the course of discharging such new obligations, then CITY agrees that appropriate rate adjustments may be made, at the request of COlLECTOR, which adjustments may be retroactive to the date on which COLLECTOR started to perform the duties involved in the discharge of such obligations.
f. COLLECTOR shall bill and collect all garbagelrecyclables and yard waste service charges, provided, however, that the CITY may require that all or some of said garbage/recyclables and yard waste service charges shall be billed and collected by CITY, and may require COLLECTOR to pay to the CITY fees, to be determined by the CITY, for such billing and collection service.
g. The CITY reserves the right to revise the provisions of Chapter 5 of Title V of the Modesto Municipal Code, from time to time, as required in order to protect the public health, safety and welfare of the CITY.
h. COllECTOR shall comply with all existing and future State and Federal laws, and all ordinances and regulations which may in any manner affect COLLECTOR'S operations under the terms and conditions of this Service Agreement. i. The Public Works and Transportation Director of the CITY of Modesto shall administer and supervise COLLECTOR'S operations under the terms of this Service Agreement and in accordance with the provisions of Chapter 5 of Title V of the Municipal Code.
In the event of any disagreement between COLLECTOR and customers regarding the amount of charges for garbage/recyclables and yard waste collection service or the type or extent of service provided by COllECTOR, the Public Works and Transportation Director shall make an investigation and determination, and the decision of the Public Works and Transportation Director shall be final.
J. COLLECTOR shall establish and maintain an office within the CITY of Modesto, or within two (2) miles of the City limits of Modesto, or other location approved by the CITY Manager, and shall keep said office open for business from 8:00 a.m. to 5:00 p.m. of every day except Saturday, Sunday, and all legal holidays observed by the CITY of Modesto.
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(1) COLLECTOR shall keep and maintain in said office at all times during the hours it is required to be open, competent personnel who shall have authority to represent COLLECTOR in its relations with the CITY and with the public, and provide accurate information about collection and disposal/recycling services and programs in the City. COLLECTOR shall obtain and keep in said office sufficient listed telephones and personnel to courteously, quickly, and expeditiously receive and answer all telephone and other calls to said office.
A daily log of service calls received and the disposition thereof shall be kept by COLLECTOR for all operations hereunder. COLLECTOR shall make this daily log of service calls available for inspection by the CITY upon reasonable advance request. COLLECTOR shall provide a service to receive calls! complaints at all other times, and an emergency telephone number so that a designated responsible representative of COLLECTOR can be reached by the service/CITY staff 24 hours a day as circumstances warrant. (2) COLLECTOR warrants on behalf ofitself and all subcontractors engaged for the performance of this Service Agreement that only persons authorized to work in the United States pursuant to the Immigration Reform and Control Act of 1986 and other applicable laws shall be employed in the performance of the work hereunder.
(3) All employees of COLLECTOR who have routine contact with the public shall be trained in customer service and shall conduct themselves in a helpful, courteous, efficient manner consistent with the CITY'S "Citizens First" Policies as provided to COLLECTOR by the CITY. The CITY shall have the right to monitor the performance of COLLECTOR'S employees at all times.
In the event that any employee is found to be discourteous or not to be properly performing the services required by this Agreement, COLLECTOR shall initiate necessary corrective measures.
k. COLLECTOR shall maintain full and complete books of account and other records showing all business transacted in connection with this Service Agreement including but not limited to records of all special monthly collections, receipts, expenses, profits, supporting statements and vouchers, balance sheets, profit and loss ststements, and other documents, accurately reflecting and showing all business of the COLLECTOR. All such books and records shall be subject to audit and inspection at any and all reasonable times by the CITY and its authorized officers, agents, or employees, and shall be made available at said office for such inspection or audit at any and all reasonable times upon written request or demand of the CITY Attorney, CITY'S independent Auditor, Manager, or Public Works and Transportation Director.
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1. COLLECTOR shall provide the CITY annually, not later than one hundred twenty (120) days after the end of the fiscal year ending June 30th, with five (5) copies of an annual balance sheet and profit and loss statement. The annual financial statement shall include a separate description of costs and revenues resulting from residential/commercial garbage!recyclables, containerized yard waste, detachable container, drop box, recycling and salvage operations hereunder and shall encompass cumulative data from the monthly statistical reports required by Section x, subsection (5), below. Financial statements submitted by the COLLECTOR to the CITY shall be regarded by the CITY as confidential financial records of the COLLECTOR, and shall not be released as a public record for inspection by any party other than authorized CITY officers, agents, or employees, unless requested in accordance with the provisions of the Public Records Act unless prohibited by a court order or other law.
The CITY may require COLLECTOR to provide a complete financial audit prepared by a Certified Public Accountant with his or her opinion attached thereto and such other financial information deemed necessary by the CITY when considering a request for rate adjustments.
m. COLLECTOR shall collect and remove from any and all premises, not later than twenty-four (24) hours after notice, demand or request, any and all garbage! recyclables and containerized yard waste which COLLECTOR shall have failed to collect and remove at the regularly scheduled time. The customer's failure to place garbagelrecyclables and containerized yard waste for collection at the regularly scheduled time and place shall not be deemed a missed collection. n. COLLECTOR shall collect garbagelrecyclables and containerized yard waste at least once each calendar week, Mondays through Fridays, for residential collections, and on Mondays through Saturdays for commercial and industrial collections.
COLLECTOR shall, at no additional charge, provide special pickup procedures beyond the normal services described herein to customers who are unable to place their containers out for collection due to physical handicap or disability as determined by a site visit andlor reasonable investigations, and authorized by CITY'S Public Works & Transportation Director.
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(1) For purposes of such collection, COLLECTOR shall divide the CITY into collection routes. Such collection routes shall be each wholly within the CITY limits, and shall be approved by the Public Works and Transportation Director. Upon approval of the proposed routes by the Public Works and Transportation Director, COLLECTOR shall prepare route books or other route documents or a route database which shall indicate the address of each service, number of containers, frequency of collection, and such other pertinent information as the Public Works and Transportation Director may 6 #7..
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require. COLLECTOR shall keep route books/route data up to date at all times.
(2) COLLECTOR shall give reasonable written notice to the general public as to the days and times for collection on each route. No changes in collection schedules shall be made without the approval of the Public Works and Transportation Director and reasonable written notice thereof by COLLECTOR to the affected customer. The notice shall include the day or days of the week upon which collection will occur, the name, address, and telephone number of COLLECTOR, and other reasonable information deemed necessary by the CITY.
(3) COLLECTOR is not required to make collections on Sundays or legal holidays observed by the City. COLLECTOR may arrange with commercial and industrial customers for Sunday and holiday collections, however.
Scheduled collections not made on legal holidays shall be made within twenty-four (24) hours, Sundays excepted.
o. The COLLECTOR shall make garbage collection service available on request to all schools, public agencies, institutions, and other nonresidential premises at the same rates established for business locations, except that COLLECTOR shall provide such services at all facilities as shown in Exhibit A, owned/operated by the City of Modesto at no direct charge. In special cases where unusual quantities of materials, special types of materials, or special methods of handling and! or disposing are required, the Public Works and Transportation Director may permit independent arrangements between COLLECTOR and the special customer.
p. COLLECTOR shall furnish, to all residential customers, a black standard sixty (60) gallon or ninety (90) gallon automated collection container for the collection of garbagelrecyc1ables, and a dark green standard sixty (60) gallon or ninety (90) gallon automated collection container for the collection of containerized yard waste.
COLLECTOR shall be responsible for the general repair and upkeep of all the standard automated collection containers furnished to the residential customers.
Containers shall be kept in serviceable condition at all times.
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(1) Upon consultation with COLLECTOR, if the Public Works and Transportation Director makes a reasonable determination that it is necessary for public information purposes to affix a sticker with instructions on either container or provide another form of notification or public education, to improve the efficiency of either program or to prevent contamination of materials being collected, COLLECTOR shall perform this task at COLLECTOR's expense.
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q.
r.
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(2) When notified of the theft of a container, or destruction of a container through an action not the fault of the customer, and following receipt of a Police Report number from customer in the instance of a stolen container or Fire Department Report in the instance of a burned container, where such a Fire Department Report is available, COllECTOR shall replace the stolen or destroyed container by no later than the customer's next collection day at no cost to the customer or CITY.
(3) COLLECTOR shall have approved detachable containers for apartment, commercial, business and industrial services on a rental basis. COLLECTOR shall be responsible for the general repair and upkeep of all detachable containers. Containers shall be kept in serviceable condition at all times.
COLLECTOR shall provide detachable container cleaning service at a rate approved by the Public Works and Transportation Director. (4) Detachable containers shall be metal and so constructed that no liquid can leak from said containers. However, containers made of materials other than metal may be proposed by COlLECTOR for the approval of the Public Works and Transportation Director during the term of this Service Agreement. No materials may be substituted without prior approval.
(5) COLLECTOR shall submit, on or before June 30, 1997, a plan subject to approval by CITY, detailing how yard waste collection services shall be provided to multi-family dwelling units, businesses, institutions, and other customers with detachable container and/or drop box service, including a cost proposal, with implementation to begin on or before January 1, 1998.
COlLECTOR shall supply all occupants or premises in the COLLECTOR's service areas with printed information cards approved by the Public Works and Transportation Director containing information regarding amounts of garbage! recyclables and containerized yard waste which will be collected, complaint procedures, charges, regulations, and days of collection. The information cards will also include the name, address, and telephone number of the COLLECTOR. Such cards shall be distributed as required by the Public Works and Transportation Director, and, in addition, upon request by occupants or owners of any premises and in advance of a change in collection day.
COLLECTOR shall not litter any premises or public property in making collections of garbagelrecyclables and containerized yard waste, nor shall garbagelrecyclables and containerized yard waste be allowed to leak, blow, or fall from collection vehicles; however, if in spite of normal precautions against spillage, litter is caused on any premises or public property, COILECTOR shall immediately remove same and clean up the area of spillage. COLLECTOR shall, without delay, after removing 8 #7..
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garbagelrecyclables and containerized yard waste from any container, replace the container in its designated position on the premises with covers closed on lidded containers, and shall repair or replace at its expense any containers damaged as a result of its handling thereof, normal wear and tear excepted. (1) COLLECTOR shall close all gates after making collections and shall avoid crossing private or public planted areas and climbing or jumping over hedges and fences. Particular attention should also be given to the location of water meters, transformers, guy wires, utility poles and irrigation structures.
COLLECTOR's personnel shall make all collections in a quiet and orderly manner, shall refrain from making unnecessary disturbances and noise, and shall be courteous and professional in all dealings with the public. If, for any reason, garbagelrecyclables and containerized yard waste is not picked up, such as overweight container, not in container, etc., COLLECTOR shall attach a tag to the container explaining the reason therefor, and shall maintain a log or record of such refusals.
(2) COLLECTOR shall strictly observe and protect the rights of privacy of customers. Information identifying the individual customers, or the composition or contents of a customer's garbage/recyclables and containerized yard waste, shall not, except upon order of a police officer who is properly identified as such, be revealed to any person, governmental unit, private agency or company, unless upon the authority of a court of law, by statute, or upon valid authorization by the customer. The rights accorded customers pursuant to this Section shall be in addition to any other privacy right accorded customers pursuant to Federal or State law. This provision shall not be construed to preclude COLLECTOR from participating in, or assisting in the preparation of waste characterization studies or waste stream analyses which may be required for the purposes/needs of CITY, or to comply with the requirements of the Califomia Integrated Waste Management Act of 1989.
(3) No person shal1 collect solid waste from any location within two hundred feet (200') of a public or private elementary, junior high, or high school, where such school is shown on an official map of the city, as designated by the Public Works & Transportation Director, as said map shall be periodically updated, during the one-half (Y:z ) hour before the commencement of the regular school day and one-half (Y:z) hour following the conclusion of the regular school day, where such locations are accessible to and used by children as routes to or from school.
(4) COILECTOR shal1 be responsible for any damage in excess of normal wear and tear to the CITY's driving surfaces, whether or not paved, resulting from 9 #7..
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the illegal weight of, or any leakage or spillage of oils, fluids or solids by vehicles providing services under this agreement.
(5) COLLECTOR's collection vehicles shall be inspected as required by the California Highway Patrol and pursuant to the Department of Transportation regulations and operated in full compliance with the California Vehicle Code and this Service Agreement. COLLECTOR shall allow CITY to review inspection records at CITY's reasonable advance request. Vehicles shall be thoroughly washed and disinfected inside the collection body each day, or as approved by the Public Works and Transportation Director, and the exterior of each vehicle shall be cleaned and washed at least once a week. (6) COLLECTOR shall not hire or continue to employ any person as a collection vehicle operator if they fail for any reason to have, and/or maintain, a valid, unexpired, unsuspended Class "p.:' or "B" driver's license as required by the Department of Transportation and the California Highway Patrol as appropriate for the vehicle to be operated by such person. (7) COLLECTOR shall develop, maintain, and enforce a Vehicle Operator TraininglEvaluation program for its drivers who perform services under the terms of this Agreement.
s. All equipment used for the collection and hauling of garbage shall be approved by the Public Works and Transportation Director and shall be so constructed and maintained as to prevent leakage, spillage, or overflow. Trucks shall not be loaded in excess of requirements of the California Vehicle Code.
t.
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All trucks and collection equipment shall be clearly identified by an assigned equipment number and with the firm name and local telephone number affixed thereto.
Collection trucks shall be painted white, or another color approved by the Public Works and Transportation Director, and shall be equipped with the safety devices and warning lights required by the California Vehicle Code.
All vehicles and equipment used in the collection of garbage, if kept within the boundaries of the City, shall, at all times when not in use in the collection of garbage, be kept on private property in the appropriate zone and not on streets or other public ways.
All garbage collection vehicles shall be well maintained, properly identified, painted, clean and in satisfactory mechanical condition. COLLECTOR shall institute a complete and comprehensive system of preventive maintenance on all vehicles and shall keep them lubricated and in good repair. Records in a form approved by the Public Works and Transportation Director to provide data on operating, maintenance 10 #7..
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and repair costs shall be kept on each piece of equipment. u. For purposes of this paragraph the following definitions apply:
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(1) "Interruption of service" means:
(a) Any time period during which garbage/recyclables and containerized yard waste collection services by COLLECTOR are interrupted by a labor dispute and scheduled collections are discontinued or substantially reduced; or
(b) Any time period after notice by the CITY of the termination of the Service Agreement by reason of a breach or default by COLLECTOR and until other suitable equipment can reasonably be purchased or otherwise acquired by the CITY for such purpose.
(2) "Equipment" means any and all vehicles and equipment used by the COILECTOR for the purpose of performing the services provided for in the Service Agreement at any time within the ninety (90) days immediately prior to the commencement of the interruption of service.
(3) "Payment for use" has the following meaning:
(a) In the case of equipment subject to a contract, "payment for use" shall mean any installment payment corning due under a contract for such equipment while the CITY is possessing and using such equipment pursuant to this paragraph during an interruption of service. Payment for use shall not be deemed to include any payment corning due under such contract either prior to, or after the expiration of, such period.
Payment for use shall be made by the City, from time to time, directly to the person or company to whom the payment is owed under the contract, and the making of such payment or payments shall constitute full compensation to all persons for the City's temporary use of such equipment.
(b) In the case of equipment not subject to a contract, "payment for use" shall mean the reasonable rental value of such equipment for such period of time during which the CITY possesses and uses such equipment pursuant to this paragraph during an interruption of service. Such payment shall, at termination of service interruption, be applied against any sums then owed to the CITY by COLLECTOR, or, if none, shall be paid by the CITY to COLLECTOR.
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(4) "Contract" means any conditional sales contract, mortgage, encumbrance, lease, rental agreement, or other agreement which provides for retention of title to said equipment or grants a security interest therein, that may exist at the commencement of the interruption of service.
(5) "Notice" means written notification actually received by the person to be notified or mailed to him or her by registered or certified mail at the most recent address furnished by him or her to the CITY Clerk of the CITY of Modesto. As to the holder of a contract, the CITY shall be required to give notice only if the holder'S identity is known to the CITY and the holder has furnished his or her address to said CITY Clerk.
In the event of an interruption of service, the CITY shall be entitled to have the temporary possession of all or any portion of the equipment of COLLECTOR on the condition that the CITY all, from time to time, make the payment for use as provided in Section u, subparagraph (3), above. Upon taking such temporary possession, CITY shall forthwith give notice thereof to COLLECTOR and to the holder at that time, if any, of the contract on such equipment. Such temporary use shall not be deemed a breach of the terms of any contract regarding said equipment, but it shall otherwise be subject to the terms of such contract which are not in conflict herewith, except that the CITY shall not be required to make any payment other than the payment for use prescnbed in Section U, subparagraph (3), above. The City's payment for use prescribed in Section u, subparagraph (3) shall be deemed to be compensation only for the temporary use of such equipment and the CITY shall not thereby acquire any ownership interest in such equipment.
So long as the CITY continues to make the payment for use of equipment when due or within ten (10) days thereafter, such equipment may be retained by the CITY and shall not be repossessed from the City. In the event the CITY fails to make a payment for use when due or within ten (10) days thereafter, the City's right to continued temporary use of such equipment shall cease, and possession of such equipment may be retaken by COLLECTOR or by the holder of any contract thereon.
At the expiration of the City's temporary possession of any such equipment, the CITY shall give written notice of such expiration to COLLECTOR and to the current holder, if any, of a contract on such equipment. In the event COILECTOR shall fail to take possession of such equipment within ten (10) days after such notice, COLLECTOR shall be deemed to have abandoned such equipment and waived all interest therein, and the CITY shall be free to use and dispose of such equipment without liability or compensation to COILECTOR, subject to the terms of any contract that may then exist with regard to such equipment.
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All equipment used by COLLECTOR for the purpose of performing the services provided for in this Service Agreement shall be solely owned by COLLECTOR except that COLLECTOR may, with the prior approval of the CITY Manager, enter into contracts as defined in Section u, subparagraph (4), above, with respect to such equipment. AU such contracts shall provide for temporary possession by the CITY as set forth herein and shalt provide that such temporary possession shalt not be deemed a breach of such contract. v. All vehicles and equipment used by COLLECTOR for the collection and hauling of garbage shall be solely owned by COLLECTOR, except that COLLECTOR may, with the prior approval of the CITY Manager, enter into conditional sales contracts, mortgages, encumbrances, leases, rental agreements, and other appropriate agreements for the purpose of purchasing, leasing or renting vehicles and equipment to be used in providing the services provided for in this Service Agreement. All such documents shalt provide for temporary possession by the CITY as set forth in Section u, subparagraph (5) above and shalt provide that such temporary possession shall not be deemed a breach of the agreement.
w. Garbage collected by COLLECTOR shall be disposed of at the Stanislaus Resource Recovery Facility. Wastes that are not acceptable for disposal at the Stanislaus Resource Recovery Facility shalt be disposed of at the Fink Road Sanitary Landfill or other sanitary landfill areas as determined by the CITY, depending on the makeup of the waste. Disposal of garbage at all facilities will be in compliance with regulations in effect for the same as they now exist or may hereafter be amended. x.
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Industrial garbage collected by COLLECTOR shalt be lawfully disposed of or recycled in accordance with the provisions of Section 5-5.05 of the Modesto Municipal Code.
Containerized yard waste collected under the terms of this Agreement wilt be taken to the CITY's compo sting facility or such other locations as directed by the Public Works & Transportation Director.
(1) COLLECTOR shall, in its initial year of operations under this Service Agreement, at its sole cost and expense, furnish all labor and equipment required to sort out and recycle alt materials placed in the garbagelrecyclables collection containers, including garbage/recyclables collection containers at multi-family units, subject to the following limitations:
(a) Materials shalt be prepared by the residents for recycling as directed by the CITY in public education materials furnished to said residents by CITY;
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(b) Materials shall be placed in blue, see-through recycling bags purchased by residents for the purpose of separating recyclables from household garbage.
(2) Subject to occurrence of the above conditions, COLLECTOR agrees, in its initial year of operations, to sort out and process for recycling from its comingled garbagelrecyc1ables collection operations conducted pursuant to this Service Agreement, an amount equal to the current annual tonnage of materials being collected by the current curbside recycling program, as reported to the CITY •..
(3) Concurrent with the delivery of the yard waste containers to residents, COLLECTOR agrees to deliver an initial supply of blue recycling bags furnished by COLLECTOR/CITY, and promotional materials furnished by CITY, to each residence.
(4) CITY and COLLECTOR agree to conduct a joint analysis three (3) months into the program to determine whether this method is performing adequately to meet the recycling tonnages established herein. Should the analysis determine that the above method cannot reasonably be expected to result in the diversion of materials in the volumes noted in Section x (2), above, COLLECTOR and CITY agree to work together in a diligent effort to either improve diversion through promotion Of other methods, or to develop an alternative method to attain the minimum diversion.
Should the analysis show that this method of recycling is providing adequate, cost-effective diversion to meet community needs and expectations, the minimum tonnage may be adjusted annually to reflect population growth, as determined by the CITY.
(5) COLLECTOR shall file with the CITY written quarterly statistical reports, no later than thirty (30) days following the end of each quarter, to report the quantities ofrecyclables being diverted from the City of Modesto. Reports shall be sent to the Solid Waste Program Manager or their designee, at P. O.
Box 642, Modesto, California, 95353. The reports shall include monthly volumes diverted for aluminum cans, bi-metal/steel cans, PET plastic, glass, newspaper, cardboard, magazines, and other recyclables as determined by the Public Works and Transportation Director.
(6) All revenue from the sale of recyc1abJes diverted from disposal by this program shall be the property of COLLECTOR, and CITY shall not apply said revenue as a credit against the cost of connningled garbagelrecyclables collection or any other operations.
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(7) COLLECTOR shall provide reasonable public access to its facility where recyclable materials may be dropped off and where used motor oil may be deposited for recycling.
(8) Pursuant to this Service Agreement, COLLECTOR shall collect and remove for recycling used motor oil that has been placed at the curb of the public street fronting on all single family residences and from designated locations near multi-family dwellings in an approved container on the scheduled service day. COLLECTOR shall also replace each one (1) gallon container collected with a clean container furnished by the CITY. COLLECTOR shall file with the CITY written quarterly statistical reports, no later than thirty (30) days following the end of each quarter, to report the volumes of oil being diverted.
Pursuant to the terms and conditions of its Used Motor Oil Block Grants and Used Motor Oil Opportunity Grants, CITY shall use Grant funds to reimburse COU.ECTOR for all reasonable costs associated with providing used motor oil collection services as agreed to by CITY.
Such grant funded collection shall continue at a minimum through June 30, 1998. In the event that no further grant funding is received to continue the program past that date, CITY shall notify COU.ECTOR a minimum of ninety (90) days prior to the expiration of grant funding to discuss alternative funding of the program, including, but not limited to, a potential charge on the refuse collection fees, and/or termination of the curbside oil collection program.
(9) Twice per year, COU.ECTOR shall provide five (5) bins for the collection of telephone books for recycling, at CITY'S request. The number, placement, and size of the bins shall be as determined by CITY. COU.ECTOR shall also accept telephone books at its transfer stations, and shall make a concerted effort to separate telephone books from the commingled garbagelrecyclables waste stream. COU.ECTOR shall assist CITY in promoting telephone book recycling.
(10) COU.ECTOR shall provide the equivalent of800 cubic yards of detachable container/drop box collection and transportation service, including all disposal fees for community and special events, each calendar year as directed by CITY, upon prior consultation with COLLECTOR.
(11) COLLECTOR will make available to CITY its facilities for the purpose of conducting waste sorts and will assist CITY in and provide requested waste type/volume information to CITY for the purpose of conducting/preparing waste characterization studies for CITY solid waste planning. COLLECTOR shall not be responsible to indemnifY or insure the CITY or any City employee, contract employee, and/or volunteer while at COLLECTOR'S facility during waste characterization activity.
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y. COLLECTOR shall file with the CITY Clerk and maintain during the term of this Service Agreement a corporate surety bond or other form of security satisfactory to the CITY Attorney in the sum of Five Hundred Thousand and no/100ths ($500,000.00) Dollars to secure said performance. The performance bond requirements may be met by a bond which is effective for a minimum of three years if three months prior to the expiration of that bond, the CITY receives from the surety a letter of commitment that another performance bond will be issued to become effective immediately upon expiration of the prior performance bond. z. COLLECTOR agrees, in connection with the performance of all operations under or pursuant to this Service Agreement, to be an Equal Opportunity Employer and to refrain from discrimination against any employee or applicant for employment because of race, creed, color, national origin, sex, age, or handicap. (1) COLLECTOR agrees that it will undertake an affirmative action program to ensure that no person shall on the grounds of race, creed, color, national origin, sex, age, or handicap be excluded from participating in any employment activities or opportunities. COLLECTOR shall fully document these efforts and shall submit to CITY on or before January 31 of each year a report detailing the affirmative actions COLLECTOR has taken during the prior calendar year. COLLECTOR shall ensure that seniority practices, job classifications, work assigrnnents, and other personnel practices, including employment reduction actions, do not have a discriminatory effect by continually monitoring all personnel and employment-related activities to ensure that the equal employment opportunity actions required by this Service Agreement are being carried out.
(2) COLLECTOR agrees to ensure and maintain a working environment free of harassment, intimidation, and coercion at all job locations and in all facilities where COLLECTOR's employees are assigned to work. shall specifically ensure that all foremen and forewomen, superintendents, and other on-site supervisory personnel are aware of and carry out the COLLECTOR's obligation to maintain such a working environment with specific attention to minority and women at such work locations or in such facilities. (3) In the event of breach of any of the above nondiscrimination, equal opportunity, and affirmative action covenants, the Council of the CITY of Modesto shall have the right to revoke this Service Agreement in accordance with the provisions of Section 5-5.32 of the Modesto Municipal Code. aa. COLLECTOR and CITY shall cooperate, on such terms as shall be agreed upon, to support, develop, publicize, expand, and promote the concept and benefits of recycling and compo sting by any reasonable and effective methods. COLLECTOR shall reimburse CITY for its reasonable expenses and mailing costs whenever CITY determines, after consultation with COLLECTOR, that it is in the best interest of the GILTAGT.WPD
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recycling/yard waste collection programs to distribute information and promotional materials to COLLECTOR's customers.
Promotional assistance shall also include, but not be limited to, allowing access for tours offacilities by the public/elected officials, supplying "props" and locations for :filming of public educational pieces, and other assistance as determined by the CITY.
Tours and/or access shall be limited to areas of operations that are non-proprietary as determined by COLLECTOR COLLECTOR shall not be responsible to indemnitY or insure the CITY or any City employee, contract employee, and/or volunteer while at COLLECTOR'S facility during these activities.
abo COLLECTOR shall comply with the IndemnificationlInsurance requirements set forth in Exhibit B.
ac. AB 939 Compliance. The scope of this Service Agreement results in the CITY relying on COLLECTOR to implement programs that enable the CITY to meet State mandated diversion goals. COLLECTOR agrees to protect, defend, with counsel approved by CITY, and indemnifY CITY against all fines or penalties imposed by the California Integrated Waste Management Board in the event the disposal reduction and diversion mandates or any other requirement of the Integrated Waste Management Act of 1989 as amended, are not met by CITY with respect to the waste stream collected in respective service areas under this Service Agreement, and such failure to meet said mandates has been occasioned by the material failure of COLLECTOR to perform as required and directed by this Service Agreement.
Material failure by the COLLECTOR to provide services required by this Service Agreement that enable the CITY to meet its diversion mandates shall be a breach of this Service Agreement and grounds for termination of the COLLECTOR's agreement by Council. If civil penalties are imposed on the CITY under AB 939, Public Resources Code Section 41850 due to COLLECTOR's failure to perform, all penalties shall be paid by the COLLECTOR
Federal, State, or local laws enacted after the effective date of this Service Agreement that impact the COLLECTOR's ability to achieve AB 939 goals, shall be taken into consideration by the City Council in the event any goals addressed herein, are not achieved. The indemnification and defense provisions contained herein shall not apply if CITY fails to carry out its statutory duties imposed by AB 939 (Public Resources Code Section 40000 et. seq.), as it may, from time to time, be amended. ad. The terms used in this agreement shall be as defined in Section 5-5.03 of the Modesto Municipal Code.
ae. No official, officer, or employee of the CITY during his or her tenure or one year thereafter shall have any interest, direct or indirect, in this Agreement or the proceeds thereof.
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af Any and all notices required to be given under the provisions of this Agreement shall be given in writing and delivered personally or by deposit in the United States mail, postage paid and addressed as follows:
TO CITY
Director of Public Works and Transportation
CITY of Modesto
P.O. Box 642
801 Eleventh Street
Modesto, California 95353
TO COLLECTOR
Gilton Solid Waste Management, Inc.
1722 Mono Drive
Modesto, California 95354
or at such other addresses as the parties may file with each other for such purposes. ag, This agreement shall go into effect and be in full force and operation on January 1, 1997.
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IN WITNESS WHEREOF, the parties have signed this Agreement this 14th dayof January, 1997
Res. 97-36
ATTEST:
BY~ OJ4.~ JEADAMS, CITY Clerk
(SEAL)
:~~
CITY OF MODESTO, a municipal corporation
BY~
1. Edward Tewes, CITY Manager
COLLECTOR* ~
By 1C-~ By ~ 7( 4-J7l
MICHAEL D. MILICH, CITY ATTORNEY
WR~LS TO RIS~~MENT FORM:
DONALD N. NORRIS, RISK MANAGER
*Corporations - signature of two (2) officers required or one (1) officer plus corporate seal.
Partnership - signature of a partner required
Sole Proprietorship - signature of proprietor required
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EXHIBIT A - CITY FACILITIES
1. City Hall- Modesto Disposal
2. Police Department - Modesto Disposal
3. Legion Hall - Gilton Solid Waste
4. Airport Administration Building - Gilton Solid Waste 12111196
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EXHIBIT B - INDEMNIFICATIONI1NSURANCE PROVISIONS
A. HOLD HARMLESS AND INDEMNIFICATION.
(1). Indemnification of CITY. COLLECTOR agrees that it shall protect, defend with counsel approved by CITY, indeIl1I1ifY, and hold harmless CITY, its officials, officers, employees, representatives, volunteers, and agents from and against any and all losses, liabilities, frnes, penalties, claims, damages of whatsoever nature, or judgments, including attorneys fees, arising out of or resulting from the CITY's grant of this Service Agreement to COLLECTOR or from COLLECTOR's exercise of this Service Agreement or omissions of COLLECTOR, its agents, employees, and subcontractors and employees thereof in connection with the performance or nonperformance of this Service Agreement. Subject to the scope of this indemnification and upon demand of the CITY, made by and through the City Attorney, the COLLECTOR shall appear in and defend the CITY and its officers, employees, and agents in any claims or actions, whether judicial, administrative, or otherwise arising out of the exercise of this Service Agreement. The COLLECTOR shall thoroughly investigate any and all claims and indeIl1I1ifY the CITY and do whatever is necessary to protect the CITY, its officers, employees, agents, and representatives as to any such claims, lawsuits, liabilities, expenses, or damages. (2). Indemnification of COLLECTOR. The CITY shall indeIl1I1ifY, defend and hold the COLLECTOR, its affiliates and their respective officers, directors, employees, and shareholders harmless from and against any and all liabilities, losses, damages, claims, actions, causes of action, costs, and expenses (including reasonable attorney's fees) arising from or in any manner related to the sole negligence or willful acts of the CITY, its officers, employees, agents, or contractors.
B. INSURANCE REOUIREMENTS
EX2FlNAL. WPD
1I1j/97
(1). Minimum Coverages - The COLLECTOR shall provide, at its own expense, and maintain at all times the following insurance with insurance companies licensed in the State of California and shall provide evidence of such insurance to CITY as may be required by the City Clerk of the CITY. The policies or certificates thereof shall provide that, thirty (30) days prior to cancellation or material change in the policy, notices of same shall be given to the Risk Manager of the CITY by certified mail, return receipt requested, for all of the following state insurance policies. (a). Workers' Compensation - In compliance with the statutes of the State of California, plus employer's liability with a minimum limit of liability of $500,000.
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(b). General Liability - Insurance with a minimum limit of liability per occurrence of$I,OOO,OOO for bodily injury and $100,000 for property damage or $1,000,000 combined single limit. The insurance shall indicated on the certificate of insurance the following coverage and indicate the policy aggregate limit applying to: premises and operations; broad form contractual; independent contractors and subcontractors; and products and completed operations.
(c:).Automobile Liability - Insurance with a minimum limit of liability per occurrence of $2,000,000 for bodily injury and $2,000,000 for property damage or $2,000,000 combined single limit. This insurance shall cover any automobile for bodily injury and property damage. This insurance shall also include a broadened pollution liability coverage endorsement (ISO CA 99 48 06 02) and an endorsement for motor carrier policies of insurance for public liability (OMB #2125-0074).
(d). Hazardous Substances Insurance - Collector agrees to reimburse the City for the premium to pay for insurance designed to protect the City from third party liability claims for bodily injury, property damage, or clean-up costs at non-owned locations specified in the policy. This insurance would be subject to policy conditions, exclusions and deductibles. Collector's reimbursement for such insurance shall be considered a "pass-through" expense and will be included as a legitimate cost of doing business during the annual garbage rate review process.
Collector agrees that this insurance shall be in the minimum amount of $20,000,000 subject to a deductible of $100,000, again subject to policy conditions and exclusions.
Policy insuring agreement shall read "The Insurance Company agrees to pay loss on behalf of the insured, that the insured becomes legally obligated to pay as a result of claims first made against the insurance and reported to the Insurance Company, in writing, during the policy period, or during the extended reporting period if applicable, for bodily injury, property damage, or clean-up costs beyond the boundaries of the non-owned location resulting from pollution conditions originating from such non-owned location, provided such bodily injury, property damage, or clean-up costs are unexpected and unintended from the standpoint of the insured."
Collector agrees to reimburse City for such insurance as may be provided by insurance company suitable to the City's Risk Manager within thirty (30) days after acquisition of such insurance by City.
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(2) Other Provisions - If at any time any of said policies required by subsections B (1) (a), (b), or (c), above, shall be unsatisfactory to the CITY, as to form or substance or if a company issuing such policy shall be unsatisfactory to the CITY, the COlLECTOR shall promptly obtain a new policy, submit the same to Risk Manager for approval, such approval not to be unreasonably withheld, and submit a certificate thereof as herein above provided. Upon failure of the COLLECTOR to furnish, deliver or maintain such insurance and certificates as above provided, this Agreement, at the election of the CITY, may be forthwith declared suspended, or terminated.
Failure of the COLLECTOR to obtain andlor maintain any required insurance shall not relieve the COLLECTOR from any liability under this Agreement, nor shall the insurance requirements be construed to conflict with or otherwise limit the obligations of the COLLECTOR concerning indemnification. The CITY, its agents, officers, employees, and volunteers shall be named as an additional insured on all insurance policies required herein, except Workers' Compensation. The Workers' Compensation insurer shall agree to waive all rights of subrogation against the CITY, its agents, officers, employees, and volunteers for losses arising from work performed by COLLECTOR for the CITY. The COLLECTOR's insurance policy(ies) shall include a provision that the coverage is primary as respects the CITY; shall include no special limitations to coverage provided to additional insured; and, shall be placed with insurer(s) with acceptable Best's rating of A:VII or with approval of the Risk Manager.
COLLECTOR shall either require any subcontractor to procure and to maintain during the term of the subcontract all insurance in the amounts specified above, or shall insure the activities of subcontractors in the policy specified above. The limits ofliability required may vary, depending on the type of permit or contract. #7..
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Managing Tomorrow’s Resources Today
590 Ygnacio Valley Road, Suite 105 John W. Farnkopf, PE Walnut Creek, California 94596 Laith B. Ezzet, CMC
Telephone: 925/977-6950 Richard J. Simonson
www.hfh-consultants.com Marva M. Sheehan, CPA
Robert C. Hilton
April 17, 2024
Rosene Nguyen
Integrated Waste Program Manager
Public Works
1010 10th Street
Modesto, CA 95354
Subject: City of Modesto 2023 Solid Waste Financial Review and Rate Analysis Dear Rosene Nguyen:
The City of Modesto (City) requested HF&H Consultants, LLC (HF&H) review the annual rate adjustment methodology and related operational and financial documentation for its two franchised solid waste haulers to provide recommendations to modify the rate adjustment methodology. This report provides a summary of our findings and recommendations and is structured into the following sections:
1. Executive Summary
2. HF&H Review and Analysis
3. HF&H Findings
4. HF&H Recommendations
5. Conclusion
EXECUTIVE SUMMARY
The City of Modesto’s residents and businesses have solid waste collection service from either Bertolotti Modesto Disposal Inc. (Bertolotti) and Gilton Solid Waste Management Inc. (Gilton) (collectively the “Haulers”). The City requested HF&H to conduct an analysis of the Haulers’ collection operations, costs, and the current rate setting methodology in order to provide recommendations to modify the rate adjustment methodology. The City was concerned about both the accuracy of and allocation of the Hauler’s costs to service the City’s residents and businesses.
Due to the narrow reporting requirements for the Haulers under the current franchise agreements, there was limited information available to be reviewed. Some information required multiple requests and conversations with the Haulers to clarify the information aligned with the request. Therefore, HF&H determined a scope of work that best met the City’s needs and the information available. ▪ HF&H reviewed each Hauler’s audited financial information for the most recently completed fiscal year and the annual rate adjustment application used to set current rates. We also reviewed the standard rate adjustment methodology to understand the mechanisms with which the annual rates are calculated.
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▪ HF&H evaluated each Hauler’s allocation of costs to the City by reviewing the types of allocation factors applies to the Hauler’s financial statements. HF&H assessed whether the allocation factor was reasonable or standard for the industry.
▪ HF&H benchmarked the residential, commercial, and residential bulky program costs against nearby jurisdictions or jurisdictions that have similar geographic structure and services. We inquired with each Hauler regarding costs that were higher than the benchmarked range. ▪ HF&H examined the current disposal, transfer, and organics pre-processing arrangements for each Hauler, including compensation for these services and their connection with the City’s composting facility.
▪ HF&H recalculated the Haulers’ tonnage reports to the City during the period under review and analyzed detailed general ledgers for certain expenses in the general and administrative categories.
The following discussion summarizes HF&H’s findings and recommendations.
Findings
• Gilton’s general and administrative allocation attributed an additional ~$96,000 in indirect expenses to the City based on an incorrect inclusion of commercial commodity revenue that is not part of the franchise. Because the current rates were set based on an inflation increase and not on this financial information, there is no impact to the current rates. • Bertolotti’s total costs per route are higher than the reasonable range from the benchmarks and the driving factor may be additional labor expenses for overtime. Gilton’s labor costs are higher than the reasonable range due to inclusion of other personnel within the driver labor category instead of the overhead category. Gilton’s overall per route costs, including fuel, are still slightly higher than the reasonable range.
• The Haulers’ annual rate adjustment application included costs that would double-compensate them for organics pre-processing services (firstly in direct costs and secondly through the per month fee). Because the current rates were set based on an inflation increase, the current rates do not double-compensate the Haulers for organics pre-processing.
Recommendations
Based on the above analysis, HF&H has summarized our recommendations for next steps below:
1. Third Party Review of Gilton Allocation: Because Gilton’s software for allocation of costs to the City is integrated with their accounting software, HF&H recommends that the software be reviewed periodically by a third party for accuracy and reasonableness. The cost for this review may be at the City’s or the Haulers’ expense.
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2. City’s Compost Facility Per-Ton Rate: HF&H recommends the City consider creating a separate rate for contaminated organic material. The City visually inspects incoming loads for contamination; if rejected, a load is charged to the Hauler, returned to their transfer station, cleaned, redelivered, and charged again. The additional cost and labor are intended to discourage contamination that should be removed during Hauler pre-processing. If a load is accepted based on visual inspection but is later determined to be too contaminated for processing, as City staff notes happens regularly, the City absorbs the cost of residuals and overs despite paying an additional pre-processing fee to haulers to ensure clean organic material. The City and Haulers should meet and confer to develop a surcharge that addresses this additional cost burden to ratepayers.
3. Amend and Restate the Current Franchise Agreements: HF&H recommends amending and restating the current franchise agreement to address operational, financial, and informational concerns. HF&H also recommends the Haulers resubmit official cost and operations forms to set a baseline to which future operations can be compared for reasonableness. The following two paragraphs provide specific recommendations regarding the amendment:
Modify Annual Rate Adjustment Methodology: The current annual rate adjustment process of using the ‘lowest cost Hauler’ does not provide sufficient guardrails to protect the City’s rate payers. HF&H recommends modifying the current annual rate adjustment process through the amendment to adjust expenses based on local collective bargaining agreements or regional and classification specific CPI indices. HF&H recommends that the new rate adjustment methodology calculate the compensation for disposal and organics pre-processing and delivery based on a build-up of tons multiplied by the rate at the destination facility. HF&H recommends tying the annual increase in the organics pre-processing rate to an index or other annual metrics.
Acceptable Disposal Location Designations: Because the current franchise agreement does not state which landfill the solid waste material should be delivered, HF&H recommends designating the disposal facilities in the franchise agreements to ensures material flow is managed and predictable.
4. Transfer / Organics Pre-Processing Rate Benchmarking: HF&H recommends the City review the transfer/pre-processing rate to ensure it is within the range of acceptable market rates.
5. Future Fee Component Removals: When performing the upcoming annual rate adjustment process, the following fees should be removed to not double-compensate the Haulers: Weekly Organics Collection, SB 1383 Collection Fee, Organics Waste Pre-Processing.
6. Monthly/Quarterly Tonnage Reports: HF&H recommends the City review the current reporting template for additional modifications, as needed during the amendment process, and discuss these modifications with the Haulers.
7. Detailed General Ledger Review: HF&H recommends placing a cap on annual increases to the general and administrative expenses through the annual rate adjustment methodology. #7..
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HF&H REVIEW AND ANALYSIS
Annual Rate Adjustment Application and Rates
Standard Methodology: The Standard Methodology was developed for the City by a previous consultant with the goal of calculating the ‘lowest cost Hauler’. Each Hauler submits audited financial information from the most recently completed fiscal year that is intended to reflect the costs to service the City. The City inputs these costs into the annual rate adjustment spreadsheet which compares Bertolotti’s and Gilton’s ‘per customer cost’ by customer class and determines the ‘lowest cost Hauler’. The lowest ‘per customer cost’ is selected for the hauler component of the rate for both Bertolotti and Gilton (Hauler Component). City fees are layered on top of the Hauler Component for City costs (e.g., landfills maintenance, compost facility improvements, City solid waste cost center).
There may be one additional adjustment made to the Hauler Component to account for anticipated increases in fuel costs based on the price of diesel. There are no adjustments to account for anticipated changes in tonnage, routes, labor, or other costs as the methodology assumes those changes will be reflected in the financial information when the applicable year is utilized for the annual rate adjustment process.
Most Recently Completed Annual Rate Adjustment Methodology: Each Hauler submitted its audited financial information from the most recently completed fiscal year (7/1/2021-6/30/22). The City input these costs into the annual rate adjustment spreadsheet to determine the ‘lowest cost Hauler’. Instead of utilizing the standard methodology with the ‘lowest cost Hauler’, the City enacted an increase to the current Hauler Components similar to the increase in the consumer price index. The City also layered various fees on top of the Hauler Component for City costs (landfills maintenance, non-containerized green waste, compost facility improvements, SB 1383 implementation, and City solid waste cost center) and additional Hauler costs not captured in their financial information (weekly organics collection, collect and process recycling, SB 1383 collection, and organic waste pre-processing). There were two adjustments made to the Hauler Component to account for anticipated increases in expenses: an increase in disposal costs based on consumer price index and an increase in fuel costs based on the price of diesel. The City chose to deviate from the standard methodology this year to account for the additional compensation for services required under SB 1383 and allow time to evaluate the impact of this rate adjustment methodology.
The City is allowed to approve, deny, delay, or enact a different rate increase than what was calculated per the annual rate adjustment applications. During the most recent annual rate adjustment, the City enacted a rate increase that was similar to the increase in the consumer price index rather than the full increase as calculated per the rate adjustment application. The rate adjustment application calculated a Hauler Component of $37.54 for residential services and $46.32 for commercial services; the City approved a $35.72 residential Hauler Component and a $43.57 commercial Hauler Component. #7..
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Hauler Allocation of Costs to Modesto
Bertolotti: Bertolotti reports its Modesto operations as a separate entity from its other corporations and franchises and provided the City with a separate set of audited financial statements. The separate set of financial statements for the City are used in the annual rate adjustment application. Bertolotti stated that all costs associated with serving the City are coded within their internal system directly to the City’s reporting entity. The only allocation that is used in preparation of the financials is related to the corporate service fee for administrative and support services to most parts of Stanislaus County and select areas of the City (further explained in the notes to the financial statements) which is allocated by containers.
Therefore, all direct service-related costs (labor, vehicle, fuel, disposal, etc.) are directly charged to and reflected in the financial statements utilized in the annual rate adjustment application. HF&H did not find any issues with Bertolotti’s allocation of the corporate service fee.
Gilton: Gilton services parts of Stanislaus County, Merced County, San Joaquin County, and various cities, including the City of Modesto. It accounts for its operations and costs as a single entity and provides a combined set of audited financial statements. The City of Modesto’s financial information is a supplemental schedule of costs allocated to the City based on various allocation factors. These allocation factors have been provided to the City and include allocation by percentage of loads, percentage of trucks to a jurisdiction/material, number of containers, customers, and revenue. The allocation calculation agrees to the information presented in Gilton’s Accounting and Supplementary Data, in which the auditor states, “We did not audit or review the financial statements or supplementary information included in the accompanying prescribed form nor we were required to perform any procedures to verify the accuracy or completeness of the information provided by management.” HF&H was unable to review the allocation calculations quantitatively as the spreadsheet calculations were hard-coded and a combination of multiple allocation methodologies. When HF&H requested a formuladriven version of the allocations file, Gilton asserted the spreadsheet provided is not a database export.
Allocation percentages are included in an allocation module in their accounting software which allocates costs held in suspense accounts until year end. This means that all files provided to HF&H include the results of the cost allocations, but the allocation percentages are calculated and applied in Gilton’s accounting software. This methodology is the same as Gilton’s Stanislaus County allocation methodology.
Therefore, if additional quantitative assurance is desired, more direct approaches may need to be considered (e.g., a site visit to Gilton to view the input of these percentages and calculations, a full review of their allocation software). However, HF&H reviewed the allocation methodology qualitatively for reasonableness of the type of allocation to the corresponding expense category and found the allocation types to be reasonable except for the revenue allocation. Revenue allocations for overhead costs are not the most appropriate allocation factor as the revenue from rates set by jurisdictions are not the best indicator of how much overhead costs are incurred.
During HF&H’s general ledger testing (refer to the Hauler Detailed General Ledger Review section below) Gilton provided copies of the general and administrative expenditures and recalculations of the general and administrative allocations. General and administrative expenditures were allocated based on revenue. HF&H reviewed the general and administrative allocation by tying revenue to the financial statements and noted that the commercial revenue was higher than presented in the financial #7..
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statements. HF&H inquired with Gilton to clarify where the additional revenue can be found in the financial information. Gilton’s response was, “this revenue is from specialty commodity bins, that should not have been included in the allocation. Prior to the enactment of SB 1383, our understanding was that we were not required to include this in revenue as recycle bins were open to competition as recycle/reuse streams are outside of the franchise revenue.” The City informed HF&H that recycling service was not an approved service per the franchise agreement, and that Gilton should not be providing this service to customers. The City also informed HF&H that hauling of any waste, including recyclable materials prior to the implementation of the curbside recycling program, is exclusive to service agreements and is not open to competition within the City limits.
Gilton provided a spreadsheet calculating the impact of reducing the City’s general and administrative allocation from 13.82% to 12.35% and its impact on the indirect expenses allocated to the City (approximately $96,000). HF&H estimated that this reduction of indirect expenses could have reduced the commercial per yard rate by $0.73. Gilton noted that this correction would not have impacted the current rates as the City enacted a rate increase assuming an inflation adjustment and not based on the higher rate increase requested based on the financial information in the application. However, HF&H notes that a review of previous year’s allocations would be required to ascertain whether the overallocation of indirect expenses occurred in previous years as well.
Hauler Collection Benchmarking
HF&H requested operational statistics from Bertolotti and Gilton for the most recently completed fiscal year (July 1, 2021 – June 30, 2022). A copy of the operational statistics shall be provided to the City for recordkeeping. HF&H also received a copy of Bertolotti’s and Gilton’s financial statements for July 1, 2021 – June 30, 2022 and the corresponding annual rate adjustment application prepared by the City.
HF&H calculated key operational and cost ratios using the financial and operational information; this allowed HF&H to benchmark the Haulers’ efficiencies and costs for reasonableness. HF&H compiled nearby jurisdictions’ Haulers’ ratios from Stanislaus County or the City of Stockton, or jurisdictions that have similar geographic structure and services in the Central Valley, and compared the key ratios. HF&H focused on cost per route, labor costs, and fuel costs for the residential and commercial sectors. While benchmarks are not always an ‘apples to apples’ comparison due to nuances of each service area, benchmarking allows general comparison and discussion on key areas as a starting point for further conversations. Refer to the tables below for a high-level summary of the benchmarking results.
Table 1. Summary of Benchmark Results - Residential
Benchmark Ratio Bertolotti Gilton
Operating Cost per Route 5% - 10% Higher than Reasonable Reasonable Total Cost per Route 0% - 5% Higher than Reasonable 5% - 10% Higher than Reasonable Total Labor Cost per Route Hour 10% - 15% Higher than Reasonable Reasonable Total Fuel Costs per Route Reasonable 30% - 35% Higher than Reasonable #7..
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Table 2. Summary of Benchmark Results - Commercial
Benchmark Ratio Bertolotti Gilton
Operating Cost per Route Reasonable Reasonable
Total Cost per Route 0% - 5% Higher than Reasonable 0% - 5% Higher than Reasonable Total Labor Cost per Route Hour Reasonable Reasonable
Total Fuel Costs per Route Reasonable Reasonable
Residential route benchmarking indicated the need for further analysis. Refer to the sections below.
Commercial benchmarking indicated an overall reasonableness in costs and was not further analyzed.
Bertolotti Per Route Comparison: Because Bertolotti was higher than reasonable in three of the four residential benchmarking categories, HF&H performed a deeper analysis on Bertolotti’s residential operations. HF&H translated Bertolotti’s financial information by expense category (labor, vehicle, fuel, etc.) into a per route cost. Then HF&H compared Bertolotti Modesto’s per route costs to Bertolotti Stanislaus County’s per route costs as these two jurisdictions are directly serviced by the same hauler and have similar programs, geography, and cost of expenses. The results of this analysis further confirmed the higher than reasonable costs were related to the labor and benefits expense categories.
Bertolotti Residential Route: HF&H inquired with Bertolotti regarding their residential route statistics and financial information specifically related to labor and benefits.
Bertolotti asserted that the residential labor costs included driver supervisor, mechanics, delivery drivers, maintenance workers, and cart assistance wages and benefits. Bertolotti also asserted that the average driver is earning between $150,000 - $160,000 with benefits. Because the benchmarks aim to compare direct driver labor, Bertolotti’s labor costs should be adjusted to remove the estimated wages and benefits related to these positions. HF&H had insufficient information to remove all categories of wages and benefits listed above but was able to remove an estimated amount for supervisor and cart assistance personnel wages and benefits. Then HF&H recalculated the labor ratios and average wage with benefits per driver. The hourly wage before benefits is competitive to benchmarked collective bargaining agreement, however the hourly wage after inclusion of benefits is higher than benchmarked collective bargaining agreements. HF&H recommends additional discussion when negotiating the amendment to the Agreement to tie the labor increases directly to a labor index based on the geographic area as Bertolotti’s divers are not under a collective bargaining agreement. However, the adjusted labor ratio (drivers per route per homes serviced) was still high in comparison to the benchmark’s reasonable range.
Bertolotti asserted that the residential Modesto service area is very dense and is located near the transfer and disposal facilities; they have trucks that are old with low mileage due to this geographic benefit.
Bertolotti also asserted that a large portion of their service area included narrow alleys that require 6- point turns and limit speed due to dust control. Historically, HF&H has seen a reasonable range of residential customers serviced per route per day to be approximately 700-800 customers. However, Bertolotti’s residential routes are servicing on average 900 customers per route per day. This indicates to #7..
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HF&H that Bertolotti is likely needing driversto work some amount of overtime, even with the geographic benefit, to achieve this operating efficiency.
The above point indicated to HF&H that Bertolotti’s operating statistics may require revision surrounding the average hours per route per day. Bertolotti’s operating statistics indicate its drivers are working 10 hour route days, which include two hours of overtime. To achieve a reasonable number of homes serviced per route, HF&H calculated that each driver would work an average of 11 hours per day instead of the asserted 10. It is possible that not all homes set out their containers each week, but it would require a significant number of customers choosing to not participate weekly. Set out information was not provided by Bertolotti in its operating statistics to verify this hypothesis.
In summary, this analysis indicates to HF&H that Bertolotti may have increased full-time employee equivalents through longer route days than reported on its operating statistics and that the additional labor expense for overtime may be the driving factor that is escalating the operating and total costs per route higher than the reasonable range from the benchmarks.
Gilton Per Route Comparison: Because Gilton was higher than reasonable in two of the four residential categories, HF&H performed a deeper analysis on Gilton’s residential operations. HF&H translated Gilton’s financial information by expense category (labor, vehicle, fuel, etc.) into a per route cost. Then HF&H compared Gilton Modesto’s per route costs to Gilton Stanislaus County’s per route costs as these two jurisdictions are directly serviced by the same hauler and have similar programs, geography, and cost of expenses. The results of this analysis further confirmed the higher than reasonable costs were related to operating costs such as labor and fuel.
Gilton Residential Route: Because the operating cost per route hour is within the reasonable range, but the total cost per route is above the reasonable range, it indicates to HF&H that Gilton is beyond the benchmarked range due to pass-through costs such as disposal, processing, and transfer. Pass-through costs are constrained by designated facilities and distances to alternative facilities. Each benchmarked jurisdiction has a unique arrangement of pass-through costs due to local facilities and contract limitations, which means pass-through costs are the least ‘apples to apples’ to compare using benchmarks. Therefore, HF&H understands why Gilton may be above the reasonable benchmark range in this category given the unique specifications of the City’s disposal and processing arrangements.
Gilton’s benchmark for fuel prices is above the reasonable range. Over the past few years, fuel prices have significantly increased. Some of the benchmarks used in HF&H’s analysis are from cost proposals or index reviews before the price increase in fuel was captured, which indicates that the reasonable range of fuel costs per route is lower than the actual current range. However, the Stanislaus County benchmark for Gilton, which uses actual fuel costs, shows the average fuel cost per route at approximately 75% of the fuel cost per route as in Modesto. Additionally, the current Agreement does not designate disposal and processing facilities, which allows the Haulers the option to haul material to facilities that are out of the area and incur additional fuel expenses. Therefore, HF&H believes Gilton’s fuel costs in Modesto may still be higher than reasonable due to increased transportation and fuel prices, but less than the 30%-35% higher than reasonable benchmark.
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In summary, overall per route costs are higher than the benchmark due to disposal, processing, and transfer costs. However, the overall per route costs, including fuel, are still slightly higher than the reasonable range.
Figure 1: City of Modesto Hauler Service Area Map
Hauler Residential Bulky Program Benchmarking
HF&H requested additional operational statistics and financial information for the residential bulky collection program from Bertolotti and Gilton for the most recently completed fiscal year (July 1, 2021 – June 30, 2022). A copy of this information is included as Attachment A and B. HF&H calculated the monthly cost per resident for the residential bulky program by dividing the bulky program costs by the number of residents served: Gilton costs $1.11 per month per resident and Bertolotti costs $1.19 per month per resident. HF&H calculated nearby jurisdictions’ cost per resident for residential bulky programs to compare for reasonableness.
Bertolotti
Transfer Station
Gilton Resource
Recovery
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The benchmarks for monthly residential bulky program costs ranged from $0.79 - $5.32. The higher cost programs have a more complete collection program that includes more types of acceptable items (e.g., tires, e-waste, hazardous materials) and a larger volume of material collected per visit. The lower cost programs have more limitations on the acceptable items and restrict overall volume. The City’s per resident program cost falls within the reasonable range and is in line with expectations due to the restrictions on type of acceptable items. The City’s program does not allow for automobile parts (including tires), household hazardous waste, computer monitors, tv’s, dead animals, C&D, or household garbage.
However, the City’s program does not limit the volume of material collected per visit. Based on a discussion the City had with the Haulers, the cost’s provided for the bulky program include costs for illegal dumping clean-up. Therefore, the true cost of the bulky collection program is less than the per resident calculated above and is more in line with the lower range of the benchmark.
Hauler Transfer and Disposal Review
Based on discussion with the City, both Haulers are required to take all garbage first to the Covanta Wasteto-Energy facility. If the Waste-to-Energy facility is at daily capacity or is shut down for the day, they are to dispose of the material at a landfill. The current agreement does not state which landfill, but the City maintained that the Haulers should use the Fink Road Landfill and are having both Haulers include in the monthly report which landfill they are using. However, the City asserts that the Haulers have been delivering solid waste to Manteca’s, Merced’s, or Livermore’s landfills. The City further explained that they do not know how much each Hauler pays at these facilities. Because the annual rate adjustment process does not include language to limit the disposal component of the adjustment to the rate charged at the Waste-to-Energy facility or the Fink Road Landfill (refer to the Annual Rate Adjustment Application section) there is no protection for the City against increased costs associated with disposal at alternative locations.
HF&H requested a narrative from Bertolotti and Gilton describing their current disposal and transfer arrangements. HF&H intended to perform a build-up of the disposal component of the Haulers’ financial information and assess the reasonableness of this cost. Refer below for a summary from each Hauler.
Bertolotti: Bertolotti asserts that all loads of material (both solid waste and organics) are brought to the transfer station and then taken to their final disposal or processing location. Bertolotti asserted they are required to take all garbage to the Covanta Waste-to-Energy facility or the Fink Road Landfill, unless they are directed to take it to another landfill. The current transfer rate is $22.00 per ton, the Waste-to-Energy facility rate is $49.90 per ton, and the Fink Road Landfill rate is $29.00 per ton. Bertolotti did not provide HF&H with the transfer or disposal costs during the financial period used in the annual rate adjustment application. However, HF&H calculated an estimated cost per ton for disposal of solid waste tonnage based on Bertolotti’s operational statics and financial information and found that it is within a reasonable range of the cost per ton as provided by Gilton who has the same disposal arrangements and additional per ton detail.
Gilton: Gilton asserts that they bring all loads of material (both solid waste and organics) to the Gilton Resource Recovery Transfer Facility (GRR) where the material is weighed on a scale with documentation for route identification for future allocation of costs. GRR accumulates material and hauls it to the Covanta #7..
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Waste-to-Energy facility or the Fink Road Landfill, unless directed to take it to another landfill. Hospital waste is taken directly to the Waste-to-Energy facility. Material is brought first to the Waste-to-Energy facility to increase the City’s diversion, but will be brought to Fink Road Landfill if the Waste-to-Energy facility cannot accept it. The City notes that Gilton’s weekly report indicates that material is also brought to other landfills.
Gilton also provided a breakdown of the per ton cost for transfer and disposal of solid waste material.
Illegal dumping disposal costs was not included in this breakdown. HF&H recalculated the disposal and transfer costs based on the tonnage reported in the operating statistics and found they agree within an immaterial variance to the disposal and transfer costs as reported in Accounting and Supplementary Data used in the annual rate adjustment process. Refer to the table below for a summary of the per ton rates during the time period reviewed.
Table 3. Gilton Transfer and Disposal Per Ton Cost
7/1/21 - 9/30/21 10/2/21 - 6/30/22
Residential, Commercial, and Debris Box Disposal $43.00 $44.00 Bulky Item Disposal $48.00 $53.00
Transfer Station Fee (Any Material) $24.00 $27.00
Hauler Organics Pre-Processing Review
As mentioned previously in the Annual Rate Adjustment Application section above, the City layers on additional fees to the Hauler Component for various programs and services. One of these fees is for residential and commercial organics pre-processing before delivery to the City’s compost facility. The City informed HF&H that all organic material collected by the Haulers within the City limit should be delivered to the City’s compost facility.
Based on the City’s SB 1383 compliance consultant’s (R3) report, the organics’ pre-processing rate was established to pay the Haulers to pre-process organic waste for delivery to the City’s compost facility. The contamination threshold at the City’s compost facility is 1%. The pre-processing rate was based on estimates from the Haulers to begin pre-processing organic material, assuming no pre-processing was currently occurring, to reach 100% clean organic material. The City asserts that neither Hauler was required to pre-processing organic material from July 1, 2021 – June 30, 2022 as it was not part of their contracts; the requirement for pre-processing began July 1, 2022 because of SB 1383 compliance. The additional component was also added to the rates beginning July 1, 2022. The current residential rate includes $1.72 per month and the current commercial rate includes $3.11 per month per cubic yard for organics pre-processing. The amount of this additional fee was based on feedback from both Haulers on the cost of pre-processing and developed by R3.
Bertolotti: Bertolotti’s narrative confirmed that it is required to deliver all organic material to the City’s compost facility. Bertolotti asserted that the transfer rate for solid waste materials is the same for organic materials, which is in alignment with the City’s narrative that Bertolotti was not pre-processing material during this time as the transfer rate for organic material would be higher to account for additional cleaning and grinding.
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However, Bertolotti’s annual rate adjustment application included $157,890 for green waste cleaning.
Therefore, Bertolotti’s annual rate adjustment application included costs that would double-compensate them for organics pre-processing services. Because the rates were set based on an inflation increase, not the Hauler’s applications, Bertolotti was not double compensated for organics pre-processing. However, this indicates to HF&H that the current rate adjustment methodology allows for potential doublecompensation in areas where the Hauler is compensated separately from the Hauler Component of the rates.
Gilton: Gilton’s narrative confirmed that organic waste is delivered to the GRR facility where it is cleaned and ground. Gilton’s breakdown of the per ton cost for transfer and disposal of solid waste included a breakdown of the cost to pre-process and transfer organic materials. HF&H confirmed with Gilton that the transfer rate for organic materials is inclusive of pre-processing and delivery of material to the City’s compost facility. the cost for pre-processing and transfer was $67.00 per ton from 7/1/21-9/30/21 and $71.00 from 10/1/21-6/30/22. Gilton asserts that they have been pre-processing organic material before it was required by the City in 2023 and consider it part of the scope of current services.
The cost to pre-process organics is compensated through the additional per month fee and should not be included in each Hauler’s financial information. Therefore, Gilton’s annual rate adjustment application included costs that would double-compensate them for at least some portion organics pre-processing services. If Gilton was the ‘lowest cost Hauler’, then costs to pre-process organic material would be included twice (firstly in direct costs and secondly through the per month fee). This indicates to HF&H that the current rate adjustment methodology allows for potential double-compensation in areas where the Hauler is compensated separately from the Hauler Component of the rates. This also indicates to HF&H that a reset of the base rate based on all current services and removes all per month fees remitted to the Haulers, would be beneficial.
For the upcoming annual rate adjustment application, the costs to pre-process organic materials will be included in both of the Haulers’ financial information and the per month fee should be removed to avoid double-compensation regardless of which Hauler is the ‘lower cost Hauler’.
City Compost Facility Rate
The City informed HF&H that the City’s compost facility reviews incoming organic material for compliance with the 1% contamination limit through a visual inspection. However, this inspection has been insufficient to identify incoming tonnage that is above the contamination level. The compost facility has been disposing of more organics contamination residue than anticipated and is incurring approximately $600,000 annually in City funds from other programs to dispose of the residue. The organics preprocessing rate was established for the Haulers to fully clean the organic materials collected within the City’s jurisdiction.
The City’s compost facility has two per ton rates: an in-city and out-of-city rate. The facility does not have a separate rate for contaminated material to cover the additional costs for the City to continue to process organic material because the pre-processing rate was established for delivered materials to have no contamination. If a load is identified as having contamination, the City will either reject the load and return #7..
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April 17, 2024
it to the Haulersfor additional pre-processing before charging a second tip fee upon return or the City will continue to process the material on site at the Compost facility at their own expense. Therefore, the current rates at the facility do not cover all of its costs incurred to process and dispose of organic residue.
Hauler Tonnage Review
The City discussed with HF&H its lack of confidence in the tonnage reports submitted by the Haulers to the City. The City also informed HF&H that the Recycling and Disposal Reporting System tonnage for the City of Modesto does not match the information provided to the City. HF&H performed a recalculation of the tonnage reports for Bertolotti and Gilton by material stream from July 2021 – June 2022. The recalculation found that not only did the annual tonnage disagree with the annual tonnage reported in the operating statistics, but it also did not agree to subtotals within the individualreports. HF&H compared the tonnage reports to the tonnage reported in the operating statistics provided to HF&H and inquired about discrepancies.
HF&H inquired with both Bertolotti and Gilton regarding the tonnage discrepancies and received the following response: The tonnage reports were created by and provided to each Hauler to fill out. The intent of the forms was submission to Cal Recycle but has since changed due to SB 1383. Gilton noticed that some of the formulas on the tabs differed from the summary page but did not modify the form. Both Bertolotti and Gilton mentioned that self-haul and schools were not included in the operating statistics tonnage reported as they are not part of the franchise. Gilton also noted that these reports were revised after June 2022. In summary, the operating tonnage submitted to HF&H should differ from the tonnage reports and Gilton recommends the tonnage per the operating statistics should be used for our review purposes. If the City requires additional information from these reports, the optimal time to modify these templates will be during the agreement amendment process.
Hauler Detailed General Ledger Review
HF&H requested expenditure descriptions from Gilton and Bertolotti for the line items in their annual rate adjustment application. A copy of these descriptions is provided at Attachments C-1 and C-2. These descriptions allowed HF&H to remap the Haulers’ annual rate adjustment applications to compare similar types of expenditures to each other as Gilton and Bertolotti group some categories of expenditures differently. Then, HF&H requested detailed general ledgers from the Haulers for expenditure categories that were of interest to the City or were significantly higher than the other Hauler.
Bertolotti: HF&H reviewed the detailed general ledgers for the following categories: Advertising, Bank Charges, and Rent. Detailed review of these general ledgers confirmed that all expenses in these categories were business-related expenditures that were reasonable to incur in operating the business and did not appear to be related to specifically non-Modesto jurisdictions.
Gilton: HF&H reviewed the detailed general ledgers for the following categories: Bank Charges, Computer, Depreciation, Rent, and Telephone. Detailed review of these general ledger confirmed that all expenses in these categories were business related expenditures that were reasonable to incur in operating a business and did not appear to be related to specifically non-Modesto jurisdictions. #7..
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Managing Tomorrow’s Resources Today
Rosene Nguyen
April 17, 2024
At the City’s request, HF&H performed a deeper review of the Business Travel expenses incurred by Gilton.
HF&H reviewed the general ledger of Business Travel and noted that 62% of expenses were for travel to attend insurance related meetings, 20% of expenses were for business lunches with employees, vendors, and other business associates, and 18% of expenses were for business meals and travel for purposes of conventions, vendor negotiations, and equipment surveying.
Gilton also provided HF&H with additional background on their Business Travel: The Operations Manager’s duties include equipment/vehicle evaluations and purchases, safety coordinator, employment practices, and insurance insight. The Operations Manager also sits on the Board of Directors for Gilton’s Captive Insurance policies, which includes worker compensation, vehicle, and liability insurances. The Operations Manager attends safety meetings twice a year to ensure Gilton is in compliance and stays on top of industry changes. The Operations Manager and Richard Gilton attend board meetings for Captive Insurance twice a year. As part of the Board meetings there are educational classes regarding loss mitigation and other insurance related subjects.
After HF&H reviewed the general ledger and Gilton’s narrative, HF&H believes these types of business travel expenses appear reasonable to incur in operating a business.
FINDINGS
• Gilton’s general and administrative allocation attributed an additional ~$96,000 in indirect expenses to the City of Modesto based on an incorrect inclusion of commercial commodity revenue that is not part of the franchise. HF&H estimates the impact of this overallocation of expenses to be ~$0.73 per commercial cubic yard. Because the current rates were set based on an inflation increase and not on this financial information, there is no impact to the current rates. A review of prior period allocations would be required to ascertain whether the incorrect allocation was used in previous years.
• Bertolotti’s total costs per route are higher than the reasonable range from the benchmarks and the driving factor may be additional labor expenses for overtime. Gilton’s labor costs are higher than the reasonable range due to inclusion of bulky drivers, customer service reps, and other personnel within the driver labor category instead of the overhead category. The overall per route costs, including fuel, are still slightly higher than the reasonable range. • Bertolotti’s and Gilton’s annual rate adjustment application included costs that would doublecompensate them for organics pre-processing services (firstly in direct costs and secondly through the per month fee). However, because the current rates were set based on an inflation increase, the current rates do not double-compensate Bertolotti or Gilton for organics preprocessing.
HF&H RECOMMENDATIONS
Based on the above analysis, HF&H has summarized our recommendations for next steps below:
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Managing Tomorrow’s Resources Today
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April 17, 2024
1. Third Party Review of Gilton Allocation: Because Gilton’s software for allocation of costs to the City is integrated with their accounting software, HF&H recommends that the software be reviewed periodically by a third party for accuracy and reasonableness. The cost for this review may be at the City’s or the Hauler’s expense. Additionally, HF&H recommends that the City provide direction to Gilton on appropriate allocators for each overhead cost category, such as customer count or overhead labor hours by jurisdiction.
2. City’s Compost Facility Per-Ton Rate: HF&H recommends the City consider creating a separate rate for contaminated organic material. The City and Haulers should meet and confer to develop a surcharge that addresses this additional cost burden to rate-payers.
3. Amend and Restate the Current Franchise Agreements: Based on discussions with the City regarding past experiences under the current franchise agreements, operational and informational challenges with the Hauler, and the insufficient franchise agreement language to provide the City the guardrails and direction it desires, HF&H recommends negotiating an amendment to and restating the current franchise agreement to address these concerns. HF&H also recommends the haulers resubmit official cost and operations forms to set a baseline to which future operations can be compared for reasonableness.
Initially, HF&H recommends the City and Haulers and discuss how the current franchise agreement is functioning appropriately, and how it can be improved. This process could be navigated through use of a third party, like HF&H, to facilitate a pointed discussion on key points of the franchise agreement and document key issues and alternatives.
Modify Annual Rate Adjustment Methodology: Because the current annual rate adjustment process of using the ‘lowest cost Hauler’ does not provide any guardrails to protect the City from high inflation factors, operational inefficiencies, disposal costs at non-preferred locations, doublecompensation, and other operational issues that impact costs, HF&H recommends modifying the current annual rate adjustment process through the amendment to account for these possibilities. Some possibilities could include linking labor cost increases to local collective bargaining agreements or inflating expense categories based on regional and classification specific CPI indices. HF&H would be happy to discuss with the City the alternative rate setting methodologies used in other jurisdictions and discuss the pros and cons of those alternative methodologies.
Acceptable Disposal Location Designations: Because the current franchise agreement does not state which landfill the solid waste material should be delivered, the Haulers may choose where to bring the material. This may increase the cost of delivery (additional fuel and labor time), and due to the current annual rate adjustment process, increased costs will directly flow to the rate payers. HF&H recommends designating the disposal facilities in the franchise agreements to ensures material flow is managed and predictable.
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April 17, 2024
Additionally, HF&H recommends that the new rate adjustment methodology calculate the compensation for disposal and organics pre-processing and delivery based on a build-up of tons multiplied by the rate at the destination facility. The ‘clean material’ rate at the City’s compost facility should be used for organics because the Haulers are being compensated to pre-process material to the facility’s standards. If the City’s compost facility enacts a separate charge for contaminated loads, as recommended above, the Haulers would be responsible for covering the additional cost if the organic material does not meet contamination standards.
4. Transfer / Organics Pre-Processing Rate Benchmarking: Because Gilton Resource Recovery and Gilton Solid Waste are affiliated parties, HF&H recommends the City review the transfer/preprocessing rate to ensure it is within the range of acceptable market rates. Additionally, HF&H recommends negotiating with the Haulers to tie the annual increase in this rate to an index or some other annual metric.
5. Future Fee Component Removals: Because certain City fees are for services that the Hauler is currently performing, the costs to perform these services will be reflected in the Hauler’s future financial information. Therefore, these fees should be removed in the upcoming annual rate adjustment process to not double-compensate the Hauler. A list of these fees is included below for reference:
a. Weekly Organics Collection
b. SB 1383 Collection Fee (For collection and processing of recyclable materials) c. Organics Waste Pre-Processing
6. Monthly/Quarterly Tonnage Reports: Because the reporting requirements may change with an amendment to the agreement, HF&H recommends the City review the current reporting template for additional modifications, as needed during the amendment process, and discuss these modifications with the Haulers
7. Detailed General Ledger Review: HF&H’s review of selected general ledger accounts did not yield expenditures that were unallowable in nature. However, certain business-related decisions and practices that are at the discretion of the company (e.g., increasing driver wages to incentivize tenure, attending multiple instead of few industry conferences, purchasing additional IT software/security) will affect the City’s rate payers and the City has no influence on or ability to veto these expenses. A revision to the annual rate adjustment process that places a cap on general and administrative expenses, or limits specific categories of expenses, can provide the City with a general enforcement mechanism while allowing the Haulers the opportunity to make these business decisions at their discretion.
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Managing Tomorrow’s Resources Today
Rosene Nguyen
April 17, 2024
CONCLUSION
HF&H reviewed the annual rate adjustment process, benchmarked the current programmatic costs and operating statistics, examined the current transfer, disposal, and pre-processing arrangements, and checked general and administrative expenses for reasonableness. HF&H recommends amending and restating the franchise agreement to modify the current rate adjustment methodology to align annual cost adjustments with indices or other third-party sources, include disposal and pre-processing guardrails to direct the flow of and quality of materials, and remove future fee components in the next year’s rates to avoid double-compensation.
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ATTACHMENT A-1:
BERTOLOTTI BULKY PROGRAM STATISTICS
A B
Account Information
1 Customer Annual Collections 2,343 NONE
Labor Information
2 # of route/hourly personnel 2 NONE
3 # of spare personnel 0
4 # of salaried personnel 0
5 Total labor hours/year 2080
A B
# of routes per
6 ONE ROUTE 2 DAYS A WEEK Weekday 1 NONE
7 Saturday
8 Sunday
# of persons/route per
9 Weekday 2
10 Saturday
11 Sunday
# of route hours/day/route per
12 Weekday 20
13 Saturday
14 Sunday
# of route hours/year per
15 Weekday 2080 NONE
16 Saturday 0 0
17 Sunday 0 0
18 Total 2080 0
19 # of FTE routes 1 0
Vehicle Information
20 # of regular collection vehicles 2
21 # of spare collection vehicles
22 Total # of collection vehicles 2
Tonnage Information (annual)
23 Direct Haul
24 Transfer
25 Solid Waste Disposed 0 0
26 Recyclable materials
27 Organic materials
28 Total 0 0
29 Tonnage Disposed
30 Projected Processing Residue %
Pulls = pull and return etc.
Full Time Equivalent (FTE) = 40 hours per week, 2,080 hours per year
STATISTICAL & OPERATIONAL DATA
Modesto
Residential
Bulky
Commercial
Bulky
Residential
Bulky
Commercial
Bulky
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ATTACHMENT A-2:
BERTOLOTTI BULKY PROGRAM COSTS
Expenses
Wages 68,640 NONE
Benefits 18,139
OTHER P/R TAX, W/C INS, UNIFORMS 19,434
Total Labor Related Costs 106,213 -
Fuel 14,300 NONE
Vehicle Related Costs R&M 9,600
Depreciation 62,000
Other Direct Costs LIABILITY INS 2,450
Total Direct Costs 194,563 -
Allocated Costs - Labor, Vehicle & Other Costs
General & Administrative 12,000 NONE
Vehicle & Container Maintenance
12,000 -
Total Annual Cost of Operations 206,563 -
Pass Through Costs
Disposal 65,007 NONE
Transfer 14,402
Interest
Total Pass Through Costs 79,409
Total Contractor Cost before City Fees 285,972 -
Residential Bulky
Collection
Commercial
Bulky Collection
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ATTACHMENT B-1:
GILTON BULKY PROGRAM STATISTICS
A B
Account Information
1 Customer Annual Collections 14712
Labor Information
2 # of route/hourly personnel 3.2937
3 # of spare personnel
4 # of salaried personnel
5 Total labor hours/year 6851.01
A B
# of routes per
6 Weekday
7 Saturday
8 Sunday
# of persons/route per
9 Weekday
10 Saturday
11 Sunday
# of route hours/day/route per
12 Weekday 0
13 Saturday
14 Sunday
# of route hours/year per
15 Weekday 0 0
16 Saturday 0 0
17 Sunday 0 0
18 Total 0 0
19 # of FTE routes 0 0
Vehicle Information
20 # of regular collection vehicles 1.96
21 # of spare collection vehicles
22 Total # of collection vehicles 1.96
Tonnage Information (annual)
23 Direct Haul
24 Transfer 2408.65
25 Solid Waste Disposed 2408.65 0
26 Recyclable materials
27 Organic materials
28 Total 2408.65 0
29 Tonnage Disposed 2408.65
30 Projected Processing Residue %
STATISTICAL & OPERATIONAL DATA
Modesto
Residential
Bulky
Commercial
Bulky
Residential
Bulky
Commercial
Bulky
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ATTACHMENT B-2:
GILTON BULKY PROGRAM COSTS
Expenses
Wages 218,446
Benefits 100,315
Other (Please List) Laundry 1,108
Total Labor Related Costs 319,869 -
Fuel 71,682
Vehicle Related Costs 50,016
Depreciation 53,240
Other Direct Costs 7,736
Total Direct Costs 502,543 -
Allocated Costs - Labor, Vehicle & Other Costs
General & Administrative -
Vehicle & Container Maintenance 99,903
99,903 -
Total Annual Cost of Operations 602,446 -
Pass Through Costs
Disposal 124,106
Transfer 62,931
Interest
Total Pass Through Costs 187,037 -
Total Contractor Cost before City Fees 789,483 -
Residential Bulky
Collection
Commercial
Bulky Collection
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ATTACHMENT C-1:
BERTOLOTTI EXPENSE LINE ITEM DESCRIPTIONS
Expense Line Item
(Modesto Annual Rate Application
Expense Line Item
(Per Financial Statements) Expense Line Item Description Direct Costs:
Wages: Supervisor Wages, Salaries and Wages Salaries and wages for Bertolotti Modesto (BMDI) drivers and mechanics Other Payroll Expenses:
Comp Insurance Workmen's Comp. Workers comp insurance costs for drivers and mechanics Group Insurance Medical / Group Ins. Medical insurance cost for BMDI drivers and mechanics Payroll Taxes Payroll Taxes Payroll taxes for BMDI drivers and mechanics Profit Sharing Profit Sharing Profit sharing for 401K BMDI drivers and mechanics Truck Expenses:
Depreciation Depreciation Depreciation for BMDI fixed assets Fuel Fuel, Oil, & Lube Fuel costs for BMDI trucks
Licenses Licenses / DMV City business licenses and DMV costs for BMDI Repairs Repairs & Maint. All R&M costs (except for fuel and tires) for BMDI trucks/equipment Tires Tires Tires costs for BMDI trucks
Vehicle/Liab Insurance Vehicle Insurance Liability/Physical damage coverage for BMDI vehicles Other Operating Expenses:
Bulky Item Disposal Fee Bulky Item Disposal Fee Disposal fee for Bulky items Green Waste Cleaning Green Waste Cleaning Cleaning costs for sorting and cleaning of organics Green Waste Hauling Green Waste Hauling Hauling costs for organics Green Waste Tip Fee Green Waste Tip Fee Tip fee for organics Laundry Laundry & Uniforms Uniform costs for BMDI employees Transfer Station fee Transfer Fees Hauling fees charged by Bertolotti Transfer Station G&A Expenses:
Accounting Accounting Services Costs paid to outside CPA for audit, financials and tax return prep Advertising Advertising Earth Day 2023 booth and supplies Advertising paid to City Advertising Paid to City Modesto billed advertising fee Bad Debts Bad Debts Write-offs of uncollectible receivables Bank Charges Bank Charges Bank servicing and credit card processing fees City Billing Fees City Billing Fees Modesto billing fees City Pollution Insurance City Pollution Insurance Bertolotti's portion of Modesto's pollution policy Computer Exp Computer / Data Process. Desktop support from outside IT consultant and small computer items Depreciation & Amort. Depreciation Depreciation of fixed assets Employee Benefits (Medical/Group Ins.) Medical/Group Ins. Medical insurance for BMDI office employees Indirect Liability insurance Indirect Liability Insurance General liability coverage Insurance (Workmen's Comp Ins) Workmen's Comp. Ins. Workers comp insurance for BMDI office employees Office Supplies Office Supplies Small Office supplies for BMDI (paper, pens, etc) Other Taxes Other Taxes and Licenses Misc taxes and licenses for BMDI (annual SOS filing, business license) Outside Services/Security Outside Services Outside temps Payroll Taxes Payroll Taxes Payroll taxes for BMDI office employees Postage Postage General postage and freight
Professional Fees/Services Professional Services
Legal costs (corporate minutes, employment liability assessment, defense costs)
Profit Sharing (Def Comp) Profit Sharing Profit sharing for office employees Property Taxes Property Taxes Real and personal property taxes Rent Rent Office and equipment rent
Salaries Salaries & Wages Salaries and wages for BMDI office employees Security Security 3 rotating security guards
Telephone Telephone VOIP Costs, Cell Phones, Radios, Fiber Internet Travel & Enter Meals & Entertainment Travel, meals, and entertainment (conventions, meals for office) Utilities Utilities BMDI utilities (TID, PGE)
Total G&A Exp:
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ATTACHMENT C-2:
GILTON EXPENSE LINE ITEM DESCRIPTION
Expense Line Item
(Modesto Annual Rate Application
Expense Line Item
(Per Financial Statements) Expense Line Item Description Direct Costs:
Wages: Wages
GROSS PAY FOR NON-ADMINISTRATIVE AND NON-MANAGEMENT INCLUDING REGULAR, OVERTIME,
VACATION, SICK, PTO AND HOLIDAY PAY (EXCLUDES SHOP)
Other Payroll Expenses:
Comp Insurance Compensation Insurance
WORKERS COMPENSATION INSURANCE PAID/ACCRUED DURING THE FISCAL YEAR FOR NON-ADMIN AND
NON-MANAGEMENT STAFF
Group Insurance Group Insurance
MEDICAL, DENTAL AND VISION PAYMENTS MADE TO INSURANCE PROVIDERS AS WELL AS SELF-INSURED
PLANS ON BEHALF OF NON-ADMIN, NON-MANAGEMENT STAFF
Payroll Taxes Payroll Taxes
EMPLOYERS SHARE OF SOCIAL SECURITY, MEDICARE, FEDERAL UNEMPLOYMENT INSURANCE, CA STATE
UNEMPLOYMENT INSURANCE AND EMPLOYER TRAINING TAX
Profit Sharing Profit Sharing EMPLOYER MATCH OF SECTION 401 (k) PAYMENTS FOR EMPLOYEE RETIREMENT PLAN Truck Expenses:
Depreciation Depreciation
ANNUAL STRAIGHT-LINE COST OF HAULER'S COLLECTION VEHICLES AND TRAILERS, E.G. AUTOMATED, FRONT LOADER, ROLL-OFF, BULKY ETC.
Fuel Fuel COST OF GAS AND DIESEL EXPENSE RELATED TO HAULER COLLECTION VEHICLES Licenses Licenses
COST OF COLLECTION VEHICLE RELATED FEDERAL AND STATE TAXES, LICENSING, PERMITTING AND
REGISTRATION FOR BOTH INITIAL PURCHASE AND RENEWALS
Repairs Repairs COLLECTION VEHICLE RELATED REPAIRS COSTS INCLUDING OIL, GREASE AND FLUIDS (PARTS AND LABOR) Tires Tires PURCHASE, INSTALLATION AND/OR REPAIR OF HAULER COLLECTION VEHICLE TIRES Vehicle/Liab Insurance Vehicle // Liability Insurance COST TO INSURE HAULER COLLECTION VEHICLES INCLUDING PROPERTY AND VEHICLE RELATED LIABILITY Other Equipment Expenses:
Depreciation Depreciation
DEPRECIATION ON CONTAINERS, LEASEHOLD IMPROVEMENTS AND OFFICE FURNITURE, FIXTURES AND
EQUIPMENT
Other Operating Expenses:
Laundry Laundry LAUNDERED UNIFORMS, MATS, TOWELS
Supplies Supplies CLEANING, JANITORIAL, DRIVER SUPPLIES, AND OTHER MISCELLANEOUS SUPPLIES Transfer Station fee Transfer Station Fee TIPPING FEE AND PROCESSING FEE PAID TO TRANSFER STATION Indirect Costs:
Officer Salaries
Shop Expense Shop Expense
ALL NON-SPECIFIC SHOP OVERHEAD (E.G. WAGES, REPAIRS, FUEL, WC, LAUNDRY, INSURANCE, SUPPLIES, ETC. NOT DIRECTLY ALLOCATED)
G&A Expenses:
Accounting Accounting COST PAID TO EXTERNAL AUDITORS, ACCOUNTANTS AND CONSULTANTS Advertising Advertising GENERAL PROMOTIONAL ITEMS
Bad Debts Bad Debts UNPAID AND UNCOLLECTABLE CUSTOMER BILLS REMOVED FROM ACCOUNTS RECEIVABLE Bank Charges Bank Charges BANK SERVICE CHARGES AND CREDIT CARD AND ELECTRONIC PAYMENT MERCHANT FEES Cash O/S Cash Over / Short MISC. CASH/OVER SHORT FROM CASH DRAWER City Billing Fees Billing Expenses
COST PAID TO THE CITY OF MODESTO FOR BILLING/COLLECTIONS (CITY WITHHOLDS THIS FROM AMOUNT
PAID TO HAULER)
Community Education/Support Public Education Costs INVOICES FROM THE CITY OF MODESTO FOR PUBLIC EDUCATION Computer Exp Computer Expenses
SERVER HARDWARE AND SOFTWARE LICENSING AND MAINTENANCE, REPORT DESIGN, DATA STORAGE,
COMPUTER AND NETWORK RELATED HARDWARE AND SOFTWARE
Contributions Contributions INDUSTRY RELATED NOT-FOR -PROFIT CONTRIBUTIONS Depreciation & Amort. Depreciation and Amortization ANNUAL STRAIGHT-LINE COST OF SUPPORT VEHICLES AND AMORTIZATION OF LOAN FEES Employee Safety Exp Employee Safety Expenses LITERATURE, TRAINING, SAFETY EVENTS AND INCENTIVES Insurance (Workmen's Comp Ins) Insurance HEALTH, DENTAL, VISION AND LIFE INSURANCE, WORKERS COMPENSATION Office Supplies Office Supplies
COPY PAPER, STAPLES, PAPER CLIPS, PENS, CALCULATOR TAPE, OTHER SMALL OFFICE ITEMS, 10-KEY CALCULATORS ETC.)
Other Taxes Other Taxes EMISSIONS COMPLIANCE, PCORI TAX, CITY OF MODESTO ANNUAL BUSINESS LICENSE Outside Services/Security Outside Services FIRE AND SECURITY ALARM SERVICES, PEST CONTROL AND, VEHICLE FUEL SERVICING FEES Payroll Taxes Payroll Taxes
EMPLOYERS SHARE OF SOCIAL SECURITY, MEDICARE, FEDERAL UNEMPLOYMENT INSURANCE, CA STATE
UNEMPLOYMENT INSURANCE AND EMPLOYER TRAINING TAX
Penalties Penalties LATE FEES AND OTHER PENALTIES
Permits/Licenses Permits STATE OF CALIFORNIA MOTOR CARRIER PERMIT FEE Postage Postage COST OF POSTAGE, POSTAGE EQUIPMENT LEASE, MAILING SERVICE AND POSTAGE SUPPLIES Professional Fees/Services Professional Fees LEGAL FEES, DIRECT PAYMENTS TO MEDICAL FACILITIES, 3RD PARTY ADMIN FEES, BROKER FEES Profit Sharing (Def Comp) Profit Sharing EMPLOYER MATCH OF SECTION 401 (k) PAYMENTS FOR EMPLOYEE RETIREMENT PLAN (ADMIN/MGMT) Property Taxes Property Taxes
STANISLAUS COUNTY UNSECURED PROPERTY TAX FOR OPERATING EQUIPMENT (E.G. CONTAINERS) USED
BY THE CITY OF MODESTO
Rent Rent OFFICE LEASE AND/OR TEMPORARY EQUIPMENT RENTALS Repairs (Repair & Maintenance) Repairs REPAIR SERVICES INCLUDING PARTS AND LABOR RELATED TO THE BUILDINGS AND GROUNDS Salaries Salaries
GROSS PAY FOR ADMINISTRATIVE SUPPORT, CSR, IT AND MANAGEMENT INCLUDING SALARY, VACATION,
SICK, PTO AND HOLIDAY PAY
Subscriptions (& Dues) Subscriptions INDUSTRY RELATED MEMBERSHIPS DUES AND FEES Telephone Telephone
CELL PHONE, TABLETS GPS SERVICES, DRIVER/FLEET MANAGEMENT, ANALOG LAND LINES, DEDICATED
FIBER/INTERNET, VOIP PHONE SYSTEM, FIREWALL
Travel & Enter Travel & Entertainment BUSINESS RELATED TRAVEL AND ACCOMPANYING EXPENSES (DOES NOT CONTAIN ENTERTAINMENT) Utilities Utilities WATER, SEWER, GARBAGE, NATURAL GAS, ELECTRICITY FOR OFFICES AND SHOP Vehicle Exp Vehicle Expenses
FUEL, REPAIRS AND MAINTENANCE, TIRES, LICENSING/REGISTRATION AND GENERAL UPKEEP OF SUPPORT
VEHICLES
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City Manager’s Office
P.O. Box 642
Modesto, California 95353
209.577.5223
Modestogov.com
January 27, 2026
Richard Gilton
Gilton Solid Waste Management, Inc.
755 S Yosemite Avenue
Oakdale, CA 95361
RE: Notice of Termination – 1997 Service Agreement (as previously amended) between the City of Modesto and Gilton Solid Waste Management, Inc.
Dear Mr. Gilton,
This notice of termination serves to notify Gilton Solid Waste Management, Inc., of the Modesto City Council’s decision to terminate the 1997 Service Agreement (as previously amended) with Gilton Solid Waste Management, Inc.
The agreement shall terminate 10 years from the date this notice of termination is given. Per the terms of the agreement, the termination date of the 1997 Service Agreement (as previously amended) shall be January 27, 2036.
Sincerely,
Joseph P. Lopez
City Manager
#7..
- 480 -
City Manager’s Office
P.O. Box 642
Modesto, California 95353
209.577.5223
Modestogov.com
January 27, 2026
Gilton Solid Waste Management, Inc.
1324 J Street
Modesto, CA 95354
RE: Notice of Termination – 1997 Service Agreement (as previously amended) between the City of Modesto and Gilton Solid Waste Management, Inc.
Dear Mr. Gilton,
This notice of termination serves to notify Gilton Solid Waste Management, Inc., of the Modesto City Council’s decision to terminate the 1997 Service Agreement (as previously amended) with Gilton Solid Waste Management, Inc.
The agreement shall terminate 10 years from the date this notice of termination is given. Per the terms of the agreement, the termination date of the 1997 Service Agreement (as previously amended) shall be January 27, 2036.
Sincerely,
Joseph P. Lopez
City Manager
#7..
- 481 -