January 28, 2025
Agenda Item No. 8
TO:
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM:
David A. Webb, Public Works Director - 949-644-3311, [email protected] PREPARED BY:
Charles Springer, Senior Management Analyst - 949-718-3466, [email protected] TITLE:
Approval of Amendment No. One to Residential Solid Waste Collection & Recycling Contract (Contract No. 8823-1) with CR&R Inc. – Addition of 5% De-Escalation Maximum ABSTRACT:
Staff recommends approval of Amendment No. One to the agreement with CR&R Incorporated (CR&R) for residential refuse collection, which would limit potential annual rate decreases to mirror the current agreement’s limit on potential annual rate increases. The agreement with CR&R includes a multi-factor annual rate adjustment formula and limits total annual increases to 5%, but it has no language limiting potential decreases. This historically presented no issues, and the City of Newport Beach benefitted significantly from the escalation cap the previous two years. An unusual combination of factors during the previous year, however, would result in a prescribed 7% rate decrease for Fiscal Year 2024-25. In the interest of maintaining a fair relationship with its contractual partner, staff proposes a reciprocal 5% limit on annual decreases, with retroactive application to July 1, 2024.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Approval of Amendment No. One to the Residential Solid Waste Collection & Recycling Agreement with CR&R Inc. to add a 5% rate de-escalation maximum.
DISCUSSION:
The proposed amendment would limit potential annual rate decreases to 5% to mirror the contract’s language limiting maximum annual rate increases. No other changes would be made. This decrease would be applied retroactively to the beginning of FY 2024-25, July 1, 2024.
The rate adjustment formula in the contract is calculated based on changes to a weighted combination of fuel costs, disposal costs, and all other costs over the previous year.
Each cost category is tied to a particular market index, and total annual rate increases are capped at 5%. This provided significant benefits to the City during the first two years of the agreement as the Consumer Price Index was high due to the recent period of inflation. Without this limit, the annual contract rate paid by the City would have increased by 9.4% in FY 2022-23, and 10.1% in FY 2023-24.
However, an unusual combination of factors, primarily associated with fuel costs, during the previous year resulted in a prescribed 7% annual rate decrease for FY 2024-25. Concerned about the rate decrease, CR&R provided data and requested that the formula fuel component be removed, or for the rate to be frozen to equal last year’s rate. Working with the contractor, and understanding that it has a lot of fixed costs and that it would be atypical for a contract to markedly decrease, staff agreed to look into a potential remedy. After much discussion, staff responded that it would be inappropriate to provide the contractual relief CR&R requested as the prescribed rate formula should also allow the City to share in any associated cost savings, such as lower fuel costs. However, staff did feel that since the City caps cost increases, it would be fair to consider including the same cap on decreases.
FISCAL IMPACT:
The adopted operating budget includes sufficient funding for this amendment. Costs for this agreement are expensed to the General Fund in the Public Works Department, 0108051-851006. If this Amendment No. One is approved, the 5% decrease for this billing year will lower costs to the City by approximately $436,000 for FY 2024-25 relative to last year’s FY 2023-24 cost.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment) and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item).
ATTACHMENT:
Attachment A – Amendment No. One to Residential Solid Waste Collection & Recycling Contract 8-3
8-1
Approval of Amendment No. One to Residential Solid Waste Collection and Recycling Contract (Contract No. 8823-1) with CR&R Inc.
January 28, 2025
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