CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
10/10/2022
1 SUBJECT:
Resolution Approving a Second Amendment to the Franchise Agreement with Recology of the Coast to extend the Term an additional ten years, with an option to extend an additional five years, approve the rate schedule set by Recology for single family residential and commercial rates for 2023, revise City fees to comply with applicable law, and other various amendments; and Finding approval of the Second Amendment exempt under the California Environmental Quality Act; and Authorizing the City Manager to execute the Second Amendment.
RECOMMENDED ACTION:
Move to adopt a Resolution:
1) Approving a Second Amendment to the Franchise Agreement with Recology of the Coast to extend the Term an additional ten years, with an option to extend an additional five years, approve the rate schedule set by Recology for single family residential and commercial rates for 2023, revise City fees to comply with applicable law, and other various amendments; and
2) Finding approval of the Second Amendment exempt under the California Environmental Quality Act; and
3) Authorizing the City Manager to execute the Second Amendment.
STAFF CONTACT:
Lisa Petersen, Director of Public Works
(650) 730-4948
[email protected]
BACKGROUND/DISCUSSION:
In February 2010, the City of Pacifica entered into a franchise agreement with Recology of the Coast (“Recology”) for Recyclable Materials, Organic Materials, and Solid Waste Collection Services. The City and Recology executed a First Amended Franchise Agreement on March 11, 2013 (“Agreement”), which is attached as Attachment 1.
On October 24, 2016 the City Council adopted Resolution No. 67-2016, extending the term of the Agreement for an additional five years until December 31, 2022.
The Agreement generally grants Recology the exclusive right and franchise to collect the following materials in the City service area:
1. Solid waste generated at residential premises, commercial premises and City facilities;
2. Targeted recyclable materials generated at residential premises and City facilities;
3. Organic materials generated at residential premises, commercial premises and City facilities; and
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4. Construction and demolition debris generated at residential premises, commercial premises and City
facilities.
The Agreement also generally grants Recology a non-exclusive right and franchise to collect the following materials in the Service Area:
• Targeted recyclable materials generated at commercial premises; and • Major appliances and specialty recyclable or reusable materials generated at residential premises and commercial premises.
ANALYSIS:
As the Agreement is set to expire on December 31, 2022, staff considered various options relating to the procurement of waste hauling services. Recology has been satisfactorily meeting the City’s requirements since 2010 and has extensive knowledge of the City’s needs and has formed important relationships within the community in order to perform their waste hauling services. Additionally, Recology has the correct equipment to provide the City collection services. Finally, Recology and City staff work very closely together on a variety of day-to-day issues that arise as well as more complex issues relating to compliance with state laws, such as SB 1383. Although the City could solicit requests for proposals from other hauling companies, the City Manager and Public Works Director are recommending instead that the City extend the current Agreement with Recology given the limited number of vendors that provide the level of service and equipment that Recology provides to the City and the potential cost increases from changing vendors.
Proposed Second Amendment Terms
The Second Amendment would, among other things, extend the term of the Agreement to allow Recology to continue to provide their services for an additional ten years with an option for renewal for an additional five years. The proposed Second Amendment is attached as Attachment 2.
Other key revisions in the proposed Second Amendment are as follows:
1. SB 1383- On November 22, 2021, the City Council introduced an Ordinance Article 7, “Mandatory Organics Waste Disposal” to Chapter 5 within Title 6 of the Pacifica Municipal Code pertaining to Mandatory Organic Waste Disposal Reduction in Compliance with Senate Bill 1383. The Ordinance includes State of California required changes related to organic waste disposal. In addition to many of these changes requiring additional staff work and cost on the City’s part, a number of these changes also require additional work from Recology in areas related to the diversion program implementation, public outreach, commercial support and data entry and reporting.
2. Fuel - The cost of fuel has been changing rapidly and has impacted the cost of running the waste collection trucks. The Second Amendment includes an updated fuel reconciliation process that will allow reconciliation related to yearly fuel cost fluctuation at the end of the year.
3. Franchise and Service Fees -A recent California Supreme Court ruling (Zolly v. City of Oakland) on this issue has altered the legal requirements and restrictions on Franchise and Service Fees that can be charged in connection with a solid waste franchise, thus necessitating a review of the fees in the Agreement. Recology has paid fees since Pacifica City Council 3
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entering into the Agreement with the City in 2010, of approximately $910,000/year. The City previously imposed a fee for AB 939 to compensate the City for its costs incurred to reduce waste, a fee for Frontierland Park is to maintain the cap over the landfill, and a fee for the value of the exclusive nature of the solid waste franchise.
As a result of the recent Zolly decision, the City will no longer charge a fee for the value of the exclusive franchise for hauling services. Instead, the fees will be limited to the City’s actual costs to provide services related to the Franchise and/or the reasonable value of City property used for the Franchise. The Amendment provides for the following Franchise and Service Fees in the proposed amendments to Section
10.01 of the Agreement:
a. Franchise Fee. The exclusive franchise that has been granted through the Agreement is intended to allow Recology the use of City property to provide collection services. The fee does not exceed the fair market value of City property used by Recology and allows Recology to access for ingress and egress of the north eastern portion of the City yard at 2212 Beach Boulevard with access off of Palmetto Avenue for a total area of 40,000 square feet and the right to place Containers in public streets, sidewalks, and right-of-ways.
b. Franchise Administrative Services Fee. This fee is equal to the City’s costs of providing services related to this Agreement and Recology’s collection services for a total of $183,790 annually.
c. Frontierland Park Remediation Fee. The City has an ongoing obligation to remediate Frontierland Park for matters related to the closed landfill site at that location. Remediation efforts focus on minimizing or resolving health, safety and public nuisance problems that may adversely affect the quality of life for citizens of the City. The remediation fee also provides funding for improvements to Frontierland Park facilities. The Frontierland Park remediation fee monies are used by the City to fund the remediation efforts. Recology shall pay to City a Frontierland Park remediation fee in the amount of $6,250 per month, which totals $75,000 annually.
The Frontierland Park remediation fee does not exceed the City’s annual costs to remediate Frontierland Park.
d. AB 939 Fee. The Act (AB 939) requires the City to plan, implement and monitor programs that will reduce the amount of Solid Waste Disposed by residents and businesses and report annually to the State. Programs include recycling and organics programs, public education and outreach efforts, franchise monitoring, etc.
The AB 939 fee is used to fund these mandated efforts. Contractor shall pay to City an AB 939 fee in the amount of $2,500 per month, which totals $30,000 annually. The AB 939 fee does not exceed the City’s costs to comply with AB 939. e. City Vehicle Impact Fee. Recology is to pay the City a refuse vehicle impact fee of $421,210 annually to compensate the City for the additional expenses it incurs to repair and address the damage to the City's public streets caused by Recology's vehicles while performing collection services. In order to better analyze the impacts to the City streets by refuse vehicles, staff retained consultant, NCE Engineering Consultants to conduct a pavement study
(<https://www.cityofpacifica.org/home/showdocument?id=13129&t=63800646359758 8293>). The pavement study demonstrates that the vehicle impact fee does not exceed the City’s costs to address the impacts of solid waste vehicles on City streets.
In order to determine the City costs to provide services related to the Franchise and the reasonable value of City property used for the Franchise, staff prepared an Pacifica City Council 4
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analysis, which is included as Attachment 3. After this analysis, the new Franchise Fee and Service Fees are proposed to remain at $910,000.
5. Labor Projections - Methods of obtaining a baseline for wages, pension, and health care costs were identified and are included in the Amendment.
6. Recycling Processing Costs - Economic changes related to the ability to sell recycled materials have changed the net cost/revenue to process recyclables. The Agreement addresses impacts related to these changes.
7. Hours of Operation - At the start of the Covid pandemic, the City allowed changes to the hours of collection for commercial and residential trash for safety reasons.
The hours were changed from 5:00 a.m. for commercial and 6:00 a.m. for residential to 4:30 a.m. for commercial and 5:00 a.m. for residential. The City has received minimal complaints related to the change in pick-up time and Recology has seen safety benefits to staff in allowing collection operation during hours with no traffic congestion. Additionally, Recology has observed lower costs in fuel due to less truck idling and less overtime from operators who are stuck in traffic. Also, Recology has stated that with return to work residents would like to have their trash collection earlier to allow trash cans to be brought in and prevent their home from looking unoccupied. For these reasons, staff is recommending permanently changing the collection times in the Proposed Amendment be as follows:
• Commercial - 4:30 a.m. to 7:00 p.m., Monday through Friday and 6:00 a.m. to 5:00 p.m. on weekends, exclusive of Holidays;
• Residential (single family and multi-family dwellings) -5:00 a.m. to 6:00 p.m., Monday through Friday, exclusive of Holidays;
• Commercial Exception (commercial premises 100 feet or less from residential premises) - 5:00 a.m. to 7:00 p.m., Monday through Saturday.
These permanent revisions to the collection times will require a slight amendment to the City’s noise ordinance provisions for solid waste collection found at Pacifica Municipal Code section 5-10.03(p).
8. On-Call Curbside Collection - This service will be increased from twice a year for each single-family dwelling residence to three times per year for bulky item collection.
9. 2023 Rate and Future Rate Adjustments- The proposed Second Amendment would also include the 2023 Rate Schedule for Single Family Residential and Commercial rates, which is attached as Attachment N to the Second Amendment.
The Second Amendment would also revise the Annual Rate Application Process identified in the Agreement to clarify that Recology ultimately sets the rate charged to the ratepayers. For future rate adjustments, the City will review and approve Recology’s application for annual rate increase to confirm accuracy and consistency with the Rate Adjustment procedures specified in the Agreement, Section 11 and the Attachment K.
The City Council would review and approve the identified maximum rates, which is 6%, to confirm that the adjustments are consistent with the maximum rate allowed to be charged to the ratepayers. Given that the City does not set, establish or impose the rates charged to the ratepayers, the City is not obligated to follow the procedures for establishing or increasing a proposed assessment under Proposition 218 (Article XIII D of the California Constitution). The City has for many years provided public notice to ratepayers of a rate adjustment and an opportunity to protest the adjustment in accordance with the procedures identified in the terms Pacifica City Council 5
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of the settlement agreement in Emde v. City of Pacifica. Those procedural requirements under the settlement agreement have expired and thus the City is no longer required to follow that process. Thus, City staff is recommending that the City no longer follow the Proposition 218 hearing process for rate adjustments as the City is not legally obligated to do so and the process itself is time consuming, costly and would be confusing for the public since the City does not set or impose the rates.
The City Manager recommends that the Council approve the Second Amendment to the Franchise Agreement with Recology. The approval of the Second Amendment would make various revisions to the Agreement, including extending the term an additional ten years, with an option for renewal for an additional five years, approve the rate schedule set by Recology for the 2023 Rates and revise the City fees, among other changes.
ALTERNATIVES:
Council may choose not to approve the Second Amendment to the Agreement or may require additional changes to the Second Amendment. Any further changes to the Second Amendment would need to be confirmed by Recology and the parties would need to execute the Second Amendment prior to December 31, 2022.
CEQA:
The approval of the Second Amendment to the Agreement would be exempt under the California Environmental Quality Act ("CEQA") Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility approval and execution of the Second Amendment would cause a significant effect on the environment. The Second Amendment to the Agreement will not change the operation of solid waste collection services provided to the City.
FISCAL IMPACT:
The City would continue to collect $910,000 as part of the Franchise Agreement Amendment negotiations that will be adjusted yearly for CPI.
ORIGINATED BY:
Public Works
ATTACHMENT LIST:
Attachment 1- Franchise Agreement (PDF)
Attachment 2- Proposed Second Amendment to Franchise Agreement with Attachments K, N and E (PDF)
Attachment 3 - City Cost analysis (PDF)
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RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA APPROVING A
SECOND AMENDMENT TO THE FRANCHISE AGREEMENT WITH RECOLOGY OF THE
COAST TO EXTEND THE TERM AN ADDITIONAL TEN YEARS, WITH AN OPTION TO
EXTEND AN ADDITIONAL FIVE YEARS, APPROVE THE RATE SCHEDULE SET BY RECOLOGY FOR SINGLE FAMILY RESIDENTIAL AND COMMERCIAL RATES FOR 2023,
REVISE CITY FEES TO COMPLY WITH APPLICABLE LAW AND OTHER VARIOUS AMENDMENTS; FINDING APPROVAL OF THE SECOND AMENDMENT EXEMPT FROM
THE CALIFORNIA ENVIRONMENTAL QUALITY ACT AND AUTHORIZING THE CITY
MANAGER TO EXECUTE THE SECOND AMENDMENT
________________________________________________________________________ WHEREAS, the City is responsible for the protection of the public health and safety of the residents and businesses of the City and solid waste handling services must be provided in a manner consistent with the exercise of City's duty to protect the public health and safety; and WHEREAS, in February 2010, the City of Pacifica entered into a franchise agreement with Recology of the Coast (“Recology”) for Recyclable Materials, Organic Materials, and Solid Waste Collection Services; and
WHEREAS, the City and Recology executed a First Amended Franchise Agreement on March 11, 2013 (“Agreement”); and
WHEREAS, on October 24, 2016, the City Council adopted Resolution No. 67-2016 extending the term of the Agreement for an additional five years until December 31, 2022; and WHEREAS, the City requires additional services related to Senate Bill 1383 and mandatory organic waste disposal; and
WHEREAS, Recology has the demonstrated experience, responsibility and qualifications to provide consistent recyclable, organic and solid waste collection services throughout the City in a safe and responsible manner and has been satisfactorily meeting the City’s requirements since 2010; and
WHEREAS, Recology has extensive knowledge of the City’s needs and has formed important relationships within the community in order to perform their waste hauling services and has the correct equipment to provide the City collection services; and
WHEREAS, to the extent that this amendment results in the imposition of any fees, rates, or charges for services or facilities in connection with the City’s solid waste system, those charges are adopted pursuant to California Health and Safety Code section 5471; and WHEREAS, the City Council of the City of Pacifica considered the City Manager’s recommendation to approve the Second Amendment to the Agreement between the City of Pacifica and Recology on October 10, 2022 and determined it is in the best interest of the public health, safety and well-being to enter into a Second Amendment to the Agreement with Recology, without competitive bidding, to extend the Agreement so that Recology can continue to be responsible for the collection, transportation and recycling or disposal of solid waste.
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NOW, THEREFORE BE IT RESOLVED by the City Council of the City of Pacifica as follows:
1. The above recitals are true and correct and material to this Resolution.
2. In making its determination, the City Council relied upon and hereby incorporates by reference all correspondence, staff reports, and other related materials submitted to the Council for consideration of the Second Amendment.
3. The approval of the Second Amendment to the Agreement would be exempt under the California Environmental Quality Act ("CEQA") Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility approval and execution of the Second Amendment would cause a significant effect on the environment. The Second Amendment to the Agreement will not change the operation of solid waste collection services provided to the City.
4. The City Council hereby approves the Second Amendment to the Agreement with Recology, in the form attached hereto as Exhibit A and all Attachments attached thereto.
5. The City Manager is hereby authorized to execute the Second Amendment, in the form attached hereto as Exhibit A, with minor revisions that may be approved by the City Manager and the City Attorney, and to execute any other necessary documents to effectuate the terms of the Second Amendment to the Agreement.
• • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on held on the 10th day of October 2022, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
____________________________
Mary Bier, Mayor
ATTEST: APPROVED AS TO FORM:
___________________________ __________________________
Sarah Coffey, City Clerk Michelle Kenyon, City Attorney Pacifica City Council 8
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EXHIBIT A