CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
11/27/2023
1 SUBJECT:
Recology of the Coast’s Application for Rate Increase for 2024 RECOMMENDED ACTION:
Move to adopt a Resolution confirming Recology of the Coast’s application for rate increase of
5.86% is accurate and consistent with the annual rate adjustment procedures specified in the Recology Agreement; and finding the confirmation of the rate increase exempt under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines 15061(b)(3).
STAFF CONTACT:
Lisa Petersen, P.E., Director of Public Works
(650) 738-3770
[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 (“ Agreement”). The City and Recology executed a First Amendment t o t h e Agreement on March 11, 2013.
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 waste materials in Pacifica. This includes solid waste, targeted recyclable material and organic materials on residential, commercial and City premises as well as construction and demolition debris.
On October 10, 2022, the City Council adopted a Resolution approving the Second Amendment to the Agreement, which among other things, extended the term an additional 10 years, with an option to extend an additional five years. The Second Amendment also revised 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’s role would be to undertake an administrative review of the application for a rate increase to confirm accuracy and consistency with the Rate Adjustment procedures specified in the Agreement (See Second Amendment to Agreement Section 11.02 and Attachment K-Attachment 1).
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 received Recology’s application for annual rate increase on September 1, 2023. In the fall of 2023, the City entered into an agreement with HF&H Consultants for financial review of the proposed 2024 Recology rate increase. The City engaged HF&H to perform a review of the application in accordance with Section 11.03(B) of the Agreement. HF&H engaged with Pacifica City Council 2
November 27, 2023
Recology and worked with them to verify the index-based cost increases applicable for 2024.
This information was provided in a November 10, 2023 report (Attachment 2) by HF&H.
HF&H confirmed the 5.86% rate increase for their services to the City of Pacifica in 2024 and that this is below the allowable maximum rate increase of 6% that is part of the Agreement and in line with the rate adjustment procedures in the Agreement. The largest components of the increase are for inflationary increases in labor and fuel costs. Fuel costs increased by 36% and labor costs increase 5.47%.
Based on the HF&H review, the City Manager recommends the City Council Approve a Resolution confirming that Recology of the Coast’s application for annual rate increase of
5.86% does not exceed the allowable maximum rate of 6% and that the City has reviewed the annual rate increase to confirm accuracy and consistency with the Rate Adjustment procedures specified in the Agreement.
ALTERNATIVES:
Council may choose not to adopt the resolution confirming the Recology rate increase, however, this would not be in accordance with the Agreement the City signed with Recology of the Coast and is not recommended.
FISCAL IMPACT:
The Recology of the Coast rates would increase by 5.86% starting in 2024.
CEQA:
The confirmation of the rate increase would be exempt under CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility approval would cause a significant effect on the environment as it is an administrative item and will not change the services provided by Recology.
ORIGINATED BY:
Public Works
ATTACHMENT LIST:
Attachment 1: Second Amendment to Recology Agreement (PDF) Attachment 2: HFH Review of Recology 2024 Rate Application (PDF) Pacifica City Council 3
November 27, 2023
RESOLUTION NO. ______
APPROVE A RESOLUTION CONFIRMING RECOLOGY OF THE COAST’S APPLICATION FOR RATE INCREASE OF 5.86% IS ACCURATE AND CONSISTENT WITH THE ANNUAL RATE ADJUSTMENT PROCEDURES SPECIFIED IN RECOLOGY AGREEMENT; AND
FINDING CONFIRMATION OF RATE INCREASE EXEMPT UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (“CEQA”) PURSUANT TO CEQA GUIDELINES SECTION 15061(b)(3)
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 (“Agreement”); and WHEREAS, the City and Recology executed a First Amendment to the Franchise Agreement on March 11, 2013; 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 Agreement generally grants Recology the exclusive right and franchise to collect waste materials in Pacifica. This includes solid waste, targeted recyclable material and organic materials on residential, commercial and City premises as well as construction and demolition; and
WHEREAS, on October 10, 2022, the City Council adopted a Resolution approving a Second Amendment to the Franchise Agreement, which among other things, extended the term an additional 10 years, with an option to extend an additional five years; and WHEREAS, the Second Amendment also revised the Annual Rate Application Process identified in the Agreement to clarify that Recology ultimately sets the rate charged to the ratepayers; and
WHEREAS, for future rate adjustments, the City’s role would be to undertake an administrative review of the application for a rate increase to confirm accuracy and consistency with the rate adjustment procedures specified in the Agreement; and WHEREAS, the City hired HF&H financial consultants in fall of 2023 who have confirmed the accuracy and consistency of the requested Recology rate increase of 5.86% with the rate adjustment procedures specified in the Agreement.
NOW, THEREFORE BE IT RESOLVED by the City Council of the City of Pacifica does hereby resolve as follows:
1. The confirmation of the rate increase would be exempt under CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that there is no possibility approval would cause a significant effect on the environment as it is an administrative item and will not change the services provided by Recology.
Pacifica City Council 4
November 27, 2023
2. Recology of the Coast’s application for rate increase of 5.86% is accurate and consistent with the annual rate adjustment procedures specified in the Agreement and does not exceed the allowable maximum rate of 6%.
• • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 27th day of November 2023, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Tygarjas Twyrls Bigstyck, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney