CITY OF PACIFICA
COUNCIL AGENDA SUMMARY REPORT
11/25/2024
1 SUBJECT:
Recology of the Coast’s application for rate increase for 2025 and Consideration of Proposed Third Amendment to Agreement with Recology for Recyclable Materials, Organic Materials, and Solid Waste Collection Services
RECOMMENDED ACTION:
Move to Adopt a Resolution that:
1. Confirms the Recology of the Coast’s (“Recology”) 2025 Rate Application for a rate increase of 5.09% is accurate and consistent with the annual rate adjustment procedures specified in the agreement with Recology for Recyclable Materials, Organic Materials, and Solid Waste Collection Services (“Agreement”);
2. Approves a Third Amendment to the Agreement with Recology of the Coast to revise section 5.5.02.D.5 of the Agreement to provide grit and screenings disposal services for the Calera Creek Water Recycling Plant and to revise Section 6.01.A, “Designated Disposal Facilities” and Attachment A of the Agreement to revise the location of the organic material disposal facility and authorizing the City Manager to execute the Third Amendment; and
3. Finding the confirmation of the rate increase and the approval of the Third Amendment to the Franchise Agreement exempt under the California Environmental Quality Act (“CEQA”) pursuant to CEQA Guidelines sections 15061(b)(3) and 15308.
STAFF CONTACT:
John Mullins, Interim Director of Public Works
(650) 501-6523
[email protected]
Louis Sun, P.E., Deputy Director of Public Works
(650) 738-3770
[email protected] <<<mailto:[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 to the 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 Pacifica City Council 2
November 25, 2024
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 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).
Recology 2025 Rate Application
The City received Recology's application for an annual rate increase on August 28, 2024. In the fall of 2024, the City engaged HF&H Consultants to conduct a financial review of the proposed 2025 rate increase in accordance with Section 11.03(B) of the Agreement.
HF&H worked closely with Recology to verify the index-based cost increases applicable for 2025. The findings were documented in a report dated November 8, 2024 (Attachment #1).
HF&H confirmed that a 5.09% rate increase is applicable for Recology’s services to the City of Pacifica in 2025. This increase is below the maximum allowable rate adjustment of 6%, as outlined in the Agreement, and aligns with the Agreement's rate adjustment procedures.
The primary driver of the increase is a compliance issue at the Ox Mountain Sanitary Landfill in Half Moon Bay, which no longer meets SB 1383 requirements. As a result, Recology now disposes of residential organic materials at South Valley Organics and commercial organic materials at South Bay Waste Management Authority. This operational change has introduced additional handling and trucking costs, as well as higher processing fees per ton which is shown as Organic Processing on the Rate Adjustment Components table below. These factors contribute 3.09% to the total 5.09% rate adjustment.
The table below summarizes the components of the recommended 5.09% rate adjustment:
Rate Adjustment Components
Operating Expenses:
Labor Costs 1.49%
Vehicle-Related Costs 0.22%
Fuel -1.92%
Organics Processing 3.09%
Lease Costs 0.00%
Other Costs 0.37%
Total Operating Expenses 3.24% a
Profit 0.36% b
Pass-through Costs: City
Fees
0.19%
Recyclable Processing 0.41%
Disposal 0.89%
Total Pass-through Costs 1.49% c
Total Rate Adjustment 5.09% =a+b+c
Based on the findings of HF&H’s financial review, the City Manager recommends that the City Council approve a resolution confirming Recology of the Coast’s proposed 5.09% annual rate increase for 2025. The proposed increase does not exceed the allowable maximum rate of 6% and has been verified for accuracy and consistency with the Rate Adjustment procedures specified in the Franchise Agreement.
Proposed Third Amendment to Franchise Agreement
Due to limited staffing and the high costs associated with vehicle maintenance for grit and screenings disposal, the City requested a proposal from Recology of the Coast to resume providing these services, as they had done prior to 2020. The proposed Third Amendment to Pacifica City Council 3
November 25, 2024
the Agreement would revise section 5.02.D.5 of the Agreement to provide that Recology will collect grit and screenings from the City’s sewage treatment plant and pump stations. The materials will be disposed of at the Ox Mountain Sanitary Landfill on at least a weekly basis.
Recology will charge the City an initial per-haul rate of $353.00, in addition to the actual disposal costs incurred. Starting January 1, 2025, and annually thereafter, the per-haul rate will be adjusted using the index-based adjustment methodology outlined in the Franchise Agreement.
This change will not include grit and screening disposal cost in the Recology Rates. The disposal of grit and screenings will be funded through the sewer fees.
The proposed Third Amendment to the Franchise Agreement with Recology is necessary to revise section 6.01.A of the Agreement to reflect the change to the Designated Disposal Facility for organic materials per SB 1383 from Ox Mountain to South Valley Organics. The Ox Mountain facility does not comply with SB 1383 and thus the City needs to have the organic materials disposed of in a manner that does comply with SB 1383 disposal standards. The approval of the proposed Third Amendment to the Franchise Agreement to revise Section 6.01 (Designated Disposal Facilities) ensures compliance with SB 1383 regulations and supports the City’s ongoing waste management operations while maintaining financial transparency and accountability.
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 5.09% starting in 2025.
Recology will charge the City an initial per-haul rate of $353.00, in addition to the actual disposal costs incurred. Starting January 1, 2025, and annually thereafter, the per-haul rate will be adjusted using the index-based adjustment methodology outlined in the Franchise Agreement.
This change will not include grit and screening disposal cost in the Recology Rates. The disposal of grit and screenings will be funded through the sewer fees.
CEQA:
The confirmation of the rate increase, the approval of the Third Amendment to the Franchise Agreement and the change in the hauler of the grit and screening would be exempt under CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that approval would cause no significant effect on the environment as it primarily an administrative item.
Additionally, the amendments to the Franchise Agreement undertaken to ensure compliance with SB 1383 and the City’s regulations relating to SB 1383 and the management of organic waste are exempt pursuant to CEQA Guidelines section 15308 (Class 8- Actions by Regulatory Agencies for Protection of the Environment) because it is authorized by local ordinance to assure the protection of the environment.
ORIGINATED BY:
Public Works - Wastewater Division
Engineering
ATTACHMENT LIST:
Pacifica City Council 4
November 25, 2024
Attachment 1- HFH Review of Recology 2025 Rate Application (PDF) Attachment 2 - Recology 2025 Pacifica Rate Application (PDF) Attachment 3- Recology Contract_Third Amendment to Franchise Agreement 11-20-24 (PDF) Pacifica City Council 5
November 25, 2024
RESOLUTION NO. ______
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PACIFICA CONFIRMING RECOLOGY OF THE COAST’S (RECOLOGY) 2025 RATE APPLICATION FOR A RATE INCREASE OF 5.09% IS ACCURATE AND CONSISTENT WITH THE ANNUAL RATE ADJUSTMENT PROCEDURES SPECIFIED IN THE RECOLOGY AGREEMENT; APPROVING A THIRD AMENDMENT TO THE AGREEMENT TO REVISE SECTION 5.02.D.5
TO PROVIDE GRIT AND SCREENING DISPOSAL SERVICES FOR THE CALERA CREEK WATER RECYCLING PLANT AND TO REVISE SECTION 6.01.A, “DESIGNATED DISPOSAL FACILITIES” AND ATTACHMENT A OF THE AGREEMENT TO REVISE THE LOCATION OF
THE ORGANIC MATERIAL DISPOSAL FACILITY AND AUTHORIZE THE CITY MANAGER TO EXECUTE THE THIRD AMENDMENT TO THE AGREEMENT; AND FINDING THE ACTIONS EXEMPT UNDER THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (“CEQA”) PURSUANT TO CEQA GUIDELINES SECTIONS 15061(B)(3) AND 15308 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 that 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 received Recology's application for an annual rate increase on August 28, 2024. In the fall of 2024, the City engaged HF&H Consultants to conduct a financial review of the proposed 2025 rate increase in accordance with Section 11.03(B) of the Agreement; and
WHEREAS, HF&H have confirmed the accuracy and consistency of the requested Recology rate adjustment procedures specified in the Agreement; and WHEREAS, approving a Third Amendment to the Agreement to allow the change in disposal sites for organic materials to be compliance with SB1383; and Pacifica City Council 6
November 25, 2024
WHEREAS, approving the Third Amendment to the Agreement to return to the past practice of having Recology of the Coast provide grit and screenings disposal services for Calera Creek water recycling plant would ensure reliable disposal of grit and screenings.
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 and the approval of the Third Amendment to the Agreement would be exempt under CEQA Guidelines Section 15061(b)(3) because it can be seen with certainty that approval would cause no significant effect on the environment as it is primarily an administrative item. Additionally, the amendments to the Franchise Agreement undertaken to ensure compliance with SB 1383 and the City’s regulations relating to SB 1383 and the management of organic waste are exempt pursuant to CEQA Guidelines section 15308 (Class 8- Actions by Regulatory Agencies for Protection of the Environment) because it is authorized by local ordinance to assure the protection of the environment.
2. Recology of the Coast’s application for rate increase of 5.09% is accurate and consistent with the annual rate adjustment procedures specified in the Agreement and does not exceed the allowable maximum rate of 6%.
3. Approve a Third Amendment to the Agreement, attached hereto, to revise section 6.01, “Designated Disposal Facilities” and Attachment A of the Agreement and to revise section 5.02.D.5 of the Agreement to provide grit and screening disposal services for the Calera Creek Water Recycling Plant.
• • • • •
PASSED AND ADOPTED at a regular meeting of the City Council of the City of Pacifica, California, held on the 25
th day of November 2024, by the following vote:
AYES, Councilmembers:
NOES, Councilmembers:
ABSENT, Councilmembers:
ABSTAIN, Councilmembers:
_________________________________
Sue Vaterlaus, Mayor
ATTEST: APPROVED AS TO FORM:
______________________________ _________________________________ Sarah Coffey, City Clerk Michelle Kenyon, City Attorney