South County Sanitary Service, Inc.
Franchise Agreement and Solid Waste
Rates
Agenda Item 11.A
By Benjamin A. Fine, Director of Public Works/City Engineer Nadia Feeser, Administrative Services Director
Jeff Clarin, South County Sanitary Services, Inc.
Meeting Date: May 3, 2022
Topics
•Amend the City’s Solid
Waste Collection
Franchise Agreement with
South County Sanitary
Service, Inc. (SCSS) for
solid waste collection
services
•SCSS Solid Waste rate
review
2 Franchise
Agreement
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Franchise Agreement Amendment
SB 1383: California’s Short-Lived Climate Pollutant
Reduction law that establishes methane reduction targets for California
•Reduce organic material in landfills by 50% by 2020
•Reduce organic material in landfills by 75% by 2025
•Recover 20% of currently-disposed edible food for human consumption by 2025
•Garbage trucks be powered by Qualified Renewable
Natural Gas
4 Franchise Agreement Amendment
•Compost give-away events (2 per year)
•Monitoring and notification of contaminants
•Coordination for public education
•Records retention (agreement term +5 years)
5 SCSS Rate Changes
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SCSS Proposed Rate Change -Process
•Franchise Agreement: “City shall have the right to
establish a cap on those rates as it deems appropriate…as calculated in accordance with the City of San Luis Obispo Rate Setting Process and Methodology Manual for
Integrated Solid Waste Management Rates, 1994 Edition.” •SCSS prepares rates based on the “Manual” for each City. •City evaluates rates in compliance with the Manual.
•City does NOT impose these rates. SCSS charges
customers directly for their services.
7 Proposed Rates
The proposed rate increases amount to an
increase of approximately 22.19% based on:
•8.05% for truck depreciation
•7.71% for food and green waste recycling via
Materials Recovery Facility (MRF)operations
to comply with Senate Bill (SB) 1383
•2.41% for health care and liability insurance
costs
•1.06% for gas and oil
•2.96% for all other cost increases including
labor, ongoing maintenance, disposal costs at
the landfill and MFR, and other pass-through
costs
8 Three -Year Rate Approval
•Three-Year Cycle: Base Year and Two Interim Years
•Base Year: 1st year Comprehensive, detailed review.
Effective May 1, 2022
•Interim Years: 2nd and 3rd year adjusted by Consumer
Price Index in January 1, 2023 and January 1, 2024
9 Cost of Living “Trigger” Option
If rate increase exceeds the cumulative cost of living, then agency has option of terminating the agreement at any
time within 9 months following approval of the requested rate increase
Note that the cumulative rate increase is 34.87% since
2008 compared to 7.98%.
Provides incentive to SCSS to limit rate increases.
10 SCSS Rate Changes
Jeff Clarin, P.E.
District Manager
South County
Sanitary Services
Waste Connections
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Description of Rate Components
•Capital Expenditures –Replacement Trucks 8.05%
•California Air Resources Board Rules –2010 or newer by January 1, 2023. •Fleet of over 100 trucks
•Double digit replacements the last 3 years
•19 trucks scheduled for 2022
•HZI Kompogas Digester 7.71%
•First in North America
•SCSS/IWMA ahead of the game
•Unexpected wear
•Less than anticipated food waste
•F.O.G. Program
12 Description of Rate Components
•Insurance Costs 2.41%
•Health care up 7.5%
•Liability insurance up 22%
•Fuel and Oils 1.06%
•Consumables rising -COVID impacts
•Based on 2021 Base Year
•Application Projected fuel is Low –could not anticipate the Ukraine war impact •Other General Costs 2.96%
•Increased cost to process recyclables
•Market Wages
•General operational costs (i.e. parts, supplies)
13 Rate Manual and Franchise Agreement
•SCSS required to show detailed cost of service
•Establish a base year every 3 years to project costs
•Allows for 8% on allowable expenses
•After Pass Through Fees ~5% operating margin
•Annual 3rd Party Audits
•Most recent audit (2020) shows 1.2% Operating Margin after allowable expense and pass through fees •SCSS rates are still the lowest in the surrounding communities (SLO County or Santa Barbara County) 14 Breakdown of Costs
•Rates are based on the size of the garbage cart (includes greenwaste/organics and commingled curbside recycling) –3 Services! •65%of residential customers use a 32 gallon cart
•New rate $21.15 per month
•$4.88 per week or $1.62 per cart, per pick-up
•28% of residential customers use a 64 gallon cart
•New rate is $42.32 per month
•$9.77 per week or $3.26 per cart, per pick-up
•7% of residential customers use a 96 gallon cart
•New rate is $63.47 per month
•$14.65 per week or $4.88 per cart, per pick-up 15
Rate Review Analysis
Analysis performed
by Mr. Bill Statler
Review of Rate Changes
•Analysis of submitted Base Rate application in compliance with Manual
•Manual determines:
•if rates are fair to City residents and provides adequate rates to hauler (SCSS)
•Ensures that hauler’s rates are justifiable and supportable and reasonable for the cost of service
•Ensures ongoing review and rate stability
•Ensures rate setting process is easy to administer and implement
17 Review of Rate Changes
Rate review process
includes thorough
review of financial
and operating data
Process designed to
prevent large,
unexpected
fluctuations in rates
Pismo Beach joins
with Arroyo Grande,
Grover Beach, and
Oceano to hire
consultant to
perform a Rate
Review
Bill Statler, former
Finance Director of
City of SLO, expert in
the Rate Review
methodology, last
16 years
18 Rate Review Findings–March 2022
COMPLETE
APPLICATION
INITIAL
10/20/21
REVISED
2/18/22
HIGH LEVEL
OF SERVICE
AT A
REASONABLE
COST
NEED FOR
UPDATED RATE-
SETTING
MANUAL/
METHODOLOGY
DELAYED RATE
IMPLEMENTATION
TRIGGER
OPTION
19 Key Cost Drivers
20 Comparison to CPI
•Including the 22.19% in
2022, rates have increased
by 3.6% on average over
the last 18 years
•Peak in 2019 and 2022 due
to regulatory and external
market changes for
recyclables
•Reflects rate stability and
price containment for SCSS
customers
Single Family Residential
Monthly Rates
Container Size Current Proposed Increase
32 Gallons 17.31 21.15 $3.84
64 Gallons 34.63 42.32 7.69
96 Gallons 51.94 63.47 11.53
Comparison to other Communities
23 IWMA Fee Increase
IWMA FEES EXCLUDED
FROM FEE ANALYSIS.
APPROVED BY SEPARATE
AGENCY AND WILL BE CHARGED
SEPARATELY ON CUSTOMER
BILLS. 5.4% INCREASE.
24 Fiscal Impact
Service Description Pickups Per
Week
Current Monthly Rate
Effective 1/1/2021
Proposed
Rate
Adjustment
Proposed Monthly
Rate Effective
5/1/2022
Residential:
32 Gallon Waste Wheeler 1 $17.31 $3.84 $21.15
64 Gallon Waste Wheeler 1 $34.63 $7.69 $42.32
Business Customers:
One 32 Gallon Waste Wheeler 1 $23.12 $5.13 $28.25
Three 32 Gallon Waste Wheelers 2 $95.17 $21.12 $116.29
1 yd dumpster 5 $275.18 $61.07 $336.25
4 yd dumpster 7 $1,100.57 $244.26 $1,344.83
City: Several garbage cans and dumpsters $12,179.17 $2,758.03 $15,187.20 •Additional cost to City of $2,758 per month.
•Franchise Fee revenue increase of $5,413 per month.25
Recommendation
•Franchise Agreement: Adopt a Resolution approving the
second amendment Franchise Agreement with SCSS
•Rate Increase:
•Conduct a public hearing
•Based on staff’s review of the Rate Review and Mr. Statler’s recommendation
•Proposed rate increase is in compliance with Manual
•Adopt a Resolution approving the proposed rate increases charged by SCSS effective May 1, 2022, January 1, 2023, and January 1, 2024
26