Pismo Beach City Council
January 24, 2025

G\T Y OF

PISMO BEACH CITY COUNCIL STAFF REPORT
A�syo sEP Agenda Item #11.A
Meeting Date: January 21, 2025
TITLE:

Third Amendment to the Amended and Restated Solid Waste Collection Franchise Agreement with South County Sanitary Service, Inc. for Solid Waste Collection Services and Adoption of Integrated Solid Waste Rates effective January 1, 2025 and each January 1 from 2026 through 2029 via a New Rate Adjustment Methodology RECOMMENDATION:

1. Adopt a Resolution approving, and authorizing the City Manager to execute, a third amendment to the Amended and Restated Solid Waste Collection Franchise Agreement with South County Sanitary Service, Inc. for solid waste collection services;

2. Conduct a public hearing to hear public comment on proposed solid waste rates;

3. Adopt a Resolution approving Integrated Solid Waste rates charged by South County Sanitary Service effective January 1, 2025 and each January 1 from 2026 through 2029 via a new rate adjustment methodology.

DISCUSSION:

The purposes of this agenda item are to discuss and recommend approval to amend the City's Solid Waste Collection Franchise Agreement with South County Sanitary Service, Inc. (SCSS) for solid waste collection services (Attachment 2) and to bring forward for a public hearing and Council consideration of Integrated Solid Waste rates charged by SCSS effective January 1, 2025 and each January 1 from 2026 through 2029 via a new rate adjustment methodology (exhibit to Attachment 3.A).

BACKGROUND:

On December 16, 1997, the City Council approved a Franchise Agreement with SCSS for collection, diversion, and disposal of solid waste. On June 3, 2008, the City Council adopted Resolution No. R-2008-037, which approved an Amended and Restated Solid Waste Collection Franchise Agreement ("New Agreement"), which offered several benefits for the City and its residents and businesses. On June 21, 2016, the City Council amended the SCSS franchise agreement at the request of SCSS to extend the contract by 20 years, beginning with the first day of operation of a new Kompogas organics processing facility. In addition, the second change in the franchise agreement was to exclude tipping fee increases, approved by the County Board of Supervisors in 2014 for landfill improvements, when calculating whether the SCSS rates charged to customers are greater than the cumulative cost of living increase.

Through the terms of the Franchise Agreement, SCSS is entitled to compensation for its "labor, equipment, materials and supplies, taxes, insurance, bonds, overhead, transfer and transport, processing, division, disposal, provide and all other things necessary to perform all of the services required by [the] Agreement." This compensation is received Council Agenda 1-21-2025 11.A-1

through the rates and charges paid by the City's customers, which are presented to the City through cost-based rate adjustment applications and reviewed by the City Council.

This is the process by which SCSS requests an increase in rates for the integrated solid waste collection, diversion, and disposal services it provides to City residents and businesses. The City does not impose these rates, but rather it reviews the requested increase to determine compliance with the rate-setting procedures. SCCS charges the customer directly for the service, and SCCS is responsible for all collection activities for the service.

Per the Franchise Agreement, rates are reviewed in accordance with the "City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates" which was originally established in 1994 (1994 Rate Manual). The 1994 Rate Manual allows for a cost-based rate adjustment every three years and interim rate adjustments in the other two years. In interim rate periods, the operator is limited to adjustments based on inflation, tipping fee adjustments, and franchise or regulatory fee changes. During cost-based rate adjustment years, SCSS is able to request adjustments due to changes in other operational costs as set forth in the 1994 Rate Manual. The following table summarizes the SCSS rate review history beginning in 2005.

Year Review Type/Rate Adjust Comment Adjustment /o
2005 Cost-based 5.60%
2006 Index-based 3.09%
2007 Index-based 3.76%
2008 Cost-based 3.00%
2009 N/A 0.00%
2010 N/A 0.00%
2011 City increased Franchise Fee from 6% to 10%. Approved rate is g 05% additional 3.9% beyond the 5.15% rate request
2012 Index-based 0.00%
2013 Cost-based 3.20%
2014 Index-based 2.05%
2015 N/A 0.00%
Cost-based, included additional 1.1% for Organics, Franchise Amendment: extending contract by 20 years, with new Kompogas 2016 organics processing facility and exclude tipping fee increases, 3.25% approved by County Board of Supervisors in 2014 for landfill improvements, in calculation of SCSS rates
2017 Index-based 1.00%
2018 Index-based 1.60%
Cost-based, included 4.5% increase for recycling via Materials o 2019 RecoveryFacilityMRF operations

10.06/o
2020 Index-based 1.70%
2021 Index-based 0.70%
2022 Cost-based, included 7.71% for food and green waste recycling via 22 19% MRF operations to comply with Senate Bill SB 1383
Council Agenda 1-21-2025 11.A-2

Year Review Type/Rate Adjust Comment Adjustment /o
2023 Index-based 9.10%
2024 Index-based 3.00%
2025 Cost-based, proposed with new rate setting methodology and 4.82% proposed third amendment to Franchise Agreement
Process of Updating the Rate Setting Manual
The City of San Luis Obispo has been working with Waste Connections, SCSS's parent company, to develop and implement a new rate adjustment methodology to replace the 30-year-old Rate Manual. The key objectives for a new rate adjustment methodology are to enhance rate stability, predictability, fairness, transparency, ease of administration, and cost-effectiveness. The City of San Luis Obispo contracted with R3 Consulting Group, Inc. (R3) to support development and negotiation of a new rate adjustment methodology and the new rate adjustment methodology is available for consideration by other public agencies in San Luis Obispo County. The City of Pismo Beach has been following the development of the new rate adjustment methodology, which will be presented to the City Council as an amendment to the agreement with SCSS in association with the January 21, 2025 public hearing regarding the 2025 rate adjustment request from SCSS.

The City of San Luis Obispo also contracted with R3 to conduct a detailed review of the 2025 cost-based rate applications submitted by Waste Connections to ten agencies in San Luis Obispo County, including the City of Pismo Beach. The City of Pismo Beach received an initial rate adjustment request from SCSS on July 3, 2024, for an adjustment to the City's solid waste rates of 3.97% effective January 1, 2025. After R3's review, and adjustments necessary for effectuation of the new rate methodology and new regional service enhancements, the recommended 2025 rate adjustment is 4.82%.

Review of 2025 Rate Adjustment Request
R3 completed a thorough review of SCSS' 2025 cost-based rate adjustment application and adjustments necessary for the new recommended rate adjustment methodology.

After careful review of the rate adjustment request, and the outcomes of negotiations of a new rate adjustment methodology between the City of San Luis Obispo and Waste Connections, R3 completed a report evaluating the 2025 rate adjustment request and the new rate methodology (exhibit to Attachment 2). R3's review suggests that the original

3.97% adjustment effective January 1, 2025, is justifiable in accordance with the 1994 Rate Manual and may be accepted by the City in the event that the City does not adopt the new rate adjustment methodology. R3's report further recommends the new rate adjustment methodology and the corresponding rate adjustment of 4.82%, which will provide key benefits to the City in terms of rate predictability and stability and new enhanced services.

New Rate Adjustment Methodology
The City of San Luis Obispo, in its capacity as the lead agency on the solid waste rate adjustment methodology update process, and in partnership with Los Osos Community Services District and Waste Connections, completed negotiations and arrived at tentative agreement with Waste Connections regarding the terms and conditions of a new Council Agenda 1-21-2025 11.A-3

methodology. The outcome was the result of extensive good faith negotiations between the City and Waste Connections, with due consideration to input provided by other public agency stakeholders, including the City of Pismo Beach.

Pending City Council approval, the new methodology will replace the 1994 Rate Manual and will regulate annual rate adjustments for the City's solid waste rates starting in 2026.

The new methodology fulfills key objectives including rate stability, predictability, fairness, transparency, ease of administration, and cost-effectiveness. Additionally, the new methodology can be applied on a regional scale and is available as recommended alternative to the 1994 Rate Manual for all agencies, including the City of Pismo Beach.

The key features of the new methodology include:
• Capped CPI Adjustments: Starting in 2026, rate adjustments will be based on the Garbage and Trash CPI, with a floor of 2% and a cap of 5%. Amounts under 2% or over 5% will carry forward. The CPI adjustment will apply to Waste Connections' collection and post-collection cost centers.
• Revenue Balancing Mechanism: Starting in 2027, adjustments to rates will account for shortfalls or surpluses in Waste Connections' actual revenues compared to projected revenues from prior years. For example, if Waste Connections' 2025 revenues exceed projections, the amount of surplus revenues will be credited to the rates in 2027 (and vice versa), achieving fairness in compensation and rates for the company and for ratepayers. Such adjustments would take place annually and will be independent of the CPI cap and floor noted above. It should be noted that SCSS's 2023 net income was such that, were a revenue balancing mechanism in place at the time, surplus revenues would have been carried forward to the 2025 rate year and would have offset the forthcoming rate adjustment.
• Less Frequent Cost-Based Adjustments: Currently, solid waste rates are adjusted based on the 1994 Rate Manual every three years on Waste Connections' costs. Via the new methodology, cost-based adjustments would occur a maximum of every five years, and only if requested by Waste Connections or the City. The first opportunity for a cost-based adjustment will be for the 2030 rate year. If neither Waste Connections nor the City request a cost-based adjustment, then the CPI adjustment approach will be applied. Cost-based adjustments will be based on Waste Connections' consolidated audited financial statements for the region. Timeframes for cost-based adjustment application and review process will be ample, such that the City will have sufficient time for review and approval processes and such that the potential for delay in implementation is minimized.
• Updated Depreciation Lifespan for Trucks: The 1994 Rate Manual set a 7-year depreciation schedule for solid waste collection trucks. Modern solid waste collection trucks have a 10-year lifespan, and the depreciation schedule was adjusted accordingly.

Council Agenda 1-21-2025 11.A-4

• Updated Profit Allowance: The 2025 rate adjustment will include a 9% profit allowance of projected collection costs and in 2026 and thereafter the profit allowance will be 10%. For context, the 2025 profit allowance is approximately 5% of revenues and R3 estimates that the 2026 profit allowance will be approximately 5.5% of revenues. • Removed Limitation on Corporate Overhead: The 1994 Rate Manual placed a limitation on corporate overhead costs. Today, corporate overhead costs fund legal, tax, payroll, human resources, engineering, compliance, IT, training and recruiting programs. The City and Waste Connections agreed to adjust corporate overhead based on Waste Connections' actual corporate overhead, which are higher than the prior limitation. Going forward from 2026 through 2029, compensation to Waste Connections for corporate overhead will be as per the CPI adjustment referenced above, and then potentially reset to actual costs when and if a cost-based rate adjustment is conducted.
• Extraordinary Adjustments: The California Air Resources Board (CARB) Advanced Clean Fleets (ACF) regulation requires all solid waste collection trucks to be zero emissions in 2042. This includes a phased in plan to get the percentage of the fleet to be zero emission vehicle (ZEV) with 10% by 2030, 25% by 2033, 50% by 2036,75% by 2039 and100% by 2042. During CPI Adjustment years, Waste Connections may request extraordinary rate adjustments due to changes in law affecting collection operations, including for compliance with CARBS's ACF electrification mandate (which may necessitate change to depreciation schedules). The City may, but is not obligated to, consider requests for extraordinary rate adjustments due to changes in law affective post-collection operations. Requests for extraordinary change are subject to good faith meet and confer negotiations between City and Waste Connections.
• Regional Service Enhancements:
o Customer Assistance Program: 20% low-income discount provided to residential customers using 32-gallon cart service, using existing jurisdictional practices on low-income relief for their offered utility type services with evidence of qualifying financial hardship (e.g., enrollment in PG&E's CARE program). o Free Bulky Waste Collections: Collection of a bulky waste item twice annually from residential accounts at no cost via bi-annual clean-up weeks. o Annual Cart Exchange: Once annual exchange of a residential solid waste, recycling, or organics cart per customer account.

Primary Factors Affecting Rate Adjustment
Per R3's report, the key factors affecting the 2025 rate adjustment are summarized as follows:

Council Agenda 1-21-2025 11.A-5

• A doubling of post-collection costs for organics processing since 2022 due to updated costs for processing infrastructure to meet the requirements of Senate Bill (SB) 1383.
• Market rate adjustment of post-collection costs for landfill disposal, which have remained flat since 2016. Landfill disposal rates have been below market at $41 per ton since 2016 and will increase to a fair market cost of $70 per ton in 2025.

Waste Connections costs related to the landfill have increased due to factors including normal cost increases, increased costs of construction, and new costs for CARB compliant operating equipment.
• Cost-of-living changes in collection costs, which include labor, capital, operating expenses, insurance and overhead costs, for 2025 increases over 2024 amounting to 4.15%.
• Additional costs for regional service enhancements, described above, which add

0.37% to the 2025 rate adjustment.

Taken altogether, and including appropriate adjustments to SCSS' original request to achieve the objectives of the new rate methodology, the 2025 rate adjustment effective January 1, is 4.82% as shown in the table below:

Original Adjustment per 1994 Rate Manual 3.97%
Revised Depreciation Schedule -1.33%
Remove Limitation on Corporate Overhead 1.51%
Regional Service Enhancements 0.37%
Updated Profit Allowance 0.22%
Recalculated Franchise Fee 0.08%
Revised Adjustment for New Methodology 4.82%
Franchise Agreement Termination Clause
The Franchise Agreement also contains language that provides that if the rate adjustment request compared with the rate in effect at the date of the Franchise Agreement exceeds the cumulative cost of living increase from that same date, the City has the option of terminating the Franchise Agreement at any time within nine months following approval of the requested rate adjustment. The "trigger" calculation does not limit the amount of adjustment that SCSS can request; it simply incentivizes SCSS to keep its requested adjustments below the cumulative increase in CPI to avoid the City opting to terminate the Franchise Agreement.

At this time, staff recommends that the City not pursue the termination ("trigger") option set forth in Section 8.3 of the City's Franchise Agreement with SCSS. Based on a detailed review of costs as presented in Attachment 3.A, the costs are reasonable and rates have been calculated in accordance with the 1994 Rate Manual and the recommended new rate adjustment methodology. Chart 1 shows that solid waste rates for Pismo Beach are among the lowest in the Central Coast area for single-family residential services.

Council Agenda 1-21-2025 11.A-6

Chart 1: 32-Gallon Monthly Service Rate Comparison to Other Communities $60
$50
$40
$30
S20
$10
$0
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Also, and as previously reported to the Council in 2022, the requirements of SB 1383 have created significant new regulatory requirements, burdens, and costs for the City, and its solid waste partners such as the IWMA and SCSS. SCSS is required by agreement to help the City meet certain SB 1383 requirements, and termination of the Franchise Agreement with SCSS at this time would create disruption in the City's efforts to comply with State regulations.

Conclusion and Recommendation
Staff recommends that the City Council adopt a Resolution (Attachment 1) approving, and authorizing the City Manager to execute, a third amendment to the Amended and Restated Solid Waste Collection Franchise Agreement with South County Sanitary Service, Inc. for solid waste collection services (Attachment 2); Conduct a public hearing to hear public comment on proposed solid waste rates; and adopt a Resolution (Attachment 3) approving Integrated Solid Waste rates charged by South County Sanitary Service effective January 1, 2025 and each January 1 from 2026 through 2029 via a new rate adjustment methodology (Attachment 3.A).

FISCAL IMPACT:

If approved, the proposed rate increases would apply to all residential and business accounts in Pismo Beach. The table below shows some of the increases in monthly costs to SCSS customers in Pismo Beach under the proposed increases for January 1, 2025.

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Service Pickups Per Current Monthly Proposed Rate Proposed Monthly Description Week Rate Effective Adjustment Rate Effective 1/1/2024 1/1/2025
Residential:
32-Gallon 1 $23.76 $1.15 $24.91
Waste Wheeler
64-Gallon 1 $47.56 $2.29 $49.85
Waste Wheeler
Business Customers:

One 32-Gallon 1 $31.74 $1.53 $33.27 Waste Wheeler
Three 32-Gallon 2 $130.68 $6.30 $136.98 Waste Wheelers
1- d dum ster 5 $377.86 $18.21 $396.07 4- d dum ster 7 $1,511.23 $72.84 $1,584.07 City:

Several garbage cans and
dumpsters $15,167.03 $731.05 $15,898.08
ATTACHMENTS:

1. Resolution adopting SCSS Third Amendment to the Franchise Agreement

2. Third Amendment to the Franchise Agreement, including Exhibit E to Franchise Agreement: Annual Rate Adjustment Methodology and R3 Report on 2025 Rate Adjustment and New Rate Methodology Report

3. Resolution adopting integrated solid waste rates

3.A. Exhibit A to Resolution: South County Sanitary Service Rate Schedule for Integrated Solid Waste Services in Pismo Beach, effective January 1, 2025 and each January 1 from 2026 through 2029 via a new rate adjustment methodology.

Prepared by:

Nadia Feeser, Administrative Services Director
David Fleishman, City Attorney
Submitted by: Nadia Feeser, Administrative Services Director City Manager Approval:

Council Agenda 1-21-2025 11.A-8

Attachment 1
RESOLUTION NO. R-2025-XXX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,

CALIFORNIA APPROVING, AND AUTHORIZING THE CITY MANAGER TO

EXECUTE, A THIRD AMENDMENT TO THE AMENDED AND RESTATED SOLID

WASTE COLLECTION FRANCHISE AGREEMENT WITH SOUTH COUNTY
SANITARY SERVICE, INC. FOR SOLID WASTE COLLECTION SERVICES WHEREAS, the City of Pismo Beach has a franchise agreement with South County Sanitary Service, Inc., (SCSS) for solid waste collection services, effective as of July 1, 2008 and expiring on June 30, 2023; and
WHEREAS, the agreement provides, among other things, that SCSS will provide solid waste, recyclable materials, and green waste collection and disposal services for the City; and
WHEREAS, this agreement has been periodically amended and restated, and further amendment is now warranted to reflect an updated rate adjustment methodology to replace the outdated "City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates" which was originally established in 1994 (1994 Rate Manual); and
WHEREAS, the new rate adjustment methodology is designed to enhance rate stability, predictability, fairness, transparency, ease of administration, and cost-effectiveness.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Pismo Beach hereby approves, and authorizes the City Manager to execute, the Third Amendment to Amended and Restated Solid Waste Collection Franchise Agreement with South County Sanitary Service, as depicted in staff's report dated January 21, 2025.

UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 21 st day of January 2025, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSED:

Approved: Attest:

Ed Waage, Mayor Erica Inderlied, City Clerk
Council Agenda 1-21-2025 11.A-9

Attachment 1
IN WITNESS WHEREOF, I have hereunto set my hand on
Erica Inderlied, City Clerk
Council Agenda 1-21-2025 11.A-10

Attachment 2

THIRD AMENDMENT
TO

AMENDED AND RESTATED

SOLID WASTE COLLECTION FRANCHISE AGREEMENT

BETWEEN

CITY OF PISMO BEACH
AND
SOUTH COUNTY SANITARY SERVICE INC.

JANUARY 2025 FINAL DRAFT
{00120647.DOCX.2}
Council Agenda 1-21-2025 11.A-11

Attachment 2
City of Pismo Beach / South County Sanitary Service, Inc.

Third Amendment to Amended and Restated Solid Waste Collection Franchise Agreement

THIRD AMENDMENT TO

AMENDED AND RESTATED

SOLID WASTE COLLECTION

FRANCHISE AGREEMENT

THIS THIRD AMENDMENT TO AMENDED AND RESTATED SOLID WASTE COLLECTION FRANCHISE AGREEMENT(this"Amendment") is made and entered into this day of , 2025 in the State of California, and shall modify that certain Amended and Restated Solid Waste Collection Franchise Agreement, dated June 3, 2008 as previously amended by a first amendment dated August 3, 2016, and a second amendment dated May 12, 2022 (collectively the "Agreement"), by and between the CITY OF PISMO BEACH,a general law city in the State of California("City")and SOUTH COUNTY SANITARY SERVICE, INC.,a California corporation ("Contractor").City and Contractor may be collectively referred to herein as the "Parties" and individually as a "Party", unless specifically identified otherwise.

This Amendment #3 is made and entered into on the basis of the following facts, understandings, and intentions of the parties:

WHEREAS: The Parties entered into the Agreement on June 3, 2008; and WHEREAS: The Agreement originally provided for a rate setting methodology according to the "City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates,"which was originally established in 1994; and
WHEREAS: The City of San Luis Obispo contracted with R3 Consulting Group, Inc. (R3) to support development and negotiation of a new rate adjustment methodology; and WHEREAS: The new rate adjustment methodology, entitled "Annual Rate Adjustment Methodology," is available for consideration and use by other public agencies in San Luis Obispo County; and WHEREAS: Both Parties have, in good faith, negotiated changes to the Agreement necessary to support the transition to a new rate setting methodology using the New Solid Waste Rate Adjustment Methodology and 2025 Rates, as set forth herein.

AGREEMENT

NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF

WHICH ARE HEREBY ACKNOWLEDGED, THE PARTIES AGREE TO AMEND THE AGREEMENT, AS FOLLOWS:

Article 1. DEFINITIONS
Article 1 of the Agreement is hereby amended to add the following definition:
"Manual" means Exhibit E,the "Annual Rate Adjustment Methodology," attached hereto and incorporated herein by reference, as supplemented by the "New Solid Waste Rate Adjustment Methodology and 2025 Rates: commissioned by the City of San Luis Obispo and prepared by R3 Consulting Group, Inc., dated November 1, 2024", provided that in the event of a conflict between the two documents,the "Annual Rate Adjustment Methodology" attached as Exhibit E shall prevail.. Any direct or indirect references to the "City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates, 1994 Edition" or"SLO Manual" in the Agreement shall be replaced with "Manual."
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Attachment 2
City of Pismo Beach / South County Sanitary Service, Inc.

Third Amendment to Amended and Restated Solid Waste Collection Franchise Agreement Article 4. CONTRACTOR'S COMPENSATION AND RATES
Section 4.5.1 (City Request to Direct Changes—General)shall be revised to read as follows:

City may request Contractor to perform additional services(including new diversion programs, etc.)or modify the manner in which it performs existing services. Pilot programs and innovative services that may entail new Collection methods, different kinds of services and/or new requirements for Waste Generators are included among the kinds of changes that City may request. Contractor shall present, within thirty(30) days of a request to do so by City, a proposal to provide additional or expanded diversion services pursuant to the terms of Article 4.5.2 (New Diversion Programs). Contractor shall be entitled to an adjustment in its compensation for providing such additional or modified services in accordance with the Manual's procedures for extraordinary adjustments for"Change in Scope" (as that term is defined in the Manual).

Article 8. CONTRACTOR'S COMPENSATION AND RATES
Article 8 of the Agreement is hereby replaced in its entirety and amended to read as follows:

8.1 General
Contractor's compensation provided for in this Article shall be the full, entire and complete compensation due to Contractor pursuant to this Agreement for all labor, equipment, materials and supplies,taxes, insurance, bonds, overhead,transfer and transport, processing, division, disposal, profit and all other things necessary to perform all the services required by this Agreement in the manner and at the times prescribed, Contractor will not be entitled to any further rate adjustments as a result of customer delinquencies and other bad debt issues.

Contractor does not look to the City for payment of any sums under this Agreement in consideration of the right to charge and collect from customers for services rendered at rates not higher than those approved by the City from time to time.The City shall have the right to establish a cap on those rates as it deems appropriate so long as the revenues forecasted to be received by Contractor from charging such rates can reasonably be expected to generate sufficient revenues to provide for Contractor's compensation as calculated in accordance with the Manual.

8.2 Collection Rates
Service rates caps shall be established by Resolution adopted by the City Council. Contractor shall provide the services required by this Agreement and charge no more than the rates authorized by City Resolution.

8.3 Rate Reviews and allowable profit
Ordinary and extraordinary rate reviews shall be submitted and considered in accordance with the procedures described in the Manual, except as that may be modified by the City from time to time. In addition to the procedures contained in the Manual, Contractor shall submit any and all data requested by and in the format prescribed by the City. In the event Contractor shall fail to meet the schedule set forth in Manual, a revision of rates for the following year shall not be authorized until the 1st day of the first calendar month following a 120 day period from the date that the complete application is submitted and such revision shall contain no consideration for Contractor's failure to submit the in accordance application with the schedule set forth in the Manual.

If at any time during the term of this Contract,the Contractor requests and is granted a rate increase by {00120647.DOCX.2}3anuary 2025 FINAL DRAFT Page 3 Council Agenda 1-21-2025 11.A-13

Attachment 2
City of Pismo Beach / South County Sanitary Service, Inc.

Third Amendment to Amended and Restated Solid Waste Collection Franchise Agreement the City that when the new rate is compared to the rate at the Effective Date exceeds the cumulative cost of living increase from the Effective Date,the City shall have the option of terminating the Agreement.The cumulative cost of living increase from the Effective Date shall be calculated in accordance with the Manual.Such option shall be available for a period of nine (9) months following the granting of the rate increase.

When calculating the change in the rate, costs resulting from Section 7.4 Other Fees, and Section 5.10 Garbage and Recycling Service in Public Areas will not be included.

8.4 Publication of Rates
Contractor shall provide written notice to subscribers of all rate changes, prior to implementation. If appropriate,this notice should include reasons and background for the rate change.

Article 9. RECORDS, REPORTS AND INFORMATION AND HEARING REQUIREMENTS The first paragraph of Section 9.6 (Annual Financial Audit)shall be revised to read as follows:

Contractor shall submit to the City annual audited financial statements prepared at Contractor's expense by an independent Certified Public Accountant not later than one hundred eighty(180) days following the expiration of the Contractor's fiscal year. Pursuant to the Manual, at the time a rate application request is submitted to City,the financial forms contained in the rate application must be reconciled to the audited financial statements to provide assurance that all of the Contractor's activities are accounted for.

City and Contractor agree and acknowledge that, except as explicitly modified by this Third Amendment or by necessary implication,the Agreement remains in full force and effect. In the event of a conflict between the terms of this Third Amendment,the Agreement, and/or any amendments to the Agreement,this Third Amendment shall prevail, and the terms of Exhibit E shall prevail in the event of a conflict relating to rate setting procedures among or between any of the foregoing documents.This Amendment may be executed in one or more facsimile or original counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, City and Contractor have executed this Third Amendment to Amended and Restated Solid Waste Collection Franchise Agreement on the day and year first hereinabove set forth.

CITY: CONTRACTOR:

CITY OF PISMO BEACH SOUTH COUNTY SANITARY SERVICE, INC.

By: By:

Name:Jorge E. Garcia Name:

Title: City Manager Title:

Attest:
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Attachment 2
City of Pismo Beach / South County Sanitary Service, Inc.

Third Amendment to Amended and Restated Solid Waste Collection Franchise Agreement By:

Name: Erica Inderlied
Title: City Clerk
Approved as to form:

By:

Name: Dave Fleishman
Title: City Attorney
{00120647.DOCX.2}3anuary 2025 FINAL DRAFT Page 5 Council Agenda 1-21-2025 11.A-15

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
Section 1 Objectives
This Exhibit details the process by which Maximum Service Rates are adjusted annually to provide fair and adequate compensation to Franchisee for collection of solid waste and other services provided to Customers and the City per the Agreement. The annual rate adjustment methodology described herein fulfills key objectives established by the City and Franchisee, including rate stability, predictability,fairness, transparency, ease of administration, and cost-effectiveness.

Section 2 Index-Based Rate Adjustments
Except in the case of a Cost-Based Rate Adjustment(see Section 3, below)Franchisee's Maximum Service Rates shall be adjusted via the Index-Based Rate Adjustment methodology described in this section. The Index-Based Rate Adjustment methodology shall be used to adjust Maximum Service Rates effective each January 1 of 2026, 2027, 2028, and 2029 and any subsequent year during which a Cost-Based Rate Adjustment is not allowed or not requested by the City or the Franchisee.

In years during which Maximum Services Rates are to be adjusted pursuant to this Index-Based Rate Adjustment methodology, Franchisee shall submit a report to the City on or before September 1 detailing its calculations of Index-Based Rate Adjustment. City shall have the right to review Franchisee's calculations of Index-Based Rate Adjustment for mathematical accuracy and adherence to the terms and conditions of this Exhibit. City shall prepare written findings regarding adjustments to the Franchisee's calculations of Index-Based Rate Adjustment that are required for mathematical accuracy and adherence to the terms and conditions of this Exhibit on or before October 30.

Index-Based Rate Adjustments shall be prepared and calculated in accordance with the steps described below. All Index-Based percentages shall be rounded to the nearest hundredth of a percent, and all cost calculations shall be rounded to the nearest dollar.

A. Calculation of CPI Adjustment to Franchisee's Collection Services and Post-Collection Services
Franchisee's prior year cost projections for Collection Services and Post-Collection Services shall be adjusted in accordance with the Consumer Price Index(CPI)for Garbage and Trash Collection, U.S. City average, Bureau of Labor Statistics Series I.D. CUUROOOOSEHG02.

The CPI Adjustment shall be equal to the percentage change in the average 12-month CPI value ending June of the current year and compared to the average 12-month CPI value ending June of the prior year.

For example, the CPI used to set the 2026 rates shall be calculated as follows:
(Average CPI from July 1,2024 to June 30,2025) — (Average CPI from July 1,2023 to June 30,2024) Average CPI from July 1,2023 to June 30,2024
If the percentage change is below 2%, the applicable CPI Adjustment shall be 2%, with the difference in the amount below 2% being carried forward as a credit on the rates and applied to the subsequent year. If the percentage change is above 5%, the applicable CPI Adjustment shall be 5%, with the difference in the amount above 5% being carried forward and applied to the rates in subsequent years. Franchisee's prior year cost projections for Collection Services and Post- Collection Services shall be escalated by the resultant CPI Adjustment, rounded to the nearest dollar.

Franchisee's 2025 cost projection for Collection Services is$2,095,751 and Franchisee's 2025 cost projection for Post-Collection Services is $1,180,703. For 2026, by way of example, if the

Council Agenda 1-21-2025 11.A-16

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 5%, then Franchisee's 2026 cost projection for Collection Services shall be$2,200,539 and Franchisee's 2026 cost projection for Post-Collection Services shall be $1,239,738. Likewise, if the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 2%, then Franchisee's 2026 cost projection for Collection Services shall be $2,137,666 and Franchisee's 2026 cost projection for Post-Collection Services shall be$1,204,317.

Example Calculation for application of amounts above cap on CPI increases applied to Collection Services component of CPI Adjustment (noting that cap on CPI increases also applies to Post- Collection Services):

Year 1
Collection Services: $2,095,751
12-month average CPI index increase: 6.00%
$2,095,751 x 0+5.00%*)= $2,200,539
*5%cap on CPI increases. 1%difference carried over to next year Year 2
Collection Services: $2,200,539
12-month average CPI index increase: 6.00%
$2,200,539 x 0+5.0%*)= $2,310,566
*5%cap on CPI increases. 1%difference carried over to next year Year 3
Collection Services: $2,310,566
12-month average CPI index increase: 3.00%
$2,310,566 x 0+5.0%*)= $2,426,094
*3.00% + 1.00% carried forward from Year 1 + 1.00% carried forward from Year 2 The above is also demonstrated in Table 1, on the following page.

Council Agenda 1-21-2025 11.A-17

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
Table 1 — Example of CPI Cap and Carryforward
2025 2026 2027 2028
Collection Services $2,095,751 $2,200,539 $2,310,566 $2,426,094 12-Month Average CPI 6.00% 6.00% 3.00% CPI Adjustment(5% Cap) 5.00% 5.00% 5.00% B. Calculation of Profit Allowance
The Index-Based Rate Adjustment methodology includes a component for Franchisee's fair and reasonable Profit Allowance. Profit Allowance is used for the purposes of calculating Index-Based Rate Adjustments and does not constitute a guarantee of profit to the Franchisee.

Franchisee's Profit Allowance for the purposes of Index-Based Rate Adjustments is calculated as a function of Franchisee's current year cost projection for Collection Services. For 2025, Franchisee's Profit Allowance is 9% of the cost projection for Collection Services and in 2026 and thereafter, Franchisee's Profit Allowance shall be 10%of the cost projection for Collection Services.

Franchisee's 2025 cost projection for Collection Services is $2,095,751; therefore, Franchisee's Profit Allowance for 2025 is $2,095,751 times 9%, rounded to the nearest dollar, equaling $188,618. Using the first example from Section 2.A above, if Franchisee's 2026 cost projection is $2,200,539 (corresponding to a 5% CPI Adjustment), Franchisee's 2026 Profit Allowance for the purposes of calculating Index-Based Rate Adjustment shall be $220,054. Likewise, and using the second example from Section 2.A above, if Franchisee's 2026 cost projection is $2,137,666 (corresponding to a 2% CPI Adjustment), Franchisee's 2026 Profit Allowance for the purposes of calculating Index-Based Rate Adjustment shall be $213,767.

C. Calculation of Franchise Fee
Franchisee pays the City a Franchise Fee of 10% of Franchisee's gross revenues received from Customers in the City. For the purposes of Index-Based Rate Adjustments, the Franchise Fee is calculated as 10% of Franchisee's annual Total Cost Projection, per Section 2.E below, rounded to the nearest dollar. For 2025, Franchisee's annual Total Cost Projection is $3,850,080, yielding Franchise Fee component of $385,008. Actual Franchise Fee payments made by Franchisee to City shall be calculated as a function of Franchisee's gross revenues received from Customers in the City and may differ from the amount used in calculating adjustments to the Maximum Service Rates.

D. Calculation of Annual Revenue Reconciliation
Starting with the 2027 Index-Based Rate Adjustment, the difference between the Franchisee's annual Total Cost Projection and the Franchisee's actual annual total billings to Customers in the City shall be included in the annual Index-Based Rate Adjustment as an Annual Revenue Reconciliation.

For example, for the 2027 Index-Based Rate Adjustment, the difference between Franchisee's 2025 Total Cost Projection and Franchisee's total 2025 billings to Customers in the City shall be included in the 2027 annual Total Cost Projection. By way of example, if Franchisee's 2025 total billings to Customers in the City is a shortfall of 1% (-$38,501) then $38,501 will be added to Franchisee's Total Cost Projection for 2027. Conversely, if Franchisee's 2025 total billings to Customers in the City is a surplus of 1% (+$35,501) then $38,501 will be subtracted from Franchisee's Total Cost Projection for 2027.

Table 2, on the following page, provides an example of the case in which there is a 1% shortfall of

Council Agenda 1-21-2025 11.A-18

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
billed revenues in 2025, which is added to the Total Cost Projection in 2027. The table shows a continuation of 1% shortfalls being added in 2028 and 2029 for example purposes only, and assumes the CPI adjustment to Collection Services, Post-Collection Services, and AB 939 Fee at the 5% cap. Table 2a on the following page, provides an example of the case in which there is a 1% surplus of billed revenues in 2025, which is added to the Total Cost Projection in 2027. The table shows a continuation of 1% surpluses being added in 2028 and 2029 for example purposes only, and assumes the CPI adjustment to Collection Services, Post-Collection Services, and AB 939 Fee at the 5% cap.

Table 2—Example Revenue Reconciliation of-1%Annually
2025 2026 2027 2028 2029
Collection Services $2,095,751 $2,200,539 $2,310,566 $2,426,094 $2,547,399 Profit Allowance $188,618 $220,054 $231,057 $242,609 $254,740 Post-Collection Services $1,180,703 $1,239,738 $1,301,725 $1,366,811 $1,435,152 Franchise Fee $385,008 $406,703 $431,316 $452,909 $475,602 Revenue Reconciliation Example N/A N/A $38,501 $40,670 $43,132 Total Cost Projection $3,850,080 $4,067,035 $4,313,165 $4,529,095 $4,756,025 Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01%

Council Agenda 1-21-2025 11.A-19

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
Table 2a—Example Revenue Reconciliation of+1%Annually
2025 2026 2027 2028 2029
Collection Services $2,095,751 $2,200,539 $2,310,566 $2,426,094 $2,547,399 Profit Allowance $188,618 $220,054 $231,057 $242,609 $254,740 Post-Collection Services $1,180,703 $1,239,738 $1,301,725 $1,366,811 $1,435,152 Franchise Fee $385,008 $406,703 $422,761 $443,872 $466,113 Revenue Reconciliation N/A N/A $(38,501) $(40,670) $(42,276) Example
Total Cost Projection $3,850,080 $4,067,035 $4,227,608 $4,438,716 $4,661,127 Indexed Rate Adjustment 5.64% 3.95% 4.99% 5.01% Significant, unexpected increases or decreases in revenue may be included or excluded from the Annual Revenue Reconciliation if deemed reasonable by the parties. As a one-time exercise, the Franchisee may request to review the entirety of its revenue earnings with the City as a check-in to evaluate alignment with its revenue forecast and conditions outlined in this exhibit. By no later than September 30, 2025, the Franchisee shall provide the City with documentation of actual to- date receipts or billings, accompanied by an analysis of all corresponding service trends. Upon receipt of these materials, the City and the Franchisee shall engage in a good-faith meet-and- confer process to discuss and determine an appropriate resolution, which may include a rate adjustment in January 2026 if necessary.

E. Calculation of Total Cost Projection
Franchisee's annual Total Cost Projection shall be the sum of the resultant values from Section 2.A through 2.D above. For 2025,the Total Cost Projection is$3,850,080.Table 3 below demonstrates the 2026 Total Cost Projection if the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 5%. Table 4, on the following page, demonstrates the 2026 Total Cost Projection in the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 2%.

Table 3—2026 Total Cost Projection at 5% CPI Value for 2026 2025 2026
Collection Services $2,095,751 $2,200,539 Profit Allowance $188,618 $220,054
Post-Collection Services $1,180,703 $1,239,738 Franchise Fee $385,008 $406,703
Total Cost Projection $3,850,080 $4,067,035

Council Agenda 1-21-2025 11.A-20

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
Table 4—2026 Total Cost Projection at 2% CPI Value for 2026 2025 2026
Collection Services $2,095,751 $2,137,666 Profit Allowance $188,618 $213,767
Post-Collection Services $1,180,703 $1,204,317 Franchise Fee $385,008 $395,083
Total Cost Projection $3,850,080 $3,950,834 F. Calculation of Annual Index-Based Rate Adjustments
The Index-Based Rate Adjustment shall be calculated as function of the Franchisee's forthcoming annual Total Cost Projection divided by the then current year Total Cost Projection, minus 100%, rounded to the nearest hundredth of a percent.

For example, taking the results shown in Table 3, on the prior page, the Index-Based Rate Adjustment for 2026 would be $4,067,035, divided by$3,850,080, minus 100%, yielding a 5.64% adjustment to the Maximum Service Rates effective January 1, 2026. Using the results of Table 4, above as an example,the Index-Based Rate Adjustment for 2026 would be$3,950,834,divided by $3,850,080, minus 100%, yielding a 2.62% adjustment to the Maximum Service Rates effective January 1, 2026.

This Index-Based Rate Adjustment calculation described herein shall repeat in 2027, 2028, and 2029, with the addition of the Annual Revenue Reconciliation amounts calculated pursuant to Section 2.D of this Exhibit. Rate adjustments shall be effective on January 1s'of each year(unless otherwise agreed to in writing by the parties)and any delay in rate change approval not caused by Franchisee will result in additional adjustments so that all required revenues are billed within the rate year. Any delay in rate change approval that is caused by Franchisee shall not result in additional adjustments corresponding with the delay in approval.

Section 3 Cost-Based Rate Adjustments
Franchisee or City shall have the right to request a Cost-Based Rate Adjustment effective January 1, 2030. Franchisee's request for Cost-Based Rate Adjustment in 2030 shall be requested in writing on or before January 15, 2029 and City's request for Cost-Based Rate Adjustment in 2030 shall be requested in writing on or before January 31, 2029. To the extent possible any City request for Cost-Based Rate Adjustment shall be coordinated with the other agencies in San Luis Obispo County that follow the rate adjustment methodology described in this Exhibit, with all such agencies opting to request Cost-Based Rate Adjustment effective in the same rate year
Upon request by either party for Cost-Based Rate Adjustment, Franchisee shall prepare and submit financial records and calculations to the City in accordance with this Section by April 30, 2029. City shall have the right to review Franchisee's financial records related to the Cost-Based Rate Adjustment and calculations of Cost-Based Rate Adjustment for mathematical accuracy and adherence to the terms and conditions of this Section. City shall prepare written findings regarding adjustments to the Franchisee's calculations of Cost-Based Rate Adjustment that are required for mathematical accuracy and adherence to the terms and conditions of this Exhibit on or before June 30, 2029. City shall make every effort to seek City Council authorization of Cost-Based Rate Adjustment prior to August 30, 2029. If neither party requests a Cost-Based Rate Adjustment in writing as specified above, then an Index-Based Rate

Council Agenda 1-21-2025 11.A-21

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
Adjustment shall be applied for adjustments to Maximum Service Rates effective January 1, 2030 and subject to the terms and conditions of Section 2 of this Exhibit.

Franchise or City shall have the right to request subsequent Cost-Based Rate Adjustments no more frequently than every five (5) years following the prior Cost-Based Rate Adjustment. For example, if a Cost-Based Rate Adjustment is requested as stipulated in above in January, 2029 (and effective January 1, 2030) then the next Cost-Based Rate Adjustment may not be requested by either party until January, 2034(for effectiveness in 2035).The schedule from the following paragraph would also apply: Franchisee would prepare and submit financial records and calculations by April 30, 2034, City would prepare written findings regarding adjustments to Franchisee's calculations of Cost-Based Rate Adjustment that are required for mathematical accuracy and adherence to the terms and conditions of this Exhibit by June 30, 2034, and City would make every effort to seek City Council authorization of Cost-Based Rate Adjustment prior to August 30, 2034.

Notwithstanding the above, nothing shall prevent the parties from mutually agreeing to conduct Cost- Based Rate Adjustments in other years (i.e., years other than 2030 and 2035), provided that both parties agree in writing to waive the five(5)year limitation on Cost-Based Rate Adjustments expressed herein. If neither party requests Cost-Based Rate Adjustments in subsequent years pursuant to the five (5) year schedule described above, then Index-Based Rate Adjustments shall be applied for adjustments to Maximum Service Rates in such years, subject to the terms and conditions of Section 2 of this Exhibit.

Franchisee shall provide all financial information and supporting documentation required by this review in a format acceptable to City (or City's designated consultant) in a timely manner. Franchisee shall not require City(or City's designated consultant)to review any such documents at Franchisee's worksite but shall instead allow for all required information and supporting documentation to be provided to City(or its designated consultant)via physical mail,e-mail, or any other delivery method approved by City.

Cost-Based Rate Adjustments shall be prepared and calculated in accordance with the steps described below.

A. Projection of Collection Services and Post-Collection Service Costs Franchisee shall prepare financial records and calculations of Cost-Based Rate Adjustment using audited financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) for Franchisee's immediately preceding three (3) fiscal years. Such financial records and calculations shall include Franchisee's projected costs for Collection Services and Post-Collection Services as well as Franchisee's projected gross revenues at then-current Maximum Service Rates for the forthcoming year(e.g., 2030 at the earliest).

Franchisee shall promptly assemble, provide, and submit such information that is reasonably necessary to support the assumptions made by the Franchisee with regard to the assumptions underlying the forecast. Upon submission of such information, the City holds the ability to make appropriate changes for non-allowable costs, large unsupported variances in cost projections including but limited to corporate transactions and allocations, large variances in inter-company and related party transactions and allocations, unjustifiable variances in any cost category, non- conformance with agreed upon depreciation terms, non-conformance agreed upon profit allowances, and other customary and reasonable adjustments as detailed in the Agreement. Cost projections for Collection Services and Post-Collection Services prepared by Franchisee must be justifiable, supportable with financial information, and provide accountability for all expenditures. In preparing such cost projections, Franchisee shall assemble and submit its forecasts of:
a. Revenues at current Maximum Service Rates for the then-current year, including delineation of revenues by sector(single-family residential vs.commercial and multi-family) and with details of the number of subscribers by type within each sector. b. Projected costs of Collection Services for the then-current year and the forthcoming year, with comparison to and explanation of any variances to actual costs for Collection Services in the prior three (3) fiscal years. Costs for Collection Services include labor, corporate

Council Agenda 1-21-2025 11.A-22

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
overhead, depreciation (with rolling stock at 10-year depreciation lifespan), and general and administrative costs and shall be delineated as per the primary cost categories included in Franchisee's Audited Financial Statements. Franchisee must provide documentation of, and explanation for, material variances in any cost category. Projected costs for the forthcoming year shall be based on Franchisee's actual costs per Audited Financial Statements and escalated by the CPI Adjustment described in Section 2.A of this Exhibit, with the exception that Franchisee may adjust projections to account for other documentable changes in costs. Corporate overhead costs shall be limited to be less than 4% of Franchisee's Total Cost Projection for the forthcoming year and Franchisee must provide documentation and justification for any amounts of Corporate Overhead above 3% of Franchisee's Total Cost Projection for the forthcoming year.City retains the right to make appropriate adjustments to cost projections to cost categories for which Franchisee does not or cannot provide adequate documentation and explanation of material variances compared to prior years.
c. Projected costs of Post-Collection Services for the then-current year and the forthcoming year, with comparison to and explanation of any variances to actual costs for Collection Services in the prior three(3)fiscal years.Costs for Post-Collection Services include landfill disposal, organics processing, recyclables processing and marketing, related-party transportation, and related-party rent and shall be delineated as per the primary cost categories included in Franchisee's Audited Financial Statements. Franchisee must provide documentation of, and explanation for, material variances in any cost category.

Projected costs for the forthcoming year shall be based on Franchisee's actual costs per Audited Financial Statements and escalated by the CPI Adjustment described in Section

2.A of this Exhibit,with the exception that Franchisee may adjust projections to account for other documentable changes in costs. City retains the right to make appropriate adjustments to cost projections to cost categories for which Franchisee does not or cannot provide adequate documentation and explanation of material variances compared to prior years.
d. Franchisee shall not include any non-allowable costs in its cost projections for Collection Services or Post-Collection Services. Non-allowable costs include but are not limited to:
i. Entertainment and non-work related travel expenses, unless authorized in advance by City.
ii. Advertising for services not within the scope of this Agreement or outside of the service area of the City of Pismo Beach.
iii. Fines or penalties of any nature.
iv. Liquidated damages assessed under this Agreement.
v. Federal or State income taxes.
vi. Profit sharing payments not related to an IRS approved pension program. vii. Charitable or political donations.
viii. Attorneys' fees and other expenses incurred by Franchisee in any court proceeding in which City and Franchisee are adverse parties, unless Franchisee is the prevailing party in said proceedings.
ix. Attorneys' fees and other expenses incurred by Franchisee in any court proceeding in which Franchisee's own negligence,violation of law or regulation,or other wrongdoing, is in issue and occasions part of the attorneys' fees and expenses claimed, provided, however, such attorneys' fees will be allowed to the extent Franchisee can demonstrate they were reasonable and necessary and a cost of doing business, and were not the result of any intentional or willful

Council Agenda 1-21-2025 11.A-23

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
misconduct by Franchisee or its employees; and attorneys' fees and expenses incurred by Franchisee in a court proceeding in which the legal theory or statute providing a basis of liability against Franchisee also provides for separate strict liability for City arising from the action of its citizens or ratepayers (such as in a CERCLA lawsuit).
x. Payments to related party entities for products or services (other than lease expense,calculated as provided below),in excess of the fair market value for those products or services. For purposes of this Agreement, related party expenses are those resulting from transactions between Franchisee and another company (companies)that has(have)common ownership or management control. e. Franchisee's audited financial statements,and any other documentation as deemed necessary by the City, will be reviewed to determine Franchisee's cost projections for each of the foregoing categories during the year involved. City will use the financial statements to determine that costs have actually been incurred and have been assigned to the appropriate category.
f. City may adjust the actual costs in two ways: (1) to exclude any non-allowable costs, set out below,and(2)to exclude and/or reduce any costs that were actually incurred but which are not reasonable and necessary in keeping with industry standard best practices.

B. Calculation of Profit Allowance
Franchisee's Profit Allowance shall be 10% of the cost projection for Collection Services, rounded to the nearest dollar.

C. Calculation of Franchise Fee
Calculation of Franchise Fee shall be calculated in accordance with Section 2.C, above, for the applicable year as appropriate.

D. Calculation of Annual Revenue Reconciliation
Calculation of Annual Revenue Reconciliation shall be calculated in accordance with Section 2.D, above, for the applicable year as appropriate.

E. Calculation of Total Cost Projection
Calculation of Total Cost Projection shall be calculated in accordance with Section 2.E, above, for the applicable year as appropriate.

F. Calculation of Cost-Based Rate Adjustment
The Cost-Based Rate Adjustment shall be the calculated as function of the Franchisee's forthcoming annual Total Cost Projection divided by the then current year Total Cost Projection, minus 100%, rounded to the nearest hundredth of a percent.This is the same calculation described in Section 21, above. The resultant percentage shall be applied to the then-current Maximum Service Rates and be effective January 1 of the forthcoming year.

Rate adjustments shall be effective on January 1st of each year (unless otherwise agreed to in writing by the parties)and any delay in rate change approval not caused by Franchisee will result in additional adjustments so that all required revenues are billed within the rate year. Any delay in rate change approval that is caused by Franchisee shall not result in additional adjustments corresponding with the delay in approval.

Section 4 Annual Audited Financial Statements
Franchisee shall annually prepare Audited Financial Statements in accordance with Generally Accepted Accounting Principles (GAAP)for its operations in the San Luis Obispo County region. Franchisee shall provide City with copies of the annual Audited Financial Statements upon request and with any Cost-

Council Agenda 1-21-2025 11.A-24

Attachment 2
Exhibit E
Annual Rate Adjustment Methodology
Based Rate Adjustment submittal.

Section 5 Extraordinary Adjustments
Except as provided herein, Franchisee may not request adjustments to Maximum Service Rates in years during which Index-Based Rate Adjustments are scheduled to be applied and must follow the timeline described in Section 3. Notwithstanding the above, Franchisee may request extraordinary adjustments to Maximum Service Rates due to changes in law affecting collection operations, including for compliance with the California Air Resource Board's(CARBS's)Advanced Clean Fleet(ACF)electrification mandate.

The City may, but is not obligated to, consider requests for extraordinary adjustment to Maximum Service Rates due to changes in law affecting Post-Collection Services. Requests for extraordinary changes in Maximum Service Rates are subject to good faith negotiations between City and Franchisee.

In the event of any Change in Scope or Change in Law (each as described below) that results in an material increase or decrease in Franchisee's costs or revenues, in the event of an Extraordinary Cost Increase (as defined below), or in the event of any Change in Fees (as described below), an appropriate adjustment will be made to the Maximum Service Rates in order to compensate, to the maximum extent possible,for such increase or decrease in costs, revenues or Fees,commencing from the Effective Date(s) such increase or decrease first occurs. Any adjustment to Maximum Service Rates due to a Change in Scope, a Change in Law or an Extraordinary Cost Increase shall be in the reasonable discretion of the City.

A. "Change in Scope"shall mean any change in the services provided by the Franchisee under the Agreement whether proposed by the Franchisee or by the City.

B. "Change in Law" shall mean the enactment, adoption, promulgation, issuance, modification or written change in any law, regulation, order or judgment of any governmental body that affects the Franchisee's performance of services under the Agreement including, without limitation, the issuance of final regulations under existing laws.

C. "Change in Fees" shall mean any change in franchise fees, vehicle impact fees and other fees charged to the Franchisee by the City connection with the services provided by the Franchisee under the Agreement the cancellation of any existing fees, and the adoption of any new fees.

D. "Extraordinary Cost Increase" shall mean a substantial increase in the Franchisee's operating or capital costs or expenses that is outside of the Franchisee's control but not due to a Change in Scope or Change in Law.

E. "Effective Date" shall mean the date in which the Franchisee notifies the City of the reasons for the cost estimate associated with a Change in Law, Change in Fees, and/or Extraordinary Cost Increase or when the Franchisee begins incurring costs for the Change in Law, Change in Fees, or Extraordinary Cost Increase,whichever is later.

In the case of a Change in Scope, a Change in Law or an Extraordinary Cost Increase, the Franchisee shall provide the City with projected operational,cost and revenue data reflecting the entire financial effect of such Change. The City reserves the right to require that the Franchisee supply any additional operational, cost and revenue data, or any other information it may reasonably need, to ascertain the appropriate financial impact of the Change and any necessary adjustment to Maximum Service resulting from such Change.

Extraordinary adjustments to Maximum Service Rates for a qualifying Change in Scope or Change in Law, for a Change in Fees, or for an Extraordinary Cost Increase shall take effect as of the beginning of the next year and will include all impacts of the extraordinary adjustment from the Effective Date of the impact; provided, however, that, in the case of any Change in Fees charged by the City, the Extraordinary adjustment shall take effect as of the Effective Date of such Change in Fees.The underlying service, cost, revenue or Fee changes supporting any rate adjustment under this Section 5 will be added to the appropriate category under Sections 2 and 3 above for purposes of future cost projections.

Council Agenda 1-21-2025 11.A-25

Attachment 2
Exhibit E
REPORT
City of San Luis Obispo and Participating Agencies
New Solid Waste Rate Adjustment
Methodology and 2025 Rates
Submitted electronically:November 1, 2024
CONSULTING GROUP, INC.

RESOURCES-RESPECT-RESPONSIBILITY
Council Agenda 1-21-2025 11.A-26

Attachment 2
Z3CONSULTING CROUP, INC.

RESOURCES- RESPECT-RESPONSIBILITY
November 1, 2024
Ms. Meg Buckingham
Solid Waste and Recycling Coordinator
Public Utilities
879 Morro, San Luis Obispo, CA 93401
submitted via email:[email protected]
SUBJECT: New Solid Waste Rate Adjustment Methodology and 2025 Rates Dear Ms. Buckingham and Participating Agencies,
R3 Consulting Group, Inc. (R3)was engaged by the City of San Luis Obispo (City)to provide solid waste consulting services via two engagements supporting the City's negotiations of a new solid waste services agreement with Waste Connections, the solid waste hauler. R3 was originally engaged by the City to work in collaboration with Los Osos Community Services District and Waste Connections to update the methodology for annual adjustments to the solid waste rates charged by Waste Connections. The key objectives for updating the rate adjustment methodology were to enhance rate stability, predictability, fairness, transparency, ease of administration, and cost- effectiveness.

As that engagement proceeded, eight other agencies in San Luis Obispo County (the City of Arroyo Grande, the City of Grover Beach, the City of Pismo Beach, Avila Beach Community Services District, Cambria Community Services District, Cayucos Sanitary District, Nipomo Community Services District, and Oceano Community Services District—altogether"Participating Agencies"or "Agencies")were included as stakeholder participants in the development of new rate adjustment methodology. With the inclusion of these additional Agencies, objectives for the engagement were updated to include regional scale applicability of the new rate adjustment methodology. R3 was then engaged by the City to review Waste Connections' rate adjustment requests for the 2025 rate year on behalf of all ten Agencies with the objective of determining 2025 solid waste rates that would provide an appropriate starting point for a new rate adjustment methodology starting in 2026.

The City of San Luis Obispo served as the lead contracting agency for both engagements, providing primary oversight and direction of R3's work. Input and feedback were also sought from the other nine Agencies, and the results reflect their stakeholder input. Ultimately, the outcomes of both engagements are the conclusion of good faith contract negotiations between the City and Waste Connections. In summary, the City and Waste Connections have tentatively agreed to updated terms and conditions for annual rate adjustment which fulfill key objectives while also securing enhanced services that will protect low income households, prevent illegal dumping, and clean solid waste collection containers. The new rate adjustment methodology and enhanced services also resulted in updated adjustments to solid waste rates for 2025.

The City intends to recommend a new agreement with Waste Connections to the City Council that will include the new rate adjustment methodology and enhanced services along with the 2025 adjustments to solid waste rates. In keeping with the objective for the results to be applicable on a regional scale, Waste Connections is willing to offer the new rate adjustment methodology and 1512 Eureka Road,Suite 220, Roseville,CA 95661 1 p 916.782.7821 1 f 916.782.7824 1 www.r3cgi.com Council Agenda 1-21-2025 11.A-27

Attachment 2
select enhanced services to the other nine Agencies at the updated 2025 adjustments to solid waste rates.

R3 would like to recognize that this has been a significant undertaking, and we'd like to thank the City of San Luis Obispo, Waste Connections, Los Osos Community Services District, and Participating Agencies for your involvement in providing feedback during this process. In closing, R3 recommends City and stakeholder consideration of the revised 2025 rates and the new rate adjustment methodology as a means of achieving shared rate fairness, stability, and predictability objectives. Here's what Waste Connections has shared regarding the outcomes:
"San Luis Garbage (SLG) had the opportunity to negotiate with the City of San Luis Obispo on the re-write of the 1994 rate-making manual. The goal of this endeavor was to simplify and streamline the rate-making process for all parties and provide an improved model going forward for potential refuse collection rate changes. The process included a considerable amount of discussion and analysis and although arduous at times, SLG feels the negotiations were performed in good faith, were collaborative in nature and carried out with mutual respect. In addition to updating the rate-making methodology, both parties took the opportunity to establish some new service enhancements that will discourage illegal dumping, provide cart cleaning exchanges, and offer rate relief for low-income customers. SLG believes the outcome of the negotiation has provided a much-improved rate-review process for the City of San Luis Obispo and other cities currently under the old rate-making methodology which will ultimately allow for an easier path to fair and reasonable rates for all customers." We appreciate the opportunity to be of service to the City and would like to thank the City and the Participating Agencies for their involvement and feedback. We would also like to recognize Waste Connections staff for being communicative and responsive to requests for information during the process.

Sincerely,
C -
Garth Schultz I Principal
R3 Consulting Group, Inc.
510.292.0853 1 [email protected]
1512 Eureka Road,Suite 220, Roseville,CA 95661 1 p 916.782.7821 1 f 916.782.7824 1 www.r3cgi.com Council Agenda 1-21-2025 11.A-28

Attachment 2

TABLE OF CONTENTS

1. Executive Summary
page 1

2. Background
page 4 .

3. New Solid Waste Rate Adjustment
Methodology and 2025 Rates
page 10
Attachments
1 Summary of Original 2025 Base Year Rate Adjustments 2 Revised 2025 Rate Adjustments
3 CPI-U for Garbage and Trash
4 Example Rate Calculations for 2026 through 2029
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates TOC Council Agenda 1-21-2025 11.A-29

Attachment 2
1 . EXECUTIVE SUMMARY
New Rate Adjustment Methodology
The City of San Luis Obispo, in its capacity as the lead agency on the solid waste rate adjustment methodology update process, and in partnership with Los Osos Community Services District and Waste Connections, completed negotiations and arrived at tentative agreement with Waste Connections regarding the terms and conditions of a new methodology. The outcome was the result of extensive good faith negotiations between the City and Waste Connections, with due consideration to input provided by other public agency stakeholders.

Pending City Council approvals,the new methodology will replace the 1994 Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates (1994 Rate Manual) and will regulate annual rate adjustments for the City's solid waste rates starting in 2026.

The new methodology fulfills key objectives established by the City and Waste Connections, including rate stability, predictability, fairness, transparency, ease of administration, and cost-effectiveness.

Additionally, in response to requests by other Agencies that contract with Waste Connections in San Luis Obispo County, the new methodology can be applied on a regional-scale and is available as recommended alternative to the 1994 Rate Adjustment Manual for those Agencies.

The key features of the new methodology include:
)) CPI Adjustments: Starting in 2026, rate adjustments will be based on the Garbage and Trash CPI, with a floor of 2% and a cap of 5%. Amounts under 2% or over 5%will carry forward. The CPI adjustment will apply to Waste Connections' collection and post-collection cost centers.

Revenue Balancing Mechanism: Starting in 2027, adjustments to rates will account for shortfalls or surpluses in Waste Connections' actual revenues compared to projected revenues from prior years. For example, if Waste Connections' 2025 revenues exceed projections, the amount of surplus revenues will be credited to the rates in 2027 (and vice versa), achieving fairness in compensation and rates for the company and for ratepayers. Such adjustments would take place annually and will be independent of the CPI cap and floor noted above (there is no cap on these amounts).
)) Less Frequent Cost-Based Adjustments: Currently, solid waste rates are adjusted based on the 1994 Rate Adjustment Manual every three years on Waste Connections' costs. Via the new methodology, cost-based adjustments would occur a maximum of every five years, and only if requested by Waste Connections or the City. The first opportunity for a cost-based adjustment will be for the 2030 rate year. If neither Waste Connections nor the City request a cost-based adjustment, then the CPI adjustment approach will be applied. Cost-based adjustments will be based on Waste Connections' consolidated audited financial statements for the region.

Timeframes for cost-based adjustment application and review process will be ample, such that the City will have sufficient time for review and approval processes and such that the potential for delay in implementation is minimized. These timeframes will be delineated in the forthcoming amendment to the agreement with Waste Connections.
)) Updated Depreciation Lifespan for Trucks: The 1994 Rate Manual set a 7-year depreciation schedule for solid waste collection trucks. Modern solid waste collection trucks have a 10-year lifespan, and the depreciation schedule was adjusted accordingly. )) Updated Profit Allowance: The 2025 rate adjustment will include a 9% profit allowance of projected collection costs and in 2026 and thereafter the profit allowance will be 10%. The updated profit allowance is in-keeping with industry standard ranges for solid waste services. For City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 1 of 19 Council Agenda 1-21-2025 11.A-30

Attachment 2
Executive Summary
context, the 2025 profit allowance is approximately 5% of revenues and we estimate that the 2026 profit allowance will be approximately 5.5% of revenues. Profit will not be allowed on post- collection costs.
)) Removed Limitation on Corporate Overhead: The 1994 Rate Manual placed a limitation on corporate overhead costs. Today, corporate overhead costs fund legal, tax, payroll, human resources, engineering, compliance, IT, training and recruiting programs. The City and Waste Connections agreed to remove the prior limitation in order to fund these services. In the near- term, compensation to Waste Connections for corporate overhead will be limited by the CPI adjustment noted above. Cost-based adjustments to corporate overhead are possible in 2030, and will be subject to review,justification, and potential limitation at that time. )) Extraordinary Adjustments: The California Air Resources Board (CARB)Advanced Clean Fleets (ACF) regulation is requiring all solid waste collection trucks to have zero emissions by 2042. This includes a phased in plan to get the percentage of the fleet to be zero emission vehicle (ZEV)with 10% by 2030, 25% by 2033, 50% by 2036,75% by 2039 and 100% by 2042.

During CPI Adjustment years, Waste Connections may request extraordinary rate adjustments due to changes in law affecting collection operations, including for compliance with CARB's ACF zero emission mandate (which may necessitate change to depreciation schedules). The City may, but is not obligated to, consider requests for extraordinary rate adjustments due to changes in law affecting post-collection operations. Requests for extraordinary change are subject to good faith negotiations between City and Waste Connections.

New Service Enhancements
During negotiations, the City and Waste Connections also took the opportunity to establish new service enhancements that will discourage illegal dumping, provide cart cleaning exchanges, and offer rate relief for low-income customers. The below service enhancements are available to the other Agencies that approve the new rate adjustment methodology in association with adjusted 2025 solid waste rates:
)) Customer Assistance Program: 20% low-income discount provided to residential customers using 32-gallon cart service, using existing jurisdictional practices on low-income relief for their offered utility type services with evidence of qualifying financial hardship. )) Free Bulky Waste Collections: Collection of a bulky waste item twice annually from residential accounts at no separate cost, via clean-up week or voucher program depending on existing program.
)) Annual Cart Exchange: Once annual exchange of a residential solid waste, recycling, or organics cart per customer account.
2025 Rate Adjustments
As a result of the above, Waste Connections' 2025 rate adjustment request was revised from a 9.29% increase to a 9.89% increase in solid waste rates, effective January 1, 2025 (and prior to other rate structure adjustments that the City and Waste Connections may enact). When the new rate methodology changes and service enhancements are equally applied to the other regional Agencies, the results are as shown in Table 1 on the following page. Additional details are included in Section 3 of this report.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 2 of 19 Council Agenda 1-21-2025 11.A-31

Attachment 2
Executive Summary
Table 1: 2025 Rate Adjustments
Agency Original Revised
City of San Luis Obispo 9.29% 9.89%
City of Arroyo Grande 3.97% 4.92%
Los Osos CSD 12.47% 13.18%
City of Pismo Beach 3.97% 4.82%
Cambria CSD 12.78% 12.59%
City of Grover Beach 3.97% 5.02%
Nipomo CSD 3.23% 5.04%
Oceano CSD 3.76% 4.98%
Cayucos SD 12.47% 14.32%
Avila Beach CSD 3.97% 4.60%
City of San Luis Obispo New Solid Waste Rate Adjustment Methodology and 2025 Rates 3 of 19 Council Agenda 1-21-2025 11.A-32

Attachment 2

2. BAC KG RO U N D
1994 Rate Manual
The 1994 Rate Manual is a 120-page document that provides step-by-step directives regarding annual adjustments to solid waste rates in the City. Though the 1994 Rate Manual specifically references the City of San Luis Obispo, other agencies in San Luis Obispo County(including the nine Agencies referenced in this report) also follow the 1994 Rate Manual for annual adjustments to solid waste rates.

The 1994 Rate Manual established a three-year cycle for adjustments to solid waste rates. The first year of each three-year cycle (called a "base year")adjusted rates based on the documented costs of providing solid waste services. In the second and third years, solid waste rates were adjusted in accordance with external indicators, such as the Consumer Price Index (CPI).

While the 1994 Rate Manual was an appropriate approach to annually adjusting solid waste rates at the time, changing regulatory conditions and modern best practices in solid waste rate setting indicate that the prior approach has outlived its usefulness. In particular, cost-based adjustments on a fixed three-year cycle are no longer the industry norm. Most solid waste rate adjustment methodologies in California today either do not include regular cost-based adjustments or do so less frequently. When allowed, cost-based adjustments are typically the result of extraordinary changes in cost due to factors like changes in law or other uncontrollable factors (such as China's National Sword Policy in 2017 and the COVID pandemic in 2020). Additionally, step-by-step instructions and timelines in the 1994 Rate Manual are outdated and do not contemplate current approaches to public noticing, public hearings, and review timelines for authorizing rate adjustments.

RFQ for New Rate Adjustment Methodology
Recognizing the limitations of the 1994 Rate Manual, the City and Los Osos Community Services District issued a request for quotes (RFQ) in early 2024 seeking a consultant to develop a new rate adjustment methodology. Pursuant to the RFQ process, R3 was awarded an agreement to provide support in developing a new rate adjustment methodology.

Rate Adjustment History
Rate adjustments experienced by the City and participating Agencies have varied significantly in the prior ten years from 2015 through 2014, as shown in Table 2, on the following page. As shown in the table, rate adjustments by agency have varied from 0% (most Agencies in 2015)to over 20% (most Agencies in 2022).

There are important reasons for these variances, primarily related to the unfunded State mandates of SIB 1383 (Short-lived Climate Pollutants Act)which required all agencies in California to implement programs to recover and recycle organic waste to reduce methane emissions from landfills. While rate adjustments were necessary to fund the required SIB 1383 programs, the combination of new costs with the three-year cost-based adjustment approach in the 1994 Rate Manual resulted in rate adjustment spikes in 2016, 2019, and 2022. Overall, across the Agencies, the average annual rate adjustment from 2015 through 2024 has been 6.76%.

One important objective of the new rate adjustment methodology is to minimize the recurrence of such spikes by reducing the frequency of cost-based rate adjustments. From R3's experience implanting new rate methodologies with other clients, the result has been stable and predictable annual rate adjustments.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 4 of 19 Council Agenda 1-21-2025 11.A-33

Attachment 2
Background
Table 2: 2015-2024 Rate Adjustments by Agency
&2Lncy 2015 20IMMI 2018 20191r2'020 2021 2022 2023 2024 City of San Luis
Obispo 0.00% 5.25% 1.00% 1.60% 13.70% 1.70% 0.70% 17.75% 9.10% 3.00% City of Arroyo
Grande 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00% Los OsmCSD 2.00% 10.37% 1.00% 1.60% 25.74% 1.70% 0.70% 41.87% 7.70% 2.70% City of Pismo Beach 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00% Cambria CSD 1.92% 9.93% 1.00% 1.60% 25.32% 1.70% 0.70% 41.50% 9.10% 3.00% City of Grover
Beach 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00% NipomoCSD 0.00% 0.00% 1.00% 1.60% 15.08% 1.70% 0.70% 21.27% 9.10% 3.00% Ocean CSD 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 21.03% 9.10% 3.00% CayucosSD 2.00% 27.39% 1.00% 1.60% 26.43% 1.70% 0.70% 43.30% 9.10% 3.00% Avila Beach CM 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00% Financial Statement History
There are three Waste Connections business units serving the ten participating Agencies (San Luis Garbage, Mission Country Disposal, and South County Sanitary Service). Each business unit prepares annual audited financial statements which are used as the basis for base year rate applications to the Agencies. R3 analyzed Waste Connections' audited financial statements for the six years from 2018 through 2023 to evaluate profit achievement, with the results summarized in Table 3, below. Table 3 also includes estimated profit achievement in 2024 (still underway)and for 2025 (prior to 2025 rate adjustments).

Table 3: 2018-2023 Profit Achievement
San Luis Garbage -13.84% -16.84% -9.66% -3.41% 12.47% 6.30% -0.64% -6.62% Mission Country Disposal -19.26% -30.77% -9.28% -19.84% -10.21% 2.47% -4.09% -8.95% South County Sanitary Service 5.38% 1.40% 0.25% -5.56% 5.93% 15.85% 8.43% 2.38% Overall -7.22% -12.45% -5.22% -7.88% 4.66% 9.67% 2.61% -3.16% City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 5 of 19 Council Agenda 1-21-2025 11.A-34

Attachment 2
Background
As shown in Table 3, in total across all three business units, Waste Connections operated without any net income between 2018 and 2021, with net positive profitability being achieved in 2022 and 2023. Profit achievement varied by business unit, with South County Sanitary Service consistently experiencing greater profit achievement and Mission Country Disposal consistently experiencing lesser or no profit achievement. This is one of the key reasons that rate adjustments for the Agencies served by Mission Country Disposal (Cambria Community Services District, Cayucos Sanitary District, and Los Osos Community Services District)were higher than the other Agencies in 2019 and 2022.

Table 3 also shows that projected profit achievement in 2024 will be lower than 2023, which is primarily the result of Waste Connections incurring increased landfill disposal costs (provided by a related party) and increased organics processing costs (provided by a non-affiliated third party processor). Projected profit achievement for 2025-which, importantly, is prior to 2025 adjustments to solid waste rates- demonstrates no net profit for San Luis Garbage and Mission County Disposal and low net income for South County Sanitary Service. Overall, without adjustments to rates, Waste Connections service to the Agencies in 2025 will not yield net income.

It should be noted that Waste Connections allocates costs between business units based on allocation metrics that include vehicle operating hours, number of solid waste containers, and number of customer accounts. While such metrics are useful means of allocating costs, they do not necessarily represent the exact cost of providing service within a given business unit.

Rate Comparison
R3 compared current 2024 solid waste rates for the Agencies to rates in other jurisdictions in San Luis Obispo County, Santa Barbara County, and Monterey County. The results are shown in Table 4, below and on the following page, and are organized in ascending order by 32-gallon monthly rate (common residential subscription level).

Table 4: Regional Comparison of Monthly Rates
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Oceano CSD N/A $20.37 $29.31 $57.39 $128.75 San Luis Obispo !7$14.74 $23.53 $47.06 $70.59 $185.21 Pismo Beach N/A $23.76 $47.56 $71.33 $ 666.02 Grover Beach N/A $24.23 $32.74 $41.23 $147.95 Arroyo Grande N/A $27.33 $35.52 $43.73 $167.65 Nipomo CSD N/A $27.57 $39.52 $51.81 $136.62 Avila Beach CSD N/A $28.31 $46.78 $65.24 $177.68 Santa Barbara County Zone 4 Lompoc N/A $31.41 $36.13 $40.70 $179.98 Cayucos SD N/A $32.60 $38.52 $44.48 $184.32 Santa Barbara County Zone 5 N/A $33.03 $37.84 $42.46 $192.87 City of Atascadero N/A $33.67 $52.80 $66.35 $172.24 San Miguel N/A $34.13 $53.80 $72.88 $124.12 Santa Barbara County Zone 4 Santa Ynez N/A $34.33 $42.62 $50.77 $254.11 City of Morro Bay $22.21 $35.54 $71.07 $106.63 $265.30 Solvang N/A $36.28 $45.20 $54.69 $256.55 City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 6 of 19 Council Agenda 1-21-2025 11.A-35

Attachment 2
Background
ic
Agency . 20Gallon 32Gallon 64Gallon %Galloj&�= .in MEMEEI�
Goleta N/A $37.39 $41.88 $48.35 $240.10 Templeton N/A $38.73 $54.63 $60.41 $149.58 Los Osos CSD $27.74 $39.45 $60.57 $64.96 $228.72 Buellton N/A $40.51 $48.40 $56.38 $281.13 Cambria CSD N/A $41.52 $83.03 $124.55 $201.94 King City $32.43 $42.83 $53.68 $63.52 $288.00 Santa Barbara County Zone 2 N/A $43.25 $54.66 $65.92 $259.61 City of Paso Robles $38.15 $43.32 $57.42 $63.59 $188.36 Santa Barbara County Zone 3 N/A $45.22 $51.52 $57.75 $215.72 MRWMD $38.28 $46.54 $72.92 $91.20 $277.20 City of Santa Barbara N/A $48.26 $59.82 $71.38 $277.66 WM Area (Formerly Mid-State) N/A $48.72 $71.31 $93.84 $214.46 Santa Barbara County Zone 1 N/A $56.60 $62.86 $69.25 $256.74 Santa Maria N/A N/A $38.74 $47.87 $166.72 Table 4 demonstrates that solid waste rates for the City and other Participating Agencies compare favorably to others in the region. Charts 1 through 4, below and on the following pages, show the information from Table 4 in graphical format.

Chart 1: Regional Comparison of Monthly 32-gallon Cart Rates $60
$50
$40
$30
$20
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Chart 1, which is organized in ascending order of 32-gallon monthly rate, demonstrates that the rates for 32-gallon monthly service (the most subscribed residential service level)for all Participating Agencies City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 7 of 19 Council Agenda 1-21-2025 11.A-36

Attachment 2
Background
other than Cambria Community Services District, Cayucos Sanitary District, and Los Osos Community Services District are the lowest in the region. Chart 2 shows how 64-gallon monthly rates compare.

Chart 2: Regional Comparison of Monthly 64-gallon Cart Rates $90
$80
$70
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Chart 3: Regional Comparison of Monthly 96-gallon Cart Rates $140
$120
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City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 8 of 19 Council Agenda 1-21-2025 11.A-37

Attachment 2
Background
Charts 3 and 4 keep the same ordering as Charts 1 and 2 and show how large residential 96-gallon service and commercial two (2)cubic yard bin service compare with the region. Overall, while exceptions exist, rates for solid waste service for the City and the Participating Agencies are among the lowest in the region, including San Luis Obispo County, Santa Barbara County, and Monterey County.

Chart 4: Regional Comparison of Monthly 2 Cubic Yard Rates $350
$300
$250
$200
$150
$100
$50
$0
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City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 9 of 19 Council Agenda 1-21-2025 11.A-38

Attachment 2

3. NEW RATE ADJUSTMENT METHODOLOGY
AND 2025 RATES
2025 Base Year Rate Adjustments
Waste Connections submitted base year rate applications to the Agencies for rates effective January 1, 2025.' Those rate applications were prepared in accordance with the 1994 Rate Manual, with modification for an effectiveness date of January 1, 2025, instead of the October 1, 2024 date that otherwise would have been the effective date given strict adherence to the 1994 Rate Manual. In simple terms, the applications project future 2025 costs for providing solid waste services based on the actual costs of providing services as follows:
)) Actual results for the most recently completed year(2023), which are based on the audited financial statements.
)) Projected results for the current year(2024), which are to be based on year-to-date information available at the time the application is submitted.
)) Projected results for the next year(2025).

Adjustments to solid waste rates are then calculated based on the projected 2025 revenue requirement, which is the sum of:
)) Allowed costs.
)) Allowable operating profit.
)) Pass through costs.

In reviewing the 2025 base year rate applications for the Agencies, R3:
)) Checked calculations for mathematical accuracy and consistency. )) Tied projected costs back to the 2023 audited financial statements. )) Evaluated the root causes of extraordinary changes in cost for landfilling and organics processing.
)) Reviewed 2024 revenues year to date to determine accuracy of projected revenues at current rates for 2025.
)) Proposed adjustments to solid waste collection vehicle depreciation lifetimes.

A summary of Waste Connections'original 2025 base year rate adjustments per the applications submitted to the Agencies is included as Attachment 1.

It should be noted that Waste Connections' base year rate applications are made at the business unit level (San Luis Garbage, Mission Country Disposal, and South County Sanitary Service)with no allocation of projected costs to individual Agencies served by those business units. Rather, the base year rate adjustment applications use total costs and revenues for those business units to calculate rate adjustments for the individual Agencies. For the purposes of our analysis, and as documented in Attachment 1, R3 allocated projected expenses by agency in accordance with proportion of revenues— this allocation approach is what the base year rate application achieve in practice, and the result is an exact match to the rate adjustment calculations included in the base year rate applications for each agency.

Authorization of the January 1, 2025 rate adjustments are expected to occur after that date. Waste Connections will prorate adjustment amounts on customer bills to account for the timing difference.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 10 of 19 Council Agenda 1-21-2025 11.A-39

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
R3 thoroughly reviewed the figures included in the 2025 rate adjustment calculations, as well as supporting documentation requested of Waste Connections during the review process and found that Waste Connections' rate applications were accurate and in accordance with the 1994 Rate Manual. The rate adjustments shown in Table 5 on the following page are the correct rate adjustments per the 1994 Rate Manual and are the default rate adjustments effective January 1, 2025, if the City and the Participating Agencies do not move forward with revisions to the 2025 rates in accordance with the new rate adjustment methodology.

Table 5: 2025 Rate Adjustments Per 1994 Rate Manual
I
City of San Luis Obispo 9.29%
City of Arroyo Grande 3.97%
Los Osos CSD 12.47%
City of Pismo Beach 3.97%
Cambria CSD 12.78%
City of Grover Beach 3.97%
Nipomo CSD 3.23%
Oceano CSD 3.97%
Cayucos SD 12.47%
Avila Beach CSD 3.97%
Revisions for New Rate Adjustment Methodology
In negotiating the terms and conditions of a new rate adjustment methodology starting in 2026, the City and Waste Connections made the following revisions to the 2025 base year rate adjustments:

Updated Depreciation Lifespan for Trucks
The 1994 Rate Manual set a 7-year depreciation schedule for solid waste collection trucks. Modern solid waste collection trucks have a 10-year lifespan, and the depreciation schedule was adjusted by Waste Connections accordingly. Table 6, on the following page, shows the dollar magnitude of this change and the effect on the 2025 rate adjustment, with the effect being a reduction in the rate adjustment calculation ranging from 1.33% to 1.62%, depending on agency. Differences in effect by agency are the result of business unit allocations described earlier in this report.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 11 of 19 Council Agenda 1-21-2025 11.A-40

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
Table 6: Change in Depreciation Lifespan
L M
Original
Depreciation $1,338,367 $376,989 $295,515 $131,502 $398,063 $316,350 $236,919 $225,376 $114,616 $26,441 Revised
Depreciation 1,125,720 317,545 248,918 110,766 336,460 267,393 200,254 190,498 96,879 22,349 Change in
Calculations (212,647) (59,444) (46,597) (20,735) (61,603) (48,957) (36,665) (34,878) (17,737) (4,092) Effect on
Rate -1.47% -1.62% -1.62% -1.62% -1.33% -1.33% -1.33% -1.33% -1.33% -1.33% Adjustment
Removed Limitation on Corporate Overhead
The 1994 Rate Manual placed a limitation on corporate overhead costs. Today, corporate overhead costs fund legal, tax, payroll, human resources, engineering, compliance, IT, training and recruiting programs.

The City and Waste Connections agreed to remove the prior limitation in order to fund these services.

Table 7, below, shows the effect of removing the prior limitation on corporate overhead. Differences in effect by agency are the result of different original proportionate amounts of corporate overhead between Agencies. In the near-term, compensation to Waste Connections for corporate overhead will be limited by the CPI adjustment noted above. Cost-based adjustments to corporate overhead are possible in 2030, and will be subject to review,justification, and potential limitation at that time.

Table 7: Change in Corporate Overhead
0 Original
Corporate $246,296 $46,213 $36,226 $16,120 $93,625 $74,406 $55,724 $53,009 $26,958 $6,219 Overhead
Revised
Corporate 430,378 80,753 63,301 28,168 163,600 130,017 97,371 92,627 47,106 10,867 Overhead
Change in 184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648 Calculations
Effect on Rate 1.28% 0.94% 0.94% 0.94% 1.51% 1.51% 1.51% 1.51% 1.51% 1.51% Adjustment
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 12 of 19 IZ Council Agenda 1-21-2025 11.A-41

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
50% Cost Share for Regional Service Enhancements
Waste Connections is offering new service enhancement to the benefit of the City and the Agencies including:
)) Collection of a bulky waste item twice annually from residential accounts at no cost, via clean-up week or voucher program depending on existing program.
)) Once annual exchange of a residential solid waste, recycling, or organics cart per customer account.

Waste Connections has estimated the annual cost of offering these service regionally and is proposing recovery of 50% of the projected costs via the 2025 rate adjustment. The City and Waste Connections have tentatively agreed to this cost sharing as part of the new agreement and for inclusion in the 2025 rates. Waste Connections is proposing the low income discount customer assistance program without a change in rate adjustment.

Table 8, below, shows the effect of including the 50% cost sharing for these two service enhancements into the 2025 rate adjustment. Cost allocations are by percentage of accounts by agency, which is the reason for differences in the effect of rate adjustment by agency.

Table 8: 50%Cost Share for Service Enhancements
•
New Annual $26,376 $9,889 $7,223 $3,623 $11,445 $7,566 $8,179 $7,987 $3,681 $320 Cart Exchange
Bulky Clean-up 21,091 7,908 5,776 2,897 9,152 6,050 6,540 6,386 2,944 256 Enhancements
Change in 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576 Calculations
Effect on Rate
Adjustment 0.33% 0.48% 0.45% 0.51% 0.45% 0.37% 0.54% 0.55% 0.50% 0.19% Corrections to AB 939 Fees
Agency fees, which include AB 939 Fees and Franchise Fees, are included as estimates in rate adjustment applications. Because the rate applications are at the company business unit level, and not at the individual agency level, AB 939 fees in the application are allocated to the Agencies in proportion to revenues. However, only the City of San Luis Obispo and Cayucos Sanitary District receive AB 939 Fees —therefore this was corrected in the revised 2025 rate adjustments as shown in Table 9, on the following page. Note that the values for the City of San Luis Obispo also include a correction to Franchise Fee revenues.z
2 Specifically,to remove the 1994 Rate Manual's approach to"grossing up"the calculated rate adjustment to account for the Franchise Fee by including the projected Franchise Fee payment amounts in the rate adjustment calculation itself.This approach is also recommended for the other Agencies starting with the 2026 rate adjustment.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 13 of 19 IZ Council Agenda 1-21-2025 11.A-42

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
Table 9: Corrections to AB 939 Fees
Original $362,140 $5,226 $4,097 $1,823 $- Agency Fees
Revised 439,411 - - 12,754 - -
Agency Fees
Change in 77,2713 (5,226) (4,097) 10,931 - - Calculations
Effect on Rate
Adjustment 0.54% -0.14% -0.140/6 0.85% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% Updated Profit Allowance
The 1994 Rate Manual, along with the Agencies agreements with Waste Connections, limits allowable profit based on an "operating ratio"of 92% or 93% of allowable collection expenses (not including post- collection disposal, processing or recycling expenses nor agency fees)depending on the agency.A 93% operating ratio is the equivalent of a 7.53% profit margin, and a 92% operating ratio is the equivalent of an 8.7% profit margin.

A key negotiation point between the City and Waste Connections was a change to the profit allowance.

Ultimately, after much discussion and negotiation, the City and Waste Connections agreed that the 2025 rate adjustment will include a 9% profit allowance of projected allowable collection costs and in 2026 and thereafter the profit allowance will be 10%. The updated profit allowance is in-keeping with industry standards for solid waste services.

For context, the 2025 profit allowance is approximately 5% of revenues and we estimate that the 2026 profit allowance will be approximately 5.5%of revenues. Table 10, on the following page, shows the effect of changing the profit allowance to 9% of collection costs for all Agencies for the 2025 rate adjustments. Differences in the effect on rate adjustment are due to differences in existing profit allowances by agency, as well as differences in the depreciation, corporate overhead and new service enhancements shown in earlier tables.
3 Includes adjustment to Franchise Fee to remove"grossing up" method from City's 2025 rate adjustment calculations.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 14 of 19 Council Agenda 1-21-2025 11.A-43

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
Table 10: 9% Profit Allowance on Allowable Collection Costs I-at
Original Profit $641,302 $188,392 $170,609 $65,715 $227,094 $180,477 $135,161 $111,295 $65,388 $15,085 Allowance
Revised Profit 768,515 224,623 175,993 78,382 237,649 188,618 141,665 134,797 68,490 15,714 Allowance
Change in 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629 Calculations
Effect on Rate 0.88% 0.99% 0.19% 0.99% 0.23% 0.22% 0.240/6 0.90% 0.23% 0.20% Adjustment
Total Revisions for New Rate Adjustment Methodology
Taken altogether, the revisions to the 2025 rate adjustment result in small increases to the original 2025 rate adjustment calculations. These are shown in Table 11, on the following page, and are also shown in Attachment 2.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 15 of 19 IZ Council Agenda 1-21-2025 11.A-44

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
Table 11: Overall Revisions to 2025 Rate Adjustments
Original 2025 1
Revenue $15,640,734 $4,089,595 $3,228,699 $1,426,540 $4,786,646 $3,804,059 $2,848,911 $2,692,832 $1,378,241 $317,951 Calculation
Change in (212,647) (59,444) (46,597) (20,735) (61,603) (48,957) (36,665) (34,878) (17,737) (4,092) Depreciation
Change in
Corporate 184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648 Overhead
Enhanced 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576 Services
Updated Profit 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629 Allowance
Corrections to 77,271 (5,226) (4,097) 10,931 - - - - - - AB 939 Fees
Revised 2025
Revenue 15,864,119 4,113,493 3,223,463 1,447,971 4,826,170 3,832,470 2,875,118 2,735,447 1,390,379 319,712 Calculation
Revenues at 14,435,726 3,677,194 2,882,493 1,282,686 4,621,616 3,672,906 2,750,690 2,616,676 1,330,724 306,989 Current Rates
Shortfall (1,428,393) (436,299) (340,970) (165,285) (204,554) (159,564) (124,428) (118,771) (59,655) (12,724) I
Proportionality in CobL of Service
R3 analyzed the 2025 rate adjustments for adequacy with respect to the cost-of-service requirements of Proposition 218. Because the base year rate adjustment methodology is based on the documented cost of provided solid waste services as expressed in Waste Connections' audited financial statements, we find that the current and proposed solid waste service rates will generate revenues sufficient to cover the cost-of-providing service plus a reasonable profit allowance commensurate with normal expectations in the solid waste industry.

R3 also analyzed the proposed solid waste service rates for adequacy with respect to proportionate allocation of costs among solid waste service customers. R3 found that the current(and thus also 4 Rate adjustments shown include grossing up for franchise fees per 1994 Rate Manual methodology,except for San Luis Obispo.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 16 of 19 Council Agenda 1-21-2025 11.A-45

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
proposed)solid waste rate structure proportionately allocates costs to service types and container sizes based on the relative differences in cost associated with the types of services provided to customers.

For example, for customers subscribing to 60-or 90-gallon cart solid waste service, the per-gallon cost-of- service for those subscribed to the larger container size (90-gallons) is proportionately less than those subscribed to the smaller container size (60-gallons). This is because solid waste service is comprised of both fixed and variable costs, with the fixed cost portion being for the cost of collection (labor, fuel, capital equipment, and other shared costs)as well as the costs related to post-collection disposal, processing, recycling and composting. Thus, the cost-of-service for the larger container size (90-gallons) has a lesser proportion of fixed costs to variable costs compared to the smaller(60-gallon)container size.

Factors Affecting 2025 Rate Adjustments
Overall,for the Agencies and the three Waste Connections business units, the 2025 rate adjustments reflect an 8.12% increase in revenues to meet increased costs and revised profit allowances. The largest contributors to the overall increase are:
)) Increases in organics processing costs—Third-party costs for the organic waste post- collection processing facility operated by the company formerly named Hitachi Zosen (NOVA, and which are not within Waste Connections' control, have doubled since 2022. The change in cost is the result of changes in facility capital and operating costs. )) Increases in landfill disposal costs—Related party costs for landfill waste disposal at Cold Canyon have remained flat since 2016. The 2025 rate adjustment reflects a market adjustment to these costs, from a per ton tipping fee of$41 per ton (in place since 2016)to a per ton tipping fee of$70. Waste Connections provided market comparison demonstrating the applicability of the $70 per ton market tipping fee.

Other factors play minor roles in the 2025 rate adjustment:
)) Collection costs including labor,vehicles, operating expenses and overhead—These costs are increasing in proportion to the Consumer Price Index and are projected to increase by 3.20% in 2024 and 4.21%for 2025.
)) Agency fees—These costs are mostly proportionate to changes in rates and are projected to increase by 2.22% in 2024 and 3.30% in 2025.

Overall, collection services comprise the single largest component overall rate funded expenses, at 56% of total rate revenues. Post-collection services are the next largest component of rate funding, at 29% of total rate revenues. Agency fees comprise 10% of rate revenues and profit allowance comprises 5% of rate revenues. This is demonstrated in Chart 5, on the following page.

City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 17 of 19 Council Agenda 1-21-2025 11.A-46

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
Chart 5: Summary Components of 2025 Rate Revenues
Profit
Allowance
Agency Fees 5%
10%
Collection
Post- Services
Collection 56%
Services
29%
New Rate Adjustment Methodology
The City and Waste Connections negotiated a new methodology for adjusting rates starting in 2026, which are summarized below. R3 is preparing an exhibit to the City's new agreement with Waste Connections that will further detail the terms and conditions of the new methodology in accordance with the following points, which have been tentatively agreed to by the parties. The exhibit will be finalized and ready for distribution to the Agencies on or around November 18, 2024. It is recommended that the Agencies bring forward the exhibit as an amendment to their agreements with Waste Connections when considering the 2025 rate adjustments, which is anticipated to occur in January 2025.

The features of the new methodology include:
)) CPI Adjustments: Starting in 2026, rate adjustments will be based on the Garbage and Trash CPI, with a floor of 2% and a cap of 5%. Amounts under 2% or over 5%will carry forward. The CPI adjustment will apply to Waste Connections' collection and post-collection cost centers. The proposed CPI is the Consumer Price Index for all Urban Consumers for Garbage and Trash in the United States, all City average. Details and prior results for this CPI are included in Attachment 3.

This is the same CPI used by Waste Connections in preparing its 2025 base year application. )) Updated Profit Allowance: As stated previously, the 2025 rate adjustment includes a 9% profit allowance of projected collection costs. The City and Waste Connections have tentatively agreed that, in 2026 and thereafter, the profit allowance will be 10% of collection costs. )) Revenue Balancing Mechanism: Starting in 2027, adjustments to rates will account for shortfalls or surpluses in Waste Connections' actual revenues compared to projected revenues from prior years. For example, if Waste Connections' 2025 revenues exceed projections, the amount of surplus revenues will be credited to the rates in 2027 (and vice versa), achieving fairness in compensation and rates for the company and for ratepayers. Such adjustments would take place annually and will be independent of the CPI cap and floor noted above. )) Less Frequent Cost-Based Adjustments: Currently, solid waste rates are adjusted based on the 1994 Rate Manual every three years on Waste Connections' costs. Via the new methodology, City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 18 of 19 Council Agenda 1-21-2025 11.A-47

Attachment 2
New Rate Adjustment Methodology and 2025 Rates
cost-based adjustments would occur a maximum of every five years, and only if requested by Waste Connections or the City. The first opportunity for a cost-based adjustment will be for the 2030 rate year. If neither Waste Connections nor the City request a cost-based adjustment, then the CPI adjustment approach will be applied. Cost-based adjustments will be based on Waste Connections' consolidated audited financial statements for the region. Timeframes for cost-based adjustment application and review process will be ample, such that the City will have sufficient time for review and approval processes and such that the potential for delay in implementation is minimized.
)) Extraordinary Adjustments: The California Air Resources Board (CARB)Advanced Clean Fleets (ACF) regulation is requiring all solid waste collection trucks to be zero emissions in 2042.

This includes a phased in plan to get the percentage of the fleet to be zero emission vehicle (ZEV)with 10% by 2030, 25% by 2033, 50% by 2036,75% by 2039 and100% by 2042. During CPI Adjustment years, Waste Connections may request extraordinary rate adjustments due to changes in law affecting collection operations, including for compliance with CARB's ACF zero emission mandate (which may necessitate change to depreciation schedules). The City may, but is not obligated to, consider requests for extraordinary rate adjustments due to changes in law affective post-collection operations. Requests for extraordinary change are subject to good faith meet and confer negotiations between City and Waste Connections.

Example Calculations for 2026 through 2029
R3 has prepared example calculations of projected rate adjustments for 2026 through 2029 based on the tentatively agreed to terms and conditions outlined above (including adjustment to 10% profit allowance on collection services starting in 2026). Table 12, below, demonstrates this example for the City of San Luis Obispo, and Attachment 4 provides examples for all Agencies. Note that the example in Table 12 and Attachment 4 includes the following assumptions:
)) CPI at the 5% cap (note that CPI below the 5% cap will result in lower rate adjustments) )) Revenue reconciliation at 1% below annual rate revenue projections (note that amounts above rate revenue projections will offset rate adjustments, not add to them). )) Discontinuance of the prior Franchise Fee grossing method on rate adjustment for all Agencies starting in 2026.

Table 12: Example Calculation of New Rate Methodology for the City of San Luis Obispo Collection Services $8,539,055 $8,966,008 $9,414,308 $9,885,024 $10,379,275 Profit Allowance 768,515 896,601 941,431 988,502 1,037,927 Post-Collection Services 4,602,096 4,832,201 5,073,811 5,327,501 5,593,876 Franchise Fee 1,586,412 1,675,695 1,777,106 1,866,072 1,959,572 AB 939 Fee 368,041 386,443 405,765 426,053 447,356 Revenue Reconciliation Example N/A N/A 158,641 167,569 177,711 Total Revenues 15,864,119 16,756,947 17,771,062 18,660,722 19,595,717 Indexed Rate Adjustment 5.63% 6.05% 5.01% 5.01% City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 19 of 19 IZ Council Agenda 1-21-2025 11.A-48

Attachment 2
Attachment 1:Summary of Waste Connections' Original 2025 Rate Application Calculations San Luis Garbage Mission Country Disposal(MCD) South County Sanitary Service(SCSS) Category Company(SLG)
San Luis Obispo Los Osos Cambria Cayucos Arroyo Grande Pismo Beach Grover Beach Nipomo Oceano Avila Single Family ReSidentlat $ 5,282,964 $ 2,795,167 $ 2,201,010 $ 987,376 $ 2,379,516 $ 1,598,158 $ 1,580,148 $ 1,570,029 $ 684,117 $ 91,446 Multi-Famity Dumpster5 2,556,077 - - - - - - - - - Current Revenues Non-Residential Carts 729,282 100,710 77,805 33,710 256,857 237,767 134,053 119,843 74,076 24,711 Non-Residential Dumpsters 5,846,7T/ ]76,244 599,]O1 259,830 1,979,781 1,832,640 1,033,238 923,712 570,958 190,469 Total Rate Revenue 14,415,100 3,672,121 2,878,516 1,280,916 4,616,154 3,668,565 2,747,439 2,613,584 1,329,151 306,626 Other l ncome(Allocated) 20,626 5,073 3,977 1,770 5,462 4,341 3,251 3,092 1,573 363 Total Current Revenues 14,435,726 3,677,194 2 882,493 1,282,686 4,621616 3,672,906 2,750,690 2,616,676 1,330 724 306,989 Labor 3,151,711 1,042,706 817,360 363,719 1,113,222 884,704 662,567 630,287 320,535 73,945 Depreciation 1,338,367 376,989 295,515 131,502 398,063 316,350 236,919 225,376 114,616 26,441 Insurance 1.124,499 316,418 248,035 110,374 329,978 262,241 196,396 186,828 95,012 21,919 Collection Services OtherGBA 976,729 282,701 221,605 98,612 304,307 241,840 181,117 172,293 87,621 20,213 Fuet 754,387 321,408 251,946 112,114 254,951 202,616 151,742 144,349 73,409 16,935 Maintenance 421,166 116,487 91,312 40,633 117,432 93,326 69,893 66,488 33,813 7,800 Corporate Overhead 246,296 46,213 36,226 16,120 93,625 74,406 55,724 53,009 26,958 6,219 Total Collection Services 8,620,154 2,602,921 1,961,999 $73,074 2,611,578 2,075,4a2 1,654,357 1,478,629 751,964 173,473 Garbage LantlfiUing 2,408,278 349,264 273,782 121,111 508,314 403,969 302,538 287,798 146,361 33,765 Organics Processing 1,108,784 477,019 373,927 166,395 660,852 525,194 313,121 374,162 190,282 43,897 Post-Collection 8 Affiliated
Party Services Recyctables Processing 916,880 173,112 135,700 60,385 270,385 214,881 160,927 153,087 77,853 17,960 Affiliated Parry Costs 16811:4 57,121 44,776 19,925 46,128 36,659 27,455 26,117 13,282 3,064 Total Post-Collection&Affiliated Party Services 4,602,096 1,066,516 81 368,536 1,485,678 1,180,703 884,245 "1'165 427,778 98,686 Franchise Fee 1,515,042 336,540 263,809 117,393 462,296 367,397 275,149 261,744 133,111 30,708 Pass-Through Services AB 939 Fee 362,140 5,226 4,097 1,823 Total PASS-Through servicesi 1,877,1821 341,766 267,905 119,2161 462,296 367,397 275,149 261,744 133,111 30,708 Total Compensation for Services 14,999,432 3,901,203 3,058,090 1,360,825 4,559,552 3,623,582 2,713,750 2,581,537 1,312,853 302,866 Allowed Operating Margin 641,302 188,392 170,609 65,715 227,094 180,477 135,161 111,295 65,388 15,085 Total Revenue Requirement 15,640,734 4,089,595 3,228,699 1,426,540 4,786,646 3,804,059 2,848,911 2,692,832 1,378,241 327,951 Surplus(Shortfall) (1,205,008) (412,401) (346,206) (143,854) (165,030) (131,163) (98,222) (76,155) (47,618) (10,962) Calculated Adjustment to Rate RevenUeS 8.36% 1122% 12.01% 11.22% 3.57% 3,57% 3.57% 2.91% 3.57% 3.57% Grossing up for Franchise Fees 9.29% 12.47% 12.78% 12.47% 3.97% 3.97% 3.97% 3.23% 3.76% 3.97% Council Agenda 1-21-2025 11.A-49

Attachment 2
Attachment 2:Summary of Revised 2025 Rate Application Calculations San Luis Garbage
Company(SLG) Mission Country Disposal(MCD) South County Sanitary Service(SCSS) Category
San Luis Obispo Los Osos Cambria Cayucos Arroyo Grande Pismo Beach Grover Beach Nipomo Oceano Avita Single Family Residential $ 5,282,964 $ 2,795,167 $ 2,201,010 $ 987,376 $ 2,379,516 $ 1,598,158 $ 1,580,148 $ 1,570,029 $ 684,117 $ 91,446 Multi-Family Dumpster5 21556,077 - - - - - - - - - Current Revenues Non-Residential Carts 729,282 100,710 77,805 33,710 256,857 237,767 134,053 119,843 74,076 24,711 Nan-Residentia l Dumpsters 5,846,7T/ T76,244 599,701 259,830 1,979,781 1,832,640 1,033,238 923,712 570,958 190,469 Tolal Rate Revenue 1 14,415,100 3,672,121 2,878,516 1,280,916 4,616,153 3,668,565 2,747,439 2.613,584 1,329,152 306,626 Other Income(Allocated) 20,6261 5,073 3,977 1,7701 5,462 4,341 3,251 3,092 1,573 363 Total Current Revenues 14,435,7261 3,677,194 2882493 __L282,6861 4621615 3,672,905 2750689 2,616,676 1330724 306989 Labor 3,658,710 1,042,706 817,360 363,719 1,113,222 884,704 662,567 630,287 320,536 73,945 Depreciation 1.125,720 317,545 248.918 110,766 336,460 267,393 200,254 190,498 96,879 22,349 Insurance 1,124,499 316,418 248,035 110,374 329,978 262,241 196,396 186,828 95,012 21,919 Collection Services OtherG&A 1,024,196 300,498 234,604 105,132 324,904 255,456 195,836 186,666 94,246 20,789 Fuel 714,317 321,401 251,946 112,114 254,951 202,616 151,742 144,349 73,409 16,935 Maintenance 421,167 116,487 91,312 40,633 117,431 93,326 69,893 66,488 33,813 7,800 Corporate Overhead 430,378 80,753 63,301 28,168 163,600 130,017 97,371 92,627 47,106 10,867 Total ColleCtion Services 1 8,639,0561 2,495,814 1,955,476 $70,906 2,640,547 2,095,751 1,674,059 1,497,742 761,000 174,605 Garbage LandfiRing 2,408,278 349,264 273,782 121,831 508,314 403,969 302.538 287,798 146,361 33,765 Organics Processing 1,108,784 477,011 373,927 166,395 660,852 525,194 393,325 374,162 190,282 43,897 Post-Collection 8 Attiliatetl
Party Services RecycLables Processing 916,880 173,112 135,700 60,385 270,385 214,881 160,927 153,087 77,853 17,960 Affiliated Party Costs 168,154 57,121 44,776 19,925 46,128 36,659 27,455 26,117 13,282 3,064 Total Post-Collection&Affiliated Parry Services 4,602,096 1,066,616 828,386 368,536 1,485,678 1,180,703 $84,245 841,164 427,779 98,686 Franchise Fee 1,586,412 336,540 263,809 117,393 462,296 367,397 275,149 261,744 133.111 30,708 Pass-Through Services A6939 Fee 368041 12,754 Total Pass-Through Services 1 1,954,4531 336,540 263,809 130,1471 462,296 367,397 275,149 261,744 133,111 30,708 Total Compensation for Services 15,095,604 3,888,870 3,047,470 1,369,589 4,588,521 3,643,852 2,733,452 2,600,650 1,321,890 303,998 Allowed Operating Margin 768,515 224,623 175,993 78,382 237,649 188,618 141,665 134,797 68,490 15,714 Total Revenue Requirement 15,864,1191 4,113,493 3,223,463 1,447,971 4,826,170 3,832,470 2,875,117 2,735,447 1,390,380 319,712 Surplus(Shortfall) 1,428,393) 436,299) (340,970) (165,285) (204,555) 159,564) 124,428) (118,771) (59,655) (12,724) Calculated Adjustment to Rate Revenues 9.89% 11.86% 11.83% 12.89% 4.43% 4.34% 4.52% 4.54% 4.48% 4.14% Grossing up for Franchise Fees 13.18% 1259% 14.32°/° 4.92% 4.82% 5.02% 5.04°/° 4.98% 4.60% Profit Margin on Collection Servlte6(2025) 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% Franchise Feel 10.0% 1 10.0% 6.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% 10.0% Changeto Original Rate Application 0.60% 0.71% -0.19% 1.85% 0.95% 0.85% 1.05% 1.81% 1.22% 0.63% Council Agenda 1-21-2025 11.A-50

Bureau of Labor Statistics Attachment 2
ATrACHMENT3
Consumer Price Index for All Urban Consumers(CPI-U)
Original Data Value
Series Id: CUUROOOOSEHG02
Not Seasonally Adjusted
Series Title: Garbage and trash collection in U.S.city average,all Area: U.S.city average
Item: Garbage and trash collection
Base Period: DECEMBER 1983=100
Years: 2014 to 2024
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HALF1 HALF2 Annual Change 2014 422.440 422.483 423.413 425.393 425.242 425.930 426.562 426.771 427.327 427.995 427.808 428.187 2015 427.734 429.248 429.235 429.807 431.234 430.813 431.229 432.967 433.843 434.829 436.428 436.996 1.46% 2016 437.205 438.296 437.699 437.676 438.317 437.858 438.607 439.358 439.707 440.311 443.343 444.745 1.71% 2017 446.266 447.699 446.987 447.129 447.272 448.046 448.328 448.717 449.008 452.196 453.820 453.596 2.20% 2018 453.354 454.915 455.230 458.722 462.887 465.041 465.579 470.457 471.026 472.535 486.650 485.935 458.358 475.364 3.96% 2019 475.687 477.474 478.569 479.449 480.865 480.984 482.138 483.987 484.346 486.133 486.485 486.708 478.838 484.966 3.22% 2020 491.003 494.429 495.288 494.432 494.946 496.679 498.564 500.882 501.756 503.315 504.970 508.190 494.463 502.946 3.49% 2021 512.722 517.270 518.505 518.579 516.440 517.202 521.185 524.408 529.934 530.114 529.053 532.538 516.786 527.872 4.74% 2022 533.078 538.313 540.719 542.564 544.546 547.554 548.187 548.706 558.254 561.090 563.816 565.185 541.129 557.540 5.17% 2023 570.412 575.697 576.773 580.124 587.431 589.812 596.167 597.347 596.997 597.569 601.631 602.164 580.042 598.646 7.28% 2024 606.773 610.551 610.015 611.073 609.538 611.946 614.089 615.880 609.983 3.71% 10-Year Average

3.69%
COAfli:A&K r.�t22V202rJ Generated on:October 8,2024(04:11:fft-51

Attachment 2
Attachment 4- Indexed Rate Adjustment Methodology Example Calculations Example CPI 5% 5% 5% 5%
San Luis Obispo
2025 2025 2026 2027 2028 2029
Collection Services $ 8,539,055 $ 8,539,055 $ 8,966,008 $ 9,414,308 $ 9,885,024 $ 10,379,275 Profit Allowance 768,515 768,515 896,601 941,431 988,502 1,037,927 Post-Collection Services 4,602,096 4,602,096 4,832,201 5,073,811 5,327,501 5,593,876 Franchise Fee 1,586,412 1,586,412 1,675,695 1,777,106 1,866,072 1,959,572 AB 939 Fee 368,041 368,041 386,443 405,765 426,053 447,356 Revenue Reconciliation Example N/A N/A N/A 158,641 167,569 177,711 Total Revenues 1 15,864,119 15,864,119 16,756,947 17,771,062 18,6609722 19,595,717 Indexed Rate Adjustment 5.63% 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example -196 1 (158,641) (167,569) (177,711) (186,607) (195,957) Arroyo Grande
2025 2025 2026 2027 2028 2029
Collection Services $ 2,640,547 $ 2,640,547 $ 2,772,575 $ 2,911,203 $ 3,056,763 $ 3,209,602 Profit Allowance 237,649 237,649 277,257 291,120 305,676 320,960 Post-Collection Services 1,485,678 1,485,678 1,559,962 1,637,960 1,719,858 1,805,851 Franchise Fee 462,296 484,875 512,199 543,197 570,391 598,970 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 48,487 51,220 54,320 Total Revenues 1 4,826,170 1 4,848,749 1 5,121,993 5,431,968 5,703,909 5,989,703 Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example -19/0 (48,487) (51,220) (54,320) (57,039) (59,897) Los Osos CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 2,495,814 $ 2,495,814 $ 2,620,605 $ 2,751,635 $ 2,889,217 $ 3,033,677 Profit Allowance 224,623 224,623 262,060 275,163 288,922 303,368 Post-Collection Services 1,056,516 1,056,516 1,109,341 1,164,808 1,223,049 1,284,201 Franchise Fee 336,540 419,661 443,556 470,397 493,949 518,698 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 41,966 44,356 47,040 Total Revenues 4,113,493 1 4,196,613 1 4,435,563 4,703,970 4,939,492 5,186,984 Indexed Rate Adjustment 5.690 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example -1% (41,966) (44,356) (47,040) (49,395) (51,870) Pismo Beach
2025 2025 2026 2027 2028 2029
Collection Services $ 2,095,751 $ 2,095,751 $ 2,200,539 $ 2,310,566 $ 2,426,094 $ 2,547,399 Profit Allowance 188,618 188,618 220,054 231,057 242,609 254,740 Post-Collection Services 1,180,703 1,180,703 1,239,738 1,301,725 1,366,811 1,435,152 Franchise Fee 367,397 385,008 406,703 431,316 452,909 475,602 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 38,501 40,670 43,132 Total Revenues 3,832,470 1 3,850,080 1 4,067,035 4,313,165 4,529,095 4,756,025 Indexed Rate Adjustment 5.641 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example (38,501) (40,670) (43,132) (45,291) (47,560) Council Agenda 1-21-2025 11.A-52

Attachment 2
Cambria CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 1,955,476 $ 1,955,476 $ 2,053,250 $ 2,155,912 $ 2,263,708 $ 2,376,894 Profit Allowance 175,993 175,993 205,325 215,591 226,371 237,689 Post-Collection Services 828,185 828,185 869,595 913,074 958,728 1,006,664 Franchise Fee 263,809 188,914 199,670 211,664 222,261 233,395 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 31,486 33,278 35,277 Total Revenues 3,223,463 3,148,569 3,327,840 3,527,727 3,704,346 3,889,920 Indexed Rate Adjustment 5.69% 6.01% 5.01% 5.01% Revenue Surplus(Shortfall)Example -19/0 1 (31,486) (33,278) (35,277) (37,043) (38,899) Grover Beach
2025 2025 2026 2027 2028 2029
Collection Services $ 1,574,059 $ 1,574,059 $ 1,652,762 $ 1,735,400 $ 1,822,170 $ 1,913,278 Profit Allowance 141,665 141,665 165,276 173,540 182,217 191,328 Post-Collection Services 884,245 884,245 928,457 974,880 1,023,624 1,074,805 Franchise Fee 275,149 288,885 305,166 323,634 339,836 356,864 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 28,889 30,517 32,363 Total Revenues 2,875,117 2,888,854 3,051,661 3,236,343 3,398,364 3,568,639 Indexed Rate Adjustment 5.640 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example -1% (28,889) (30,517) (32,363) (33,984) (35,686) Nipomo CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 1,497,742 $ 1,497,742 $ 1,572,629 $ 1,651,261 $ 1,733,824 $ 1,820,515 Profit Allowance 134,797 134,797 157,263 165,126 173,382 182,051 Post-Collection Services 841,164 841,164 883,223 927,384 973,753 1,022,441 Franchise Fee 261,744 274,856 290,346 307,917 323,333 339,533 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 27,486 29,035 30,792 Total Revenues 2,735,447 2,748,559 2,903,461 3,079,173 3,233,326 3,395,332 Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example -19/0 (27,486) (29,035) (30,792) (32,333) (33,953) Oceano CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 761,000 $ 761,000 $ 799,050 $ 839,002 $ 880,953 $ 925,000 Profit Allowance 68,490 68,490 79,905 83,900 88,095 92,500 Post-Collection Services 427,779 427,779 449,168 471,626 495,207 519,968 Franchise Fee 133,111 139,697 147,569 156,500 164,335 172,569 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 13,970 14,757 15,650 Total Revenues 1,390,380 1,396,966 1,475,692 1,564,998 1,643,347 1,725,686 Indexed Rate Adjustment 5.640 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example (13,970) (14,757) (15,650) (16,433) (17,257) Council Agenda 1-21-2025 11.A-53

Attachment 2
Cayucos SD
2025 2025 2026 2027 2028 2029
Collection Services $ 870,906 $ 870,906 $ 914,452 $ 960,174 $ 1,008,183 $ 1,058,592 Profit Allowance 78,382 78,382 91,445 96,017 100,818 105,859 Post-Collection Services 368,536 368,536 386,962 406,311 426,626 447,957 Franchise Fee 117,393 147,842 156,250 165,705 174,002 182,720 AB 939 Fee 12,754 12,754 13,392 14,061 14,764 15,503 Revenue Reconciliation Example N/A N/A N/A 14,784 15,625 16,571 Total Revenues 1,447,971 1,478,420 1,562,501 1,657,053 1,740,019 1,827,202 Indexed Rate Adjustment 5.69% 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example -19/0 1 (14,784) (15,625) (16,571) (17,400) (18,272) Avila Beach CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 174,605 $ 174,605 $ 183,335 $ 192,502 $ 202,127 $ 212,234 Profit Allowance 15,714 15,714 18,334 19,250 20,213 21,223 Post-Collection Services 98,686 98,686 103,620 108,801 114,241 119,953 Franchise Fee 30,708 32,112 33,921 35,974 37,775 39,667 AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 3,211 3,392 3,597 Total Revenues 319,712 321,117 339,210 359,738 377,748 396,675 Indexed Rate Adjustment 5.630 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example -1% (3,211) (3,392) (3,597) (3,777) (3,967) Total
2025 2025 2026 2027 2028 2029
Collection Services $ 22,604,956 $ 22,604,956 $ 23,735,204 $ 24,921,964 $ 26,168,062 $ 27,476,465 Profit Allowance 2,034,446 2,034,446 2,373,520 2,492,196 2,616,806 2,747,647 Post-Collection Services 11,773,587 11,773,587 12,362,266 12,980,380 13,629,399 14,310,869 Franchise Fee 3,834,558 3,948,262 4,171,077 4,423,411 4,644,863 4,877,591 AB 939 Fee 380,795 380,795 399,835 419,826 440,818 462,859 Revenue Reconciliation Example N/A N/A N/A 407,420 430,419 456,452 Total Revenues 40,628,342 40,742,046 43,041,902 45,645,298 47,930,367 50,331,883 Indexed Rate Adjustment 5.65% 6.05% 5.01% 5.01% Revenue Surplus(Shortfall)Example (407,420) (430,419) (456,452) (479,304) (503,319) Council Agenda 1-21-2025 11.A-54

Attachment 3
RESOLUTION NO. R-2025-XXX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PISMO BEACH,

CALIFORNIA APPROVING INTEGRATED SOLID WASTE RATES CHARGED BY SOUTH COUNTY SANITARY SERVICE EFFECTIVE JANUARY 1, 2025 AND EACH JANUARY 1 FROM 2026 THROUGH 2O29 VIA A NEW RATE ADJUSTMENT

METHODOLOGY
WHEREAS, the City of San Luis Obispo, in its capacity as the lead agency on the solid waste rate adjustment methodology update process, and in partnership with Los Osos Community Services District and Waste Connections, completed negotiations and arrived at tentative agreement with Waste Connections regarding the terms and conditions of a new methodology; and
WHEREAS, the outcome of the negotiations was a report entitled New Solid Waste Rate Adjustment Methodology and 2025 Rates and Exhibit E Annual Rate Adjustment Methodology, collectively referred to as "Methodology", and the Methodology was the result of extensive good-faith negotiations between the City of San Luis Obispo and Waste Connections, with due consideration to input provided by other public agency stakeholders, including the City of Pismo Beach; and
WHEREAS, South County Sanitary Service (SCSS) has submitted a rate increase application in accordance with the City's amended franchise agreement for solid waste, recycling, green waste, and organic waste services, using the Methodology, which is designed to enhance rate stability, predictability, fairness, transparency, ease of administration, and cost-effectiveness.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Pismo Beach that the solid waste rates set forth in Exhibit A to this Resolution are approved to be charged by South County Sanitary Service and shall become effective January 1, 2025 and each January 1 from 2026 through 2029 via the Methodology.

UPON MOTION OF Council Member , seconded by Council Member , the foregoing resolution was adopted by the City Council of the City of Pismo Beach this 21 st day of January 2025, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSED:

Council Agenda 1-21-2025 11.A-55

Attachment 3
Approved: Attest:

Ed Waage, Mayor Erica Inderlied, City Clerk
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of Pismo Beach, California, on
Erica Inderlied, City Clerk
Council Agenda 1-21-2025 11.A-56

Attachment 3.A

SOUTH COUNTY SANITARY SERVICE
RATE SCHEDULE for SOLID WASTE SERVICES, EFFECTIVE JANUARY 1, 2025

CITY OF PISMO BEACH
Pickups Per Monthly Rate Proposed Rate Monthly Rate Service Description Week Effective 01/01/2024 Adjustment Effective 01/01/2025 RESIDENTIAL SINGLE FAMILY DWELLING AND MULTI-UNIT (4 UNITS OR LESS):
32 Gallon Waste Wheeler 1 $23.76 1.15 $24.91 64 Gallon Waste Wheeler 1 $47.56 2.29 $49.85 96 Gallon Waste Wheeler 1 $71.33 3.44 $74.77 TWO-64 Gallon Waste Wheelers 1 $95.14 4.59 $99.73 ONE 64 &ONE 96 Gallon 1 $118.92 5.73 $124.65 TWO-96 Gallon Waste Wheelers 1 $142.73 6.88 $149.61 Residential customers must use the waste wheelers provided by the garbage company. This solid service fee for residential trash collections (container with black or gray lid) includes once a week pick-up of one greenwaste/organics container(green lid), one recycling container(blue lid).

MULTI-FAMILY(5 or MORE)
Rates are the same as commercial dumpsters and waste wheeler rates (below).

COMMERCIAL DUMPSTERS -ALL AREAS:
1 yd dumpster 1 $130.68 6.30 $136.98 1 yd dumpster 2 $190.71 9.19 $199.90 1 yd dumpster 3 $250.77 12.09 $262.86
1 yd dumpster 4 $321.39 15.49 $336.88
1 yd dumpster 5 $377.86 18.21 $396.07
1 yd dumpster 6 $448.49 21.62 $470.11
1 yd dumpster 7 $545.12 26.27 $571.39

1.5 yd dumpster 1 $148.35 7.15 $155.50

1.5 yd dumpster 2 $229.58 11.07 $240.65

1.5 yd dumpster 3 $324.94 15.66 $340.60

1.5 yd dumpster 4 $423.80 20.43 $444.23

1.5 yd dumpster 5 $515.64 24.85 $540.49

1.5 yd dumpster 6 $582.71 28.09 $610.80

1.5 yd dumpster 7 $682.31 32.89 $715.20 2 yd dumpster 1 $166.02 8.00 $174.02 2 yd dumpster 2 $277.23 13.36 $290.59
2 yd dumpster 3 $395.54 19.07 $414.61
2 yd dumpster 4 $522.68 25.19 $547.87
2 yd dumpster 5 $646.26 31.15 $677.41
2 yd dumpster 6 $724.00 34.90 $758.90
2 yd dumpster 7 $841.80 40.57 $882.37
Council Agenda 1-21-2025 11.A-57

Attachment 3.A

SOUTH COUNTY SANITARY SERVICE
RATE SCHEDULE for SOLID WASTE SERVICES, EFFECTIVE JANUARY 1, 2025

CITY OF PISMO BEACH
Pickups Per Monthly Rate Proposed Rate Monthly Rate Service Description Week Effective 01/01/2024 Adjustment Effective 01/01/2025 3 yd dumpster 1 $197.78 9.53 $207.31 3 yd dumpster 2 $374.39 18.05 $392.44
3 yd dumpster 3 $522.68 25.19 $547.87
3 yd dumpster 4 $681.60 32.85 $714.45
3 yd dumpster 5 $808.71 38.98 $847.69
3 yd dumpster 6 $964.11 46.47 $1,010.58 3 yd dumpster 7 $1,231.46 59.36 $1,290.82 4 yd dumpster 1 $247.22 11.92 $259.14 4 yd dumpster 2 $437.90 21.11 $459.01
4 yd dumpster 3 $628.60 30.30 $658.90
4 yd dumpster 4 $808.71 38.98 $847.69
4 yd dumpster 5 $999.46 48.17 $1,047.63 4 yd dumpster 6 $1,186.67 57.20 $1,243.87 4 yd dumpster 7 $1,511.23 72.84 $1,584.07 6 yd dumpster 1 $370.81 17.87 $388.68 6 yd dumpster 2 $656.87 31.66 $688.53
6 yd dumpster 3 $942.90 45.45 $988.35
6 yd dumpster 4 $1,213.05 58.47 $1,271.52 6 yd dumpster 5 $1,499.21 72.26 $1,571.47 6 yd dumpster 6 $1,780.00 85.80 $1,865.80 6 yd dumpster 7 $2,266.85 109.26 $2,376.11 8 yd dumpster 1 $494.42 23.83 $518.25 8 yd dumpster 2 $875.82 42.21 $918.03
8 yd dumpster 3 $1,257.21 60.60 $1,317.81 8 yd dumpster 4 $1,617.43 77.96 $1,695.39 8 yd dumpster 5 $1,998.98 96.35 $2,095.33 8 yd dumpster 6 $2,373.35 114.40 $2,487.75 8 yd dumpster 7 $3,022.08 145.66 $3,167.74 The rates shown above include the monthly container rental fee and a semi-annual dumpster cleaning.

Council Agenda 1-21-2025 11.A-58

Attachment 3.A

SOUTH COUNTY SANITARY SERVICE
RATE SCHEDULE for SOLID WASTE SERVICES, EFFECTIVE JANUARY 1, 2025

CITY OF PISMO BEACH
Pickups Per Monthly Rate Proposed Rate Monthly Rate Service Description Week Effective 01/01/2024 Adjustment Effective 01/01/2025 COMMERCIAL GARBAGE CANS -ALL AREAS:

One 32 Gallon Waste Wheeler 1 $31.74 1.53 $33.27 One 32 Gallon Waste Wheeler 2 $67.05 3.23 $70.28 One 32 Gallon Waste Wheeler 5 $147.68 7.12 $154.80 One 32 Gallon Waste Wheeler 7 $205.40 9.90 $215.30 Two 32 Gallon Waste Wheelers 1 $67.05 3.23 $70.28 Two 32 Gallon Waste Wheelers 2 $91.87 4.43 $96.30 Two 32 Gallon Waste Wheelers 3 $101.67 4.90 $106.57 Two 32 Gallon Waste Wheelers 4 $120.89 5.83 $126.72 Two 32 Gallon Waste Wheelers 5 $148.40 7.15 $155.55 Two 32 Gallon Waste Wheelers 6 $175.88 8.48 $184.36 Two 32 Gallon Waste Wheelers 7 $266.70 12.85 $279.55 Three 32 Gallon Waste Wheelers 1 $77.70 3.75 $81.45 Three 32 Gallon Waste Wheelers 2 $130.68 6.30 $136.98 Three 32 Gallon Waste Wheelers 3 $164.72 7.94 $172.66 Three 32 Gallon Waste Wheelers 4 $199.04 9.59 $208.63 Three 32 Gallon Waste Wheelers 5 $223.06 10.75 $233.81 Three 32 Gallon Waste Wheelers 7 $305.77 14.74 $320.51 Four 32 Gallon Waste Wheelers 1 $98.87 4.77 $103.64 Four 32 Gallon Waste Wheelers 2 $158.89 7.66 $166.55 Four 32 Gallon Waste Wheelers 3 $203.38 9.80 $213.18 Four 32 Gallon Waste Wheelers 4 $247.88 11.95 $259.83 Four 32 Gallon Waste Wheelers 5 $292.39 14.09 $306.48 Four 32 Gallon Waste Wheelers 6 $336.87 16.24 $353.11 Four 32 Gallon Waste Wheelers 7 $381.37 18.38 $399.75 Five 32 Gallon Waste Wheelers 1 $120.04 5.79 $125.83 Five 32 Gallon Waste Wheelers 2 $194.23 9.36 $203.59 Five 32 Gallon Waste Wheelers 3 $259.56 12.51 $272.07 Five 32 Gallon Waste Wheelers 4 $324.88 15.66 $340.54 Five 32 Gallon Waste Wheelers 5 $390.22 18.81 $409.03 Five 32 Gallon Waste Wheelers 6 $455.54 21.96 $477.50 Five 32 Gallon Waste Wheelers 7 $520.87 25.11 $545.98 Six 32 Gallon Waste Wheelers 1 $137.72 6.64 $144.36 Six 32 Gallon Waste Wheelers 2 $222.44 10.72 $233.16 Six 32 Gallon Waste Wheelers 3 $281.46 13.57 $295.03 Six 32 Gallon Waste Wheelers 4 $352.42 16.99 $369.41 Six 32 Gallon Waste Wheelers 5 $423.39 20.41 $443.80 Council Agenda 1-21-2025 11.A-59

Attachment 3.A

SOUTH COUNTY SANITARY SERVICE
RATE SCHEDULE for SOLID WASTE SERVICES, EFFECTIVE JANUARY 1, 2025

CITY OF PISMO BEACH
Service Description Pickups Per Monthly Rate Proposed Rate Monthly Rate Week Effective 01/01/2024 Adjustment Effective 01/01/2025 Six 32 Gallon Waste Wheelers 6 $508.12 24.49 $532.61 Six 32 Gallon Waste Wheelers 1 7 1 $588.91 28.39 $617.30 * Maximum volume and weight per garbage can : 33 gallons/80 pounds COMMERCIAL- OTHER CHARGES:

Rates for all commercial customers include recycling or greenwaste/organics pickup once per week, included with the garbage service rate. Customers can choose from a 64 or 96 gallon blue co-mingle recycle waste wheeler or a 32 64 gallon organics waste wheeler provided free of charge (96 gallon waste wheelers can only be used with green waste due to weight). If you need a bin for recycling there is a charge (see below).

If you need more frequent recycling service, it can be provided at a 50%discount from the garbage service rates for the specified level of service required.

MISCELLANEOUS CHARGES -ALL CUSTOMERS:

Overstacked Garbage&extra bags
Minimum/unit each $7.56 0.36 $7.92 Overstacked Greenwaste&extra
ba s Minimum/unit each $3.79 0.18 $3.97 Overstacked Blue Bin &extra bags
Minimum/unit each $3.79 0.18 $3.97 In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE RATES per month $18.88 0.91 $19.79 Monthly charge for additional 32, 64
or 96-gallon green waste/organics
service per month $5.23 0.25 $5.48 Monthly charge for additional 32, 64
or 96- allon recycle service per month $2.20 0.11 $2.31 Vacant Rate per month $17.61 0.85 $18.46 Waste wheeler cleaning each time $28.17 1.36 $29.53 Trip charge each time $18.88 0.91 $19.79 Non-payment downsize service each time $18.88 0.91 $19.79 Non-payment redeliver waste wheeler each time $18.88 0.91 $19.79 Non-payment reconnect service each time $45.41 2.19 $47.60 Small item pickup(TV, toilet) each $44.31 2.14 $46.45 Appliance pickup-residential each $62.49 3.01 $65.50 Lock Charge per month $10.70 0.52 $11.22 Garbage extras on your scheduled
pickup day per yard $15.94 0.77 $16.71 Garbage extras-NOT ON YOUR
SCHEDULED PICKUP DAY per yard $43.99 2.12 $46.11 Commercial Waste Wheeler rent per month $5.85 0.28 $6.13 Re-deliver bin on stopped acct each time $54.19 2.61 $56.80 Compactors per yard $24.10 1.16 $25.26 Sunday Service (in additional to
,garbage service level) per month $94.55 4.56 $99.11 Recycle bin rental per month $74.19 3.58 $77.77 Council Agenda 1-21-2025 11.A-60

Attachment 3.A

SOUTH COUNTY SANITARY SERVICE
RATE SCHEDULE for SOLID WASTE SERVICES, EFFECTIVE JANUARY 1, 2025

CITY OF PISMO BEACH
Pickups Per Monthly Rate Proposed Rate Monthly Rate Service Description Week Effective 01/01/2024 Adjustment Effective 01/01/2025 Stand by time per hour $90.63 4.37 $95.00 Extra bin cleaning each $84.51 1 4.07 1 $88.58 City Clean Up each $15.47 0.75 $16.22 Larger than residential appliance or
glass, glass doors, or plate glass by quote only
Replacement/Repair of bins or waste
wheelers at market price
Short Term Dumpsters:

Delivery& Pickup-Bin $54.19 2.61 $56.80 Delivery& Pickup-Waste Wheeler $18.88 0.91 $19.79 Rental Per Day $4.01 0.19 $4.20 Empties Per Yard $43.99 2.12 $46.11 Mattress:

Twin Per $24.58 1.18 $25.76
Double Per $24.58 1.18 $25.76
Queen Per $24.58 1.18 $25.76
King Per $24.58 1.18 $25.76
ADDITIONAL INFORMATION ALL CUSTOMERS:

1. Customers requesting Temporary Bins or Roll-off Box Service can call the office for current rates

2. Polystyrene(Styrofoam, Plastic#6)is not collected for recycling and should be thrown away as trash. Please bag Styrofoam packing peanuts before placing in trash container.

3. It is encouraged to bag your trash in the garbage container but do not bag your recyclables or green waste in their respective containers and keep it loose.

4. Recycling, Greenwaste/Organcis and Garbage containers should spaced 3 feet apart away from any obstacles (i.e mailboxes, cars, etc)before 6:00am on collection service day.

5. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees,which are separately noted on the billings.

6. Cleaning fees will be billed on a time and materials basis

7. Late Fees are imposed for residential customers over 30 days delinquent. The fee is 1.5% per month of the outstanding charge,with a minimum fee of$5.00. No prior notice is required, as this late fee policy is stated at the bottom of every bill.

8. Customers can be responsible for contamination fees
Any additional recycling including greenwaste/organic services are charged out at 50% of the garbage rate.

Council Agenda 1-21-2025 11.A-61