POINT ARENA CITY COUNCIL
AGENDA ITEM SUMMARY
AGENDA ITEM: IX A
MEETING DATE: 1/24/2023
TITLE
Request by Recology to Terminate Garbage Disposal Contract Early
RECOMMENDED ACTION
Receive report and provide direction to staff
ANALYSIS
Recology is seeking to terminate its franchise agreement with the City of Point Arena.
According to their attached letter, Recology is “operating at a significant financial loss under the existing contract, spending more annually servicing the City than it collects in revenues from City customers.”
They cite Section 5 of the current franchise agreement that states that “the rates approved by CITY for the services called for by this Agreement shall provide a reasonable return to COMPANY.” Recology estimates that would require a 100% increase in garbage collection rates.
In 2017, the franchise agreement with Pacific Coast Disposal was converted to Recology upon sale of the former to the latter and with approval of the City Council with assurances of no change in service. That agreement is set to expire December 11, 2025.
In 2019, Recology approached the City to request they be allowed to subcontract with Solid Waste of Willits for collection services. Part of the reason was due to the cost of Recology to operate on the Mendocino Coast. The City Council approved that subcontract.
Now, Recology is requesting the City release a Request for Proposals for a new garbage hauler with a targeted date of December 31, 2023 for transition. That would end their current contract with the City two years early.
The reality of a successful RFP for garbage service in our area is not likely to yield many proposals. Garbage service rates will likely increase, perhaps dramatically.
Staff is seeking direction from the City Council for moving forward.
FISCAL IMPACT
Undetermined at this time, but likely rate increases for customers.
ATTACHMENTS
1. Letter from Recology dated December 15, 2022
2. Franchise Agreement with Recology
CITY MANAGER SIGNATURE
____________________________
Paul Andersen, City Manager
December 15, 2022
Mr. Paul Anderson
City Manager
451 School Street
Point Arena, CA 95468
Dear Mr. Anderson,
Thank you for the opportunity to attend the September 27, 2022 City Council meeting for the City of Point Arena (City). While I was glad to hear from the Council and the public, it was clear from the meeting that the current operations are creating some challenges for all parties. Recology is sincerely concerned about the service issues but is unable to address them impactfully due to the need to subcontract the work. Recology is additionally operating at a significant financial loss under the existing contract, spending more annually servicing the City than it collects in revenues from City customers.
Considering the general dissatisfaction of many, if not all, parties to this agreement, Recology believes a new contract is required to appease all affected stakeholders. This path would be preferable to implementing a needed 100% rate increase to bring the City into compliance with Section 5 of the Contract Granting Franchise for Collection and Removal of Garbage dated September 23, 1997 (Franchise Agreement), which states:
Section 5. The rates approved by CITY for the services called for by this Agreement shall provide a reasonable return to COMPANY.
As such, Recology is requesting that the City initiate a new Request for Proposal process (RFP) to establish a direct relationship with a waste collection company that will perform the required services.
Recology recognizes the RFP process will require time and is prepared to continue the subcontracting arrangement and rate structure for a reasonable period until a new contract can be signed.
We believe the RFP process could be conducted and completed in the next year, thereby allowing the City and Recology to terminate the current Franchise Agreement no later than December 31, 2023, and that this process would give both the City and Recology enough time to complete an orderly transition.
If the transition cannot be completed by that date, then out of fairness we will need to insist that the necessary rate increase be implemented as required by our contract.
Please contact me or Nikki Burke at 707-586-8233 or [email protected] if you have any questions.
Sincerely,
Fred Stemmler
General Manager
Recology Sonoma Marin
cc: Nikki Burke