Administrative
Report
L.2., File # 23-6087 Meeting Date: 6/6/2023
To: MAYOR AND CITY COUNCIL
From: TED SEMAAN, PUBLIC WORKS DIRECTOR
TITLE
PUBLIC HEARING TO CONSIDER ARAKELIAN ENTERPRISES INC. DBA ATHENS SERVICES PROPOSED SOLID WASTE CHARGES AND FEES FOR FISCAL YEAR 2023-2024 ADOPT BY TITLE ONLY RESOLUTION NO. CC-2306-053 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF REDONDO BEACH, CALIFORNIA, ESTABLISHING CONTRACTOR’S
CHARGES AND CORRESPONDING CITY FEES FOR RESIDENTIAL, MULTIFAMILY AND COMMERCIAL REFUSE COLLECTION FOR THE 2023-2024 FISCAL YEAR PROCEDURES:
a. Open the Public Hearing,
b. Take Testimony,
c. Close the Public Hearing; and
d. Adopt by Title Only Resolution No. CC-2306-053
EXECUTIVE SUMMARY
On June 18, 2019, the City Council approved an amendment with Athens Services for the continuation of solid waste handling services for a term of nine years plus a two-year option to extend. The amendment included a varied five-year rate adjustment of 7% percent per year for residential and multifamily customers, 14% percent for commercial customers and the typical annual base rate adjustment per the contractual methodology, plus a 1% annual increase. FY 2023-24 will be the fifth and final year of the City Council approved five-year rate adjustment.
The base rate of the total trash fee is calculated using the year-to-year changes in published price indices for six industry cost components: labor, fuel, equipment, waste-to-energy, disposal and “other” costs and the individual component’s weighted portion of the rate. In April 2019, the City conducted a Proposition 218 protest balloting process that set the refuse rates for FY 2019-20 and established the methodology for rate modifications through FY 2023-24. Currently, the base refuse rate for single family homes is $23.38 per month for a total monthly cost of $25.48 (after including City fees of $2.10).
This year, the recommended increase to the base refuse rate for FY 2023-24, according to the prescribed methodology, is 9.78%. The 9.78% is reflective of increased costs across the Consumer Price Index (CPI) and other cost components, particularly driven by the rising cost of fuel and labor indices. After including the annual 1% increase in the contract to account for extraordinary changes in the solid waste industry and the varied five-year adjustments of 7% (single/multi-family) and 14%
L.2., File # 23-6087 Meeting Date: 6/6/2023
in the solid waste industry and the varied five-year adjustments of 7% (single/multi-family) and 14% (commercial) described above, the total recommended increase for single/multi-family customer rates in FY 2023-24 is 16.78% and 23.78% for commercial customers.
As a result, the single-family residential customers’ monthly charge would increase from $25.48 to $29.40, the most common multi-family unit monthly charge would increase from $139.72 to $161.51, and the most common commercial customer monthly charge would increase from $203.55 to $251.18. Even with these increases, Redondo Beach residents and businesses would experience solid waste collection rates that are comparable to other cities in the region (see the attached survey). It should be noted that Redondo residents are able to dispose of an unlimited amount of solid waste each week, while other municipalities place limits on the amount and tier their solid waste rates accordingly.
Athens has continued to inform staff about industry pressures affecting diversion rates, including foreign-policy changes that eliminate outlets for materials recovered and uncertainty surrounding availability of diversion options like the Southeast Resource Recovery Facility (SERRF). However, despite these challenges, Athens Services met the contractual solid waste diversion (recycling) requirement of 75% in calendar year 2022, as reported to the City in the 2022 Annual Report.
BACKGROUND
The Solid Waste Handling Services Franchise Agreement with Athens Services (Agreement) is the City’s single largest contract and affects nearly every resident and business in the community. The City Council approved the original Agreement in January 2011 and it became effective July 1, 2011.
The City Council subsequently approved an amendment to the Agreement on June 18, 2019 for an additional nine-year term plus an additional two-year City option.
In April 2019, the City conducted a Proposition 218 protest balloting process that set the refuse rates for FY 2019-20 Fiscal Year and established the methodology for rate modifications through FY 2023-
24. The base rate of the total trash fee is calculated using the year to year changes in published price indices for six industry cost components: labor, fuel, equipment, waste-to-energy, disposal and “other” costs and the individual component’s weighted portion of the rate.
On June 18th, 2019 the City Council approved an amendment to the Agreement with Athens Services for a term of nine years plus a two-year City option to extend. The approved amendment includes a varied five-year rate adjustment of 7% percent per year for residential and multifamily customers, 14% for commercial customers, an additional 1% and the approved annual rate adjustment. After the five-year rate adjustment structure the subsequent year’s rates would adjust based on the annual rate adjustment plus 1%. All other elements of the existing Agreement remained in place, including the City’s 75% diversion rate.
Solid Waste Handling Services Agreement Compliance Audit On January 17, 2023, the City Council approved a contract with HF&H Consultants to conduct a hauler-funded compliance audit. The audits are intended to ensure compliance with the terms of the contract, accuracy of customer service levels and billing, fee payments, gross receipts, tonnage and verification of diversion rates. The audit is in progress and City staff, HF&H and Athens Services are working to address the scope of work outlined in the contract. HF&H will present their report to City Council early in FY 2023-24.
L.2., File # 23-6087 Meeting Date: 6/6/2023
Proposed Annual Refuse Rate Adjustment for the FY 2023-2024 On February 9, 2023, Athens Services, in accordance with the requirements established in the Agreement with the City, submitted an annual adjustment request to modify the base refuse rates for FY 2023-24. The proposed average increase to Redondo Beach customers will be 16.78% for residential customers and 23.78% for commercial customers.
Staff has reviewed Athens Services’ requested adjustment and determined that it was calculated according to the prescribed methodology approved in the Agreement and subsequently ratified by the Proposition 218 balloting process conducted in 2019. Specifically, staff reviewed the proposed increase/decrease for each industry cost component in the approved formula to ensure it was adjusted as follows.
· The Labor Cost component was adjusted by the change in the highest-level rate for the "Driver A/B" Classification as published in the Agreement between local haulers and Package and General Utility Drivers Local Union 396, International, from January 2022 to January 2023.
The year-over-year increase was determined to be 10.96%. · The Fuel Cost component was adjusted by the change in the average annual index for the twelve-month period of November 2020 through October 2021 compared to November 2021 through October 2022 for the PPI-Fuels and related power products and power, natural gas (WPU 0531). The year-over-year increase was 86.71%.
· The Equipment Cost component was adjusted by the change in average annual index for the twelve-month period of November 2020 through October 2021 compared to November 2021 through October 2022 for the Producer Price Index (PPI) - Heavy duty truck manufacturing (PCU336120336120). The year-over-year increase was 1.82%. · The Waste-to-Energy Cost component was based on no change in the facility gate fees of $105 per ton on January 1, 2022 remaining at $105 per ton on January 1, 2023. The change in the cost of the gate fees is 0%.
· The Disposal Cost component, which includes green waste and organics, was adjusted by the change in the average annual index for the twelve-month period of November 2020 through October 2021 compared to November 2021 through October 2022 for the Consumer Price Index - for all Urban Consumers, Los Angeles-Long Beach-Anaheim, CA, all items (CUURS49ASA0). The year-over-year increase was 7.60%, but is capped at 5% per the Agreement.
· The All Other Cost component was adjusted by the change in the average annual index for the twelve-month period of November 2020 through October 2021 compared to November 2021 through October 2022 for the Consumer Price Index-All Urban Consumers, U.S. City Average, all items less food and energy, (CUUR0000SA0L1E). The year-over-year increase was
6.05%.
Additional information on how each industry cost component or index value has increased/decreased over the year-over-year is attached to this report. Tables 1 and 2 below illustrate how the 9.78% rate adjustment percentage was calculated.
L.2., File # 23-6087 Meeting Date: 6/6/2023
A B C
Adjustment Factor Annual Index
(Previous)
Average
Annual % Change in Index
Labor (Local Union 396
contract per hour rate) $ 28.75 $ 31.90 10.96%
Fuel (National Producer
Price Index) $ 131.53 $ 245.58 86.71%
Equipment (National
Producer Price Index) $ 153.28 $ 156.07 1.82%
Waste-to-Energy (Gate
rate per ton) $ 105.00 $ 105.00 0.00%
Disposal/Organics
(Consumer Price Index $ 286.32 $ 308.07 5% (7.6% - Capped per Agreement)
All Other (National
Consumer Price Index) $ 274.92 $ 291.55 6.05%
Table 1. Industry cost components percentage change
In Table 2, the cost components are weighted as a percentage of the base rate total (column D) and are multiplied (in column E) by the percentage change in the index as calculated above to arrive at the total weighted change of each cost component (column F). The original cost component base rate percentages were determined as part of the approved contract with Athens Services and the subsequent Proposition 218 Noticing and Balloting process. The grand total base rate adjustment of
8.78% is determined by adding together the components total weighted change.
D E F
Labor 25.73% 10.96% 2.82%
Fuel 4.31% 86.71% 3.74%
Equipment 9.14% 1.82% 0.17%
Waste-to-Energy 20.52% 0.00% 0.00%
Disposal/Organics 36.90% 5.00% 1.85%
All Other 3.40% 6.05% 0.21%
Total Base Rate % 100.00% 8.78%
Adjustment Factor
Cost Component
as a % of Base
Rate
Total Weighted
Change
% Change in Index
(from Column C in
Table 1)
Table 2. Cost components weighted percentage change and impact on base rate
Additionally, the multi-family per unit fee for recyclables collection which is separate from the requested refuse rate and calculated differently under the terms of the Solid Waste Agreement (see
L.2., File # 23-6087 Meeting Date: 6/6/2023
requested refuse rate and calculated differently under the terms of the Solid Waste Agreement (see Table 3 below) is adjusted by the change in the average annual index for the twelve-month period of November 2020 through October 2021 compared to November 2021 through October 2022 for the Consumer Price Index-All Urban Consumers, U.S. City Average, all items less food and energy, (CUUR0000SA0L1E).
Table 3. Industry cost component percentage change for Multi-family per unit fee for recyclables collection
Table 4 below illustrates how the 8.78% rate percentage increase plus the extraordinary rate increase of 1% and the prescheduled varied rate increases of 7% and 14%, for single family/multifamily and commercial customers, respectively, would affect the trash fees in FY 2023-24 for the most common types of service and lists the other City fees that make up the full monthly refuse rates.
Residential Base Rate Fee $23.38 16.78% $27.30
Admin Fee (City fee) ($.86 per unit) $0.86 0% $0.86
AB 939 Fee (City fee) ($.33 per
unit) $0.33 0% $0.33
HHW Fee (City fee) ($.91 per unit) $0.91 0% $0.91
Total Single Family Rate $25.48 $29.40
Multi-family 2-yard serviced, 1x per
week, 6 units* (Base Rate Fee) $106.91 16.78% $124.85
Admin Fee (City fee) ($.86 X 6
units) $5.16 0.00% $5.16
AB 939 Fee (City fee) (4.25% of
base rate) $4.54 0% $5.31
HHW Fee (City fee) ($.91 X 6 units) $5.46 0% $5.46
Recycling Service Fee (Contractor
Fee) (3.46 X 6 units) $18.18 14.05% $20.76
($0.43 increase
per unit)
Total Multi-Family Rate $139.72 $161.54
Proposed
Monthly Service Category Current Monthly Refuse Rates
Percentage
Decrease/
Increase
L.2., File # 23-6087 Meeting Date: 6/6/2023
Residential Base Rate Fee $23.38 16.78% $27.30
Admin Fee (City fee) ($.86 per unit) $0.86 0% $0.86
AB 939 Fee (City fee) ($.33 per
unit) $0.33 0% $0.33
HHW Fee (City fee) ($.91 per unit) $0.91 0% $0.91
Total Single Family Rate $25.48 $29.40
Multi-family 2-yard serviced, 1x per
week, 6 units* (Base Rate Fee) $106.91 16.78% $124.85
Admin Fee (City fee) ($.86 X 6
units) $5.16 0.00% $5.16
AB 939 Fee (City fee) (4.25% of
base rate) $4.54 0% $5.31
HHW Fee (City fee) ($.91 X 6 units) $5.46 0% $5.46
Recycling Service Fee (Contractor
Fee) (3.46 X 6 units) $18.18 14.05% $20.76
($0.43 increase
per unit)
Total Multi-Family Rate $139.72 $161.54
Commercial 3-yard, serviced 1x
per week* (Base Rate-Contractor
fee)
$178.95 23.78% $221.50
Admin Fee (City fee) (9.15% of
base rate) $17.00 $20.27
AB 939 Fee (City fee) (4.25% of
base rate) $7.60 $9.41
Total Commercial Rate $203.55 $251.18
Proposed
Monthly Service Category Current Monthly Refuse Rates
Percentage
Decrease/
Increase
*Most common service level for multi-family and commercial customers Table 4. Current and Proposed Refuse Rates
In addition to modifying the refuse rates charged to residential and commercial customers, the Rate
L.2., File # 23-6087 Meeting Date: 6/6/2023
In addition to modifying the refuse rates charged to residential and commercial customers, the Rate Resolution also modifies the charges to the City for services that are only provided to the City and optional services for customers. These services, which include household hazardous waste roundups, compactor roll-off box collection at the Pier, use of temporary cleanup bins and bin cleaning, will be adjusted and will have a small impact on the Solid Waste Fund’s bottom line. Staff will continue to monitor these costs. Changes to these charges are in accordance with specific franchise contract terms stipulated in the approved amendment. Staff have proposed some infrastructure changes to create efficiencies in the Pier compactor area to reduce operational costs.
Rate Comparisons
The proposed residential refuse rate of $29.40 per month continues to be in line with neighboring cities when comparing with similar single-family service levels (see attachments). The monthly commercial rate of $251.18 has seen a significant increase due to inflationary drivers and the increase in CPI indices. However, the proposed monthly commercial rate of $251.18 for a three-yard bin collected one time per week is also on par when compared to the cities surveyed with the same service levels (see attachments). A summary of the solid waste rates with City administrative fees for the past four years is shown below.
FY 19-20 FY 20-21 FY 21-22 FY22-23
$18.84 $20.74 $22.72 $25.48 $29.40
Commercial 3-
Yard Rate
Serviced 1x Per
Week
$120.40 $143.26 $168.55 $203.55 $251.18
Proposed
FY23-24
Service
Category
Single Family
Rate
Table 5: Five Year Rate Comparison
COORDINATION
The City Attorney’s Office approved the Resolution as to form.
FISCAL IMPACT
The proposed FY 2023-24 rate modification would increase the pass-through funding collected by the City on behalf of the contractor and then paid to Athens by approximately $758,505 and would increase the AB 939 and Administration fees collected by the City by an estimated $40,008 and $76,204 respectively.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Reso - Establishing Contractor’s Charges and Corresponding City Fees for Residential, MultiFamily and Commercial Refuse Collection for FY 2023-24
L.2., File # 23-6087 Meeting Date: 6/6/2023
· Redondo Beach Rate Adjustment Request, Athens, February 9, 2023 · Table - Single Family and Commercial Refuse Rate Survey FY 2023-24 · Rate Increase Approval Presentation