Administrative
Report
L.1., File # 24-0901 Meeting Date: 6/18/2024
To: MAYOR AND CITY COUNCIL
From: ANDREW WINJE, PUBLIC WORKS DIRECTOR
TITLE
PUBLIC HEARING TO CONSIDER ARAKELIAN ENTERPRISES INC., DBA ATHENS SERVICES, PROPOSED SOLID WASTE CHARGES AND FEES FOR FISCAL YEAR 2024-2025 ADOPT BY TITLE ONLY RESOLUTION NO. CC-2406-048 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 2024-2025 FISCAL YEAR AND ORDERING THE ANNUAL REFUSE CHARGES FOR FISCAL YEAR 2024-25 TO BE COLLECTED ON THE COUNTY
OF LOS ANGELES TAX ROLL
PROCEDURES:
a. Open the Public Hearing,
b. Take Testimony,
c. Close the Public Hearing; and
d. Adopt by Title Only Resolution No. CC-2406-048
EXECUTIVE SUMMARY
The City’s refuse collection and hauling service rates for residential, multi-family, and commercial properties is governed by Proposition 218. Proposition 218 requires a public hearing be held no less than every five years to consider the refuse rates for the next five years. It has been five years since the last Proposition 218 process (June 18, 2019) that established the rates through FY 2023-24. On April 23, 2024, the City Council directed staff to initiate the Proposition 218 process that is necessary to set the refuse rates for FY 2024-25 and to confirm the contracted methodology for rate modifications through FY 2028-29. The Proposition 218 notice included a proposal to increase the City Administration fee of $0.86, by 15%, to $0.99 per month. This fee was last adjusted in 2012 and would bring the total of monthly City fees from $2.10 to $2.23.
On June 18, 2019, the City Council approved a First 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. According to the First Amendment, new refuse collection base rates are determined every year according to a defined methodology contained therein. FY 2023-24 was the fifth and final year the methodology included a special rate adjustment. Beginning in FY 2024-25 the typical annual base rate adjustment includes only the calculated adjustment, plus a 1% annual increase. For FY
L.1., File # 24-0901 Meeting Date: 6/18/2024
base rate adjustment includes only the calculated adjustment, plus a 1% annual increase. For FY 2024-25 the refuse collection base rate adjustment is determined to be 0.9% for both residential and commercial customers.
The 0.9% is reflective of a cumulative cost decrease across the Consumer Price Index, Producer Price Index, and other cost components of 0.1% (-0.1%) plus the annual 1% increase in the contract to account for market variances in the solid waste industry. Adding these factors brings the total recommended percentage increase for single/multi-family and commercial customer base rates to
0.9% in FY 2024-25.
Staff has also recommended a $0.13 increase to the monthly City Administration fee for residents and multi-family units to recoup rising City staff costs for administration of the program, as proposed in Decision Package #5.
Currently, the collected refuse rate for single family homes is $27.30 per month for a total monthly cost of $29.40 (after including City fees of $2.10 with the base rate). As a result of the 0.9% increase, and the $0.13 City Administration Fee increase, the total single-family residential customers’ monthly charge would increase from $29.40 to $29.78.
The result of the 0.9% increase to the most common multi-family unit monthly charge would be an increase from $161.51 to $164.74, and the most common commercial customer monthly charge would increase from $251.18 to $253.44. 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 disposal amount, and tier their solid waste rates accordingly.
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.
The base rate of the total trash fee is calculated using the year-to-year changes in published price indices for industry cost components: labor, fuel, equipment, waste-to-energy, disposal, and “other” costs, and the individual component’s weighted portion of the rate. The individual components’ weighted portion of the rate is prescribed in the Athens Agreement, as amended, less the waste-toenergy cost component, which is no longer a service disposal option for Athens Services.
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 included a varied five-year rate adjustment schedule based on the sum of the approved annual rate adjustment using calculation methodology, a special adjustment consisting of 7% percent per year for residential and multifamily customers and 14% for commercial customers, and an additional 1%.
Now the five-year special rate adjustment period is over, and the subsequent year’s rates are adjusted based on the annual calculated methodology rate adjustment plus 1%. All other elements of the existing Agreement remained in place, including the City’s 75% diversion rate.
L.1., File # 24-0901 Meeting Date: 6/18/2024
Proposition 218 Process
Proposition 218 requires a public hearing be held no less than every five years to consider the refuse rates for the next five years. In April 2019, the City conducted a Proposition 218 protest balloting process that established the methodology for rate modifications through FY 2023-24. On April 23, 2024 City Council authorized staff to initiate the Proposition 218 process required to set rates for FY 2024-25 and the following four years. There is no proposed change to the prescribed contractual methodology outlined in the amendment to the Agreement (approved June 18, 2019) for the annual rate adjustment.
Proposition 218 requires that all property owners, or those responsible for paying the refuse bill, receive a notice 45 days prior to the Public Hearing for an opportunity to challenge any proposed fee increases. The City Council officially set June 18, 2024 as the date for the Public Hearing and staff posted mailers to all owners before May 3, 2024. In the absence of a majority protest, the City Council maintains the right of final approval of the rate structure for FY 2024-25 through FY 2028-29.
It should be noted, that included in the Proposition 218 notice was a proposal to increase the City Administration fee for residents and multi-family units that was last adjusted in 2012. This fee can only be adjusted through the Proposition 218 process. The current City Administration fee assessed for residents and multi-family unit per month is $0.86. The proposed increase is 15% for a new monthly fee of $0.99 ($11.88 annually), which is an increase of $1.56 per year.
Proposed Annual Refuse Rate Adjustment for the FY 2024-2025 On February 14, 2024, 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 2024-25. The proposed average increase to Redondo Beach customers will be 0.9% for residential and 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. 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 2023 to January 2024.
The year-over-year increase was determined to be 3.13%. · The Fuel Cost component was adjusted by the change in the average annual index for the twelve-month period of November 2021 through October 2022 compared to November 2022 through October 2023 for the PPI-Fuels and related power products and power, natural gas (WPU 0531). The year-over-year adjustment was a decrease, negative 54.33%. · The Equipment Cost component was adjusted by the change in average annual index for the twelve-month period of November 2021 through October 2022 compared to November 2022 through October 2023 for the Producer Price Index (PPI) - Heavy duty truck manufacturing
L.1., File # 24-0901 Meeting Date: 6/18/2024
through October 2023 for the Producer Price Index (PPI) - Heavy duty truck manufacturing (PCU336120336120). The year-over-year increase was 2.46%. · 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 2021 through October 2022 compared to November 2022 through October 2023 for the Consumer Price Index - for all Urban Consumers, Los Angeles-Long Beach-Anaheim, CA, all items (CUURS49ASA0). The year-over-year increase was 3.86%. (Disposal is capped at 5% with any excess rolling to the following year. The FY2023-24 Disposal calculation was 7.6%, capped at 5%. 2.6% has been added to the FY 2024-25 calculation and capped at 5% as is shown in Table 1 below. 1.46% will carry forward to the July 1, 2025 Disposal adjustment.) · The “All Other” Cost component was adjusted by the change in the average annual index for the twelve-month period of November 2021 through October 2022 compared to November 2022 through October 2023 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 5.09%.
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 0.9% rate adjustment percentage was calculated.
A B C
Adjustment Factor Annual Index
(Previous)
Average
Annual
% Change in
Index
Labor (Local Union 396
contract per hour rate) $ 31.90 $ 32.90 3.13%
Fuel (National Producer
Price Index) $ 245.70 $ 112.22 -54.33%
Equipment (National
Producer Price Index) $ 156.07 $ 159.91 2.46%
Waste-to-Energy (N/A) $ - 0.00%
Disposal/Organics
(Consumer Price Index $ 308.07 $ 319.95 5.00%
All Other (National
Consumer Price Index) $ 291.55 $ 306.40 5.09%
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 processes. The grand total base rate adjustment
L.1., File # 24-0901 Meeting Date: 6/18/2024
of -0.1% is determined by adding together the components total weighted change.
D E F
Labor 26.24% 3.13% 0.82%
Fuel 7.41% -54.33% -4.02%
Equipment 8.55% 2.46% 0.21%
Waste-to-Energy N/A 0.00% 0.00%
Disposal/Organics 54.48% 5.00% 2.72%
All Other 3.31% 5.09% 0.17%
Total Base Rate % 100.00% -0.10%
Adjustment Factor
Cost
Component
% Change in
Index (from
Total
Weighted
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 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 2022 through October 2023 for the Consumer Price Index-All Urban Consumers, U.S. City Average, all items less food and energy, (CUUR0000SA0L1E).
Multi-family per unit fee for
recyclables collection (National
Consumer Price Index)
291.55 306.39 5.09%
Adjustment Factor Annual Index
(Current)
Average
Annual
% Change in
Index
Table 3. Industry cost component percentage change for Multi-family per unit fee for recyclables collection
Table 4 below illustrates how the -0.1% rate percentage increase plus the additional increase of 1% would affect the trash fees in FY 2024-25 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
$27.30 0.9% $27.55
Admin Fee (City fee)
($.86 per unit) $0.86 15% $0.99
AB 939 Fee (City fee)
($.33 per unit) $0.33 0% $0.33
HHW Fee (City fee)
Proposed
Monthly Service Category Current Monthly Refuse Rates
Percentage
Decrease/ Increase
L.1., File # 24-0901 Meeting Date: 6/18/2024
Residential Base Rate
Fee
$27.30 0.9% $27.55
Admin Fee (City fee)
($.86 per unit) $0.86 15% $0.99
AB 939 Fee (City fee)
($.33 per unit) $0.33 0% $0.33
HHW Fee (City fee)
($.91 per unit) $0.91 0% $0.91
Total Single Family
Rate
$29.40 $29.78
Multi-family 2-yard
serviced, 1x per week, 6
units* (Base Rate Fee)
$124.85 0.9% $125.97
Admin Fee (City fee)
($.86 X 6 units) $5.16 15% $5.94
AB 939 Fee (City fee)
(4.25% of base rate)
$5.31 0.9% $5.35
HHW Fee (City fee) ($.91
X 6 units) $5.46 0% $5.46
Recycling Service Fee
(Contractor Fee) (3.67 X
6 units)
$20.76 6.09% $22.02
Total Multi-Family Rate $161.54 $164.74
Commercial 3-yard,
serviced 1x per week*
(Base Rate-Contractor
fee)
$221.50 0.90% $223.49
Admin Fee (City fee)
(9.15% of base rate)
$20.27 $20.45
AB 939 Fee (City fee)
(4.25% of base rate) $9.41 $9.50
Total Commercial Rate $251.18 $253.44
Proposed
Monthly Service Category Current Monthly Refuse Rates
Percentage
Decrease/ Increase
($1.26 increase per unit)
*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 Refuse
L.1., File # 24-0901 Meeting Date: 6/18/2024
In addition to modifying the refuse rates charged to residential and commercial customers, the Refuse Rate Resolution (attached) also modifies the charges to the City for services that are only provided to the City as 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 First 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 $29.78 per month continues to be in line with neighboring cities when comparing with similar single-family service levels (see attachments). The proposed monthly commercial rate of $253.44 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 20-21 FY 21-22 FY22-23 FY23-24
$20.74 $22.72 $25.48 $29.40 $29.78
Commercial 3-
Yard Rate
Serviced 1x
Per Week
$143.26 $168.55 $203.55 $251.18 $253.44
Service
Category
Proposed
FY24-25
Single Family
Rate
Table 5: Five Year Rate Comparison
If the request to modify the solid waste rates for FY 2024-25, and the formulas for future rate modifications during the subsequent four fiscal years, are authorized by the rate payers and approved by the City Council, staff will update the Los Angeles County Direct Assessment information for single family customers for collection of refuse charges with their property tax bill.
Staff will also notify Athens Services of the official approval of the refuse rates for direct billing of commercial and multi-family customers.
COORDINATION
The City Attorney’s Office approved the Resolution as to form.
FISCAL IMPACT
The proposed FY 2024-25 rate modification would increase the pass-through funding collected by the City on behalf of the contractor, and then paid to Athens, by approximately $52,356. The increase in the City Administration fee for single and multi-family residents would increase Administration Fees collected by the City by an estimated $24,945.
APPROVED BY:
Mike Witzansky, City Manager
ATTACHMENTS
· Reso - No. CC-2406-048 Establishing Contractor’s Charges and Corresponding City Fees for
L.1., File # 24-0901 Meeting Date: 6/18/2024
· Reso - No. CC-2406-048 Establishing Contractor’s Charges and Corresponding City Fees for Residential, Multi-Family and Commercial Refuse Collection for FY 2024-25 · Redondo Beach Rate Adjustment Request, Athens Services, February 14, 2024 · Table - Single Family and Commercial Refuse Rate Survey FY 2024-25, as of June 2024 · Proposition 218 Notice
· Administrative Report - City Council, Authorizing staff to initiate Proposition 218 Process, April 23, 2024