Land Use, Sustainability, and Resilience Committee
TO: LAND USE, SUSTAINABILITY, AND DATE: JANUARY 8, 2024
RESILIENCE COMMITTEE MEMBERS
FROM: PUBLIC WORKS DEPARTMENT WARDS: ALL
SUBJECT: PRELIMINARY COST ESTIMATES TO INSOURCE RESIDENTIAL AND COMMERCIAL SOLID WASTE SERVICES ISSUE:
Receive a report and provide input on preliminary cost estimates to insource residential and commercial solid waste services.
RECOMMENDATION:
That the Land Use, Sustainability, and Resilience Committee provide input on preliminary cost estimates associated with insourcing residential and commercial solid waste services.
BACKGROUND:
During the May 9, 2023, City Council meeting, the Public Works Department was directed to return to the Land Use, Sustainability, and Resilience Committee to explore the gradual scaling of internal trash hauling services. To initiate this conversation, staff studied operational needs and costs associated with insourcing all residential and commercial solid waste operations.
DISCUSSION:
Overview of Solid Waste Operation
Solid waste collection and street sweeping services for the City’s 63,484 residential solid waste accounts and 7,408 commercial accounts are currently provided through a combination of City staff and contract haulers. City staff provide residential collection services for approximately 2/3 of the City’s residential customers (42,323 customers). Street sweeping services are provided entirely by City personnel.
As of July 1, 2023, the remaining 1/3 of residential customers (21,161 customers) receive solid waste service through an exclusive Franchise Agreement with Arakelian Enterprises dba Athens Services. All 7,408 commercial solid waste accounts are currently serviced by contracted companies.
A Transfer Station Materials Recovery Facility (MRF) is a facility that receives, separates, and prepares recyclable materials that are sold for reuse or repurposing. A MRF is either a Clean MRF or a Dirty/Mixed-Waste MRF. A Clean MRF is a facility that accepts incoming recyclables that have already been separated at the residential and/or commercial source. A Dirty/Mixed-Waste MRF is a facility that accepts incoming recyclables that are mixed, requiring a higher level of mechanical and manual sorting. Additionally, a MRF will accept municipal waste and organic waste, where the product may be processed for mulch or transferred to a local landfill.
The City has an Agreement for Transfer Services with Agua Mansa Transfer Station/Material Recovery Facility (AMTS-MRF) to handle all trash, recyclable material, and organic recyclable material which includes source-separated food waste (Agua Mansa Transfer Station/Material Recovery Facility is a Dirty/Mixed Waste MRF). This Agreement, effective through March 30, 2029, requires all haulers who provide solid waste services within the City of Riverside to transfer these commodities to the AMTS-MRF. All organic recyclable material, except for commercial green waste, collected within the city limits must be delivered to the AMTS-MRF by City staff and/or the City’s contracted haulers. “Recyclable materials” are materials that are required to be separated from solid waste and recyclable materials prior to disposal and returned for use or reuse in the form of raw materials for new, used, or reconstituted products. Examples of organic recyclable materials include yard trimmings such as grass clippings, weeds, leaves, pruning, branches, dead plants, brush, and tree trimmings, dead trees, and small wood pieces, and food scraps such as vegetable waste, fruit waste, dairy waste, meat waste, fish waste, and paper contaminated with food scraps.
Exclusions from Estimating Costs for Insourcing
Staff researched and developed a high-level cost estimate to insource, following discussions with operational staff and General Services staff. The following cost elements were excluded from staff’s assessment, due to too many unknown variables:
Installation of additional CNG fueling stations and electric vehicle (EV) charging stations Additional vehicle mechanics and/or EV mechanics required to service the additional vehicles and equipment, and other costs associated with maintaining an expanded fleet.
Electric grid connection to support increased power demands for EV vehicle charging.
Real Property costs of an expanded solid waste operation base such as housing vehicles, bin storage, and fueling connections.
Land acquisition and construction of a City-owned MRF and the regulatory requirements associated with operating a MRF.
Study to compare insourcing vs. outsourcing to evaluate costs vs. revenues, including the potential to serve additional jurisdictions other than the City of Riverside.
Potential impact on rates and whether an increase would be needed.
Franchise Agreements
On July 1, 2023, the City entered into 15-year Franchise Agreements for residential and solid waste services.
The following excerpt is from Article 22 “Modifications to the Agreement" of the Agreement for the Provision of Single-Family Dwelling Garbage, Recyclable Materials, and Organic Waste Collection Services, and Article 23 “Modifications to the Agreement" of the Agreement for the Provision of Commercial and Multi-Family Dwelling Garbage, Recyclable Materials, and Organic Waste Collection Services:
“The scope and method of providing Collection Services as referenced herein will be liberally construed to include procedures, operations and obligations, financial or otherwise, of Contractor. When such modifications are made to this Agreement, City and contractor will negotiate in good faith, a reasonable and appropriate compensation adjustment for any increase or decrease in the service or other obligations required of Contractor due to any modification in the Agreement under this Article.” Should the City pursue insourcing solid waste, the City and our Franchise Hauler would be required to negotiate the terms for a reduction in contracted service. It is difficult to estimate costs to the City to buy out the franchisee’s investment to provide 15-years of trash hauling services including vehicle fleet acquisition, bin inventory, lost profit, and personnel. The following analysis provides a high-level look at some of these potential costs.
Insourcing Residential Solid Waste
Staff’s analysis identified that estimated costs for new personnel, new heavy- and light-duty vehicles, and bin inventory associated with insourcing the 21,161 residential refuse accounts that are presently serviced by a franchise hauler, would be at least $12 million. This estimate includes:
$1.9 million for 21 additional full-time City employees, which includes 16 additional drivers, 2 supervisors, 2 general service workers, and 1 office support position. $10.5 million for the purchase of 16 electric refuse vehicles including 12 refuse collection trucks and 4 light-duty vehicles. As we do not yet know how effectively electric refuse vehicles will perform, there is the possibility that a higher number of vehicles will be required to provide a full day of service plus the time required to dispose of the loads at the MRF. $400,000 annually for residential bin replacement inventory.
In addition to this financial component is the time required to ramp up an in-house expansion. Currently new heavy-duty vehicles are taking 18 months or longer for manufacturing and delivery. As drivers are hired and trained, and new vehicles are received, routes could be gradually transferred from the franchise hauler to City forces. It is likely that a complete transition to an in-house operation could take 3 years or longer to execute.
Insourcing Commercial Solid Waste
The City of Riverside does not currently operate any commercial operations and contracts with three commercial refuse operators to service approximately 7,408 commercial accounts. Commercial accounts vary between being serviced daily to once a week. Staff’s analysis identified that the estimated costs for new personnel, new heavy- and light-duty vehicles, and bin inventory associated with insourcing all 7,408 commercial customers, is nearly $63 million. This includes:
$4 million to hire a minimum of 44 additional employees, which include 36 additional drivers, 4 supervisor positions, and 4 field and office support staff. $34.6 million for the purchase of 50 electric refuse vehicles including 40 refuse collection trucks and 10 light-duty vehicles. As we do not yet know how effectively electric refuse vehicles will perform, there is the possibility that a higher number of vehicles will be required in order to provide a full day of service plus the time required to dispose of the loads at the MRF. $23.7 million for the purchase of an estimated 25,080 commercial bins for immediate placement and inventory.
In addition to this financial component is the time required to ramp up an in-house expansion. Currently new heavy-duty vehicles are taking 18 months or longer for manufacturing and delivery. As drivers are hired and trained, and new vehicles are received, routes could be gradually transferred from the franchise hauler to City forces. It is likely that a complete transition to an in-house operation could take 3+ years to execute.
The recommendation would be to first focus on insourcing residential operations and concurrently start planning to bring commercial service in-house. The commercial agreements require a 5-year exclusive notification, and we would need a transition period to be the new hauler. This 5-year period would allow time to purchase vehicles, hire staff, and build up inventory of commercial bins.
Operational Real Property Needs
The Public Works Department’s Solid Waste Division is based out of the City’s Corporation Yard. The Corporation Yard is also the base for a number of other City operations including Public Utilities, Parks, General Services Building Maintenance and Fleet Services, Fire Department, Special Transportation, and the Central Stores warehouse. All of these work groups share space for offices, vehicles, equipment, and materials storage.
Historically, the Corporation Yard has been adequate to meet solid waste operational requirements. However, increased insourcing combined with new requirements for electric vehicles will require additional space and new infrastructure. Some of the real property needs to expand solid waste operations are additional space for housing more vehicles, expanded fleet maintenance facilities, increased fueling connections, and a greater storage location for a large inventory of residential and commercial bins. This may require either displacing other City departments from the City Corporation Yard and constructing a new City facility to support those operations, or constructing a new Yard to house an expanded solid waste operation. This component was not included in staff’s analysis due to the unknowns of acquisition costs, regulations, permitting, and construction costs. The real property needs of an expanded solid waste operation would need to be studied further, and staff would recommend engaging a consulting firm knowledgeable in this area to perform the study and make recommendations.
Transfer Station Material Recovery Facility
The City of Riverside Refuse does not operate a Transfer Station Material Recovery Facility (MRF), and is under contract through March 2029 with Burrtec Services, Inc. to process all residential and commercial trash and recycling at the Agua Mansa site. If the City of Riverside was to construct and operate a MRF, consideration will be needed as to whether the MRF would just handle the City of Riverside residential and commercial waste or if it would also accept refuse materials from other jurisdictions.
The cost for the City to acquire land, construct, and operate a MRF was not part of Staff’s analysis of an in-housing effort, as we do not have the expertise to perform this analysis. In order to appropriately identify those costs, staff would seek to hire a consulting firm to research the topic and identify costs, timelines, regulations, permitting, and potential challenges.
Attachment 1 shows a more detailed cost breakdown for insourcing all residential accounts and all commercial accounts. This is a general estimate of the known costs for insourcing all solid waste operations. There are additional costs that are not included, such as regulatory costs and the costs associated with a City-owned and operated MRF. A comprehensive study would be required to analyze and identify missing costs, costs associated with a physical location to serve as the solid waste operation’s base, and the costs associated with a City-owned and operated MRF in order to determine the feasibility of insourcing all or a portion of the currently outsourced solid waste operations.
STRATEGIC PLAN ALIGNMENT:
This item contributes to Strategic Priority 4 – Environmental Stewardship, and Goal 4.4 – Implement measures and educate the community to responsibly manage goods, products, and services throughout their life cycle to achieve waste reduction outcomes.
This project aligns with each of the five Cross-Cutting Threads as follows:
Community Trust – Discussing potentially in-housing solid waste operations buildings community trust through examination of operations and identifying areas of opportunity to serve the community better and potential challenges that may arise.
2. Equity – Solid waste is a service provided to every resident and business located in the city.
3. Fiscal Responsibility – Discussing potentially insourcing solid waste operations could identify potential long-term cost savings to residents and businesses.
Innovation – This item is neutral toward this Cross-Cutting Thread.
Sustainability & Resiliency – Insourcing all residential, commercial solid waste services may improve the City’s efforts to be a zero-waste community.
FISCAL IMPACT:
There is no fiscal impact associated with this update.
Prepared by: Bob Rivers, Principal Management Analyst
Approved by: Gilbert Hernandez, Public Works Director
Certified as to
availability of funds: Kristie Thomas, Assistant Chief Financial Officer/Finance Director Approved by: Kris Martinez, Assistant City Manager
Approved as to form: Phaedra A. Norton, City Attorney
Attachments:
Exhibit A – Estimated Costs for Insourcing All Solid Waste Operations Residential Franchise Agreement
Commercial Franchise Agreement
Presentation
Estimated Cost to Insource Residential and Commercial Solid Waste Operations Page 3