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DISCUSSION
City of San Bernardino
Request for Council Action
Date: May 15, 2024
To: Honorable Mayor and City Council Members
From: Lynn Merrill, Director of Public Works
Department: Public Works
Subject: Consideration of the Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid
Waste Collection, Processing and Disposal Services
with Burrtec Waste Industries, Inc. (All Wards)
Recommendation:
It is recommended that the Mayor and City Council of the City of San Bernardino, California, adopt Resolution No. 2024-111 approving the Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc.
Executive Summary
Consideration of approval of the Third Amendment to the Franchise agreement between the City of San Bernardino and Burrtec Waste Industries, Inc. to continue the current $26.42 per month rate for Single Family and Multi-Family Dwelling units and all other per month rates as currently set forth; implementing the SB 1383 Short-Lived Climate Pollutants Act of 2016 to require residential and commercial waste generators to participate in organic recycling programs, which includes the option of extending the existing franchise agreement from March 31, 2026 to March 31, 2031.
Background
The City of San Bernardino has an exclusive Franchise Agreement (Agreement) with Burrtec Waste and Recycling Services, LLC (Burrtec) to provide waste and recycling services to all residents and businesses in the City, effective April 1, 2016 through March 31, 2026. The initial rate set forth for Single or Multi-Family Dwellings for the period April 1, 2016 through June 30, 2017 was $22.84 per month. The original Franchise Agreement was subsequently amended twice. Amendment Number 1 made adjustments to the list of City owned vehicles that were originally purchased by Burrtec, while Amendment Number 2 made a further adjustment in the list of City 2 1
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owned vehicles to adjust for vehicles that were either retained by the City or had been previously disposed of by the City. Both Amendments Number 1 and Number 2 were made in January of 2016 and did not affect the Franchise Agreement as originally approved by the City.
Under Section 21.1.3 of the Franchise Agreement, Burrtec is allowed to submit a proposed rate adjustment and rate schedule to the City Manager for review by March 1, of each agreement year. The Agreement also established a Maximum Annual Increase of no more than 5% per year, and then any amount above 5% or below 0% were carried forward. These rates would become effective July 1st of each year.
Senate Bill (SB) 1383, the Short-Lived Climate Pollutants: Organic Methane Waste Emissions Reduction Act (Lara, Chapter 395, Statutes of 2016), was passed by the Legislature to reduce greenhouse gases produced by organic material in the waste stream. The new legislation has a large impact on services the City is required to provide to its residents and businesses (by January 2022). Because these services were not included in the current agreement with Burrtec, an amendment is now required to incorporate them.
In 2021, the City approved a rate adjustment which increased the Single Family and Multi-Family Dwelling rate from $22.84 to $26.42 per month. In 2022, a CPI adjustment was deferred due to negotiations with Burrtec. Effective in late 2022, the City and Burrtec commenced negotiations relating to the implementation of the SB1383 Residential Program and a subsequent rate adjustment as a result of changes in law. An initial public hearing was scheduled for February 15, 2023 and appropriate Proposition 218 notices were released 45-days prior to the February 2023 hearing; however, this hearing was closed and void due to inadequate noticing and a subsequent public hearing notice was established, setting a May 17, 2023 hearing date. The proposed rate for Single Family and Multi-family dwelling units was proposed to be $37.97. At the May 17, 2023 Council meeting, Council directed staff to continue the Public Hearing to June 21, 2023 and to conduct additional negotiations with Burrtec for a lower rate. On June 31, 2023, staff requested that the Public Hearing be again continued to July 19, 2023. On September 6, 2023, staff again requested that the Public Hearing be continued to January 17, 2024 and staff advised that they had retained R3 Consulting Group to conduct the rate analysis and provide draft franchise Agreement Amendment Language. R3 Consulting Group was retained in September 2023. At the January 17, 2024, Council meeting, staff requested that the Public Hearing process be terminated, and that a new rate proposal be brought forward by May 1, 2024.
The City contracted with R3 Consulting Group, Inc. (R3 Consulting), a nationally recognized solid waste consulting firm. Over the last seven months, R3 Consulting has assisted the City in negotiations. Staff has worked with R3 Consulting to complete a thorough review of the Burrtec Agreement, identify changes that needed to be made to implement SB 1383, and negotiate a draft amended Agreement to incorporate these changes.
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A condition of the franchise agreement, Section 4.3 “Term Extensions” permits the City to negotiate at the City’s discretion, one, five-year extension of the franchise agreement, extending the term of the agreement from March 31, 2026, to March 31, 2031. The City established an “Exclusive Negotiating Period” with the franchise hauler that commenced on April 1, 2023, and ended no later than March 31, 2024.
At the January 17, 2024, Council meeting, staff advised the Council that it was expecting to request solicitation of new solid waste and recycling services prior to expiration of the existing contract on March 31, 2026. Based on business considerations, on March 29, 2024, Burrtec submitted a proposal to retain the existing rates in exchange for the City exercising the term adjustment. Staff and R3 reviewed this revised proposal from Burrtec and determined that this new proposal should be considered. The key elements of the proposal are set forth in the Discussion section.
Discussion
REFUSE RATES – Burrtec has proposed to hold the residential refuse rates to the current monthly rate of $26.42 through June 30, 2025. This means that the City of San Bernardino will have the lowest residential monthly rates of any of the cities within the County area. Staff conducted a survey of refuse rates in the larger San Bernardino and Riverside metropolitan areas, and the result of the survey are shown in the table in Exhibit 1. As shown in Exhibit 1, Residential rates for Single Family dwellings currently range from $28.08 for Loma Linda to $40.77 per month for Redlands. The average residential refuse rate among the 18 cities is $34.51.
The proposed rate set forth by Burrtec at $26.42 per month for FY24-25 would place the City at the absolute lowest rate in the Inland Empire among the 18 surveyed cities. This rate would also serve as the base rate for additional rate increases, starting in July 2025 and would be capped at 5% for CPI, which means that the FY25-26 residential rate would be no more than $27.74 per month.
SB1383 IMPLEMENTATION – Burrtec proposes to implement the SB1383 Residential Program, effective July 1, 2024. This will bring the City into compliance with this State requirement and will prevent any potential enforcement efforts by the State, including but not limited to levying a $10,000 per day fine against the City.
STREET SWEEPING SERVICE ISSUES – Burrtec has retained a new street sweeping contractor who is fully compliant with the requirements of the street sweeping program, including Global Position Systems. This will allow the City to better monitor the sweeping program, including complaint resolution.
PERIOD OF PERFORMANCE – In order to implement this proposal, Burrtec is requesting that the City approve the five-year extension of the service agreement. This would mean that the current agreement, which is set to expire on March 31, 2026, will 2 1
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be extended through March 31, 2031.
Staff and R3 have reviewed the proposed terms which are set forth in the attached Third Amendment of the Contract. Staff recommends the proposed amendment as it offers the best value to the City’s rate payers, makes more staff resources available to achieve high priority goals, avoids costly processing and ensures immediate legal compliance with state laws that could otherwise result in costly fines to the City. If the Third Amendment to the Franchise Agreement is approved, there will be no necessity of holding a Public Hearing in 2024 to adopt refuse rates, because the rates would remain the same as currently in place. A Public Hearing would be necessary in May 2025, if a rate increase is sought by Burrtec for that period; however, the maximum increase that would be proposed would be 5% as set forth in 21.1.3b of the existing franchise agreement plus a $2.60 per month SB1383 program fee. This fee is included in the existing $26.42 service fee.
2021-2025 Strategic Targets and Goals
Adoption of the proposed Third Amendment to the Franchise Agreement aligns with Key Target No. 3c: Improve Quality of Life by evaluating and enhancing the quality of public safety services and Key Target No. 3d: Improve Quality of Life by improving the City’s appearance, cleanliness, and attractiveness.
Fiscal Impact
There will be no impact to the General Fund. Revenues to the General Fund shall remain the same.
Conclusion
It is recommended that the Mayor and City Council of the City of San Bernardino, California, adopt Resolution No. 2024-111 approving the Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc.
Attachments
Attachment 1 – Table of Refuse Rates.
Attachment 2 – Resolution No. 2024-111
Attachment 3 – Attachment 3 - Third Amendment to the Exclusive Franchise Agreement
Attachment 4 – Third Amendment Exhibit 1 - City of San Bernardino - Current Rates 2024
Ward:
All Wards
Synopsis of Previous Council Actions:
January 25, 2016 – Resolution of the Mayor and City Council of San Bernardino approving a ten-year Exclusive Franchise Agreement for Integrated Solid Waste 2 1
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Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc.
December 7, 2022 - Notice of Intent to Conduct a Public Hearing on December 7, 2022, to Consider Adjusting the Maximum Permitted Service Rates for Integrated Solid Waste Collection, and Organic Waste Collection, Processing and Disposal Services, Street Sweeping, and Right-of-Way Cleanup Service.
February 15, 2023 - Public Hearing Regarding Solid Waste Rate Increases and Resolution Adopting Rates for Solid Waste Services, Approving Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc., and Finding the Action Exempt from the California Environmental Quality Act (All Wards).
May 17, 2023 - Public Hearing Regarding Solid Waste Rate Increases and Resolution Adopting Rates for Solid Waste Services, Approving Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc., and Finding the Action Exempt from the California Environmental Quality Act (All Wards) June 21, 2023 - Continuation, to July 19, 2023, of Public Hearing Regarding Solid Waste Rate Increases and Resolution Adopting Rates for Solid Waste Services, Approving Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc., and Finding the Action Exempt from the California Environmental Quality Act.
July 19, 2023 – Continuation to September 6, 2023 of Public Hearing Regarding Solid Waste Rate Increases and Resolution Adopting Rates for Solid Waste Services, Approving Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc., and Finding the Action Exempt from the California Environmental Quality Act.
September 6, 2023 - Continuation, to January 17, 2024, of Public Hearing Regarding Solid Waste Rate Increases and Resolution Adopting Rates for Solid Waste Services, Approving Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc., and Finding the Action Exempt from the California Environmental Quality Act.
January 17, 2024 - Cancellation of January 17, 2024, Public Hearing Regarding Solid Waste Rate Increases and Resolution Adopting Rates for Solid Waste Services, Approving Third Amendment to the City’s Exclusive Franchise Agreement for Integrated Solid Waste Collection, Processing and Disposal Services with Burrtec Waste Industries, Inc., and Finding the Action Exempt from the California Environmental Quality Act.