STAFF REPORT ATTACHMENT 3
ANNUAL RATE ADJUSTMENT
METHODOLOGY
Attachment 3 1
ATTACHMENT 3
RATE ADJUSTMENT METHODOLOGY
Beginning July 1, 2026, and each July 1 thereafter for a five-year period (through and including adjustments effective on or after July 1, 2030) the rates for Solid Waste Services may be administratively adjusted annually as described below. As authorized by State law (Government Code Section 53756), the annual administrative adjustments do not require additional public hearings, but a written notice will be mailed to each property owner at least 30 days prior to the effective date of the annual increase. In no event will an administrative increase exceed the City’s cost of providing Solid Waste Services.
The City provides solid waste services to property owners and tenant customers through its Agreement with Valley Vista Services, Inc., dated May 21, 2025, for the “Collection, Transportation, Processing and Diversion of Municipal Solid Waste, Recyclable Materials, Food Scraps, Yard Trimmings, Construction and Demolition Debris and Other Materials for the Collection, Transportation and Disposal of Municipal Solid Waste” (“Agreement”). The Solid Waste Service Rates are based on the proportionate cost of delivering the solid waste services described in the Agreement to each customer; and the Agreement provides for an annual adjustment to the solid waste service rates as set forth in Agreement Section 14 and Attachment J, as summarized in part 2 of this Exhibit G, Rate Adjustment Factors, and explained below:
(1) the collection component of the rates will be adjusted based on the annual percentage change (January-December) in the Producer Price Index (“PPI”); (2) the change in landfill disposal charges, recycling sorting and marketing charges, and organics processing charges will be adjusted by actual changes in the costs charged for use of those facilities;
(3) changes in the weight of trash, recyclables, and organics generated by each customer (resident and business) each year will be factored into the annual rate adjustment. (4) The City’s regulatory compliance costs will be ‘trued-up’ to actual costs each year.
See part 2 of this Exhibit G, Rate Adjustment Factors, which lists all the Residential and Commercial/Multifamily rates for the City of San Marino. The Rate Adjustment Factors shows each component included in the rates. The components are: Labor Costs, Fuel Costs, Processing Costs, Landfill Disposal Costs, NonEscalating Capital Costs and the City Regulatory Compliance Cost.
A description of the calculation of the annual solid waste service adjustments begins on the next page.
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CALCULATION OF ANNUAL SOLID WASTE SERVICE RATE ADJUSTMENTS A. Adjustment of the Collection Component
The change in the Collection Component of the rate is calculated based on a seven-step formula. Steps 1-3 calculate the subtotal increased rate for fuel cost for collection. Steps 4-6 calculate the subtotal increased rate for labor cost for collection. Step 7 adds both subtotals to get the combined rate increase for the Collection Component.
Fuel Cost Increase
Step 1. The City calculates the percentage change in the PPI for Natural Gas (Bureau of Labor Statistics, Series ID WPU0531) by taking the annual average change for the prior calendar year compared to the calendar year before that (e.g. for an adjustment in 2026, the annual average change between calendar year 2024 and 2025 would be used). The percentage change shall be calculated by taking the difference between the two annual averages and dividing it by base year average (e.g., (2025 average – 2024 average) /2024 average).
Step 2. The City calculates the annual percentage of the Collection Component attributable to fuel costs by multiplying the current collection rate by 15%. This is based on the estimated distribution of Collection Component costs identified in the Agreement, on which the rates were calculated, with fuel at 15% and labor at 85%.
Step 3. The City multiplies the fuel cost calculated in Step 2 (15% of Collection) by (1 + Percentage Change in PPI for Natural Gas in Step 1) to determine the increased rate for fuel costs. If this Step 3 calculation results in an increase, the increase shall be no greater than 25% more than the Step 2 calculation. If this Step 3 calculation results in a decrease, the decrease shall be no greater than 25% less than the Step 2 calculation. This Step 3 calculation results in the respective increase or decrease in the Collection Component of the solid waste service rates.
Labor Cost Increase
Step 4. The City calculates the percentage change in the Producer Price Index for Finished Goods Less Food and Energy (Bureau of Labor Statistics, Series ID WPUFD4131) (“FG PPI”) by taking the annual average change for the prior calendar year compared to the calendar year before that (e.g. for an adjustment in 2026, the annual average change between calendar year 2024 and 2025 would be used).
The percentage change shall be calculated by taking the difference between the two annual averages and dividing it by base year average (e.g., (2025 average – 2024 average) /2024 average). The percentage change in the FG PPI is capped at 5% per year.
Step 5. The City calculates the annual percentage of the Collection Component attributable to labor costs.
This is calculated by multiplying the current collection rate by 85%. This is based on the estimated distribution of Collection Component costs identified in the Agreement, on which the rates were calculated, with fuel at 15% and labor at 85%.
Step 6. The City multiplies the labor cost calculated in Step 5 (85% of Collection) by (1+Percentage Change of the FG PPI in Step 4) to determine the increased rate for labor cost.
Attachment 3 3
Sum of Labor Cost and Fuel Cost
Step 7. The City takes the sum of the adjusted fuel cost (15% of Collection Component) in Step 3 and the adjusted labor cost (85% of Collection Component) in Step 6 to get the total adjusted Collection Component portion of the rate.
Sample Rate Adjustment Calculation for Change in PPI for Fuel and Finished Goods (All numbers are examples only and are used here for illustration purposes).
Example Assumptions:
Final Annual Average PPI for Finished Goods (old) 140.00 Final Annual Average PPI for Finished Goods (new) 144.00 Final Annual Average PPI for Natural Gas (old) 237.4
Final Annual Average PPI for Natural Gas (new) 270.7
Current Residential Recycling Cart Collection Rate $0.91 Current Commingled 3-yd bin Collection Rate $32.28
Step One. Calculate average annual percentage change in PPI for Natural Gas. 270.7 - 237.4 = (33.3/237.4) X 100 = 14.0%
Step Two. Calculate average annual percentage of Collection component attributable to fuel costs (= 15%).
Residential Collection Rate: $.91 X .15 = $.14
3 yd. Bin Collection Rate: $32.28 X .15 = $4.84
Step Three. Apply annual percentage change of PPI for Natural Gas to fuel costs calculated in Step Two.
Residential Collection Rate: $.14 X 1.14 = $.16
3 yd. Bin Collection Rate: $4.84 X 1.14 = $5.52
Step Four. Calculate average annual percentage change in PPI for Finished Goods. 144 – 140 = (4/140) 100 = 2.9%
Step Five. Calculate Collection component attributable to labor costs (= 85%).
Residential Collection Rate: $.91 X .85 = $.77
3 yd. Bin Collection Rate: $32.28 X .85 = $27.44
Step Six. Apply annual percentage change of PPI for Finished Goods to labor costs calculated in Step Five.
Residential Collection Rate: $.77 X 1.029 = $.79
3 yd. Bin Collection Rate: $27.44 X 1.029 = $28.24
Step Seven. Add the rates calculated in step three and step six to calculate the total adjusted Collection rate.
New Residential Collection Rate: $.16 + $.79 = $.95
New 3 yd. Bin Collection Rate: $5.52 + $28.24 = $33.76
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B. Adjustment for Change of Density of Collected Materials The change in the Density of Collected Materials of the rate is calculated in a three-step formula.
Step 1. For residential collection, the City will calculate the residential lbs. per household per year for each type of material collected (MSW/recyclable materials and food scraps/yard trimmings) for the previous calendar year using total the number of residential tons collected divided by the number of households with backyard service. For commercial collection, the City will calculate the commercial density in lbs./cubic yard for each type of material collected (MSW/recyclable materials and food scraps/yard trimmings) for the previous calendar year using the total commercial tons collected divided by the total number of monthly cubic yards collected.
Step 2. For residential customers, the City will calculate the percent change in the lbs. per household based upon the change between the most recent lbs. per household per month for each type of material collected (MSW/recyclable materials and food scraps/yard trimmings) on which rates are based, and the new calculated lbs. per household per month for each type of material collected (MSW/recyclable materials and food scraps/yard trimmings) . For commercial customers, the City will calculate the percent change in the density based upon the change between the most recent lbs. per cubic yard per month for each type of material collected (MSW/recyclable materials and food scraps/yard trimmings) on which the rates are based, and the new calculated lbs. per cubic yard per month for each for each type of material collected (MSW/recyclable materials and food scraps/yard trimmings).
Step 3. The City will apply the percent change in lbs. per household and the lbs. per cubic yard for commercial customers, to the current rates’ disposal or processing component(s) to calculate the densityadjusted processing or disposal component of the rate. An increase in density of a material when compared to the previous years’ density will result in an increase in the processing costs. A decrease in the density of a material when compared to the previous years’ density will result in a processing cost decrease.
Step 4. The City will adjust the density-adjusted processing and/or disposal component(s) as described in Section C. Adjustment of the Processing and Disposal Components (Tipping Fees) Step 5. The City will complete the same calculation for all material collection streams.
Sample Rate Adjustment Calculation for Change in Residential MSW Density (All numbers are examples only and are used here for illustration purposes).
Example Assumptions:
Total tons of Residential MSW Collected during previous calendar year 6,000 Average monthly value of MSW Collection during previous calendar year 500 Number of households serviced with backyard MSW service 4000 Calculated Lbs. of MSW per household per month from previous calendar year 250
Lbs. of MSW per household per month included in the current rate 225 Current rate for Residential MSW Disposal Component $2.00 Step One. Calculate lbs. per household of residential MSW for previous calendar year ((6000 tons of residential MSW per year for previous calendar year) x (2000 lbs. per ton)) / ((4000 households) x (12 months per year)) = 250 lbs. per household per month of MSW for previous calendar year
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Step Two. Calculate percent change in lbs. per household per month of MSW between value used in current rates vs. the value calculated during the previous calendar year to determine the percent change in density to apply to the disposal components of the adjusted rates.
Lbs. per HH per month of MSW value used in current rates: 225 lbs./month Lbs. per HH per month of MSW value from previous calendar year: 250 lbs./month ((250 – 225) / 250) x 100 = 10%
Step Three. Apply the annual percentage change of lbs. per household from the actual previous year’s density to the disposal component included in current rates to ‘true up’ the adjusted rates to reflect the most recently available material density.
Current disposal component included in current residential MSW rate: $2.00 Adjusted Disposal Component Based on Changes in Lbs. of MSW per HH per month (density): $2.20 ($2.00) x (1+0.1) = $2.20
Step Four. The disposal component for residential MSW that was adjusted based on density ($2.20 in the example above) will be further adjusted to reflect any changes in disposal costs as described in Section C.
Step Five: Complete the same calculation to determine the change in lbs. per household per month (density) for residential recycling and residential co-collected food scraps and yard trimmings or co-collected MSW and recyclables (if applicable).
NOTE: the “previous year” is the 12-month calendar year period ending Dec 31 before the rate adjustment becomes effective on July 1 of the current rate year. So, as an example, if the City calculates the rate adjustment for July 1, 2027, the “previous year” density values used would be from Jan 1 - Dec 31, 2026; and the density for the “current rate” is based on the rates that were adjusted on July 1, 2026 (and currently in effect immediately prior to adjustment) that rely on density data from Jan1 – Dec 31, 2025.
C. Adjustment of the Processing and Disposal Components (Tipping Fees) The change in the Disposal and/or Processing Component(s) of the rate is calculated in a two-step formula. For rates that include both Processing and Disposal components, the following adjustment methodology will apply to both the Processing and Disposal components. For rates that only include Processing component, the following adjustment methodology will apply only to the Processing component. For rates that only include Disposal component, the following adjustment methodology will apply only to the Disposal component.
Step 1. The City will calculate the percentage change in the disposal and/or processing tip fee per ton, based upon the change between the most recent tipping fee(s) on which the rates are based, and the new tipping fee.
Step 2. The City will apply the resulting percentage change to the most current Disposal and/or Processing Component(s) of the rate by multiplying the Disposal and/or Processing Component(s) by (1+Percentage Change of the tip fee in Step 1) to determine the adjusted Disposal and/or Processing Component(s) portion of the rate.
Sample Rate Adjustment Calculation for Change in Disposal and/or Processing Charge(s) (All numbers are examples only and are used here for illustration purposes) Example Assumptions:
Attachment 3 6
Disposal Tip Fee (old) $100/ton
Disposal Tip Fee (new) $105/ton
Component of Residential MSW Cart rate* $ 2.20
Component of 3 yd. MSW Bin rate* $110
* The disposal/processing component that has been adjusted to reflect actual density from the previous calendar year using the protocols shall be used.
Step One. Calculate percentage change in Tip Fee for Disposal or Processing costs. $105 - $100 = (5/100) x 100 = 5.00%
Step Two. Apply percent change to Disposal Charge/Processing Cost component of existing rates.
Residential Disposal rate: $2.20 x 1.05 = $2.31
3-yard Bin Disposal rate: $110 x 1.05 = $115.50
D. Sum of Adjusted Collection Component, Density-Adjusted Processing, and DensityAdjusted Disposal Components Plus Non-Adjusted Capital Component to Determine the Adjusted Rate
The capital component of the rate will not be adjusted at any point during the term of the Agreement.
The percent change in processing and/or disposal costs is applied to the processing or disposal component after the density-adjustment calculations are applied.
The subtotals of the adjusted collection component, density-adjusted processing component, densityadjusted disposal component, and the non-adjusted capital component will be added to determine the adjusted rate.
Example of adjusted rates (using figures in previous examples included in this example calculation):
Collection Component
Disposal
Component*
Nonescalating
Capital
Fuel (15%) Component Total
Labor
(85%)
Residential Example $0.16 $0.95 $2.31 $1.00 $4.42
Commercial Example $5.52 $33.76 $115.50 $1.00 $155.78
*Percent change in disposal costs applies to density-adjusted disposal component.
E. Regulatory Compliance Cost Added to the Adjusted Rate The change in Regulatory Compliance Cost (RCC) is calculated in a seven-step formula.
Step 1. The City will determine if the actual Regulatory Compliance Costs incurred since the last rate setting (or rate adjustment) are less than, equal to, or more than the amount of the RCC included in the rates.
Step 2. If the actual costs incurred are less than the amount of the RCC in the rates, the difference will be used to offset the RCC cost for the following rate year in Step 5 below.
Step 3. If the actual costs incurred exceeded the amount of the RCC included in the rates, the amount of the overage will be included as part of the RCC in the new rates in Step 5 below.
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Step 4. If the actual costs incurred were the same as the amount included in the rates for the RCC, proceed to Step 5.
Step 5. The City will estimate the amount of Regulatory Compliance Costs required for the new rate year.
The estimated amount will be adjusted by either deducting the amount from Step 2 above, or adding the amount from Step 3 above.
Step 6. The City will calculate the difference between the RCC in the existing rates and the projected RCC costs for the new rate year (from Step 5).
Step 7. The City will apply the rate adjustment to the RCC component of the rates.
EXAMPLE CALCULATION FOR CHANGE IN REGULATORY COMPLIANCE COST (RCC) –APPLIES
ONLY WHEN RCC INCREASES OR DECREASES
The City, at its sole discretion, may adjust the RCC at any point during the year. In the event that the City adjusts the RCC outside of the annual rate adjustment process (i.e. on January 1 instead of July 1), the same calculation process as described below will apply.
Step 1: The City will conduct analysis to determine if the RCC needs to be adjusted based on actual expenditures associated with regulatory compliance for the previous evaluation period.
Step 2: Calculate the delta between the old Regulatory Compliance Costs (RCC) and the new Regulatory Compliance Costs.
Example assuming an increase in the RCC:
Old RCC = $500,000 per year
New RCC = $550,000 per year
Change in RCC = $50,000 per year
Example assuming a decrease in the RCC:
Old RCC = $500,000 per year
New RCC = $450,000 per year
Change in RCC = ($50,000) per year
Step 3: Divide the change in the RCC fee by the old Regulatory Compliance Cost.
Example assuming an increase in the RCC:
Old Regulatory Compliance Cost = $500,000 per year
Annual change in the RCC = $50,000
Divide the $50,000 per year change in the RCC by the current Regulatory Compliance Cost of $500,000 to determine the needed rate adjustment (10% in this example)
Example assuming a decrease in the RCC:
Old Regulatory Compliance Cost = $500,000 per year
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Annual change in the RCC = ($50,000)
Divide the ($50,000) per year change in the RCC by the current Regulatory Compliance Cost of $500,000 to determine the needed rate adjustment (-10% in this example)
Step 4: Apply the rate adjustment (increase or decrease) to the Regulatory Compliance Cost component of the rates.
Example assuming an increase in rates:
If the residential Regulatory Cost Compliance component, which was provided with the Contractor’s submittal of Proposal Form 29 which became Attachment D to the Contract, is $1/month for a residential recycling cart, multiply $1 by 1.1 to calculate the adjusted Regulatory Cost Component of the residential recycling cart ($1.10/month).
If the Regulatory Compliance Cost component of a commercial 3-yard MSW bin 1x/week is $10 per month, multiply $10 by 1.1 to calculate the adjusted Regulatory Compliance Cost component ($11/month) of the commercial 3-yard MSW bin serviced 1x/week.
Example assuming a decrease in rates:
If the Regulatory Compliance Cost component of the residential rate is $1/month, multiply $1 by 0.9 to calculate the adjusted Regulatory Compliance Cost Component of the rate ($0.90/month).
If the Regulatory Compliance Cost component of a commercial 3-yard MSW bin 1x/week is $10 per month, multiply $10 by 0.9 to calculate the adjusted Regulatory Compliance Cost component of the rate ($9.00/month).
F. New Rate
The adjusted RCC is then added to the adjusted rate to determine the new Solid Waste Service Rate.