CITY OF SAN MATEO
CITY OF SAN MATEO
Agenda Report
City Hall
330 W. 20th Avenue
San Mateo CA 94403
www.cityofsanmateo.org
Agenda Number: 14 Section Name: NEW BUSINESS Account Number: 21-4678 File ID: 25-10564 TO: City Council
FROM: Alex Khojikian, City Manager
PREPARED BY: Public Works Department
MEETING DATE: January 12, 2026
SUBJECT:
Solid Waste 2026 Rate Setting and Proposition 218 Notification — Approval RECOMMENDATION:
Provide direction on proposed increases to residential solid waste rates and authorize staff to mail a Proposition 218 Notification to all property owners proposing a not to exceed increase in solid waste, recycling, and compost collection rates for 2026.
BACKGROUND:
The City’s Solid Waste Program (Program) includes waste diversion, compost/recycling education and outreach, special collection events, construction and demolition recycling plan processing, litter reduction programs, illegal dumping abatement, and hazardous waste management, and ensures compliance with all county, regional, state, and federal regulations. Solid waste, recycling, and organics collection, processing, and disposal services are available to all residents and commercial businesses in the City of San Mateo.
Each year, Council authorizes the solid waste rates to cover the costs of the collection services provided by Recology San Mateo County (Recology); the processing and disposal services provided by South Bayside Industries, Inc. (SBI); the City’s portion of the costs of membership in the joint powers authority, South Bayside Waste Management Authority (RethinkWaste); and the agency fees, which include the City’s solid waste and street sweeping programs, trash capture device maintenance, landfill fee, and franchise fees. The City retains HF&H Consultants (HF&H) to assist in developing a rate structure to fund the cost of solid waste services.
In 2021, the City adopted a long-term plan for incremental adjustment to the residential solid waste rates to bring them into alignment over time with their true cost of service. This is an ongoing effort.
The exclusive franchise agreement between the City and Recology San Mateo County allows for inflationary increases to Recology’s collection expenses: fuel costs, labor costs, vehicle maintenance costs, and other costs. Recology’s annual compensation increases are reviewed and approved by the Board of Directors of RethinkWaste, of which a City Council member sits as a member. The agreement was renewed in 2019 and will expire in 2035.
For rate year 2026, the City faces increased costs for collection, processing, and disposal services.
Recology’s collection costs in 2026 increased four percent compared to 2025. After review, the RethinkWaste Board of Directors found the proper inflation factors were used to determine Recology’s allowable compensation for 2025 and the increases were approved.
The processing and disposal services fees set by RethinkWaste are increasing seven percent in 2026. The cost increase is a
CITY OF SAN MATEO
result of a five-percent increase to the tipping fee rates set by RethinkWaste and increased material processed at the Shoreway Facility.
In addition to collection, processing and disposal costs, solid waste rates also fund the City’s street sweeping activities, street sweeper vehicle purchases, and trash capture device maintenance and installation. Program costs associated with operating the solid waste enterprise are also funded through rates.
The 2026 cost increase is also a result of the decision of the City Council last year to defer $331,333 in increased costs from 2025 to 2026, as allowed under the franchise agreement. That decision lowered rates in 2025 but must be accounted for this year.
Maintaining current rates to meet the 2026 projected expenses described above would lead to an anticipated deficit of $1,170,910. Therefore, staff recommends the following step be taken by the City Council to address the revenue shortfall for 2025:
1. Authorize raising residential rates by a range of $4.16-$6.50 per month. These increases will result in a deficit of $14,137 in 2026. In addition, residential customers subscribing to 96-gallon solid waste carts will meet their cost of service.
Table A summarizes the current and proposed 2026 residential rates. These rates include collection, processing, and disposal of garbage, recycling, and organics.
Table A – Proposed 2026 Residential Solid Waste Rate Changes Size of
Collection Cart
2025 Current
Monthly Rate
2026 Proposed
Monthly Rate
Monthly
Difference
20-gallon $36.09 $42.09 $6.00
32-gallon $45.93 $52.18 $6.25
64-gallon $72.43 $78.93 $6.50
96-gallon $103.08 $107.24 $4.16
Staff Recommmendation:
Staff recommends Council authorize the rate increases in Table A at a future meeting to meet the need for commercial and residential rates to meet their cost of service, to judiciously preserve the Solid Waste Fund reserves to blunt the impact of future rate increases over the next ten years as well as the City’s anticipated share of future capital improvements at the Shoreway Environmental Center forecast by RethinkWaste, and to be better prepared for upcoming, anticipated increases from Recology and RethinkWaste.
Balancing Account:
In accordance with the City’s franchise agreement, Recology maintains a balancing account which tracks the cumulative surplus or deficit between what Recology is owed and what is collected from solid waste rates. The City is charged interest if the cumulative balancing account is a negative balance at the end of any given year. Past City Council direction is to avoid interest charges by keeping the balancing account as low as possible.
In March 2024, the City Council authorized the use of $1.0 million in fund reserves to be remitted to Recology to reduce the balancing account deficit before the year’s end. The payment was made in August 2024 which avoided accruing additional interest on the deficit. In March 2025, the City Council authorized the use of $0.4 million to be remitted to Recology to reduce the balancing account deficit. The payment was made in August 2025 which avoided accruing additional interest on the deficit.
The City’s current long-term plan is to bring residential rates into alignment with their cost of service by the end of the
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current franchise agreement in 2035. By judiciously using Solid Waste Fund reserves over time to blunt the effect on residential rate payers, this goal is attainable. These funds are derived from rate stabilization fees collected from 2019-2021 and from City program savings over time.
Council direction has been for all solid waste and street sweeping program savings be used for rate stabilization. In March 2025, staff reported to council that $4.4 million was available for stabilization.
Since then, the City has allocated approximately $630,000 to purchase a new electric street sweeper, the purchase for which was approved by City Council on November 18, 2024, and is considering purchase of a bike lane electric street sweeper which would be of a similar cost. These purchases would reduce the reserve balance to $3.2 million for future rate stabilization. However, with the recommended increases to residential rates, no remittance to Recology is recommended for 2026 as the City projects to have fully addressed its balancing account deficit by the end of 2025. City staff will continue to recommend strategic use of Solid Waste Fund reserves to help offset added costs for service and/or partially offset future rate increases as the cost-of-service implementation plan is implemented over the next ten years.
It is important to note that in addition to potential annual contractual inflationary increases, Recology, SBI, and RethinkWaste must meet state regulations such as the move to zero emission vehicles, and RethinkWaste is considering necessary capital improvement projects and bond measures, all of which may require the City to raise rates in the next few years.
Rate Setting Procedures:
Proposition 218 is a citizen-led initiative constitutional amendment enacted in 1996 and is alternatively known as the “Right to Vote on Taxes Act.” While the courts have not ruled that Proposition 218 applies to solid waste collection rates from a franchise hauler, in an abundance of caution, the City has historically followed the “majority protest” proceedings set forth in Proposition 218.
Accordingly, with the City Council’s approval, a public notification of the proposed maximum increase in solid waste rates will be mailed to property owners. The proposed notification mailer is attached. The notification will instruct property owners wishing to submit a written protest that they must state the purpose in the protest letter; include the owner or customer’s name, service address, assessor’s parcel number, and the owner’s or customer’s signature for the property served; and mail the statement to the Office of the City Clerk. Statements of protest that include the above criteria will be accepted through the time of the public hearing currently scheduled for the March 16, 2026, City Council meeting. These requirements are set out by state law.
At the end of the public Proposition 218 protest hearing, the City Clerk will tally and report the qualifying written protests and the City Council will certify whether the written protests in opposition to the increase meet or do not meet the 50 percent +1 protest threshold. In accordance with Article XIIID, Section 6, of the California Constitution, a "majority protest" exists if written protests against the proposed fee or charge are presented by a majority of owners of the identified parcels. If a majority protest is not received, the City Council may then authorize the increased rates. If a majority protest is received, the City cannot increase the rates and the rates will remain unchanged.
BUDGET IMPACT:
There is sufficient funding in the Solid Waste Fund to cover the cost of mailing a notice to all property taxpayers proposing a not to exceed increase in solid waste, recycling, and compost collection rates. If the proposed rate adjustments are authorized, the Solid Waste Fund’s revenues will increase toward alignment with the costs of service.
ENVIRONMENTAL DETERMINATION:
This action by the City in setting the maximum rates to be charged by Recology San Mateo County relates to funding an on- going solid waste collection service and is not a project subject to CEQA, because it is a government fiscal activity which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. (CEQA Guidelines Section 15378(b)(4).)
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NOTICE PROVIDED
All meeting noticing requirements were met.
ATTACHMENTS
Att 1 – Proposed 2026 Solid Waste 218 Notification Mailer
STAFF CONTACT
Jack Johnson, Waste Management Supervisor
[email protected]
(650) 522-7346