FOR THE COUNCIL MEETING OF NOVEMBER 19, 2024
COUNCIL AGENDA REPORT
TO: City Council
FROM: Acting City Manager Chuen Wu
BY: Director of Utilities Shad S. Springer
SUBJECT: Adoption of a Resolution Approving an Amendment with Engel & Gray, Inc. for Operational Management of the City of Santa Maria Green Waste Collection Program and a Disposal Fee Adjustment for the Regional Landfill for Clean Green Waste / Wood Waste
Description:
The City Council will consider adopting a Resolution approving an amendment with Engel & Gray, Inc. for Operational Management of the City of Santa Maria Green Waste Collection Program and approving a disposal fee adjustment at the Santa Maria Regional Landfill for clean green waste / wood waste.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3), no environmental review is required.
RECOMMENDATIONS:
Adopt a Resolution approving: (1) Amendment No. 2 with Engel and Gray, Inc. for Operational Management of City of Santa Maria Green Waste Collection Program, effective January 1, 2025; and (2) Disposal fee adjustment for Clean Green Waste / Wood Waste, effective January 1, 2025.
BACKGROUND:
Since 2011, the City of Santa Maria (City) Utilities Department has provided residential green waste collection services. Following a successful recycling pilot program and subsequent request for proposals for the operational management of City-collected green waste, in 2012, Engel and Gray, Inc. was selected by the City to process green waste .
The City’s recycling program was expanded in 2016 to include organic waste collection services for commercial businesses, as required by Assembly Bill (AB) 1826, and again in 2022, to include organic waste collection services for residents, as required by Senate Bill (SB) 1383, ensuring ongoing compliance with State recycling legislation.
The original contract with Engel & Gray, Inc., executed on January 7, 2013, and amended on April 1, 2020 , to provide a nominal processing fee increase from $30.00/ton to $31.20/ton, specifically identifies green waste, but does not address additional organic waste streams introduced b y more recent legislation - AB 1826 (commercial organics) and SB 1383 (residential organics). Notwithstanding that, Engel & Gray, Inc. continued to 2 accept and process all organic material types collected by the City from commercial customers and residents.
The organic material types currently accepted from the City and processed by Engel and Gray, Inc. include:
Green Waste (green- and wood waste) – includes landscape and pruning waste, and non -hazardous wood waste accepted at the Santa Maria Regional Landfill Recycling Park, and transported to Engel & Gray, Inc.
Mixed Organic Waste (residential organics waste) – consists of mixed organic food waste and green waste collected from residential customers and delivered to Engel & Gray, Inc. by City collection vehicles.
Source Separated Food Waste (commercial organics waste) – includes organic food waste and food soiled paper waste collected from commercial customers and delivered to Engel & Gray, Inc. by City collection vehicles.
DISCUSSION:
Engel & Gray, Inc. Amendment No. 2
The current annual cost for the Engel & Gray, Inc. agreement is $240,000 , however, processing costs for these materials have risen significantly since the last contract amendment. This is primarily due to changes in processing methods , including capital investments for new equipment, and new regulatory requirements.
After evaluating alternative processing options, City staff determined that no other providers offer a more cost -effective solution. As a result , staff recommends amending the current agreement with Engel & Gray, Inc. (see Attachment “A” – Amendment No. 2), rather than issuing a new request for proposals.
City staff and Engel & Gray, Inc. negotiated new processing costs for each waste stream as follows:
Green Waste $39.17 per ton
Mixed Organic Waste $53.55 per ton
Source Separated Food Waste $62.55 per ton
Based on historical tonnage processed by Engel & Gray, Inc., the estimated cost for these services is $740,000 annually. For the remainder of Fiscal Year 202 4-2025 (January – June 2025), this would be an additional $94,117 for the Solid Waste Collections Fund 003 and $275,500 for the Solid Waste Disposal Fund 010.
Solid Waste Disposal Fund 010 (Enterprise Funds) – Landfill Disposal Fees With approval of the contract amendment, an adjustment to landfill disposal fees for clean green waste and wood waste will be required; the new fees are proposed to be effective January 1, 2025 , consistent with the effective date o f the Engel & Gray, Inc. contract amendment:
3 Description Approved Fee 1/1/25 Proposed Fee 1/1/25
Clean Green Waste / Wood
Waste, up to 1,000 pounds
$42.00 (flat) $65.00 (minimum)
Clean Green Waste / Wood
Waste, over 1,000 pounds
$83.00/ton (prorated) $90.00/ton (prorated)
This adjustment is necessary to ensure that the Solid Waste Disposal Fund 010 generates adequate revenue to cover the increased Green Waste processing costs. City staff will continue to closely monitor the revenues and expenditures of the Solid Waste Disposal Fund 010 to maintain financial stability and ensure its long-term solvency.
Disposal fees are not property-related such as rates for water service, sewer service, and refuse collection. As a result, they are not subject to Article XIII D, Section 6 of the California Constitution, commonly referred to as “Prop 218”.
Solid Waste Collections Fund 003 (Enterprise Fund) – Collections Rates The Solid Waste Collections Fund 003 will also incur higher processing costs for mixed organic waste and source -separated food waste. While no additional appropriation is requested for the current fiscal year, these increased costs will be included in an ongoing cost-of-service study and evaluation of the City’s collection rates. Proposed adjustments to solid waste collection rates will be presented to the City Council at a future meeting, following completion of the study, adherence to rate-setting procedures, and the necessary notification for property-related fees.
Alternative(s)
1. City Council may direct City staff to renegotiate the amendment. However, the processing fees are fair and reasonable for the work being performed and renegotiation is unlikely to yield a better outcome.
2. City Council may opt not to approve the amendment and instead direct staff to issue a new request for proposals. Staff does not recommend this, as the recent analysis of other destinations indicated no cost-effective alternatives.
3. City Council may approve the contract amendment w ithout adjusting the disposal fees. This option is not recommended because the disposal fees will not adequately cover processing costs and could require subsidy from other sources.
Without adjusting disposal fees, the Solid Waste Disposal Fund 010 may fac e shortfalls, which could impact service s or lead to subsidizing costs from other sources.
To ensure adequate funding and continued compliance with State regulations for diversion and recycling , concurrent approval of the amendment - and the disposal fee adjustment - is recommended.
Fiscal Considerations
An additional appropriation of $275,500 is requested for Solid Waste Disposal Fund 010 for Fiscal Year 2024-25 to cover the increased costs associated with this amendment. If the proposed disposal fees and the requested budget appropriation are approved, 4 sufficient funds will be available in both the Solid Waste Disposal Fund 010 and the Solid Waste Collections Fu nd 003 to cover the expenses related to Engel and Gray, Inc.
Amendment No. 2. City staff will continue to monitor and assess the financial impact on both Solid Waste Enterprise Funds throughout the remainder of the fiscal year.
Impact to the Community
Amendment No. 2 with Engel & Gray, Inc. represents a continued cost-effective and efficient solution for diverting organic waste in compliance with State regulations. The partnership will continue to ensure quality service for the residents and businesses of Santa Maria.
Impact to the City
The adjustments to landfill disposal fees will support the City’s compliance with state regulations requiring the diversion of organic waste from the Santa Maria Regional Landfill, while also ensuring continued funding for the operational management services provided by Engel & Gray, Inc.
ATTACHMENTS
A. ENGEL & GRAY, INC. AMENDMENT NO. 2