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Home My WebLink About12 RATE ADJ FED DISP 09-16-02AGENDA REPORT NO. 12 09-16-02 · MEETING DATE: TO: FROM: SEPTEMBER 16, 2002 400-10 830-50 WILLIAM A. HUSTON, CITY MANAGER PUBLIC WORKS DEPARTMENT SUBJECT: CONSIDERATION OF AN EXTRAORDINARY SOLID WASTE RATE ADJUSTMENT REQUEST BY FEDERAL DISPOSAL SERVICE SUMMARY Federal Disposal Service has requested approval of an extraordinary solid waste rate adjustment based on costs associated with an approved union contract with the International Brotherhood of Teamsters, Local 396. Staff has verified the basis for this request and recommends that the City Council approve the rate adjustments and that they be applied to commercial customers and roll off box rates based on the cost of hauler operations. Commercial rates would increase 7.6% and roll off rates would be increased 21.7% over the previously approved Producer Price Index increases. RECOMMENDATION Staff recommends that the City Council approve a $231,753 extraordinary solid waste rate adjustment for Federal Disposal Service directly related to costs of the approved union contract and apply the rate adjustments to commercial and roll off customers. FISCAL IMPACT Commercial customers only pay a 2% Franchise Fee. Franchise Fees paid to the City by a proportionate amount. The commercial rate will increase BACKGROUND In May of this year, Federal Disposal Service (FDS) requested a Producer Price Index (PPI) rate adjustment for residential and cOmmercial customers and an extraordinary rate adjustment for commercial customers of $367,152 to compensate for expenses which FDS says were unanticipated when the contract bids were submitted in early 2000. On August 5, 2002, the City Council approved a PPI adjustment to residential and commercial rates. Residential rates were increased 4.3% and commercial rates were increased 2.7%. These approved rate adjustments will increase FDS annual revenue in excess of $85,000. The residential rates approved on August 5, 2002 have been forwarded to the County of Orange Assessors office to be placed on the residential property tax roll and will remain in effect for the entire 02-03 tax year. The property tax assessments can not be adjusted until the 03-04 tax year. Rate adjustments for commercial customers can be authorized at any time as billing is handled by the hauler. Since the original rate adjustment submittal, staff has worked closely with FDS to refine the extraordinary rate adjustment. Staff and FDS have considered several cost proposals, and rate adjustment scenarios in order to identify which anticipated services costs are directly related to the union contract and how to allocate those costs to customers. The most recent extraordinary request consists of a $231,753 increase in direct labor costs associated with the final approved labor contract. This wage and benefit increase represents a 33% increase in labor costs to FDS over the current non union rates and is further explained in Exhibit A. Staff has verified the basis for the extraordinary adjustment request and is completely satisfied that the FDS proposal is directly associated with the hauler's costs for the union labor contract. A final issue is the allocation of the extraordinary increases to customers. FDS has agreed to allocate the extraordinary increase to commercial and roll off customers in proportion to the cost of business operations in these areas. Compliance with state waste diversion requirements is critical in these sectors and the costs associated with recycling are also higher for commercial and roll off customers than in the residential sector where there is already a highly effective waste diversion program. Consequently, Staff and FDS propose that 25% of the overall extraordinary adjustment be allocated to roll off customers and 75% of the adjustment be allocated to commercial customers. Roll off boxes are large capacity (20-40 cubic yards) containers which are used for construction, demolition and other high volume applications for customer's short term disposal needs. Much of the wastes collected in these instances are premium recyclable materials such as wood waste, scrap metal, concrete and excess dirt. It should be noted that pursuant to the City's solid waste contract, commercial customers can avoid higher fees by taking advantage of the free commercial recycling program. Similar to the residential cart program, businesses can request extra 3 or 4 yard bins for green waste and mixed recyclables at no extra charge. Single family residential rates are not affected by this extraordinary rate adjustment. Exhibit B shows the proposed rate adjustments and how they were calculated and applied to the various service tiers. Combined with the previously approved Producer Price Index rate adjustments, commercial rates will increase 10.3% and roll off rates will increase 26%. All rates will become effective on October 1,2 002. Exhibit C demonstrates t hat despite t he increases, commercial rates will remain the lowest in Orange County. Ti~D~ Serlet ~ Dir~t~or of Public Works/City Effgineer Public Works Department TDS:JM:ccg:RDS rate adjustment 9-16-02.doc Exhibit A Federal Disposal Cost Increase Detail Exhibit B 2002 FDS Rates and extraordinary adjustment Exhibit C Orange County Hauler Survey EXHIBIT A FEDERAL DISPOSAL COST INCREASE DETAIL FEDERAL DISPOSAL SERVICE LABOR AGREEMENT COST INCREASE DETAIL (Revised) September 11, 2002 FDS Bid Dec-99 Union Effective 10/01/02 Analysis 1 Hourly Rate (Regular) $ 12.00 2 Weighted Rate (Including OT) $ 14.00 Benefits 3 Health $ 0.72 4 Pacific Trust Fund (Pension) 5 Vacation $ 0.60 6 Holiday $ 0.28 7 Sick Leave $ 14.35 $ 16.96 $ 2.34 $ 0.50 $ 0.552 $ 0.635 $ 0.166 Subtotal-Benefits $ 1.60 $ 4.19 Statutory 8 Workers COmp $ 1.08 $ 9 Payroll Tax $ 0.92 $ Subtotal-Statutory $ 2.00 $ 1.32 0.92 2.24 Total Cost Per Hour $ 17.60 $ 23.39 Annual Labor-Hrs. 10 Increase Labor Hrs.-Union Subtotal-Hours 45,540 45,540 - 45,540 Annual Contract Labor Cost $ 801,504.00 (PPI Labor Increase of $801,504 @ 4%) NET $1,065,317.22 (32,060.16) 33% Increase 0% Increase $ 231,753.06 Increase 2 - Base on 55 hrs work per week 3 - Base on worker with family 5, 6, 7 Base on employee with 3 years or more with the company H :\FDSusers~Z~nna\Don's Proj\PRcost-Union FEDERAL DISPOSAL SERVICE EXTRAORDINARY LABOR COST INCREASE DETAIL (Notes) (Revised) September 11, 2002 Please note: Hrs per week 92.00 55 2 2 40 3 3 3 4 40 5 O/T: $ 14.35 1.5 $ 21.525 per hour <(40'14.35)=A+(21.525'10)=B+(28.70'5)=C>/55 TOTAL HOURS RATE/HR A=574.00 B=215.25 C=143.50 932.75 55 18.96 2080/12=173.33 hrs/mo Average cost $520(Health) $3.50(Life) $31.30(Dental) per mo - $150 (employee's contr)=$404.80 ($404.80/173.33 hrs = $2.34 per hour per employee paid by company Set by Union 80 hrs at regular pay 14.35 = $1,148 per year - base on 2,080 hrs = .552 per hrs 6 standard holidays, 2 floating holidays & 3.5 Personal days = 11.5days x 8hrs = 92.00hrs 92 hrs at regular pay 14.35 = $1,320.20, per year - base on 2,080 hrs = .635 per hrs 1 days on 1st year, 1 additional day during each year - Maximum 5 days 24 hrs at regular pay 14.35 = $344.40 per year - base on 2,080 hrs =..166 per hrs 8 9 10 Pay per hrs 14.35*12.44% experience rate * 0.74% experience Modification = 1.32 Prior Year rate H:\FDSusers~nna\Don's Proj\PRcost-Union EXHIBIT B FEDERAL DISPOSAL SERVICE/STAFF RECOMMENDED EXTRAORDINARY RATE ADJUSTMENT PROPOSAL Federal Disposal Service 2002 PPI Adjusted Rates Approved Rate Adjustment - Customer Billed By the City on Tax Roll Step One: Determine disposal expense and service revenue as a percent of actual rate revenue Revenue Component Single Family Rate Revenue Less: Single Family Refuse Disposal Expense Single Family Service Revenue Group (3) Tonnage Report Annual Amount (a) $ 1,452,423 $ 273,372 $ 1,179,051 Step Two: Calculate percentage change in adjustment factors I Adjustment Factor I Old Disposal Gate Fee per Ton $ Producer Price Index 22.00 129.5 J$ New (b) 22.00 129.5 Percent of Rate Revenue 100.0% 18.8% 81.2% Percent Change 0.0% 0.0% Step Three: Calculate weighted percentage change in single family rates Components of Actual Revenue Refuse Disposal Service Tota Component Weight 18.8% 81.2% 100.0% Percent Change (c)0.0%I O.0%J N/AJ Weighted Rate Adjustment O.0%J O.0%J 0.0%1 Step Four: Apply weighted percentage change to single family rates Current Monthly Rate (d) Adjusted Monthly Rate Service Single Family-Automated Cart Manual Can $ 12.59 $ 7.59 Weighted Rate Adjustment 0.0% 0.0% $12.59 $7.59 (a) PPI adjusted Revenue (b) No adjustment (c) From percent change in Step Two (d) The weighted rate adjustment applied to the total rate, including franchise fee portion of the rate (e) From weighted rate adjustment in Step Three CC: H:\FDS users\ed\Rate adjustment formula Revised9/11/2002 Federal Disposal Service Proposed Rate Adjustment - Commercial Customers Billed By the Company (Except Rolloff) Step One: Deduct franchise fees from gross rate revenue Revenue Component (including Franchise Fees) Actual Gross Commercial and MFR Rate Revenue Groups (1,2,5 & 98) Actual Commercial and MFR Franchise Fees Quarterly Reports Actual Gross Commercial and MFR Rate Revenue Net of Franchise Fees Annual Amount (a) $ 2,384,865 $ 6O,564 Percent of Rate Revenue Including Franchise Fees 100.0% 2.5% $ 2,324,301 97.5% Step Two: Determine disposal expense and service revenue percentage of total actual rate revenue Annual Amount (b) Percent of Rate Revenue Revenue Component (net of Franchis~Fees___~) Actual Commercial and MFR Bin revenue Net of Franchise Fees (b) Less: Actual Commercial and MFR Disposal Less: Labor Actual Commercial and MFR Bin Service Revenue Groups (1,2, & 5 & 98) Tonnage Report Basis $ 2,324,301 $ 873,334 $ 815,000 $ 635,967 Net of Franchise Fees lOO.O%J 37.6%J 27.4°/oj Step Three: Calculated percentage change in adjustment factors Adiustment Factor Disposal Gate Fee per Ton Labor- 75% of total ($231753.06'.75) Producer Price Index Old $ 22.00 $ 801,504.00 $ 129.50 New $ 22.00 $ 975,318.80 $ 129.50 I O.0%J 21.7%J o.o%1 Percent Change Step Four: Calculated weight percentage change in commercial and MFR Bin rates Components of Actual Revenue Refuse Disposal Service Labor Total Component Weight (c) 37.6% 27.4% 35.1% 100.0% I · Weighted Rate Adjustment J 0.0%I 0.0%I 7.6%I 7.6%I Percent Change %.o%J O.0%J 21.7%J N/AI Step Five: Applied weighted percentage change to commercial and MFR Bin rates Service 1 ea. 2 yard Bin once per week 1 ea. 2 yard Bin twice per week 1 ea. 2 yard Bin three times per week 1 ea. 2 yard Bin four times per week 1 ea. 2 yard Bin five times per week 1 ea. 2 yard Bin six times per week 1 ea, 3 yard Bin once per week 1 ea. 3 yard Bin twice per week 1 ea. 3 yard Bin three times per week 1 ea. 3 yard Bin four times per week 1 ea. 3 yard Bin five times per week 1 ea. 3 yard Bin six times per week 1 ea. 4 yard Bin once per week 1 ea. 4 yard Bin twice per week 1 ea. 4 yard Bin three times per week 1 ea. 4 yard Bin four times per week ea. 4 yard Bin five times per week Current Monthly Rate $ 36.48 $ 65.20 $ 93.94 $ 122.66 $ 151.40 $ 180.12 $ 41.01 $ 74.28 $ 107.55 $ 140.81 $ 174.08 $ 207.34 $ 45.55 $ 83.35 $ 121.15 $ 158.95 $ 196.76 Weighted Rate Adiustment (f) 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% 7.6% Adjusted Monthly Rate $39.25 $70.16 $101.08 $131.99 $162.91 $193.82 $44.13 $79.93 $115.73 $151.52 $187.32 $223.11 $49.01 $89.69 $130.36 $171.04 $211.72 ea. 4 yard Bin six times per week $ 234.57 7.6% (a) For the twelve months ending on the date six months prior to the effective date of the rate adjustment. FoF example, for adjustment effective July 1, 2002 the revenue used should be for the twelve months ending December 31,2001 (b) From Step One Above. Note that the basis for determining percent of revenue is different from that in Step One (c) From percent of revenue net franchise fees in Step Two (d) From percent change in Step Three (e) The weighted rate adjustment should be applied to the total rate, including franchise fee portion of the rate (f) From weighted rate in Step Four the a rate $252.41 9/11/2002 Revised9/11/2002 Federal Disposal Service (2002) PPI Adjusted Rates plus Labor Proposed Rate Adjustment - Rolloff Rates Step One: Calculate percentage change in Pull Charge Annual Billing New I Percent Change 330,977.25I 21.2% Adiustment Factor Labor- 25% of total ($231,753'.25) Old Annual Billincjs 273,039.00 Step Two: Apply percentage change in Annual Billing to Rates Rates Service Current Monthly Rate Adjustment Adjusted Rate Rate (a) Standard Rolloff charge per load (a) $ 90.95 21.2% $ 110.25 Compactor charge per load $ 161.61 0.0% $ 161.61 :Delivery or relocation charge $ 78.20 0.0% $ 78.20 'Temporary "Clean-U p" Bins $ 52.13 0.0% $ 52.13 Locking Bins $ 5.21 0.0% $ 5.21 On-Call Bin Cleaning Services (in excess of lx/yr) $ 36.49 0.0% $ 36.49 Bulky Item Pick up (in excess of 2x/yr) $ 20.85 0.0% $ 20.85 Special Pick (in excess of 2x/¥r) Auto Cart Cust $ 5.21 0.0% $ 5.21 a) Excluding disposal. Disposal is billed at Contract rate of $28.00 per ton. CC: H:\FDS users\ed\Rate adjustment formula Revesed 9/11/2002 Federal Disposal Service Proposed Rate Schedule September 11, 2002 Residential Multi-Family and Commercial Cart/Manual Can Rates Actual Qty. Row Service Proposed of Monthly Annual Billings Monthly Rate Service Units Billin~ls 1 Automated Cart $12.59 $ 9,173 $ 115,488 $ 1,385,642 2 Manual Can $7.59 $ 733 $ 5,563 $ 66,780 3 Total Cart/Can Billin~ls $ 121,052 $ 1,452,423 Commercial and Multi-Family Bin Rates Pickups per Week Row Service 1 2 3 4 5 6 4 2 Cubic Yards $39.25 $70.16 $101.08 $131.99 $162.91 $193.82 5 3 Cubic Yards $44.13 $79.93 $115.73 $151.52 $187.32 $223.11 6 4 Cubic Yards $49.01 $89.69 $130.36 $171.04 $211.72 $252.41 Commercial and Multi-Family Bin Distribution Matrix - Number of Bins Pickups per Week Row Service Total I 2 3 4 5 6 7 2 Cubic Yards 67 15 14 2 - 98 8 3 Cubic Yards 236 470 440 105 103 48 1,402 9 4 Cubic Yards 23 127 140 32 42 38 402 10 Total 326 612 594 137 147 86 1,902 The City does not assume any responsibilty for the accuracy of the reported information Commercial and Multi-Family Bin Billings Pickups per Week Row Container Total Size 1 2 3 4 5 6 11 2 Cubic Yards $ 2,630 $ 1,052 $ 1,415 $ - $ 326 $ $ 5,423 12 3 Cubic Yards 10,414 37,566 50,920 15,909 19,294 10,709 144,813 13 4 Cubic Yards 1,127 11,390 18,251 5,473 8,892 9,591 54,725 14 Total Monthly Billin~ls $ 14,172 $ 50,009 $ 70,586 $ 21,382 $ 28,512 $ 20,301 $ 204,962 15 TotalAnnual Billin~ls $ 170,060 $ 600,109 $ 847,036 $ 256,590 $ 342,142 $ 243,607 $ 2,459,542 Roll-Off Box Billings Row Description Billing Unit Units per Proposed Estimated Year Rate Annual Billings 16 Pull Charge # of Pulls 3,002 $ 110.25 $ 330,971 17 Disposal/Processing Charge # of Tons 13,407 $ 28 375,396 18 Total 706,367 Summary of Projected Annual Billings Proposed Base Increase % Increase 19 Residential Multi-Family and Commercial Cart/Manual Can Billings $ i,452,423 $ 1,452,423 0.0% 20 Commercial and Multi-Family Bin Service Billings 2,459,542 2,285,741 173,801 7.1% 21 Roll-Off Box Billin~ls 706,367 648,435 57,932 8.2% 22 Total Proiected Annual Billin~ls 4,618,332 4,386,599 231,733 5.0% CC: H:\FDS users\ed~Rate Adjustment Revised9/11/2002 r-- ..... EXHIBIT C ORANGE COUNTY SOLID WASTE RATE SURVEY