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HomeMy WebLinkAbout01 SOLID WASTE RATE INCREASE 06-19-06 AGENDA REPORT MEETING DATE: JUNE 19,2006 TO: WILLIAM A. HUSTON, CITY MANAGER FROM: PUBLIC WORKS DEPARTMENT SUBJECT: APPROVAL OF RESIDENTIAL AND COMMERCIAL SOLID WASTE RATE ADJUSTMENTS AND ADOPTION OF RESOLUTION NO. 06- 71 PLACING ASSESSMENTS OR RESIDENTIAL SOLID WASTE COLLECTION ON THE 2006-2007 ORANGE COUNTY PROPERTY TAX ROLL SUMMARY The City's Solid Waste Franchise Agreement with Federal Disposal Service (FDS) provides for an annual adjustment to solid waste rates based on the Producer Price Index (PPI). FDS has requested a rate adjustment for all customers pursuant to an increase in the PPI. The PPI increase has been adjusted downward to reflect a decrease in the hauler's Workers Compensation costs. Staff is recommending approval of the modified PPI rate adjustment for all customers and placement of the residential assessment on the property tax roll. The residential and commercial rates will increase 0.8% per month and the annual residential assessment would be $162.24. RECOMMENDATION Staff recommends that the City Council: 1) approve residential and commercial solid waste rate adjustments related to the Producer Price Index and an extraordinary insurance cost adjustment to both residential and commercial rates and, 2) adopt Resolution No. 06-71 placing assessments for residential solid waste collection on the Orange County Property Tax Roll for fiscal year 2006-2007. FISCAL IMPACT Commercial customers pay a 2% Franchise Fee which is collected by the hauler and then paid to the City. Annual Franchise Fee Revenue to the City is approximately $90,000. An increase in the commercial rate will result in increased Franchise Fees paid to the City. BACKGROUND The Integrated Solid Waste Management Services Franchise Agreement with Federal Disposal Service specifies that Solid Waste Collection Rates may be increased annually according to changes in the Producer Price Index. The Producer Price Index is a federal measure of the average change, over time, of the price received by domestic producers of goods and services. Approval of Residential and Commercial Solid Waste Rate Adjustments and Adoption of Resolution No. 06-71 Placing Assessments or Residential Solid Waste Collection on the 2006-2007 Orange County Property Tax Roll June 19, 2006 Page 2 The City's Solid Waste Contract separates the two major cost components associated with the provision of solid waste services; disposal costs and service related costs. The disposal component of the rates is only adjusted when the County's waste disposal fee is adjusted. Pursuant to the Orange County Waste Disposal Agreement, the current disposal rate is fixed at $22.00 per ton and will remain at that level until 2010. The service component is comprised of the various operational costs incurred by the hauler while providing waste collection services and is annually adjusted according to the annual increase in the PPI. In addition to PPI adjustments, the contract contains provisions to adjust rates at any time for extraordinary cost changes incurred by the hauler. The contract specifies that extraordinary adjustments are to be for the purpose of accommodating "unusual changes in the cost of providing service". Approval, denial or modification of extraordinary adjustments shall be made "in the City's sole judgment". The bid specifications for this contract did not allow rate adjustments during the first two years of the contract. Subsequently, rates were adjusted in 2002, 2003 and 2004. Only commercial and multi-family rates were adjusted in 2005 pursuant to the Diversion Services Agreement with FDS which was necessitated to pay for programs identified in the SB-1066 time extension granted by the California Integrated Waste Management Board. The table below summarizes cumulative effect of previous rate adjustments. Cumulative Rate Adjustments from 2000 to 2005 Oct 2000 2005-2006 . Rate Type R t R t Total Adjustments a es a es Residential Commercial - 3yd. 3x a week 12.17 104.76 13.41 196.59 10.2% 87.7% Roll Off 87.23 115.18 32.3% Approval of Residential and Commercial Solid Waste Rate Adjustments and Adoption of Resolution No. 06-71 Placing Assessments or Residential Solid Waste Collection on the 2006-2007 Orange County Property Tax Roll June 19, 2006 Page 3 DISCUSSION For the 2006-2007 rate year, FDS has requested a PPI increase for residential and commercial rates. FDS is contractually entitled to an annual PPI adjustment to its service costs (excluding disposal costs) corresponding to the increase in the PPI for the preceding calendar year. The 2006 PPI adjustment, for residential and commercial rates, is summarized in the table below: Producer Price Index Annual Change Solid Waste Collection (PCU5621115621112) as of 12-31-04 Solid Waste Collection (PCU5621115621112) as of 12-31-05 Incremental Change % Change 137.4 140.2 2.8 1.6% In 2004, FDS was granted an extraordinary adjustment of approximately $47,000 reflecting increased Worker's Compensation costs. Pursuant to staffs request, FDS reviewed its Worker's Compensation insurance costs and determined that the costs have decreased due to state reforms and the 2004 adjustment can be withdrawn. Consequently, the PPI rate request has been adjusted downward to reflect these decreased costs. The final PPI and extraordinary cost adjustments proposed by FDS are detailed below: Current % Monthly $ Adjusted Total Total Service Monthly Monthly Annual annual Rate Adjustment Adjustment Rate Adjustment cost Single Family $13.41 0.8% $.11 $13.52 $1.32 $162.24 Automated Cart Commercial 3 yard bin 196.99 0.8% $1.60 $198.59 $19.20 $ 2,383.08 3 x per week Approval of Residential and Commercial Solid Waste Rate Adjustments and Adoption of Resolution No. 06-71 Placing Assessments or Residential Solid Waste Collection on the 2006-2007 Orange County Property Tax Roll June 19, 2006 Page 4 Staff concurs with FDS' request and recommends approval of the PPI rate adjustments for single family and commercial customers with a downward adjustment for all rates related to decreased Worker's Compensation insurance costs. The rates will become effective on July 1, 2006. With the recommended increases, the total annual value of the residential and commercial services portion of the Franchise Agreement will be approximately $6.43 million. This represents an increase of approximately $2.2 million from the original bid price of $4.2 million in 2000. FDS also receives an additional unspecified amount of revenue related to other ancillary services. Tim D. Serlet Director of Public Works/City Engineer Joe Meyers Administrative Services Manager TDS.JM:ccg:FDS Rate Adjustment 6-19-06.doc Attachments: Resolution 06-71 Exhibit A FDS Request Producer Price Index RESOLUTION NO. 06-71 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA ADOPTED PURSUANT TO THE PROVISIONS OF SECTION 5473 ET SEQ. OF THE HEALTH AND SAFETY CODE OF THE STATE OF CALIFORNIA, APPROVING AND ADOPTING A REPORT RELATIVE TO PARCELS OF REAL PROPERTY RECEIVING SOLID WASTE COLLECTION SERVICES, DETERMINING THE CHARGES FOR SOLID WASTE COLLECTION TO BE ASSESSED AGAINST THE RESPECTIVE LOTS OR PARCELS OF LAND AS THEY APPEAR ON THE CURRENT ASSESSMENT ROLL The City Council of the City of Tustin does hereby resolve as follows: I. Proceedings were duly instituted, conducted and completed pursuant to provisions of Section 5473 et seq. of the Health and Safety Code of the State of California. A. A written report dated June 19, 2006 containing a description of each parcel of real property receiving solid waste collection services and facilities and the amount of the charge proposed to be levied upon each parcel for the collection of solid waste for the Fiscal Year 2006-2007 was prepared and filed with the City Clerk of the City ofTustin on June 15, 2006. B. That a Public Hearing to hear and consider all objections or protests, if any, to the aforesaid report and proposed charges was duly set for June 19, 2006 at 7:00 o'clock p.m. in the Council Chamber of the City of Tustin at 300 Centennial Way, Tustin, California. C. Said hearing was duly noticed as required by law, by publication once each week for two successive weeks on May 6, 2004 and May 13, 2004 in the Tustin News, a newspaper of general circulation in the City of Tustin. D. At the foresaid time and place the duly noticed hearing was held and all persons who were present were heard and all comments, objections, and protests to the aforesaid report and proposed charges were duly heard and considered by the City Council. E. The charges proposed in the aforesaid report are fair and reasonable, are commensurate with the services provided, and the charge therefore should properly be collected on the tax roll in the same manner, by the same persons and at the same time as, together with and not separately from, general taxes. Resolution No. 06-71 Page 2 II. The City Council hereby elects to have the charges set forth in the aforesaid report collected on the tax roll in the same manner, by the same persons, at the same time as, and together with and not separately from its general taxes, and hereby authorizes that such charges be collected on the tax roll, as all prescribed to the provisions of Health and Safety Code Section 5473 et seq. III. The resolution shall be effective following its adoption by a two-thirds vote of the members of the City Council and shall remain in force and effect and said charges shall be collected in the manner as foresaid for the year 2006-2007 and for each subsequent year as authorized by the hereinabove-referenced section of the Health and Safety Code. IV. The City Clerk is authorized and directed to forthwith file a certified copy of this resolution with the Auditor of the County of Orange, together with a copy of the hereinabove described report, and a statement endorsed thereon over her signature that the said report has been finally adopted by the City Council of the City of Tustin. PASSED AND ADOPTED at a regular meeting of the City Council of the City of Tustin, California, held on the 19th day of June 2006. Doug Davert, Mayor ATTEST: City Clerk RESOLUTION CERTIFICATION STATE OF CALIFORNIA ) COUNTY OF ORANGE ) ss CITY OF TUSTIN ) RESOLUTION NO. 06-71 Pamela Stoker, City Clerk and ex-officio Clerk of the City Council of the City of Tustin, California, does hereby certify that the whole number of the members of the City Council is five; that the above and foregoing resolution was passed and adopted at a regular meeting of the City Council held on the 19th day of June, 2006 by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: Pamela Stoker, City Clerk FDS RATE ADJUSTMENT REQUEST Federal Disposal Service EXHIBIT SA Proposed Residential Rates Customers Billed By the City on the Tax Roll Step One: Determine disposal expense and service revenue as a percent of actual rate revenue Revenue ComDonent Annual Amount fal Percent of Rate Revenue Single Family Rate Revenue 2005 Actual Revenue $ 1,658,442 100.0% Less:Single Family Refuse Disposal Expense 2005 Tonnage Report $ 380,710 23.0% Sinale Familv Service Revenue $ 1,277,732 77.0% Step Two: Calculate percentage change in adjustment factors Adjustment Factor Old New Percent Channa Disposal Gate Fee per Ton $ 22.00 $ 22.00 0.0% Producer Price Index 137.4 140.2 2.0% Step Three: Calculate weighted percentage change in single family rates Components of Actual Revenue ComDonent Weioht fbl Percent Chanoe fcl Weiahted Rate Adiustment Refuse Disposal 23.0% 0.0% 0.0% Worker's Camp Adjustment -0.8% Service 77.0% 2.0% 1.6% Total 100.0% N/A 0.8% Step Four: Apply weighted percentage change to single family rates Service Current Monthly Rate Idl Weiahted Rate Adiustment lel Adiusted Monthly Rate Single Family-Automated Cart $ 13.41 0.8% $13.52 ReYised06/05/2006 Federal Disposal Service EXHIBIT 5B Proposed Commercial Rates Customer Billed By the Company (Except Rolloff) Step One: Deduct franchise fees from gross rate revenue Revenue Component (including Franchise Fees) Annual Amount <a) Percent of Rate Revenue Includina Franchise Fees Actual Gross Commercial and MFR Rate Revenue 2005 Actual Revenue $ 3,918,178 100.0% Actual Commercial and MFR Franchise Fees 2005 Qrtly Fee Rpts $ 95,920 2.4% Actual Gross Commercial and MFR Rate Revenue Net of Franchise Fees $ 3,822,258 97.6% Step Two: Determine disposal expense and service revenue percentage of total actual rate revenue Revenue Component (net of Franchise Fees) Annual Amount (a) Percent of Rate Revenue Net of Franchise Fees Actual Commercial and MFR Bin revenue Net of Franchise Fees (b) $ 3,822,258 100.0% Less: Actual Commercial and MFR Disposal 2005 Tonnage Report $ 900,878 23.6% 0.0% Actual Commercial and MFR Bin Service Revenue $ 2,921,380 76.4% Step Three: Calculated percentage change in adjustment factors Adjustment Factor Old New Percent Chanae Disposal Gate Fee per Ton $ 22.00 $ 22.00 0.0% Producer Price Index $ 137.40 $ 140.20 2.0% Step Four' Calculated weight percentage change in commercial and MFR Bin rates ComDonents of Actual Revenue Comoonont Woinht tcl Percent Chanao Cdl Weiahted Rate Adiustment Refuse Disposal 23.6% 0.0% 0.0% Service 76.4% 2.0% 1.6% Worker's Camp Adjustment -0.7% Total 100.0% N/A 0.8% Step Five: Applied weighted percentage change to commercial and MFR Bin rates Service Current Monthly Rate Weighted Rate Adjusted Monthly Rate leI Adiustment III 1 ea. 2 yard Bin once per week $ 66.81 0.8% $67.35 1 ea. 2 yard Bin twice per week $ 119.42 0.8% $120.39 1 ea. 2 yard Bin three times per week $ 172.06 0.8% $173.46 1 ea. 2 yard Bin four times per week $ 224.67 0.8% $226.50 1 ea. 2 yard Bin five times per week $ 277.31 0.8% $279.56 1 ea. 2 yard Bin six times per week $ 329.91 0.8% $332.59 1 ea. 3 yard Bin once per week $ 75.13 0.8% $75.74 1 ea. 3 yard Bin twice per week $ 136.06 0.8% $137.17 1 ea. 3 yard Bin three times per week $ 196,99 0.8% $198,59 1 ea. 3 yard Bin four times per week $ 257.91 0.8% $260.01 1 ea. 3 yard Bin five times per week $ 318.85 0.8% $321.44 1 ea. 3 yard Bin six times per week $ 378.77 0.8% $381.85 1 ea. 4 yard Bin once per week $ 83.42 0.8% $84.10 1 ea. 4 yard Bin twice per week $ 152.67 0.8% $153.91 1 ea. 4 yard Bin three times per week $ 221.89 0.8% $223.69 1 ea. 4 yard Bin four times per week $ 29114 0.8% $293.51 1 ea. 4 yard Bin five times per week $ 360.40 0.8% $363.33 1 ea. 4 yard Bin six times per week $ 429.63 0.8% $433.12 RevisedOB/OB/200B Federal Disposal Service EXHIBIT 5C Proposed Roll Off Rates With PPI Rate Adjustment Step One: Calculate percentage change in Producer Price Index Adjustment Factor Old New Percent Chanae Worker's Como Adiustment -1.5% Producer Price Index $ 137.40 $ 140.20 2.0% 0.58% Step Two: Apply percentage change in Producer Price Index to Service Portion of rolloff rates Service Current Monthly Rate Adjustment Adjusted Rate Rate <a) Standard Rolloff charge per load (b) $ 115.18 0.58% $ 115.85 Compactor charge per load $ 168.85 0.58% $ 169.83 Delivery or relocation charge $ 81.70 0.58% $ 82.17 Temporary "Clean-Up" Bins $ 54.47 0.58% $ 54.79 Locking Bins $ 5.44 0.58% $ 5.47 On-Call Bin Cleaning Services (in excess of 1 xlyr) $ 38.13 0.58% $ 38.35 Bulky Item Pick up (in excess of 2x/yr) $ 2179 0.58% $ 21.92 Special Pick (in excess of 2xJyr) Auto Cart Cust $ 5.44 0.58% $ 5.47 CRT's (E Waste) $ 30.63 0.58% $ 30.81 Tippino Rate $ 28.00 0.0% $ 28.00 RevisedOB/OS/200B Federal Disposal Service Proposed Rate Summary Dated 06/05/2006 PPI and Extraordinary Insurance Residential Multi.Familv Cart Rates Original Quantity Row Service Proposed of Monthly Annual Billings Monthly Rate Service Units Billings 1 Automated Cart $13.52 10,390 $ 140,465 $ 1 ,685,586 3 Total Cart Billings $ 140,465 $ 1 ,685,586 Commercial and Multi-Familv Bin Rates Pickups per Week Row Service 1 2 3 4 6 6 4 2 Cubic Yards $67.35 $120.39 $173.46 $226.50 $279.56 $332.59 5 3 Cubic Yards $75.74 $137.17 $198.59 $260.01 $321.44 $381.85 6 4 Cubic Yards $84.10 $153.91 $223.69 $293.51 $363.33 $433.12 Commercial and Multi-Familv Bin Distribution Matrix - Number of Bins Pickups per Week Row Service Total 1 2 3 4 5 6 7 2 Cubic Yards 87 63 50 14 5 3 222 8 3 Cubic Yards 262 381 342 100 105 44 1,234 9 4 Cubic Yards 32 105 121 41 42 56 397 10 Total 381 549 513 155 152 103 1,853 Commercial and Multi-Familv Bin Billinas Pickups per Week Row Container Total Size 1 2 3 4 5 6 11 2 Cubic Yards $ 5,860 $ 7,585 $ 8,673 $ 3,171 $ 1,398 $ 998 $ 27,684 12 3 Cubic Yards 19,844 52,260 67,918 26,001 33,751 16,801 216,575 13 4 Cubic Yards 2,691 16,161 27,067 12,034 15,260 24,255 97,467 14 Total Monthly Billings $ 28,395 $ 76,005 $ 103,658 $ 41,205 $ 50,409 $ 42,054 $ 341,726 15 Total Annual Billings $ 340,738 $ 912,063 1,243,893 $ 494.463 $ 604,907 $ 504,646 $ 4,100,710 RolI-Off Box Billinas Row Description Billing Unit Units per Proposed Estimated Year Rate Annual Billings 16 Pull Charge # of Pulls 2,932 $ 115.85 $ 339,666 17 Disposal/Processing Charge # of Tons 10,840 $ 28 303,520 18 Total 13,772 144 643,186 Summarv of Proiected Annual Billinas Proposed Rate Current Rate Increase % Revenue 19 Residential Multi-Family and Commercial Cart Billings $ 1,685,586 $ 1,671,959 0.82% 2622:1 20 Commercial and Multi-Family Bin Service Billings 4,100,710 4,067,658 0.81% 63.78% 21 Roll-Off Box Billings 643,186 641,228 0.31% 10.00% 22 Total Projected Annual Billings $6,429,481 $6,380,845 0.76% Residential $13,627 Commercial $33,052 Roll-Off $1,958 Total Increase $48,636 Revised06/05/2006 FEDERAL DISPOSAL SERVICE City of Tustin SOLID WASTE TONNAGE REPORT 2005 Programs Residential Tons Landfill Green Waste Mixed Rec . Dump Sites 1 st '05 Bowerman Tierra Verde Sunset Comm'l Multi-F Tons Landfill Green Waste Transformation Mixed Rec cle Bowerman Tierra Verde SERF Sunset Bulky Item Tons Landfill White Goods YTD 2005 27,699 350 12,900 1,900 ilir~ Bowerman Adams 138 138 17 18 552 70 Roll OttlC & D Tons Landfill Green Waste SERF Metal SERF Inert CCIAshalt Mixt;ld Rec . 2,600 90 25 8 30 410 320 2,425 75 15 5 30 390 300 90 10,199 330 100 30 120 1,600 1,300 380 Bowerman Tierra Verde Lon Beach Adams Steel Commerce RJ Noble Ewles Sunset 2,625 80 30 8 30 390 320 90 . ~1I. ... Commercial and MFR Franchise Fees 2005 Revenues 720,531.06 1,098,067.15 1,057,203.25 1,042,376.93 3,918,178.39 Fee 18,956.64 26,771.31 25,280.91 24,911.12 95,919.98 First Quarter Secon Quarter Third Quarter Fourth Quarter Total 17,305 x22 380,710 40,949 x22 900,878 12,249 06/05/2006 PRODUCER PRICE INDEX .'., " "', ~~ ~.. .:: .. . ' "/ .~ . " "'T, '" '" I"~ ..->~ u.s. Department of Labor Bureau of Labor Statistics CJI...~ ~ y- Ftll Foe. I ......... C"' fr:. U ". ..~ r..L.tt1~ Bureau of Labor Statistics Data www.bls.gov ~ Search I A-Z Index BLS Home I Programs &. Surveys I Get Detailed Statistics I Glossary I What's New I Find It! In DOL Change Output Options: From: 2000 " To: 2006 ~ include graphs NEWI ~ More Formattino ODtions~ Data extracted on: June 6, 2006 (6:36:05 PM) Producer Price Index Industry Data Series Id: PCU5621115621112 Industry: Solid waste collection Product: Solid waste collection Base Date: 9306 140 ~ '" 0 '" '" II :l 130 ~- .:l x / " " oS 120 , , , , , 01100 01101 01102 01103 01104 01105 01106 Month Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual 2000 118.3 120.2 120.2 120.2 120.5 122.6 122.8 122.8 122.8 123.6 123.6 124.2 121.8 2001 126.1 126.1 126.1 126.1 126.1 126.1 126.8 126.8 127.4 129.8 129.6 129.5 127.2 2002 129.3 129.7 129.9 130.0 129.9 130.8 131.0 131.4 131.3 131.4 131.4 132.5 130.7 2003 132.2 132.9 133.6 133.7 133.7 135.2 135.3 136.5 136.2 135.6 135.3 135.3 134.6 2004 136.4 137.1 136.5 137.1 137.5 137.5 137.2 137.2 137.2 137.4 137.4 137.4 137.2 2005 137.4 137.4 137.4 138.9 139.0 139.0 139.0 139.0 139.2 140.2 140.2 140.2 138.9 2006 140.2 141.8 141.2 141.1 (P) (P) (P) (P) P : Preliminary. All indexes are subject to revision four months after original publication.