AgdaPkt 2017-05-22 Joint SA PFA - Laserfiche WebLink

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Term Recology proposed the option of a 10-year or a 15-year term for the new Agreement and after considering the financial benefits of spreading the depreciation cost of a new collection fleet, the FAX committee recommended a 15-year term. At the end of the current contract, Recology’s $36.3 million collection fleet with be fully depreciated, however, the company has indicated that it can continue to use the vehicles for 2-3 additional years. By agreeing to a 15-year term, and combining the use of the current and new vehicles for a longer term, the member agencies will benefit from reduced depreciation and interest expense (approximately $1.7 million per year). Contractor Compensation and Customer Rates The FAX committee recommended an agreement with a 2021 Base Contractor’s Compensation of $65,330,616 that assumes a 15-year term and includes depreciation expense for the replacement collection vehicles in rate year 2020 of the current Agreement. Based on these assumptions and subject to the adjustments described above, the Base Contractor’s Compensation would: · Increase 2.4% from 2019 to 2020 (instead of a 7% reduction) · Increase 8.2% from 2020 to 2021 · Be adjusted by changes in the selected indices plus growth adjustments, up to a maximum increase of 5% Customer rates, plus the use of any reserves, are set to equal the Total Customer Billed Revenue. Total Customer Billed Revenue is comprised of Recology’s cost plus Disposal and Processing costs (15%). Based on certain reasonable assumptions regarding these fees, the Total Customer Billed Revenue may increase as follows: · Increase by 3.3% from 2019 to 2020 · Increase by 7.8% from 2020 to 2021 · The actual increase may vary by individual agency since it will be affected by its existing rates and any surplus it may be generating (or may have generated) that could be applied to offset these increases. By including a portion of future depreciation expense in 2020, extending the term of the Amended and Restated Agreement 15 years instead of 10, and providing a three-year rolling average for the change in customer subscription levels, SBWMA has already taken steps to mitigate the increase in Base Contractor’s Compensation. Throughout the negotiations process, the SBWMA has worked closely with Recology in reviewing the 2013 amended FA to streamline the agreement and make changes to clarify service expectations. The newly proposed amended and restated FA language is 7.A - Page 3