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Page | 4 SBWMA Recology Negotiations FAX Report 4/20/17 2. EXECUTIVE SUMMARY Currently the Member Agencies are in the seventh year of a ten-year Franchise Agreement for Collection Services for Garbage, Recycling and Organic Materials with Recology. In anticipation of the Agreement’s expiration in 2020, the SBWMA initiated discussions of a contract extension with the company. A starting point for this process was the gathering of stakeholder input from SBWMA Board Members, Member Agency staff, and community members. All groups surveyed expressed a high-level of satisfaction with Recology and concur that the company has consistently provided professional, competent, reliable service in the execution of their collection services. Based on this strong performance and survey response, the SBWMA Board approved a plan and recommended a negotiation process during Spring 2016. The Plan included a key assumption that all Member Agencies intend to participate in a Franchise Agreement extension with Recology by December 31, 2017. Negotiations Process As part of the Plan and recommended negotiation process, the Board created the Franchise Agreement Extension committee (FAX) with the primary tasks of:  Develop an amended and restated Model Franchise Agreement to be presented to the SBWMA Board of Directors at the April 27, 2017 meeting.  Obtain Recology’s total revenue requirement (cost) to perform collection services starting in rate year 2021 and establish a compensation adjustment methodology to govern the rate changes in future contract years.  Obtain and include feedback from the SBWMA Technical Advisory Committee (TAC) at its April 13th meeting. Since November, the SBWMA negotiation team has held special TAC meetings in January and April, ten FAX committee meetings, seven negotiation sessions with Recology (many phone meetings were also held between Recology, HFH Consultants and SBWMA staff), and two additional all-day negotiations sessions were held on April 4th and 6th to finalize negotiations. This negotiated deal will provide:  Consistency with all existing solid waste, recycling and organics services.  No new-service provider transition pitfalls (i.e., container switch-out, customer service center setup & billing setup, driver route training, hard -rollout of a new truck fleet, developing a new rate setting process, and end-of-contract buyouts (e.g. Allied Waste’s exit).  Rate-setting stability/predictability after an initial rate true-up, rate increases are tied to indices.  SBWMA rates will continue to be in-line with Bay Area communities.  Continued cost savings from collection efficiencies gained by Recology’s years of experience.  Sharing of future inflation risk by Recology beginning with their 2021 Cost Proposal.  Avoidance of an estimated $2-3 million in avoided RFP and potential contractor-transition costs.  Maintain labor peace by continuing with a known company and management team. 7.A - Page 14