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

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Page | 6 SBWMA Recology Negotiations FAX Report 4/20/17 Thereafter, annual adjustments to the Contractor’s Base Compensation would correspond to the changes in the indices for wages, benefits, fuel and other expenses plus a growth adjustment 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 Member Agency fees; plus Disposal and Processing costs. Based on certain reasonable assumptions regarding these fees, the Total Customer Billed Revenue may annually increase from 2018 to 2020 by 3.3% and from 2020 to 2021 by 7.8%. Other reasonable assumptions could be made regarding these future fees and the results would be different - i.e., the rate impact on any specific Member Agency customer would 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. It should be noted there are other factors that will affect the customer rates, which include processing costs and tip fees from these other facilities. The current agreement with Recology for Collection Services represents about two-thirds of the entire waste collection, handling and transportation system costs. Therefore, the remaining costs which are components of our overall system costs are all tied to contracts outside the Franchise Agreement negotiations discussion. For example, in February 2017, the Agency renewed its contract Construction and Demolition materials processing contract so those costs are now known through 2022. The Agency has, however, three other significant materials handling , processing and/or disposal contracts that will expire before 2020. There is no clear understanding of what the negotiations with those contracts will hold, or what the new rates will be. Rate setting methodology: This topic has been a primary focus of the negotiation process and maintaining rate stability and predictability has been a major goal for the SBWMA (specifically, Recology’s compensation and rate setting methodology regarding depreciation of the vehicles, fuel cost indexing, General and Administrative costs (G&A), and adjustments for growth were areas of focus). Amended and Restated Franchise Agreement Throughout the negotiations process the SBWMA has worked closely with Recology in reviewing the 2013 amended Franchise Agreement to streamline the agreement and make changes to clarify service expectations. The newly amended and restated Franchise Agreement language is approximately 90% unchanged and has been reviewed by both the SBWMA and Recology’s legal counsel. Though residential and commercial customers will not experience any changes to their current collection services , there are four minor modifications to the Franchise Agreement for residential and commercial services: 1. Mixed Use Buildings: The agreement defines a new class of service – Mixed Use Buildings - which contain commercial uses on the ground floor and residential uses above. The residential element of Mixed Use Buildings will receive the services currently provided to multi -family customers and the commercial element shall receive the services currently provided to commercial customers. This building type and other multifamily and commercial customers will also b e able to receive bin relocation services (at an additional fee) which may be required due to the below-street level location of bin enclosures on the property. 7.A - Page 16