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Page | 19 SBWMA Recology Negotiations FAX Report 4/20/17 <br /> <br />5.2 Financial Considerations <br />This section outlines financial considerations for the franchise agreement and compensation <br />package. It should be noted that there are other factors that will affect the customer rates, which <br />include processing costs and tip fees. The current agreement with Recology for Collection Services <br />represents about two-thirds of the entire waste collection, handling and transportation system costs. <br />Therefore, the remaining costs which are components of our overall system costs are all tied to contracts <br />outside the Franchise Agreement negotiations discussion. <br />In February 2017, the Agency renewed its contract Construction and Demolition materials processing <br />contract so those costs are through 2022. The Agency has, however, three other significant materials <br />handling, processing and/or disposal contracts that will expire before 2020. There is no clear understanding <br />of what the negotiations with those contracts will hold, or what the new rates will be. These contracts are <br />identified below in Table 4. <br />Table 4. SBWMA Major Contract Values <br />SBWMA Major Contract Values <br />Contract Contract <br />Expires Tons Per Year <br />Percent of <br />Total <br />Amount <br />Annual Contract <br />Value <br />Zanker C&D Processing Agreement 2017 <br />38,625 <br />37% <br /> $ 1,588,000 <br />Newby Composting Agreement 2018 <br />50,100 $ 2,653,000 <br />Recology-Grover Composting Agreement 2020 <br />50,891 $ 1,817,000 <br />Ox Mountain Disposal Agreement 2019 <br />217,900 $ 8,960,000 <br />SBR- Shoreway Operations Agreement 2020 <br />471,890 $ 18,936,513 <br />Recology- <br />Collection Services Agreement 2020 N/A 63% $ 58,500,000 <br /> Total Solid Waste System Costs: 100% $ 92,454,513 <br />Source:2016/17 Budget <br /> <br />Proposed 2021 Compensation and potential Customer Revenue Impacts <br />The agreed upon 2021 Base Contractor’s Compensation is $65,303,616. It assumes a 15-year term and <br />the inclusion of depreciation expense for the replacement collection vehicles in rate year 2020 of the Current <br />Agreement. Based on these assumptions and sub ject to the adjustments described above, the Base <br />Contractor’s Compensation would: <br /> Increase 2.4% from 2019 to 2020 (instead of a 7% reduction). <br />7.A - Page 29