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Page | 20 SBWMA Recology Negotiations FAX Report 4/20/17 <br /> <br /> Increase 10.2% from 2020 to 2021 (+-5%, range of 5.2% to 15.2%). <br /> Thereafter, adjustments would correspond to the changes in the indices plus the growth <br />adjustments up to a maximum increase of 5%. <br />Because several important deal-points are still being finalized, detailed financial worksheets will be <br />presented and handed out in the May 3 rd half-day workshop and will be discussed at the May 25 th Board <br />meeting and distributed by May 18th as part of this Board meeting’s agenda packet. <br /> <br />Compensation Subject to Adjustment in 2020 to set 2021 <br />Customer rates, plus the use of any reserves, are set to equal the Total Customer Billed Revenue. <br />This is comprised of Recology’s Base Compensation (approximately 58% of the total Rates); plus <br />Member Agency fees (~27%); plus Disposal and Processing Fees (~15%). Between 2017 and 2021, <br />Member Agency fees and disposal and processing fees will be adjusted. Based on certain reasonable <br />assumptions regarding these fees, the Total Customer Billed Revenue may increase from 2019 to 2020 by <br />3.3% and from 2020 to 2021 by 7.8%. Other reasonable assumptions could be made regarding these future <br />fees and the results would be different. The rate impact on any specific Member Agency customer would be <br />affected by its existing rates and any surplus it may be generating (or may have generated) that could be <br />applied to offset these increases. <br /> <br />Methods to Mitigate Rate Increase <br />By including a portion of future depreciation expense in 2020, extending the term of the Amended <br />and Restated Agreement 15-years instead of 10-years, and providing a 3-year rolling average for the <br />change in customer subscription levels, steps have already been taken to mitigate increases in Base <br />Contractor’s Compensation. Additional steps Member Agencies may take include: <br /> Applying existing reserves to offset the increase. <br /> Increasing rates between 2017 and 2020 to have a higher base rate in 2019 and, thereby, reduce <br />the amount of the increase to rates in 2020 , and to use the excess revenue generated to add to <br />existing reserves or create reserves that can be used to phase in the customer rate increase. <br /> Changing the rate structure to incorporate rates for recycling services and increase the rates for <br />organic services, to mitigate the increase in garbage rates. <br /> <br />7.A - Page 30