AgdaPkt 2000-02-28 - Laserfiche WebLink

Browse Search

EXHIBIT A Sß'3 REPORT :.",,",. To the Honorable Mayor and City Counçfl From the Ci Mana "f!r February 22, 1999 Subject Solid Waste Collections Rate Increase Recommendation It is recommended that the City Council approve a $1.88 monthly increase for typical residential customers who have one 40-gallon container picked up once a week, establish a lifeline rate with no increase for a single residential 20-gallon container, and initiate a "pullout" charge for customers using front loader bin services. Background Each year the franchised solid waste collection agent, Browning Ferris Industries (BFI), submits a rate request application to the South Bayside Transfer Station Authority (SBTSA) of which Redwood City is a member. The SBTSA is a joint powers authority consisting of 11 public agencies which comprise the contiguous BFI service area from Burlingame to East Palo Alto and which acts as a collective bargaining agent on behalf of member jurisdictions. The SBTSA engages a consultant, Hilton, Farnkopf, and Hobson, to review the rate application for compliance with the rate setting methodology contained in the franchise agreement. The consultant has determined that a 16% increase is in conformance with the rate setting formula contained within the franchise agreement. Under this methodology, BFI presently earns about five cents for each one dollar of revenue they receive. The rationale for the recommended 16% rate adjustment is due to BFI's failure to accurately project revenue requirements for 1997 and 1998. This rate increase is not driven by a substantial increase in BFI's operating costs; the increase is driven by an underestimation of revenues. The actual revenue shortfall for 1997 was 4.8%. This was followed by 3.4% revenue shortfall for 1998. There were no rate increases in 1997 and 1998 as BFI believed that increases would not be needed due to anticipated revenue growth from recently developed commercial and residential projects (the most recent increase was an 8.5% increase in 1996). Had BFI increased rates 4.8% in 1997 and 3.4% in 1998, the recommended increase for 1999 would be 1.3%. The cumulative effect of lack of rate increases in 1997 and 1998 has resulted in a 13% (4.8% plus 4.8% plus 3.4%) deficit in the City's "balancing account" with BFI.1 It is .. recommended that this deficit be repaid over two years (6 1/2% per year). The following matrix helps to isolate the origins of the recommended increase: 1 If BFI receives more revenue than they are entitled to, a surplus is available to offset future rate increases encountered by the City. If BFI does not collect sufficient revenues, a deficit is generated in the balancing account. This deficit must be paid back to BFI through future rate increases, .. ,~. """"'~"1" ....