AgdaPkt 2005-12-19 - Laserfiche WebLink

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�� The last time that the City Council increased Allied's collection rates was March 2001 for the 2001 rate year (five years without a rate increase). Since that time Allied's rates did not require any increases as the annual revenues collected by Allied were sufficient to meet Allied's expenditures. The March 2001 rate increase of 5.7% coupled with an 8.9% increase in January 2000 was sufficient to create a surplus in the balancing account that gradually eroded due to a reduction of revenue from commercial account activity in 2002 and 2003. The surplus in the balancing account was eliminated during the first half of 2005. Allied's current operating expenditure projections through the end of 2006 show an increase of 17.82%% since the end of 2004 while pass-through costs have decreased 9.29% during the same time as a result of disposal rate reductions at the transfer station due to reduced landfill rates. The net effect is an increase of 8.10% in 2006. The primary reasons for this increase are: 1) the unionization of Allied's workforce in 2004 that resulted in higher health benefits, new pension requirements, and changes in work rules that have increased overtime pay, and 2) higher costs for fuel and an impact on tires due to the impact on petroleum costs. Utilities Committee Recommendation Although a 9.9% rate increase is needed to eliminate the cumulative deficit in the balancing account and bring 2006 expenditures and revenues into balance, the Council Utilities Committee recommends that $205,000 from the $2.4 million payment (see below) the City will receive from Allied be used to eliminate this deficit. The committee further recommends that collection rates be increased 8.1 % to bring ongoing revenues into balance with ongoing expenditures. The $2.4 million payment the City will be receiving over the next four years is the result of an agreement reached between the SBWMA and Allied earlier this year under which: • The SBWMA extended the agreement for operating the transfer station by one year, from December 31, 2009 to December 31, 2010; • Each member agency of the SBW MA extended the expiration of their respective collection agreements from December 31, 2009 to December 31, 2010; • The SBWMA agreed to commit disposing of all solid waste at Allied's Ox Mountain (Half Moon Bay) landfill for the next 15 years. It should be noted that the reason for initiating these negotiations under which these agreements were made was due to Allied charging a lower landfill disposal rate to South San Francisco Scavenger of approximately $10.00 per ton (from $44 per ton to $34 per ton). As soon as the SBWMA became aware of this rate reduction, the SBWMA initiated negotiations with Allied to obtain the same reduction. Given this background, the Utilities Committee recommends that the $2.4 million payment from Allied be used as a rate stabilization reserve against future unanticipated rate increases. These funds will be kept in the City's balancing account maintained by Allied.