AgdaPkt 2007-03-26 - Laserfiche WebLink

Browse Search

RE~o~ T To the Honorable Mayor and City Council Frorn the City Manager March 26, 2007 Subject Solid Waste Collections Rate Increase Recommendation It is recommended that the City Council approve by resolution a 10.75% rate increase efifective February 1, 2007. For typical residentia! customers who have one 32-gallon container picked up once a week, the increase will amount to $1.82 per month. Background Each year the franchised solid waste collection agent, Allied Waste Service (formerly BFI), submits a rate request application to the South Bayside Waste Management Authority (SBWMA) of which Redwood City is a member. The SBWMA is a joint powers authority consisting of 12 public agencies which comprise the contiguous Allied Waste Service service area from Burlingame to East Palo Alto and which acts as a collective bargaining agent on behalf of member jurisdictions. The SBWMA engages a consultant, Hilton Farnkopf and Hobson (HF&H), to review the rate application for compliance with the rate- setting methodology contained in the franchise agreement. Allied's profit is calculated on the operating ra#io method using a factor of 91 %. Under this arrangement, Allied is entitled to 9 cents profit for each 91 cents of operating expenses. Allied also incurs other costs, known as "pass-through costs," upon which Allied is not entitled to earn a profit. The most significant pass-through costs are the costs of disposing solid waste. Since Allied owns the landfill and earns a profit from the landfill operations, Allied is not allowed to earn a profit on these costs as doing so would allow Allied to earn profits upon profits. Consistent with past practice and the franchise agreement between Allied Waste Services and the City, Allied submitted their rate application in August 2006. HF&H reviewed this rate application and after making a number of adjustments, that were agreed to by Allied, recommends that the City adjust Allied's collection rates as follows: 7B Page 1 1. A 7.40% increase due to projected increases in the franchise hauler's (Allied Waste Industries) operating expenses for 2007, including: • 3.30% increase due to increases in labor costs; • 1:30% increase due to increases in vehicle and container maintenance expenses (i.e. fuel, etc.); • 1.10% increase due to increased costs to dispose of the garbage; • 0.70% increase due to an increase in depreciation expense from the purchase of new, fully automated residential yard waste collection vehicles; • 0.60% increase due to an increase in liability and workers' compensation premiums and claims; • 0.40% increases in other projected expenses. 1