AgdaPkt 2008-02-11 Clsd and Reg - Laserfiche WebLink

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. . . ..". . . . .. ." ," . ", ".. .. . .. ... ... ... .. ... , To the HOnOr:3Ple~~&~t~~~G~i;YM~~~I1~i: 88 Page 1 .. . " 'R.:.'t::.:p.........O:'......R......."T. .. '", "', ." :......' .,:.. "_ "C",. =: ,":." ,.. ", '.' ....... .,~ .......:; ,"". . :......,: : ',,' ....'. > : ", ~:'. '::: .:: :, . ; :.:': . ..... ' ., . '.' .' '. , ..' ", . : . - . . . '. . . . . '"',..' . .".. . . ". February 11, 2008 SUBJECT Solid Waste Collections Rate Increase RECOMMENDATION It is recommended that the City Council approve by resolution a 5% increase in the overall revenue requirement for Allied Waste Industries, the City's franchised waste hauler, effective February 12, 2008 and approve the implementation of a progressive rate structure for commercial subscribers. For typical residential customers who have one 32-gallon container picked up once a week, the increase will amount to $0.19 per month. BACKGROUND Each year the franchised solid waste collection agent, Allied Waste Industries (formerly SFI), submits a rate request application to the South Bayside Waste Management Authority (SBWMA) of which Redwood City is a member. The SSWMA is a joint powers authority consisting of 12 public agencies which comprise the contiguous Allied Waste Industries 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 ratio 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 2007. 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: 1.9% increased labor-related costs 0.9% increased vehicle-related costs 0.7% increased administrative costs 0.4% increased costs for items such as disposal costs and corporate overhead 1 .1 % increased disposal costs at the Shoreway Recycling & Disposal Center 5.0% Total increase While a 5% increase in overall rates is requested, not all subscribers will experience a 5% rate increase as it is also being proposed that the rate structure for commercial subscribers be modified to provide for a progressive rate structure under which the cost to dispose of refuse (on a per tonnage basis) increases as the subscriber disposes of additional waste.