AgdaPkt 2009-02-09 reg - Laserfiche WebLink

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8A age 1 RiEiP()'R.T To the Honorat)leM.yor andC:ityCouneil From theCi Manaer February 9, 2009 SUBJECT Solid Waste Collections Rate Increase RECOMMENDATION It is recommended that the City Council approve by resolution a 1.60/0 increase in the overall revenue requirement for Allied Waste Industries, the City's franchised waste hauler, effective February 10, 2009 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 $0.24 per month. BACKGROUND Each year the franchised solid waste collection agent, Allied Waste Industries (Allied), 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 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 and the City, Allied submitted their rate application in August 2008. HF&H reviewed this rate application and after making a number of adjustments, that were agreed to by Allied, recommends that the City increase Allied's collection rates by 1.60/0 While a 1.6% increase in overall rates is requested, not all subscribers will experience a 1.60/0 rate increase as it is also being proposed that the Council also approve the completion of the transition to an equalized volume-based rate structure for residential customers that began with the adoption of the 2008 rates. Under an equalized volume- based rate structure all residential customers will pay the same amount per gallon regardless of waste generated. Doing so will remove any inequities that that presently exist in the rate structure. The only recommended exception is to set the per gallon rates for the 20 gallon lifeline service tier at 40 cents per gallon compared to the rates for the other container sizes which are 60 cents per gallon.