Agda Pkt 2025.01.27 Joint SA PFA

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Page 2 of 9 City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org management of solid waste collection services for the member agencies and annually reviews and audits Recology’s Compensation Application, which outlines costs for solid waste and agency services for the year. The approved application becomes the basis for authorizing the maximum solid waste collection rates for the member agencies. The City contracted with HF&H Consultants (HF&H) to assist in solid waste rate analysis and a Franchise Fee Study to help formulate a rate structure that generates enough revenue to cover solid waste collection service costs while proportionately allocating increased collection costs to the rates paid by each customer class. Conducting service rate analysis and formulating appropriate rate structures is specialized work, and the City does not have staff expertise in these areas. Additionally, cities across the state contract with HF&F on similar studies, giving the City the benefit of understanding approaches employed across the state. ANALYSIS Revenue Requirement As is common throughout California, the City’s solid waste rate structure initially was designed to encourage recycling and reduce the amount of material that reaches landfills by setting lower rates for the 20 and 32 gallon carts. This rate structure has had the desired result throughout the State, with the landfilling of materials decreasing on a per-household basis. Approximately 85% of residential customers in Redwood City are subscribed to a 20 or 32 gallon cart service, with the remainder subscribing to a 64 or 96 gallon cart. However, due to the nature of the current rate structure and increases in expenses over the years, the City needs to realign solid waste rates to ensure that increased collection costs are proportionately allocated to each customer class. Based on analysis performed by HF&H and SBWMA, if the City were to take no action in 2025 (i.e. keep rates the same with no increase), the City would face a revenue shortfall of $2.45 million. In other words, the revenue generated by solid waste rates would be insufficient to cover the total estimated costs for solid waste collection (~ $27.6 million). A large portion of this shortfall can be attributed to actions taken at the February 26, 2024 public hearing to reduce the rate increase necessary for 2024: One-time funding The SBWMA Board of Directors approved one-time funds in the amount of $2.4 million to be used from the SBWMA Rate Stabilization Reserve to assist member agencies in 2024. This money was half of the total balance from the SBWMA Rate Stabilization Reserve and was allocated to each member agency based on total waste tonnage generated by each agency. Based on this allocation, the City received one- time funds in the amount of $481,046. Rates in 2025 need to be increased to permanently meet the higher revenue requirements that were bought down for one year in 2024. 7.A. - Page 2 of 32 128