Title
Recommendation to Accept an Informational Report on Establishing Integrated Waste Collection Ceiling Rates and Service Fees for Alameda County Industries, Inc. for Rate Period 14 (July 2015 to June 2016). (Public Works 274)
Body
To: Honorable Mayor and Members of the City Council
From: John A. Russo, City Manager
Re: Informational Report on Establishing Integrated Waste Collection Ceiling Rates and Service Fees for Alameda County Industries, Inc. for Rate Period 14 (July 2015 to June 2016)
BACKGROUND
The Alameda Municipal Code requires that the City Council establish integrated waste management rates on a yearly basis. These rates are established to ensure sufficient revenues are generated to pay all required costs and fees for the collecting, processing, and transporting of integrated waste in accordance with the City's franchise agreement with Alameda County Industries (ACI). This franchise expires in 2022.
ACI has submitted an application to request a yearly adjustment to these rates. Depending upon the year and as prescribed by the franchise agreement, a change in rate is either calculated on a cost or index basis. In a cost year, the City and its consultant conduct a detailed review of ACI's forecasted costs, profit, and pass-through fees.
Index-based Adjustment. The upcoming year, Rate Period 14 (July 2015 to June 2016), is an index-based review. As prescribed by the franchise, an indexed-based rate adjustment is calculated by applying cost-of-living indices, a labor index from the Teamsters Local 70 collective bargaining agreement, and adjusting pass-through costs (e.g., disposal fees). By the index's formula, this year's rate adjustment is an across-the-board 2.80% increase. The vast majority of Alameda subscribe to a 20- or 32-gallon container. For these ratepayers, this amounts to an increase of between $0.80 and $1.01 per month.
Special Adjustment. ACI is requesting a special adjustment related to a significant change in their labor costs at their Material Recoveries Facility in San Leandro. ACI's sorters and other workers voted to join the International Longshore and Warehouse Union (ILWU), Local 6. ACI and ILWU are currently negotiating a collective bargaining agreement. Prior to unionization, ACI had contracted with a third-party staffing agency that hired and employed the sorters.
ACI employs approximately 60 sorters in two shifts, processing curbside recyclable material from Alameda, Livermore, San Leandro, and Santa Clara. Sorters work alongside a winding piece of equipment to ensure that the commingled paper, plastic, and glass that comes into the facility is sorted into piles of paper, plastic, aluminum, metals, and glass that are prepared to be sold. Based on a 2009 agreement approved by the City Council, ACI shares a portion of the revenue on the sale of these commodities with the City's ratepayers.
While ACI and the ILWU continue to negotiate a collective bargaining agreement, they have tentatively agreed on the sorters gaining full benefits (i.e., health and welfare, vacation, sick, etc.) and hourly rate schedule for future years. The schedule, including a burdened rate that includes full benefits, is listed in Table 1.
Table 1: Hourly Rate and Benefit Schedule
|
Staffing Agency |
Current |
Rate Per. 14 2015/2016 |
Rate Per.15 2016/2017 |
Rate Per. 16 2017/2018 |
Rate Per. 17 2018/2019 |
Hourly Rate |
$9.00 |
$14.59 |
$15.68 |
$16.86 |
$18.12 |
$19.48 |
Benefits |
- |
- |
$13.75 |
$14.50 |
$15.30 |
$16.15 |
Burdened Rate |
$14.57 |
$14.59 |
$29.43 |
$31.36 |
$33.42 |
$35.63 |
By this schedule, the sorters would gain parity with their counterparts in Fremont, California Waste Solution's Oakland facility, and Waste Management's Davis Street facility. The increases are driven by three factors. One, the hourly pay to the sorters has grown from $9 to $14.59 per hour. This portion is required under an agreement between ACI and the City of San Leandro in accordance with that city's living wage ordinance. Two, to get the workers closer to the prevailing wage for workers in this industry, the next four years will see increases from $1.11 to $1.36 per hour. Three, and most impactful, the burdened rate is going from $14.59 per hour currently to $29.43 in 2015/2016 and growing to $35.63 by 2018/2019. The burdened rate's significant increase results primarily from ACI's now unionized employees going from zero to full benefits.
ACI has requested that Alamedan ratepayers pay their portion of the incremental increase of the wage and benefit increases. These incremental costs would result in a rate increase of 7.78%, plus the 2.80% indexed increase, for a total increase of 10.58%. For most ratepayers, this amounts to an increase of between $3.01 and $3.80 per month.
ACI's memo explaining the rate impacts of these labor increases is attached as Exhibit 1. Attached as Exhibit 2 is a letter in support of ACI's special rate adjustment from the ILWU.
On April 20 and May 11, respectively, the City Councils of San Leandro and Livermore are set to address whether their rates should account for their portions of ACI's increased labor costs in 2015/2016.
Process. The City Council must adopt new rates for the upcoming year. It is the City Council's decision whether to adopt an indexed increase (2.80%), the special rate increase (10.58%), or another alternative. Staff and HFH are conducting further due diligence on ACI's proposal and exploring with ACI ways to limit impacts on Alameda's ratepayers. Staff will share the status of these efforts during this informational report's presentation. In addition, this item will return to City Council on April 21 for the required public hearing and action to adopt integrated waste management rates for July 2015 - June 2016.
DISCUSSION
The City's consultants, HF&H Consultants LLC (HFH), provided a comprehensive, independent analysis of the City's options for this year's rate adjustment. Their report on the indexed rate adjustment of 2.80% is attached as Exhibit 3. HFH also confirmed ACI's calculations on the special rate increase were mathematically accurate.
Table 2 compares current rates for monthly single-family dwellings with the two options for rate adjustments.
Table 2: Monthly Single-Family Rates
Cart Size (Count) |
Existing rate |
With 2.80% increase |
$ change from existing |
With 10.58% increase |
$ change from existing |
20 gal (5,794) |
$28.46 |
$29.26 |
$0.80 |
$31.47 |
$3.01 |
32 gal (8,600) |
$35.92 |
$36.93 |
$1.01 |
$39.72 |
$3.80 |
64 gal (713) |
$59.02 |
$60.67 |
$1.65 |
$65.27 |
$6.25 |
96 gal (39) |
$82.42 |
$84.73 |
$2.31 |
$91.14 |
$8.72 |
For most ratepayers, the difference between the indexed increase and special rate increase is $2.21 per month (20-gallon) or $2.79 per month (32-gallon).
The sorters' salary schedule also includes increases for 2016-2020. The projected rate impacts of those increases are shown below in Table 3.
Table 3: Projected Future Rate Impacts
|
Rate Period 15 2016/2017 |
Rate Period 16 2017/ 2018 |
Rate Period 17 2018/2019 |
Rate Period 18 2019/2020 |
Rate increase |
0.33% |
0.28% |
0.39% |
0.35% |
Approx. monthly dollar impact (32-gallon) |
$0.13 |
$0.11 |
$0.17 |
$0.15 |
ACI proposes to offset these future rate impacts by retooling their facility, as updated equipment would handle more material with fewer sorters. This may help defray future rate increases attributable to the sorters' wage increases. If retooling occurs, the facility modification is not likely until 2016-2017.
FINANCIAL IMPACT
The City Council's adoption of rates impacts the City's ratepayers. In addition, the City receives a 10% franchise fee and other flat fees from ACI based on their gross receipts. These fees contribute to the City's General Fund (Fund 001), Solid Waste Fund (Fund 270), and Waste Reduction Fund (Fund 274). The proposed increases in the rates will provide approximately $64,605 or $202,138 in additional City fee revenue, depending on whether the indexed or special rate increase is adopted.
Rates are set to sufficiently compensate ACI for its cost to provide the required services. Where ACI receives more or less revenue than the rate increase projects, the franchise agreement includes a revenue reconciliation provision in which any shortfall or surplus is carried into the next year in a balancing account. While the balancing account currently stands at -$1,066,192, the negative balancing account has reduced by $371,471 from last year. The negative balancing account resulted primarily from deferred rate increases, the economic downturn, and ratepayers' downsizing garbage subscriptions due to increased recycling and composting. The improvement of the negative balancing account is attributable to a stronger economy; a targeted, overall 10% rate increase approved by City Council in July 2013; and the sharing of recycling commodity revenues.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
AMC Section 21-20.4(a) requires the City Council to hold a public hearing before establishing new ceiling rates and fees for the collection, processing, and disposal of the City's integrated waste. This franchise is an important factor in the City accomplishing its goals under the Local Action Plan for Climate Protection, adopted in 2008, and the Zero Waste Implementation Plan, adopted in 2010.
ENVIRONMENTAL REVIEW
This project is statutorily exempt under California Environmental Quality Act Guidelines Section 15273(a)(1) Rates, Tolls, Fares, and Charges - meeting of operating expenses.
RECOMMENDATION
Accept informational report on establishing integrated waste collection ceiling rates and service fees for ACI for rate period 14 (July 2015 - June 2016).
Respectfully submitted,
Robert G. Haun, Public Works Director
By,
Liam Garland, Deputy Public Works Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Memo from Alameda County Industries
2. Letter from ILWU, Local 6
3. HF&H Consultants, LLC's Report