Title
Public Hearing to Consider Adoption of Resolution Establishing Integrated Waste Collection Ceiling Rates and Service Fees for Alameda County Industries, Inc. for Rate Period 15 (July 2016 to June 2017) (Public Works 0274)
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Public Hearing to Consider Adoption of Resolution Establishing Integrated Waste Collection Ceiling Rates and Service Fees for Alameda County Industries, Inc. for Rate Period 15 (July 2016 to June 2017)
BACKGROUND
On July 2, 2002, the City entered into a franchise agreement with Alameda County Industries (ACI) for the curbside collection of solid waste, the collection and processing of recyclable materials, and the collection of organic materials, collectively referred to as integrated waste. In April 2009, the term of the agreement was extended to 2022. Through a separate agreement, the City contracts with Waste Management for the transferring and landfilling of the solid waste. ACI is responsible for managing and paying all costs and fees associated with the collection, processing, and disposal of integrated waste, and directly billing all residential and commercial customers for these services.
The Alameda Municipal Code specifies that the ceiling rates for the collection and processing of integrated waste be set by the City Council at a public hearing. Ceiling rates are established to generate sufficient revenue to recover ACI's costs in its entirety, including fees paid to Waste Management at its transfer station.
The franchise specifies two types of annual rate reviews: an index-based and a cost-based adjustment. An index-based adjustment requires the ceiling rates to be adjusted by three specific Consumer Price Index categories. Every third year a cost-based adjustment is performed, which includes a detailed review of ACI's forecasted costs, profit, and pass-through fees.
Rate Period 15, July 1, 2016 through June 30, 2017, is a cost-based adjustment year. The City contracted with HF&H Consultants, LLC (HF&H) to provide a comprehensive analysis of the application. As indicated in their report (Exhibit 1), HF&H has adjusted ACl's Rate Period 15 application.
DISCUSSION
For the first time in more than ten years, staff is proposing no increase in rates. ACI has received more revenue, and incurred less expense, than projected. With no increase, the monthly residential rates in Alameda will remain:
|
Cart Size (gal) |
Rate |
|
20 |
$30.65 |
|
32 |
$38.68 |
|
64 |
$63.56 |
|
96 |
$88.77 |
There is more positive news. Ceiling rates are set to sufficiently compensate ACI for its cost to provide the required services. When ACI receives more or less revenue than projected in the rate increase, the franchise agreement includes a revenue reconciliation provision. This provision carries over any shortfall or surplus into the next year in what is termed a balancing account. For many years, Alameda’s balancing account has been negative and grew to as much as -$1,437,663 in 2014. The negative balancing account resulted from an array of factors such as deferred rate increases, past economic challenges, and ratepayers’ downsizing garbage subscriptions due to increased recycling and composting.
This year, however, the balancing account has been reduced by half to -$780,781. Due to an improved rate structure (and increases) approved by City Council in 2013 and the improving economy, projections show the balancing account may be eliminated within the next several years, if current trends continue.
In addition, over the past year, ACI has piloted an annual bulky item pickup for multi-family properties. In the past, residents at multi-family properties were not entitled to an annual bulky item pickup, even if they were willing to pay for the service. In contrast, Alameda’s franchise entitles single-family residential property owners to one free annual bulky item pickup every year and an additional pickup at $137.08. ACI has agreed to extend the annual bulky item pickup to multi-family residents at a steeply discounted price ($34.27) and charge reduced rates for single item pick-ups, such as mattresses ($25), carpets ($25), and tires ($15). These offerings will reduce illegal dumping and help keep Alameda streets and neighborhoods looking their best.
FINANCIAL IMPACT
The City Council's adoption of ceiling rates impacts the City's ratepayers. Included in adopted ceiling rates are City fees, including a 10% franchise fee (based on ACI’s gross receipts). These fees are expected to raise an additional $167,767, which will be contributed to the City's General Fund (Fund 001), Solid Waste Surcharge Fund (Fund 270), and Waste Reduction Surcharge Fund (Fund 274).
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Alameda Municipal Code Section 21-20.4(a) requires the City Council to hold a public hearing before establishing ceiling rates and fees for the collection, processing, and disposal of the City's integrated waste. This franchise agreement with ACI 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
Hold a public hearing to consider adoption of a resolution establishing integrated waste collection ceiling rates and service fees for ACI for Rate Period 15 (July 2016 - June 2017).
Respectfully submitted,
Robert G. Haun, Public Works Director
By,
Liam Garland, Deputy Public Works Director
Financial Impact section reviewed by,
Elena Adair, Finance Director
Exhibits:
1. HF&H Consultants, LLC Report
2. Ceiling Rate and Services Tables