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 17 (July 2018 to June 2019). (Public Works 274)
Body
To: Honorable Mayor and Members of the City Council
From: Elizabeth D. Warmerdam, Acting 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 17 (July 2018 to June 2019)
BACKGROUND
On July 2, 2002, the City entered into a Franchise Agreement (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. 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.
Through a separate agreement, the City contracts with Waste Management for the transferring and landfilling of the solid waste portion of the integrated waste stream.
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 Agreement with ACI 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 17, July 1, 2018 through June 30, 2019, is an index-based adjustment year. As prescribed by the Agreement, 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 1.68% increase. The vast majority of Alameda subscribe to a 20- or 32-gallon container. For these ratepayers, this amounts to an increase of between $0.53 and $1.53 per month. Next year will be a cost-based adjustment (Rate Period 18 - from July 1, 2019 through June 30, 2020) and will include a detailed review.
The City contracted with HF&H Consultants, LLC (HF&H) to provide a comprehensive analysis of the application prepared in accordance with the methodology prescribed in ACI’s franchise agreement with the City. As indicated in their report (Exhibit 1), HF&H has adjusted ACl's Rate Period 17 application.
DISCUSSION
Following no increase to rates in Rate Period 15 (July 1, 2016 through June 30, 2017), and a 2.38% increase in Rate Period 16 (July 1, 2017 - June 30, 2018), staff is proposing a 1.68% increase in rates for Rate Period 17 (July 1, 2018 - June 30, 2019). With this increase, the monthly residential rates in Alameda will be:
|
Cart Size (gal) |
Existing Rate |
Proposed Rate |
Differential |
|
20 |
$31.38 |
$31.91 |
$0.53 |
|
32 |
$39.60 |
$40.27 |
$0.67 |
|
64 |
$65.07 |
$66.16 |
$1.09 |
|
96 |
$90.88 |
$92.41 |
$1.53 |
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. However, this is the second year when the balancing account has turned positive (+$1,401,974). This largely reflects the benefits of a growing economy, and payment of the City’s share of commodity (recyclables) revenues. In the coming year, staff may consider seeking Council approval to utilize the balancing account to defray increased costs attributable to the Zero Waste Implementation Plan execution and recycling market changes (e.g., China’s changed regulatory climate that impacts ACI’s ability to send materials to China).
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 $134,000, 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 17 (July 2018 to June 2019).
Respectfully submitted,
Liam Garland, Public Works Director
By,
Liz Acord, Public Works Coordinator
Financial Impact section reviewed by,
Elena Adair, Finance Director
Exhibits:
1. HF&H Consultants, LLC Report
2. Ceiling Rate and Services Tables