17. Solid Waste Services Franchise AgreementCUPERTINO
PUBLIC WORKS DEPARTMENT
SUMMARY
AGENDA ITEM /I
AGENDA DATE May 18, 2010
SUBJECT AND ISSUE
Adopt a Resolution approving a five -year Solid Waste Services Franchise Agreement with Recology
(formerly Los Altos Garbage) effective November 1, 2010, with an option for a five -year extension by
mutual agreement.
BACKGROUND
On November 30, 2009, Council directed staff to negotiate the final details and prepare a five -year
solid waste services franchise agreement with Recology (formerly Los Altos Garbage Company). A
five -year extension of the new Agreement will be considered by Council after Recology has met a 75%
diversion goal by November 2014.
A key component of this Agreement is to maintain Cupertino's role as a leader in recycling solid waste
in Santa Clara County. Staff has negotiated a contract with Recology that will result in a 75% rate in
waste diversion by November 2014. Currently the State of California requires a minimum of 50 %`
diversion and, as of 2009, Cupertino had diverted 60% of all its solid waste collections.
The Agreement negotiated with Recology for a five -year term includes expanding recycling features at
• minim cost to the ratepayers. The Agreement provides for all of the expanded recycling services at
• 50 -cent per month ($6.00 per year) increase for r -.sidents to compensate for door --to -door residential
household hazardous waste (HHW) collection by appointment, with no rate increase for commercial
businesses during the first year.
This Agreement embodies the same terms and conditions approved by the Council on November
30, 2009. Notable new recycling features in the Agreement include the collection of:
• Food waste (compostable materials) from residents along with plant trimmin for
processing into. compost ( Recology will provide each household two free seal -tight
pitchers, one for use while the other is in the dishwasher, in which to save food scraps
until they are wrapped in paper bags or newspaper and combined with plant trimmings
in the organics bin for collection);
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• Food waste (compostable materials) from restaurants, grocery stores and other
businesses in Cupertino;
Compostable Materials include:
✓ organic materials generated from tree tr shrubbery pruning, vegetative garden
wastes, dead plants, weeds, leaves, grass clippings, and non -food vegetative matter
✓ all food soiled paper, such as napkins, towels, plates, tissue, cups, and take -out
containers, and including pizza boxes and waxed cardboard boxes
✓ All food products and bones, such as chicken, turkey, fish, beef, and pork
✓ Coffee grounds, tea bags and filters
✓ Dairy products
✓ Pasta, bread and dough products
✓ All fruit and vegetables
✓ Paperboard milk cartons;
• Unlimited single - stream recycling and food waste collection from multi - family town
homes, condominiums and apartments (this service will match all services that are
available for single family homes);
Residential household hazardous (chemical) waste (HHW). This service provides a kit
containing a 16 gallon bag, pre - printed labels, a one -way secure tie and instruction sheet
that will be_ mailed to participants to ensure that hazardous (chemical) waste is set out
and contained in one location, safe from weather for pick -up by Curbside Inc. Door -to-
door service includes pick -up of Electronic waste, fluorescent tubes, car batteries and
dry cell batteries, all of which are not required to be bagged. Service will be available
by appointment for all single family dwelling (SFD) and multi- family dwelling (MFD)
residents in Cupertino. Appointments for this pick -up service will be made through
Curbside Inc. and instructions for making appointments will be provided in the
Recology and City newsletters and on the respective websites;
Dry cell batteries and cell phones for recycling to be collected from drop -off bins that
will be placed at multi- family dwelling management offices;
• Cooking oil from residents when placed at curbside, on the regularly scheduled service
day, in a 1- gallon clear plastic container with a closed screw -top lid;
Coats and blankets which will be laundered and donated to local non -profit
organizations to keep children and adults in need warm through the winter months.
Recology will promote these expanded recycling programs through its residential newsletter,
website, quarterly utility bill inserts, newspaper ads, and through the City's website and access
channel.
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Additional features of the Agreement include:
Two drive- through recycling events annually for residents offered by Recology at De
Anza College. These events will include sensitive document shredding and collection of
all items that are currently offered at Recology's Environmental Recycling Days (e.g.
large used play structures and toys, construction debris, used clothing, E- waste,
fluorescent bulbs and batteries).
Recology will provide two free composting classes per year in Cupertino for residents.
Recology and the city will advertise these classes through their newsletters and
websites. Recology will provide one free Biostack backyard compost container to each
Cupertino household after one of its residents takes a compost class or Recology will
reimburse a household for the purchase of one compost bin on its next garbage bill after
the resident provides a receipt to show proof of purchase.
In response to requests for lower or competitive debris box rates from residents and
Cupertino's business community, Recology will offer a mid -sized (20 Cubic Yard)
debris box at a proportional and competitive rate of approximately $467. Currently,
debris boxes are available with a 1fi CY capacity at about $397, a 26 CY capacity at
approximately $608.
NET REVENUE / OPERATIONS PROJECTION
Attachment A (the table of revenue and cost projections), shows a first year projection of net revenues
(the 17% of rate payer revenue called the "operating revenue ") less the Newby Island payment of
approximately $558,000 for solid waste related operations. It should be noted that in the first 2 years of
the new agreement the City is spending slightly more money on solid waste programs than it is
collecting in solid waste operating revenue. (See Table below)
Net Revenue / Operations Projection
(Numbers are $1.000's rounded)
ITEM
2011
2012
2013
2014
LAGCo Payment
$1,258
$1,258
$1,258
$1,258
Newby Island
Payment
(700)
(650
600
X5501
Net to City
$558
$601;
$658
$708
Program Costs*
(600)
(61 0)
(620 )
(630
Impact"
$ 42
($ 2)
$ 38
$ 78
*The City's waste management program cost of approximately $600K annually and is expected
to increase by 1 -2% per year thereafter. These expenses include program staff, supplies, public
education, street sweeping and residential participation in the County's household hazardous
waste collection (HH)W) program.
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"During the first year of the proposed Agreement the City's waste management operations
revenue, expected to be $558,000, will fall short of covering program expenses, projected to be
approximately $600,000, by approximately $42,000. As landfill costs decrease, with increased
diversion of organics, the solid waste operations revenue from the Franchisee will cover the
costs and ultimately will provide extra funds for the expansion of the City's waste management
programs.
Therefore, as noted above, after the second year, due to the collection of organics and a higher
diversion rate, the City will make enough from the operating revenue to cover all solid waste
management program costs. In the fourth and fifth years the City will begin to have about $38K and
$78K to pay for any increases in costs of solid waste programs and to pay for additional ratepayers'
education for expanding solid waste programs as they may be required.
The cost of the expanded commercial organics processing is relatively uncertain. As such, under the
terms of the new contract, Recology Cupertino at the end of the first year will evaluate and report any
fluctuations in the cost of that expanded service. On the basis of that evaluation, under the new
Agreement Recology may propose a rate adjustment for commercial users if necessary to cover any
increased costs. However, the City will retain the right to approve, disapprove or modify any such rate
proposal.
CONCLUSION
The negotiated new 5 -year Agreement with Recology is attached to this report. The current contract
expires on October 31, 2010 and the new contract would take effect on November 1, 2010. City Staff
and Recology Management and the attorneys for both parties have agreed to all of the terms of the
attached Agreement. As such staff recommends approval of the Agreement.
FISCAL IMPACT
Table A attached to this report outlines a comparison of the cost and revenue distribution under the
new contract in comparison to the current contract. In summary, in order to simplify the transactions,
the Staff and Recology have agreed to modify the distribution of costs and revenues such that the city's
solid waste program will receive a smaller percentage of reimbursement from all revenues in exchange
for LAGCo paying directly for all services except for the Newby Island Landfill tonnage fees.
The City retains the responsibility for the payment of the Newby Island fees. As the diversion rate
increases up to 75 %, the tonnage to the landfill decreases resulting in a lower landfill cost to the City.
The cost/revenue projections show a slight increase in net revenue to the City over the life of the new
five -year contract.
The franchise fee of 12% of gross revenues, which goes directly to the general fund, remains
unchanged. Based on the current annual revenue projection of $7,400,000 the franchise fee would be
approximately $888,000 annually. It has occasionally been noted that because the franchise fee goes
to the general fund, which is unrestricted, the fee (currently 12 %) should be increased and offset by a
decrease in the percentage of the operations revenue (proposed to be 17 %). Since all revenues are from
rate - payers and should be expended to the greatest extent to fund solid waste services, staff does not
recommend making such a change at this time.
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STAFF RECOMMENDATION
Approval of a 5 -Year Solid Waste Services Franctise Agreement with Recology Cupertino, A Norcal
Company) for solid waste collection with additional collection services and expansion of recycling
services, including curbside collection of household hazardous waste for a rate increase of 50 cents a
month ($6.00 per year) for the City of Cupertino effective November 1, 2010 and upon mutual
agreement after November 1, 2014 an option for an additional five years beginning November 1, 2015.
Submitted by:
Ralph A. Qualls, Jr.
Director of Public Works
Approved for submission:
r'
k av'd W. Knapp
City Manager
Attachments: A — Table of revenue and cost projections for new contract
B — Table of Rate Comparisons with other cities
C — Resolution of the City of Cupertino Approving and Authorizing Execution of a
Franchise Agreement Between the City of Cupertino and Recology Cupertino
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ATTACHMENT A
(Revised 11- 13-09)
Los Altos Garbage Company
City of Cupertino
Current annual revenue for Single Family, Multi - Family, and Commercial Businesses collection
services: $7,400,000
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Current
Projected
Year 1
29%
17%
12%
City
City
LAGCo
City of Cupertino payment from LAGCo at 29% of revenue
$2,146,000
$1,258,000
$888,000
from SFD, MFD and CB
Newby Island Disposal, $39.38 per ton (21,650 tons)
($852,577)
Newby Island Disposal- Expanded Program Year 1 (17,783
{$700,294)
tans -3,867 tonnage reduction from Year 1 organics)
Residential organics Processing, $41.36 per ton (7,427 tons)
($307,180)
Residential organics Processing, $50 per ton- Expanded
($450,000)
Program Year 1 (9,000 tons)
Commercial Organics Processing, $77 per ton (1,206 tons)
($92,862)
Commercial Organics Processing, $77 per ton- Expanded
($269,500}
Program Year 1 (3,500 tons)
Recycling Reimbursement
($390,750)
($390,750)
Impact
$502,631
$557,706
($222,250)
Year 2 Projected Increase for Organics
3.00%
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ATTACFIMENT B
May 2010;
1 32' Gallon: Cart
City or Jurisdiction Name
Monthly
Rate
Los Altos Hills
$28.03
Palo Alto
$31.00
Los Altos
$28.11
Milpitas
$30.28
Gilroy
$26.63
San Jose
$27.50
Sunnyvale
$26.70
Monte Sereno
$24.06
Morgan Hill
$25.15
Saratoga
$21.37
Cupertino'
$20.23
Santa Clara
$19.44
Campbell
$19.58
Los Gatos
$19.65
Mountain View (bi- weekly r ecycling)
$17.55
Commercial Frant Lo.ider`Rate Comparison
`1 34d Bm /:1 x We Service
Palo Alto
$382.00
Los Altos
$238.22
Monte Sereno
$275.06
Sunnyvale
$270.40
Saratoga
$271.79
Morgan Hill
$270.50
Gilroy
$257.19
Mountain View
$237.75
Los Gatos
$215.93
Milpitas (Non - Exclusive Franchise -City
Does Not Set Rate)
$ -M _
Campbell
$193.72
Cupertino
$188.80
Santa Clara
$16 1.56
1 May 2010 Rate, before the annual cost of living adjustment due on August 1, 2010, plus the proposed fifty cents
per month increase to cover door -to -door household hazardous waste collection, effective November 2010
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0achi'-� C-
RESOLUTION NO. 10 -097
A RESOLUTION OF THE CITY OF CUPERTINO APPROVING AND
AUTHORIZING EXECUTION OF A FRANCHISE AGREEMENT BETWEEN
THE CITY OF CUPERTINO AND RECOLOGY CUPERTINO
WHEREAS, the City Council of the City of Cupertino is committed to recycling and diversion
and regulates the collection, reuse and disposal of recyclables, compostable materials, demolition and
construction debris and garbage to protect the physical health and safety of its inhabitants; and,
WHEREAS, the City is acting under clearly expressed policies of the State of California
empowering Cities to regulate the collection, reuse and disposal of recyclables, compostable materials
and garbage; and,
WHEREAS, the City and Franchisee desire to enter into a Franchise Agreement for the collection
and processing of recyclable and compostable materials, and the collection and disposal of garbage
generated in City:
NOW, THEREFORE, the City Council of the City of Cupertino resolves as follows:
1. Public interest and the physical health and safety of its inhabitants require City to enter
into the Agreement described above.
2. The City Council hereby approves the Franchise Agreement between the City of
Cupertino and Recology Cupertino for the Collection and Processing of Recyclable and Compostable
Materials, and the Collection and Disposal of Garbage and the Mayor is hereby authorized on behalf of
the City to execute the Agreement between City and Recology Cupertino.
PASSED AND ADOPTED at the regular meeting of the City Council of the City of Cupertino
this 18' day of May 2010, by the following vote:
Vote Members of the Cijy Council
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST: APPROVED:
City Clerk Mayor, City of Cupertino
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