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Home My WebLink AboutCC 12-15-20 Item No. 13 10-yr Franchise Agreement with Recology_Staff PresentationDecember 15, 2020Roger Lee, Director of Public WorksUrsula Syrova, Environmental Programs ManagerNew 10-yr Franchise AgreementCC 12-15-20 Item No. 13 •Adopt Resolution to execute the new 10-year franchise agreement for:•recycling, organics, solid waste collection•recycling and organics processing•transport for disposal •Adopt max rate schedule for year 1 and % increases for years 2 and 3Recommended Action Resource Recovery Enterprise Fund•Authorize minimum reserve of $500,000•Authorize use for rate smoothing•Approve budget modification to allow rate smoothing payments for the remainder of current fiscal yearRecommended Action Ordinance Revision:Amend the Cupertino Municipal Code Chapter 6.24 (Garbage, non-organic recycling and organic waste recycling collection and disposal)Recommended Action •Recology currently provides service, franchise agreement (FA) expires on 1/31/2021•City Council authorized negotiation of a new FA with Recology on April 21, 2020 •Bridge agreement also authorized – 18 mos. of service if new FA not in place or decide to go out to RFP for a different providerBackground •Maintain high levels of service and low rates relative to surrounding cities.•Maintain and increase levels of diversion from landfill in accordance with existing State and local regulations. •Comply with Short-Lived Climate Pollutants (SLCP): Organic Waste Methane Emissions Reductions regulations (SB1383), which go into effect in January 2022. Goals for the new FA •HF&H lead on due diligence•Thorough review of Recology’s cost and revenue requirements – productivity, fuel, labor, equipment, processing, etc.•Compared to other haulers in the area•Determined that Recology’s productivity is as good or better than others in the area and requirements are in line with competitorsSole-Source Negotiations, Value for City •Godbe survey (700 responses, 96% confidence)•Survey also available online (166 responses)•Online survey – commercial cust (7 responses)•Council Study Session – Oct. 6, 2020•Sustainability Commission, Chamber of Commerce•Notice from Recology to all customers (>14,000)•Cupertino Scene articles, social media•Dedicated web page Cupertino.org/newFACommunity Outreach •>75% of residents were somewhat or very satisfied with Recology customer service•>86% of residents were somewhat or very satisfied with Recology collection service•>50% of residents consider existing “extra” services valuable (on-call collections, Environmental Days, curbside collection of batteries and CFL bulbs, compost site)Community Outreach - Results Current services would continue under the new FA:•3-stream collection (garbage, recyclables, organics)•Extra services (on-call collections, Enviro Days, etc.)•Garbage and construction & demolition debris will continue to be collected and taken to Newby Island•Recyclables to GreenWaste for processing•Organics to South Valley and Blossom Valley for processingScope of Services New FA allows the City to change destination facilities•Recyclables and organics processing agreements are between Recology and the facilities, but City can direct changes to destination if desired•Landfill agreement is between the City and International Disposal, expiring 11/2023Note about destination facilities Negotiations called for continuation of current services, understanding that community satisfaction is high and there are no significant changes needed. But some new services:•Compliance with SB1383 (organics diversion)•Already have required service & processing•Additional audits, reporting, education needed•New 24-gallon cart option for residents•Reduced rate for qualified low-income residentsChanges and New Services Metrics used in new FA:•Tonnage-based diversion (regular accounts)•Subscription-based diversion (commercial cust.)•Construction & demolition debris (per CalGreen)•Pounds per day per resident to landfill and diversion rate equivalent (per CalRecyle)Diversion from Landfill Liquidated Damages (financial penalties) can be triggered:•Hours of operation•Noise•Container servicing and placement•Litter and spills•Record keeping and reporting•Collection vehicle specs, repair, maintenancePerformance Standards City does not set rates – it regulates and approves the maximum rates that Recology may charge to its customers.Regulation of Maximum Rates •Remain low for the area•Reflect costs to comply with SB1383•Add a charge for commercial recycling•Bring Recology in Cupertino to profitability by year 4 - it has been operating at a loss (recycling markets, labor rates, COVID)•Rate schedule is set for year one with % increases established for years 2 and 3Proposed new max rates: •Years 4 and 8: cost-basedanalysis and adjustment with a 5% cap on increased expenses•Other years: index-based(CPI, fuel, labor, maintenance) with a 5% cap on increased revenue•The caps do not equal annual rate increases. •Any increase must be substantiated.•The increased need can manifest as a greater than 5% rate increase for some customer sectors, and a less than 5% increase for othersAnnual adjustment of max rates: Service Type Monthly Rate Current Year One (eff. 2/2021) Year Two (eff. 2/2022) Year Three (eff. 2/2023) Residential: 32‐gallon garbage cart (bundled with recycling and organics carts) $30.50 $33.45 $36.66 $40.18 Commercial/MFD: 1‐3yd/1x/week, MSW $287.98 $288.39 $301.94 $317.04 1.5yd/1x/week, Recycling $0.00 $43.26 $68.43 $95.12 1.5yd/1x/week, Organics $179.97 $180.23 $188.70 $198.14 Rates: Current and First 3 Years Rates by % increase* Rate Period One Rate adjustment is relative to the Rates effective November 1, 2020 and as approved by the City under its previousagreement with Contractor.** Rate Period One establishes a chargefor Recyclable Materials Collection service for Multi‐Family and Commercial Carts and Bins of 24.0%of the Rate to service Multi‐Family Residential and Commercial Solid Waste Carts or Bins of equivalent size. Rate Period Two increases to36.3%of the Solid Waste Cart or Bin Rate. Rate Period Three increases to 48.0% of the Solid Waste Cart or Bin Rate.Service SectorRate Period 1* Rate Adjustment Rate Period 2Rate Adjustment Rate Period 3Rate Adjustment Single-Family Residential Services:All Material Streams - Carts9.70% 9.60% 9.60%Multi-Family Residential and Commercial:Solid Waste (Garbage) - Carts and Bins0.10% 4.70% 5.00%Multi-Family Residential and Commercial:Organic Materials - Carts and Bins0.10% 4.70% 5.00%Commercial Drop Boxes: All Material Streams3.90% 6.50% 5.00%New MF/Commercial Rate for Recyclables % of Solid Waste (Garbage) RateMulti-Family Residential and Commercial:Recyclable Materials - Carts and Bins24.0%** 36.3%** 48.0%** Residential Rate Comparisons Commercial Rate Comparisons •SB1383 compliance actions account for about 2.2% of the rate increase•24-gallon carts – cost of making the new smaller carts available account for about 0.2% of the rate increase•The costs to provide the current extra services were negligible overall and were included in the basic cost to provide serviceCost: SB1383 Compliance & Extra Services Community Survey Response to Rates Chapter 6.24 of the Cupertino Municipal Code (CMC) includes the City Council’s authority to award an exclusive franchise to a solid waste collector to perform solid waste collection service, and certain terms and conditions related to solid waste collection service.Municipal Code Amendment •Clarify and confirm the City’s role and responsibility for collection of payments & regulation of collector•Better align the code to the franchise agreement•Make consistent use of defined terms•Re-organize and title existing language•Update to reflect new AB1826 threshold for mandatory commercial organics serviceMunicipal Code Edits: Diversion from landfill in accordance with:•AB939, the California Integrated Waste Management Act: minimum 50% diversion•Cupertino’s Zero Waste Policy•Cupertino’s Climate Action Plan•SB1383 Short-Lived Climate Pollutants (SLCP): Organic Waste Methane Emissions ReductionsAnnual assessment of clean fuel collection truck tech.Sustainability Impact 100% Electric truck in Cupertino in December and Januaryas a demonstration Franchise Fee: •12% of Recology gross receipts paid to City•Approximately $2M/year•Into General Fund, offsets cost of pavement damage attributable to collection trucksSolid Waste Fund Operations Fee: •Based on City’s estimated cost to administer FA and run Resource Recovery Program ($1.39M in year 1)Fiscal Impact to City •Solid Waste Fund has been in place >20 years•Accrued balance of about $5.3M can only be used to benefit ratepayers•New proposed rates incorporate use of the fund to keep increases lower than would be otherwise•New FA commits the City to use the fund to smooth for the first 3 years•Recommend establishing a minimum reserve of $500,000Use of the Solid Waste Enterprise Fund Questions?