CITY COUNCIL STAFF REPORT
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1 CITY COUNCIL STAFF REPORT Meeting Date: TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS SUBJECT: AUTHORIZING THE CITY MANAGER TO EXECUTE AN AMENDMENT TO THE FRANCHISE AGREEMENT BETWEEN THE CITY OF PLEASANT HILL AND REPUBLIC SERVICES OF CONTRA COSTA COUNTY FOR IMPLEMENTATION OF A COMMERCIAL AND RESIDENTIAL CITYWIDE ORGANICS PROGRAM SYNOPSIS The proposed amendment to the franchise agreement with Republic Services, the City s hauler for solid waste and recycling, would introduce organics (green waste and food scraps) recycling for all residential and commercial customers. Currently, Republic Services provides green waste pickup but there is no food scraps recycling for residential customers and most commercial customers. This proposal would introduce the service beginning October 1, The additional annual cost to implement the program would be $387,000 with most of the increased cost occurring for commercial users. Residential customers would see a one-time rate increase of 2.79% beginning January 1, 2017 and commercial customers would see a phased increase over three years (in equal amounts of 2.43%) of 7.3% also beginning January 1, The City would agree to cover the cost of the program at $46,762 for the initial three month period from October 1st to December 31, DISCUSSION Background State Legislation - AB 1826 State legislation, recently signed into law by Governor Brown, requires all cities and counties to introduce organics (green waste, food scraps and food soiled paper) recycling in 2016, with the largest generators of organic waste required to begin first. Under AB 1826, all businesses generating eight or more cubic yards of organic material per week were required to begin organics recycling in April Businesses generating four yards of organic material per week are required to begin in January 2017, and businesses generating four or more cubic yards of solid waste per week are required to begin in January Republic Services has 342 commercial customer accounts in Pleasant Hill. Based on information provided by Republic, staff estimates that approximately 70 businesses in Pleasant Hill will be required to implement an organics program by January 1, This will include a number of restaurants, most shopping centers, larger retail stores, and several schools.
2 P a g e 2 AB 1594 Currently, all green waste (yard waste, tree trimmings etc.) is used by Republic Services as alternative daily cover (ADC) for trash going into landfill. Although this green waste is not composted, under AB 939, jurisdictions are permitted to claim ADC as diversion. A second legislative bill, AB 1594, eliminates the provision in state law which allows cities to count green waste as diversion, effective January 1, All cities and counties must include plans in their annual reports to CalRecycle on how to address this issue no later than August 1, Staff is proposing to incorporate the new requirements into the amended franchise agreement with Republic Services (Attachment C). Specifically, all organic materials collected from residential and commercial customers, beginning October 1, 2016, would be taken to a composting facility owned by Republic Services in Richmond, California. While there is no requirement for residential customers to recycle food scraps, staff is proposing to implement a residential organics program beginning October 1, Other jurisdictions, including Martinez and cities within the Contra Costa Solid Waste Authority, have recently adopted similar programs. Residents would put their food scraps and yard waste into their green carts and all materials collected would be transported to the Richmond composting facility. This program meets the requirements of AB 1594 and ensures that the City will continue to meet its diversion goals. In order to fully explore program implementation and associated costs, the City engaged the services of Erik Nylund, Senior Manager with Crowe Horwath LLP, a full service independent consulting firm with offices in San Francisco. Mr. Nylund provided his analysis of the proposed program which is attached as Attachment A Assessment of Organics Collection Services Provided by Republic Services, Inc. Operational Assumptions of Program According to the 2014 reported statistics from Republic Services, residential customers diverted 6,638 tons of yard waste, which was used as ADC. Mr. Nylund and Republic Services estimated that approximately 40% of the 9,566 residential customers would participate in the food scraps recycling program and that the average household would divert seven pounds per week. Using these numbers, the estimated annual tonnage of food scraps that would be composted is 696 tons. This is equal to an additional 10.5% of organics diverted from landfill. Likewise, using similar assumptions, commercial and multi-family customers would divert a further 179 tons of food scraps annually, which would increase the total (commercial/multi-family) organics diverted by 17%. The total annual food waste capture or diversion would be approximately 875 tons, which is equivalent to an increase of 11.4% in the amount of organics diverted overall (using 2014 numbers) for both residential and commercial/multi-family customers. As part of the program implementation, and to achieve increased participation at the residential level, staff is proposing to deliver food pails, at no charge, to every household in Pleasant Hill. This proposed program cost is discussed below. Larger food waste containers, known as slim-jims, would be delivered to commercial customers upon request at no charge to the customer.
3 P a g e 3 Residential Organics Program As stated earlier, the proposal is to begin the organics program for all residential customers on October 1 st. The estimated breakdown of costs would necessitate a one-time rate increase of 2.79%. Per the franchise agreement with Republic Services, the annual CPI rate increase occurs on January 1 st each year. In order to avoid two rate increases within a three month span, staff is proposing that the City use recycling funds to pay for the cost to implement the program from October 1, 2016 through December 31, 2016 (see Fiscal Impact section). Republic Services has indicated that the cost for this period would be $46,762. The franchise agreement permits Republic to adjust the rates for all customers by 85% of the CPI (San Jose-San Francisco-Oakland All Urban Consumer Price Index) each year on January 1 st. Republic has agreed that the total rate adjustment (2.79% plus 85% of the CPI) on January 1, 2017 would be capped at 5% (see Table 2 below) for residential customers only. This rate increase would include the CPI adjustment and the organics program cost combined. The actual monthly rates for residential customers, based on an estimated 5% increase, are shown in Table 3 below. Table 2 Total Estimated Combined Rate Changes CPI 1 Plus New Organics (with Foodwaste) Collection Program (2017 to 2019) Implementation Date Residential Sector Commercial Sector January 1, XCPI % (not to exceed 5%) 0.85XCPI % January 1, XCPI 0.85XCPI % January 1, XCPI 0.85XCPI % Table 3 Maximum January 1, 2017 Residential Collection Rates Including Combined Yardwaste and Foodwaste Organics Collection (Based on Estimated 5% Percent Rate Increase) Service Level Current Rate (per Month) Potential New Rate (per Month) 5% Increase Rate Change (per Month) 20 Gallon $21.30 $22.37 $ Gallon $24.64 $25.87 $ Gallon $33.62 $35.30 $ Gallon $50.43 $52.95 $2.52 Table 3 shows the current monthly residential garbage rates based on the size of the customer s waste 1 CPI will be equal to 85% of the prior year change in the San Jose-San Francisco-Oakland All Urban Consumer Price Index.
4 P a g e 4 cart and the estimated rate on January 1, 2017 (using a 5% rate increase). These rates are below average for residential garbage rates in Contra Costa and Alameda Counties. Commercial/Multi-Family Program The total rate increase for commercial customers would be 7.29%. However, given that the organics program will be phased in over a three year period for commercial ratepayers, and to lessen the impact, Republic has agreed to phase in the rate increase over three years in three equal amounts of 2.43%. Thus, the annual increase for commercial customers would be 2.43% plus 85% of the CPI. Table 4 below shows the current rates for commercial accounts based on the size of the container with a collection frequency of once per week, and the new rates based on an estimated 5% increase on January 1, Table 4 January 1, 2017 Commercial Collection Rates Including Combined Yardwaste and Foodwaste Organics Collection (Based on Estimated 5% Percent Rate Increase) Service Level (Container Size) Current Once per Week Rate (per Month) Estimated New Once per Week Rate (per Month) Rate Change (per Month) 1-Cubic Yard $ $ $ Cubic Yard $ $ $ Cubic Yard $ $ $ Cubic Yard $ $ $ Cubic Yard $ $ $ Cubic Yard $ $ $ Cubic Yard $ $ $40.80 Food Pails for Residential Customers In order to keep the increased cost to residential customers as low as possible, while encouraging the maximum participation rate, staff is proposing to purchase and deliver household food pails to every residential customer. These 3-gallon food pails are ideal for holding food scraps in household kitchens and are already being used in other cities. The cost for this would be $48,576 based on purchasing 9,600 pails. As part of the amended and restated Franchise Agreement of September 2012, Republic Services provides $10,000 annually to the City to pay for the City s Backyard Composting Program. This program allows the City to sell home composting bins at a discounted price of $40 per bin to residents who participate in a composting workshop. To date, the City has sold over 1,100 bins through this program. Since the proposed residential organics program would reduce the demand for home composting bins sold by the City, staff is proposing to use this annual contribution over five years from Republic Services, totaling $50,000, to pay for the purchase of the food pails. Republic has
5 P a g e 5 agreed to provide this funding up front in order to cover the cost of the pails. Although staff will continue to operate the backyard composting program and host workshops for residents, the City would no longer be able to offer bins for this program at the discounted rate. Lastly, Republic will provide one free compost pick up day per year for all customers. On this pick up day, residents will be allowed one cubic yard of compost at a designated location. Program Costs The additional annual cost to implement the organics program for all customers is $387,000. This includes additional costs for labor, equipment, material processing (diverting organics from Keller Canyon Landfill to Richmond Composting Facility), and transportation (See Table 6 below). Most of the increased costs including labor and equipment will be in the commercial/multi-family component of the program. Table 6 Description of Cost Changes for New Residential and Commercial Organics Program Labor costs Cost Category Variable truck costs New truck and equipment costs Material processing costs Transportation and transloading costs City composting program funding Description One full-time equivalent driver providing an additional 5-day route week. Truck fuel, and operations and maintenance, costs associated with the additional route week of truck use. One additional truck (a used truck), new carts/slim jims for commercial service, and new pails for residential services. Change from using yardwaste material as alternative daily cover (ADC) to using combined yardwaste and foodwaste for composting, an increase in processing costs. AWS will use the Contra Costa Transfer & Recovery Station facility to accumulate organics material and will use transfer trailers to transport material to the West Contra Costa Landfill (Golden Bear Transfer Station) facility instead of Keller Canyon Landfill. As a requirement of the franchise agreement, AWS makes an annual $10,000 payment to the City to support the City s composting program. As the material will ultimately be composted, the City will use this payment to offset a portion of the costs of this new organics (foodwaste) program. Education and Outreach to Customers Republic Services, in consultation with the City, will provide outreach and educational materials to residential and commercial customers to promote the organics program. This will include: 1. A website with information on the program, how to comply and participate, and explanations of State laws, AB 1826 and AB Printed materials Republic will produce and distribute to all customers postcards and flyers to highlight the program and provide program details. Letters will also be sent to
6 P a g e 6 commercial customers to explain the mandatory participation requirements under AB Outlook Newsletter The City will use its newsletter to promote the organics program to all customers as well as a webpage with full program details. See Exhibit E - Education, Outreach and Monitoring of Organics Program, for additional information. Summary and Recommendations In consultation with Erik Nylund of Crowe-Horwath, staff believes that the proposed costs to implement the organics program for residential and commercial customers is fair and reasonable. The cost to implement the commercial/multi-family component of the program is approximately $293,000 and the residential component is $94,000. The commercial component is more expensive due to the necessity of establishing one additional route for organics pick up five days per week, which would incur additional labor, truck and equipment costs. In summary, this amendment to the City s franchise agreement with Republic Services would: 1. Establish an organics program for all residential customers beginning October 1, Establish an organics program for commercial customers using a phased in approach beginning October 1, Only generators of significant amounts of organics would initially be required to participate, with most customers participating by Require a rate increase of 2.79% for residential customers beginning January 1, Require a rate increase for commercial accounts of 7.29% - this increase would be phased in over three years in equal amounts, beginning January 1, 2017 with a 2.43% increase. 5. Ensure that all green waste and food waste that is added to green carts (or other organics containers) is composted rather than going to landfill. 6. Deliver 2-gallon kitchen food pails to every residential customer and 23-gallon slim-jim containers to commercial customers upon request or as needed. 7. Ensure that the City continues to meet its diversion goals and requirements under AB 939, AB 1826 and AB The City Council Budget subcommittee reviewed the proposed agreement and organics program at its meeting on May 16, 2016 and recommended proceeding with the proposal for City Council consideration at a future meeting.
7 P a g e 7 FISCAL IMPACT There would be a one-time charge of $46,762 to implement the program from October 1, 2016 to December 31, Currently, there is insufficient fund balance in Fund 23 (Solid Waste & Recycling) to cover this cost. Therefore, the City Manager s discretionary fund would initially be used to fund the program, but would be reimbursed by Fund 23 over the next four fiscal years. There will be an additional one time charge of $48,576 to provide food pails to every household. Republic Services will cover this cost in lieu of making the $10,000 per year contribution to the City for the home composting program for the next five years. PUBLIC CONTACT Public contact was made through the posting of the agenda for the public meeting at which this item will be heard on the City s official notice bulletin board, the City s web page, and, together with the staff report, in the City Clerk s office, at the Pleasant Hill Library, and at the Pleasant Hill Police Department. ALTERNATIVES TO RECOMMENDED CITY COUNCIL ACTION 1. Direct staff to modify the terms of the proposed amendment to the franchise agreement RECOMMENDED ACTION Adopt the attached resolution authorizing the City Manager to execute an amendment to the franchise agreement with Republic Services for implementation of a citywide organics program. Prepared by: Martin Nelis, Public Information Officer Reviewed by: Andrew Murray, Assistant City Manager Attachment A Assessment of Organics Collection Services Provided by Republic Services, Inc from Crowe Horwath LLP Attachment B Proposed Resolution Attachment C Proposed Amendment to Franchise Agreement Exhibit E - Education, Outreach and Monitoring of Organics Program
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