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Item 15a Staff Report Approval to Negotiate Contract with Green Valley Disposal CompanyTOWN OF LOS GATOS COUNCIL AGENDA REPORT DATE: AUGUST 4, 1989 TO: MAYOR AND TOWN COUNCIL EXHIBIT 1 COUNCIL AGENDA DATE: AUGUST 7, 1989 ITEM NO: J� Air FROM: DEBORAH SWARTFAGER, TOWN MANAGWO-lb SUBJECT: APPROVAL TO NEGOTIATE CONTRACT WITH GREEN VALLEY DISPOSAL COMPANY TO PROVIDE CURBSIDE RECYCLING SERVICES AND SCHEDULE PUBLIC HEARING FOR OCTOBER 16, 1989 TO CONSIDER AWARD OF CONTRACT FOR CURBSIDE RECYCLING AND AMENDMENT TO GARBAGE COLLECTION RATES RECOMMENDATION: 1. That Council direct staff to negotiate a contract with Green Valley Disposal Company for provision of curbside recycling services. 2. Schedule a Public Hearing for October 16, 1989 to consider award of contract for curbside recycling and consideration of amendment to garbage collection rates. DISCUSSION: The attached report from the Rate Review Committee (consisting of staff representatives from the Town, Saratoga, Campbell and Monte Sereno) provides the following: (continued on page 2) PREPARED BY: REGINA A. FALKNER, Community Services D3''N'ion RAF:dr Reviewed by: Attorney TOWN COUNCIL ACTION DIRECTED TO: ACTION OF COUNCIL: A:\CNCLRPTS\GVOCR.cy. PAGE TWO MAYOR AND TOWN COUNCIL APPROVAL TO NEGOTIATE CONTRACT WITH GREEN VALLEY DISPOSAL COMPANY TO PROVIDE CURBSIDE RECYCLING SERVICES AUGUST 7, 1989 - A listing of the proposals received - Cost comparisons between the two least expensive vendors - Listings of the "pros" and cons of each of the two vendors - Program funding alternatives CONCLUSION: Green Valley Disposal Company and CIRCO Recyclers are offering the West Valley Cities the most affordable curbside recycling program. Although costs proposed by the two vendors are both $0.82 per household/month, staff recommends that the cities negotiate an agreement with Green Valley Disposal Company for the following reasons: 1. Green Valley Disposal Company has an established billing system which can easily accommodate the additional charge for the recycling program. Although CIRCO is willing to absorb the cost of billing, none of the other systems reviewed by staff are satisfactory. 2. Green Valley Disposal Company is also more familiar with the West Valley Communities and has established route systems to serve them. 3. Having a single vendor provide collection services is also advantageous. The vendor, providing comprehensive services, is more likely to note and fill holes in the solid waste management effort. Additionally, residents can contact a single vendor regarding services provided, thereby eliminating questions about which vendor is responsible for what service. With Council's approval, staff will negotiate a contract with Green Valley Disposal Company and return to Council in October with a recommended contract. FISCAL IMPACT: None. Should Council approve the recommended contract, costs for the services will be borne by the rate payers. EXHIBIT: 1. Curbside Recycling Request for Proposals (RFP) PAGE THREE MAYOR AND TOWN COUNCIL APPROVAL TO NEGOTIATE CONTRACT WITH GREEN VALLEY DISPOSAL COMPANY TO PROVIDE CURBSIDE RECYCLING SERVICES AUGUST 7, 1989 DISTRIBUTION: 1. Kevin Duggan, City Manager, City of Campbell 2. Harry Peacock, City Manager, City of Saratoga 3. Rosemary Pierce, Chief Administrative Officer, City of Monte Sereno DATE: August 4, 1989 MEMO TO: Kevin Duggan, City Manager, City of Campbell Deborah Swartfager, Town Manager, Town of Los Gatos Harry Peacock, City Manager, City of Saratoga Rosemary Pierce, Chief Administrative Officer, City of Monte Sereno FROM: Four -City Rate Review Committee SUBJECT: CURBSIDE RECYCLING REQUEST FOR PROPOSALS (RFP) RECOMMENDATION: That City Manager direct staff to negotiate a contract with Green Valley Disposal Company (GVDC) contingent upon collection of cardboard, grocery bags and scrap metal at no additional cost. BACKGROUND: As background to the above recommendation, attached please find the report from the Rate Review Committee dated February 27. 1989, which provides the following: o Summary of the Request For Proposal for curbside recycling o Background to the request, including discussions of: - The Proposal submitted by GVDC - The County Solid Waste Management Plan - Guadalupe Expansion - State Legislation - Jurisdictions served by GVDC - Status of Curbside Recycling A Request For Proposal describing a curbside recycling service tailored to meet the needs of the West Valley communities was approved by each of the City Councils in March of this year and subsequently released on April 3; the proposal opening was held on May 15. The Rate Review Committee recommends that the Managers direct staff to negotiate a contract with GVDC and, subsequently request authorization from each of the four Councils to enter into a five-year contract with GVDC for curbside recycling services. DISCUSSION: In response to the West Valley cities' request, four firms submitted proposals for provision of curbside recycling services: BFI; CIRCO Recyclers; GVDC; and Waste Management Inc. Five year costs ranged from $1,281,600 to $2,249,390 (Cities Billed), from $1,313,640 to $2,934,430 (Households Billed Annually), and from $1,313,640 to $3,226,235 (Households Billed Quarterly). The Rate Review Committee has reviewed pc, ,1:.. held sevre-al meetings to discuss proposals, and obtained additional clarifi:. ,ir._s tiaom contractors where necessary. As a result of the Committee's review and pursuant to the selection process outlined in the RFP, two firms, CIRCO Recyclers and GVDC, were interviewed. Generally, interview selection criteria focused on program costs and in one case, to a lesser degree, on completeness of the proposal and commitment to program promotion. A. Cost: Cost was the primary determinate in selecting a contractor. The table below outlines cost factors for each vendor. Year 1 - Year 5 Cost/household/month Total 5 years COSTS PER HOUSEHOLD PER MONTH CIRCO GVDC CITIES BILLED DIRECTLY $.80 $1,281,600 $.82 $1,313,640 *Difference of $32,040 over the five-year term; $6,408 average difference per year; or, difference of $.02/household/month. Cost/household/month Total 5 years Cost/household/month Total 5 years HOUSEHOLDS BILLED ANNUALLY $.82 $1,313,640 $.82 $1,313,640 HOUSEHOLDS BILLED QUARTERLY $1.03 $1,650,060 $.82 $1,313,640 *Difference of $336,420 over the five-year term; $67,284 average difference per year; or difference of $.21/household/year. B. Proposal Pluses and Minuses: Factors other than cost were also considered. The following lists the "pros" and "cons" of each vendor: -2- CIRCO, PLUSES - one bin system - breadth of experience in recycling industry - operate curbside recycling pilot programs in two cities (Pasadena and Walnut Creek - awarded contract for curbside recycling program in Walnut Creek - two staff members have experience in Palo Alto and Sunnyvale - commercial area experience - public relations campaign plans (more sophisticated, slide show, advisory committee, etc.) - free waste reduction audits to businesses interested in household hazardous materials collection; may be more competitive at securing grants for household hazardous waste collection program - buy back - drop off program - would also recycle garbage bags, cardboard and scrap metal MINUSES - billing mechanism not identified - no local transfer station secured - cost of obtaining route information unknown - another company for the public and staff to deal 1. who to call? 2. whose problem is it? GREEN VALLEY DISPOSAL COMPANY PLUSES with have billing system in place a. ability to add cost of recycling to refuse bill or simply as a cost of solid waste disposal b. quarterly bills as an opportunity to promote recycling program - knowledge of routes - knowledge of communities - experience with collecting in these communities - centralized materials collection MINUSES have not done curbside recycling public awareness campaign not as detailed as CIRCO in other communities the two -bin system has not yielded as high a volume as the single bin system should program lose revenue for company, revenue shortfall could result in higher fees charged at landfill use of yard facility as recycling transfer station not, yet, approved -3- F NDING ALTERNATIVES: Described below are five possible funding methods identified to finance the curbside recycling program. 1. Surcharge - Refuse Bill The most desirable mechanism may be a surcharge to the refuse bill. This method would be particularly streamlined if GVDC were the selected contractor. If CIRCO is selected, we anticipate there will be an additional administrative fee charged by GVDC to add the item to the bill, collect and account for the money, and distribute to the cities or CIRCO. 2. General Fund Contribution The Cities/Town could fund the recycling program by simply making an expenditure from their general funds. The annual cost (assuming $.82 per household per month) would be as follows: Campbell $ 83,640 Los Gatos 81,672 Monte Sereno 12,792 Saratoga 84,624 TOTAL $262,728 3. General Fund Contribution - Financed By Increased Refuse Franchise Fee In a variation of Alternative #2, the Cities/Town could finance a general fund contribution to pay for recycling through additional franchise fees. Pursuant to our franchise agreements, a ten percent franchise fee is paid to each city based on revenue derived there. An increase in the fee could be authorized that would equal the annual recycling program cost in each jurisdiction. The result of the increased franchise fee would of course be higher refuse rates. This alternative would, however, involve opening negotiations on our current franchise agreements with GVDC. Also, the additional fee needed in each jurisdiction is different. Because the fee is based on total revenue, those cities with smaller revenue bases would need greater increases to cover the recycling program costs. Differing franchise fee rates among the four jurisdictions may create administrative problems for GVDC which would need to be resolved. Additionally, while not necessarily inappropriate, we should recognize that using an increased franchise fee to support the program spreads the cost among commercial and Drop -Off -Box sectors as well. 4. Proverty Tax Surcharge Another method of financing the curbside program would be a fee collected through the property tax bill. At an estimated $.82 per household per month, the annual fee would be $9.84. As long as a relationship can be shown between the cost of the service and the charge, there is no question that it is a fee and not a tax. Therefore, a vote is not required. -4- In examining t''is alternative, however, we have identified several drawbacks. Fir! ., we would anticipate much more staff time involved in administering this funding method than with other alternatives. Secondly, there would be additional costs associated with setting up and managing this funding mechanism. Analytic Management Systems, a firm that the City of Campbell contracts with to help administer its Lighting and Landscape District charges, was able to provide some very rough estimates for consultant services. Initial set-up was estimated at about $10,000 and ongoing costs at about $5,000 annually. These figures assume the Cities/Town will provide information and staff support as well. Third, one of the more difficult aspects of identifying parcels to charge would most likely involve duplexes, triplexes, and fourplexes, which the recycling programs plan to serve. Fourth, the issue of an owner being assessed a fee while a tenant is receiving the service would need to be addressed. Fifth, because the property tax is collected in two installments, we might need to address those people who move during the year. Finally, the County Assessor, at the present time, is not able to add any new direct assessments to the tax roll. We understand, however, the Assessor is reviewing new computer systems, and in the future may be able to better accommodate these kinds of charges. 5. Charge at the Landfill Because Guadalupe Landfill will be annexed to the City of San Jose,•we would not be able to assess a charge per ton on refuse to cover the cost of a recycling program. We would assume, however, that the Cities and Town would attempt to persuade the City of San Jose to return a portion of the Business Tax to finance our recycling efforts. The amount that San Jose will collect from Guadalupe Landfill (from the West Valley Cities' residents) would more than cover a recycling program. CONCLUSION: GVDC appears to be offering the West Valley Cities the most feasible curbside recycling program. A primary objective of the curbside recycling program is to divert materials from the landfill. The CIRCO proposal contains elements which would probably result in higher volumes being diverted (i.e. one -bin system and higher participation rate assumed). This would potentially result in greater tipping fees savings. After reviewing the funding alternatives, however, staff is concerned that a method of collection satisfactory to the cities and CIRCO may not be implementable at the proposed cost. GVDC's established billing system on the other hand, can easily accommodate an additional charge necessary to finance the curbside recycling program. Furthermore, GVDC is more familiar with local communities and has established route systems to serve the West Valley cities. It is for the above reasons that the Rate Review Committee should be -5- directed to negotiate terms of a contract with GVDC contingent upon their collection of the additional ite s listed. We hope that resolutions authorizing execution of an agreement with ;he selected vendor could be forwarded to the respective Councils in August. RAF: dr Attachments -6- A:\memef\recyclnq.rfp