15 Staff Report - Solid Waste Collection Rate Adjustmentpow N of MEETING DATE: 5/16/05
ITEM NO. 15
f
COUNCIL AGENDA REPORT
X03 ~G At~s
DATE: May 12, 2005
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGER
SUBJECT: COUNCIL DISCUSSION AND AUTHORIZATION REGARDING
PROPOSED REVISION TO SOLID WASTE COLLECTION RATE
ADJUSTMENT
RECOMMENDATION:
Council discussion and authorization regarding proposed revision to Solid Waste Collection rate
adjustment.
BACKGROUND:
At its April 18t' meeting Council considered a proposed rate adjustment and authorized
Councilmember Glickman to support the adjustment at the West Valley Solid Waste Management
Authority's Board meeting held May 5'. (See attached report.) During rate discussions at the Board
meeting, members discussed preference for increasing rates this summer to a level that would be
effective through February 2007, the end of the collection agreement contract. This.action would
eliminate the need to increase rates again next summer. The Board approved the proposed rates and
directed staff to identify the rate adjustment necessary to implement this alternative. Rates could be
amended at the Board's special meeting to be held within the next 30 days.
DISCUSSION:
The Authority's Executive Director, Scott Hobson, worked with Green Valley Disposal
representatives to forecast the rate necessary to avoid imposing an increase next summer. Assuming
a 3.5% inflation rate, and a 25% increase in the motor fuel index, Los Gatos' rates would need to
increase 7% to carry it through February 2007.
PREPARED BY: Regina A. Falkner, C - Services Director
CADocuments and Settings\User\Desktop\trashrates2. f
Reviewed by: L6~LAssistant_Town Manager Town Attorney Clerk Administrator
-nv Finance Community Development Revised: 5/12/05 4:44 pm
Reformatted: 5/30/02
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT:
(May 12, 2005)
The affect on the residential rates is summarized below. The first figure represents the monthly rate.
Residential customers are billed quarterly; the second figure reflects the billed amount:
FY 2004/05
FY 2005/06
August 2005 -
1 can rate
1 can rate
February 2007
(existing rates)
(with 5%
1 can rate
adjustments)
(with 7.2%
adjustments)
$15.75/$47.25
$16.55/$49.65
$16.90/$50.70
CONCLUSION:
Staff recommends that Council provide feedback to its West Valley Solid Waste Management
Authority Board Representative, Councilmember Steve Glickman, regarding the 7.2% rate increase
alternative.
ENVIRONMENTAL ASSESSMENT:
The proposed Solid Waste Management rate adjustment is not a project defined under CEQA, and
no further action is required.
FISCAL IMPACT:
The Solid Waste Management surcharge will increase under the proposed rate adjustment. This
increase in revenues will be reflected in the FY 2005/06 Operating Budget.
Attachments:
Solid Waste Management Council Report; 4/18/05
Distribution:
Scott Hobson, Executive Director, West Valley SWM Authority
MEETING DATE: 4/18/05
pow %ITEM NO. %
COUNCIL AGENDA REPORT
~~S G Aj~s
DATE: April 12, 2005
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGE
SUBJECT: COUNCIL DISCUSSION AND AUTHORIZA REGARDING
PROPOSED SOLID WASTE COLLECTION.RATE ADJUSTMENT
RECOMMENDATION:
Council discussion and authorization regarding proposed solid waste collection rate adjustment.
BACKGROUND:
The Town contracts for solid waste collection and disposal services through the West Valley Solid
Waste Management Authority (Authority), a j oint powers agency consisting of the following member
municipalities: Town of Los Gatos, City of Campbell, City of Monte Sereno, and City of Saratoga.
The Authority was formed in 1997, at which time all four municipalities assigned their refuse
collection, disposal, residential curbside recycling collection, and residential yard waste collection
agreements to the new Authority. The Authority now holds contracts with Green Valley Disposal
Company to provide these services. It is the Authority's role to manage the contracts and the
services provided under them, including monitoring service levels, setting residential and
commercial collection rates, and negotiating new contracts as appropriate.
Residential and commercial collection rates were last adjusted in February 1995; in the last ten years
they have remained static.
The Authority is staffed by a contract Executive Director, Scott Hobson of Hilton Farnkopf &
Hobson, LLC. The Authority Board c Dixectors includes one Council representative from each
agency; Councihnember Glickman is the Los Gatos Boardmember.
PREPARED BY: Regina A. Falkner, Director of iiity Services
N:\CSD\TCRPTS\2005 TCRPTS\Swm rates fmal.wpd
_VZ
Reviewed by: Assistant Town Manager Q Town Attorney Clerk Administrator
_;,g7 Finance Community Development Revised: 4/12/05 1:56 pm
Reformatted: 5/30/02
PAGE 2
MAYOR AND TOWN COUNCIL
SUBJECT: COUNCIL DISCUSSION AND AUTHORIZATION REGARDING PROPOSED
SOLID WASTE COLLECTION RATE ADJUSTMENT
April 12,'2005
DISCUSSION:
The purpose of this report is to provide information on the Authority's proposed adjustments to
residential and commercial collection service rates, so that Council may direct the vote of its
Authority representative. .
Rate Adjustment Process
The Authority contracts with Green Valley Disposal Company to provide waste collection services
to Los Gatos residents and businesses under the Refuse Collection Services Agreement. This
agreement states the services that are to be provided, and outlines a process for setting the rates for
those services. Under the agreement, Green Valley may submit a rate adjustment request to the
Authority by March 1 of each year, for new rates effective July 1. The Authority then adopts the
rates for Los Gatos residents and businesses.
Collection rates for Los Gatos were last adjusted in February 1995, previous to the existence of the
Authority. Adjustments requested by Green Valley for 1996 received extensive review by the Town
and the other West Valley cities, in order to achieve fair and reasonable rates. In response, Green
Valley.sued the cities collectively for breach of contract. The negotiated settlement resulted in the
formation of the Authority, and a new Refuse Collection Services Agreement for each municipality.
The favorable terms of the new Refuse Collection Agreement resulted in a small surplus ofrevenues
over expenses for the first few years, which were used as a "rate stabilization fund" to offset
increasing costs in subsequent years. However, these funds have now been substantially depleted.
A rate adjustment request was submitted to the Authority by Green Valley this March 1. This
request has been reviewed for accuracy and adherence to contract requirements by the Authority's
Executive Director.
Proposed Adjustment
The Authority's agreements with Green Valley outline a Consumer Price Index (CPI) based formula
for adjusting rates each year. The collection rate includes the following six components:
Component
Annual Adjustment
Refuse Collection'
80% of annual change in the national CPI
Base Disposal
90% of the annual change in the national CPI
Disposal Surcharges
actual change in surcharges at landfill, imposed by various
regulatory agencies
Franchise Fees
actual change in franchise fees, set by member agencies
PAGE 3
MAYOR AND TOWN COUNCIL
SUBJECT: COUNCIL DISCUSSION AND AUTHORIZATION REGARDING PROPOSED
SOLID WASTE COLLECTION RATE ADJUSTMENT
April 12, 2005
Component
Annual Adjustment
Agency Surcharges
actual change in agency surcharges, set by member agencies
Recycling Surcharges
45% of the annual change in the national CPI, plus 5% of the
annual change in the motor fuel component of the national CPI
This formula has resulted in very small increases due Green Valley for the last several years. These
small increases have been absorbed by the Town's "rate stabilization fund," described above. As
the increase due this year is larger than in previous years, and as this fund has now been substantially
depleted, the increase due Green Valley under the agreements must be covered by an increase in
rates.
The proposed increase in rates, described below, will not add monies back to the "rate stabilization
fund." This fund will continue to be drawn down, though at a reduced rate. The strategy is to
graduallybring down the balance of the fiend until 2007, at which time there will be a new collection
contract, with new services and new rates, and potentially a new provider of these services. During
the negotiation process for the new contract, Council may wish to consider whether or not a rate
stabilization fund, or some other mechanism, would be a desirable component of the new rate
structure. This process will take place in early 2006.
The rate adjustment request submitted by Green Valley on March 1, which complies with the
contract formula described above, requires a 3.2% increase in rates effective July 1. This request
assumed no change in the Franchise Fee or Agency Surcharges components of the collection rates.
The Franchise Fee for Los Gatos is a percentage of gross revenues to Green Valley; no change is
contemplated for this fee. The Agency Surcharges for Los Gatos, for FY 2004/05, are as follows:
Surcharge
Amount
Recycling Administration
$30,000
Solid Waste Management
$95,000
Total
$125,000
The Recycling Administration surcharge supports General Fund activities. The Solid Waste
Management surcharge is used to fund solid waste management activities, budgeted in the Solid
Waste Management Program 2210. These activities have included public education efforts aimed
at increasing recycling, collection ofwaste from public litter receptacles in the downtown, and Town
participation in Authority activities. For FY 2004105, solid waste related activities performed by
Parks and Public Works Department staff were added to the Solid Waste Management Program
budget. These activities include sidewalk steam cleaning, trash removal in Town parks and regular
removal of debris from the streets and storm drains during the winter. Each of these services was
PAGE 4
MAYOR AND TOWN COUNCIL
SUBJECT: COUNCIL. DISCUSSION AND AUTHORIZATION REGARDING PROPOSED
SOLID WASTE COLLECTION RATE ADJUSTMENT
April 12, 2005
formerly funded through the General Fund. The shift to funding these services through the Solid
Waste Management surcharge reflects the Town's ongoing efforts to appropriately and precisely
align services with funding source.
In order to continue to fund these solid waste management activities from the Solid Waste
Management surcharge, the surcharge must be increased. Staff estimates that an increase of
$235,000 will be sufficient. This increase, and the adjustments due Green Valley under the
agreements, will result in a collection fee increase of 5%, rather than the 3.2% increase requested
by Green Valley.
Should the adjustment be made at the 3.2% level, rather than at the recommended level of 5%, the
solid waste management activities listed above would need to be funded from some other source of
funds, such as the General Fund, or the services be discontinued.
The agreements call for rate adjustments to become effective July 1. Due to the billing schedule
used by Green Valley, staff recommends that the new commercial rates become effective July 1, and
the new residential rates become effective August 1.
Rate Comparison
Residential collection rates, for the most popular service level, for the Authority member cities are
shown below. The 5% recommended adjustment would increase the rate for Los Gatos ratepayers
from $15.75 per month to $16.55 per month. Los Gatos would continue to have the lowest rates of
the West Valley cities. . .
Agency
FY 2004/05
1 can rate
(existing rates)
FY 2005/06
1 can rate
(with proposed
adjustments)
Los Gatos
$15.75
$16.55
Campbell
$16.85
$18.05
Saratoga
$18.18
$18.64
Monte Sereno
$21.00
$21.43
Public Outreach
A proactive approach has been taken to educate Los Gatos residents and businesses about the
collection rate adjustment. The Fall 2004 issue of the Town newsletter, the Los Gatos Yista,
included'a short article explaining the rate adjustment process, and directing readers to sources for
PAGE 5
MAYOR AND TOWN COUNCIL
SUBJECT: COUNCIL DISCUSSION AND AUTHORIZATION REGARDING PROPOSED
SOLID WASTE COLLECTION RATE ADJUSTMENT
April 12, 2005
more information. The Spring 2005 issue of the Vista, distributed this month, contained similar.
information, and discussed the May 5 Authority public meeting, at which rates will be considered.
Green Valley included the same information in the Spring 2005 issue of its newsletter, sent to all
residents and businesses in Los Gatos.
Future Adjustments
Current projections show that a 5% increase in rates will be necessary again in FY 2006/07; this
increase would be effective from July 2006 through March 1, 2007, when the new collection contract
will be in place. This anticipated increase will be necessary to keep service levels status quo.
CONCLUSION:
Staffrecommends that Council authorize its West Valley Solid Waste Management Authority Board
Representative, Council member Steve Glickman, to approve the proposed solid waste collection
rate adjustment.
ENVIRONMENTAL ASSESSMENT:
The recommended action is not a project defined under CEQA, and no further action is required.
FISCAL IMPACT:
As noted above, the Solid Waste Management surcharge will increase under the proposed rate
adjustment. This increase in revenues will be reflected in the FY 2005/06 Operating Budget.
Distribution:
Scott Hobson, Executive Director, West Valley Solid Waste Management Authority