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RESOURCES . RESPECT . RESPONSIBILITY CONSULTING GROUP, INC. 1512 Eureka Road, Suite 220, Roseville, CA 95661 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com March 12, 2021 Jordan Lane Solid Waste & Recycling Coordinator City of San Luis Obispo 990 Palm Street, San Luis Obispo, CA 93401 submitted via email: jlane@slocity.org SUBJECT: Proposal for Solid Waste Rate Study Dear Ms. Lane, R3 Consulting Group, Inc. (R3) is pleased to submit this proposal to provide the City of San Luis Obispo (City) with a Solid Waste Rate Study. We have been monitoring the City’s needs and expectations for the Rate Study for some time and have consequently established a tight-knit team of seasoned analysts who stand at-the-ready to fully meet the City’s objectives for this project. Several factors set us apart from our competitors - Primarily, we only work for public agencies and do not work for solid waste operators. This claim cannot be shared by some of our known, potential competitors. Secondly, while we are very well qualified to perform rate studies and have a track record of proven results, we are also a full-service solid waste consulting company on the leading edge of compliance with State mandates (such as SB 1383) and are always striving to advance our clients’ landfill diversion objectives. This means that we are not merely “bean-counters”, but rather long-term partners, working hand-in-hand with our clients to ensure successful passage of rates followed by implementation of quality programs, meaningful reporting, and clear communications with residents and ratepayers. We recently established a fee revenue audit of Integrated Waste Management fees paid by the San Luis Garbage Company to the San Luis Obispo County Integrated Waste Management Authority. During that project we executed a non-disclosure agreement with the Company (as is expected for this Rate Study) and took all appropriate steps to protect the Company’s sensitive information while still providing meaningful findings and recommendations to the Authority. We also established a good understanding solid waste conditions in the County and an excellent working relationship with the Authority, both of which will be valuable during the completion of this Rate Study project for the City. Garth Schultz will serve as Project Manager and primary point of contact for this engagement. He has the authority to contractually obligate R3 and negotiate contacts on behalf of R3. Jordan Muratsuchi will serve as Lead Project Analyst and is an exceptional rate study analyst. They will be supported by Rose Radford and Claire Wilson who worked on our recent project for the Authority. * * * * * We appreciate the opportunity to submit this proposal and look forward to working with the City. Should you have any questions regarding our proposal, or need any additional information, please don’t hesitate to contact us directly. Sincerely, Garth Schultz | Principal, Project Manager Jordan Muratsuchi | Sr Project Analyst, Lead Analyst R3 Consulting Group, Inc. R3 Consulting Group, Inc. 510.292.0853 | gschultz@r3cgi.com 808.284.3168 | jmuratsuchi@r3cgi.com In an effort to reduce paper usage, this page has been left blank for double-sided printing purposes. If printing, please consider using 100% recycled paper. 1. SUBMITTAL FORMS -22- SECTION I: PROPOSAL SUBMITTAL FORM The undersigned declares that she or he has carefully examined Project No. [xxxx] which is hereby made a part of this proposal; is thoroughly familiar with its contents; is authorized to represent the proposing firm; and agrees to perform the specified work for the following cost quoted in full: BID ITEM: SOLID WASTE RATE STUDY Total Base Price Other TOTAL $ Delivery of equipment to the City to be within _______ calendar days after contract execution and written authorization to proceed. ❑Certificate of insurance attached; insurance company’s A.M. Best rating: __________________. Firm Name and Address Contact Phone Signature of Authorized Representative Date City of San Luis Obispo | Solid Waste Rate Study 1 X A+ R3 Consulting Group, Inc. 1512 Eureka Road, Suite 220 Roseville, CA 95661 Garth Schultz 510.292.0853 March 12, 2021 75,430 N/A Proposal for Solid Waste Rate Study $ 75,430 1. SUBMITTAL FORMS 2 11/12/2020 McClatchy Insurance Agency License #0724020 2410 Fair Oaks Blvd, Suite 140 Sacramento CA 95825 Kimberley Maxwell (916) 488-4702 (916) 488-2336 Kim@McClatchyIns.com R3 Consulting Group, Inc. 1512 Eureka Road, Ste 220 Roseville CA 95661 Sentinel Insurance Company, Limited 11000 Hartford Accident & Indemnity 22357 Hartford Property & Casualty 34690 Philadelphia Indemnity Insurance Company 18058 CL20111216583 A 57SBAAT6312 11/27/2020 11/27/2021 2,000,000 1,000,000 10,000 2,000,000 4,000,000 4,000,000 B 57UECFM1071 11/27/2020 11/27/2021 1,000,000 Medical payments 10,000 A 10,000 57SBAAT6312 11/27/2020 11/27/2021 2,000,000 2,000,000 C Y 57WBCNP9192 07/01/2020 07/01/2021 1,000,000 1,000,000 1,000,000 D Professional Liability-Each Claim Professional Liability-Annual Aggregate PHSD1586478 12/15/2020 12/15/2021 $2,000,000 incl Claim Expens $3,000,000 incl Claim Expens $5,000 Deductible per Claim Proof of Insurance FOR INFORMATION ONLY SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE THE EXPIRATION DATE THEREOF, NOTICE WILL BE DELIVERED IN ACCORDANCE WITH THE POLICY PROVISIONS. INSURER(S) AFFORDING COVERAGE INSURER F : INSURER E : INSURER D : INSURER C : INSURER B : INSURER A : NAIC # NAME:CONTACT (A/C, No):FAX E-MAILADDRESS: PRODUCER (A/C, No, Ext):PHONE INSURED REVISION NUMBER:CERTIFICATE NUMBER:COVERAGES IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(ies) must have ADDITIONAL INSURED provisions or be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement. A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsement(s). THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. OTHER: (Per accident) (Ea accident) $ $ N / A SUBR WVD ADDL INSD THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. $ $ $ $PROPERTY DAMAGE BODILY INJURY (Per accident) BODILY INJURY (Per person) COMBINED SINGLE LIMIT AUTOS ONLY AUTOSAUTOS ONLY NON-OWNED SCHEDULEDOWNED ANY AUTO AUTOMOBILE LIABILITY Y / N WORKERS COMPENSATION AND EMPLOYERS' LIABILITY OFFICER/MEMBER EXCLUDED?(Mandatory in NH) DESCRIPTION OF OPERATIONS belowIf yes, describe under ANY PROPRIETOR/PARTNER/EXECUTIVE $ $ $ E.L. DISEASE - POLICY LIMIT E.L. DISEASE - EA EMPLOYEE E.L. EACH ACCIDENT EROTH-STATUTEPER LIMITS(MM/DD/YYYY)POLICY EXP(MM/DD/YYYY)POLICY EFFPOLICY NUMBERTYPE OF INSURANCELTRINSR DESCRIPTION OF OPERATIONS / LOCATIONS / VEHICLES (ACORD 101, Additional Remarks Schedule, may be attached if more space is required) EXCESS LIAB UMBRELLA LIAB $EACH OCCURRENCE $AGGREGATE $ OCCUR CLAIMS-MADE DED RETENTION $ $PRODUCTS - COMP/OP AGG $GENERAL AGGREGATE $PERSONAL & ADV INJURY $MED EXP (Any one person) $EACH OCCURRENCE DAMAGE TO RENTED $PREMISES (Ea occurrence) COMMERCIAL GENERAL LIABILITY CLAIMS-MADE OCCUR GEN'L AGGREGATE LIMIT APPLIES PER: POLICY PRO-JECT LOC CERTIFICATE OF LIABILITY INSURANCE DATE (MM/DD/YYYY) CANCELLATION AUTHORIZED REPRESENTATIVE ACORD 25 (2016/03) © 1988-2015 ACORD CORPORATION. All rights reserved. CERTIFICATE HOLDER The ACORD name and logo are registered marks of ACORD HIREDAUTOS ONLY Insurance Certificate 1. SUBMITTAL FORMS City of San Luis Obispo Specification No. 9xxxx -23- REFERENCES Number of years engaged in providing the services included within the scope of the specifications under the present business name: . Describe fully the last three contracts performed by your firm that demonstrate your ability to provide the services included with the scope of the specifications. Attach additional pages if required. The City reserves the right to contact each of the references listed for additional information regarding your firm's qualifications. Reference No. 1: Agency Name Contact Name Telephone & Email Street Address City, State, Zip Code Description of services provided including contract amount, when provided and project outcome Reference No. 2: Agency Name Contact Name Telephone & Email Street Address City, State, Zip Code Description of services provided including contract amount, when provided and project outcome City of San Luis Obispo | Solid Waste Rate Study 3 R3 Consulting Group, Inc. City of Menlo Park Rebecca Lucky 650.330.6765 | rllucky@menlopark.org 701 Laurel Street Menlo Park, CA 94025 Project Description: Please refer to page 7 within this proposal. Contract Amount: $250,000 Project Dates: October 2017 – Current Ongoing Project Dave Staub 408.615.3086 | dstaub@santaclaraca.gov 1700 Walsh Ave Santa Clara, CA 95050 City of Santa Clara Project Description: Please refer to page 7 within this proposal. Contract Amount - $299,000 Project Dates: November 2018 – Current Ongoing Project References 1. SUBMITTAL FORMS City of San Luis Obispo Specification No. 9xxxx -24- Reference No. 3 Agency Name Contact Name Telephone & Email Street Address City, State, Zip Code Description of services provided including contract amount, when provided and project outcome City of San Luis Obispo Specification No. 9xxxx -24- Reference No. 3 Agency Name Contact Name Telephone & Email Street Address City, State, Zip Code Description of services provided including contract amount, when provided and project outcome City of San Luis Obispo Specification No. 9xxxx -24- Reference No. 3 Agency Name Contact Name Telephone & Email Street Address City, State, Zip Code Description of services provided including contract amount, when provided and project outcome 4 Elaine Marshall 408.586.2603 | emarshall@ci.milpitas.ca.gov 1265 N. Milpitas Boulevard Milpitas, CA 95035 City of Milpitas Project Description: Can be found on page 8 within this proposal. Contract Amount - $80,000 Project Dates: June 2018 – Current Ongoing Project Cory Bytof 415.485.3407 | cory.bytof@cityofsanrafael.org 1313 Fifth Avenue San Rafael, CA 94901 Marin Franchisor’s Group Project Description: Please refer to page 8 within this proposal. Contract Amount - $88,000 Project Dates: November 2018 – Current Ongoing Project Eric Miller 530.879.2351 | emiller@buttecounty.net #7 County Center Drive Oroville, CA 95965 Butte County 4 5 Project Description: Assisting with solid waste planning efforts for the County’s Enterprise Fund and Neal Road Recycling and Waste Facility. R3 is providing a variety of services including reviewing and confirming rate adjustments, reviewing franchise agreements, providing contract negotiation assistance, drafting regulatory language for compliance requirements, and financial planning assistance. Contract Amount - $199,960 Project Dates: October 2020 – Current Ongoing Project1. SUBMITTAL FORMS 2. QUALIFICATIONS City of San Luis Obispo | Solid Waste Rate Study 5 About R3 Consulting Group, Inc. Incorporated in California in 2002, R3 Consulting Group, Inc., (R3) is a California Certified Small Business headquartered in Roseville, California. Our firm is led by two principals, Richard Tagore-Erwin and Garth Schultz, who have 40+ years of combined solid waste expertise. We specialize in providing a diverse range of solid waste management consulting services exclusively to public agencies, including rate and financial reviews, competitive procurement and/or extension negotiations of collection, processing and disposal services; development, implementation and monitoring of service contracts and franchise agreements; and legislative compliance. R3 works exclusively for public agencies, and does not work for any private solid waste management companies. We do, however, have very good professional working relationships with private sector service providers - which is valuable in negotiations. Solid Waste Rate Studies R3 regularly assists jurisdictions with solid waste rate and cost-of-service studies. Our rate studies include providing the following for our public sector clients: —Review and analysis of fees, rates, and rate structure options; —Projection and analysis of revenues and expenses over an extended planning period (5-10 years); —Development of rate models, cost-of-service rates and multiple-year rate-adjustment recommendations; —Analysis of annual costs, including capital expenditures, operations and maintenance, debt service, depreciation, and reserve requirements; —Evaluation and analysis of the current cost of services; —Evaluating rates and rate structures for Proposition 218 compliance; —Conducting nexus studies to support enterprise fund transfers; and —Developing enterprise fund rate models. Our staff has performed dozens of cost-of-service analyses in support of developing residential and commercial cost-of-service rate structures by line of business (e.g., residential, commercial, roll-off) and service level within each line of business (e.g., 30-, 60-, 90-gallon carts, commercial containers by size and frequency). R3 reviews and verifies the accuracy and reasonableness of cost/compensation allocations between lines of business provided by a solid waste company (e.g., single-family, multi-family, commercial and industrial services and/or garbage, recycling, and organics collection) and/or between several agencies served by a single solid waste company. Our cost-of-service analyses have been conducted in support of Proposition 218 compliance, and the establishment of fair and equitable rates for both franchised and municipal collection systems. In addition, we have developed recyclable material revenue-sharing methodologies, revenue incentives, and rate-adjustment methodologies to support increased diversion and address account migration. Our recent municipal rate study clients include the Cities of Berkeley, Davis, Folsom, Fresno, Merced, Redlands, Sacramento, San Jose, Tulare and Visalia; the Counties of Plumas and San Joaquin; and Kings Waste & Recycling Authority. 2. QUALIFICATIONS 6 R3 Qualifications and Experience R3’s project team brings a unique level of relevant experience and knowledge of solid waste solutions that can help you deliver fair and cost-based rates and policies that your community needs. Our work, with a sampling shown below, covers everything from rate analyses, agreement negotiations, legislative compliance, policy and ordinances development and revisions, to stakeholder engagement. More information on select projects can be found within the following pages. JURISDICTION SERVICE Rate Analysis and Study / Rate ReviewCost-of Service / Rate Structure AnalysisRate Survey /Fee StudyAnalysis of Comparable Agencies' RatesUpdates to Rate Setting Manual / PoliciesAmador County City of Banning City of Chula Vista City of Citrus Heights City of Cloverdale City of Concord City of El Cerrito City of Healdsburg City of Larkspur City of Los Altos City of Los Banos City of Menlo Park City of Merced City of Mill Valley City of Milpitas City of Newark City of Petaluma City of Pleasant Hill City of San Jose City of San Rafael City of Santa Clara City of Santa Clarita City of Santa Monica City of Santa Rosa City of Turlock Kings Waste and Recycling JPA Las Gallinas Valley Sanitary District Marin County Tamalpais Community Services District Town of San Anselmo Town of Windsor 2. QUALIFICATIONS City of San Luis Obispo | Solid Waste Rate Study 7 »City of Menlo Park | Rate Studies and Rate Structure Analysis »City of Santa Clara | Exclusive Franchise Agreement Negotiations and Rate Study R3 is engaged by the City of Santa Clara (City) to assist in the preparation and negotiation of the City’s future exclusive Franchise Agreements (Agreements) with Recology South Bay (Recology) and Mission Trail Waste Systems (MTWS), including a Rate Study to help the City establish customer rates for services to be provided under the new Agreements. R3 worked with City staff throughout the negotiation process to ensure that the new Agreements achieve the City’s objectives, including compliance with applicable state legislation, and the City’s long-term financial and diversion goals. R3 also assisted in procuring a separate contract for waste processing services to meet SB 1383 requirements with GreenWaste Recovery. Negotiations resulted in three compliance options for Council consideration, at varying levels of rate-payer convenience and expense. City Council selected most convenient and most expensive option, with projected increases in rates of about 60% over three years. R3 also recently completed a Rate Study for rates effective July 1, 2021 to ensure ongoing funding of City’s entire solid waste program and new expenses related to SB 1383 compliance. Project Benefits: • Successful negotiations of three solid waste agreements that were executed by the City and are now in effect. • Successful completion of a cost-of-service rate study which meets the annual solid waste system funding requirements, complies with Prop 218, addresses discounted rates for low-income residents, and funds the costs of SB 1383 compliance. In 2016, the City of Menlo Park (City) engaged R3 to develop a revised rate structure to calculate rates based on cost-of-service information provided by the City’s franchised hauler (Recology). R3 facilitated a transparent rate setting process, producing rates which aligned to cost-of-service and supported the City’s Zero Waste goals by preserving incentives to divert solid waste from landfill, including financial incentives for waste reduction. The new rate structure R3 developed allows the City to provide its customers with long-term consistency for their expected rates because it ensures that customers are charged in accordance with the specific services they receive and protected from potential rate spikes. In addition, it ensures the ease of future implementation during rate-setting processes for the City. With R3’s assistance, the City successfully adopted the rate structure and rate-setting methodology in November 2017. Currently, R3 is providing on-site staff support to the City. Tasks to be completed under this role include updating the City’s Solid Waste and C&D ordinances, developing a Reusable Foodware ordinance, managing the City’s contract with Recology, and helping the City develop, implement, and enforce a program for their zero waste building and occupancy requirements. These innovative requirements will require buildings to achieve zero waste by 2035. Specifically, the City’s Solid Waste Ordinance will be updated to require recycling and organics collection to increase diversion and meet the requirement of AB 341, AB 1826, and SB 1383. R3’s work scope for this project includes, but is not limited to, the following tasks: —Updating the City’s Solid Waste and C&D ordinances to require recycling and organics collection to increase diversion and meet the requirements of AB 341, AB 1826, and SB 1383; —Developing a Reusable Foodware ordinance; —Helping the City develop, implement, and enforce a program for their zero waste building and occupancy requirements; —Conducting a bimonthly call with City Staff and R3 Staff, for the term of this agreement; —Active tracking of permit applicants in the process; —Active management of auditors and audit requirements; —Providing support for 2020 rate setting, based on the rate structure already developed by R3 for the City. As part of this project, R3 also completed a survey of rates in the surrounding area and analyzed the impact on rates of potential increases to the City’s franchise fee. Based on the information provided, the City elected to phase in a modest increase to the franchise fee. 2. QUALIFICATIONS 8 »City of Milpitas | Detailed Rate Review and Annual Rate Adjustments R3 has been continually working with the City of Milpitas to conduct reviews of the 2018, 2019, 2020, and 2021 Annual Rate Adjustment Application submitted by the City’s hauler, Milpitas Sanitation Inc. (MSI). With the primary objective of calculating MSI’s rates for Rate Periods Two through Four. R3’s tasks include, but are not limited to: reviewing MSI’s Rate Application for compliance, mathematical accuracy, and logical consistency; determining MSI’s total contractor costs; calculating the rate adjustment factor and adjustment to rates; and providing the City with a recommended rate adjustment that is both accurate and reasonable. As part of this engagement, R3 is also evaluating funding options for the City to direct haul waste to several transfer and/or disposal facilities with the objective of establishing alternatives for the City to fund the transfer and disposal of Public Works waste. Project Benefits: • Calculation of MSI’s rates for Rate Period Two, to be effective January 1 through December 31, 2019; • Adjusted rate recommendations appropriate and reasonable based on the terms and conditions of MSI’s Agreement with the City; • Identification of any areas of non-compliance and net adjustments to MSI’s proposed Rate Application; and • Recommendations regarding City handling of Public Works waste disposal and cost coverage going forward. »Marin Franchisor’s Group | Rate Methodology & Detailed Rate Reviews and Annual Rate Adjustments R3 was engaged to conduct a comprehensive Rate Methodology Review on behalf of the Marin Franchisors’ Group (Group), which is made up of the Cities of San Rafael and Larkspur, the Town of Ross, the County of Marin, and the Las Gallinas Valley Sanitary District. R3’s primary objectives were to streamline and simplify the Group’s rate-setting methodology in order to address recycling commodities fluctuations and complete a meet-and-confer negotiation process to resolve $1.15 million in accumulated losses from the processing and sale of recyclable materials since the recycling market crash. R3 worked with the Group and franchised hauler, Marin Sanitary Service (MSS), to develop a rate-adjustment methodology that addressed changes and challenges in the industry in the coming years. Project tasks included: —Developing a Simplified Rate Adjustment Methodology – R3 simplified and streamlined the existing rate- adjustment methodology, and proposed a method of addressing changes and challenges in the industry in the coming years (i.e., where the industry is going and what the Group and MSS should be planning for) as well as the proposed approach to address potential MSS requested changes to programs and services in non-detailed rate review years; —Developing a New Methodology for Recycling Revenues Balancing Account – R3 addressed recycling commodities fluctuations, including how the processing cost and recycling revenue projections are set initially and adjusted after; and —Developing a Methodology for Addressing Commercial Migration – i.e., more recycling and composting results in a smaller garbage cart and lower price, but not less service or cost. Project Benefits: • Stable and predictable rates for the next 5 years, and a firm basis for rate control in future years; • Significant saving on consultant costs and staff time to conduct the of the annual rate adjustment process (anticipated annual 70-80% reduction in time and costs); • Improved accuracy and transparency of the rate adjustment process; • New performance metrics for outreach and education as well as regular operations, billing, and customer service; and • A revised rate-setting methodology designed to address rate fluctuations, while maintaining an emphasis on responsible solid waste management, good value to customers, and reduction of waste to landfill.2. QUALIFICATIONS City of San Luis Obispo | Solid Waste Rate Study 9 Project Team We have formed a leading team of specialists with experience implementing ambitious and complex solid waste rate models and policies throughout California. As a firm, we have broad and deep collective experience completing multi-year rate studies that adequately fund solid waste operations, secure new funding to meet state mandates and increase diversion achievement, protect rate-payer and City interests, all while operating within the boundaries set by Proposition 218. Within the last several years, R3 has completed multi-year rate studies, rate structure alternatives analyses, cost-of-service analyses and/or rate comparisons for California agencies including: »Amador County »City of Banning »City of Chula Vista »City of Citrus Heights »City of Cloverdale »City of Concord »City of Davis »City of El Cerrito »City of Fresno »City of Hayward »City of Healdsburg »City of Hercules »City of Larkspur »City of Los Altos »City of Los Banos »City of Menlo Park »City of Merced »City of Mill Valley »City of Milpitas »City of Newark »City of Petaluma »City of Pinole »City of Pleasant Hill »City of Rancho Cordova »City of Rancho Cucamonga »City of Richmond »City of Riverside »City of Rohnert Park »City of Roseville »City of San Bruno »City of San Jose »City of San Rafael »City of Santa Clara »City of Santa Clarita »City of Santa Monica »City of Santa Rosa »City of Turlock »City of Twenty-nine Palms »City of Upland »Town of Fairfax »Town of Ross »Town of San Anselmo »Town of Windsor »Kings Waste and Recycling JPA »Lake County »Las Gallinas Valley Sanitary District »Marin County »Novato Sanitary District »RecycleMore »Tamalpais Community Services District »San Mateo County »Zero Waste Sonoma Overall, projects for these clients and others have resulted in successful adoption of new rates to fund solid waste operations, adoption of new funding approaches for State compliance and diversion programs, and clear understanding of the outcomes on the part of agency staff, policy-makers and rate-payers alike. Thanks to our substantial portfolio of procurement and negotiation experience throughout the State we have an excellent understanding of the current trends and requirements in rate analysis and rate adoption, including the impacts of China’s National Sword, changes in solid waste generation rates and technologies, impacts of new State Laws including SB 1383, and the recent impacts of the COVID-19 pandemic. What’s more, haulers enjoy working with us because we treat them fairly and respectfully, guard the confidentiality of their information, and work towards well- reasoned and defensible outcomes for all parties. This promotes their cooperation and, in turn, the successful and timely completion of our projects. Organizational Chart Below is the organization of our project team structure. The City’s Core Project Team will be the primary, day-to-day staff responsible for this engagement. Additionally, R3 has a deep bench of talented analysts to pull from and can be made available to assist, as-needed. Resumes for these Core Project Team members can be found in the subsequent pages. PROJECT MANAGER Garth Schultz Principal-in-Charge »Marin Franchisor’s Group | Rate Methodology & Detailed Rate Reviews and Annual Rate Adjustments KEY TEAM MEMBERS Jordan Muratsuchi Sr. Project Analyst Claire Wilson Sr. Project Analyst Rose Radford Project Manager 2. QUALIFICATIONS 10 Garth Schultz Principal, Project Manager About Mr. Schultz has extensive solid waste management experience in both the private and public sectors. He has managed and evaluated municipally operated solid waste collection programs, conducted Detailed Rate Reviews and annual Indexed Rate Adjustments, and developed robust 5- and 10-year financial plans. His areas of financial planning expertise include reviewing rate applications for franchised haulers; assessing and designing rate structures and rate-adjustment scenarios; performing cost-of-service analyses; evaluating current and historical budgets; projecting capital and operating costs; and conducting market rate surveys and analyses. He is a skilled facilitator and regularly engages stakeholders on a variety of solid waste topics, including rate policy choices. Other areas of solid waste industry experience include: developing strategic Zero Waste and high-diversion plans; modeling, reviewing, and restructuring rates; reviewing hauler operations and performance; reviewing solid waste programs and providing recommendations for improvement; and engaging stakeholders and communities through workshops and outreach planning. Education & Certifications »Master of Public Administration and Public Policy Development - Cal State University, East Bay »Bachelor of Science in Environmental Science and Minor in Public Policy - University of California, Berkeley Relevant Experience »Zero Waste Plan and Rate Restructuring and Rate Study | City of Menlo Park Principal, led another restructuring process for the City’s rates, which overlaid cost-of-service rates with incentives to meet community Zero Waste goals. As a result of his work, the City adopted a new rate structure that facilitates a transparent rate setting process and customer rates that aligned with cost-of-service. »Solid Waste Rate Studies | Cities of Los Banos, Folsom, Menlo Park, Merced, Roseville, and Turlock; and Tamalpais Community Service District Principal, assisted with the development of estimates for operational requirements and costs to address future growth and potential expansion of collection programs, such as commercial recycling and organics in response to AB 1826 and SB 1383. He also conducted a comprehensive, cost-of-service study of solid waste utility rates and designed a financial planning model of up to 10 years based on expected cost increases over time. These studies regularly include: comparisons of rates to other agencies, review and recommendations regarding updates to rate setting manuals and policies, development of multiple rate adjustment scenarios, and analysis of discounted rate options. »Financial Compliance and Performance Audits | Cities of Piedmont, Fairfield, Santa Clara, Santa Rosa, and Stockton Principal, recently conducted financial compliance and performance audits, which helped determine if the cities’ haulers were fulfilling the financial terms of their Franchise Agreements, including proper billing of customers and accurate remitting of franchise fee payments to the cities. He led reviews of franchise fee payments, customer service lists, and contract compliance, and conducted on-site assessments of Republic’s compliance with commercial recycling and organics requirements. Mr. Schultz has also conducted financial compliance and performance audits for the Cities. »Rate Methodology Review and Rate Study | Marin Franchisors’ Group, Cities of San Rafael and Larkspur, Towns of Fairfax, Ross and San Anselmo, County of Marin, and Las Gallinas Valley Sanitary District. Principal, led the research for various rate setting methodologies and the complete restructuring of the Group’s base year detailed rate review methodology. He also assisted in the development of a valuable new methodology for the recycling revenues balancing account, which would address recycling commodities fluctuations, including how the processing cost and recycling revenue projections might be set at the beginning of an agreement and adjusted moving forward. Since original engagement with the Group to streamline and simplify the rate setting methodology in 2017, Mr. Schultz has been re-engaged every year for annual rate setting processes including presentations to seven member agency Councils and Boards. »High Diversion Implementation Planning | City of Los Altos, Menlo Park and Santa Rosa and Alameda, Santa Monica. Principal, recently led the development of several High Diversion Implementation Plans. He assisted in developing recommendations to meet diversion goals and objectives, and achieve compliance with AB 341, AB 1826, and SB 1383. 2. QUALIFICATIONS City of San Luis Obispo | Solid Waste Rate Study 11 Rose Radford Project Manager, Project Support About With her strong background in research and technical writing, Rose has accumulated valuable experience in solid waste management planning, environmental consulting, research, policy, data and financial analysis. Her strong analytical skills enable her to provide valuable support for R3’s financial planning projects, including Rate Reviews, Rate Models, and Rate Studies. She has a wide range of hauler compliance review experience, and has completed the past four years’ Financial Audit and Annual Report Audits on behalf of the South Bayside Waste Management Agency, and has been completing annual rate reviews on behalf of the City, as well as for the Cities of Los Altos and Concord, among others. She has completed over forty facility audits on behalf of Los Angeles County. Education & Certifications »Master of Public Administration in Environmental Science and Policy; Columbia University »Bachelor of Science in Conservation and Resource Studies; University of California, Berkeley »Construction and Demolition (C&D) Facility Evaluator; Recycling Certification Institute Relevant Experience »Cost-Based Rate Review, Extraordinary Rate Increase and Interim Rate-Setting | City of Milpitas Project Manager, assisted the City in reviewing the hauler’s annual rate applications since the beginning of the new hauling contract in 2017, including the most recent year’s cost-based rate review setting rates for calendar year 2021. As a part of this process, Rose reviewed the hauler’s financial and subscription data to verify accuracy reviewed the hauler’s rate application for alignment with the rate-setting methodology in the franchise agreement, and advised the City on policy decisions related to the hauler’s extraordinary rate increase request for COVID-19 revenues. Rose’s analysis resulted in a reduction in the hauler’s extraordinary rate increase request of 3.13%. »Solid Waste Rate Review | City of Newark Project Manager, assisted the City in reviewing the hauler’s extraordinary rate increase application. As a part of this process, Rose reviewed the hauler’s financial and subscription data to verify accuracy, reconciled the hauler’s revenues and expenses for labor-related costs, vehicle-related costs, fuel costs, other costs, and direct depreciation costs, confirmed that all non- allowable costs were not included in the hauler’s expenses, reviewed the hauler’s rate application for alignment with the rate-setting methodology in the franchise agreement, and advised the City on the reasonableness of the hauler’s expense requests. Rose’s analysis resulted in a reduction in the hauler’s extraordinary rate increase request from 9.03% to 6.51%. »Extraordinary Rate Increase Review | Cities of Upland and Rancho Cucamonga Project Manager, reviewed the hauler’s extraordinary rate increase request related to recycling revenue reductions. Rose verified mathematical accuracy and alignment with the rate-setting methodology in the franchise agreements, and conducted a detailed financial review of the hauler’s expenses and revenues related to changes in recycling markets. »Rate Structure Analysis | City of Menlo Park Project Analyst, developed the spreadsheet methodology that incorporates customer subscription levels and hauler collection and post-collection costs to set rates for garbage, recycling, and organics service in the residential and commercial sectors based upon the cost of providing service. The rate model Rose developed automatically calculates the change in customer rates to proportionately move toward cost-of-service without reducing any customer rates. This project established a logical and defensible approach to rate setting by the City, and also provided a user-friendly calculation spreadsheet for City use in setting future rates for recycling and organics service. »Refuse Rate Index Annual Rate Adjustments | Cities of Concord, Piedmont, and Los Altos Project Manager, reviewed annual rate adjustment requests for the Cities since 2016 for mathematical accuracy and alignment with the rate-setting methodology in the franchise agreements. »SB 1383 (Organics) Rate Survey | CalRecycle (California’s Department of Resources Recycling and Recovery) Project Analyst, played a primary role in designing the database used to store and analyze rates and services associated with SB 1383, including organic processing infrastructure and policy alternatives for jurisdictions to support the implementation of SB 1383 throughout California. »10-year Financial Plan and Cost-of-Service Analysis | City of Davis Project Analyst, documented current financial baselines, prepared revenue and expense projections, developed the Excel- based rate model, reviewed the City’s current rate structure, and analyzed various rate options for the 10-year planning period. 2. QUALIFICATIONS 12 Jordan Muratsuchi Sr. Project Analyst, Lead Analyst About Jordan Muratsuchi brings years of experience in waste management at the local and community level, and has a background in engineering and community planning. As Executive Director of an environmental 501c(3) nonprofit focused on waste management and community engagement, he synchronized the financial and operational systems. He has a diverse comprehension of environmental management, with experience in waste management, environmental engineering, storm water management, and community-based natural resource management. He has designed and built small-scale biodigesters, performed debris studies and analyses, planned recycling and community outreach events, and assisted in multiple research projects focused on local and community-based natural resource management. He is well-versed in facilitating solutions between governmental, business, and community stakeholders and clients. Education »Master of Science, Natural Resources & Environmental Management: University of Hawaiʻi, Mānoa »Bachelor of Science, Civil Engineering (Environmental Concentration): University of Michigan »Zero Waste Community Associate Certification - Zero Waste USA Relevant Experience »Rate Modeling, Rate Reviews and Other Solid Waste Services | Butte County Sr. Project Analyst, assisting the County in projecting future needs to sufficiently operate the Neal Road Recycling and Waste Facility. This includes developing a 10-year rate model to project revenues and expenses, and recommend revenue requirements that will provide the County with the financial resources to fund landfill operations, potentially procure a new composting facility, and build out reserves to industry standard levels. In 2020, he conducted detailed rate reviews for the County’s three franchised haulers, setting new base rates for this year. He is also analyzing organic waste capacity and edible food recovery capacity within the County for compliance planning per SB 1383. »Revenue Audit | San Luis Obispo County Integrated Waste Management Authority Sr. Project Analyst, performed an audit of financial records, tonnage reports, and solid waste management fees paid by in-county haulers and landfills. He evaluated the tonnage-based fees and performed recalculations to ensure the IWMA is compensated correctly. »Solid Waste Rate Study | City of Porterville Sr. Project Analyst, conducting a rate study, involving the creation of a 10-year financial model for the City’s solid waste enterprise fund. He is analyzing various rate adjustment scenarios that will allow the City to generate enough revenue for financial sustainability of its enterprise fund and ensuring a sufficient amount of reserve funds while being mindful of potential impacts to rate payers. »Feasibility Analysis for Outsourcing Operations | Lassen Regional Solid Waste Management Authority Sr. Project Analyst, performed a cost / benefit privatization analysis, currently in draft form, to inform the LRSWMA on the advantages and disadvantages of outsourcing physical operations. This includes a review of revenues and expenses, and projecting potential cost savings from outsourcing. »Recycling Operation Evaluation | City of El Cerrito Sr. Project Analyst, currently engaged by the City to evaluate options to outsource their recycling operations. He is providing the City with an analysis of current financial standing and projected market value of curbside recycling collection operations via a review of current budget and associated costs and implications of outsourcing. »Procurement and Negotiation Assistance | City of Wasco Sr. Project Analyst, creating a 10-year financial model for the City’s solid waste enterprise fund, including a 5-year rate plan that will ensure financial sustainability and legislative compliance at the best value for rate payers. Additionally, he is assisting in preparing the City for SB 1383 by identifying legislative requirements and developing an associated compliance plan, as well as recommending updates to the City’s solid waste Municipal Code. »Procurement Services | Tamalpais Community Services District Sr. Project Analyst, assisting with procurement of new refuse trucks that will work within the specific limitations of their service area which include narrow and hilly streets. The current configuration is no longer manufactured, and new models are needed. Benefits will be new vehicles to replace their aging fleet leading to improved service and reduced maintenance. »Procurement and Negotiation Assistance | City of El Cajon and California State Polytechnic University at Pomona Sr. Project Analyst, for these projects, evaluated and compared proposals for collection services. His primary function was analyzing the qualifications and experience of proposers as it relates to collection services experience.2. QUALIFICATIONS City of San Luis Obispo | Solid Waste Rate Study 13 Claire Wilson Sr. Project Analyst, Analytical Support Relevant Experience About Claire Wilson utilizes her background in environmental science and ecology and her experience in research and data analysis, plus community outreach and education, that is invaluable to the range of R3’s solid waste planning projects. She is experienced in Zero Waste and high diversion planning and implementation, specializes in community and stakeholder engagement strategies, and has worked with jurisdictions to develop innovative methodologies to approach Zero Waste and comply with State legislation. She has also assisted with the revision of municipal ordinances to update and clearly define diversion goals and other Zero Waste strategies. Education & Awards »Bachelor of Science in Environmental Studies - UC, Santa Barbara »Zero Waste Community Associate Certification - Zero Waste USA »2019 Young Professionals Scholarship Recipient - California Resource Recovery Association »Detailed Rate Review | City of Menlo Park Lead Analyst, worked to account for known and estimate future increases to the City’s contractor’s compensation, post- collection costs, and other changes. Ms. Wilson worked to analyze subscription levels for the purposes of forecasting annual rate revenues, re-work the City’s prior rate model (developed by R3) to continue to advance towards customer rates that align with the actual costs of providing service (which historically included higher proportionate increases to commercial rates, and lower increases to residential rates), and calculate recommended solid waste rates for the years 2021-2025. »Solid Waste Fee Audit | San Luis Obispo Integrated Waste Management Authority (SLO IWMA) Lead Analyst, she was lead analyst for R3’s financial audits and on-site reviews of each of the 16 licensed haulers and 3 landfills within the County to verify accuracy of three years of fee payments to IWMA. This audit was inclusive of the City’s current waste hauler, San Luis Garbage, and it’s landfill, Cold Canyon. »Detailed Rate Review | South Bayside Waste Management Authority Project Analyst, assisted in the past three years’ financial systems audit, which included verification of gross billed revenues, revenue adjustments for each member agency, the calculations used to derive disposal and processing expenses and the fees assessed by each member agency, and the calculations of surplus (or shortfall) in billings by member agency. »SB 1383 (Organics) Rate Survey | CalRecycle (Department of Resources Recycling and Recovery) Project Analyst, provided research assistance on SB 1383 implementation, including compilation of data on rate structures, infrastructure development, and compost facility capacity for jurisdictions/haulers throughout California. »NEF Hauler Audits and Compliance with Recycling and Organics Requirements | City of Santa Clara Project Manager and Lead Analyst, she has conducted a franchise fee review of the City’s 10-12 non-exclusive franchised haulers. Currently, she is the manager and lead analyst for this on-going project in its fourth audit cycle. She has communicated and managed data input for all haulers, and analyzed the revenue, customer accounts, and tonnage reports provided by each of the haulers. Additionally, Ms. Wilson compared City records of franchise fee payments with hauler records to determine if each hauler has paid the appropriate amount and used tonnage data to determine if City commercial recycling and organics requirements have been met for over 2,000 industrial sites in the City. »Solid Waste Tonnage and Residential and Commercial Franchise Fee Verification | Los Angeles County Project Analyst, reviewed records and documentation for the calculation of solid waste management fees paid to the County. Coordinated with landfills, transfer stations, processors, and other facilities in the County to conduct reviews, which include tracking and reviewing tonnage reports and revenues, and re-calculating solid waste management fees owed to the County to determine if an overpayment or underpayment occurred. »Climate Action Planning | City of San Luis Obispo Project Support, provided support in developing the zero waste Pillar of the City’s Climate Action Plan. Tasks included development of two pathways to achieve progress toward zero waste in the next five years. She also provided support in drafting a memorandum on the current status of the solid waste industry and provide context to the selected zero waste strategies including diversion potential and GHG emission reductions analyses.2. QUALIFICATIONS 14 Billing Rates & Payments In the table below, we have provided our hourly billing rates for R3 staff that may be involved in providing solid waste consultant hourly rates are effective January 1, 2021 and are subject to periodic adjustments based on CPI. Unless otherwise agreed in writing, fees for work completed will be billed monthly at the first of each month for the preceding month and will be payable within 30 days of the invoice date. CLASSIFICATION HOURLY RATE Principal $ 225 Project Director $ 215 Senior Project Manager $ 190 Project Manager $ 185 Senior Project Analyst $ 165 Senior Administrative Support $ 160 Project Analyst $ 155 Administrative Support $ 125 REIMBURSABLE COSTS Consultants/Subcontractors Cost plus 10% Lodging and meals Direct cost Travel — Private or company car At Current Federal Rate Travel — Other Direct cost Delivery and other expenses Direct cost Statement of Past Contract Disqualifications City of San Luis Obispo Specification No. 9xxxx -25- STATEMENT OF PAST CONTRACT DISQUALIFICATIONS The proposer shall state whether it or any of its officers or employees who have a proprietary interest in it, has ever been disqualified, removed, or otherwise prevented from bidding on, or completing a federal, state, or local government project because of the violation of law, a safety regulation, or for any other reason, including but not limited to financial difficulties, project delays, or disputes regarding work or product quality, and if so to explain the circumstances. ◼ Do you have any disqualification as described in the above paragraph to declare? Yes ❑ No ❑ ◼ If yes, explain the circumstances. Executed on at _______________________________________ under penalty of perjury of the laws of the State of California, that the foregoing is true and correct. ______________________________________ Signature of Authorized Proposer Representative City of San Luis Obispo Specification No. 9xxxx -25- STATEMENT OF PAST CONTRACT DISQUALIFICATIONS The proposer shall state whether it or any of its officers or employees who have a proprietary interest in it, has ever been disqualified, removed, or otherwise prevented from bidding on, or completing a federal, state, or local government project because of the violation of law, a safety regulation, or for any other reason, including but not limited to financial difficulties, project delays, or disputes regarding work or product quality, and if so to explain the circumstances. ◼ Do you have any disqualification as described in the above paragraph to declare? Yes ❑ No ❑ ◼ If yes, explain the circumstances. Executed on at _______________________________________ under penalty of perjury of the laws of the State of California, that the foregoing is true and correct. ______________________________________ Signature of Authorized Proposer Representative X March 12, 2021 R3 Consulting Group, Inc.,2. QUALIFICATIONS 3. WORK PROGRAM City of San Luis Obispo | Solid Waste Rate Study 15 Proposed Scope of Services This section provides a description of R3’s intended approach to efficiently and effectively provide a Rate Study to the City. We understand that the City’s expectations for the Rate Study is to accomplish the following objectives: —A comprehensive cost-of-service based study of solid waste rates and recommended rates for, at minimum, the next three years (CY 2022 through CY 2025); —A rate study narrative documenting the report methodology, assumptions and data behind the rate recommendations; —A rate forecast up to 10 years based on forecasted costs; —A spreadsheet based pro-forma model that will become the property of the City; »The model must be user-friendly and allow staff to compare different “Scenarios” and report on the results for future projections/recommendations; »Spreadsheet should include all necessary revenues; —An evaluation of rate structure alternatives compliant with Proposition 218; »Evaluate feasibility of flat or base rate to better support revenue stability; »Identify at least two (2) recommended rate structure alternatives for residential and commercial hauling services with an evaluation of advantages and disadvantages of each (should be incorporated into model); »Identify any start-up and/or on-going costs for implementing alternative rate structures; »Discuss pros and cons of different rate structure options and their general impacts on customer types; —An assessment of future costs associated with SB 1383 hauler requirements; —An analysis of discounted rate options for low-income or otherwise at-risk customers, in compliance with Prop 218; —A rate benchmarking analysis versus other local agencies; and —A summary of recommendations and considerations for the upcoming Rate Setting Manual update. R3 regularly conducts rate studies, financial planning, and Proposition 218 analyses meeting the City’s objectives for this project. The following tasks describe our approach to cost-effectively and efficiently achieve these objectives with the City and San Luis Garbage Company. Task 1 Project Orientation / Kick-off Meeting Successful projects begin with a mutual understanding and confirmation of key project objectives, goals, tasks, schedules, client interests, and expectations. We know the value of establishing a communication protocol to facilitate the successful, timely execution of the project to the satisfaction of the City. To that end, R3 will work with City staff to conduct a project Kick-off Meeting. Attendees will include key R3 project staff and should include key City and San Luis Garbage Company staff knowledgeable of the engagement, at the City’s discretion. R3 will submit an agenda for City review, distribute the approved meeting agenda, and lead the meeting in coordination with City staff, with the main objectives being the identification of key City and San Luis Garbage Company representatives that will be R3’s main points of contact throughout the Study, the roles and responsibilities of each, and the potential identification of other parties that may have a significant interest in the Study. 3. WORK PROGRAM 16 The Kick-off Meeting will provide an opportunity to review the City’s objectives, R3’s project approach, schedule and budget, and data availability. We suggest that the meeting begin with a private session between R3 and City staff, with San Luis Garbage Company joining in after preliminaries are completed. Throughout the course of the engagement, R3 will coordinate with the City and San Luis Garbage Company to schedule teleconference meetings (as needed) to discuss our review, information requests, and review our preliminary findings as they are developed. Task 2 Investigation and Data Collection The objective of this task is to identify and compile the information necessary to understand the City’s current rates, fees, and rate structure, as well as San Luis Garbage Company’s specific operational and revenue needs. Upon City authorization to proceed, R3 will submit a Request for Information (RFI) to the City and San Luis Garbage Company, which may include, but will not necessarily be limited to, the following: From the City: —Current solid waste ordinances and resolutions; —All current solid waste rates and fees, and historical rates and fees dating as far back in time as possible; —Current agreement (including amendments) with San Luis Garbage Company; —Correspondence between the City and San Luis Garbage Company regarding any relevant contractual matters (e.g., financial issues); —Annual billings for the past three (3) fiscal years; —An editable Word version of the Rate Manual, if available; —Accounting of Fees paid by San Luis Garbage Company to the City for the past three (3) fiscal years; and —Notifications to assess administrative charges and any other information related to the findings associated with those notices. From San Luis Garbage Company: —Historical and projected operating expenses and revenues, including anticipated capital expenses (preferably in Excel format); —Excel file with customer subscription levels detailing customer service level (cart/bin size and frequency), billing rate, service address, day of service, route, and special categories such as on-premise service, key service, etc. (SFD, MFD, Commercial, City), and any historical trends to these service levels; —Annual and quarterly billing register for the past three (3) fiscal years; —Historical diversion and disposal tonnages by material stream, line of business (residential, commercial, and roll- off) and program (e.g., residential curbside, residential organics, commercial recycling, C&D recovery, etc.); and supporting documentation for 2017-2019 reported diversion rates; —Audited (if available) financial statements supporting annual “Gross Rate Revenues” for 2017-2019; —Summary of gross receipts and corresponding franchise fees paid to City for the past three (3) fiscal years; —A complete list of billing codes; and —The approved rate schedules for the past three (3) fiscal years in Excel format. As this information is provided to R3, we will review, organize and catalog all information for use in completing the Study. R3 will take care to protect the proprietary interests of San Luis Garbage Company’s information as appropriate. R3 also understands that a non-disclosure agreement (NDA) with San Luis Garbage Company will likely be necessary. R3 has recent experience executing and complying with such an agreement with the Company, and we are comfortable with the terms and conditions in the draft NDA that the City has made available to proposers. 3. WORK PROGRAM City of San Luis Obispo | Solid Waste Rate Study 17 Task 3 Cost-of-Service / Rate Structure Analysis The objectives of this Task are to: 1. Evaluate the feasibility of a flat rate structure; 2. Develop at least two alternative rate structures; 3. Identify start-up and any on-going costs associated with implementing alternative rate structures; and 4. Discuss the pros and cons of the different rate structure alternatives including general impacts on customers. Task 3.1 Flat Rate and Alternative Rate Structures R3 will work with the City and San Luis Garbage Company to prepare a cost-of-service analysis, which is a key aspect of compliance with Proposition 218 requirements. The cost-of-service analysis can be conducted on two levels: 1. Line-of-Business Cost-of-Service Analysis – The analysis of revenues and expenses among lines of business (e.g., residential, commercial, industrial) with the intent of balancing revenues and expenses to eliminate any subsidies that may exist across lines of business (e.g., commercial rates subsidizing residential rates); and 2. Individual Rate Cost-of-Service Analysis – The analysis of rates and the relationships between rates within a given rate structure to determine the extent to which an individual rate reflects the cost of the associated service level (e.g., the cost to service a 4-yard container one time per week compared to the cost to service a 1-yard container four times per week). The cost-of-service analysis will 1) evaluate of the feasibility of a flat rate structure; and 2) include at least two (2) alternative rate structure scenarios for the City’s consideration. It is our understanding that alternative rate structures are to be developed concurrently with the City. As such, we are open to developing up to three (3) alternative rate structures should it be deemed worthwhile for the City. Advantages and disadvantages of each rate structure will be identified, incorporated, and discussed in the report to the City. One specific focus of this task will be to advance the City’s diversion goals and objectives under State Law, and to quantify the cost of commercial recycling services and the impact of potential expansion of those services in response to the State’s mandatory commercial organics recycling requirements under AB 1826 and SB 1383. This will support the determination of a specific cost-of-service rate for commercial organics recycling and various other commercial recycling rate options and increasing the City’s diversion achievement. Factors to be reviewed and evaluated via this analysis include: —Current and projected operating expenses; —Transfer, processing and disposal costs; —Current and projected revenue; —The City’s current rate structure, revenue streams and billing program; and —Other elements as identified by the City and R3. As part of this Task, R3 will examine the disposal costs of materials sent to Cold Canyon Landfill, Cold Canyon Processing Facility, and the Kompogas Facility. R3 will review and evaluate City tonnages delivered by the Company to these facilities, the costs per ton for those materials as well as trends in tonnages and costs. From there we will project future tonnages and costs for use in this analysis. Task 3.2 Identify the Start-up and On-going Costs Related to Alternative Rate Structures R3 will identify potential costs related to the initial implementation of a new rate structure and the associated on- going operations. We will include a discussion on these costs in our cost-of-service analysis. Start-up costs may include procurement of new containers, swapping of containers (as customers adjust to a new rate structure), and the associated delivery costs. Additionally, there would need to be a robust education and outreach effort during the initial implementation. On-going costs may include maintaining container inventory and continued education and outreach efforts.3. WORK PROGRAM 18 Task 3.3 Evaluate the Pros and Cons of Rate Structure Alternatives R3 will include a discussion on the pros and cons of each rate structure alternative in our cost-of-service analysis. We will work with both the City and San Luis Garbage Company to identify and address any specific areas of concern. Topics for discussion may include: —The extent to which the rate structure aligns with the cost of providing service; —The feasibility of the City to implement the rate structure; —Indirect community impacts (e.g., contamination, illegal dumping concerns); and —Potential impacts on customers. This evaluation will be based on industry and policy research and internal knowledge and experience from prior communications with similar jurisdictions. Task 3.4 Analysis of Discounted Rate Options in Compliance with Proposition 218 To be in compliance with Proposition 218, the standard customer rates should not subsidize the cost of providing discounted services to those receiving discounted rates. R3 has experience crafting Proposition 218 compliant need- based discounted rate mechanisms for other clients and is well positioned to help the City evaluate its alternatives. R3 will support the City in analyzing a discount rate for eligible residents, and will work with San Luis Garbage Company to understand the mechanics of implementing such a rate discount in the City. We will provide analysis, findings, and recommendations pertaining to discounted rate options in compliance with Proposition 218. This will generally include: —Identifying existing needs-based discount programs for existing utilities which will be used as the basis for establishing eligibility for such a discount for the solid waste rates; —Identifying or estimating the number of customers that may be eligible for a needs-based discount; —Estimating the amount(s) of discount that the City may wish to extend to eligible customers (e.g., 10%, 15%, 20%, etc.); —Estimating the amount of monthly and annual subsidy that would be needed to provide a Proposition 218 compliance needs-based discount to eligible customers; and —Providing guidance on the types of funding sources that may be used to fund the discounted rates in compliance with Prop 218. Task 3.5 Evaluate Policies and Provisions for Opt-out / Pause in Service R3 will examine the cost of non-service at properties currently receiving service and identify impacts to the City’s overall revenue. R3 has addressed this concern with other clients in a variety of ways, including but not limited to the following, all of which can be discussed with the City: —Setting a minimum flat monthly fee for accounts that pause service and/or opt out of service temporarily (e.g., for vacation holds); —Setting an overall revenue target for the Company’s operations, against which non-attained revenue from customers who opt-out or pause service may be applied; —Developing mandatory subscription ordinance requirements in compliance with Proposition 218; and —Setting rates at the cost of providing service. Via this task, R3 will work with the City to evaluate the specific needs and objectives for this task, and then will collaborate with the City to evaluate and describe policies and provisions that can be undertaken to address the underlying concerns. 3. WORK PROGRAM City of San Luis Obispo | Solid Waste Rate Study 19 Task 4 Rate Study The objective of this task is to project the cost of operations (for the City’s solid waste system as a whole) for a ten- year time frame and recommend cost-of-service rates for the next five rate years. We propose setting maximum allowable rates on a five-year period to align with maximum Proposition 218 noticing limitations. This task will incorporate the alternative rate structures identified in the cost-of-service analysis to provide the City with multiple rate scenarios. A broad description of R3’s general approach to conducting this type of analysis is included below – the specific approach for this Rate Study will vary from this description based on the form and content of San Luis Garbage Company’s projected operating expenses and revenue needs, which will be the starting basis for this analysis. Factors to be reviewed and evaluated via this analysis include: —Current and projected operating expenses; —Projected future operating costs resulting from residential, commercial and/or development growth and known future regulatory requirements; —Projected future operating costs resulting in new, changed and/or expanded collection programs such as commercial recycling and organics services and new infrastructure needs; —Vehicle and equipment replacement; —Transfer, processing and disposal costs; —Staffing needs; —Capital needs including trucks, containers, facilities, and other capital expenses; —Emergency operating reserve funds; —The City’s current rate structure, revenue streams and billing program; and —Other elements as identified by the City and R3. Task 4.1 Document Financial Baselines and Prepare Projections This task involves documenting current financial baselines, including applicable revenue and expense line items, fund reserves, capital cost estimates and any other relevant data. It is anticipated that this information will, with any appropriate adjustments, form the basis for projections over the five-year planning period. To the extent feasible, R3 will evaluate and incorporate historical information from prior rate study projects for the City to allow for review and analysis of historical trends. Available year-to-date information will also be reviewed. Revenue projections will be prepared for a ten-year planning period. These projections will account for both rate related revenue and non-rate related revenue (e.g., interest income, bond proceeds, grants, sale of assets, development fees, etc.), and the impact of growth and other relevant factors. Rate revenue projections will be based on current rates, which will then be adjusted as part of the rate modeling that will be performed in a subsequent task. Task 4.2 Prepare Expense Projections The purpose of this task will be to prepare projections of San Luis Garbage Company’s solid waste operation expenditures over the planning period. In developing these projections, we will coordinate with appropriate City staff, as necessary, to review the historical expenditures and discuss the assumptions, conditions and trends affecting the projections. The format for these projections will correspond to San Luis Garbage Company’s existing accounting records but will also incorporate modifications discussed in the Kick-off Meeting. To the extent that San Luis Garbage Company is projecting capital project expenses, we will review available capital project expense projections and, as appropriate, make any suggestions for updating or otherwise modifying those projections based on available data, including the operational projections developed in a prior task. Any such capital project expenses will be incorporated into the rate model. Working with the City and San Luis Garbage Company and based on information provided by the San Luis Obispo Solid Waste Management Authority, we will assess future costs associated with SB 1383 hauler requirements and include them in the overall expense projections.3. WORK PROGRAM 20 Task 4.3 Prepare Financial Plan The various revenue and expense projections developed in the prior tasks will be used to construct a simple, easy- to-use, easy-to-modify, and easy-to-update Excel-based ten-year rate plan (upon which the rate model and rates will also be built). The rate plan will incorporate the alternative rate structures previously identified. This ten-year plan will be cost-effectively developed by starting with San Luis Garbage Company’s operating projections. Task 4.4 Prepare Rate Model Using the ten-year financial plan, and in conjunction with City staff, R3 will analyze the City’s current rate structure in addition to the alternative rate adjustment scenarios and determine the revenues needed that are sufficient to fund the City’s annual operating costs over the ten-year planning horizon, while provide necessary funding for vehicle replacement, residential and commercial/development growth, operating reserves, and other expense and revenue factors. Using the model, we will develop and recommend rates for a five-year period. The resultant rate model will: —Be user-friendly and will allow staff to easily compare different scenarios; —Use best industry practices to determine the ability of the current rates and current rate structure to meet the City’s ongoing solid waste operational needs, and over what time frame; —Identify the specific impact that growth and new development will have on the rates as projected; —Use the ten-year financial findings and projections to recommend solid waste rates and service charges that are cost-based, equitable and legally defensible; and —Provide rates which meet the legal requirements of Proposition 218. Rate adjustment scenarios may include: —A single rate adjustment that will set rates and satisfy the revenue requirement over a set planning period without need for additional adjustment (e.g., no additional annual indexed adjustments); —A single rate adjustment that will set rates and satisfy the revenue requirement over the set planning period, with additional planned annual CPI indexed adjustments; —Consistent annual rate adjustments over a set amount of time to more gradually introduce the rate structure changes; —Periodic rate adjustments (e.g., rate adjustments every two or three years); and/or —Other viable rate adjustment scenarios as mutually determined by R3 and the City. As with prior tasks, R3 will seek to utilize and build upon the financial projections prepared by San Luis Garbage Company to ensure that efforts under this task are as cost-effective as possible. R3 will work with the City to establish how the resultant rate model can provide the flexibility to integrate information from the San Luis Garbage Company’s financial system into the model and thus compute rates over time. This will start with the Task 2 information request during which we will request examples of reports from the San Luis Garbage Company’s financial system in order to ensure that reports can be integrated into the ten-year financial plan and thus into the rate model. A CPI and/or RRI element will also be developed in conjunction with this Task, to provide regular annual adjustments over time. This element will be discussed and confirmed with City staff and San Luis Garbage Company and will be based on other similar and recent models developed by R3 via other client engagements. Task 5 Benchmarking Analysis of Comparable Agencies’ Rates The objective of this task is to conduct a survey of comparable local agencies’ solid waste rate and fee structure with a particular emphasis on the cities in San Luis Obispo County and neighboring region. R3 routinely conducts similar surveys across the State that can be leveraged for the cost-effectiveness of this effort. We will supplement existing information with original research of rates, fees, and services for 7-10 of the most comparable cities in San Luis Obispo County (which will be determined in consultation with City staff). 3. WORK PROGRAM City of San Luis Obispo | Solid Waste Rate Study 21 Prior to conducting this task, we suggest that R3 and the City establish which specific cities’ rates and services are most appropriate for comparison. Careful selection of comparable agencies is important – variances in rate setting methodology, potential subsidies between residential and commercial sectors, local interpretations of Proposition 218, post-collection agreement terms, disposal and processing fees, government and regulatory fees, provision of services to schools, distribution of container sizes in the community, and many other factors can make a seemingly “apples- to-apples” comparison complex, with results that may not be representative for the purposes of this comparison and benchmarking exercise. In order to select appropriate comparisons prior to conducting the survey, R3 will prepare a list of known municipal solid waste operations along with currently retained information about the rates, services, location and other conditions that will facilitate selection of appropriate comparable communities. We will provide this information to City staff and then solicit the City’s input on the top 7-10 communities for inclusion in the survey. R3 will then communicate with staff at the selected cities to gather information including: —Community population; —Services rates for all container sizes, waste streams, and other services; —Detailed list of services that are provided via any “bundled” service rates, and the specific service offerings for those services (e.g., bulky item pickups, extra service charges, street sweeping services, City services, services to schools, HHW service, etc.) —Types, sizes and frequency of collection of containers provided for residential, commercial and industrial customers; —Specific information regarding post-collection costs including disposal, organics processing, and recyclables processing fees, as applicable; —Governmental and regulatory fees, as applicable; and —Other information discussed and confirmed in consultation between R3 and the City. R3 will seek this information voluntarily from the 7-10 communities selected in consultation with the City via phone, email, and written request. If we are unable to acquire complete survey information for five comparable communities based on the voluntary request, we may suggest that the City issue a formal Public Records Act request for the necessary information. However, we would like to avoid that being necessary because of the time, effort, and relationship impacts that can arise from making such requests. Results from this Task 3 will be presented to the City in form of a brief electronic memorandum, raw data sets (in Excel) and a summary of results in chart form, which will serve as a baseline with respect to the results of the following Study Tasks. Task 6 Recommendations for Rate Setting Manual Update Recommendations for updating the Rate Setting Manual will be based on current industry standards, acknowledging the relevant legislation that has been implemented since the Manual was developed. Generally, R3 expects that revisions to the Rate Manual will not need to be extensive; rather, we would seek to work with the City to simplify and streamline aspects of the Rate Setting Manual that may no longer apply (given that the Rate Manual is over 20 years old) or that may be overly complex. Alternatively, should the City wish to consider alternatives to the Rate Setting Manual, the efforts of this task can be redirected at establishing a simple summarized description of future rate setting processes. Such summary descriptions are now the industry standard for solid waste collection agreements, with detailed rate setting manuals of the type currently in place in the City being uncommon (and generally unnecessary). 3. WORK PROGRAM 22 Task 7 Meetings, Reporting and Presentation The objectives of this Task are to prepare reports and present Rate Study and Feasibility analysis findings to City staff. R3’s findings and recommendations will be organized in an electronic Draft Report. The Draft Report will be submitted to City staff for review and comment, and an electronic Final Report will be prepared based on incorporation of consolidated written comments received from the City. The Draft and Final Reports will include recommended rate adjustments and will summarize the findings and recommendations from Tasks 1-6 above, including charts showing the proposed rates, detailed calculations of the expected solid waste expenditure budget for each year, and the expected solid waste revenue based on rates proposed via the rate study. Our proposed cost estimate for the Tasks and deliverables proposed herein includes five (5) virtual meetings with City staff and virtual attendance at up to three (3) meetings with City Council (including presenting our work, findings and recommendations to the City Council for a study session, rate presentation, and rate hearing). Within our proposed cost estimate, we have included the development of a PowerPoint presentation summarizing our work and based on the contents of our Draft and Final Reports. We will provide a draft copy of the presentation to City staff for review and comment, with the draft being revised into a final presentation. Project Deliverables R3 will provide the following project deliverables: —One (1) Final Cost-of-Service Analysis with Rate Structure Alternatives in Microsoft Excel format; —One (1) Final 10-year pro-forma Financial Plan and one (1) final 10-year pro-forma Rate Model in Microsoft Excel format; —One (1) Final 10-year Cost-of-Service Rate Plan in Microsoft Excel format; —One (1) Draft Report in Microsoft Word format containing all of our findings; —One (1) Final Report in Microsoft Word format; —Preparation for and attendance at up to five (5) virtual meetings with City staff; —One (1) draft and one (1) final PowerPoint (PPT) presentation to City Council; and —Preparation for and virtual attendance at up to three (3) meetings with City Council. 3. WORK PROGRAM City of San Luis Obispo | Solid Waste Rate Study 23 Proposed Schedule R3 is available to begin work on this project as soon as indicated by the City. R3 proposes the following schedule for work completion, with the project beginning in March 2021 and completing by the end of December 2021. Please note these dates are subject to change, based on timing of notice to proceed from the City. TASK START FINISH 1. Project Orientation / Kick-off Meeting March 19, 2021 March 26, 2021 1.1 Agenda, Kick-off Meeting, Next Steps March 19, 2021 March 26, 2021 2. Investigation and Data Collection March 19, 2021 April 9, 2021 2.1 Prepare RFI, Review Documents Received & Follow Up Questions March 19, 2021 April 9, 2021 3. Cost-of-Service / Rate Structure Analysis March 26, 2021 May 7, 2021 3.1 Rate Structure Analysis (including feasibility of a flat rate)March 26, 2021 April 23, 2021 3.2 Identification of Costs Related to Rate Structure Alternatives March 26, 2021 April 23, 2021 3.3 Identification of Pros and cons of Rate Structure Alternatives March 26, 2021 April 23, 2021 3.4 Analysis of Discounted Rate Options in Compliance with Prop 218 March 26, 2021 April 23, 2021 3.5 Analysis of Policies and Procedures for Opt-out / Pause in Service March 26, 2021 May 7, 2021 4. Rate Study March 26, 2021 May 7, 2021 4.1 Document Financial Baseline and Prepare Budget Projections March 26, 2021 April 16, 2021 4.2 Prepare Expense Projections March 26, 2021 April 23, 2021 4.3 Prepare Financial Plan March 26, 2021 April 23, 2021 4.4 Prepare Rate Model March 26, 2021 May 7, 2021 5. Benchmarking Analysis of Comparable Agencies’ Rates March 26, 2021 April 30, 2021 5.1 Compare the City’s Rates and Services with Similar Agencies March 26, 2021 April 30, 2021 6. Recommend updates to the Rate Setting Manual March 26, 2021 May 7, 2021 6.1 Review and Develop Recommendations March 26, 2021 May 7, 2021 7. Meetings, Reporting and Presentation March 19, 2021 December 31, 2021 7.1 Draft Report May 7, 2021 May 21, 2021 7.2 Final Report June 11, 2021 June 25, 2021 7.3 Up to Five (5) Virtual Meetings with City March 19, 2021 December 31, 2021 7.4 Up to Three (3) Virtual Meetings with City Council June 25, 2021 December 31, 2021 3. WORK PROGRAM 24 Proposed Budget This section includes our proposed budget to complete this project. Our project budget includes the scope of work and deliverables, as listed in Tasks 1-7. Please note, our proposed cost estimate includes virtual attendance at all meetings – should in person meetings be required, additional budget may be necessary. TASK STAFF TOTAL HOURS TOTAL COSTGarth Schultz Rose Radford Jordan Muratsuchi Claire Wilson 1. Project Orientation / Kick-off Meeting 1.1 Agenda, Kick-off Meeting, Next Steps 2 2 2 2 8 $ 1,480 2. Investigation and Data Collection 2.1 Prepare RFI, Review Documents & Follow Up Questions 2 2 8 2 14 $ 2,470 3. Cost-of-Service / Rate Structure Analysis 3.1 Rate Structure Analysis 8 0 32 0 40 $ 7,080 3.2 Identification of Costs 4 0 8 0 12 $ 2,220 3.3 Identification of Pros and Cons 4 0 8 0 12 $ 2,220 3.4 Analysis of Discounted Rate Options 2 0 8 16 26 $ 4,410 3.5 Analysis of Policies and Procedures 2 16 8 0 26 $ 4,730 4. Rate Study 4.1 Document Financial Baseline and Prepare Projections 4 4 24 0 32 $ 5,600 4.2 Prepare Expense Projections 2 8 12 0 22 $ 3,910 4.3 Prepare Financial Plan 2 4 24 0 30 $ 5,150 4.4 Prepare Rate Model 8 0 24 0 32 $ 5,760 5. Benchmarking Analysis of Comparable Agencies’ Rates 5.1 Benchmarking Analysis of Comparable Agencies’ Rates 4 0 16 20 40 $ 6,840 6. Recommend updates to the Rate Setting Manual 6.1 Review and Develop Recommendations 4 8 8 8 28 $ 5,020 7. Meetings, Reporting and Presentation 7.1 Draft Report 4 8 24 4 40 $ 7,000 7.2 Final Report 4 4 8 0 16 $ 2,960 7.3 Up to Five (5) Virtual Meetings with City 10 0 10 0 20 $ 3,900 7.4 Up to Three (3) Virtual Meetings with City Council 12 0 12 0 24 $ 4,680 Totals 78 56 236 52 422 $ 75,4303. WORK PROGRAM City of San Luis Obispo | Solid Waste Rate Study 25 4. REQUESTED CHANGES TO TERMS & CONDITIONS Agreement and Insurance Requirements R3 Consulting Group, Inc., does not object to any requirements in the City of San Luis Obispo standard professional services agreement attached to the RFP. We will sign the standard City’s professional services agreement upon award of the contract. 4. REQUESTED CHANGES TO TERMS & CONDITIONS