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Item 6c. 2022 Solid Waste Rate Study and Resolution Establishing Integrated Solid Waste Rates
Item 6c Department: Utilities Cost Center: 6107 For Agenda of: 4/19/2022 Placement: Public Hearing Estimated Time: 30 minutes FROM: Aaron Floyd, Utilities Director Prepared By: Jordan Lane, Solid Waste and Recycling Coordinator; Rebecca Bernstorff, Business Services and Administrative Manager SUBJECT: 2022 SOLID WASTE RATE STUDY AND A RESOLUTION ESTABLISHING INTEGRATED SOLID WASTE RATES RECOMMENDATION Adopt a Resolution entitled “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Integrated Solid Waste Rates”, provided there is not a majority protest against such increase. REPORT-IN-BRIEF In accordance with the City’s Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates (Rate Setting Manual, Attachment B), a franchised waste hauling company has an opportunity to apply for a rate increase every three years. The City of San Luis Obispo received a rate application from San Luis Garbage Company proposing (1) an increase to curbside waste collection of 17.75 percent and (2) a temporary rate increase of 8.88 percent to cover a delay in rate adoption, in addition to an impending fee increase based on 5.4 percent of gross hauler receipts imposed by the San Luis Obispo Integrated Waste Management Authority (IWMA) on all member agencies starting July 1, 2022. The proposed solid waste rates are needed to continue to provide environmentally sound solid waste, recycling, and green waste collection and processing services to City customers. The proposed solid waste rates were prepared in compliance with Proposition 218 and the City’s Rate Setting Manual. DISCUSSION Background San Luis Garbage Company (the Garbage Company) has three Franchise Agreements with the City to provide collection, transportation and disposal of solid waste, recycling, and green waste (Attachments C, D, and E). Each Franchise Agreement outlines the obligations of both parties in areas like service delivery, record keeping, and regulatory compliance. In accordance with the agreements, the City’s solid waste, recycling, and green waste is collected for processing by the Garbage Company each week for residential customers and up to seven days per week for commercial customers. Page 747 of 1192 Item 6c On August 10, 2021, the Garbage Company submitted its base year rate application (Attachment F) for consideration by the City. One major factor impacting the cost of waste service is Senate Bill 13831 (Short-lived Climate Pollutants, SB 1383) which was adopted in 2016 and takes effect this year, 2022, requiring statewide waste collection changes to reduce greenhouse gas emissions at landfills. Organic waste decomposes in landfills and generates methane gas, a greenhouse gas at least 80 times more potent tha n carbon dioxide. Landfills are the third largest source of methane gas in California, and SB 1383 aims to reduce emissions by decreasing the amount of organic material that is landfilled in the State. Beginning in 2022, the City is required to provide organic waste collection services to all residents and businesses by expanding its existing curbside green waste program and as a result, new responsibilities have been assigned to the Garbage Company for the collection and disposal of additional incoming organic waste. As required by newly applicable Senate Bill 1383, Council will also be considering, as a separate agenda item, the required diversion-based amendments to the three Franchise Agreements on April 19, 2022. The City’s Rate Setting Process and Proposed Increases The City’s Rate Setting Manual provides a process and schedule for review of the Garbage Company’s rates. Under this methodology, base year applications are prepared every three years. Base year applications require a detailed submittal and review of past, current, and future operating expenses. As part of the rate request review and analysis, the Garbage Company outlines the revenues, expenditures, profits, and operational information that is necessary to measure compliance with the terms of the Rate Setting Manual and to document the need for the proposed rate increase. In addition to the financial documentation requirements, the Rate Setting Manual aims to have rates that are environmentally sound, easy to understand, and supportive of the City’s waste reduction goals. Based on the costs of implementing new State regulations and nationwide increases in operational costs (supplies and fuel for example), insurance, and labor, San Luis Garbage Company has submitted a Base Year Rate Adjustment Application to the City for a 17.75 percent increase effective May 1, 2022 and onward, a temporary 8.88 percent rate increase to be effective May 1, 2022 – January 1, 2023 and a 5.4 percent IWMA fee increase to be effective July 1, 2022 and onward. 1 S. SB-1383, Chapter 13.1 (commencing with Section 42652) to Part 3 of Division 30 of the Public Resources Code SB-1383 Short-lived climate pollutants: methane emissions: dairy and livestock: organic waste: landfills. ( 2016) enacted). Rate Setting Objectives 1.Easy to understand 2.Environmentally sound 3.Supportive of waste reduction goals Page 748 of 1192 Item 6c Three Rate Increases and the Reasons for Them There are three rate increases proposed with this resolution as follows. 1) A proposed 17.75 percent rate increase effective May 1, 2022 is based on: a. Equipment. Across the country, industries are facing financial and operational challenges caused in large part by the pandemic, inflation, and material shortages. The proposed rate increase from the Garbage Company considers increases in costs associated with capital, the anaerobic digestion facility, market wage adjustments, and other operating functions. b. Capital. Increased revenue will be used to fund replacement of service vehicles compliant with California specifications. New vehicles are necessary to support increased demand of the curbside organic waste program while reducing statewide emissions. Worn containers and equipment will also be replaced. c. Anaerobic Digestion Facility. The local anaerobic digestion facility, which processes the City’s curbside food and yard waste and turns it into compost, has been fully operational and serving San Luis Obispo since 2018 but has met some unanticipated challenges with being the first of its kind built in the United States. Challenges impacting the rate increase include: 17.75% SLG Proposed Rate Increase Effective May 1, 2022 Anaerobic Digester: 3.70% CPI/Other Operational: 5.61% Capital Purchases: 3.84% Market Wage Rate: 1.99% AB 939 & SB 1383 Implementation: 1.55% Insurance Increases: 1.06% 8.88% SLG Proposed Temporary Rate Increase Effective May 1, 2022 The additional 8.88% temporary increase is for the delayed rate implementation from January 1 to May 1, 2022. The 8.88% temporary increase will expire January 1, 2023. 5.4% IWMA Fee Effective July 1, 2022 At the March 9, 2022 IWMA Board Meeting, the total fee amount was adopted. The fee will be implemented starting July 1, 2022. Page 749 of 1192 Item 6c i. Unanticipated rises in prevailing wage and material costs, ii. Deficiencies in the quantity, quality, and availability of feedstock to produce renewable electricity, iii. Accelerated equipment replacement, iv. Permit constraints related to incoming tonnage, v. Upgrades to meet necessary building specifications, vi. Modifications including the addition of screening mechanisms, and vii. Waste stream improvements like new Fats, Oils, and Greases equipment. The facility plays a major role in the City’s compliance efforts to meet the requirements of SB 1383 and the City’s goals of carbon neutrality. The success of these programs relies heavily on the facility operating properly and processing all incoming food and yard waste. The Garbage Company must maintain a fleet capable of collecting and transporting an increased inflow of organic waste, must provide service to all residential and commercial customers, must provide labeled bins to all customers, and must continue to support diversion of curbside recycling and organics. d. Market Wage Adjustments. Employers throughout the country are facing challenges with hiring and retaining qualified labor. San Luis Garbage is no exception and has found positions that require commercial driving licenses, customer service representatives, and mechanics are especially difficult to hire. The proposed rate increase accounts for an increase of $2 per hour and 5% salary of non-management positions to help attract and retain qualified employees to deliver safe and quality service. e. Other. Three other reasons for the proposed rate increase include: insurance premium increases, AB 939/SB 1383 fee increases, and overall increases in CPI. Table 1: Key Rate Increase Factors 2) A temporary rate increase of 8.88% effective May 1, 2022 and expiring January Key Factor Proposed Rate Increase Capital investment costs for new collection vehicles, replacement waste containers, and additional waste containers to meet the demands of SB 1383 compliance. 3.84% Increased capital equipment investments and escalating operating expenses related to the anaerobic digester. 3.70% Market wage adjustments to attract and retain safe and quality employees. 1.99% Increases in insurance premiums. 1.06% Page 750 of 1192 Item 6c 1, 2023. San Luis Garbage Company’s 8.88 percent temporary rate increase accounts for a period of uncollected revenues from January 1 to May 1, 2022, and is required by the Garbage Company to fund operations over the next year. The delay in rate adoption was due to the timing of the County of San Luis Obispo’s withdrawal from the IWMA in relation to the effective date of SB 1383 regulations. SB 1383 became effective on January 1, 2022 and as a result, local government solid waste sections are expanding to comply. As members of the IWMA2, the City and other Member Agencies have assigned specific requirements to the regional body that would otherwise be designated to jurisdictions. Assigned duties of the IWMA include providing outreach and education, performing compliance inspections, record keeping and reporting, and administering waivers all which create new costs. The cost of IWMA operations is divided between Member Agencies. The County’s sudden departure created both fiscal and operational impacts to the IWMA’s implementation of SB 1383 and were not fully known in time for rate adoption January 1, 2022. A study of the IWMA fee was necessary for rate adoption under Proposition 2183 and was completed in time for the final 5.4% IWMA Board fee adoption on March 9, 2022. According to the City’s adopted Rate Setting Manual, the City will include the value of revenue lost due to the delay as part of the pending Base Year Rate Adjustment Application. The proposed temporary fee of 8.88 percent allows the Garbage Company to remain operational despite being deficient in revenues colle cted between January 1 and May 1, 2022. The proposed fee is temporary and will expire on January 1, 2023. 2 The IWMA is a government entity formed through a Joint Powers Authority and is now governed by an eight-person Board of elected officials from the cities of Arroyo Grande, Atascadero, Grover Beach, Morro Bay, Paso Robles, Pismo Beach, San Luis Obispo and one member representing eleven Community Service Districts. These jurisdictions, along with the County, formed the IWMA in 1994 to plan and implement regional solid waste and hazardous waste programs. The scope of services provided by the IWMA to Participating Agencies are based on California statutes and regulations intended to optimize economies of scale and support regional compliance. The County’s departure impact the revenues and expenditures of the agency. 3 In general, the intent of Proposition 218 is to ensure that all taxes and most charges on property owners are subject to voter approval. In addition, Proposition 218 seeks to curb some perceived abuses in the use of assessments and property-related fees, specifically the use of these revenue-raising tools to pay for general governmental services rather than property-related services. Increased AB 939/SB 1383 fee costs which are used to fund the City waste diversion programs associated with California Assembly Bill 939 and Senate Bill 1383. 1.55% Increases in other operational expenses including a Consumer Price Index increase of 5.3%. 5.61% Total Proposed Base Year Increase 17.75% Page 751 of 1192 Item 6c 3) IWMA Fee Increase of 5.4% The IWMA requires funding to support the planning, programming, and implementation of the statutory mandates and related regulations established by the State of California. Specifically, fees are used to support operations managing edible food recovery goals, public education and outreach, contamination monitoring and sampling activities, recordkeeping and reporting, organic and edible food recovery, and infrastructure capacity planning. Fees established by the IWMA impact all 18 participating cities and Community Service Districts (Participating Agencies) throughout San Luis Obispo County. The IWMA’s primary sources of revenue are (1) a solid waste management fee consisting of 2 percent of the gross revenue collected from commercial customers, $0.30 per month for residential customers charged less than $50 per month, and 2 percent per month for residential customers charged more than $50 per month; and (2) a landfill tipping fee surcharge of $3 per ton at the landfills in San Luis Obispo County. Solid waste management fees established by the IWMA are imposed on all franchised waste haulers and roll-off companies in any of the Participating Agencies served by the IWMA. Costs are passed through to customers as a line item separate from the customer’s curbside waste service charges. On March 9, 2022, the IWMA Board adopted a 5.4 percent fee on gross hauler receipts to account for increases in regulatory costs associated with SB 1383 (performing curbside bin inspections, managing waivers and exemptions, fulfilling educational and outreach requirements, etc.), structural deficits beginning with fiscal year 2020-2021, and capital outlay and reserve requirements. The IWMA hired HF&H Consultants to evaluate program costs and expenditures necessary to provide Participating Agencies with the resources to be compliant with SB 1383. HF&H compared the IWMA’s total projected revenues to the total revenue required for SB 1383 implementation and determined that the agency would need to collect an additional $1,800,000 annually from haulers and landfills. Starting July 1, 2022, the new fee reflecting 5.4 percent of gross hauler receipts will replace the existing IWMA fee currently found on residential and commercial customer bills. Regional and Statewide Comparisons and Impacts to Customers According to a study performed by the League of California Cities, nine out of ten cities indicated an increase in solid waste service rates largely due to the impacts of SB 13834. The average customer in the City of San Luis Obispo has a 32-gallon service level and will continue to pay 9-15 percent less than other local entities in our region. Neighboring cities and districts are being faced with 22-46 percent base year increases, not yet taking into account the increased IWMA fee. 4 https://www.cacities.org/Resources-Documents/Policy-Advocacy-Section/Policy-Development/Policy- Committees/Environmental-Quality/Cal-Cities-Waste-Rate-Survey-Infographic-Feb-2021.aspx Page 752 of 1192 Item 6c Solid waste rate increases for Base Year 2022, and Interim Years 2023 and 2024 are proposed to become effective on May 1, 2022, January 1, 2023, and January 1, 2024. Proposed rates for residential customers can be found in Attachment G, while proposed rates for commercial customers can be found in Attachment H. Sample rates for the first year of the rate increase for standard residential customers can be seen in Table 2 below. The average residential customer in the City of San Luis Obispo has 32 -gallon level service (cost of service based on volume of solid waste bin, not recycling or organics) and would see an increase of $4.73 per month. Table 2: Standard Residential Service Rate Increases Previous Council Action 2022 Third-Party Solid Waste Rate Study (Attachment I) Every three years, the Garbage Company performs a solid waste rate audit as required by the Rate Setting Manual. Historically, rate studies have been performed under contracts held by the Garbage Company, however, the City acknowledges the benefits of contracting with a third-party agency to perform the study under the purview of the City. On November 17, 2020, City Council approved a budget of $150,000 to fund a Request for Proposals (RFP) for a third-party rate study and a Rate Setting Manual update. The consultant R3 Consulting was contracted through the RFP process to perform the rate study and began work for the City of San Luis Obispo in August 2021. The scope of work completed in the rate study includes: 1. Review of the 2022 Base Year Rate Application for consistency with the Rate Setting Manual methodology 2. Review of the 2022 Base Year Rate Application for mathematical accuracy 3. Review of the Garbage Company’s 2019 and 2020 audited financial statements 4. Review of the Garbage Company’s 2021 and 2022 projected revenues and expenses for reasonableness, including general consistency with changes in reported revenues, accounts, and tonnages 5. Review of the Garbage Company’s survey of rates in neighboring communities Service Level (includes solid waste, recycling, and green waste services) Current Rate Proposed May 1, 2022 Rate Proposed July 1, 2022 Rate (after IWMA increase) Economy Rate (32 Gallon Container) $17.78 $22.51 $23.70 Standard Rate (64 Gallon Container) $35.56 $45.03 $47.41 Premium Rate (96 Gallon Container) $53.35 $67.56 $71.14 Page 753 of 1192 Item 6c The rate study was completed on March 28, 2022 and supports the proposed rate adjustments. The Rate Setting Manual update is expected to begin as a regional effort in 2022. Policy Context The recommendation to increase solid waste rates to maintain three-streams (solid waste, recycling, and green waste) of service to our community aligns not only with our Rate Setting Manual, City’s Climate Action Plan5, and Municipal Code6, but also with regulations of the State of California. The City of San Luis Obispo is a leading agency in curbside green waste service and processing. The Hitachi Zosen Inova anaerobic digestion facility is the first in the United States and began accepting the City’s curbside green material in 2018. The existing curbside green waste program and processing facility show that San Luis Obispo is leading the State towards its mission of reducing landfilled green waste going to the landfill by 75 percent by 2025. Public Engagement In compliance with Proposition 218 noticing requirements, a public notice was mailed to every residential and commercial property in the City of San Luis Obispo on March 5, 2022, 45 days prior to the Public Hearing on April 19, 2022. The notice includes the proposed rate increase, a summary of the purpose of the increase, a fee schedule, and instructions on how to protest the proposed increase. The notices are also posted on the Garbage Company’s website and are included as Attachment G and H. A Frequently Asked Questions webpage was also added to the City’s website to increase community awareness of the proposed rate increase and benefits to the community. CONCURRENCE The City’s Finance Department concurs with the recommended action. 5 City of San Luis Obispo Climate Action Plan Update and CEQA GHG Emissions Thresholds. ( 2020, August 3). Retrieved from https://www.slocity.org/home/showdocument?id=27813 6 City of San Luis Obispo Municipal Code Section 8.04.040 " Collection Required at Least Once a Week.". Retrieved from https://sanluisobispo.municipal.codes/Code/8.04.040 Page 754 of 1192 Item 6c ENVIRONMENTAL REVIEW The California Environmental Quality Act (CEQA) does not apply to the recommended action, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15378. FISCAL IMPACT Budgeted: N/A Budget Year: N/A Funding Identified: N/A Fiscal Analysis: Funding Sources Total Budget Available Current Funding Request Remaining Balance Annual Ongoing Cost General Fund State Federal Fees $150,000 $74,570 Other: Total $150,000 $0 $74,570 $0 On November 17, 2020 Council approved collection of $150,000 through customer solid waste bills to fund a third party solid rate study and an update to the City’s Rate Setting Manual. An RFP for the rate study was published and a contract was awarded to R3 Consulting Group, Inc. (R3), signed on May 20, 2021. Remaining funds are reserved for the Rate Setting Manual update which is expected to be executed in 2022. As a part of the Garbage Company’s 17.75 percent increase, 1.55 percent includes an increase to current funds used for the City waste diversion programs associated with California Assembly Bill 939 and Senate Bill 1383. Section 41901 of the California Public Resources Code authorizes a city or county to impose fees in amounts sufficient to pay the costs of preparing, adopting, and implementing an integrated waste management plan. Section 41902 adds that a local agency may directly collect the fees authorized by this chapter or may, by agreement, arrange for the fees to be collected by a solid waste hauler providing solid waste collection for the city or county. As part of this proposed rate increase, the City will directly receive an additional 1.55 percent of AB 939/SB 1383 fees to fund the City’s growing Solid Waste and Recycling Program. The fees are restricted for use directly related to waste diversion and reduction efforts and will fund the necessary staffing and resources to oversee the program. The Program will be responsible for outreach, implementation, enforcement, and compliance measures mandated by SB 1383. Page 755 of 1192 Item 6c Appropriation of the funding to the program’s budget will occur through the City’s Supplemental Budget process. ALTERNATIVES Continue Consideration of the Proposed Solid Waste Rates. Council may elect to continue consideration of the proposed solid waste rates. The proposed solid waste rates are necessary to continue providing environmentally sound solid waste, recycling, and green waste collection and processing services to the commu nity. The proposed rates were prepared in compliance with Proposition 218 and the City’s Rate Setting Manual and reflect the cost of programmatic changes required by the State of California. The level of service provided to the community by San Luis Garbage meets the terms stated in the Franchise Agreements. Consulting firm R3 Consulting confirms and verifies that the proposed rates are justifiable and accurate . Therefore, this alternative is not recommended. ATTACHMENTS A. Draft Resolution establishing Solid Waste Rates 2022 B. City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management C. Solid Waste Contract D. Recycling Contract E. Green Waste Contract F. 2022 Base Year Rate Adjustment Application G. Proposition 218 Notice – Residential Solid Waste Rates H. Proposition 218 Notice – Commercial Solid Waste Rates I. 2022 Solid Waste Rate Study Page 756 of 1192 R ______ RESOLUTION NO. _____ (2022 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, ESTABLISHING INTEGRATED SOLID WASTE RATES WHEREAS, on June 21, 1994, the City Council of the City of San Luis Obispo approved the Rate Setting Manual Process and Methodology Manual for Integrated Solid Waste Management Rates; and WHEREAS, notices regarding the requested rate increase were mailed to all property owners and customers 45-days prior to the April 19, 2022 public hearing; and WHEREAS, sufficient protests were not received to prevent the rate increase; and WHEREAS, a review of San Luis Garbage Company’s 2022 Base Year Solid Waste Rate Application has been completed in accordance with the adopted solid waste rate setting policies. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Resolution No. 11189 (2020 series) is hereby rescinded as of 11:59 p.m., April 19, 2022. Page 757 of 1192 Resolution No. _____ (2022 Series) Page 2 R ______ SECTION 2. Rate increase exhibited in Exhibits A and B shall become effective at 12:00 a.m. May 1, 2022, as outlined in the Proposition 218 notification. Upon motion of _______________________, seconded by _______________________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _____________________ 2022. ___________________________ Mayor Erica A. Stewart ATTEST: _______________________ Teresa Purrington City Clerk APPROVED AS TO FORM: ________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________ Teresa Purrington City Clerk Page 758 of 1192 Resolution No. _____ (2022 Series) Page 3 R ______ EXHIBIT A SINGLE FAMILY AND MULTI-UNIT RESIDENTIAL (4 UNITS OR LESS) Page 759 of 1192 Resolution No. _____ (2022 Series) Page 4 R ______ Page 760 of 1192 Resolution No. _____ (2022 Series) Page 5 R ______ EXHIBIT B COMMERCIAL AND MULTI-UNIT RESIDENTIAL (5 UNITS OR MORE) Page 761 of 1192 Resolution No. _____ (2022 Series) Page 6 R ______ Page 762 of 1192 Resolution No. _____ (2022 Series) Page 7 R ______ Page 763 of 1192 Resolution No. _____ (2022 Series) Page 8 R ______ Page 764 of 1192 Resolution No. _____ (2022 Series) Page 9 R ______ Page 765 of 1192 Resolution No. _____ (2022 Series) Page 10 R ______ Page 766 of 1192 Resolution No. _____ (2022 Series) Page 11 R ______ Page 767 of 1192 Page 768 of 1192 City o~ san llt1s OBISPO Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates June 1994 Page 769 of 1192 Page 770 of 1192 Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates Prepared for City of San Luis Obispo San Luis Garbage Company Prepared by s1/ ERNST & YOUNG 555 Capitol Mall, Suite 650 Sacramento, California 95814 June 1994 Printed on Recycled Paper Page 771 of 1192 Page 772 of 1192 ~ .. Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates Table of Contents Section I: Rate Setting Overview A. B. c. D. E. F. G. Introduction Rate Setting Objectives Rate Structure Objectives Other Key Objectives Rate Adjustment Application Process Allowable and Pass Through Costs Using the Manual Section II: Rate Setting Process A. B. c. D. Base Year Rate Setting Process 1. 2. 3. 4. 5. 6. 7. 8. 9. Preparation and Submission of Rate Adjustment Application Verification of Completeness of Rate Adjustment Application Review of R'.1te Adjustment Application and Preparation of Responses Response to Additional Information Requests from City Preparation of Draft Council Agenda Report Review of Draft Council Agenda Report Preparation of Final Council Agenda Report Presentation of Agenda Report to City Council Implementation of New Rates Timing of Base Year Rate Setting Process Interim Year Rate Setting Process 1. Preparation and Submission of Rate Adjustment Application 2. Preparation of Draft Council Agenda Report 3. Review and Response to Draft Council Agenda Report 4. Preparation of Final Council Agenda Report 5. Presentation of Agenda Report to City Council 6. Implementation of New Rates Timing of Interim Year Rate Setting Process . Page 1-1 I-1 1-1 I-2 1-3 I-5 I-5 I-7 II-1 II-1 II-5 II-9 II-10 II-13 II-14 II-16 II-17 II-18 II-19 II-20 II-22 II-24 11-25 II-26 II-27 II-29 II-29 II-30 Pagei Page 773 of 1192 Table of Contents (cont.) Section Ill: Base Year Rate Setting Methodology 1. 2. 3. 4. 5. 6. Entry of Operating Costs Determination of Revenues without Rate Increase Calculation of Allowable Operating Profit and Revenue Requirement Calculation of Percent Change In Rates Preparation of Summary Form Survey of Rates in Similar Areas Section IV: Interim Year Rate Setting Methodology Appendix 1. 2. 3. 4. 5. 6. Appendix A AppendixB Page ii Determination of Base Year Costs and Weightings Calculation of Percent Changes in Controllable and Pass Through Costs Calculation of Weighted Change in Rates Preparation of the Summary Form Survey of Rates in Similar Areas Application Certification. Blank Forms and Worksheets Chart of Accounts Page III-1 III-9 III-13 III-15 III-17 III-18 III-19 IV-1 IV-5 IV-7 IV-8 IV-9 IV-10 IV-11 A-1 B-1 Page 774 of 1192 Exhibits Exht1>it Page I-1 Organization of Each Step 1-9 II-1 Base Year Rate Setting Process II-2 II-2 Base Year Rate Setting Process Diagram II-4 II-3 Timing of Base Year Rate Adjustment Process II-21 II-4 Interim Year Rate Adjustment Process II-23 II-5 Timing of Interim Year Rate Adjustment Process II-31 III-1 Preparation of the Base Year Rate Adjustment Application III-2 III-2 Sample Base Year Rate Adjustment Application IIl-3 IIl-3 Definition of Financial Terms from Base Year Rate Adjustment Application III-10 III-4 Sample Solid Waste Fee Survey III-20 IV-1 Preparation of the Interim Year Rate Adjustment Application IV-2 IV-2 Sample Interim Year Rate Adjustment Application IV-3 Page iii Page 775 of 1192 Page 776 of 1192 Section I Rate Setting Overview Page 777 of 1192 \ Page 778 of 1192 I. Rate Setting Overoiew This section of the manual provides an overview of the rate setting process. This section is organized as follows: A. Introduction B. Rate Setting Objectives c Rate Structure Objectives D. Other Key Objectives E. Rate Adjustment Application Process F. Allowable and Pass Through Costs G. Using the Manual A. Introduction This manual provides a step-by-step guide for the City of San Luis Obispo (City) and its franchise hauler to prepare and approve adjustments to integrated solid waste management rates. The manual establishes rate adjustment policies, provides application forms, specifies reporting formats, identifies required supporting documentation, and· describes procedures to be followed in requesting, reviewing, and adopting rate adjustments. Cost and revenue information is required for all services provided by the franchise hauler. This manual provides a formal structure for establishing integrated solid waste management rates and has been developed with input and direction from both the City and current franchise hauler. It incorporates current ordinances and existing operating conditions in the City. As both the City and franchise hauler gain experience using the rate setting methodology described in the manual, the process should be updated, revised, and improved. City of San Luis Obispo This manual is organized into four sections: Section I: Rate Setting Overview: This section provides an introduction to the manual and discusses the objectives followed in establishing the rate setting processes. Section IL· Rate Setting Process: A detailed discussion of the rate setting process is presented in this section. This discussion focuses on responsibilities of participants in the process, activities to be performed, and the timing of these activities. Section III: Base Year Rate Setting Methodology: This section provides detailed instructions on how to complete the forms used to establish new rates for each base year. Section IV: Interim Year Rate Setting Methodology: In this section, detailed instructions are provided for completing forms used to establish new rates for each interim year. B. Rate Setting Objectives The primacy goal of the rate setting process and methodology is to determine integrated solid waste management rates which are fair to San Luis Obispo residents and which provide adequate revenue to the hauler. Four rate setting objectives were considered in developing the rate setting approach: O Rates requested by the franchise hauler must be justifiable and supportable. A formal request to adjust rates submitted by the franchise hauler should be based on formally adopted · guidelines for expenses and profit, and provide the basis for all rate adjustments. The requested rates Page 1-1 Page 779 of 1192 Section I. Rate Setting Overview should include only allowable and pass through costs, and provide accountability for all expenditures. O The process should ensure revenue adequacy to fully meet reasonable costs of service. Estimated costs of service and resulting integrated solid waste management rates should be reasonable. Granting a franchise for solid waste collection recognizes the private sector's ability to provide quality service at a reasonable cost. Further, the City acknowledges that maintenance of good service is related to providing adequate compensation and financial incentives for continued good performance. Revenues generated should be adequate to fully meet reasonable costs of service. The resulting monthly rates for solid waste service should be comparable to those charged in other cities for providing similar services. O The rate setting process should provide for ongoing review and rate stability. A formal and thorough City review of financial and operating data will set an expectation for both City staff and hauler, ultimately to protect the rate payer. The process should be designed to prevent large, unexpected fluctuations in rates anticipated from funding a broadening scope of integrated waste management services. O The process should be easy to administer, while ensuring that any rate request is justifiable and reasonable. The process should be easy to explain and not place an undue .cost on either the City or the franchise hauler to implement. C Rate Structure Objectives The primary goal of the rate structure is to provide San Luis Obispo residents with fair rates that are understandable and consistent with solid waste reduction and Page 1-2 recycling objectives. Four objectives were utilized in developing the City's rate structure: O Promote source reduction, maximum diversion, and recycling. Reducing the volume of landfilled waste was established as a City priority in 1990 with the adoption of volume-based residential rates. The California Integrated Waste Management Act, Assembly Bill 939 (AB 939, Chapter 1095, 1989) prioritized diversion of solid waste through source reduction, reuse, and recycling. Rate structure design should be consistent with AB 939 goals and provide residents incentives to reduce solid waste generation while maximizing recycling. In response to AB 939, the City's Source Reduction and Recycling Element (SRRE) establishes policies to promote source reduction, maximum diversion, and recycling. Rate structures and collection systems should work together to meet SRRE objectives. Rate structures that encourage maximum diversion generally are uniform or have increasing rates for increasing volumes of waste generated. In combination with volume-based rates, collection systems with a flexible "increment" of service create incentives to reduce and recycle. O Provide equity and fairness within classes of customers. The rate structure should be constructed so no customer class is given preferential rates, either between classes or within the same class· of customers. However, low income residents may be provided a discount on their rates. Determination of equity includes the relative demand (i.e., tonnage of solid waste generated) which customers place on the solid waste system. O Be environmentally sound. Environmental concerns associated with collection systems include the added amount of waste created by use of orange bags and air quality impacts City of San Luis Obispo Page 780 of 1192 '. Section I. Rate Setting Overview from transportation of waste, recyclable materials, and yard debris. Working towards environmental soundness means phasing out the use of disposable containers (orange bags). Air quality impacts can be addressed through financial incentives to reduce frequency of pickups and to increase efficiencies of collection to allow for a large number of accounts per route. O Be easy to understand. Both residential and non-residential customers should be able to understand the rate structure. D. Other Key Objectives The following are other key objectives considered in developing the processes and detailed methodologies described in this manual: O Regulation of residential and non- residential integrated solid waste management rates. Both residential and non-residential integrated solid waste management rates are regulated by the City, and will represent recovery of allowable costs incurred by the franchise hauler. These allowable costs include collection/ disposal of residential and non-residential garbage, curbside collection of residential recyclable materials, and collection of non- residential recyclables. Costs incurred by the franchise hauler must be adequately documented in a formal request for a rate adjustment, and the rate request must be supported by company financial statements. The first formal request for a rate adjustment (which may be submitted during 1994) will not require audited financial statements, but all future base year rate requests will. O Profit. A profit to the hauler is allowed in the rate base, and is based on a targeted operating ratio of 92 percent on allowable costs, with a range of between 90 and 94 percent. In the base year, if City of San Luis Obispo rates would remain unchanged at an operating ratio within the range of 90 to 94 percent, and the company actually realized an operating ratio within this range, then that same operating ratio resulting in no rate change will be used, and no rate change will occur. Otherwise, a 92 percent operating ratio will be used for the base year calculation. The operating ratio effectively determines the profit allowed to the franchise hauler on allowable costs. Total revenue requirements then are determined as the sum of: (1) allowable costs, (2) allowable profit, and (3) pass through costs (for which the franchise hauler gets no profit). In the first base year, the operating ratio will be 92 percent. In each succeeding base year (once every three years), the operating ratio would range from 90 to 94 percent, whfch will help stabilize rate adjustments and afford the company an incentive to reduce costs. In any succeeding base year, if the company earned an operating ratio outside this range, then 92 percent would be reestablished. O Retroactive rate increase. There will be no allowance for a retroactive increase in rates. O Performance audits. While rates for residential and non-residential services are evaluated in detail during each base year (every three years), the rate review focuses on actual costs and does not address opportunities for the franchise hauler to improve general operational efficiency. If actions can be taken to improve the franchise hauler's efficiency, this could result in lower total costs, and correspondingly, lower rates for customers. In order to address this issue, performance audits of the franchise hauler could be conducted at regular intervals, such as once every three years. The timing of these audits could Page 1-3 Page 781 of 1192 Section I. Rate Setting Overview be independent of the rate adjustment process described in this manual. A two-phase approach may be appropriate for these audits. An overall diagnostic review would be conducted in Phase I, and more detailed and focused work in selected areas would be conducted in Phase II, based on the Phase I findings. O Cost savings programs. The franchise hauler will be allowed to share in cost savings due to improvements implemented by the hauler. This savings program provides an incentive to the franchise hauler to reduce costs. Under the rate setting process described in this manual, if the franchise hauler is able to reduce costs, the benefits of these cost reduction efforts are passed on to the rate payers in the next base year. There may be no direct incentive for the franchise hauler to identify and implement cost savings activities. The purpose of a formal program is to allow the franchise hauler to receive some of these benefits while also lowering the rates for customers. The amount of cost savings would be identified initially during development of a proposed new program and then would be monitored during implementation of the new program. Savings would be shared by the franchise hauler and the rate payers, based on pre-determined splits. For example, during the first year of a new program, the franchise hauler may receive 75 percent of the savings and the rate payers would receive 25 percent. In year two, the franchise hauler would receive 50 percent of the benefit and the rate payer would received 50 percent. In year three, the franchise hauler would receive 25 Page 1-4 percent of the cost savings. In the fourth year, all savings would be· passed through to City customers. Examples of cost savings programs include investing in new equipment, redesigning collection routes, automating administrative functions, or streamlining administrative processes. These opportunities for cost savings might be identified by the franchise hauler or through performance audits reviewed by the City. Monitoring actual savings achieved is the most difficult task in developing a cost savings program. Cost, and in some cases, operating data must be identified and carefully reviewed. Without careful monitoring, the program may be abused. Adjusting rates to reflect the savings also is difficult because rate adjustments for each interim year <).re determined by a change in the consumer price index instead of by an examination of base year costs. The hauler may, in fact, lower costs of operation through a cost savings program, though the rates would not automatically be lowered. Cost savings can not be included simply by reflecting the savings as a reduction in total cost. New polices and procedures would have to be established to allow for cost savings adjustments under the methodology presented in this manual. These policies must address a number of issues including: the time period for sharing costs, the split of the savings, the form in which cost reduction proposals must be prepared, the process for monitoring actual cost savings, and incorporation of the concept in the current methodology. City of San Luis Obispo Page 782 of 1192 Section I. Rate Setting Overview E. Rate Adjustment Application Process A Base Year Rate Adjustment Application from the franchise hauler is required once every three years. This process requires detailed financial and operating information which is carefully reviewed and analyzed by the City. These detailed reviews are referred to as "base" years in the methodology. With the Base Year Rate Adjustment Application, the hauler submits annual audited financial statements (except for the initial base year application after this manual is adopted). These statements will serve as the base document of the application. Financial forms contained in the application should be reconciled to the audited financial statements to provide assurance that all of the company's activities are accounted for. At the time a Base Year Rate Adjustment Application is submitted, the franchise hauler also shall provide the City with a survey of rates and services provided in at least six other municipalities of comparable size and service. The format for this survey is contained in Appendix A of this manual. In each of the "interim" two years, rate adjustments will be based on the annual percentage change in a composite index of the following three items: O Annual change in the most recent actual, not forecasted, U.S. Consumer Price Index published by the Bureau of Labor Statistics in their Monthly Labor Review, applied to specified costs of the franchise hauler (such as wages, salaries, payroll taxes, rent, and general and administration costs) O Change in costs for tipping fees, and AB 939 and regulatory fees estimated to occur in the next interim year O An adjustment for the franchise fee, which is based on a percentage of total revenues generated from residential and non-residential integrated solid waste collection service. Ctty of San Luts Obispo The franchise hauler will be required to submit an Interim Year Rate Adjustment Application for a rate increase between base years. The scope of each interim year application would be more limited than a base year request. Although a formal application would be required each year, the company would have the option to not increase rates, though an interim year adjustment might allow it to do so. The City or franchise hauler may request an extraordinary or consequential adjustment outside of the base year and interim year adjustment schedules. The franchise hauler requesting an extraordinary or consequential cost increase should demonstrate, to the satisfaction of the City Administrative Officer, that it has incurred extraordinary and consequential cost increases. To be extraordinary or consequential, cost changes must be significant enough to require a greater than five percent (5%) decrease or increase in monthly rates. F. Allowable and Pass Through Costs For purposes of computing required revenue to be obtained from rate payers, it is necessary to determine which of the franchise hauler's costs are allowable, non- allowable, and pass through. Profit is allowed to the franchise hauler for allowable costs. Non-allowable costs cannot be recovered through the rate base. Pass through costs do not earn a profit, but can be recovered through the rate base. Allowable Costs The hauler is allowed to earn a profit on certain costs. These allowable costs include direct labor, corporate overhead, office salaries, and other. general and administrative costs. These allowable costs are defined in Table 1, on the following page. Page 1-5 Page 783 of 1192 Section I. Rate Setting Overview Table 1 Allowable Costs Cost Description Direct Labor All costs associated with solid waste and recyclable materials collection, including wages, overtime, payroll taxes, health and welfare benefits, workers compensation, and pension benefits. Corporate Overhead Salaries paid to the franchise hauler's corporate officers. The amount of this item cannot exceed $120,000 per year (in 1994 dollars). Office Salaries Wages and related benefits paid to office and administrative staff, including wages, overtime, payroll taxes, health and welfare benefits, workers compensation, and pension benefits. Other General and Administrative Costs All general and administrative costs with the exception of corporate overhead and office salaries. This item includes the following costs: • Collection fees • Office rent • Computer equipment • Office supplies and services • Postage • Depreciation Professional fees • • Dues and subscriptions Promotion • • Insurance Office repair and • • Janitorial maintenance • Laundry and uniform • Telephone • Interest expense • Licenses • Medical expenses A few costs of providing collection service need to be clarified because of special treatment for purposes of rate setting. These are discussed below. O Interest Expense. Interest expense is included as an allowable cost on which profit is allowed. 1 O Lease Payments. Lease payments to non-affiliated companies are an allowable expense. These payments may implicitly contain interest. 1 Interest expense is allowed in the operating profit calculation, which differs from the practice in some municipalities. Interest expense is a relatively small portion of the current franchise hauler's total costs. If interest becomes a significant factor in the franchise hauler's cost structure, the City may wish to reconsider the treatment of this cost component. Page 1·6 • Travel • Trucking • Utilities Lease payments to affiliated companies are a pass through co.st. O Depreciation. The following depreciation methods and useful lives are to be used for amortizing capital costs for rate setting purposes: Table 2 Depreciation Methods Capital Item Type Ca) · Years Office Equipment SL Vehicles and Equipment SL Buildings and Leasehold Improvements SL (a) SL = straight line depreciation 5 years 7 years 25 years City of San Luis Obispo Page 784 of 1192 Section I. Rate Setting Overview · 0 Recycling. Costs of providing residential curbside recycling and non-residential recycling services provided to the City by the franchise hauler will be an allowable cost. Therefore, the integrated solid waste management rates charged to customers would include recovery of allowable costs of providing recycling services, and a profit is allowed on ·these costs. Non-Allowable Costs The following costs are not allowable and as a result will not be passed on to the rate payers: O Charitable and political contributions O Entertainment O Income taxes O Profit sharing payments not related to an IRS approved pension program. Pass 7brough Costs The following pass through costs do not earn a profit, but are included in determining total. revenue requirements to establish integrated solid waste management rates: O Tipping Fees. If the franchise hauler utilizes a disposal facility which is owned by an affiliated company, the tipping fee charged by the disposal facility to the franchise hauler must be the same as the rate charged to other non-affiliated haulers for the same service. Tipping fees are defined to include both transfer station, transformation facility, and landfill charges. In each interim year, tipping fees are not automatically adjusted by the CPI, as is proposed for all City of San Luis Obispo controllable costs. Rather, a projection is made of what tipping fees would be in the new interim year. Then, a comparison is made with tipping fees in the previous year. The resulting percent change in tipping fees would be weighted by their share of total base year revenue requirements, in determining the composite index used in each interim year. O Franchise fee. The franchise fee is 6.0 percent of the hauler's gross residential and non-residential revenues, excluding revenues from the sale of recyclable materials and California refund value (CRV). This fee is a pass through cost (no profit is allowed). O Costs to implement State mandated source reduction and household hazardous waste programs. The City plans to adopt the Source Reduction and Recycling Element (SRRE) and Household Hazardous Waste Element (HHWE) as required by AB 939. These elements contain a number of recommended programs whose costs are projected to be funded in part by integrated solid waste management rates. If the City implements a surcharge on the monthly charge for waste management services, this surcharge will be considered pass through cost for the purposes of rate setting. The franchise hauler will not be allowed a profit on these AB 939 surcharges. O Trucking Charges. Trucking charges from companies affiliated with the franchise hauler are a pass through cost, and no profit is allowed to the franchise hauler. This is based on the assumption that · profits already are included in the trucking charges paid by the franchise hauler. Page 1-7 Page 785 of 1192 Section I. Rate Setting Overview G. Using the Manual Each section of the manual has been divided into a number of subsections. A subsection begins with a discussion related to a major topic. Many subsections of this manual include a series of "steps" which must be completed during the rate setting process. Each step begins at the top of a page and is prominently marked for easy reference. The organization of each step is worksheets and forms which are used to complete selected steps of the process: Page 1·8 O Base year rate adjustment application O Interim year rate adjustment application O Interim year rate adjustment worksheet O Solid waste fee survey. Appendix Bis a copy of a "standardized" chart of accounts which contains a proposed basis for allocating indirect costs of the hauler. City of San Luis Obispo Page 786 of 1192 EXHIBITI-1 Organization of Each Step -Manual Organization - I. Section A. Subsection 1. Step a. Task Process or Activity Where Ibis Step Occurs Responsibility: Timing: Tasks: Section Number and Name Party Responsible for Completing the Step When the Step Franchise Hauler · Should Be Completed 120 days prior to the date rate-;-v" Completed become effective J / Tasks Required to· Complete the Step a. Prepare Cost Information b. Prepare Revenue Information c. Prepare Operating Information d. Survey Residential and Non-residential Solid Waste Rates and Charges in Similar Service Areas e. Prepare and Submit Rate Adjustment Application and Supporting Documents Detailed Descriptions of the Actions Required in Description of Tasks _ Each Task '"I _a._Pre __ p_arc __ C_os_t_Inf._o_rma __ ti_o_n ______ _ Overview During this step, the franchise hauler prepares the Base Year Rate Adjustment Applicatton. Included with the completed application are required forms, related supporting documents, and a survey of other cities. Instructions for preparing application forms are available in Section III of this manual. Blank forms are provided in Appendix A of this manual. Information provided by the franchise hauler is for five years: O Calendar year two years prior to current year (year one) O Lastest completed calendar year prior to current year (year two) Current calendar year (year three) Projected base calendar year ear four) Cost information from the franchise hauler is provided in the Base Year Rate Adjustment Appltcatton. Cost information is reported for two historical years, the current year, the two projected years (the base year, and year after the base year). Information reported in each line item is the total cost for solid waste and recyclable materials collection for residential and non-residential customers. A segregation of costs by residential, non-residential, and recycling is not required. Integrated solid waste management rates are to be based on costs of providing collection and transportation of solid waste and recyclables, and costs of disposing of solid wastes. Revenues from the processing facility will be treated as a revenue offset for purposes of setting rates. Revenues from the processing facility are· determined by adding scrap payments received from all materials sold, California Refund Value_ · Page 1-9 Page 787 of 1192 Page 788 of 1192 Section II Rate Setting Process Page 789 of 1192 Page 790 of 1192 Section II.. Rate Setting Process The City of San Luis Obispo rate setting process follows a three year cycle. In the first year of the cycle, the franchise hauler is required to submit a Base Year Rate Adjustment Application. In both the second and third years, the franchise hauler is allowed to submit an Interim Year Rate Adjustment Application. The cycle repeats itself in year four. This section describes the detailed processes and steps involved from the franchise hauler completing a base year or interim year application through to the City's approval of new rates. This section is organized into four subsections: A. Base Year Rate Setting Process B. Timing of Base Year Rate Setting Process C Interim Year Rate Setting Process D. Timing of Interim Year Rate Setting Process. Topics covered in this section of the manual include: O Who is responsible for the various steps in each process O What tasks must be completed within each step O When each step should be performed. Information about how to complete worksheets and forms for Base Year Rate Adjustment Application and Interim Year Rate Adjustment Application are provided in Sections III and IV of this manual, respectively. A. Base. Year Rate Setting Process The base year rate setting process requires the franchise hauler to submit to City of San Luis Obispo the City a Base Year Rate Adjustment Application every three years, beginning in 1994. In this application, the franchise hauler completes a number of forms, provides supporting financial and operational information, and includes results of a survey of rates in other cities. After reviewing the application, the City evaluates whether proposed rate adjustments will be fair to both residents of the City and the franchise hauler. Fairness is demonstrated through an analysis of the franchise hauler's actual and projected revenues and expenses included in the Base YearRate Adjustment Application. Information required in the rate setting process which is considered confidential by the franchise hauler will not be disclosed at any public meetings (i.e., City Council meetings). This would include employee compensation information. The existing franchise agreement requires Base Year Rate Adjustment Applications be submitted by the franchise hauler at least 120 days in advance of when the proposed base year rate adjustment would take place. The City has up to 15 days to verify the application is complete. After the City verifies that the hauler's application is complete, the process is scheduled to take 105 days until rates are implemented. New rates are to become effective on October 1 of each year. Exhibit Il-1, following this page, provides an overview of the base year rate setting process. Exhibit Il-2, following Exhibit 11-1, is a diagram showing participants involved and documents provided during the base year process. Following this exhibit is a description of each step in the process. The timing of the base year rate setting process is described in Section 11-B of'this manual. Page 11-1 Page 791 of 1192 Base Year Rate Setting Process 1. Preparation and Submission of Rate Adjustment Application a. Prepare Cost Information b. Prepare Revenue Information c. Prepare Operating Information d. Survey Residential and Commercial Solid Waste Rates and Charges in Similar Service Areas e. Prepare and Submit Rate Adjustment Application and Supporting Documents 2. Verification of Completeness ·of Rate Adjustment Application a. Verify Financial Data and Format b. Verify Supporting Documents and Schedules c. Notify Franchise Hauler 3. Review of Rate Adjustment Application and Preparation of Responses a. Review Actual and Projected Revenue Requirements b. Review Actual and Projected Revenues c. Review and Verify Operating Ratio d. Determine Components of Requested Adjustment in Rates e. Review Performance Data f. Verify Survey of Rates in Similar Service Areas g. Request Additional Data and Clarification, If Necessary h. Document Staff Review and Prepare Written Response 4. Response to Additional Information Requests from City a. Provide Additional Information, If Requested b. Prepare and Submit Response Page 11-2 EXmBITll-1 PAGE! OF2 Franchise Hauler City City Franchise Hauler l Page 792 of 1192 Base Year Rate Setting Process (continued) 5. Preparation of Draft Council Agenda Report a. Prepare Draft Council Agenda Report 6. Review of Draft Council Agenda Report a. Review Draft Council Agenda Report with City Staff b. Resolve Any Remaining Issues c. Prepare Response to Draft Council Agenda Report 7. Preparation of Final Council Agenda Report a. Incorporate Franchise Hauler's Changes in Final Report b. Prepare Final Report and Recommendations 8. Presentation of Agenda Report to City Council a. Distribute Report and Resolution to Council Members b. Post Notice of Public Hearing c. Conduct Public Hearing d. Obtain Council Approval 9. Implementation of New Rates a. Prepare Notification of Rate Adjustment b. Implement Rate Adjustment EXIUBIT Il-1 PAGE 2 OF 2 City Franchise Hauler City City Franchise Hauler Page 11-3 Page 793 of 1192 Participant Franchise Hauler City City Franchise Hauler City Franchise Hauler City City Franchise Hauler Page 11-4 EXIDBITil-2 Base Year Rate Setting Process Diagram Process Preparation and Submission of Rate Adjustment Application Verification of Completeness of Rate Adjustment Application Review of Rate Adjustment Application and Preparation of Responses i v Response to Additional Information Requests from City Preparation of Draft Council Agenda Report Review of Draft Council Agenda Report Preparation of Final Council Agenda Report ' v Presentation of Agenda Report to City Council Implementation of NewRates. Document • Rate Application • Audited Financial Statements • Supporting Financial Infomation • Summary Survey of Other Cities • Letter to Franchise Hauler • Letter to Franchise Hauler • Workpapers • Additional Documents, If Necessary • Draft Council Agenda Report • Supporting Documentation • Response Letter to Draft Council Agenda Report • Final Council Agenda Report • Notice of Public Hearing • Approved Resolution • Notification to Customer • Rate Schedule Page 794 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: Franchise Hauler Completed 120 days prior to the date rates become effective a. Prepare Cost Information b. Prepare Revenue Information c. Prepare Operating Information d. Survey Residential and Non-residential Solid Waste Rates and Charges in Similar Service Areas e. Prepare and Submit Rate Adjustment Application and Supporting Documents Description of Tasks Overview During this step, the franchise hauler prepares the Base Year Rate Adjustment Application. Included with the completed · application are required forms, related supporting documents, and a survey of other cities. Instructions for preparing application forms are available in Section III of this manual. Blank forms are provided in Appendix A of this manual. Information is provided by the franchise hauler for five years: O Calendar year .two years prior to current year (year one) O Latest completed calendar year prior to current year (year two) O Current calendar year (year three) O Projected base calendar year (year four) O Projected calendar year after base year (year five). City of San Luis Obispo a. Prepare Cost Information Cost information from the franchise hauler is provided in the Base Year Rate Adjustment Application. Cost information is reported for two historical years, the current year, and two projected years (the base year, and year after the base year). Information reported in each line item is the total cost for solid waste and recyclable materials collection for residential and non-residential customers. A segregation of costs by residential, non-residential, and recycling is not required. Integrated solid waste management rates are to be based on costs of providing collection and transportation of solid waste and recyclables, costs of disposing of solid waste, and costs of the processing facility. Revenues from the processing facility will be treated as a revenue offset for purposes of setting rates. Costs from the processing facility will be treated as a revenue offset for purposes of setting rates. Revenues from the processing facility are determined by adding scrap payments received from all materials sold, California Refund Value (CRV) and beverage container recycling processing fees, and fees from other cities. Page 11-5 Page 795 of 1192 Section II. Rate Setting Process In addition, for information purposes only, the franchise hauler is requested to segregate company total costs of providing service to: (1) customers within City limits, (2) customers in adjacent unincorporated areas, and (3) California State University, San Luis Obispo (Cal Poly). Suggested allocation bases for any shared costs are presented in a "standardized" Chart of Accounts (discussed in task e of this section). Appendix A to manual includes a form for the frartchise hauler to report these allocations. In the application, costs are further grouped into the following major cost categories: O Allowable Costs Direct Labor Corporate Overhead Office Salaries Other General and Administrative Costs O Pass Through Costs Tipping Fees Franchise Fees AB 939 and Regulatory Fees Lease Payments to Affiliated Companies. If one of the major cost categories in the application changes at an unusual rate, then the hauler ·should provide ~n explanation for the change. An unusual change in cost is any increase which is greater than the change in the U.S. Consumer Price Index (CPI) published by the Bureau of Labor Statistics in their Monthly Labor Review. Cost information for the current. year and projected years must account for any increases or decreases in number of customers served, or tons of solid waste and recyclable materials collected. Actual increases in cost also must be included. For example, if labor costs are expected to increase in the base year due to current labor agreements, this additional cost must be included. If these costs are not Page 11-6 included, the rate increase will not be sufficient to compensate the franchise hauler for actual costs and will result in a reduction of the franchise hauler's actual profits. Cost information provided in the application is used to calculate the franchise hauler's revenue requirement. This amount is compared to anticipated revenues at existing rates to calculate the rate adjustment. b. Prepare Revenue Information Similar to cost information, revenues are reported for two historical years, current calendar year, and two projected years (the base year, and year after the base year). Revenue is reported in five separate categories: O Residential O Non-residential O Revenue from the processing facility O Interest· on investments O Other income. Actual revenue for each category is reported for the two historical years, estimated revenue is reported in the current year, and projected revenue is reported for both base year and year after. Residential and non-residential revenues in the base year are projected without any increases in rates. Residential and non- residential revenue projections are prepared based on existing rates and number of customers which the franchise hauler anticipates serving in the base year. Allowances for uncollectible residential and non-residential accounts are identified in the application. This provides for a more accurate determination of the franchise hauler's revenue in the base year, as a small number of customers do not pay the franchise hauler for service rendered. Revenues from the processing facility are reported as the sum of (1) scrap payments for materials sold, (2) California refund value City of San Luis Obispo Page 796 of 1192 Section II. Rate Setting Process and processing fees, and (3) fees received from other cities. · Interest earned on investments, and other income, must be identified separately in the application. Supporting documentation should be provided which indicates sources of interest and other income. Once all revenues have been reported in the application, total revenue is calculated. This total revenue is termed a "revenue offset," because it is subtracted from the revenue requirement calculated earlier in task a to determine the franchise hauler's net surplus/shortfall. A net shortfall determines the amount of a rate increase to be applied to residential and non-residential rates. If there is a net surplus, the franchise hauler should determine if the operating ratio can be reduced to eliminate the surplus (i.e., the franchise hauler retains the surplus as additional profit). If the operating ratio is calculated at 90 percent, which provides the franchise hauler with the maximum amount of profit allowable under current policy, and a surplus still exists, the City must determine if rates will be lowered, and over what period of time. In addition, for information purposes only, the franchise hauler is requested to segregate company total revenue. Like cost information, revenue should be segregated into: (1) customers within City limits, (2) customers in adjacent unincorporated areas, and (3) California State University, San Luis Obispo (Cal Poly). c. Prepare Operating Information During this task, non-financial operating information is compiled by the franchise hauler. Information to be provided for both residential and non-residential customers includes: O Accounts served O Routes City of San Luts Obispo O Tons collected O Direct labor hours. This information allows both the City and franchise hauler to monitor changes in the service characteristics, to estimate total revenues at existing rates, and compare these to changes in total cost and revenues.· Operating information is provided on a form in the Base Year Rate Adjustment Application. d. Survey Residential and Non- Residential Solid Waste Rates and Charges in Similar Service Areas The hauler conducts and reports results of a survey of residential and non-residential solid waste rates in communities similar in size and location to the City of San Luis Obispo. The purpose of the survey is to benchmark rates proposed by the franchise hauler against other cities to determine if the rates are reasonable. The City and the franchise hauler will agree on which cities will be surveyed. The survey includes over 25 questions covering general information, residential service, non-residential service, and tipping fees. The purpose is to determine the characteristics of each jurisdiction with which to fairly compare rates. Sample survey forms and instructions are provided in Section III of this manual. The franchise hauler shall prepare a summary report of the survey, to be contained as part of the application. e. Prepare and Submit Rate Adjustment Application and Supporting Documents The completed Base Year Rate Adjustment Application is submitted by the franchise hauler to the City. The application should include the following items: O Management Representation Letter The management representation letter transmits the application to the City, and Page 11-7 Page 797 of 1192 Section II. Rate Setting Process should provide a listing of included documents. The letter should identify the requested adjustment in rates and include a discussion of specific issues . which impact new rates (e.g., significant increases in tipping fees). The letter should state that: • Management reviewed and accepts responsibility for the rate application • The application is based upon management's judgment of the most likely set of conditions and course of action • All significant relevant information are made available • Assumptions are reasonable and are accurate. O Base Year Rate Adjustment Application The franchise hauler should provide a Base Year Rate Adjustment Application including completed application forms and supporting documentation. Supporting documentation includes the current rate schedules for residential and non-residential customers. O Supplemental Audited Financial Information For applications received after 1994, the most current audited financial statements for the franchise hauler should be included, as well as other documentation which support operating and financial data provided in the application. Because audited financial statements serve as base documents for the application, statements of revenues and expenses and other reports contained in the application shall be reconciled to the audited financial statements to provide assurance that all activities are accounted for. O Chart of Accounts Although not required, it is requested that the franchise hauler submit a "standardized" chart of accounts for Page 11-8 information purposes only. This chart of accounts structures a framework for cost accounting, provides a basis for determining reasonableness, and enhances year-to-year comparability. The chart of accounts allows for separate accounting of franchised and non-franchised activities, and of direct and indirect costs associated with the franchise hauler's operations. Appendix B to this manual contains a sample chart of accounts, including: account title, account type (asset, liability, revenue, expense), type of cost (direct or indirect), and suggested allocation basis for indirect costs (e.g., tons collected, number of accounts). The franchise hauler may find other miscellaneous accounts may be required. To maintain comparability, the franchise hauler should indicate any major changes to the chart of accounts. The hauler submits a completed Base Year Rate Adjustment Application to the City. The City then is allowed fifteen (15) days to review the application for completeness. The penalty to the franchise hauler for an incomplete application would be a loss of any additional revenue which would have been generated through a timely and approved rate adjustment application. Similarly, for missing any other deadlines specified in the rate setting process (i.e., responding to City requests for additional information or reviewing the City's draft agenda report) the franchise hauler would lose revenue due to later implementation of rates. If the City fails to meet established time frames for its responsibilities (i.e., steps 2, 3, 5, 7, and 8), at no fault of the franchise hauler, the City will include the value of revenue lost due to the delay, as part of the pending Base Year Rate Adjustment Application or pending Interim. Year Rate Adjustment Application. City of San Luts Obispo Page 798 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: City Completed within fifteen (15) days after the hauler submits the Base Year Rate Adjustment Application a. Verify Financial Data and Format b. Verify Supporting Documems and Schedules c. Notify Franchise Hauler Description of Tasks Overview During this step, the City ensures that the application has been fully completed by the franchise hauler and that the data provided are consistent. During the 15- day period, the City will obtain from the franchise hauler any information necessary to complete the application. a. Verify Financial Data and Format City staff reviews the application to determine if it is complete and ready for analysis. Detailed analysis of the application's contents occurs during step 3. The City reviewer should determine the following: O Has the applicant included all required forms? O Are all forms complete? a Are all financial calculations mathematically correct? O Has the applicant completed the survey of other cities and provided a survey summary? City of San Luis Obispo b. Verify Supporting Documents and Schedules Various documents may be included in the application to support the rate adjustment. The purpose of these supporting documents should be clearly identified by the franchise hauler. c. Notify Franchise Hauler If the application is complete the City will notify the franchise hauler that it will begin the process of evaluating and analyzing the proposed rate adjustment. If incomplete the City will attempt to obtain from the franchise hauler additional required information within the 15-day verification period. A revision of rates shall not be authorized until the 1st day of the first calendar month following a 105 day period from the date that an application is verified to be complete. As an example, if the franchise hauler's application is deemed complete on June 25th due to the fault of the hauler (a 10 day delay), rates would be effective November 1st instead of on October 1st. The franchise hauler would lose the incremental revenues that would have been received from applying the new rates during October. Page 11-9 Page 799 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: City Completed within fifteen (15) days after determining that the application package is complete a. Review Actual and Projected Revenue Requirements b. Review Actual and Projected Revenues c. Review and Verify Operating Ratio d. Determine Components of Requested Adjustment in Rates e. Review Performance Data f Verify Survey of Rates in Similar Service Areas g. Request Additional Data and Clarification, If Necessary h. Document Staff Review and Prepare Written Response Description of Tasks Overview During this step, City staff evaluates the entire rate adjustment application. This review includes examining significant changes in costs or operating performance and evaluating explanations of these changes provided by the franchise hauler. a. Review Actual and Projected Revenue Requirements In this task, costs and operating profit of the application are reviewed and analyzed for reasonableness. Reconciliations of costs to audited financial statements shall be checked for consistency. Explanations are sought for items significantly different than would otherwise normally be expected. Absolute and percentage changes in costs for the five years identified on the application should be calculated and reviewed. Projections prepared from previous years in prior Base Year Rate Adjustment Applications Page 11-10 are compared with actual results. Costs are correlated with operating collection efficiency statistics provided by the hauler. Any unusual trends or variances should be explained by the franchise hauler. An unusual increase would be a change in cost which is greater than the change in the U.S. Consumer Price Index, published by the Bureau of Labor Statistics in their Monthly Labor Review, and which can not be attributed to changes in the number of customers serviced or tons of waste or recyclable materials collected. If these unusual changes are not adequately explained in the application, the City should request additional clarification from the franchise hauler. b. Review Actual and Projected Revenues Actual and projected revenues should be reviewed in this task. · Current residential and non-residential rates provided in the City of San Luis Obispo Page 800 of 1192 Section II. Rate Setting Process application are verified. Any changes in the number of customers seivked should be identified and explained by the franchise hauler. The application requires the franchise hauler to report five years of non-residential and residential revenues: (1) calendar year two years ago (2) most recent calendar year, (3) current year, (4) projected "base" year, and (5) projected year after the "base" year. For applications received after 1994, the City should reconcile the first two years revenues with audited financial statements. Revenues for the current year are compared with unaudited financial statements and documentation supplied by the hauler. Projected revenues for the fourth, or "base" year, and fifth year are evaluated by the City for reasonableness. All assumptions made by the hauler in preparing these projections are reviewed. Residential and non-residential revenues reported by the hauler should not include any rate increases in the base year (year 4) or year after (year 5). Rate schedules submitted by the franchise hauler should be consulted to determine average rate increases. Account information included in the application is reviewed to determine changes in the number of accounts setved. Allowances for residential and non- residential uncollectible accounts also are reviewed. These figures should be deducted from total residential and non-residential revenue projections. These allowances may be based on a fixed percentage of total revenues or on actual experience. Assumptions related to allowances for residential and non-residential accounts should be provided by the franchise hauler. Revenues from the franchise hauler's processing facility are provided in the application. Revenues are equal to total scrap sales, plus CRV and beverage container processing fees received plus fees received from other cities. Amounts identified in the first and second years of the five years City of San Luis Obispo provided should reconcile with the two most recent financial audits. Amounts identified in the current (third) year, the base (fourth) year, and final year (year 5) should be documented by the franchise hauler. The City will review these projections to ensure they are consistent with trends in recycling collection costs, scrap values, processing costs, as well as estimated diversion rates and tonnage. Revenue from interest on investments, and other income, is also reviewed by the City. The City will verify that interest on investments, and other income, is received from investments and income related to the franchise hauler's operation. c. Review and Verify Operating Ratio The operating ratio must be between 90 percent and 94 percent, and is set at 92 percent in the initial base year. City staff verifies that the operating ratio used in the application is within this range. The allowable operating profit also is recalculated utilizing the operating ratio stated in the application. If the operating ratio does not fall within the range stated above, or if there are any errors in calculating allowable operating profit, these deficiencies are noted. d. Determine Components of Requested Adjustment in Rates The City evaluates all costs, revenues, and operating profits provided in the application to determine the components of the requested adjustment in rates. This would include determining the proportion of the requested adjustment in rates which is due to changes in each o.f the following: O Costs O Non-residential revenues O Residential revenues Page 11-11 Page 801 of 1192 Section II. Rate Setting Process O Revenues from the processing facility O Interest on investments O Operating profit (or loss). e. Review Performance Data City staff reviews and analyzes performance data which are included in the application (number of accounts, routes, tons collected, direct labor hours). Operating statistics are reviewed to explain past historical trends and justify future expenses. Both actual and percentage increases are examined and any unusual changes in performance are investigated to determine their cause and effect on future cost performance. An unusual change in operating statistics is any increase or decrease of more than the Consumer Price Index (CPI) published by the Bureau of Labor Statistics in their Monthly Labor Review. As noted above, changes in accounts served, number of routes, tons collected, or direct labor hours generally should correspond to changes in cost and revenue. f. Verify Survey of Rates in Similar Service Areas City staff shall review the survey of rates in similar service areas to determine if the surveys were completed according to the Page 11-12 survey format. This includes careful evaluation of why rates might be different. For example, tipping fees may be significantly different, or non-residential accounts may provide a large subsidy to residential accounts. Survey results should be benchmarked against rates proposed by the franchise hauler to determine if proposed rates are reasonable. Survey results which are significantly different from information included in the franchise hauler's rate adjustment application should be noted. g. Request Additional Data and Clarification, If Necessary Throughout the analysis of the application, City staff may request clarification and/or additional data from the franchise hauler to explain any unusual changes in costs or operating performance. This information is requested in a letter from the City to the franchise hauler. h. Document Staff Review and Prepare Written Response During this task, City staff documents the review process. A memorandum is prepared which lists the activities completed during the review process and highlights any of the key findings of the review. City of San Luis Obispo Page 802 of 1192 Section II. Rate Setting Process Responsibility: Ti.ming: Tasks: Franchise Hauler Completed during the second week of step 3. a. Provide Additional Information If Requested ' b. Prepare and Submit Response Description of Tasks Overview During this step the franchise hauler responds to requests for additional information from the City. a. Provide Additional Information, If Requested During the prior step 3, City staff reviewed the application and may have identified missing information, or changes in the financial or operating data between the City of San LuiS Obispo five fiscal years which require clarification or further explanation. The franchise hauler should respond to the City's request for additional information. Responses will very depending on the specific requirements of the City. b. Prepare and Submit Response The franchise hauler prepares written responses to the City's request for additional information. These responses are forwarded to the City during this step. Page 11-13 Page 803 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: City Completed fifteen (15) days after the review of rate adjustment application and preparation of responses (step 3) is complete a. Prepare Draft Council Agenda Report Description of Tasks Overview A draft Council Agenda Report with recommendations is prepared by City staff and submitted to the franchise hauler for review. The report will be reviewed by the franchise hauler in step 6. Residents of the City will be able to comment on the rate adjustment process through a public hearing (step 8). a. Prepare Draft Council Agenda Report In this step, City staff prepares a draft Council Agenda Report including recommendations for a rate adjustment. The draft report includes the following sections: O Chief Administrative Officer Recommendation O Discussion of Rate Application and Review O Effect of Rate Adjustment on Customers O Potential Future Rate Adjustments O Concurrences O Attachments. Each of these report topics is discussed below: O Chief Administrative Officer Recommendation This is one or two paragraphs recommending the new integrated Page 11-14 solid waste management rates, This may include a chart showing current and proposed rates, and the recommended rate adjustment. O Discussion of Rate Application and Review This section of the report provides a brief overview of the rate adjustment process and discussion of significant historical issues. This includes a review of analysis work completed by City staff. This section may include the following sub-sections: Review of Rate Adjustments, including a discussion of rate adjustments during each year since the last base year, and an analysis of the significant components of . the adjustment in rates (e.g., increased tipping fees, changes in operating profit). Analysis of Projected Costs, including a discussion of any unusual increases in costs which were discovered during the review process. Discussion of Seroice Issues, including changes in frequency or type of service. If significant service issues are not involved with a rate adjustment, this section would be omitted. O Effect of Rate Adjustment on Customers City staff would prepare an analysis of how the monthly bills for customer City of San Luis Obispo Page 804 of 1192 Section II. Rate Setting Process classifications will change. This would also include a comparison of existing and recommended new rates. O Potential Future Rate Adjustments A discussion would be presented on possible future rate adjustments, given City staff analysis of the recommended rate adjustment and potential additional costs which may need to be recovered through the rate payers. This may include a comparison of what future rate increases may need to be if an alternative rate adjustment is adopted by City Council. O Concurrences This is a paragraph stating concurrences by the Finance and Utilities Departments for the recommended rate adjustment. City of San Luis Obispo O Attachments Attachments to the report could include: • City Council Resolution which formally adopts new rates • Revised rate schedule • Historical rate adjustments • Estimated tipping fees • Estimated costs and revenues • Alternative rate adjustments · • Other relevant supporting materials provided by the franchise hauler or prepared by City staff • Comparison of residential and non- residential rates with other cities. After the draft report is complete, copies are provided to the franchise hauler. Page 11-15 Page 805 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: Franchise Hauler Completed within seven (7) days after the City's completion of the draft council agenda report (step 5) a. Review Draft Council Agenda Report with City Staff b. Resolve Any Remaining Issues c. Prepare Response to Draft Council Agenda Report Description of Tasks Overview The franchise hauler reviews the City's draft of the Council Agenda Report. The franchise hauler also may provide additional information related to any issues identified by the City. a. Review Draft Council Agenda Report with City Staff Each section of the draft report should be reviewed by the hauler to ensure the following: O Correct data are included O City staff analysis is accurate and fair O Rate adjustments are acceptable. b. Resolve Any Remaining Issues If any issues are identified during this step, the franchise hauler works with City staff to fully explore and resolve these outstanding issues. Page 11·16 c. Prepare Response to Draft Council Agenda Report A written response to the draft report is prepared, if the hauler deems it necessary. The response may cover one or more of the following topics: 0 · If data discrepancies exist in any of the areas noted in the prior task, the City should be notified of these discrepancies O If the analysis conducted by City staff can be clarified or considered differently, this information should be provided to the City staff O If the report is acceptable and no clarification or comments can be offered, this should be relayed to City staff. City of San Luis Obispo Page 806 of 1192 Section II. Rate Setting Process Responsibility: Ti.ming: Tasks: City Completed eight (8) days after receiving hauler's comments on the draft agenda report (step 6) a. Incorporate Franchise Hauler's Changes in Final Report b. Prepare Final Council Agenda Report Description of Tasks Overview The City prepares the Final Council Agenda Report, incorporating relevant comments from the franchise hauler during this step. a. Incorporate Franchise Hauler's Changes in Final Report Any comments or issues raised during the franchise hauler's review of the draft report are addressed during this task. If necessary, meetings are conducted with representatives from the City and the Ctty of San Luts Obispo franchise hauler. Final solutions to outstanding issues are included in the Council Agenda Report. b. Prepare Final Report and Recommendations After final comments from the franchise hauler have been considered, the Final Council Agenda Report package is prepared. This includes the Council resolution to be signed by appropriate City officials to adopt new rates. A copy of the final report is submitted to the franchise hauler. Page 11-17 Page 807 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: City Completed thirty (30) days after Final Report and Recommendations are complete a. Distribute Report and Resolution to Council Members b. Post Notice of Public Hearing c. Conduct Public Hearing d. Obtain Council Approval Description of Tasks Overview During this step, the final recommendations are presented to the City Council for review, comment, and approval. a. Distribute Report and Resolution to Council Members The Council Agenda Report is provided to members of the City Council. The report is included as an agenda item for Council consideration at a regular Council meeting. b. Post Notice of Public Hearing City staff will prepare for a public hearing on the proposed rate adjustment at the formal Council meeting. Page 11-18 c. Conduct Public Hearing Comments from City residents are made during the Council meeting considering the rate adjustment. Copies of the Council Agenda Report should be made available at the meeting. d. Obtain Council Approval. Council members consider the public comments, and review the agenda report and proposed rate adjustments. If Council agrees with the recommendations of the City staff, the report and rates are approved and a resolution is adopted to implement these rates. If Council does not agree with the recommendations, the report is returned to City staff for additional analysis. City of San Luis Obispo Page 808 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: Franchise Hauler Completed thirty (30) days after Council approves application and resolution a. Prepare Notification of Rate Adjustment b. Implement Rate Adjustment Description of Tasks Overview During this final step, the franchise hauler implements new rates. Rates are implemented on October 1 of each year, unless no rate adjustment is requested or the rate application is delayed. a. Prepare Notification of Rate Adjustment After a formal resolution is adopted by the Council approving the new rates, the hauler notifies all customers of the rate adjustment. This notification may be City of San Luts Obispo included with a regular billing or mailed separately. b. Implement Rate Adjustment During this final task, new rates are entered into the franchise hauler's billing system and included in the billing cycle. If the franchise hauler prepares billings once every two or three months, and a rate adjustment occurs during the middle of a billing cycle, unbilled amounts in current billing cycle due to the rate adjustment are calculated and included in the next billing cycle. Page 11-19 Page 809 of 1192 Section II. Rate Setting Process B. Timing of Base Year Rate Setting Process A base year rate adjustment is implemented on October 1 if no delays in the process occur. The Base Year Rate Adjustment Application must be submitted Page 11-20 to the City by June 1 in order to meet the October 1 implementation date. Exhibit Il-3 on the next page shows the timeline for completion of the rate adjustment process. Key milestones are noted in the exhibit by circled letters. City of San Luis Obispo Page 810 of 1192 EXHIBITil-3 Timing qf Base Year Rate Adjustment Process Month -2 Month -1 I Month 1 Month 2 i Month 3 Month 4 Process Activity 1. Preparation and Submission of Rate Adjustment Application 2. Verification of the Completeness of Rate Adjustment Application 3. Review of Rate Adjustment Application and Preparation of Responses 4. Response to Additional Information Requests from City 5. Preparation of Draft Council Agenda Report 6. Review of Draft Council Agenda Report 7. Preparation of Final Council Agenda Report 8. Presentation of Agenda Report to City Council 9. Implementation of the New Rates Milestones Franchise Hauler Preparation I 1sDay I Review. I i;·.>I ; ® ' Step2 Step3 Step4 A. Rate Adjustment Application E. Public Hearing Fonnal City Review Step6 Step@ : Implement i I Step8 l I ©CE) Step9 @ B. Acceptance/Return Letter F. Resolution Adopting New Rates C. Draft Council Agenda Report G. New Rates Effective D. Final Council Agenda Report Page 11-21 Page 811 of 1192 Section II. Rate Setting Process C Interim Year Rate Setting Process Interim year rate adjustment requests are accepted in the two years between base years. The interim year process requires less information and preparation time, while still allowing fair and reasonable rate adjustments. During the two interim years, rates can be adjusted annually through application of a composite index. The index consists of: O Historical changes in the U.S. National Consumer Price Index (CPI) published by the Bureau of Labor Statistics in their Monthly Labor Review O Projected changes in tipping fees O Projected changes in AB 939 and regulatory fees O Adjustment for the franchise fees which change if revenues change. In each interim year, the franchise hauler is responsible for determining the actual annual change in the CPI for the most recent 12-month period. The franchise hauler also will be responsible for estimating and documenting projected changes in tipping Page 11-22 fees, and AB 939 and regulatory fees in the interim year for which a rate adjustment is requested. Even if the interim-year adjustment would justify an increase in rates, the franchise hauler is not required to apply for the increase. This will help stabilize rate adjustments even when small increases might be warranted. Special mid-year rate adjustments are allowed outside of the annual schedules of the base year and interim year adjustments. These adjustments are for extraordinary and consequential cost increases which would require across-the-board rate increases of greater than five percent (5%). Both the City and franchise hauler may initiate the special mid-year rate adjustment process by contacting the City Administrative Officer (CAO). For special mid-year rate adjustments, the franchise hauler will provide necessary information and documentation so the CAO can make a judgment as to the reasonableness of such a rate adjustment. With CAO approval, a mid- year rate adjustment can be made by the franchise hauler. Exhibit 11-4, following this page, provides an overview of the interim year rate adjustment process. Following this exhibit is a description of each step in the process. City of San Luis Obispo Page 812 of 1192 EXIDBITil-4 Interim Year Rate Adjustment Process 1. Preparation and Submission of Rate Adjustment Application Franchise Hauler a. Prepare an Interim Year Rate Adjustment Application b. Submit Application to City Staff 2. Preparation of Draft Council Agenda Report City a. Request Additional Data, and Clarification, If Necessary b. Prepare Draft Council Agenda Report 3. Review and Response to Draft Council Agenda Report Franchise Hauler a. Review Draft Council Agenda Report with City Staff b. Prepare and Submit Response 4. Preparation of Final Council Agenda Report City a. Incorporate the Franchise Hauler's Comments in Final Report b. Prepare Final Council Agenda Report 5. Presentation of Agenda Report to City Council . City a. Distribute Report to Council Members b. Post Notice of Public Hearing c. Conduct Public Hearing d. Obtain Council Approval 6. Implementation of New Rates Franchise Hauler a. Notify Customers b. Implement Rate Adjustment Page 11-23 Page 813 of 1192 Section II. Rate Setting Process. Responsibility: Timing: Tasks: Franchise Hauler Completed 120 days prior to the date new rates become effective a. Prepare an Interim Year Rate Adjustment Application b. Submit Application and Worksheet to City Staff Description of Tasks Overview During this first step, the franchise hauler prepares the Interim Year Rate Adjustment Application. a. Prepare an Interim Year Rate Adjustment Application The Interim Year Rate Adjustment Application requires information from the most recent Base Year Rate Adjustment Application.' The application is used to calculate proposed new rates. Detailed instructions on how to complete this application are provided in Section IV of this manual. The application requires the franchise hauler determine the annual change in the U.S. National Consumer Price Index, as published by the Bureau of Labor Statistics in Page 11·24 their Monthly Labor Review. The actual annual change in this index during the twelve months prior to the date the Interim Year Rate Adjustment Application is used to adjust controllable costs allowed in the prior base year rate adjustment. In the application, the franchise hauler is also responsible for projecting changes in two pass through costs: O Tipping fees O AB 939 and regulatory fees. These projections are made for the interim year for which new rates are being requested. b. Submit Application to City Staff The application is signed by an appropriate representative of the franchise hauler and sent to the City for review. City of San Luis Obispo Page 814 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: Cicy Completed fifteen (15) days after the Interim Year Rate Adjustment Application is submitted a. Request Additional Data, and Clarification, If Necessary b. Prepare Draft Council Agenda Report Description of Tasks Overview A draft Council Agenda Report with recommendations is prepared by City staff and submitted to the franchise hauler for review. The report will be reviewed by the franchise hauler in step 3. Residents of the City will be able to comment ori the rate . adjustment process through a public hearing (step 5). a. Request Additional Data, and Clarification, If Necessary If necessary, City staff requests clarification and/or additional data from the franchise hauler. The request is to clarify the hauler's assumptions for projected changes in tipping fees or regulatory costs, and to indicate the expected adjustment in rates. b. Prepare Draft Council Agenda Report City staff prepares a draft Council Agenda Report with recommendations of new rates for City Council consideration. This report should be brief and include the following sections: O Chief Administrative Officer Recommendation This is one paragraph which recommends the required rate adjustment. City of San Luts Obispo O Discussion of Application and Review This is a summary of the review process and includes the information for the proposed rates, and the recommended rate adjustment. The report might include a discussion of any significant increases in pass through costs and an identification of the change in CPI. This section also may include a discussion of any significant historical issues. O Effects of Rate Adjustment on Customers This section includes an analysis of the impact on monthly bills due to the rate adjustment. O Attachments Attachments to the report would include: • City Council Resolution which formally adopts new rates • Revised rate schedule • Rate adjustment worksheet. After the draft agenda report has been prepared, the document should be submitted to the franchise hauler for comment and review. Page 11-25 Page 815 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: Franchise Hauler Completed twenty (20) days after preparation of rate adjustment indices a. Review Draft Council Agenda Report with City Staff b. Prepare and Submit Response Description of Tasks Overview The franchise hauler reviews the draft report to ensure that any analysis completed by City staff are fair, reasonable, and justified. a. Review Draft Council Agenda Report with City Staff The franchise hauler reviews the draft report to ensure the following: O Correct data are included O City staff analysis is accurate and fair. Page 11-26 b. Prepare and Submit Response A written response to the draft report is prepared. The response may cover one or more of the following topics: O Data discrepancies in any of the areas noted in the prior task O Clarification for the City or alternative analysis of the application O Responses to the City's request for additional information. City of San Luis Obispo Page 816 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: City Completed twenty-five (25) days after review and response to City analysis and calculations a. Incorporate the Franchise Hauler's Comments in Final Report b. Prepare Final Council Agenda Report Description of Tasks Overview The City prepares the final Council Agenda Report incorporating comments from the franchise hauler, as appropriate. a. Incorporate the Franchise Hauler's Comments in Final Report Any comments or issues raised during the franchise hauler's review of the draft report are addressed during this task. If necessary, meetings should be conducted Ctty of San Luis Obispo with representatives from the City and the franchise hauler. Final solutions to outstanding issues should be included in the report. b. Prepare Final Council Agenda Report After final comments from the franchise hauler have been considered, the final Council Agenda Report is prepared. A copy of the final report should be submitted to the franchise hauler. Page 11-27 Page 817 of 1192 Section II. Rate Setting Process Responsibility: Ti.ming: Tasks: City Completed thirty (30) days after preparation of final agenda report a. Distribute Report to Council Members b. Post Notice of Public Hear!ng c. Conduct Public Hearing d. Obtain Council Approval Description of Tasks Overview The final Council Agenda Report is submitted to City Council for review, comment, and approval, during this step. a. Distribute Report to Council Members The Council Agenda Report is provided to members of the City Council. The report is included as an agenda item for Council consideration at a regular Council meeting. b. Post Notice of Public Hearing City staff will prepare for a public hearing on the proposed rate adjustment at the formal Council meeting. Page 11-28 c. Conduct Public Hearing Comments from City residents are m·ade during the Council meeting considering the rate adjustment. Copies of the Council Agenda Report should be made available at the meeting. d. Obtain Council Approval Council· members will review the report and proposed rate adjustments. If Council agrees with the recommendations of City staff, the resolution attached to the report should be approved. If Council does not agree with the recommendations, the report is returned to City staff for additional analysis. City of San Luis Obispo Page 818 of 1192 Section II. Rate Setting Process Responsibility: Timing: Tasks: Franchise Hauler Completed thirty (30) days after the Council approves the application and resolution a. Notify Customers b. Implement Rate Adjustment Description of Tasks Overview After new rates have been approved by City Council, the final step in the process is to implement the new rates. a. Notify Customers After a formal resolution _is adopted by Council, a notification of a rate adjustment should be made to all customers. This notification may be included with a regular billing or mailed separately. City of San Luis Obispo b. Implement Rate Adjustment During this final task, the franchise hauler enters new rates into their billing system and includes the new rates on the next appropriate customer invoice. If the billing cycle is two months or more, and if a rate adjustment occurs during the middle of the billing cycle, unbilled amounts are calculated and included in the next billing cycle. Page 11-29 Page 819 of 1192 Section II. Rate Setting Process D. Timing of Interim Year Rate Setting Process The application from the hauler for a interim year rate adjustment should be submitted to the City on June 1st, four months prior to the implementation of the rates. Interim year rate adjustments are implemented October 1. Page 11-30 Exhibit 11-5, on the following page, shows the timeline for completion of the interim year rate adjustment process. Key milestones are noted in the exhibit by circled letters. City of San Luis Obispo Page 820 of 1192 EXIDBITil-5 Timing of Interim Year Rate Adjustment Process Process Activity 1. Preparation and Submission of Rate Adjustment Application 2. Preparation of Draft Council Agenda Report 3. Review and Response to Draft Council Agenda Report 4. Preparation of Final Report and Recommendations 5. Presentation of Final Report and Recommendations to City Council 6. Implementation of the New Rates Month -1 i Month 1 I Month 2 ! Month 3 Month 4 Franchise Hauler\ Preparation I Formal City Review Step! i 10 I _._SJep2 Milestones Step3 Step4@ A. Application Submitted to City B. Final Report and Recommendation C. Public Hearing D. Resolution Adopting New Rates E. New Rates Effective \ i i I Step5 i ! Implement ©@l I Step6 0 Page 11-31 Page 821 of 1192 Page 822 of 1192 Section III Base Year Rate Setting Methodology Page 823 of 1192 Page 824 of 1192 III. Base Year Rate Setting Methodology This section provides detailed instructions on how to complete the Base Year Rate Adjustment Application. The application will be prepared by the franchise hauler and reviewed by the City once every three years. The application includes detailed financial and operating information and is used to determine base year costs and revenues of the franchise hauler. As part of the application, the franchise hauler also conducts and summarizes results of a survey of collection rates in similar cities. Exhibit ID-1, following this page, provides an overview of the steps and related tasks which must be completed to prepare the application form. Exhibit ID-2, following Exhibit III-1, is a sample application form as it might be completed by the franchise hauler. Following this exhibit are detailed descriptions of each step and related tasks. Please note that data included in these exhibits are provided for illustrative purposes only and are not intended to reflect actual operating or financial conditions of the franchise hauler. Information for five years is required from the hauler. The information is intended · to show the relationship between the most recently completed years (years 1 and 2), the City of San Luis Obispo current year (year 3), and projections for the new base year (year 4) and year after (year 5) .. On the application, these five years are organized as five columns: O Historical ( columns 1 and 2) - includes audited financial information for the franchise hauler's prior two years. O Current ( column 3) - includes estimated financial information for the full year in which the application is submitted. Data in this year includes year-to- date performance plus estimated performance during the remaining months of the current year. O Projected (columns 4 and 5) - provides estimated operations during the base year (for which new rates will be established), and projected performance during the year after the base year. The relationship between these five . columns for any given line item should be consistent. Any substantial difference between each of the five years should be explained by the franchise hauler and considered by the City during the review process. Page 111-1 Page 825 of 1192 EXIDBIT ill-1 Preparation of the Base Year Rate Adjustment Application 1. Entry of Operating Costs a. Enter Prior Two Years Audited Information b. Enter Current Year Estimated Information c. Enter Base Year Projected Information d. Enter Future Year Projected Information e. Enter Operating Information 2. Determination of Revenues Without Increase a. Determine Residential Revenue b. Determine Non-Residential Revenue c. Determine Allowance for Uncollectible Accounts d. Determine Revenues from Processing Facility e. Calculate Total Revenue Offsets 3. Calculation of Allowable Operating Profit and Revenue Requirement a. Calculate Allowable Operating Profit b. Determine Franchise Fee c. Calculate Revenue Requirement 4. Calculation of Percent Change In Rates a. Calculate Net Shortfall/Surplus b. Calculate Percent Change In Rates 5. Preparation of Summary Form a. Calculate New Rates b. Sign and Submit the Application 6. Survey of Rates in Similar Areas a. Complete Solid Waste Fee Survey b. Summary of Survey Page 111·2 Page 826 of 1192 EXHIBITID-2 Page 1 of6 Sample Base Year.Rate Adjustment Application City of San Luis Obispo Base Year Rate Adjustment Application Summary 1. Rate Increase Requested Rate Schedule Single Family Residential 2. Economy Service (collection) Economy Service (orange bags) 3. Standard Service 4. Premium Service 5. Mu/tiunit Residential and Non-resident/al Increased Current Rate Rate $2.00 $2.20 $1.00 $1.10 13.40 14.74 18.25 20.08 Adjustment $0.00 $0.00 0.01 0.02 10.0%11 New Rate $ 2.20 $1.10 14.75 20.10 (a) Calculated rates are rounded up to the nearest SO.OS. Rate increases of H 10.0% U will be applied to all rates in each structure with each rate rounded up to the nearest S 1.00. CertHlcatlon To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of San Luis Obispo. Name: John Brown Title: Controller Signature: Jofrn 'lJrown. Date: May 1, 19xx Fiscal Year: Pg. 1 of6 Page 111-3 Page 827 of 1192 EXHIBITID-2 Page 2 of6 Sample Base Year Rate Ad;ustment Application City of San Luis Obispo Base Year Rate Adjustment Application Financial Information 6. 7. 8. 9. 10. Direct Labor Corporate Overhead Office Salaries Other General and Administrative Costs Total Allowable Costs 11. Operating Ratio 12. Allowable Operating Profit 13. 14. 15. 16. 17. Tipping Fees Franchise Fees AB 939 and Regulatory Fees Lease Pavments to Affiliated Comnanies Total Pass Through Costs 18. Revenue Requirement 19. Total Revenue Offsets (from Pg. 3) 20. Net Shortfall (Surplus) Historical 1992 I 1993 Section I-Allowable Costs s:1000000 I S: 1050000 108000 114000 245 000 255 000 1680000 1690000 $3 033 000 $3109 000 section II-Aliow.ble Operating Profit $750000 $770000 170000 180 000 0 0 25000 25000 $945 000 ! $971SnM Section_ IV-Revenue Requlrament. U $4p93.000 I $41234poo . Section V-NatShorlfall (sw,,tua) Section VI-Pen:ent Change In Rates 21. Total Residential and Non-residential Revenue without increase 22. 23. 24. in Base Year (from Pg. 3, lines 32 + 40) Percent Change in Residential and Non-residential Revenue Requirement Franchise Fee Adiustment Factor 11 -6.0 oercentl Percent Change In Existing Ratea Fiscal Year: Page 111-4 Current Proiected Base Year II 1994 1995 1996 (from Pg. 4) $1100000 S:1248600 $1260000 120000 126000 132 000 260 000 268.200 275 000 1 740000 1820200 1825000 $3 220 000 $3.463000 $3.492.000 92.0% 93.3% 301130 $250 000 $800000 ,tRM\000 $850 000 190000 200000 210 000 50000 ·-· 100000 100 000 25000 25000 25000 -C,1 ·---M $1 1R<; onn $4.405,000 $4.929.130 $4.927.000 $393.370 ii s:4175760 · 9.4% ' 94.0% 10.0% Page 2of6 Page 828 of 1192 Sample Base Year Rate Adjustment Application City of_ San Luis Obispo Base Year Rate Adjustment Application Revenue Offset Summary Residential Revenue (without Increase in Base Yr.) Current Projected Price per Account Type 25. Economy Service Rate/Month Months Accounts H P;ckaoe ij $2.00 12 ~,980 10 26. Standard Service 13.40 12 6 200 27. Premium Service 18.25 12 660 28. Single Family Residential Multiunit Residential Dumpster 29. Number ot' Accounts 30. Revenues 31. Less Allowance for Uncollectibfe Residential Accounts 32. Total Residential Revenue Non-resident/at Revenue (without Increase in Base Yr.) Account Type Non-residential Can 33. ·•• Number of Accounts 34. Revenues -Non-residential Waste Wheeler 35. Number of Accounts 36. Revenues Non-residential Dumpster 37. Number of Accounts 38. Revenues 39. Less: Allowance for Uncollectibfe Non-residential Accounts: 40. Total Non-residential Revenue Processing Facility Revenues 41. Scrap Payments for all Materials Sold 42. Calttomia Redemption Value (CRV) and Processing Fees 43. Fees from Other Cities 44. Revenues from Proceaalng Facility 45. Interest on /nw,stmenta 46. Other Income 47. Total Revenue Offsets Fiscal Year: No.of ~ ~ $1.100.000 490 640 000 $31.400 $1,708.600 490 120000 245 $160.000 1100 1 850 ooo I S40 16oo $2.089.400 $105000 $110000 $30 000 $245000 $50.000 $0 S410931ooo Current 1993 1994 $1,175.000 $1,300.000 500 510 650000 660 000 $34.500 $41.200 Ii $1.790.500 $1.918.800 500 510 125 000 130 000 250 255 $170 000 $180.000 1125 1150 1870000 1 885000 $41,500 s18:8 00 u $2.123.500 $2.146.200 $110 000 $115000 S120000 $130000 $40000 $45 000 $270000 S290 000 $501000 s501000 n $0 $0 $4,234.000 $4.405.000 EXHIBITID-2 Page 3 of6 Proected Base Year 1995 214560 996 960 144 540 $1.356.060 520 670000 S40 1eoo H $1.985,460 520 135000 260 $190000 1175 1910000 HFoo tt $2.190300 $120000 S140000 $50 000 ~"110000 $5MOO U $0 $4,535.760 1996 $1.450.000 $7 $2.107.000 530 145 000 265 $200.000 1 200 $1 950 000 $45,900 s2.249.100 Ii $125 000 S150 000 $55 000 $330 000 s5o,ooo n $0 S4i736.100 Page 3 of6 Page 111-5 Page 829 of 1192 Sample Base Year Rate Adjustment Application City of San Luis Obispo Base Year Rate Adjustment Application Cost Summary for Base Year Description of Cost Labor Payroll Taxes 48. Total Direct Labor 49. Total Corporate Overhead Office Salary Payroll Taxes 50. Total Office Salaries Computer Services Depreciation on Building and Equipment Depreciation on Truck and Containers Dues and Subscriptions Equipment Rental Fines Gas and Oil Hauling Interest Expense Laundry Legal and Accounting Miscellaneous and Other Non-Deductable Office Expense Operating Supplies Other Insurance Other Taxes Outside Services Parts Public Relations and Promotion Recycling Rent Telephone Tires Travel Truck Insurance Truck Repairs Utilities 51. Total Other General and Administrative Coats 52. Total Tipping Fees 53. Total Franchise Fee 54. Total AB 939 and Regulatory Fees 55. Total Lease Paymenta to Affiliated Companies 56. Total Coat Fiscal Year: Page 111-6 For Information Purposes Only Total 1141l500 100100 $1248600. s12.600 1 $8 820 138195 $16650 11 655 36105 4350 3045 $174 300 $21 000 $14 700 $ 30000 $ 23 572 .. $ 2 840 $ 1 988 60000 36727 4425 3 098 I.•,. .<6QQOO .. 36727 4425 3098 • ·.·. ··• ····s·ooo· 3984 480 336 .· .. :., ······a.:10·000 •. • 8300 1000 700 ...... · 1000 830 100 70 ···329500 271410 32700 22 890 10000 8300 1 000 700 ·. 35000 29050 3500 2450 10000 7138 860 602 15000 12450 1 500 1 050 ·saoo 2905 350 245 . · 5000 4150 500 350 40.300 32370 3900 2 730 330000 224 930 27100 18 970 . 530000 439 900 53000 37100 34000 28220 3400 2 380 . 24000 19920 2400 1 680 5000 4150 500 350 ·99<ltV\·. 54697 6590 4 613 25.000 20750 2500 1 750 1· . · 18000 8300 1000 700 •.... · -•40000• 32785 3950 2765 . :· 3;000· 2490 300 210 . "4600 1495 180 125 .. 45000 34860 4200 2940 11000 3320 400 280 30000 15no 1900 1330 sr·520200 $1369500 $165000 !l:115 500 I -~i000 II !697,200 !84000 !58.800 I ···~1000·11 $200,000 1\1 iO I s100;000 11 §831000 I $101000 ~,000 I· ~51000 ~ 12oi750 I 1:21500 £\750 i $4}!281000 II S3A29153o $3891100 $2721370 EXHIBITID-2 Page 4 of6 Processing Facilit 283 500 25100 $308 600 S 1 600 15750 15 750 200 0 0 2600 0 0 1 400 0 6300 0 1 300 59000 0 0 0 0 34000 0 8000 500 0 2 800 3000 7000 11 nnn $170 2no 1° II !g I ~1 ~~ $537:000 U Page 4 of6 Page 830 of 1192 Sample Base Year Rate Ad;ustment Application City of San Luis Obispo Base Year Rate Adjustment Application Base Year Revenue Offset Summary Residential Revenue (without Increase in Base Yr.) 57. Single Family Residential Multiunit Residential Dumpster 58. Number of Accounts 59. Revenues 60. Less Allowance for Uncollectible Residential Accounts 61. Total Residential Revenue Non-residential Revenue (without Increase in Base Yr.) Account Type Non-residential Ca(l 62. Number of Accounts 63. Revenues Non-residential Waste Wheeler 64. Number of Accounts 65. Revenues Non-residential Dumpster 66. Number of Accounts 67. Revenues 68. Less: Allowance for Uncollectible Non-residential Accounts: 69. Total Non-residential Revenue Processing Facility Revenues 70. Scrap Payments for all Materials Sold 71. CalHomia Redempfion Value (CRV) and Processing Fees 72. Fees from Other Cities 73. Revenues from Processing Faclllty 74. Interest on Investments 75. Other Income 76. Total Revenue Offsets Fiscal Year: For Information Purposes Only Section Vll-Revenua-Offseb-. Total Ci i $1,356.0601 $1.152.651 I 520 380 $670000 $569 500 $40,6001 $34,5101 i $1,985,4601 $1,687.641 I 520 442 135000 $114 750 I · 11so;ooo: 2601 $1611:~I 1'175 999 1910000 $1,623,500 ~i7ool ;~z ~~~I 1211so1aool s1 1861i755j ~120000 so $140000 so ssoooo so $310000 $0 iso,oool $5010001 I< 11• !21 ~1535i7601 $3,59913961 CSU SLO $122.0451 20 $60.300 $3.654 j $178 6911 47 $12150 $17.,:1 $4.023 j $1971127 ! so· $0 $0 $0 S5o1oool so! $42518181 EXHIBITill-2 Page 5 of6 $81.3641 soij 120 $40.200 $2.436 ! so!I $119.1281 so~ 31 0 $8100 $0 $11,4~~, $~11 71 0 114 600 s21682 I soil $13114181 soil $0 $120 000 $0 $140.000 $0 $ 50,000 $0 $310 000 $501000 I soil sol soij $30015461 $310100011 Page 5 of6 Page 111-7 Page 831 of 1192 Sample Base Year Rate Adjustment Application City of San Luis Obispo Base Year Rate Adjustment Application Operating Information II Histortcal II Current Prniected Percent Percent Percent Base Year Percent 1992 Chanae 1993 Chanae 1994 Cha nae 1995 Chanae · Sectlon .. lX • Operating.Data Residential 77. Accounts 9,250 2.2% 9,450 2.1% 9,650 I 2.0% 9,840 1.6% 78. Routes 4 0.0% 4 0.0% 4 0.0% 4 0.0% 79. Tons Collected 11,350 1.8% 11,550 1.7% 11,750 2.1% 12,000 1.7% 80. Direct Labor Hours 15,700 0.6% 15,800 0.6% 15,900 0.6% 16,000 0.6% Non-residential 81. Accounts 1,835 2.2% 1,875 2.1% 1,915 I 2.1% 1,955 2.0% 82. Routes 4 0.0% 4 0.0% 4 0.0% 4 0.0% 83. Tons Collected 18,700 2.1% 19,100 2.1% 19,500 1.5% 19;800 2.0% 84. Direct Labor Hours 9,700 1.0% 9,800 1.0% 9.900 I 1.0% 10;000 1.0% Recyclable Materials 85. Fees from Other Cities $30,000 33.3% $40,000 12.5% $45,000 11.1% $50,0QO. 10.0% 86. Tons from Other Cities 750 20.0% 900 5.6% 950 5.3% 1;000 5.0% 87. Cost per Ton 40 10.0% 44 6.8%1 47 6.4% 50 4.0% Fiscal Year: ' ' Page 111-8 EXHIBITID-2 Page 6 of6 1996 10,000 12,i 16.1 I 1,995 4 20,200 10,100 $55,000 1,050 52 Pg. 6 of 6 Page 832 of 1192 Section Ill. Base Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 1 of the base year rate adjustment process (refer to Section II-A) a. Enter Prior Two Years Audited Information b. Enter Current Year Estimated Information c. Enter Base Year Projected Information d. Enter Future Year Projected Information e. Enter Operating Information Description of Tasks a. Enter Prior Two Years Audited Information Financial information from audited financial statements is consolidated into specific categories identified on page 2 of the application. These categories include: Line 6 Direct Labor Line 7 Line 8 Line 9 Line 13 Line 14 Line 15 Line 16 Corporate Overhead Office Salaries Other General and Administrative Costs Tipping Fees Franchise Fees AB 939 and Regulatory Fees Lease Payments to Affiliated Companies. The specific components of these cost categories are described in Exhibit ill-3, on the following page. Supplemental documentation should be prepared by the hauler which reconciles the franchise hauler's financial audit to information provided in the application. This documentation, along with a copy of each audit, should be included in the application package. Ell ERNST & YOUNG Total cost information for residential, non- residential, and recycling services should be reported in this initial task and in tasks b, c, and d below. Segregation of costs for residential, non-residential, and recycling is not required. For informational purposes only, the franchise hauler should further segregate total costs into four areas: O San Luis Obispo (within city limits) O California State University at San Luis Obispo (CSU SLO) O Adjacent unincorporated areas O Materials processing facility. This segregation also is provided on page 4 of the application. Suggestions of factors to allocate any indirect costs are summarized in the "standardized" chart of accounts in Appendix B of this manual. b. Enter Current Year Estimated Information Current year costs are determined from actual costs to-date and estimated costs that will be incurred during the remainder of the current year. Total costs for the current year Page 111-9 Page 833 of 1192 EXHIBITID-3 Definition of Financial Terms from Base Year Rate Adjustment Application !Llne'Number/Item·· 6. Direct Labor 7. Corporate Overhead 8. Office Salaries 9. Other General and Administrative Costs 10. Total Allowable Costs 11. Operating Ratio 12. Allowable Operating Profit 13. Tipping Fees 14. Franchise Fees 15. AB 939 and Regulatory Fees 16. Lease Payments to Affiliated Companies Page 111-10 Definition···. All costs associated with solid waste and recyclable materials collection, including wages, overtime, payroll taxes, health and welfare benefits, workers compensation, and pension benefits Salaries paid to the franchise hauler's corporate officers. The amount of this item cannot exceed $120,000 per year in 1994 dollars (the $120,000 , will be adjusted annually by the Consumer Price Index as published by the Bureau of Labor Statistics in their Monthly Lahar Review). Wages and related benefits paid to office and administrative staff, including wages, overtime, payroll taxes, health and welfare benefits. workers compensation, and pension benefits All general and administrative costs with the exception of corporate overhead and office salaries. This item includes the following costs: • Collection fees • Office rent • Computer equipment and • Office supplies services • Postage • Depreciation • Professional fees • Dues and subscriptions • Promotion • Insurance • Office repair and maintenance • Janitorial • Telephone • Laundry and uniform • Travel • Interest expense • Trucking • Licenses • Utilities • Medical expenses Sum of direct labor, corporate overhead, office salaries, and other general and administrative costs Determines allowable operating profit, and is the ratio of total allowable costs to total allowable revenue. The operating ratio must be between 90 and 94 percent. If the franchise hauler's actual operating ratio is outside this range, the operating ratio is to be set at 92 percent. Established by the allowable operating ratio Costs to dispose of solid waste at transfer stations, transformation facilities, or landfills Payments to the City of 6.0 percent of gross revenues (revenues from residential and commercial billings only; excludes recyclable material sales) Payments to the City of San Luis Obispo to meet AB 939 programs Lease payments for trucks, office space, and other operating facilities made to affiliated companies Page 834 of 1192 Section Ill. Base Year Rate Setting Methodology should be similar to the prior audited year, after taking into account increases due to inflation and changes in the number of residential, non-residential, and recycling customers served. Any significant changes should be explained and documented. A significant change includes any increase in cost which is greater than the Consumer Price Index as reported by the Bureau of Labor in their Monthly Labor Review, or any decrease in a cost item. c. Enter Base Year Projected · Information Base year costs are projected by the franchise hauler. These projected costs then are used to calculate the net surplus/shortfall in revenues and, subsequently, the percent adjustment in rates. These projected costs should be based on anticipated service levels during the base year, and expenses which will be incurred to provide these services. Each cost element in the application should be reviewed and any anticipated increase in specific line items should be included in the base year projection. For example, if negotiated labor rates or workers compensation a·re expected to change, or if tipping fees are expected to change, these ' changes should be included in cost projections for the base year. The franchise fee for the base year (year four of the application) is not estimated in this task, but is estimated in step 3. Because franchise fees are based on gross revenues from residential and non-residential services, the projected franchise fee in the base year is calculated using revenue projections developed in step 2. d. Enter Future Year Projected Information Costs are projected for the year after the base year. Although these costs will not be used for any rate adjustments made by the City, the projection provides the City City of San Luis Obispo information to use for evaluating future rates. Projected costs should be based on anticipated service levels and significant changes in operating costs. e. Enter Operating Information Operating information requested in the application provides an important indicator of the franchise hauler's performance. If costs are changing at an unusual rate, operating data may provide some explanation of these changes. For example, cost increases could be attributed to the increased level of service provided (i.e., accounts served). Five operating characteristics are required in the application for both residential and non-residential customers: O Accounts served O Routes O Tons of solid waste collected O Direct labor hours O Tons of recyclable materials received at processing facility, and the fees charged to process these materials. Five years of operating data are required in the application. Prior year data are based on actual annual operating results. Current year performance is based on performance to-date plus estimated performance for the remaining months of the current year. Projected operating results are the franchise hauler's best estimate of service levels during the new base year and the year after that. Year-to-year percentage changes then are determined for each of the four operating characteristics above. Any significant changes should be documented and explained by the franchise hauler. A significant change in an operating characteristic is an increase or decrease of more than two percent. Page 111·11 Page 835 of 1192 Section Ill. Base Year Rate Setting Methodology Note that page 5 of the application contains the total number of residential and non-residential accounts serviced by the franchise hauler in the new base year. Page 111-12 These totals should agree with the account information used to calculate residential and non-residential revenue (page 3 of the application). City of San Luis Obispo Page 836 of 1192 Section Ill. Base Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 1 of the base year rate adjustment process (refer to section II-A) a. Determine Residential Revenue b. Determine Non-residential Revenue c. Determine Allowance for Uncollectible Accounts d. Determine Revenues from Processing Facility e. Calculate Total Revenue Offsets Description of Tasks a. Detennine Residential Revenue Single family residential revenues are provided for all five years. For the base year only, the hauler also provides revenues, by service type, at existing rates. The calculation of base year single family residential revenues under the City's current rate structure is documented on page 3 of the application. The hauler provides the projected number of accounts by service type, and the existing monthly rate for each service type. Total revenue for each service type then is calculated as follows: Multiplied by Equals Multiplied by Equals Rate per month Twelve months Rate per year Projected average number of single family residential accounts during year Revenue by service type For economy service an additional amount is added for bag package purchases as foJ!ows: City of San Luis Obispo Multiplied by Equals Rate per package of bags Number of packages purchased Revenue for packages purchased Revenue by service type then is entered under the base year (fourth column of cells). These values then are summed and entered on line 28. The number of accounts in each service category may change throughout the year (e.g., new customers, or customers which switch to a different service). The average number of accounts by service type is to be used in these calculations. In addition, the number of accounts identified for these calculations must agree with operating data provided on page 5 of the application. The number of multiunit residential customers and estimated revenues for each of the five years are also provided by the hauler on page 3. Finally, the franchise hauler should provide sufficient information to support any figures included in this portion of the form. Page 111-13 Page 837 of 1192 Section Ill. Base Year Rate Setting Methodology b. Determine Non-residential Revenue Non-residential revenue information is entered on page 3 of the application. For each service type (e.g., can, waste wheeler, or dumpster) both the number of accounts and annual revenues are reported. Information for the first two years should tie to supporting audited financial information. Non-residential revenues for the current year are based on actual revenue to-date plus an estimate of the revenue that will be received through the end of the year. Non-residential revenue in the current year should be comparable to revenue in the prior two years, after taking into account increases in rates and service levels. Projected non-residential revenue information for the base year and year after also are provided on page 3. The non- residential rate structure and account summary assumed for each of these years (by service type and frequency of pick-up) should be documented separately by the franchise hauler, and provided to the City. Operating data provid_ed on page 5 of the application should correspond to the numbers of accounts provided on page 3. c. Determine Allowance for Uncollectible Accounts The franchise hauler will likely not be paid by all customers served. While this amount is expected to be relatively small, it must be accounted for in the calculation of base year net revenues. These amounts are reported on page 3 of the application (allowance for uncollectible residential accounts and allowance for uncollectible non-residential accounts). These amounts can be calculated based on a formula, such as a percentage of anticipated revenues, or based on actual experience. All assumptions rela~ed to the Page 111·14 projection of uncollectible accounts must be documented and included as a supplement to the application. d. Determine Revenues from Processing Facility If the franchise hauler owns and operates a processing facility used to process recyclable materials collected from City residences and businesses, the revenues from operating the processing facility shall · be an offset to the hauler's revenue requirements for purposes of establishing City residential and non-residential rates. On page 3 of the application, the hauler is to provide annual scrap payments received for all materials sold, annual California Redemption Value (CRY) and processing fees received for beverage containers, and fees from other cities. The result is added to total revenue offsets on page 3. e. Calculate Total Revenue Offsets Total revenue offsets are determined as follows: Plus Plus Plus Line 32 Total residential revenue Line 40 Total non-residential revenue Line 44 Revenues from processing facility Line 45 Interest on investments Plus Line46 Other income Equals Total revenue offsets Total revenue offsets are entered on page 3, line 47, and on page 2, line 19 of the application. ill ERNST & YOUNG Page 838 of 1192 Section Ill. Base Year Rate Setting Methodology Responsibility: . Franchise Hauler Timing: Prepared during step 1 of the base year rate adjustment process (refer to Section II-A) Tasks: a. Calculate Allowable Operating Profit b. Determine Franchise Fee c. Calculate Revenue Requirement Description of Tasks a. Calculate Allowable Operating Profit The operating ratio method is used to establish allowable operating profit. The operating ratio establishes revenue requirements based on allowable costs. The equation for the operating ratio is: Allowable costs Divided by Total operating revenues Equals Operating ratio. The operating ratio effectively determines the profit allowed to the franchise hauler on its allowable costs. In the first base year, the operating ratio will be 92 percent. In each succeeding base year, the operating ratio will range from 90 to 94 percent, which will help stabilize rate adjustments and afford the franchise hauler an incentive to reduce costs. In any succeeding base year, if the franchise hauler earned an operating ratio outside this range, then 92 percent would be reestablished. The following operating costs are included as operating costs in the allowable operating profit calculation: ill ERNST & YOUNG O Direct labor O Corporate overhead O Office salaries O Other general and administrative costs. A definition of the components of these cost categories is provided earlier in Exhibit m- 3. The actual or projected operating ratio and operating profit received by the franchise hauler is entered on line 11 for each of the five years. To calculate actual or projected operating ratio, the hauler first determines allowable revenues as total revenues minus all pass through costs. Then, the hauler divides allowable costs by allowable revenues to determine the operating ratio. To calculate the allowable operating profit each year, the following equation is utilized: Divided by Equals Minus Equals Allowable costs Operating ratio Allowable revenues Allowable costs Allowable operating profit. Page 111-15 Page 839 of 1192 Section Ill. Base Vear Rate Setting Methodology b. Determine Franchise Fee The franchise fee is six percent (6%) of gross residential and non-residential solid waste collection revenue collected. Any services which are provided by the franchise hauler but which fall outside the City's jurisdiction are not subject to the franchise fee payment. An adjustment for these services should be included in the franchise fee calculation. Historical and projected franchise fees should be entered on line 14 of the application. Note that the franchise fee attributed to any requested adjustment in rates will be accounted for separately in the franchise fee adjustment factor. This adjustment factor is computed in step 4. Therefore, annual payments of franchise fees in the base year are estimated based on revenues received at existing monthly rates. After total franchise fees are determined, total annual· costs can be calculated. Lines 13 through 16 should be added and the Page 111-16 result entered on line 17, total pass through costs. Any significant changes in total pass through costs for the base year should be explained and documented. c. Calculate Revenue Requirement The revenue requirement establishes the level of revenue needed to meet all allowable costs, operating profit, and pass through costs. This includes solid waste and recyclable material collection costs, and assumes a reasonable profit margin based on the operating ratio calculation. Total revenue requirements are determined as the sum of: O Allowable costs O Allowable operating profit O Pass through costs. The revenue requirement is entered on line 18 of the application. f!J ERNST & YOUNG Page 840 of 1192 Section Ill. Base Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 1 of the base year rate adjustment process (refer to Section II-A) a. Calculate Net Surplus/Shortfall b. Calculate Percent Change In Rates Description of Tasks a. Calculate Net Shortfall/Surplus The net shortfall/surplus is determined based on the following calculation: Line 18 Revenue requirement Less Line 19 Total revenue offsets Equals Net shortfall/surplus. The net shortfall/surplus is entered on line 20. This number is used to calculate the required percent change in existing rates. b. Calculate Percent Change in Rates The percent change in rates is the amount that residential and non-residential rates must be adjusted in order to generate revenues sufficient to meet total revenue requirements. The percent change in existing rates is calculated as follows: Line 20 Divided by Line 21 City of San Luis Obispo Net shortfall/surplus Total residential and non-residential revenues without increase (line 32 + line 40) Equals Percent change in rates without franchise fee adjustment. The percent change in rates is entered on line 22 of the application. In order to account for additional franchise fees which must be paid on the additional (or lower) revenue that will be collected, an adjustment is made to the rate increase. The franchise fee adjustment is based on the following equation: Line22 Divided by Line 23 Equals Percent change in rates without franchise fee adjustment Franchise fee adjustment factor (1 -franchise fee) Percent change in existing rates. The percent change in existing rates is entered on line 24 of the application. Page 111-17 Page 841 of 1192 Section Ill. Base Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 1 of the base year rate adjustment process (refer to Section II-A)· a. Calculate New Rates b. Sign and Submit the Application Description of Tasks a. Calculate New Rates The rate adjustment identified on page 2, line 24 should be entered on page 1, line 1 of the Base Year Rate Adjustment Application. Current monthly single family residential rates for solid waste collection should be entered in the first column of lines 2-4. Adjusted rates then are calculated by multiplying the current rate by one plus the rate adjustment identified in line 1. These adjusted rates are entered in the second column of lines 2-4. In column three of lines 2-4, the adjusted rates are rounded up to the nearest five cent increment. This simplifies record keeping for the franchise hauler and should not make a material difference to customers. The adjustment required to reach the nearest five cent increment should be calculated and entered in the third column of lines 2-4. To determine new single family residential rates, column two on lines 2-4 Page 111-18 should be added to column three and the result should be entered in column four. This column provides the new single family residential rate schedule. Line 5 of page 1 identifies the rate increase to be applied to multiunit residential and non-residential rates. Multiunit residential and non-residential rates should be rounded up to the nearest $1.00. The franchise hauler should provide supporting documentation for the requested multiunit residential and non-residential rates for the base year. b. Sign and Submit the Application An authorized representative from the franchise hauler should sign and date the application. This signature provides a certification of the franchise hauler that the application is complete, accurate, and consistent with the instructions provided in this manual. City of San Luis Obispo Page 842 of 1192 Section Ill. Base Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 1 of the base year rate adjustment process (refer to Section II-A) a. Complete Solid Waste Fee Survey b. Summary of Survey Description of Tasks a. Complete Solid Waste Fee Survey As a check of the reasonableness of existing and new integrated solid waste management rates, a survey of residential and non-residential rates in similar communities should be conducted during each base year (once every three years). This survey covers questions concerning both residential and non-residential service. Exhibit m-4, following this page, is a sample survey form. The survey should be conducted by telephone instead of by mail in order to ensure complete responses to each question. A minimum of six cities should be contacted. The City and the franchisee hauler will agree on which cities will be surveyed. While all questions in the survey provide valuable comparative information, there are several key questions including: City of San Luis Obispo O Monthly rates for all residential service types O Monthly rate for standard non- residential services (i.e., one to six cubic yard bins picked up once per week) O Tipping fees charged the hauler O Responsibility for billing customers. b. Summary of Survey After the survey has been conducted, the results are summarized for comparison with the franchise hauler's rate application. This summary is included as an attachment to the Base Year Rate Adjustment Application, as described in Section II-A, step 3. This information also is used. in the evaluation of the franchise hauler's application. Page 111·19 Page 843 of 1192 Sample Solid Waste Fee Suroey City of San Luis Obispo Solid Waste Fee Survey l·sectionJ -~Introduction· 1. Name of City/County 2. Contact Person 3. Title of Contact Person - 4. · ·Telephone Number 5. Date Contacted I Sectionll--Generallnformation I 6. Are residential curbside collection and disposal services provided by the municipality or private contractor? 7. Is a franchise for refuse collection granted to the hauler? B. Is a franchise for recyclable material collection granted to the hauler? 9. Is there a franchise fee? If so, how much is it? 10. What is the franchise hauler's disposal cost per ton? 11. Who bills customers? i Section Ill -Residential Service 12.--Are residential rates regulated? 13. What is the monthly charge for residential service? 14. How many cans are picked up at this charge? 15. What is the charge for additional cans? Fiscal Year: Page 111-20 EXIIlBIT m-4 Page 1 of 2 ... Page 1 of2 Page 844 of 1192 Sample Solid Waste Fee Suroey City of San Luis Obispo Solid Waste Fee Survey [ SectionJII -, Residential Service {continued) 16. Is there a separate charge for yard waste collection? 17. Are there any City-wide clean-up days provided at no additional charge by the hauler? 18. Does your community have a curbside recycling program? 19. Is there an additional charge to residents for this program, or is it included in the monthly charge for solid waste collection? . 20. If separate, what is the charge per month? I Section V --Non-residential Service 21. Are non-residential rates regulated? 22. Provide the monthly fee for the followin!;J services, assuming pick-up is one time per week: 23. 1 cubic yard 24. 1 1 /2 cubic yards 25. 2 cubic yards 26. 3 cubic yards 27. 6 cubic yards 28. Effective period of ratesquoted: Fiscal Year: EXHIBITill-4 Page 2 of 2 Page2of2 Page 111-21 Page 845 of 1192 Page 846 of 1192 Section IV Interim Year Rate Setting Methodology Page 847 of 1192 Page 848 of 1192 IV. Interim Year Rate Setting Methodology The Interim Year Rate Adjustment Application is completed by the franchise hauler and is used to calculate the adjustments in rates effective for the interim year. The application documents changes in tipping fees, and AB 939, and regulatory charges. The Interim Year Rate Adjustment Application is used to calculate new interim year rates. This document is prepared by the franchise hauler. Interim year rate adjustments are based on a weighted average change in controllable and pass through costs. Inflators for this process include changes in the U.S. National Consumer Price Index and changes in pass through costs. The application is a two-page form. Page 1 provides summary information about the rate adjustment and the resulting new rates. Page 2 includes detailed City of San Luis Obispo calculations required to determine the rate adjustment. Steps 1 through 3 of the methodology describe how to complete page 2 of the application. Steps 4 and 5 describe how to complete page 1 of the application. Exhibit IV-1, following this page, provides an overview of the steps and related tasks which must be completed to prepare the application form and calculate new rates. Exhibit IV-2, following Exhibit IV-1, is a sample of the two page application as it might be prepared by the franchise hauler. This exhibit includes references to various steps which must be completed to prepare the application. Following Exhibit IV-2 is a detailed description of each step and related tasks. Please note that the data included in this sample exhibit are provided for illustrative purposes only and are not intended to reflect actual operating or financial conditions. Page IV-1 Page 849 of 1192 EXHIBIT IV-1 Preparation of the Interim Year Rate Adjustment Application · 1. Determination of Base Year Costs and Weighting a. Identify Prior Base Year Controllable Costs b. Identify Prior Base Year Pass Through Costs c. Calculate Weightings 2. Calculation of Percent Changes in Controllable and Pass Through Costs a. Enter Controllable and Pass Through Cost Information b. Review Mathematical Accuracy 3. Calculation of Weighted Change in Rates a. Calculate Weighted Change in Controliable Costs b. Calculate Weighted Change in Pass Through Costs c. Calculate Total Percent Change in Cost d. Calculate Franchise Fee Adjustment e. Calculate Percent Adjustment in Existing Rates 4. Preparation of the Summary Form a. Enter Rate Adjustment b. Calculate New Rates 5. Survey of Rates in Similar Areas a. Complete.Solid Waste Fee Survey b. Summary of Survey 6. Application Certification a. Sign Application b. Submit Application to City Page IV-2 Page 850 of 1192 EXIDBIT IV-2 · Page 1 of 2 Sample Base Year Rate Adjustment Application City of San Luis Obispo Interim Year Rate Adjustment Application Summary 1. Rate Increase Requested Rate Schedule Single Family Residential Economy Service (collection) Economy Service (orange bags) 3. Standard Service 4. Premium Service 5. Mu/liunit Residential and Non-residential Requested Increase Rate Schedule Increased Current Rate Rate $2.00 $2.10 $ 1.00 $ 1.05 13.40 14.06 18.25 19.14 Adiustment $0.00 $0.00 0.04 0.01 (a) Calculated rates are roundea up to the nearest $0.05. 4.9% New Rate $2.10 $1.05 14.10 19.15 Rate increases of 4.9% ~ will be applied to all rates in each structure with each rate rounded up to the nearest $1.00. W~ Certification · · . .. .. . .. .. . . . ;I To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with . . .•....... . .. : the instructions provided by the City of San Luis Obispo. Name: John Brown Title: Controller Signature: Jofm'Brown Date: May 1. 19xx Fiscal Year: Pg. 7 ofZ Page IV-3 Page 851 of 1192 EXHIBIT IV-2 Page 2 of 2 Sample Interim Year Rate Adjustment Application City of San Luis Obispo Interim Year Rate Adjustment Application Financial Information 6. 7. 8. 9. 10. 11. 12. Section I-Base Year Costs Base Year Controllable Costs Total Allowable Costs Plus Allowable Operating Profit Plus Lease Payments to Affiliated Companies Equals Total Controllable Costs Base Year Pass Through Costs Tipping Fees Plus AB 939 and Regulatory Fees Equals Total Pass Through Costs 13. Base Year Revenue Requirements (Less Franchise Fee) Section II-Changes in Cost Change in Controllable Cost 14. Historical Percentage Change in Consumer Price Index 15. 16. 17. 18. 19. 20. 21. Change in Pass Through Cost Prior Year Tipping Fees Plus: Prior Year AB 939 and Re ulato Fees Equals: Total Prior Year Pass Through Costs Projected Interim Year Tipping Fees Plus: Projected Interim Year AB 939 and Re ulator Fees Equals: Total Projected Interim Year Pass Through Costs Projecled Percentage Change in Pass Through Costs Section Ill-Calculation of Percent Change in Rates Weighted Change in Controllable Costs $2,926,000 254,435 25,000 $3,205,435 $840,000 100,000 $940,000 $4145435 22. 23. 24. Controllable Costs as a Percent of Base Year Revenue Requirements Multiplied bv Percent chanae in CPI Equals Weighted Percent Change in Controllable Costs Weighted Change in Pass Through Costs 25. 26. 27. 28. 29. 30. Multiplied bv Equals Total Change Divided by Equals Fiscal Year: Page IV-4 Pass Through Costs as a Percent of Base Yr. Revenue Requirements Percent Chanae in Pass Throuah Costs Weighted Percent Change in Pass Through Costs Total Percent Change in Cost Adjustment for Franchise Fee (1 -6.0 percent) Percent Change in Existing Rates II II n.3%H 22.7%U 10000%11 n.3% 4.0% 3.1% 22.7% 6.4% 1.5% 4.6% 94.0% 4.9% 11 Page2of2 Page 852 of 1192 Section IV. Interim Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 2 of the interim year rate adjustment process (refer to Section II-C) a. Identify Prior Base Year Controllable Costs b. Identify Prior Base Year Pass Through Costs c. Calculate Weightings Description of Tasks a. Identify Prior Base Year Controllable Costs Controllable costs are those items which can be reasonably managed by the franchise hauler in order to minimize future rate increases. Increases in these costs are adjusted by the annual change in the U.S. National Consumer Price Index· (CPI), as published by the Bureau of Labor Statistics in their Monthly Labor Review. In order to streamline the interim year process, controllable costs are changed based on an annual change in the CPI, rather than projected changes in each cost item. This eliminates the need to conduct a detailed review of the franchise hauler's financial and operating statements. The following table identifies the line items in the base year application which must be entered on the controllable cost portion of the interim year application. The name of each line item is the same in both applications. Base Yt:ar Application Line Number 10. 12. 16. Interim Yt:ar Application Name of Lint: Numbt:r Lint: Item 6. Total Allowable Cost 7. Allowable Operating Profit 8. i Lease Payments to I Affiliated Companies I ill ERNST & YOUNG The total of lines 6, 7, and 8 is entered on line 9 of the application and is used to calculate the weighted change in controllable costs. b. Identify Prior Base Year · Pass Through Costs Pass through costs are those expenses which the franchise hauler is allowed to recover through rates but for which no profit is allowed. These include tipping fees, and AB 939 and regulatory charges. Changes in these cost categories do not necessarily match changes in CPI. Therefore, changes in pass through costs during an interim year are based on the franchise hauler's projection of total annual costs, not projected changes in the CPI. Total costs in the prior base year must be identified in order to determine the weighting of controllable costs and pass through costs to total costs. The following table identifies line items from the prior base year application which must be entered on the interim year application. The name of each line item is the same in both forms. PagelV-5 Page 853 of 1192 Section IV. Interim Vear Rate Setting Methodology Base Year Application Line Number 13. 15. Interim Year Application Name of Line Number Line Item 10. I Tipping Fees I 11. AB 939 and Regulatory Fees The amounts in lines 10 and 11 are added and the total entered on line 12. c. Calculate Weightings Total controllable costs Cline 9) plus total pass through costs (line 12) equals total base year costs (excluding franchise fees). This total is entered on line 13 of the application (base year revenue requirement less franchise fee). A weighting for both controllable costs and pass through costs is calculated as follows: Page IV-6 Controllable Costs Weighting Divided by Equals Line 9 Total controllable costs Line 13 Base year revenue requirement Controllable costs as a percentage of base year revenue requirements. This percentage figure is entered on line 9, column 2, and line 22. Pass Through Costs Weighting · Divided by Equals Line 12 Total pass through costs Line 13 Base year revenue requirement Pass through costs as a percentage of base year revenue requirements .. This percentage figure is entered on line 12, column 2, and line 25. City of San Luis Obispo Page 854 of 1192 Section IV. Interim Vear Rate Setting Methodology Responsibility: Ti.ming: Tasks: Franchise Hauler Prepared during step 2 of the interim year rate adjustment process (refer to Section II-C) a. Enter Controllable and Pass Through Cost Information b. Review Mathematical Accuracy Description of Tasks a. Enter Controllable and Pass Through Cost Information The historical Consumer Price Index ( CPI) percentage change in line 8 of the application is entered on lines 14 and 23 of the application. This percentage change in historical CPI (the previous 12 months) is used to determine the weighted average change in controllable costs. Figures on lines 1 through 6 of the application (actual and projected pass through costs) are entered on lines 15 though 20, respectively, of the application. Any significant changes in these costs are documented by the franchise hauler. A significant change would be any increase greater than the annual change in the CPI, or a decrease of any amount. If a significant s!J ERNST & YOUNG change has not been adequately explained, additional information is requested from the franchise hauler. b. Review Mathematical Accuracy The mathematical accuracy of the franchise hauler's calculations of total prior year pass through costs (line 17), and total projected interim year pass through cost Cline 20) are checked during this task. The percent change in pass through costs should be calculated as follows: line 20 -line 17 line 17 After the percentage change in pass through costs has been verified, this figure is entered on line 21 of the application. Page IV-7 Page 855 of 1192 Section IV. Interim Vear Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler To be prepared during step 2 of the interim year rate adjustment process (refer to Section 11-C) a. Calculate Weighted Change in Controllable Costs b. Calculate Weighted Change in Pass Through Costs c. Calculate Total Percent Change in Cost d. Calculate Franchise Fee Adjustment e. Calculate Percent Adjustment in Existing Rates Description of Tasks a. Calculate Weighted Change in Controllable Costs Figures should have been entered on line 22 of the application (controllable costs as a percent of base year revenue requirements), and line 23 of the application (change in CPI, based on calculations completed in previous tasks). To obtain the weighted increase in controllable costs, line 22 is multiplied by line 23 and the result entered on line 24. b. Calculate Weighted Change in Pass Through Costs Line 25 (pass through costs as a percent of base year revenue requirements) and line 26 (percent change in pass through costs) should now have an entry based on calculations completed in previous tasks. To obtain the weighted change in pass through costs, line 25 is multiplied by line 26 and the result entered on line 27. c. Calculate Total Percent Change in Cost To calculate total percentage change in costs, line 24 (weighted percent change in controllable costs) is added to line 27 Page IV-8 ( weighted percent change in pass through costs), and the result entered on line 28 (total percent change in costs). d. Calculate Franchise Fee Adjustment In order to account for changes in the franchise fee resulting from a change in rates. an· adjustment is made to the percentage change in total costs which was entered on line 28. The adjustment factor is equal to one minus the franchise fee (l.00 - 0.06 = 0.94). This value should be entered on line 29. e. Calculate Percent Adjustment in Existing Rates The final task in this step is to calculate the percent adjustment in existing rates. To determine this adjustment, line 28 (total percent change in costs) is divided by line 29 (adjustment for franchise fee), and the result entered on line 30. The value on line 30 should be greater than the value on line 28. The difference accounts for the increase in · franchise fees. City of San Luis Obispo Page 856 of 1192 Section IV. Interim Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 2 of the interim year rate adjustment process (refer to Section II-C) a. Enter Rate Adjustment b. Calculate New Rates Description of Tasks a. Enter Rate Adjustment The rate adjustment identified on line 30 should be entered on page 1, lines 1 and 5 of the application. b. Calculate New Rates Current rates for single family residences are entered in the first column of lines 2 through 4 on page 1, by service type. The adjusted rates then are calculated by multiplying the current rate by one plus the rate increase identified on line 1. The adjusted rates are entered on the second column of lines 2 through 4. City of San Luis Obispo The adjusted rates then are rounded up to the nearest five cent increment. The adjustment amount required to reach the nearest five cent increment is calculated and entered on the third column of lines 2 through 4. To determine new rates, column two, lines 2 through 4, is added to column three and the result is entered on column four. This column provides the new schedule of single family integrated solid waste management residential rates. To determine multiunit and non-residential rate adjustments, the rate adjustment in line 5 is applied uniformly to all rates in each rate structure. Rates are rounded up to the nearest $0.05. Page IV-9 Page 857 of 1192 Section IV. Interim Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 2 of the interim year rate adjustment process (refer to Section II-C) a. Complete Solid Waste Fee Survey b. Summary of Survey Description of Tasks a. Complete Solid Waste Fee Survey As a check of the reasonableness of existing and new integrated solid waste management rates, a survey of residential and non-residential rates in similar communities should be conducted during the interim year. This survey covers questions concerning both residential and non-residential service. Exhibit m-4, on page III-20, is a sample survey form. The survey should be conducted by telephone instead of by mail in order to ensure complete responses to each question. A minimum of six cities should be contacted. The City and the franchisee hauler will agree on which cities will be surveyed. While all questions in the survey provide valuable comparative information, there are several key questions including: City of San Luis Obispo O Monthly rates for all residential service types O Monthly rate for standard non-, residential services (i.e., one to six cubic yard bins picked up once per week) O Tipping fees charged the hauler O Responsibility for billing customers. b. Summary of Survey After the survey has been conducted, the results are summarized for comparison with the franchise hauler's rate application. This summary is included as an attachment to the Interim Year Rate Adjustment Application. This information also is used in the evaluation of the franchise hauler's application. PagelV-10 Page 858 of 1192 Section IV. Interim Year Rate Setting Methodology Responsibility: Timing: Tasks: Franchise Hauler Prepared during step 2 of the interim year rate adjustment process (refer to Section II-C) a. Sign Application b. Submit Application to City Description of Tasks a. Sign Application An authorized representative from the franchise hauler should sign and date the application. This signature provides certification by the franchise hauler that the application is complete, accurate, and consistent with the instructions provided in this manual. Page IV-11 b. Submit Application to City At this point the application should be submitted, together with the Survey of Rates in Similar Areas, to the City for review of the rate adjustment. City of San Luis Obispo Page 859 of 1192 Page 860 of 1192 Appendix A Blank Forms and Worksheets Page 861 of 1192 Page 862 of 1192 City of San Luis Obispo Base Year Rate Adjustment Application Summary 1. Rate Increase Requested Rate Schedule Single Family Residential 2. Economy Service (collection) Economy Service (orange bags) 3. Standard Service 4. Premium Service 5. Multiunit Residential and Non-residential · RequestecUncrease. Current Rate Increased Rate Adjustment (a) New Rate (a) Calculated rates are rounded up to the nearest $0.05. Rate increases of l=======::::!lj will be applied to all rates in each structure with each rate rounded up to the nearest $1.00. Certification, To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of San Luis Obispo. Name: John Brown Title: Controller Signature: John Brown Date: May 1, 19XX Fiscal Year: Pg. 1 of6 Page 863 of 1192 Page 864 of 1192 City of San Luis Obispo Base Year Rate Adjustment Application Financial Information 6. 7. 8. 9. 10. Direct Labor Corporate Overhead Office Salaries Other General and Administrative Costs Total Allowable Costs 11. Operating Ratio 12. Allowable Operating Profit 13. Tipping Fees Franchise Fees AB 939 and Regulatory Fees Historical I Sectlonl-Allowable·Coats·· Section II-Allowable Operating Profit Section 111-Paaa Through Costa . 14. 15. 16. 17. Lease Payments to Affiliated Comoanies I I Total Pass Through Costs Section IV-Revenue Requirement· 18. Revenue Requirement 19. Total Revenue Offsets (from Pg. 3) Section V-Net Shortfall (Surplus) 20. Net Shortfall (Surplus) Section VI-Percent Change Jn Rates· 21. Total Residential and Non-residential Revenue without increase in Base Year (Pg. 3, lines 32+40) 22. Percent Change in Residential and Non-residential Revenue Requirement 23. Franchise Fee Adiustment Factor (1 -6.0 oercentl 24. Percent Change in Existing Rates Fiscal Year: Current I Projected I Base Year II (from Pg. 4) § I 1§§ Page 2of6 Page 865 of 1192 Page 866 of 1192 City of San Luis Obispo Base Year Rate Adjustment Application Revenue Offset Summary Residential Revenue (without Increase In Base Yr.) Current Projected Prtce per Account Type 25. Economy Service 26. Standard Service 27. Premium Service l~~rf§D 28. Single Family Residential Multiunlt Residential Dumpster 29. Number of Accounts 30. Revenues 31. Less Allowance for Uncollectible Residential Accounts 32. Total Residential Revenue Non-residential Revenue (without Increase in Base Yr.) Account Type Non-residential Can 33. Number of Accounts 34. Revenues Non-residential Waste Wheeler 35. Number of Accounts 36. Revenues Non-residential Dumpster 37. Number of Accounts 38. Revenues 39. Less: Allowance for Uncollectible Non-residential Accounts: 40. Total Non-residential Revenue Processing Facility Revenues 41. Scrap Payments for all Materials Sold 42. California Redemption Value (CRV) and Processing Fees 43. Fees from Other Cities 44. Revenues from Processing Facility 45. Interest on Investments 46. Other Income 47. Total Revenue Offsets Fiscal Year: Current No. of II Packages /j Page 3of6 Page 867 of 1192 Page 868 of 1192 City of San Luis Obispo Base Year Rate Adjustment Application Cost and Revenue Summary for Base Year Description of Cost Labor Payroll Taxes 48. Total Direct Labor 49. Total Corporate Overhead Office Salary Payroll Taxes 50. Total Office Salaries Computer Services Depreciation on Building and Equipment Depreciation on Truck and Containers Dues and Subscriptions Equipment Rental Fines Gas and Oil Hauling Interest Expense Laundry Legal and Accounting Miscellaneous and Other Non-Deductable Office Expense Operating Supplies Other Insurance Other Taxes Outside Services Parts Public Relations and Promotion Recycling Rent Telephone Tires Travel Truck Insurance Truck Repairs Utilities 51. Total Other General and Administrative Costs 52. Total Tipping Fees 53. Total Franchise Fee 54. Total AB 939 and Regulatory Fees 55. Total Lease Payments to Affiliated Companies 56. Total Cost Fiscal Year: . I I. I < . I .· . ' .. For Information Purposes Only .· .· I .. ' . ·· . .. ·i: ·'> . ... ,' ·. Processing Facilit Page 4of6 Page 869 of 1192 Page 870 of 1192 City of San Luis Obispo Base Year Rate Adjustment Application Base Year Revenue Offset Summary Resident/al Revenue (without Increase In Base Yr.) 57. Single Family Residential Muitiuntt Residential Dumpster 58. Number of Accounts 59. Revenues 60. Less Allowance for Uncollectible Residential Accounts 61. Total Residential Revenue Non-resident/al Revenue (without Increase In Base Yr.) Account Type Non-residential Can 62. Number of Accounts 63. Revenues 64. 65. Non-residential Waste Wheeler Number of Accounts Revenues Non-residential Dumpster 66. Number of Accounts 67. Revenues 68. Less: Allowance for Uncoliectible Non-residential Accounts: 69. Total Non-residential Revenue Processing Fac//lty Revenues 70. Scrap Payments for all Materials Sold 71. California Redemption Value (CRV) and Processing Fees 72. Fees from Other Ctties 73. Revenues from Processing Facility 74. Interest on Investments 75. Other Income 76. Total Revenue Offsets Fiscal Year: Total II For Information Purposes Only Adjacent CSU SLO Uninco rated Processing Facili Page 5ot6 Page 871 of 1192 Page 872 of 1192 City of San Luis Obispo Base Year Rate Adjustment Application Operating Information Current Percent Percent Base Year Cha Ch •·SectionlX-O~tinsrData. Residential 77. Accounts I : I I I I 78. Routes 79. Tons Collected 80. Direct Labor Hours Non-residential 81. Accounts I ! I I I I 82. Routes 83. Tons Collected 84. Direct Labor Hours Reye/able Materials 85. Fees from Other Cities I I j I i I 86. Tons from Other Cities 87. Cost per Ton Fiscal Year: Pg. 6 of 6 Page 873 of 1192 Page 874 of 1192 City of San Luis Obispo Interim Year Rate Adjustment Application Summary 1. Rate Increase Requested Rate Schedule Single Family Residential 2. Economy Service (collection) Economy Service (orange bags) 3. Standard Service 4. Premium Service 5. Multiunit Residential and Non-residential Requested.Increase .. ··.Rate Schedule<; Current Rate Increased Rate Adjustment (a) New Rate ~ (a) Calculated rates are rounded up to the nearest $0.05. Rate increases of ========!.! will be applied to all rates in each structure with each rate rounded up to the nearest $1.00. CertHication . To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the City of San Luis Obispo. Name: John Brown Title: Controller Signature: John Brown Date: May 1, 19XX Fiscal Year: Pg. 1 of2 Page 875 of 1192 Page 876 of 1192 City of San Luis Obispo Interim Year Rate Adjustment Application Financial Information ··Sectionl;..aase Year Costs Base Year Controllable Costs 6. Total Allowable Costs 7. Plus Allowable Operating Profit 8. Plus Lease Payments to Affiliated Companies 9. Equals Total Controllable Costs lf 10. 11. 12. Base Year Pass Through Costs Tipping Fees § Plus AB 939 and Regulatory Fees --------------------1 ~ Equals Total Pass Through Costs II 13. Base Year Revenue Requirements (Less Franchise Fee) 14. 15. 16. 17. 18. 19. 20. 21. 22. 23. 24. 25. 26.· 27. 28. 29. 30. Section II-Changes in Cost Change in Controllable Cost Historical Percentage Change in Consumer Price Index Change in Pass Through Cost Prior Year Tipping Fees § _P_ru_s_:~~~~-P_ri_or_Y_e_a_r_A_B~93_9_a_n_d_R ___ eo~1u_la_t_o_,_~F_e_e_s~~~~~~~~~~--1 Total Prior Year Pass Through Costs Equals: Projected Interim Year Tipping Fees § _P_ru_s_:~~~~-P_ro~1je_c_te_d~ln_te_r_im~Y_e_ar_A_B~9_39~a_nd~R_e~gul_at_o~ry_Fe_e_s~~~~~~----i Equals: Total Projected Interim Year Pass Through Costs Projected Percentage Change in Pass Through Costs Section Ill-Calculation of Percent Change in Rates Weighted Change in Controllable Costs Controllable Costs as a Percent of Base Year Revenue Requirements § Percent chanqe in CPI Mu/ti,::,lied by Weighted Percent Change in Controllable Costs E;quals Weighted Change in Pass Through Costs Pass Through Costs as a Percent of Base Yr. Revenue Requirements § Percent Chanoe in Pass Throuoh Costs ____._____....__..__----'-'-"'--__ Multi,::,lied bv Equals Weighted Percent Change in Pass Through Costs Total Change Divided by II Total Percent Change in Cost Adjustment for Franchise Fee (1 -6.0 percent) Equals Percent Change in Existing Rates Fiscal Year: Page2of2 Page 877 of 1192 Page 878 of 1192 City of San Luis Obispo Solid Waste Fee Survey I SectionJ· .... fntroduction 1. Name of City/County 2. Contact Person 3. Title of Contact Person 4. Telephone Number 5. Date Contacted r Section If . .:. General··••lnformation .. I 6. Are residential curbside collection and disposal services provided by the municipality or private contractor? 7. Is a franchise for refuse collection granted to the hauler? 8. Is a franchise for recyclable material collection granted to the hauler? 9. Is there a franchise fee? If so, how much is it? 10. What is the franchise hauler's disposal cost per ton? 11. Who bills customers? I Section Ill..;. ResidentiaLService I 12. Are residential rates regulated? 13. What is the monthly charge for residential service? 14. How many cans are picked up at this charge? 15. What is the charge for additional cans? Fiscal Year: Page 1 of 2 Page 879 of 1192 Page 880 of 1192 City of San Luis Obispo Solid Waste Fee Survey I Section 111 H Residential Service ( continued) 16. Is there a separate charge for yard waste collection? 17. Are there any City-wide clean-up days provided at no additional charge by the hauler? 18. Does your community have a curbside recycling program? 19. Is there an additional charge to residents for this program, or is it included in the monthly charge for solid waste collection? 20. If separate, what is the charge per month? \ Sectio~ V --Non-residential• Service 21. Are non-residential rates regulated? 22. Provide the monthly fee for the following services, assuming pick-up is one time per week: 23. 1 cubic yard 24. 1 1 /2 cubic yards 25. 2 cubic yards 26. 3 cubic yards 27. 6 cubic yards 28. Effective period of -ratesquoted: \ Fiscal Year: Page2 of 2 Page 881 of 1192 Page 882 of 1192 Appendix B Chart of Accounts Page 883 of 1192 Page 884 of 1192 Appendix B. Sample Chart of Accounts A chart of accounts is provided in Exhibit A, following this page. This chart of accounts provides a suggested framework for the hauler to record financial transactions, provides a basis for comparing annual rate adjustment requests, and presents a suggested basis for allocating indirect costs and revenues of operation to different service areas (e.g., customers within city limits, adjacent unincorporated areas, Cal Poly, and the recyclable materials processing facility). City of San Luis Obispo The chart identifies account name, account type (asset, liability, revenue, or expense), type of revenue or cost (direct or indirect), and a suggested basis for allocating indirect revenues and costs (e.g., tons collected, number of accounts). The franchise hauler may find other miscellaneous accounts may be required. To maintain comparability from year to year, the franchise hauler should indicate any major changes to the chart of accounts. Page B-1 Page 885 of 1192 Accounts Receivable Accumulated Depreciation Buildings Certificate of Deposit Checking Account Containers Furniture, Fixtures and Equipment Income Tax Receivable Investments Land Money Market Notes Receivable Petty Cash Prepaid Expenses Prepaid Life Insurance Savings Account Stockholders-Advance Tax Refund Receivable Trucks and Automobiles Accounts Payable Accrued Liabilities Capital Stock Deferred Interest Equipment Loans Retained Earnings A L Asset Liability R Revenue E Expense Page B-2 Sample Chart of Accounts A A A A A A A A A A A A A A A A A A A L L L L L L D = Direct revenue or cost Indirect revenue or cost EXIDBIT A Page 1 of3 Page 886 of 1192 Dividend Income Garbage Service Interest Income Other Income Recycling Materials Sales Sorting Line Revenue Computer Depreciation Dues Equipment Rental Federal Income Taxes Fines Franchise Tax Fuel Interest Expense Labor Landfill Laundry Legal & Accounting Meals and Entertainment Miscellaneous and Other Office Expenses A = Asset L Liability R Revenue E Expense EXIIlBIT A Page 2 of3 Sample Chart of Accounts (continued) R R R R R R E E E E E E E E E E E E E E E E D - D/1 D D/1 D/I D D D/I D/I I D D D D D I D/1 D I I Direct revenue or cost Direct where possible, otherwise number of accounts None Direct where possible, otherwise number of accounts Direct where possible, otherwise number of accounts None None Number of accounts Direct where possible, otherwise number of accounts Number of accounts Number of accounts None None None Number of accounts None None Number of accounts Direct where possible, otherwise number of accounts None Number of accounts Number of accounts Indirect revenue or cost Page 8-3 Page 887 of 1192 Office Salary Officers Salary Operating Supplies Other Insurance Outside Services Payroll Taxes Payroll Taxes Pr & Promotion Profit Sharing Recycling Expense Rent Repairs State Income Taxes Taxes & Licenses Telephone Travel Truck Insurance Truck Licenses Utilities A L R Asset Liability Revenue E Expense Page B-4 EXIDBffA Page 3 of 3 Sample Chart of Accounts E E E E E E E E E E E E E E E E E E E D (continued) D/I Direct where possible, otherwise number of aq::ounts I Percent of operating wages I Number of accounts D/I Direct where possible, otherwise number of accounts I Number of accounts D/I Direct where possible, otherwise number of accounts I Direct where possible, otherwise number of accounts I Number of accounts D None D None I Trucks D/I Direct where possible, otherwise factored truck hours I Number of accounts D/I Direct where possible, otherwise factored truck hours I Number of accounts D/I Direct where possible, otherwise number of accounts D/I Direct where possible, otherwise factored truck hours D None I Number of accounts Direct revenue or cost Indirect revenue or cost Page 888 of 1192 ~ .· FRANCHISE AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO · AND. SAN LUIS GARBAGE COMP ANY For Collection, Diversion, and Disposal of Solid Waste Within the City of San Luis Obispo This Agreement is made and entered into as of the 20th day of August, 2010 in the State of California by and between the City of San Luis Obispo, a Charter Municipal Corporation of the State of California, (hereinafter the "City") and San Luis Garbage Company, Inc., a California corporation (hereafter referred to as the "Franchisee"); RECITALS This Agreement is entered into with reference to the following facts and circumstances: 1. The Legislature of the State of California, by enactment of California Integrated Waste Management Act of 1989, Division 30 of the California Public Resources Code, commencing with Section 40000 (CIWMA), declares that it is within the public interest to authorize and require local agencies to make adequate provisions for solid waste handling within their jurisdictions. The law, AB 939 requires a 50 percent reduction in the amount of waste which is landfilled by 2000; and 2. The City has authority to grant a franchise for collection, diversion, and disposal of solid waste within the City of San Luis Obispo pursuant to City Charter Article X and Chapter 8.04 of the San Luis Obispo Municipal Code; and 3. The City Council has determined that solid waste, including discards from residential and non- residential properties, must be regulated to protect public health, safety and welfare; to conserve landfill disposal capacity; and to develop and maintain effective resource management programs; and 4. The City Council has determined that all occupied developed properties in the City must participate in the City's solid waste collection and disposal service; and 5. The City Council has determined that an exclusive franchise granted to a private company is the most effective and efficient way to collect and remove solid waste within the City; and 6. The City Council has determined that the Franchisee can provide needed solid waste services; and 7. Franchisee is responsible for arranging for solid waste collection and disposal service, and an appropriate landfill destination for collected solid waste; and 8. Upon passage by the City Council, Ordinance 1551, pursuant to the authority granted by City Charter Article X and Chapter 8.04 of the San Luis Obispo Municipal Code; and 9. This Agreement has been developed by and is satisfactory to the parties. Page 889 of 1192 Franchise Agreement -Solid Waste NOW, THEREFORE, for and in consideration of the mutual promises herein contained, it is hereby agreed by and between the City and Franchisee as follows: 2 Page 890 of 1192 Franchise Agreement -Solid Waste · ARTICLE 1. DEFINITIONS For purposes of this Agreement, unless a different meaning is clearly required, the following terms shall have the following meanings: 1.1 "AB 939" means the California Integrated Waste Management Act of 1989, as it maybe amended from time to time. 1.2 "Affiliate" means all businesses (including corporations, limited and general partnerships, and sole proprietorships) which are directly or indirectly related to Franchisee by virtue of a common ownership interest or common management shall be deemed to be "Affiliated with" Franchisee and included within the term "Affiliate" as used herein. An Affiliate shall include a business in which Franchisee owns a direct or indirect ownership interest, a business which has a direct or indirect ownership interest in Franchisee and /or a business which is also owned, controlled or managed by any business or individual which has a direct or indirect ownership interest in Franchisee. For purposes of determining whether an indirect ownership exists, the constructive ownership provisions of Section 3 l 8(a) of the Internal Revenue Code of 1986, as in effect the date of this Agreement, Shall apply; provided, however, that (i) "ten percent (10%)" shall be substituted for "fifty percent (50%)" in Section 3 l 8(a)(2)(C) and in Section 318(a)(3)(C) thereof; and (ii) Section 318(a)(5)(C) shall be disregarded. For purposes of determining ownership under this paragraph and constructive or indirect· ownership under Section 3 l 8(a), ownership interest of less than ten percent (10%) shall be disregarded and percentage interests shall be determined on the basis of the percentage of voting interest or value which the ownership interest represents, whichever is greater. 1.3 "Agreement" means this agreement the between the City and Franchisee for arranging for the collection, diversion, and disposal of solid waste, and collection and any future amendments hereto. 1.4 "Arranger" means any person that arranges for the collection, diversion, transfer, burning, disposal or processing of any solid waste. 1.5 "Bulky Waste" means discarded, large household appliances, furniture, tires, carpets, mattresses, and.similar large items which require special handling due to their size, but can be collected without the assistance of special loading equipment (such as forklifts or cranes) and without violating vehicle load limits. It does not include abandoned automobiles. 1.6 "CERCLA" means the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C Section 9601, et seq. 1.7 "City" means the City of San Luis Obispo, a Charter municipal corporation, and all the territory lying within the municipal boundaries of the City as presently existing or as such boundaries may be modified during the term of this Agreement. 1.8 "Collect" or "Collection" means to take physical possession of, transport, and remove Solid Waste within and from the City. 3 Page 891 of 1192 Franchise Agreement -Solid Waste 1.9 "Commercial and Industrial Property" means property upon which business activity is conducted, including, but not limited to, retail sales, services, wholesale operations, manufacturing and industrial operations, but excluding businesses conducted upon residential properties which are permitted under applicable zoning regulations and are not the primary use of the property. 1.10 "Construction Debris" means used or discarded construction materials removed from a premises during the construction, repair or renovation of a structure. 1.11 "Container" means any bin, vessel, can or receptacle used for collecting and storing solid waste before removal. 1.12 "Demolition Debris" means used construction materials removed from a premises during the razing or renovation of a structure. 1.13 "Designated Collection Location" means the place where an authorized recycling agent or a solid waste collector has contracted with either the City or a private entity to collect solid waste. 1.14 "Disposal Site(s)" means any properly licensed and permitted solid waste facility or facilities arranged by Franchisee after consultation with City for the ultimate disposal of solid waste collected by Franchisee. 1.15 "Designated Processing Facility" means any properly licensed and permitted plant or site used for the purpose of sorting, cleansing, treating, reconstituting, processing and marketing recyclable materials, which has been arranged by Franchisee after consultation with City. 1.16 "Disposal" means the ultimate disposition of solid waste collected by Franchisee at a landfill in full regulatory compliance or other fully permitted disposal site. 1.17 "Facility" means any plant or site, owned or leased and maintained and/or operated or used by Franchisee for purposes of performing under this Agreement. 1.18 "Franchise" means the special right granted by the City of San Luis Obispo to operate a solid waste collection company providing such services within the City. 1.19 "Franchisee" means San Luis Garbage Company, a corporation organized and operating under the laws of the State of California, and its officers, directors, employees, agents, companies. 1.20 "Full Regulatory Compliance" means compliance with all applicable permits for a facility and with other applicable regulations such that the Franchisee will at all times maintain the ability to fully comply with its obligations under this Agreement. 1.21 "Green Waste" means tree trimmings, grass cuttings, dead plants, leaves, branches and dead 4 Page 892 of 1192 Franchise Agreement -Solid Waste trees (no more than six (6) inches in diameter) and similar materials generated at the premises. 1.22 "Gross Revenues" means the sum of the cash receipts derived by Franchisee from customer billings for solid waste collection services and orange bag sales provided in the City. 1.23 "Hazardous Waste" is as defined in Article 2, Chapter 6.5, Section 25117 of the Health and Safety Code and Public Resource Code Section 40141. For the purposes of this Agreement, however, hazardous waste shall not include Household Hazardous Waste which maybe contained in solid waste. 1.24 "Household Hazardous Waste" means hazardous waste generated at residential premises. 1.25 "Interruption of Service" means (a) any period during which Franchisee's operations are diminished or discontinued by circumstances beyond its control, or (b) any period during which operations are diminished or discontinued as a result of any breach of the Agreement by Franchisee or ( c) any period after the City has terminated the franchise and until the City can reasonably acquire other suitable service and/or enter into a new franchise agreement. 1.26 ''Materials Recovery Facility" means a permitted Facility where solid wastes are sorted or separated for the purposes of recycling or reuse. 1.27 "Medical Waste" means biohazardous waste, sharp wastes, waste which is generated or produced as a result of the diagnosis, treatment or immunization of human beings or animals, in research pertaining thereto, or in the production or testing of biological products, pursuant to California Health and Safety Code, Section 25023.2. 1.28 "Multi-Family Dwelling Unit" means any premises, other than a single family dwelling unit, used for residential purposes, irrespective of whether residence therein is transient, temporary or permanent. 1.29 "Occupied" means when a person or persons has taken or is/are holding possession of a premises for temporary or permanent use. For the purpose of determining whether a premises was occupied during periods when solid waste collection service was available to such premises, the premises shall be presumed to have been so occupied unless evidence is presented that no gas, electric, telephone or water utility services were consumed on such premises during such periods or such other evidence is presented to the satisfaction of the City Manager. 1.30 "Owner" means the person or persons record title to the property constituting the premises to which solid waste collection service is to be provided under this Agreement or the person holding legal title to a facility used by Franchisee under this Agreement. 1.31 "Person" means any individual, firm, association, organization, partnership, corporation, business trust, joint venture, the United States, the State of California, the County of San Luis Obispo, local agencies and special purpose districts. 5 Page 893 of 1192 Franchise Agreement -Solid Waste 1.32 "Premises" means any land, or building where solid waste is generated or accumulated. 1.33 "Recyclable Materials" means residential and non-residential by-products or discards of economic value which include, but are not limited to, aluminum, glass, paper, plastic, metal, and green or woody debris. 1.34 "Related Party Entity" means any affiliated entity which has financial transactions with the Franchisee. 1.35 "Residential Property" means property used for residenth1l purposes, irrespective of whether such dwelling units are rental units or are owner-occupied, and includes both single family and multi-family dwelling units. 1.36 "Rubbish" means all waste wood, wood products, printed materials, paper, paste.board, rages, straw, used and discarded clothing, packaging materials, ashes, floor sweepings, glass and other materials not included in the definition of Garbage, Hazardous Substance, or Recyclable Materials. 1.37 "Single Family Dwelling Unit" means each premises used for or designated as a single family residential dwelling, including each unit of a duplex or triplex in all cases in which there is separate or individual solid waste collection service. 1.38 "Solid Waste" means all putrescible and non-putrescible residential refuse, commercial solid waste, institutional solid waste, garbage, recyclable material, yard waste, and rubbish, and as otherwise defined in Public Resources Code 640191. Solid waste which is not required to be collected includes: (a) Demolition and construction debris which are not offered by persons performing the work and which may be legally collected and disposed of by some alternate means; (b) Recyclable materials separated from solid waste by the waste generator and for which waste generator sells or is otherwise compensated by a collector in a manner resulting in a net payment to the Waste generator; ( c) Recyclable materials separated from solid waste by the waste generator and which the waste generator donates to a charitable organization such as the Boy Scouts; ( d) Materials removed by householders or occupants and transported by them to disposal facilities or recycling centers; (e) Residential recyclable materials source separated by the waste generator for the purposes of scheduled collection with the recyclable materials collection Franchisee. 1.39 "Term" means the term of the Agreement, as provided for in Article 3. 6 Page 894 of 1192 Franchise Agreement -Solid Waste 1.40 "Waste Generator" means any person as defined by the Public Resources Code, whose act or process produced solid waste as defined in the Public Resources Code, or whose act first causes solid waste to become subject to regulation. 7 Page 895 of 1192 Franchise Agreement -Solid Waste ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF THE FRANCHISEE 2.1 Corporate Status Franchisee is a corporation duly organized, validly existing and in good standing under the laws of the State of California. It is qualified to transact business in the State of California and has the corporate power to own its properties and to carry on its business as now owned and operated and as required by this Agreement. 2.2 Corporate Authorization Franchisee has the authority to enter into and perform its obligations under this Agreement. The Board of Directors of Franchisee (or shareholders if necessary) have taken all actions required by law, its articles of incorporation, its bylaws or otherwise to authorize the execution of this Agreement. The persons signing this Agreement on behalf of Franchisee have authority to do so. 2.3 Compliance with Laws and Regulations Franchisee shall comply with all existing and future City, County, other local agencies, State, and Federal laws and regulations with particular note of Article X of the City Charter and Chapter 8.04 of the City Municipal Code. 2.4 Financial Representation Franchisee represents that it has the financial ability to full perform its obligations as set forth in this Agreement. 2.5 Absence of Litigation Franchisee represents that there are no suits or threatened suits which would impair the financial or legal ability of Franchisee to perform its obligations under this Agreement and that the entering into this Agreement by Franchisee will not in any was constitute a breach of any other agreement entered into by Franchisee with other parties, or constitute a violation of any law. 8 Page 896 of 1192 Franchise Agreement -Solid Waste ARTICLE 3. TERM OF AGREEMENT 3.1 Effective Date The effective date of this Agreement shall be August 20, 2010 ("Effective Date"). 3.2 Th!:!!! The term of this Agreement shall be fifteen years, commencing at 12:01 a.m., August 20, 2010, and expiring at midnight, August 20, 2025, subject to extension as provided in paragraph 3.3 (Option to Extend). The City Council may elect to renew this franchise at any time during the three year period prior to the end of the franchise. 3.3 Option to Extend The City shall have the sole option to extend this Agreement up to 36 months in periods of at least twelve (12) months each. If City elects to exercise this option, it shall give written notice not later than ninety (90) days prior to the initial termination date, or, if one extension has been ex~rcised, ninety (90) days prior to the extended termination date. 3A Conditions to Effectiveness of Amendment The obligation of City to permit this Agreement to become effective and to perform its undertakings provided for in this Agreement is subject to the satisfaction of each and all of the conditions set out below, each of which may be waived in whole or in part by the City, in its sole direction. (1) Accuracy of Representations. The representations and warranties made by Franchisee in Article 2 of this Agreement are true and correct on and as of the effective date. (2) Effectiveness of City Council Action. The City's Ordinance No. 1551, approving this Agreement, shall have become effective pursuant to California law on or prior to the effective date. 9 Page 897 of 1192 Franchise Agreement • Solid Waste ARTICLE 4. SCOPE OF AGREEMENT . 4.1 Grant and Acceptance of Exclusive Franchise for Solid Waste Collection and Disposal Subject to paragraphs 3.4 (Conditions to Effectiveness of Agreement) and 4.2 (Limitations to Scope), this Agreement grants the Franchisee the exclusive right to arrange for the collection, processing, diversion and disposal of Solid Waste from residential and non-residential properties placed in the designated collection location for regular or scheduled collection in accordance with the City's Municipal Code and Ordinances, except where otherwise preclu9ed by law. Franchisee accepts the grant of the Franchise under the terms and conditions as set forth in this Agreement. Franchisee agrees to perform and be bound by each of the conditions proposed in the grant and by procedural ordinance and the requirements of Acceptance on file with the City Clerk's office (Article X of the City Charter, Section 1006, Duties of Grantee). 4.2 Limitations to Scope This Agreement for the collection, processing, diversion and disposal of Solid Waste from residential and non-residential properties shall be exclusive except as to the following categories of solid waste, which the Franchisee may, but shall not be obligated to collect, transfer, process, divert or dispose of: A. To the extent allowable by law, all residential recyclable materials whether 1. source separated by the waste generator for the purpose of placing for scheduled collection with the recycling collection franchisee, or 2. separated from solid waste by the waste generator and which the waste generator either donates to a charitable organization, or sells or is otherwise compensated by a collector in a manner resulting in a net payment to the waste generator; or 3. separated at any premises and transported by the owner or occupant of such premises (or by his or her full-time employees) to a processing facility. B. All green waste material whether 1. . source separated by the waste generator for the purpose of placing for scheduled collection with the green waste collection franchisee, or 2. separated from solid waste by the waste generator and which the waste generator either donates to a charitable organization, or sells or is otherwise compensated by a collector in a manner resulting in a net payment to the waste generator; or 3. separated at any premises and transported by the owner or occupant of such premises (or by his or her full-time employees) to a processing facility. 4. Green waste removed from a premises by a gardening, landscaping, or tree trimming company as an incidental part of a total service offered by that company rather than as a hauling service; C. Animal waste and remains from slaughterhouse or butcher shops; D. By-products of sewage treatment, including sludge, sludge ash, grit and screening; 10 Page 898 of 1192 Franchise Agreement· Solid Waste E. Hazardous waste, liquid waste and medical waste. Franchisee acknowledges and agrees that c_ity may permit other persons besides Franchisee to collect any or all types of the solid waste listed in paragraph 4.2 without seeking or obtaining approval of Franchisee under this Agreement. This grant to Franchisee of an exclusive Franchise, right and privilege to collect, transfer, process, divert and dispose of Solid Waste shall be interpreted to be consistent with state and federal laws, now and during the term of this Franchise,· and the scope of this exclusive franchise shall be limited by current and developing state and federal laws with regard to solid waste handling, exclusive franchise, solid waste flow control, and related doctrines. In the event that future interpretations of current law, enactment or developing legal trends limit the ability of the City to lawfully provide for the scope of Franchise services as specifically set forth herein, Franchisee agrees that the scope of the Franchise will be limited to those services which may be lawfully provided for under this Agreement. Further, the Franchisee agrees that the City shall not be responsible for any lost profits or damages claimed by the Franchisee to arise out of further limitations of the scope of the Agreement set forth herein. It shall be the responsibility of Franchisee to minimize the financial impact to other services being provided. 4.3 Administration of Franchise The City Manager shall administer the City's solid waste franchise and the City's Utility Director shall supervise Franchisee's compliance with the Agreement's terms and conditions. 4.4 Serve Without Interruption . Franchisee shall continue to collect and dispose of solid waste throughout the term of its franchise without interruption. 4.5 Permits and Licenses Franchisee shall procure all permits and licenses, pay all charges and fees, and give all notices as necessary. 4.6 Preservation of City Property Franchisee shall pay to the City, on demand, the cost of all repairs to public property made necessary by any .of the operations of Franchisee under this Agreement. 4. 7 Franchisee as Arranger The City.and Franchisee mutually agree that the City's granting of this franchise shall not be construed as the City "arranging for" the collection and disposal of solid waste or recyclables within the meaning of CERCLA. The parties further mutually agree that the granting of the Franchise by City shall be· construed as an action whereby the Franchisee is granted, and accepts the rights, responsibilities, benefits and liabilities of collection and disposal of solid waste. Commencing on the effective date of this Agreement and, to the extent that Franchisee's performance under this Agreement requires the collection and disposal of solid 11 Page 899 of 1192 Franchise Agreement • Solid Waste waste, and may be construed as "arranging for" collection and disposal of solid waste within the meaning of CERCLA, such actions shall be the sole responsibility of Franchisee and Franchisee expressly agrees to be solely responsible for all such actions. 4.8 Use of City Streets Such grant of franchise shall give Franchisee the right and privilege to operate solid waste collection vehicles and equipment on such streets, public ways, rights-of-way, or easements of the City. 4.9 Annexation The Franchisee shall automatically extend all services herein described to any area annexed to the City, except that the City may permit a firm franchised by the County of San Luis · Obispo before the annexation to continue serving the area for a period not to exceed five (5) years. 4.10 Ownership of Solid Waste Once solid waste is placed in containers and properly presented for collection, ownership and the right to possession shall transfer directly from the waste generator to Franchisee by operation of this Agreement. Franchisee is hereby granted the right to retain, process, divert, dispose of, and otherwise use such solid waste, or any part thereof, in any lawful fashion or for any lawful purposed desired by franchisee. Subject to this Agreement, Franchisee shall have the right to retain any benefit resulting from its right to retain, process, divert, dispose of, or use the solid waste which it collects. Arty cost savings resulting from decreased disposal shall off-set Franchisee's operating expenses in accordance with the "City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates". Solid waste, or any part thereof, which is disposed of at a disposal site or facility (whether landfill, transformation facility, transfer station, or materials recovery facility} shall become the property of the Owner or operator of the disposal site(s) or facility once deposited there by Franchisee. The City may obtain ownership or possession of solid waste placed for collection upon written notice of its intent to do so. However, nothing in this Agreement shall he construed as giving rise to any inference that the City has such ownership or possession unless such written notice has been given to Franchisee. · 12 Page 900 of 1192 Franchise Agreement • Solid Waste ARTICLE 5. DIRECT SERVICES 5.1 General The work to be d~me by the Franchisee pursuant to this Agreement shall include the furnishing of all labor, supervision, equipment, materials, supplies, and all other items and tasks necessary to perform the services required. It is mandatory that the work to be done by Franchisee pursuant to this Agreement shall be accomplished in a thorough and professional manner so that all occupied developed properties within the City are provided reliable, courteous, prompt and high-quality services for collection of solid waste. All collection activities shall be conducted in such a manner that public and private property will not be damaged. Franchisee shall replace containers and covers in designated collection locations and shall not place them in the street or on adjoining property. The City reserves the right to revise its laws and regulations pertaining to solid waste collection and disposal in order to protect public health, safety and welfare. The Franchise Agreement is subject to any such future revisions of the City's laws and regulations, and Franchisee agrees to comply with any such changes in said laws and regulations as if incorporated into the Agreement. 5.2 Single Family Residential Solid Waste Collection Service For residential customers, Franchisee shall collect solid waste at the curbside at a minimum of once a week, Monday through Friday, except as specified below. The Franchisee will notify solid waste customers of holiday collection schedules. Handicapped residents shall have the option of placing their containers near their dwelling, visible from the curb, and the Franchisee will collect their containers at this location and return container to same location. Franchisee will notify residents annually, beginning within thirty (30) days of execution of this Agreement, of this collection option. To be eligible for this collection option, residents must present proof of their physical incapacity to the Franchisee. 5.3 Other Solid Waste Collection Service 5.3.1 Multi-family Solid Waste Collection Service Franchisee shall collect Solid Waste from all Multi-Family dwelling units within the City, using containers of a size and shape acceptable to Franchisee, not less than once per week. The Franchisee and each customer shall agree on the designated collection location. Special consideration shall be given when determining the designated collection location for multi- family accounts to ensure that the flow of traffic is not impeded and that it does not result in aesthetic degradation of an area. The designated collection location, if disputed by customer or Franchisee, shall be determined by the City. 5.3.2 Commercial, Industrial and Institutional Solid Waste Collection Services Franchisee shall collect Solid Waste from all commercial, industrial and institutional properties within the City, using containers of a size and shape acceptable to Franchisee, not 13 Page 901 of 1192 Franchise Agreement -Solid Waste less than once per week. To the extent allowable by law, Franchisee shall collect from all occupied commercial, industrial and institutional properties in the City recyclable materials, arranged for Collection by the Franchisee with the Waste Generator, that have been placed in recycling containers provided by the Franchisee and placed in the designated collection location for regular collection by Franchisee. To the extent allowable by law, nothing in this Agreement shall preclude any organization from collecting recyclable materials from commercial and/or industrial customers within the City. The Franchisee and each customer shall agree on the designated collection location. Special consideration shall be given when determining the designated colleetion location for commercial and/or industrial accounts to ensure that the flow of traffic is not impeded and that it does not result in aesthetic degradation of an area. The designated collection location, if disputed by customer or Franchisee, shall be determined by the City. Additionally, if in the City's opinion, the location of an existing collection location for particular multi-family dwelling unit or commercial, industrial or institutional property is inappropriate, the City may direct the customer or Franchisee to relocate the collection location. If a customer refuses to comply with said directive, Franchisee shall decline to collect solid waste from said mis-located containers. 5.4 Public Facilities Collection When requested by the City, the Franchisee shall collect and dispose of all Solid Waste generated at premises owned and/or operated by the City. Franchisee shall make collections from City solid waste containers, not less than once per week, Monday through Friday or on Saturdays following non-working holidays. Collections shall be scheduled at a time mutually agreed upon by Franchisee and the Waste Generator. Franchisee shall provide, at City's direction, additional solid waste collection and disposal and consulting services including: (1) Collection of solid waste from all sidewalk litter containers; (2) Collection of solid waste from City-sponsored special events as specified by the City; (3) Collection of solid waste from containers in City parks as mutually agreed upon by the Franchisee and the City; (4) Review of plans for land use or.property developments with regard to solid waste service issues; and (5) Residual solid waste remaining from temporary household hazardous waste collection events. 5.5 Missed Pickups Upon notification, Franchisee shall collect any missed pickup which had been properly and timely placed for collection within 24 hours of said notice. 5.6 Bulky Waste Collection Franchisee shall make special collection arrangements with Waste Generators within seven (7) days after waste generators' written or verbal request for the collection of bulky waste for 14 Page 902 of 1192 Franchise Agreement -Solid Waste a fee established by the City and updated by resolution when the City adjusts rates. Any single item is not to exceed 200 pounds. 5.7 Semi-Annual Clean-up Weeks At least twice per year throughout the term of this Agreement, Franchisee shall provide, in addition to regularly scheduled service, two clean-up events pursuant to guidelines established by the Franchisee and approved by the City, for solid waste placed at the curb by single family dwelling units and at pre arranged locations for multi-family residential properties in addition to each customer's normal collection service. The dates for each event shall be proposed by Franchisee and approved by the City prior to September 1st of each year. Franchisee shall record by class and weight (in tons) the solid waste, white goods, etc., collected during the clean-up events. Franchisee shall record the kinds and weights (in tons) of solid waste diverted during these clean-ups from the landfill through recycling, reuse, transformation or other means of diversion. 5.8 City Right to Request Changes 5.8.1 General City may request Franchisee to perform additional services (including new diversion programs, billing services, etc.) or modify the manner in which it performs existing serVices. Pilot programs and innovative services which may entail new Collection methods, different kinds of services and/or new requirements for Waste Generators are included among the kinds of changes which City may request. Franchisee shall present, within 30 days of a request to do so by City, a proposal to provide additional or expanded diversion services . pursuant to the terms of Section 5.8.2. Franchisee shall'be entitled to an adjustment in its compensation in accordance with Section 9.4, for providing such additional or modified services. 5.8.2 New Programs Franchisee shall present, within 30 days of a request to do so by City, a proposal to provide additional or expanded services. The proposal shall contain a complete description of the following: • Collection methodology to be employed (equipment, manpower, etc.) • Equipment to be utilized (vehicle number, types, capacity, age, etc.). • Labor requirements (number of employees by classification). • Type of Containers to be utilized. • Provision for program publicity/education/marketing. • A projection of the financial results 0f the program's operations for the remaining Term of the Agreement in a balance sheet and operating statement format including documentation of the key assumptions underlying the projections and the support for those assumptions. • Materials processing facility to be utilized. 5.8.3 City's Right to Acquire Services Franchisee acknowledges and agrees that City may permit other Persons besides Franchisee to provide additional services not otherwise contemplated under Section 5.8 (City's Right to . 15 Page 903 of 1192 Franchise Agreement-Solid Waste Request Changes). If pursuant to Section 5.8.2 (New Programs), Franchisee and City cannot agree on terms and conditions of such services in ninety (90) days from the date when City first requests a proposal from franchisee to perform .such services, Franchisee acknowledges and agrees that City may permit Persons other than Franchisee to provide such services. 5.9 Report of Accumulation of Solid Waste; Unauthorized Dumping Franchisee shall direct its drivers to note the addresses of any premises at which they observe that solid waste is accumulating and is not being delivered for collection; and the address, or other location description, at which solid waste has been dumped in an unauthorized manner. Franchisee shall report the address or description to the City within twenty-four (24) hours of such observation. 5.10 City Directed Removal of Solid Waste Franchisee shall arrange for the removal of all accumulated solid waste and recyclables on any developed or vacant property in the City as directed by the City Utilities Director. The Franchisee shall make a good faith effort to recover the cost of disposal from the waste generator, and the costs of this effort, as well as the cost of disposal shall be chargeable to the waste generator. The Franchisee shall be entitled to include the costs incurred and not collected under this Section as an operating expense for purposes of rate setting. 5.11 Processing of Solid Waste The City reserves the right, prior to disposal, to direct portions of the waste stream collected under this franchise, to a designated processing facility for separation and recycling of any recyclable materials contained therein. City shall provide Franchisee with reasonable prior written notice concerning any change of service location. 5.12 Designated Disposal Facility Franchisee shall arrange with the operator of a disposal site situated outside the city limits for disposal of solid waste collected within the City. All solid waste collected within the City and not separated for recycling shall be delivered to the designated disposal site and disposed of according to the regulations of the designated disposal site. Franchisee shall secure within 90 days of the effective date of this Agreement, sufficient disposal site capacity commitment including landfill disposal site capacity commitment, to adequately serve the reasonably anticipated solid waste disposal needs of the City and its customers during the term of this Agreement, including any extensions provided for herein. City reserves the right to review said disposal capacity commitments. Prior to entering into any capacity commitment, Franchisee shall give prior written notice to the City concerning negotiations. The disposal site capacity commitment contract for the designated disposal facility shall be incorporated into this Agreement as Appendix I. If Franchisee receives notice from the landfill operator or otherwise expects, during the term of this Agreement, to be prevented from delivering solid waste to the designated disposal site, Franchisee shall immediately notify in writing the City's Utilities Director, stating the reason(s) Franchisee is prevented, or expects to be prevented, from disposing of solid waste in the designated disposal facility. Franchisee shall in good faith expeditiously identify and 16 Page 904 of 1192 Franchise Agreement -Solid Waste evaluate alternative disposal sites. An alternative designated disposal site or sites shall be arranged for and secured by Franchisee, after consultation with the City's Utilities Director. Franchisee shall provide City with adequate written notice prior to contracting for any alternate disposal site. City reserves the right to direct the waste stream to other disposal site selected by Franchisee. City in addition, reserves the right to direct the waste stream to any disposal facility or site. Absent such direction by the City, nothing contained herein shall be construed to mean that the City has arranged for site selection or waste disposal. Section 12.5, "Excuse From Performance", does not relieve Franchisee from the good faith .obligation to find and secure alternate disposal sites. Absent a Section 12.5 event, Franchisee shall be responsible for any increased costs, including transportation, with respect to the alternate disposal site, 5.13 Hazardous Waste Handling and Disposal If the Franchisee determine~ that solid waste placed in any container for collection is a Hazardous Waste or Medical Waste, or other solid waste that may not be legally disposed of at the designated disposal site or presents a hazard to the Franchisee's employees, the Franchisee shall have the right to refuse to accept such solid waste. The Franchisee will contact the waste generator and request that the waste generator arrange for proper disposal. If the Waste Generator cannot be reached immediately, the Franchisee shall, prior to leaving the premises, leave a tag at least two inches by six inches indicating the reason for refusing to collect the solid waste, in which case, a copy of the tag, along with the address of the premises (and the name of the waste generator, if known) shall be delivered to the City on the following business day. If the Hazardous waste or medical waste or other unauthorized waste is collected before its presence is detected by Franchisee, and if the waste generator cannot be identified or fails to remove the solid waste after being requested to do so, the Franchisee shall arrange for its legal disposal. The Franchisee shall make a good faith effort to recover the cost of disposal of such waste from the waste generator, and the costs of this effort, as well as the cost of disposal shall be chargeable to the waste generator. Provided the failure to detect the hazardous waste, medical wastes or other unauthorized wastes prior to collection and/or their delivery to the designated disposal site is not due to the negligence of the Franchisee or its employees or due to failure of the Franchisee to have an adequate in place inspection program, the Franchisee shall be entitled to include the costs incurred under this paragraph as an operating expense for purposes of rate setting. 17 Page 905 of 1192 Franchise Agreement -Solid Waste ARTICLE 6. COLLECTION SERVICE STANDARDS 6.1 Operations 6.1.1 Schedules To preserve peace and quiet, solid waste shall not be collected within two-hundred (200) feet of residential premises between 6:30 p.m. and 6:30 a.m. on any day, Monday through Friday. When the regularly scheduled collection day falls on a holiday, collection shall take place on the following regularly scheduled collection day. Franchisee will promptly resolve any complaints of noise to the satisfaction of the City Manager or the City Manager's designee. 6.1.2 Vehicles A. General. Franchisee shall keep a fleet of collection trucks sufficient in number and capacity to efficiently perform the work required in the Agreement in strict accordance with the terms of this Agreement. Franchisee shall provide a detailed description concerning the number and type of vehicles necessary for performance. Franchisee shall have available on collection days sufficient back-up vehicles for each type of collection vehicle (i.e., rear loader, front loader, and roll-off) used to respond to complaints and emergencies. The fleet shall be maintained according to the requirements of Municipal Code 8.04.030. B. Specifications. All vehicles used by Franchisee in providing solid waste collection services shall comply with all federal, state, and local requirements for such vehicles as they now exist or may be amended in the future; and be registered with the California Department of Motor Vehicles. All such vehicles shall have water-tight bodies designed to prevent leakage, spillage, or overflow. All such vehicles shall comply with U.S. Environmental Protection Agency noise emission regulations and other applicable noise control regulations. C. Condition. 1) Franchisee shall maintain all of its properties, facilities, and equipment used in providing service under this Agreement in a safe, neat, clean and operable condition at all times. 2) Franchisee shall inspect each vehicle daily to ensure that all equipment is operating properly. Vehicles which are not operating properly and represent a safety hazard shall be taken out of service until they are repaired and do operate properly and safely. Franchisee shall perform all scheduled maintenance functions in accordance with the manufacturer's specifications and schedule. Franchisee shall keep accurate records of all vehicle maintenance, recorded according to date and mileage, and shall make such records available to City upon request. 3) Franchisee shall repair, or arrange for the repair of, all of its vehicles and equipment for which repairs are needed because of accident, breakdown or any other cause so as to maintain all equipment in a safe and operable condition. Franchisee shall maintain accurate records ofrepair, which shall 18 Page 906 of 1192 Franchise Agreement • Solid Waste include the date/mileage, nature of repair and the signature of a maintenance supervisor that the repair has been properly performed. D. Vehicle Identification. Each truck shall display in a prominent place a sign as required in Municipal Code 8.04.090. E. Operation. Vehicles shall be operated in compliance with the California Vehicle Code, and all applicable safety and local ordinances. Franchisee shall not load vehicles in excess of the manufacturer's recommendations or limitations imposed by state or local vehicle weight restrictions. 6.1.3 Containers A. Residential Solid Waste Containers. When requested, Franchisee shall supply each Single Family Dwelling Unit with a waste wheeler in size consistent with the City approved Solid Waste collection program. Franchisee shall supply each multi-family complex with the appropriate type of container to adequately service the needs of the complex per the solid waste handling location. Franchisee agrees to provide additional appropriate Containers, as required. City and Franchisee acknowledge that from time to time, a customer may damage or destroy a Container. City and Franchisee also acknowledge that from time to time Containers may be stolen from the curb or damaged due to normal use. When notified of such occurrence, Franchisee shall replace the Container, at no charge to the customer pursuant to the guidelines established by the Franchisee and approved by the City. The container replacement guidelines are presented in Appendix II of this Agreement. B. Non-Residential and Multi-Family Dwelling Unit Solid Waste Containers. Franchisee shall furnish to all customers appropriate containers to collect solid waste at multi-family dwelling units, commercial and industrial properties, and other premises upon customer request. Containers with a capacity of one cubic yard or more shall be available in standard sizes. The kind, size and number of containers furnished to particular customers shall be as determined mutually by the customer and Franchisee. Containers which are front loading bins shall have lids. All containers with a capacity of one cubic yard or more shall meet applicable regulations for Solid Waste bin safety and shall be maintained in good repair with neatly and uniformly painted surfaces and shall prominently display the name and telephone number of Franchisee. Additionally, one cubic yard or more bins in public right-a-ways shall have reflectorized markings. Bins shall be clearly marked and identified as belonging to Franchisee. Franchisee shall not be obligated to provide customers with compactor units, but will be obligated to charge the rates set by the City for the collection of compacted solid waste. Each customer shall be responsible for excess damage to any such containers not caused by Franchisee. 19 Page 907 of 1192 Franchise Agreement -Solid Waste 6.1.4 Personnel A. General. Franchisee shall furnish such qualified drivers, mechanical, supervisory, clerical, and other personnel as may be necessary to provide services required by this Agreement in a safe and efficient manner. If Franchisee needs to provide additional personnel, Franchisee shall be responsible for all costs related to provision of such additional personnel. Franchisee may only reduce the number and type of personnel required with prior approval of City. If quality of service declines following such reduction in type and number of personnel, the City at its discretion, may require the Franchisee to increase the number and type of personnel utilized, at no additional cost to the City. B. Identification. Franchisee shall ensure that while on duty each collection worker wears a clean uniform with conspicuous insignia displaying Franchisees company name and the worker's name or identification number. C. Fees & Gratuities. Franchisee shall not, nor shall it permit any agent, employee, or subcontractors employed by it to request, solicit, demand, or accept, either directly or indirectly, any compensation or gratuity for any services performed under this Agreement, except as provided in Article 8 of this Agreement. D. Training. All drivers shall be trained and qualified in the operation of vehicles they operate and must possess a valid license of the appropriate class, issued by the California Department of Motor Vehicles. Franchisee shall provide adequate operations, health and safety training, and Hazardous Waste identification and handling training for all of its employees who use or operate equipment or who are otherwise directly involved in collection or other related operations. E. Customer Courtesy. Franchisee shall train its employees in customer courtesy; shall prohibit the use of loud or profane language; and shall instruct collection crews to perform the work quietly. Franchisee shall use its best efforts to ensure that all employees present a neat appearance and conduct themselves in a courteous manner. If any employee is found to be discourteous or not to be performing services in the manner required by this Agreement, Franchisee shall take all necessary corrective measures. If City has notified Franchisee of a complaint related to a discourteous or improper behavior, Franchisee will reassign the employee to duties not entailing contact with the public while Franchisee is pursuing its investigation and corrective action process. 6.2 Service Complaints Franchisee shall maintain and provide copies of all written service complaints and summaries of all oral service .complaints and the Franchisee's response to those complaints for the term of one year and shall allow City officials to inspect these records during the required office staffing hours after the City has requested such inspection with reasonable notice. 20 Page 908 of 1192 Franchise Agreement -Solid Waste If a disagreement arises between Franchisee and a customer, the customer may request an administrative hearing. The City's Utilities Director shall conduct an investigation, and give notice of that decision. The customer may elect to appeal this decision to the City Integrated Waste Management Appeals Committee made up of representatives from the Utilities Department, the Finance Department and the Administrative Office. 6.3 Periodic Performance Audit The City shall have the right to periodically, not less than annually, request a performance audit or billing audit be completed by the Franchisee, the City or an independent third party; The City shall be entitled to select the type of consultant that it deems qualified to conduct said audits. The cost of such audits will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.8. 6.4 Performance Hearing The City maintains the right to hold a public hearing at any time, not more than once each year, at which the Franchisee shall be present and shall participate, to review Franchisees services and performance. The purpose of the hearing shall be, in part, to provide for a discussion and review of technological, economic and regulatory changes and quality of service provided to date. The goal of the performance hearing is to strive for an ever- advancing solid waste management system, and to ensure services are provided with adequate quality, efficiency and economy. Sixty (60) days after receiving notice from City of a performance review hearing, Franchisee shall, at a minimum, submit a report to City indicating the following: • Changes ~ecommended and/or new services to improve City's ability to meet the goals of AB 939 and to contain costs and minimize impacts on rates; and • Any specific plans for provision of changed or new services by Franchisee. The reports required by this Agreement regarding customer complaints shall be used as one basis for review. Franchisee may submit other relevant performance information: and reports for consideration. City may request Franchisee submit specific information for the hearing. In addition, any customer may submit comments or complaints during or before the hearing, either orally or in writing, and these shall be considered, Topics for discussion and review at the performance review hearing shall include, but shall not be limited to, quality and adequacy of services provided, feasibility of providing new services, application of new technologies, customer complaints, amendments to this Agreement, developments in the law, new initiatives for meeting or exceeding AB 939's goals, regulatory constraints and Franchisee performance. City and Franchisee may each select additional topics for discussion at any performance review hearing. Not later than sixty (60) days after the conclusion of each performance review hearing, City may issue a report. As a result of the review, City may request Franchisee to provide expanded or new services. Franchisee shall present, within 30 days of a request to do so by 21 Page 909 of 1192 Franchise Agreement -Solid Waste City, a proposal to provide additional or expanded diversion services. The proposal shall · contain a complete description of the following: • Collection methodology to be employed (equipment, manpower, etc.) • Equipment to be utilized (vehicle number, types, capacity, age, etc.). • Labor requirements (number of employees by classification). · • Type of Containers to be utilized. • Provision for program publicity/ed:ucation/marketing. • A projection of the financial results of the program's operations for the remaining Term of the Agreement in a balance sheet and operating statement format including documentation of the key assumptions underlying the projections and the support for those assumptions. • Materials processing facility to be utilized. 22 Page 910 of 1192 Franchise Agreement -Solid Waste ARTICLE7. OTHER SERVICES: BILLING, REPORTING, RECORD-KEEPING AND PUBLIC EDUCATION 7.1 Billing By resolution of the City Council, the City shall establish rates for the services provided by the Franchisee. Franchisee shall bill and collect these rates. Franchisee billing fonnat and billing frequency shall be subject to approval of the City and Chy shall have the right to revise the billing fonnat to itemize certain charges. The City may also direct Franchisee to insert mailers relating to Franchisee provided service with the billings at no additional cost to the City. The mailers must fit in standard envelopes and not increase the required postage. The City will provide not less than thirty (30) days notice to Franchisee prior to the mailing date of any proposed mailing to permit Franchisee to make appropriate arrangements for inclusion of City materials. Franchisee shall maintain copies of said billings and receipts, each in chronological order, for a period of three (3) years after the date of service for inspection by the City, or for such longer term as the City directs. Franchisee may, at its option, maintain those records in computer form, on microfiche, or in any other manner, provided that the records cannot be altered, and can be preserved and retrieved for inspection and verification in a timely manner. Franchisee shall, in addition, provide an adequate backup system for billing records, regardless of the form in which the records are maintained. Any such backup system shall be subject to approval by the City. 7.2 Owner Responsible for Payment The owner of occupied developed property shall be responsible and liable for paying the solid waste collection and disposal fees for that property. 7 .3 Collection of Bills from Delinquent Solid Waste Customers. Bills shall be considered delinquent if not paid within 30 days of the date due. Once each year, prior to a date established by the City, Franchisee may take actions pursuant to Chapter 8.04 of the Municipal Code to collect delinquent solid waste collection and disposal accounts. 7.4 Records Franchisee shall maintain records required to conduct its operations, to support requests it may make to City, and to respond to requests of the City. Adequate record security shall be maintained to preserve records from events that can be reasonably anticipated such as a fire, theft and earthquake. Electronically maintained data and records shall be protected and an adequate backup system shall be provided for such data and records. The protection and backup systems shall be subject to approval by the City. The following records shall be maintained for the City in form and detail satisfactory to the City, relating to: Customer services and billing; 23 Page 911 of 1192 Franchise Agreement -Solid Waste • Weight of solid waste, especially as related to reducing and diverting solid waste. Information is to be separated by kind of account (including multi-family dwelling units with residential); • Special annual clean-up event results; • Routes; • Facilities, equipment and personnel used; • Facilities and equipment operations, maintenance and repair; • Processing and disposal of solid waste; • Complaints; and • Missed pick-ups. Franchisee shall maintain records of transfer, diversion and disposal of all solid waste collected in the city for the period of this Agreement and all extensions to this Agreement or successor Agreements. In the event Franchisee discontinues providing solid waste services to City, Franchisee shall provide all records of diversion and disposal of all solid waste collected within the City to City within thirty (30) days of discontinuing service. Records shall be in chronological order, and organized in a form readily and easily interpreted. Records for other programs shall be tailored to specific needs. In general, they shall include: • Plans, tasks·, and milestones; and, • Accomplishments in terms such as dates, activities conducted, quantities of products used, produced or distributed, and numbers of participants and responses. 7.5 Waste Generation/CharacterizatiOn Studies Franchisee acknowledges that the City must perform solid waste generation and disposal characterization studies periodically to comply with AB 939 requirements. Franchisee agrees to participate and cooperate with the City and its agents, at no cost to the City, to accomplish studies and data collection, and prepare reports, as needed, to determine weights and volumes of solid waste and characterize solid waste generated, diverted, disposed, transformed, or otherwise .handled or processed to satisfy AB 939 requirements. 7.6 Report Formats and Schedule Records shall be maintained in forms and by methods that facilitate flexible use of data contained in them to structure reports, as needed. Reports are intended to compile recorded data into useful forms of information that can be used to, among other things: • Determine and set rates, and evaluate the financial efficacy of operations; and • Evaluate past and expected progress towards achieving goals and objectives; and • Determine needs for adjustment to programs; and • Evaluate customer service and complaints. The City may at no cost to itself request that Franchisee provide such additional information in the reports set forth below as the City deems necessary or appropriate to meet its needs, including provision of AB 939 report information. Franchisee may propose report formats that are responsive to the objectives and audiences for each report. The format of each report shall be subject to approval by the City. 24 Page 912 of 1192 Franchise Agreement • Solid Waste Monthly reports shall be submitted within ten (10) calendar days after the end of the report month. Quarterly reports shall be submitted within fifteen (15) calendar days after the end of the quarter. Quarters end on November 30, February 28, May 31, and August 31. All reports shall be submitted to: Utilities Director City of San Luis Obispo 879 Morro Street San Luis Obispo, CA 93401 7. 7 Monthly Reports The information listed shall be the minimum reported for each service: • Solid Waste, collected, transferred, diverted and disposed of, by sector (commercial, industrial, residential) of waste generator--collected by Franchisee, in tons, by month. • Complaint summary, for month and cumulative for report year, as above. Summarized by nature of complaints. • Narrative summary of problems encountered and actions taken with recommendations for the City, as appropriate. 7 .8 Quarterly Report Quarterly reports shall be quarterly summaries of the monthly information in addition to the following: • Status report on applications for renewals of existing permits or any new permits which may be required to continue operations at the designated disposal site within existing permitted areas. • Solid Waste, collected, diverted and disposed of, in tons, during the semi-annual residential clean-up weeks, if applicable. • For each new program, provide activity related and narrative reports on goals and milestone and accomplishments. Describe problems encountered, actions taken and any recommendations to facilitate progress. • Provide a summary assessment of the overall solid waste program from Franchisee's perspective relative to financial and physical status of program. The physical status is to relate to how well the program is operating for efficiency, economy and effectiveness relative to meeting all the goals and objectives of this Agreement. Provide recommendations and plans to improve. Highlight significant accomplishments, problems and proposed solutions. 7.9 Annual Financial Audit Franchisee shall submit to the City annual audited financial statements prepared at Franchisee's expense by an independent Certified Public Accountant not later than 180 days following the expiration of the Franchisee's fiscal year. Pursuant to the "Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates", dated June 1994, at the time a rate application request is submitted to City, the financial forms contained in the rate application must be reconciled to the audited financial statements to 25 Page 913 of 1192 Franchise Agreement -Solid Waste provide assurance that all of the company's activities are accounted for. The annual report shall separate out information with respect to revenues and expenses in relation to performance of this Agreement, including detailed information concerning overhead claimed by Franchisee. Operations by Franchisee concerning activities not related to performance of this Agreement shall be maintained in a separate portion of the annual financial statement. City shall have the right to inspect or review the payroll tax reports, specific documents or records required expressly or by inference pursuant to this Agreement, or any other similar records or reports of Franchisee that City shall deem, in its sole discretiori, necessary to evaluate annual reports, compensation applications provided for in this Agreement and Franchisee's performance provided for in this Agreement. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the records inspection. The cost of such inspection or review will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.8. The Franchisee shall provide to the City a copy of Cold Canyon Landfill's request for an increase in tipping fees no later than five (5) days following submittal of said request to the County of San Luis Obispo. Additionally, the Franchisee shall notify the City of the action taken by the Board of Supervisors regarding said request within five (5) days following said action, including letter to the Board of Supervisors and related executed resolution. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the review. The cost of such inspection or review will be an allowable · cost under the rate setting methodology unless there are findings pursuant to Section 12. 8. 7.10 Maintenance of Accounting Records Franchisee shall maintain accounting records in accordance with generally accepted standards and principles of accounting. In its accounting records, Franchisee shall discreetly maintain and clearly identify all items of revenue and expense pertaining to the City's franchised operations. Cost and revenue information for the City shall be segregated from other geographical areas served by Franchisee. Cost and revenue information for the City, in addition, shall be segregated from other business activities of the Franchisee. Separate detailed records shall be maintained by Franchisee with respect to all transactions with affiliated entities that affect the cost and revenue of Franchisee in providing the franchise collection services. 7.11 Right to Audit Records In addition to other reporting requirements in this Agreement, the City may review, test and audit the books and records of the Franchisee or may engage a Certified Public Accountant for this purpose. The cost of such inspection or review will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.8. 7.12 Inspection by City The designated representatives of the City shall have the right to observe and review Franchisee operations and enter Franchisee's premises for the purpose of such observation 26 Page 914 of 1192 Franchise Agreement • Solid Waste and review at all reasonable hours with reasonable notice. 7.13 Office Franchisee shall maintain an office with telephone within the City limits where customers may apply for service, pay bills, and register complaints. At a minimum, Franchisee shall staff this office from 8:00 a.m. to 5:00 p.m., Monday through Friday, except legal holidays observed by the City. A representative of Franchisee shall be available during office hours to communicate with the public in person and directly by telephone. 7.14. Customer Information Franchisee shall prepare and keep current a flier acceptable to the City which summarizes solid waste regulations, all services provided by Franchisee, solid waste collection and disposal rates, telephone numbers, special collection events, collection schedules, complaint procedures, and other pertinent information. Franchisee shall have copies of this flier available at all times in Franchisee's office; shall distribute copies to all new customers; shall annually mail copies to all of its current customers; and shall mail updated copies to all customers as notifi~ation of changes in service or rates, prior to such changes. 7.15 Regulatory Reporting · Franchisee shall promptly provide the City copies of each adverse report from, and each regulatory action from local, state or federal regulatory agencies. In addition, Franchisee shall send copies to City of any reports that Franchisee submits to regulatory agencies with respect to performance of this Agreement. Franchisee shall provide City promptly with copies of any notices and cm;respondence from other facilities, including disposal sites, utilized by Franchisee in performance of this Agreement, concerning any breach of agreement with such facility or violation of regulations, including delivery of unauthorized wastes. Franchisee shall direct such facilities to at all times simultaneously send copies of such notices and correspondence to City. Franchisee shall promptly provide City with copies of any reports and correspondence concerning the status of permits with respect to Franchisee and such disposal sites and facilities referenced above. 7.16 Public Education Franchisee acknowledges and agrees that education and public awareness are critical, key and essential elements of any efforts to achieve AB 939 requirements. Accordingly, Franchisee agrees to take direction from City to exploit opportunities to expand public and customer knowledge concerning needs and methods to reduce, reuse and recycle solid waste and to cooperate fully with City in this regard. Franchisee shall maintain its own program of providing information relevant to billing and solid waste services, issues and needs with its bills. Franchisee shall also include in customer bills additional information, including information on recycling programs, as directed by the City. Franchisee shall bear all labor costs with respect to inserting public education materials with the billings. City shall bear any additional postage expense resulting from the City's 27 Page 915 of 1192 Franchise Agreement • Solid Waste inserts and shall bear other expenses related to the inserts to the extent said expenses are clearly in excess of the Franchisee's normal billing costs. All public education materials shall be approved in advance by the City. At the direction of the City, Franchisee shall participate in and promote AB 939 activities and other solid waste management techniques at community events and local activities. Such participation would nonnally include providing, without cost, educational and publicity information promoting the goals of the City's solid waste program. 7.17 Records Retention Franchisee shall maintain the above records, reports and data set forth in this Article for such time as City may direct. Franchisee agrees to make all such records, reports and data . available for inspection by City or City's authorized representatives, upon reasonable notice by City. 28 Page 916 of 1192 Franchise Agreement • Solid Waste · ARTICLES. PAYMENTS TO CITY 8.1 Franchise Fee Payments In consideration of the exclusive franchise provided for in Article 4 of this Agreement, Franchisee shall pay the City ten percent (10%) of Franchisee's gross revenues for collection and disposal of solid waste within the City; provided, however, that such franchise fee shall not exceed the costs incurred by the City to deliver service to properties. Such franchise fee shall be a "pass-through" expense for purposes of rate review and setting. Each monthly remittance of fees to City shall be accompanied by a statement detailing gross revenues for the period covered from all operations conducted or permitted pursuant to this Agreement. 8.2 Schedule of Payment Franchise fees described in Section 8.1 are due on the 15th day of each month for receipts from the previous month. The remittance will be accompanied by a report setting forth the basis, and calculations used for computing the amount due. 8.3 AB 939 Fee Amount In consideration of the exclusive franchise provided for in Article 4 of the Agreement, Franchisee shall pay when directed by the City, a percentage of Franchisee's gross revenue for an AB 939 fee(i.e. the cost that the City incurs in managing and addressing AB 939 issues regarding diversion, recyclable materials, source reduction, etc.), on a monthly installment basis, based on cash receipts from customers provided residential and non-residential services. during the prior month. All AB 939 fees paid to the City shall be considered a pass through cost for purposes ofrate setting under Article 9. The monthly AB 939 fee is due on the 15th day of each month for receipts from the previous month. 8.4 Other Fees The City shall reserve the right to set such other fees, as the City deems necessary. These fees will he treated as a pass-through expense. The amount, time and method of payment shall be similar to section 8.2. 8.5 Time and Method of Payment If Franchisee is directed to pay an AB 939, Franchise Fee or "Other" Fee, it shall do so on or before the fifteenth (15th) day of each month during the Term. Franchisee shall remit to City a sum of money equal to the designated percentage of the gross revenue or a flat monthly fee as determined by the City. If any fees are not paid on or before the fifteenth (15th) day of any month, Franchisee shall pay to City a late payment penalty in an amount equal to one percent (1 %) of the amount owing for that month. Franchisee shall pay an additional late payment penalty of one percent (1 %) owing on any unpaid balance for each following thirty (30) day period the fee remains unpaid. Late payment penalty amounts shall not be included in any revenue requirement. 8.6 Review of Fee Payments The City, or its agent, reserves the right to annually perform an independent review of fee payments to verify that fees are being paid in accordance with this Agreement. The cost of such inspection or review will be an allowable cost under the rate setting methodology unless 29 Page 917 of 1192 Franchise Agreement -Solid Waste there are findings pursuant to Section 12.8. 8.7 Business License Tax Franchisee shall pay each year the annual business license tax. 30 Page 918 of 1192 Franchise Agreement • Solid Waste ARTICLE 9. SERVICE RATES AND REVIEW 9.1 General Franchisee's compensation provided for in this Article shall be the full, entire and complete compensation due to Franchisee pursuant to this Agreement for all labor, equipment, materials and supplies, taxes, insurance, bonds, overhead, transfer and transport, processing, division, disposal, profit and all other things necessary to perform all the services required by this Agreement in the manner and at the times prescribed, Franchisee will not be entitled to any further rate adjustments as a result of customer delinquencies and other bad debt issues. Franchisee does not look to the City for payment of any sums, except for solid waste collection services provided to the City and presented in Appendix III, under this Agreement in consideration of the right to charge and collect from customers for services rendered at rates fixed by the City from time-to-time. The City shall have the right to structure those rates as it deems appropriate so long as the revenues forecasted to be received by Franchisee from charging such rates can reasonably be expected to generate sufficient revenues to provide for Franchisee's compensation as calculated in accordance with the "City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates". 9.2 Service Rates Service rates are those established by Resolution adopted by City Council. Franchisee shall provide the services required by this Agreement and charge no more than the rates authorized by City Resolution. 9.3 Rate Review Franchisee shall submit to the City an application for rate review annually, in accordance with the procedures described in the 11 City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates," dated June 1994, except as that may be modified by the City from time to time. In addition to the procedures contained in the above referenced manual, Franchisee shall submit any and all data requested by and in the format prescribed by the City. In the event Franchisee shall fail to rrieet the schedule set forth in the above referenced manual, a revision of rates for the following year shall not be authorized until the 1st day of the first calendar month following a 120 day period from the date that the complete application is submitted and such revision shall contain no consideration for Franchisee's failure to submit the application in accordance with the schedule set forth in the above-referenced manual. 9.4 Special Interim Rate Review The City or franchisee may request an extraordinary or consequential adjustment outside of the base year and interim year adjustment schedules, as set forth in the 11 City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates," dated June 1994 .. To be extraordinary and consequential, cost changes must be significant enough to require a greater than five percent (5%) decrease or increase in monthly rates for basic residential service. 31 Page 919 of 1192 Franchise Agreement • Solid Waste 9.5 Allowable Profit When performing the procedure~ described in the "City of San Luis Obispo Rate Setting Process and Methodology Manual/or Integrated Solid Waste Management Rates," dated June 1994, the allowable profit on expenses shall be calculated using targeted operating ratio of ninety-three percent (93%), with a range of ninety-one percent (91 %) to ninety-five percent (95%), applied to Franchisee's reasonable and necessary allowable costs, as these costs are defined in the rate setting manual, incurred in the performance of its obligations under this Agreement. 9 .6 Publication of Rates Franchisee shall provide written notice to subscribers of all rate changes, prior to implementation. If appropriate, this notice should include reasons and background for the rate change. 32 Page 920 of 1192 Franchise Agreement -Solid Waste ARTICLE 10. INDEMNITY, INSURANCE, AND PERFORMANCE BOND 10.1 Indemnification 10.1.1 General. Franchisee agrees to defend, indemnify, protect and hold the City and its Council members, agents, officers and employees harmless from.and against any and an· claims asserted or liability established for damages or injuries to any person or property, including, but not limited to, damages arising from or related to alleged or actual violations of Proposition 218 and/or its implementing legislation, injury to the Franchisee's employees, agents or officers to the extent arising from or connected with or are caused or claimed to be caused by the acts or omission of the Franchisee, and its agents, officers, directors or employees, in performing the services herein, and all expenses of investigating and defending against same; provided, however, that the Franchisee's duty to indemnify and hold harmless shall not include any claims or liability arising from the established sole negligence or willful misconduct of the City, its agents, officers or employees. 10.1.2 CERCLA. Franchisee agrees to defend and indemnify the City, Council members, officers, employees and agents for all actions of the Franchisee associated with the Franchisee's role as the arranger of solid waste service, or as a "potentially responsible party" within the meaning of CERCLA in performing solid waste service under any Federal, State or local laws, rules or regulations. The Franchisee shall further defend and indemnify City from any and all legal actions against City on the basis of the assertion that the City is an arranger of solid waste services as a result of this Agreement. 10.1.3 Integrated Waste Management Act. Franchisee agrees to defend and indemnify the City, Council members, officers, employees and agents for any fines or penalties imposed by the California Integrated Waste Management Board or its agents in the event and to the extent that Franchisee's delays in providing information or reports required pursuant to this Agreement prevent the City from submitting reports or attaining goals in a timely manner as required by the Integrated Waste Management Act. 10.2 Insurance Franchisee shall procure and maintain for the duration of the franchise insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the services hereunder by the Franchisee, its agents, representatives, employees or subcontractors. A. Minimum Scope of Insurance. Coverage shall be at least as broad as: (1) Insurance Services Office Commercial General Liability coverage (occurrence form CG 0001). (2) Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability, code I (any auto). (3) Workers' Compensation insurance as required by the State of California and Employer's Liability insurance. ( 4) Pollution Legal Liability 33 Page 921 of 1192 Franchise Agreement -Solid Waste B. Minimum Limits of Insurance. Franchisee shall maintain limits no less than: (1) Commercial or Comprehensive General Liability: Five Million Dollars ($5,000,000) combined single limit per occurrence for bodily injury, personal injury, and property damage. If Commercial General Liability or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this Agreement or the general aggregate limit shall be twice the required occurrence limit. (2) Automobile Liability: Five Million Dollars ($5,000,000) combined single limit per accident for bodily injury and property damage. (3) Workers' Compensation and Employers Liability: Workers' compensation limits as required by the Labor Code of the State of California and employers liability with limits of $1,000,000 per accident for bodily injury or disease. (4) Pollution Liabilities: One million Dollars ($1,000,000) each loss/Two Million Dollars ($2,000,000) annual aggregate all losses. C. Deductibles and Self-Insured Retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, Council members, its officers, officials, employees, and agents; or the Franchisee shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. Any insurance policies providing for self insured retentions shall further provide that legal costs and costs of investigation, including consultant fees, with respect to any claim or suit, shall apply · to the self insured retention amount. D. Other Insurance Provisions. The general liability and automobile liability policies are to contain, or be endorsed to contain, the following provisions: (1) The City, Council members, its officers, officials, employees, and agents are to be covered as insurers as respects: liability arising out of activities performed by or on behalf of the Franchisee; products and completed operations of the Franchisee; premises owned, occupied or used by the Franchisee; or automobiles owned, leased, hired or borrowed by the Franchisee. The coverage shall contain no special limitations on the scope of protection afforded to the City, its officers, officials, employees, or agents. (2) For any claims related to this project, the Franchisee's insurance coverage shall be primary insurance as respects the City, Council members, its officers, officials, employees, and agents. Any insurance or self-insurance maintained by the City, its officers, officials, employees, agents or volunteers shall be excess of the Franchisee's insurance and shall not contribute with it. 34 Page 922 of 1192 Franchise Agreement • Solid Waste (3) Any failure to comply with reporting or other provisions of the policies including breaches of warranties shall not affect coverage provided to the City, Council members, its officers, officials, employees, or agents. (4) The Franchisee's insurance shall apply separately to each insured against whom claim is made or suit is brought except with respect to the limits of the insurer's liability. (5) Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days' prior written notice by certified mail, return receipt required, has been given to the City. (6) The Automobile Liability Policy shall be endorsed to delete the Pollution exclusion and add the Motor Carrier Act endorsement (MCS-90), TL.1005, TL 1007 and/or other endorsements required by federal or state authorities. (7) Pollution, if on a Claims Made form: a. The "Retro Date" must be shown, and must be before the date of the contract or the beginning contract work. b. Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of the contract of work. c. If coverage is canceled or non-renewed, and not replaced with another claims made policy form with a "Retro Date" prior to the contract effective date, the Franchisee must purchase "extended reporting" coverage for minimum of two years after completion of contract. E. Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:VII. Insurers selected by Franchisee shall be admitted to issue insurance in the State of California. F. Verification of Coverage. Franchisee shall furnish the City with Certificates of insurance and with original endorsements effecting coverage required herein. The certificates and endorsements for each insurance policy are to be signed by a person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on forms provided by or acceptable to the City and are to be received and approved by the City before performance under this Agreement commences. The City reserves the right to require complete certified copies of all required policies at any time, and Franchisee shall provide said copies upon request. G. Subcontractors. Franchisee shall include all subcontractors as insurers under its policies or shall furnish separate certificates and endorsements for each subcontractor. All coverages for subcontractors shall be subject to all of the requirements stated 35 Page 923 of 1192 Franchise Agreement -Solid Waste herein .. H. Occurrence Based Coverage. All policies secured by Franchisee shall be occurrence and not claims based unless City so Consents in writing. 10.3 Performance Bond Simultaneously with the execution ofthis Agreement, Franchisee shall file with the City a bond, payable to City, securing Franchisee's faithful performance of its obligations under this Agreement. The principal sum of the bond shall be One Half Million Dollars ($500,000). The bond shall be executed as surety by a corporation authorized to issue surety bonds in the State of California, with a financial condition and record of service satisfactory to City. The bond shall be in a form approved by the City. If such bond at any time ceases to be effective for any reasori, this shall be deemed a breach of this Agreement by Franchisee and the City shall be entitled to proceed as hereinafter provided. 36 Page 924 of 1192 Franchise Agreement • Solid Waste ARTICLE 11. CITY'S RIGHT TO PERFORM SERVICE 11.1 General In the event that Franchisee, for any reason whatsoever, fails, refuses or is unable to Collect, transport or process any or all Solid waste materials which it is required by this Agreement to Collect and process, at the time and in the manner provided in this Agreement, for a period of more than seven (7) calendar days, and if, as a result thereof, Solid Waste should accumulate in the City to such an extent, in such a manner, or for such a time that the City Manager should find that such accumulation endangers or menaces the public health, safety or welfare, then City shall have the right, but not the obligation, upon twenty-four (24) hour prior written notice to Franchisee during the period of such emergency as determined by the City Manager, (1) to perform, or cause to be performed, Sl!Ch services itself with its own or other personnel without liability to Franchisee, and/or (2) to take possession of any or all of Franchisee's land, equipment and other property to Collect, transport or process any Solid Waste generated within the City which Franchisee would otherwise be obligated to Collect, transport, process or market pursuant to this Agreement. In the event the City takes possession of the Franchisee's equipment and other property, the City shall be entitled to have another Franchisee operate such equipment and property under City direction. Additionally, in the event the City takes possession of the Franchisee's equipment and other property, the City does not guarantee repair of existing problems with equipment and facilities. Notice of Franchisee's failure, refusal or neglect to collect, transport or process Solid Waste may be given orally by telephone to Franchisee at its principal office and shall be effective immediately. Written confirmation of such oral notification shall be sent to Franchisee within twenty-four (24) hours of the oral notification. Franchisee further agrees that in such event: • It will take direction from City to effect the transfer of possession of property to City for City's use. • It will, if City so requests, keep in good repair and condition all of such property, provide all motor vehicles with fuel, oil and other service, and provide such other service as may be necessary to maintain said property in operational condition. • City may immediately engage all or any personnel necessary or useful for the Collection, transportation and processing Solid Waste, including, if City so desires, employees previously or then employed by Franchisee, Franchisee further agrees, if City so requests, to furnish City the services of any or all management or office personnel employed by Franchisee whose services are necessary or useful for Solid Waste Collection, Transportation arid processing operations and for the billing and collection of fees for these services. City agrees that it assumes complete responsibility for the proper and normal use of such equipment and facilities while in its possession. If the interruption or discontinuance in service is caused by any of the reasons listed in Section 12.4 (Excuse From Performance), City shall pay-to Franchisee the reasonable rental 37 Page 925 of 1192 Franchise Agreement -Solid Waste value of the equipment and facilities, possession of which is taken by City, for the period of City's possession, if any, which extends beyond the period of time for which Franchisee has rendered bills in advance of service. Except as otherwise expressly provided in the previous paragraph, City's exercise of its rights under this Article I I (I) does not constitute a taking of private property for which compensation must be paid; (2) will not create any liability on the part of City to Franchisee; and (3) does not exempt Franchisee from the indemnity provisions of Article I 0, Indemnification, Insurance and Bond, which are meant to extend to circumstances arising under this Section, provided that Franchisee is not required to indemnify City against claims and damages arising from the sole negligence of City officers, employees and agents in the operation of Collection vehicles during the time City has taken possession of such vehicles. 11.2 Temporary Possession of Franchisee's Property If the City suffers an interruption or discontinuance of service as described in Section I I. I (including interruptions and discontinuance due to events described in Section 12.4, Excuse from Performance), City may take possession of and use all of Franchisee's property described above until other suitable arrangements can be made for the provision of Solid Waste Services which may include the grant of a Contract to another company. The same notice requirements of Section 11.1 are applicable. 11.3 Billing and Compensation to City During City's Possession During such time that city is providing Solid Waste services, as above provided, Franchisee shall continue to bill and collect payment from all users of the above-mentioned services. Franchisee further agrees that, in such event, it shall reimburse City for any and all costs and expenses incurred by City in taking over possession of the above-mentioned property for Solid Waste service in such manner and to an extent as would otherwise be required of Franchisee under the Terms of this Agreement. Such reimbursement shall be made from time to time after submission By City to Franchisee of each statement listing such costs and expenses, but in no event later than five (5) working days from and after each such submission. The City shall have the right, at its sole discretion, to take over billing and payment collection activities. The City shall then pay any net revenues to the Franchisee, after deducting all expenses, including City-incurred expenses. 11.4 City's Right to Relinquish Possession It is further mutually agreed that City may at any time at its discretion relinquish possession of any or all of the above-mentioned property to Franchisee and thereupon demand that Franchisee resume the Solid Waste services as provided in this Agreement, whereupon Franchisee shall be bound to resume the same. 11.5 Duration of City's Possession City's right pursuanfto this Article to retain temporary p:ossession of Franchisee's facilities and equipment, and to render Collection services, shall terminate when City determines that such services can be resumed by Franchisee, or when City no longer reasonably requires such facilities or equipment. In any case, City has no obligation to maintain possession of Franchisee's property and/or continue its use for any period of time and may at any time, in its 38 Page 926 of 1192 Franchise Agreement -Solid Waste sole discretion, relinquish possession to Franchisee. 39 Page 927 of 1192 Franchise Agreement -Solid Waste ARTICLE 12. DEFAULT AND REMEDIES 12.1 Events of Default All provisions of this Agreement to be performed by Franchisee are considered material. Each of the following shall constitute an event of default. A. Fraud or Deceit. If Franchisee practices, or attempts to practice, any fraud or deceit upon city. B. Insolvency or Bankruptcy. If Franchisee becomes insolvent, unable, or unwilling to pay its debts when due, or upon listing of an order for relief in favor of Franchisee in a bankruptcy proceeding. The Franchisee is. also in default if there is an assignment of this contract for the benefit of its creditors. C. Failure to Maintain Coverage. If Franchisee fails to provide or maintain in full force and effect the Workers' Compensation, liability, indemnification coverage or any insurance coverage or bond required under this Agreement. D. Violations of Regulation. If Franchisee facilities fall out of full regulatory compliance or if Franchisee violates any orders or filings of any regulatory body having jurisdiction over Franchisee relative to this Agreement, provided that Franchisee may contest any such orders or filings by appropriate proceedings conducted in good faith, in which case no breach of the Agreement shall be deemed to have occurred. E. Failure to Perform. If Franchisee ceases to provide Solid Waste services as required under this Agreement for a period of two (2) days or more, for any reason within the control of Franchisee. F. Failure to Pay/Report. If Franchisee fails to make any timely payments, including liquidated damages and penalties, required under this Agreement and/or fails to provide City with required information, reports, and/or records in a timely manner as provided for in the Agreement. G. Acts or Omissions. Any other act or omission by Franchisee which violates the terms, conditions, or requirements of this Agreement, the California Integrated Waste Management Act of 1989, as it may be amended from time to time, or any order, directive, rule, or regulation issued thereunder and which is not corrected or remedied within the time set in the written notice the violation or, if Franchisee cannot reasonably correct or remedy the breach within the time set forth in such notice, if Franchisee should fail to commence to correct or remedy such violation within the time set forth in such notice and diligently effect such correction or remedy thereafter. H. False or Misleading Statements. Any representation or disclosure made to City by Franchisee in connection with or as an inducement to entering into this Agreement, or any future amendment to this Agreement, which proves to be false or misleading in any material respect as of the time such representation or disclosure is made, whether or not any such 40 Page 928 of 1192 Franchise Agreement -Solid Waste representation or disclosure appears as part of this Agreement. I. Attachment. There is a seizure of attachment of, or levy on, the operating equipment of Franchisee, including without limits its equipment, maintenance or office facilities, or any part thereof. J. Suspension or Termination of Service. There is any termination or suspension of the transaction of business by Franchisee, including without limit, due to labor unrest including strike, work stoppage or slowdown, sickout, picketing, or other concerted job action lasting more than two (2) days. Upon default by the Franchisee, the City Manager shall provide written notice to Franchise of the violation. The City Manager shall include in the notice, a demand that the Franchisee correct the violation within 10 days following the delivery of said notice. If the violation is not corrected within the 10 days, the City shall have the right to terminate the Agreement per the provisions provided in Section 12.2. For purposes of this Agreement and any notice required thereunder, the term "days" shall mean calendar days. 12.2 Right to Terminate Upon Default Upon a default by Franchisee, City shall have the right to terminate this Agreement upon a ten (10) days notice if the public health or safety is threatened, or otherwise a thirty (30) days notice, but without the need for any hearing, suit or legal action. This right of termination is in addition to any other rights of City upon a failure of Franchisee to perform its obligations under this Agreement. 12.3 Possession of Property and Billing Records and Systems Upon Termination In the event of termination for default, the City shall have the right, subject to the obligations contained in Article 12 hereof, to take possession of any and all of Franchisee's land, equipment, and other property used or useful in the collection, diversion and/or disposal of solid waste and to conduct all activities concerning billing and .collection of fees for these services and to use such property. The City shall have the right to retain the possession of such property until other suitable arrangements can be made for the provision of solid waste collection services, which may include the award of an agreement or franchise to another waste hauling company. If the City retains possession thereof after the period of time for which Franchisee has already been paid by means of bills issued in advance of providing service for the class of service involved, Franchisee shall be entitled to the reasonable rental value of such property (which shall be offset against any damages due the City for the Franchisees default). Franchisee shall provide the City immediate access to all of its business records and billing system related to its billing of accounts for services and shall take direction from the City regarding the billing of customers during the period between the City's termination of the Agreement for default until other suitable ·arrangements can be made for the billing of solid waste collection services. The provisions dfthis Section 12.3 shall survive the termination of this Agreement. 41 Page 929 of 1192 Franchise Agreement -Solid Waste 12.4 City's Remedies Cumulative; Specific Performance The City's right to terminate the Agreement under Section 12.1 and to take possession of the Franchisee's properties under Section 12.3 are not exclusive, and the City's termination of the Agreement shall not constitute an election of remedies. Instead, they shall be in addition to any and all other legal and equitable rights and remedies which the City may have. By virtue of the nature of this Agreement, the urgency of timely, continuous and high quality service, the lead time required to effect alternative service, and the rights granted by the City to Franchisee, the remedy of damages for a breach hereof by Franchisee is inadequate and the City shall be entitled to injunctive relief and/or specific performance if it so desires. 12.5 Excuse from Performance The parties shall be excused from performing their respective obligations hereunder in the event they are prevented from so performing by reason of floods, earthquakes, other "acts of God", war, civil insurrection, riots, acts of any govemment(includingjudicial action), and other similar catastrophic events which are beyond the control of and not the fault of the party claiming excuse from performance hereunder. Labor unrest, including but not limited to strike, work stoppage or slowdown, sick-out, picketing, or other concerted job action conducted by Franchisee's employees or directed at Franchisee or its selected facilities is not an excuse from performance and Franchisee shall be obligated to continue to provide service notwithstanding the occurrence of any or all such events. The party claiming excuse from performance shall, within two (2) days after such party has notice of such cause, give the other party notice of the facts constituting such cause and asserting its claim to excuse under this Section. The interruption or discontinuance of Franchisee's services caused by one or more of the events excused shall not constitute a default by Franchisee under this Agreement. Notwithstanding the foregoing, however, if Franchisee is excused from performing its obligations hereunder for any of the causes listed in this Section for a period of seven (7) days or more, City shall have the right to review the circumstances under which the excuse from performance was granted. After such review, ifthe City determines the excuse from service is no longer valid, the City shall notify the Franchisee in writing to resume service within two (2) days from the receipt of such notification. If the Franchisee fails to resume service within the two (2) days, the City shall have the right to terminate this Agreement by giving ten (10) days notice, in which case the provisions relative to taking possession of Franchisee's land, equipment and other property and engaging Franchisee's personnel in Article 11, City's Right to Perform Services, and this Article 12 shall apply. 12.6 Liquidated Damages City finds, and Franchisee agrees, that as of the time of the execution of this Agreement, it is impractical, if not impossible to reasonably ascertain the extent of damages which shall be incurred by City as a result of a breach by Franchisee of its obligations under this Agreement. The factors relating to the impracticability of ascertaining damages include, but are not limited to, the fact that: • substantial damage results to members of the public who are denied services or 42 Page 930 of 1192 Franchise Agreement -Solid Waste denied quality or reliable service; • such breaches cause inconvenience, anxiety, frustration, and deprivation of the benefits of the Agreement to individual members of the general public for whose benefit this Agreement exists, in subjective ways and in varying degrees of intensity which are incapable of measurement in precise monetary terms; • that services might be available at substantially lower costs than alternative services and the monetary loss resulting from denial of services or denial of quality or reliable services is impossible to calculate in precise monetary terms; and • the termination of this Agreement for such breaches, and other remedies are, at best, a means of future correCtion and not remedies which make the public whole for past breaches. However, substantial breaches may result in the termination of this Agreement as described in Section 12.1. The parties further acknowledge that consistent, reliable solid waste collection service is of utmost importance to City and that City has considered and relied on Franchisee's representations as to its quality of service commitment in awarding the Franchise to it. The parties further recognize that if Franchisee fails to achieve the performance standards, or fail to submit required documents in a timely manner, City and its residents will suffer damages and that it is and will be impractical and extremely difficult to ascertain and determine the exact amount of damages which City will suffer. Therefore, without prejudice to City's right to treat such non-performance as an event of default under this Article 12, the parties agree that the following liquidated damage amounts represent a reasonable estimate of the ,amount of such damages considering all of the circumstances existing on the date of this Agreement, including the relationship ofthe sums to the range of harm to City that reasonably could be anticipated and the anticipation that proof of actual damages would be costly or inconvenient. Franchisee agrees to pay (as liquidated damages and not as a penalty) the amounts set forth below: Collection Reliability and Quality • For each failure over five (5) annually to commence service to a new customer account within seven (7) days after order: • For each failure over ten (10) annually to Collect Solid Waste, which as been properly set out for Collection, from an established customer account on the scheduled Collection day: • For each failure to Collect Solid Waste which have been properly set out for Collection, from the same customer on $150.00 $150.00 two (2) consecutive scheduled pickup days: $150.00 • For each occurrence over five (5) annually of damage to private property: $250.00 • For each occurrence of discourteous behavior: $250.00 • For each failure over ten (10) annually to clean up Solid Waste spilled from Bins: $150.00 • For each occurrence over five (5) annually of Collecting • Solid Waste during unauthorized hours: $250.00 • For each failure to respond to a customer complaint within 43 Page 931 of 1192 Franchise Agreement • Solid Waste twenty-four (24) working hours: $100.00 • For each failure to prepare for or properly conduct twice annual clean-ups including advertising and press releases; $250.00 • For each failure to perform and submit billing reviews: $250.00 • For each occurrence over ten (10) annually of failure to properly return containers to avoid pedestrian or vehicular traffic impediments or to place cans upright with lid secured: $150.00 • For each occurrence of excessive noise above the limits specified in this Agreement: $250.00 Customer Responsiveness • For each failure to respond to a customer complaint within sixteen (16) working hours: $100.00 • For each failure to process customer complaints to City: $500.00 • For each failure to carry out responsibilities for establishing service: $500.00 Timeliness of Submissions to City REPORTS Any report shall be considered late until such time as a correct and complete report is received by City. For each calendar day a report is late, the daily assessment shall be: Monthly Reports: For each infraction Quarterly Reports For each infraction Annual Reports: For each infraction $100per day $250 per day $500 per day Liquidated damages will only be assessed after Franchisee has been given the opportunity but failed to rectify the damages, as described in this Agreement (e.g., twenty-four (24) working hours to respond to a complaint). City may determine the occurrence of events giving rise to liquidated damages through the observation of its own emplOyees or representative or investigation of customer complaints. Prior to assessing liquidated damages, City shall give Franchisee notice of its intention to do so. The notice will include-a brief description of the incident(s)/non-performance. Franchisee may review (and make copies at its own expense) all information in the possession of City relating to incident(s)/non-performance. Franchisee may, within ten (10) days after receiving the notice, request a meeting with City. If a meeting is requested, it shall be held by the City Manager or his/her designee. Franchisee may present evidence in writing and through testimony of its employees and others relevant to the incident(s)/non performance. The City Manager or designee will provide Franchisee with a written explanation of his or her determination on each incident(s)/non-performance prior to authorizing the assessment of liquidated damages. The decision of the City Manager or designee shall be final. C. Amount. The City Manager may assess liquidated damages for each calendar day or event, as appropriate, that Franchisee is determined to be liable in accordance with this Agreement. 44 Page 932 of 1192 Franchise Agreement -Solid Waste D. Timing of Payment. Franchisee shall pay any liquidated damages assessed by City within ten (I 0) days after they are assessed. If they are not paid within the ten (I 0) day period, City may proceed against the performance bond required by this Agreement or order the termination of this Agreement, or both pursuant to the terms of this Agreement. 12.7 Notice, Hearing and Appeal Should the Franchisee contend that the City is in breach of the Agreement, Franchisee shall file a written request with the Utilities Director for a consultation regarding the allegations. Such consultation shall be held within thirty calendar days of the receipt of Franchisee's request. Franchisee shall present its position and all relevant facts to the Utilities Director. Franchisee shall be notified of the Utilities Director judgment within ten calendar days of the consultation. If the Franchisee is not in agreement with the ruling issued by the Utilities Director, it shall have the right to appeal the decision to the City Manager. This appeal shall be made in writing to the City no later than fourteen days after the notification is mailed by Utilities Director of the judgment. The City Manager shall notify Franchisee of the time and date of the review of allegation within thirty calendar days of the request. Franchisee shall present its position and all relevant facts to the City Manager. Franchisee shall be notified in writing within fourteen calendar days of the City Manager's ruling. The decision of the City Manager can be appealed to City Council per Municipal Code Section 1.20.020. 12.8 Financial Material Errors, Omissions or Irregularities The City may review, test and audit the books and records of the Franchisee for the purpose of determining whether the Franchisee is complying with the terms of the Agreement. In the event that material errors or omissions or irregularities are identified, then the cost associated with the audit; test or review shall be paid by the Franchisee to the City. In the case of financial errors, materiality shall be deemed to be two percent (2%) or greater of the gross revenues of the Franchisee from activities performed under this agreement. Recovery of any overpayment will be negotiated on a case by case basis, either immediately or through the next rate setting evaluation. 45 Page 933 of 1192 Franchise Agreement-Solid Waste ARTICLE 13. ASSIGNMENT 13.1 Assignment Except as provided in Article 11, "City's Right to Perform Service", neither party shall assign its rights nor delegate or otherwise transfer its obligations under this Agreement to any other person without the prior written consent of the other party. Any such assignment made without the consent of the other party shall be void and the attempted assignment shall constitute a material breach of this Agreement. The City may, however, assign its rights and delegate its obligations under this Agreement to a joint powers authority without the prior written consent of Franchisee. For purposes of this section, "assignment" shall include, but not be limited to (1) a sale, exchange or other transfer to a third party of at lease fifty-one percent of Franchisee's assets dedicated to service under this Agreement; (2) a sale, exchange or other transfer to a third party, including other shareholders, of outstanding common stock of Franchisee which may result in a change of control of Franchisee; (3) any dissolution, reorganization, consolidation, merger, recapitalization, stock issuance or re-issuance, voting trust, pooling agreement, escrow arrangement, liquidation or other transaction which Franchisee or any of its shareholders is a party which results in a change of ownership or control of Franchisee; and (4) any assignment by operation; of law, including insolvency or bankruptcy, assignment for the benefit of creditors, writ of attachment for an execution being levied against this Agreement, appointment of a receiver taking possession of Franchisee's property, or transfer occurring in the probate proceeding; and (5) any combination of the foregoing (whether or not in related or contemporaneous transactions, which has the effect of any such transfer or change of ownership, or change of control of Franchisee. Franchisee acknowledges that this Agreement involves rendering a vital service to City residents and businesses, and that City has selected Franchisee to perform the services specified herein based on: 1. Franchisee's experience, skill and reputation for conducting its solid waste management operations in a safe, effective and responsible fashion, at all times in keeping with applicable environmental laws, regulations and best waste management practices, and 2. Franchisee's financial resources to maintain the required equipment and to support its indemnity obligations to City under this Agreement. City has relied on each of these factors, among others, in choosing Franchisee to perform the services to be rendered by Franchisee under this Agreement. 46 Page 934 of 1192 Franchise Agreement -Solid Waste If Franchisee requests Citys consideration of and consent to an assignment, City may deny or approve such request in its complete discretion. The City is concerned about the possibility that assignment could result in significant rate increases, as well as a change in the quality of service. Accordingly, the following standards have been set to ensure that assignment will result in continued quality service. In addition, the City reserves the right to solicit competitive bids for these services if the assignment results in a request by the assignee for rate increases that are higher than the inflationary index and do not reflect value changes in service standards. At a minimum, no request by Franchisee for consent to an assignment need be considered by City unless and until Franchisee has met the following requirements: A. Franchisee shall undertake to pay City its reasonable expenses for attorney's fees and investigate the suitability of any proposed assignee, and to review and finalize any documentation required as a condition for approving any such assignment; B. Franchisee shall furnish City with audited financial statements of the proposed assignee's operations for the immediately preceding three (3) operating years; C. Franchisee shall furnish City with satisfactory proof: 1. that the proposed assignee has at least ten (10) years of solid waste management experience on a scale equal to or exceeding the scale of operations conducted by Franchisee under this Agreement; 2. that in the last five (5) years, the proposed assignee or affiliates has not suffered any significant citations or other censure from any federal, state or local agency having jurisdictions over its waste management operations due to any significant failure to comply with state, federal or local environmental laws and that the assignee has provided City with a 9omplete list of such citations and censures; 3. that the proposed assignee has at all times conducted its operations in an environmentally safe and conscientious fashion; 4. that the proposed assignee conducts its solid waste management practices in accordance with sound waste management practices in full compliance with all federal, state and local laws regulating the collection and disposal of solid waste, including hazardous wastes; and, 5. of any other information required by City to ensure the proposed assignee can fulfill the terms of this Agreement in a timely, safe and effective manner. Under no circumstances shall the City be obliged to consider any proposed assignment by Franchisee, if Franchisee is in default at any time during the period of consideration. 47 Page 935 of 1192 Franchise Agreement • Solid Waste ARTICLE 14. OTHER AGREEMENTS OF THE PARTIES 14.1 Relationship of Parties The parties intend that Franchisee shall perfonn the services required by this Agreement as an independent Franchisee engaged by the City and not as an officer or employee of the City nor as a partner of a joint venture with the City. No employee or agent of Franchise shall be nor shall be deemed to be an employee or agent of the City. Except as expressly provided herein, Franchisee shall have the exclusive control over the manner and means of conducting the solid waste collection and disposal services performed under this Agreement, and over all persons performing such services. Franchisee shall be solely responsible for the acts and omissions of its officers, directors, employees, subcontractors, and agents. Neither Franchisee nor its officers, employees, subcontractors and agents shall obtain any rights to retirement benefits, workers compensation benefits, or any other benefits which accrue to City employees by virtue of their employment with the City. 14.2 Governing Law This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California. 14.3 Jurisdiction Any lawsuits between the parties arising out of this Agreement shall be brought and concluded in the courts ofthe State of California, which shall have exclusive jurisdiction over such lawsuits. With respect to venue, the parties agree that this Agreement is made in and will be performed in San Luis Obispo County. 14.4 Subcontracting Except as approved in writing by the City, Franchisee shall not enter into an agreement to have another Person perform Franchisee's duties of this Agreement. Franchisee shall undertake to pay City its reasonable expenses for attorney's fees and investigation costs necessary to investigate the suitability of any proposed subcontractor, and to review and finalize any documentation required as a condition for approving any such subcontracting agreement. 14.5 Interests of Franchisee Franchisee covenants that it presently has no interest, and shall not acquire any interest direct or indirect or otherwise, which would conflict in any manner or degree with the performance of the work hereunder. The Franchisee further covenants that, in the performance of this work, no subcontractor of any person having such an interest shall be employed. The Franchisee certifies that no one who has or will have any financial interest in performing this work is an officer or employee of the City. 14.6 Binding on Successors The provisions of this Agreement shall insure to the benefit of and be binding on the successors and permitted assigns of the parties. 14.7 Transition of Next Franchise 48 Page 936 of 1192 Franchise Agreement -Solid Waste At the point of transition to a new franchise, Franchisee will cooperate with the City and subsequent franchisee(s) to assist in an orderly transition which will include Franchisee providing route lists and billing information. Franchisee will not be obliged to sell collection vehicles, bins, and containers to the next franchise. The Franchisee, at its option, may enter into negotiations with the next franchisee to sell (in part or all) collection vehicles, bins and containers. 14.8 Parties in Interest Nothing in this Agreement, whether express or implied, is intended to confer any rights on any persons other than the parties to it and their representatives, successors and permitted assigns. 14.9 Waiver The waiver by either party of any breach or violation of any provision( s) of this Agreement shall not be deemed to be a waiver of any breach or violation of any other provision nor of any subsequent breach or violation of the same or any other provision. The subsequent acceptance by either party of any monies which become due hereunder shall not be deemed to -be a waiver of any pre-existing or concurrent breach or violation by the other party of any provision of this Agreement. 14.10 Condemnation The City fully reserves whatever rights it may have to acquire Franchisee's property utilized in the performance of this Agreement, by negotiated purchase or failing that.1 through the exercise of the right of eminent domain. 14.11 City Free to Negotiate with Third Parties The City may investigate, during the term and thereafter, all options for the collection, diversion, and disposal of solid waste after the expiration of the term. Without limiting the foregoing, the City may solicit proposals from Franchisee and from third parties for the provision of collection services, disposal services, recyclirig services, Solid waste collection and composting, and any combination thereof, and may negotiate and execute agreements for such services which will take effect upon the expiration or earlier termination under Section 11.1 of this Agreement. 14.12 Immigration Act of 1986 The Franchisee warrants on behalf of itself and all subcontractors engaged for the performance of this work that only persons authorized to work in the United States pursuant to the Immigration Reform and Control Act of 1986 and other applicable laws shall be employed in the performance of this work. 14.13 Non-Discrimination In the performance of this work, the Franchisee agrees that it will not engage in, nor permit such subcontractors as it may employ, to engage in discrimination in employment of persons because of age, race, color, sex, national origin or ancestry, sexual orientation, physical disability, mental condition or religion of such persons. 14.14 Public and Employee Safety Whenever the Franchisee's operations create a condition hazardous to the public or City employees, it shall, at its expense and without cost to the City, furnish, erect and maintain such fences, 49 Page 937 of 1192 Franchise Agreement • Solid Waste temporary railings, barricades, lights, signs and other devices, and take such other protective measures as are necessary to prevent accidents or damage or injury to the public and employees. 14.15 Recycled Products The City encourages the Franchisee's use of recycled products. 14.16 Notice All notices, demands, requests, proposals, approvals, consent, and other communications which this Agreement requires, authorizes or contemplates, except as provided in Section 12. l, shall be in writing and shall either be personally delivered to a representative of the parties at the address below or be deposited in the United States mail, first class postage prepaid, addressed as follows: Ifto City: If to Franchisee: Utilities Director City of San Luis Obispo 879 Morro Street San Luis Obispo, CA 93401 San Luis Garbage Company 2945 McMillan #136 San Luis Obispo, CA 93401 The address to which communications may be delivered may be changed from time to time by a notice given in accordance with this Section. Notice shall be deemed given on the day it is personally delivered or, if mailed, three days from the date it is deposited in the mail. 14.17 Representatives of the Parties References in this Agreement to the "City" shall mean the City Council and all actions to be taken by the City shall be taken by the City Council except as provided below. The City Council may delegate, in writing, authority to the City Manager, the Director of Utilities and/or to other City officials and may permit such officials, in tum, to delegate in writing some or all of such authority to subordinate officers. Franchisee may rely upon actions taken by such delegates if they are within the scope of the authority properly delegated to them. Franchisee shall, by the effective date, designate in writing a responsible officer who shall serve as the representative of Franchisee in all matters related to the Agreement and shall inform the City in writing of such designation and of any limitations upon his or her authority to bind Franchisee. The City may rely upon action taken by such designated representative as actions of Franchisee unless they are outside the scope of the authority delegated to him/her by Franchisee as communicated to the City. 14.18 Entire Agreement This Agreement represents the full and entire Agreement between the parties with respect to the 50 Page 938 of 1192 Franchise Agreement -Solid Waste matters covered herein. 14.19 Section Headings The article headings and section headings in this Agreement are for convenience and reference only and are not intended to be used in the construction of this Agreement nor to alter or affect any of its provisions. 14.20 References to Laws All references in this Agreement to laws shall be understood to include such laws as they may be subsequently amended or recodified, unless otherwise specifically provided. 14.21 Interpretation This Agreement shall be interpreted and construed reasonably and neither for nor against either party, regardless of the degree to which either party participated in its drafting. 14.22 Amendment This Agreement may not be modified or amended in any respect except by another Agreement in writing signed by the parties. 14.23 Severability If any non-material provision of this Agreement is for any reason deemed to be invalid and unenforceable, the invalidity or unenforceability of such provision shall not affect any of the remaining provisions of this Agreement which shall be enforced as if such invalid or unenforceable provision had not been contained herein. 14.24 Counterparts This Agreement may be executed in counterparts each of which ~hall be considered an original. 14.25 Use of "Will" The use of the word "will" shall be construed as interchangeable with the word "shall." 14.26 Surviving Provisions Paragraphs 7.11, 7.16, 8.5, 10.2, and other provisions of this Agreement so providing, shall survive termination of this Agreement. 14.27 Investigation Franchisee has relied on its own investigations in deciding to enter into this Agreement and has not reliyd upon any representations of the City, its Council members, officers, directors, employees or agents. 51 Page 939 of 1192 Franchise Agreement -Solid Waste By: CITY OF SAN LUIS OBISPO <D~~~ Mayor ATTEST: &:l« City Clerk 52 Page 940 of 1192 AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND SAN LUIS GARBAGE COMPANY For Collection and Disposal of Residential Recyclable Materials Within the City of San Luis Obispo This Agreement (Agreement) is made and entered into this 20th day of August, 2010, in the State of California by and between the City of San Luis Obispo, A Charter Municipal Corporation of the State of California, (City) and San Luis Garbage, a California corporation, (Contractor), for the Collection, processing and marketing of residential Recyclable Materials and the Performance of other services related to meeting the goals and requirements of the California Integrated Waste Management Act of 1989. RECITALS This Agreement is entered into with reference to the following facts and circumstances: 1. The Legislature of the State of California, by enactment of the California Integrated Waste Management Act of 1989 (AB 939) Division 30 of the California Public Resources Code, commencing with 40000, has declared that it is within the public interest to authorize and require local agencies to make adequate provisions for Recyclable Materials handling within their jurisdictions. AB 939 also requires a fifty percent (50%) reduction by the year 2000; and 2. The separate Collection, processing and marketing of Recyclable Materials for beneficial reuse or Recycling was selected in the City's Source Reduction and Recycling Element adopted June 1994, hereinafter referred to as the SRRE, as a means of meeting the 2000 State mandated diversion goals of AB 939; and 3. The City has entered into an exclusive franchise with San Luis Garbage Company of the Collection, transportation, processing, diversion and disposal of refuse from residential properties, Multi-Family Dwelling Units, institutional and commercial and industrial properties; and 4. The City has determined that an Agreement granted to a private company for the Collection, processing and marketing ofresidential Recyclable Materials is the most effective and efficient way to collect and divert residential Recyclable Materials within the City; and 5. The City declares its intention of maintaining reasonable rates and high quality service for the Collection, processing, and marketing of residential Recyclable Materials; and 6. The Contractor is responsible for arranging for residential Recyclable Materials Collection, processing and marketing services; and Page 941 of 1192 Residential Recycling Services Agreement 7. The Contractor has submitted a proposal to the City dated November I, 1995, and the City has selected the Contractor on the competitive advantages of that proposal over other proposals received by the City; and, 8. This Franchise Agreement has been developed by and is satisfactory to the parties. NOW, THEREFORE, for and in consideration of the mutual promises herein contained, it is hereby agreed by and between the City and Contractor as follows: 2 Page 942 of 1192 Residential Recycling Services Agreement ARTICLE I DEFINITIONS 1.1 "AB 939 means the California Integrated Waste Management Act of 1989, as it may be amended from time to time. 1.2 "Affiliate" means all businesses (including corporations, limited and general partnerships and sole proprietorships) which are directly or indirectly related to Contractor by virtue of direct or indirect common ownership interest or common management shall be deemed to be "Affiliated with" Contractor and included within the term "Affiliates with" Contractor and included within the "Affiliates" as used herein. An Affiliate shall include a business in which Contractor owns a direct or indirect ownership interest, a business which has a direct or indirect ownership interest in Contractor and/ or a business which is also owned, controlled or managed by any business or individual whieh has a direct or indirect ownership interest exists, the constructive ownership provisions of Section 318(a) of the Internal Revenue Code of 1986, as in effect on the date of this Agreement, shall apply; provided, however, that (i) "ten percent (10%)" shall be substituted for "fifty percent (50%)" in Section 318(a)(2)(C) and in Section 318(a)(3)(C) thereof; and (ii) Section 318(a)(5)(C) shall be disregarded. For purposes of determining ownership under this paragraph and constructive or indirect ownership under Section 318(a), ownership interest ofless than ten percent (10%) shall be determined on the basis of the percentage of voting interest or value which the ownership interest represents, whichever is greater. 1.3 "Agreement" means this residential Recycling Agreement (dated August 20, 2010, including all exhibits and attachments, and any amendments thereto) between City and Contractor for Collection, processing and marketing ofresidential Recyclable Materials and other services related to meeting the diversion goals and requirements of AB 939. 1.4 "Billings" means any and all statements of charges for services rendered by Contractor pursuant to this Agreement. 1.5 "California Integrated Waste Management Act of 1989" means Public Resources Code, 40,000 et. seq. 1.6 "City" means the City of San Luis Obispo, a Charter Municipal Corporation, and all the territory lying within the municipal boundaries of the City as presently existing or as such boundaries may be modified during the term, acting through the City Council or the City Manager. 1.7 "Collect" or "Collection" means to take physical possession, transport, and remove Recyclable Materials within and from the City. 3 Page 943 of 1192 Residential Recycling Services Agreement 1.8 "Commercially Generated Recyclable Materials" means Recyclable Materials generated at commercial and/or industrial property and separated by the Waste Generator for Collection and which are excluded from the scope of this Agreement as described in Article 4, Scope of Agreement. 1.9 "Container" means any bin, vessel, can or receptacle used for Collection and storing Recyclable Materials before removal. 1.10 "Contractor" means San Luis Garbage, a corporation organized and operating under the laws of the State of California, and its officers, directors, employees, agents, companies and subcontractors where applicable. 1.11 "Environmental Laws" means all federal and state statutes, county, local and City ordinances and regulations concerning public health, safety and the environment including, by way of example and not limitation, the comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC 9601 et seq.; the Resource Conservation and Recovery Act, 42 USC 6902 et seq.; the Federal Clean Water Act, 33 USC 1251 et seq.; the Toxic Substances Control Act, 15 USC 1601 et seq.; the Occupational Safety and Health Act, 29 USC 651 et seq.; the California Hazardous Waste Control Act, California Health and Safety Code 25100 et seq.; the California Toxic Substances Account Act, California Health and Safety Code 25300 et seq.; the Safe Drinking Water and Toxic Enforcement Act, California Health and Safety Code 25249.5 et seq.; as currently in force or as hereafter amended, and all rules and regulations promulgated there under. 1.12 "Facility" means any plant or site, owned or leased and maintained and/or operated or used by Contractor for the purposes of performing the duties to fulfill this Agreement. 1.13 "Fiscal Year" means the period commencing January 1 and concluding December 31 for Contractor. For City it means the period commencing July 1 of one year and concluding June 30 of the subsequent year. 1.14 "Hazardous Waste" means any discarded material or mixture of materials, which is toxic, corrosive, flammable, radioactive or which, because of its quantity, concentration, physical, chemical or infectious characteristics may do harm to either humans, animals or the environment, or as defined in Article 2, Chapter 6.5 25117 of the Health and Safety Code and Public Resources Code 40141. 1.15 "Materials Recovery Facility" means a permitted Facility where Solid Waste or Recyclable Materials are sorted or separated for the purposes of Recycling or reuse. 4 Page 944 of 1192 Residential Recycling Services Agreement 1.16 "Multifamily Dwelling Unit" means any Premises, other than a Single Family Dwelling Unit, used for residential purposes, irrespective of whether residence therein is transient, temporary or permanent. 1.17 "Owner" means the person holding the legal title to the real property constituting the Premises to which solid waste collection service is to be provided under this Agreement. 1.18 "Person" means any individual, firm, association, organization, partnership, corporation, business trust, joint venture, the United States, the State of California, the County of San Luis Obispo, local agencies, cities and special purpose districts. 1.19 "Premises" means any land or building in the City where Solid Waste is generated or accumulated. 1.20 "Recyclable Materials" means residential by-products or discards of economic value set aside, handled, packaged or offered for Collection in a manner different from Solid Waste. Including, but not limited to, aluminum, newspaper, clear and colored glass, tin and bi-metal, High density Polyethylene (HDPE), Polyethylene Terephthalate (PET), cardboard, chipboard, and mixed paper. 1.21 "Recycling" means the process of separating for Collection, Collecting, treating and/or reconstituting Recyclable Materials which would otherwise be discarded without receiving compensation or returning them to the economy in _the form ofraw materials for new, reused, or reconstituted products. The Collection, transfer, transportation or disposal of Recyclable Materials not intended for, or capable of, reuse is not Recycling. Recycling does not include the use of Recyclable Materials for conversion to energy. · 1.22 "Related Party Entity" means any Affiliate which has financial transactions with Contractor. 1.23 "Single Family Dwelling Unit" means each Premises used for or designated as a single family residential dwelling, including each unit of a duplex or triplex in all cases in which there is separate or individual Solid Waste Collection services. 1.24 "Solid Waste" means all putrescible and non-putrescible refuse, garbage, yard waste, construction and demolition debris, rubbish, and Recyclable Materials, and as otherwise defined in Public Resources Code 40191. 1.25 "Term" means the term of this Agreement, as provided for in Article 3. 5 Page 945 of 1192 Residential Recycling Services Agreement 1.26 "Transfer Station" includes those facilities used to receive solid wastes, temporarily store, · separate, convert, or otherwise process the materials in the solid wastes, or to transfer the solid wastes directly from smaller to larger vehicles for transport and those facilities used for transformations. 1.27 "Waste Generator" means any Person as defined by the Public Resources Code, whose act or process produces Solid Waste as defined in the Public Resources Code, or whose act first causes Solid Waste to become subject to regulation. 6 Page 946 of 1192 Residential Recycling Services Agreement ARTICLE2 GRANT AND ACCEPTANCE OF AGREEMENT 2.1 Grant and Acceptance of Agreement Subject of Section 3.4 (Conditions to the Effectiveness of Agreement), City hereby grants to Contractor an exclusive franchise to collect, process and market Recyclable Materials accumulating at Single Family and Multi-family dwelling units in the City that are offered for Collection to Contractor in accordance with this Agreement. Contractor hereby accepts the Agreement on the terms and conditions set forth in this Agreement. 2.2 Effective Date The effective date of this Agreement shall be August 20, 2010. 2.3 Term of Agreement The term of this Agreement shall be fifteen (15) years commencing at 12:01 a.m., August 20, · 2010, and expiring at midnight August 20, 2025, subject to extension as provided in Section 2.4 (Option to Extend). In the event of a change oflaw or technology which would render the Collection, processing and marketing services to be implemented under this Agreement obsolete, unnecessary, impractical, undesirable, or illegal, the City reserves the right to terminate this Agreement upon the giving of a six (6) month prior written notice of City's election to so terminate this Agreement. It is understood between Contractor and City that this Agreement is motivated by the passage of AB 939, and that subsequent legislation could make this Agreement unnecessary and/or adverse to the best interests of the City. In particular, City and Contractor acknowledge the possibility of future legislation changing the requirements of AB 939, and/or requiring a coordination of the collection of Solid Waste and Recyclable Materials. 2.4 Option to Extend The City shall have the sole option to extend this Agreement up to 24 months in periods of a least twelve (12) months each. If City elects to exercise this option, it shall give written notice not later than one hundred eighty (180) days prior to the initial termination date, or, if one extension has been exercised, one hundred eighty (180) days prior to the extended termination date. 2.5 Conditions to Effectiveness of Agreement 7 Page 947 of 1192 Residential Recycling Services Agreement The obligation of City to permit this Agreement to become effective and to perform its undertakings provided for in this Agreement is subject to the satisfaction of each and all of the conditions set out below, each of which may be waived in whole or in party by City. A. Accuracy of Representations. The representations and warranties made by Contractor throughout this Agreement are accurate, true and correct on and as of the effective date of this Agreement. B. Absence of Litigation. There is no litigation pending in any court challenging the award of this Agreement to Contractor or the execution of this Agreement or seeking to restrain or enjoin its performance. C. Furnishing of Insurance and Bonds. Contractor has furnished evidence of the insurance and bonds required by Article 10, Indemnification, insurance and Bond. D. Effectiveness of City Council Action. The City's Ordinance No. 1551, approving this Agreement, shall have become effective pursuant to California law on or prior to the effective date of this Agreement. 8 Page 948 of 1192 Residential Recycling Services Agreement ARTICLE3 TERMS OF AGREEMENT 3.1 Contractor Status Contractor is duly organized, validly existing and in good standing under the laws of the State of California and has the financial ability to perform its obligations set forth in this Agreement. Additionally, the Contractor has no suits or threatened suits which would impair the financial ability of the Contractor to perform its obligations under this Agreement, and that the entering into this Agreement by Contractor will not in any way constitute a breach of any other agreements entered into by Contractor with other parties, or constitute a violation of any law. 3.2 Contractor Authorization Contractor has the authority to enter into and perform its obligations under this Agreement. The Board of Directors of Contractor (or the shareholders, if necessary) have taken all actions required by law, its articles of incorporation, its bylaws or otherwise to authorize the execution of this Agreement. The persons signing this Agreement on behalf of Contractor have the authority to do so. 3.3 Compliance with Laws and Regulations Contractor shall comply with all existing and future City, county, state, and federal laws, including all Environmental Laws, with particular note of Article X of the City Charter and Chapter 8.04 of the Municipal Code. 3.4 Serve Without Interruption Contractor shall Collect, process and market residential Recyclable Materials throughout the term of this Agreement without interruption except as described in Section 12.4. 3.5 Permits and Licenses Contractor shall procure, and keep in full force and affect, all permits and licenses, pay all charges and fees, and give all notices as necessary. 3.6 Preservation of City Property Contractor shall pay to the City, on demand, the cost of all repairs to public property made necessary by any of the operations of Contractor under this Agreement. 9 Page 949 of 1192 4.1 Scope of Agreement Residential Recycling Services Agreement ARTICLE 4 SCOPE OF AGREEMENT Subject to Section 4.2 (Limitations to Scope), the Agreement granted to Contractor shall be exclusive for residential Recyclable Materials, except where otherwise precluded by law. 4.2 Limitations to Scope The Agreement for the Collection, processing and marketing of Recyclable Materials granted to Contractor shall be exclusive except as to the following categories of Recyclable Materials listed in this Section. The granting of this Agreement shall not preclude the categories of Recyclable Materials listed below from being delivered to and Collected and transported by others provided that nothing in this Agreement is intended to or shall be construed to excuse any person from obtaining any authorization from City which is otherwise required by law: A. Recyclable Materials separated from Solid Waste by the Waste Generator and for which Waste G~nerator sells or is otherwise compensated by a collector in a manner resulting in a net payment to the Waste Generator for such Recycling or related services. B. Recyclable Materials donated to a charitable, environmental or other non-profit organization. C. Recyclable Materials which are separated at any Premises and which are transported by the owner or occupant of such Premises (or by his/her full-time employee) to a Facility; D. Containers delivered for Recycling under the California Beverage Container Recycling Litter Reduction Act, 14500, et seq. California Public Resources Code; and, E. Recyclable Materials generated at non-residential premises are also excluded from this Agreement. Contractor ackno\Yledges and agrees that City may permit other Persons beside Contractor to Collect any or all types of the Recyclable Materials listed in this Section 4.2, without seeking or obtaining approval of Contractor under this Agreement. This Agreement to Collect, transport, process, and market Recyclable Materials shall be interpreted to be consistent with state and federallaws, now and during the term of the Agreement, and the scope of this Agreement shaU be limited by current and developing state and federal laws with regard to Recyclable Materials handling, Recyclable Materials flow control, and related doctrines. In the event that future interpretations of current law, enactment 10 Page 950 of 1192 Residential Recycling Services Agreement or developing legal trends limit the ability of the City to lawfully provide for the scope of services as specifically set forth herein, Contractor agrees that the scope of the Agreement will be limited to those services and materials which may be lawfully provided for under this Agreement, and that the City shall not be responsible for any lost profits and/or damages claimed by the Contractor as a result of changes in law. 4.3 Administration of Agreement The City Manager shall administer this Agreement and the City's Utilities Director shall supervise Contractor compliance with the Agreement terms and conditions. 4.4 Use of City Streets Such grant of Agreement shall give Contractor the right and privilege to operate Recycling Collection vehicles and equipment on such streets, public ways, rights-of-way, or easements of the City. 4.5 Annexation Contractor shall automatically extend all services herein described to any area annexed to the City, except that the City may permit a firm franchised by the County of San Luis Obispo before the annexation to continue service the area for a period not less than five (5) years. 4.6 City Right to Request Changes 4.6.1 General City may request Contractor to perform additional services (including new diversion programs, billing services, etc.) or modify the manner in which it performs existing services. Pilot programs and innovative services which may entail new Collection methods, different kinds of services and/or new requirements for Waste Generators are included among the kinds of changes which City may request. Contractor shall present, within 30 days of a request to do so by City, a proposal to provide additional or expanded diversion services pursuant to the terms of Section 4.6.2. Contractor shall be entitled to an adjustment in its compensation in accordance with Section 8.8 (Extraordinary Adjustments), for providing such additional or modified services. 4.6.2 New Diversion Programs Contractor shall present, within 30 days of a request to do so by City, a proposal. to provide additional or expanded diversion services. The proposal shall contain a complete description of the following: • Collection methodology to be employed (equipment, manpower, etc.) • Equipment to be utilized (vehicle number, types, capacity, age, etc.). • Labor requirements (number of employees by classification). • Type of Containers to be utilized. • Provision for program publicity/education/marketing. 11 Page 951 of 1192 Residential Recycling Services Agreement • A projection of the financial results of the program's operations for the remaining Term of the Agreement in a balance sheet and operating statement format including documentation of the key assumptions underlying the projections and the support for those assumptions. • Materials processing facility to be utilized. 4.6.3 City's Right to Acquire Services Contractor acknowledges and agrees that City may permit other Persons besides Contractor to provide additional Recycling services not otherwise contemplated under Section 4.6 (City's Right to Request Changes). If pursuant to Section 4.6.2 (New Diversion Programs), Contractor and City cannot agree on terms and conditions of such services in ninety (90) days from the date when City first requests a proposal from Contractor to perform such services, Contractor ackllowledges and agrees that City may permit Persons other than Contractor to provide such services. 4.6.4 Implementing new Services If I) Contractor is capable of performing or developing the ability to perform a requested service or modifying an existing service; 2) City has agreed to have Contractor provide such additional service in accordance with Contractor's proposal; and 3) an adjustment in Contractor's compensation has been requested but has not been agreed upon or implemented within 90 days, City may permit a third party to perform the request or modified existing service, and Contractor shall not be obligated, to perform such additional or modified service pursuant to the terms of Section 4.6.3. 4. 7 Ownership of Recyclable Materials Once Recyclable Materials are placed in Containers and properly presented for Collection, ownership and the right to possession shall transfer directly from the Generator to Contractor by operation of this Agreement. Contractor is hereby granted the right to retain, recycle, process, reuse, and otherwise use such Recyclable Materials or any part thereof, in any lawful fashion or for any lawful purpose consistent with the hierarchy and goals of AB 939. Subject to the provisions of this Agreement, Contractor shall have the right to retain any benefit resulting from its right to retain, recycle, process or reuse the Recyclable Materials which it Collects. Recyclable Materials or any part thereof, which are delivered to a Facility (processing Facility, transformation Facility, transfer station, or Material Recovery Facility) shall become the property of the owner or operator of the Facility(ies) once deposited there by Contractor. The City may obtain ownership or possession of Recyclable Materials placed for Collection upon written notice of its intent to do so, however, nothing in this Agreement shall be construed as giving rise to any inference that City has such ownership or possession unless such written notice has been given 'to Contractor. 12 Page 952 of 1192 Residential Recycling Services Agreement 5.1 General ARTICLE 5 DIRECT SERVICES The work to be done by Contractor pursuant to this Agreement shall include the furnishing of all labor, supervision, equipment, materials, supplies, and all other items necessary to perfonn the services required as presented in the Contractor's proposal incorporated in this document as Exhibit A. The enumeration of, and specification ofrequirements for, particular items oflabor or equipment shall not relieve Contractor of the duty to. furnish all others, as may be required, whether enumerated or not. The work to be done by Contractor pursuant to this Agreement shall be accomplished in a thorough and professional manner so that the residents within the City are provided reliable, courteous and high-quality Recycling Collection service at all times. The enumeration of, and specification of requirements for, particular aspects of service quality shall not relieve Contractor of the duty of accomplishing all other aspects in the manner provided in this Section, whether such aspects are enumerated elsewhere in the Agreement or not. 5.2 Recycling Services Contractor shall Collect and remove all Recyclable Materials placed in or adjacent to Containers at the designated Collection locations for Single Family Dwelling Units and Multifamily Dwelling Units. Recyclable Material Collection shall be a minimum of once each week on the same day of the week as Solid Waste Collection service. Contractor will notify Recycling customers of holiday Collection schedules. Should the Solid Waste collection day change, Contractor shall re-route Collections within sixty (60) days of the notification by the change in Solid Waste collection days to provide same day service. 5.3 Materials To Be Collected Materials to be collected are to include but not limited to: newspaper, aluminum, tin and bi- metal cans, clear and colored glass containers, High Density Polyethylene (HDPE), Polyethylene Terephthalate (PET), polystyrene, corrugated cardboard, and mixed paper (Including white and colored ledger paper, chipboard, junk mail, magazines and phone books). 5.4 Refusal to Provide Collection Services Contractor may refuse to Collect Recyclable Materials and shall not be obligated to continue to provide Recycling Container(s) to any participant in the Recycling program who, after reasonable warning, fails to properly sort and set out Recyclable Materials. Contractor shall report monthly to City any warning notices issued. 13 Page 953 of 1192 Residential Recycling Services Agreement 5.5 Marketing and Sale of Recyclable Materials Contractor shall be responsible of the marketing and sale of all Recyclable Materials Collected pursuant to this Agreement. Revenues from the sales of these materials shall be applied to the cost of service under the Agreement to reduce Contractor's compensation. Contractor shall sell all Recyclable Materials Collected pursuant to this Agreement at not less than fair market value as described in Article 8, Contractor's Compensation and Rates. 5.6 Operations 5.6.1 Schedules To preserve peace and quiet, no Recyclable Materials shall be Collected from or within two- hundred (200) feet ofresidential Premises between 6:30 P.M. and 6:30 A.M. on any day and such Recyclable Materials shall be Collected, Monday through Friday on the same day as Solid Waste collection. When the regularly scheduled Collection day falls on a holiday, Collection shall take place on the following regularly scheduled collection day. In the event the Contractor misses the collection of set out recyclables, the Contractor shall collect the missed pickups with one (1) business day of notification. 5.6.2 Vehicles A. General. Contractor shall provide a fleet of Collection vehicles sufficient in number and capacity to perform the work required by this Agreement and proposed in Exhibit "A" and in strict accordance with its terms. Contractor shall have available on Collection days sufficient back-up vehicles in order to respond to complaints and emergencies. The fleet shall be maintained according to the requirements of Municipal Code 8.04.030. B. Specifications. All vehicles used by Contractor in providing Recyclable Materials Collection services under this Agreement shall comply with all federal, state, and local requirements for such vehicles as they now exist or may be amended in the future, and be registered with the California Department of Motor Vehicles. All such vehicles shall have water-tight bodies designed to prevent leakage, spillage or overflow. All such vehicles shall comply with U.S. Environmental Protection Agency noise emission regulations and other applicable noise control regulations. C. Condition 1) Contractor shall maintain all of its properties, facilities, and equipment used in providing service under this Agreement in a safe, neat, clean and operable condition at all times. 2) Contractor shall inspect each vehicle daily to ensure that all equipment is operating properly. Vehicles which are not operating properly and represent a safety hazard shall 14 Page 954 of 1192 Residential Recycling Services Agreement be taken out of service until they are repaired and do operate properly and safely .. Contractor shall perform all scheduled maintenance functions in accordance with the manufacturer's specifications and schedule. ·Contractor shall keep accurate records of all vehicle maintenance, recorded according to date and mileage and shall make such records available to City upon request. 3) Contractor shall repair, or arrange for the repair of, all of its vehicles and equipment for which repairs are needed because of accident, breakdown or any other cause so as to maintain all equipment in a safe and operable condition. Contractor shall maintain accurate records of repair, which shall include the date/mileage, nature of repair and the signature of a maintenance supervisor that the repair has been properly performed. 4) Contractor shall arrange all vehicles and other equipment in safe and secure location(s) in accordance with all applicable zoning regulations. D. Vehicle Identification. Each truck shall display in a prominent place a sign as required in Municipal Code section 8.04.090. E. Operation. Vehicles shall be operated in compliance with the California Vehicle Code, and all applicable safety and local ordinances. Contractor shall not load vehicles in excess of the manufacturer's recommendations or limitations imposed by state or local weight restrictions on vehicles. 5.6.3 Recycling Containers Contractor shall supply each Single Family Dwelling Unit with a container in size consistent with the City approved curbside recycling collection program. Contractor shall supply each multi-family complex with the appropriate type of container to adequately service the needs of the complex per the solid waste handling location. Containers shall be identified for Recyclable Materials only. Contractor agrees to provide additional appropriate Containers, as required. City and Contractor acknowledge that from time to time, a customer may damage or destroy a Container. City and Contractor also acknowledge that from time to time Containers may be stolen from the curb or damaged due to normal use. When notified of such occurrence, Contractor shall replace the Container, at no charge to the customer. 5.6.4 Litter Abatement Contractor shall use due care to prevent Recyclable Materials from being spilled or scattered during the Collection or transportation process. If any Recyclable Materials are spilled during Collection, Contractor shall promptly clean up all spilled materials. Each collection vehicle shall carry a broom and shovel at all times for this purpose. 15 Page 955 of 1192 Residential Recycling Services Agreement 5.6.5 Personnel A. General. Contractor shall furnish as presented in Exhibit "A" such qualified drivers, mechanical, supervisory, clerical, and other personnel as may be necessary to provide services required by this Agreement in a safe and efficient manner. B. Identification. Contractor shall ensure that while on duty each Collection worker wears a clean uniform which displays the Contractor's company name and the worker's name or identification number. C. Fees & Gratuities. Contractor shall not, nor shall it permit any agent, employee, or subcontractors employed by it to request, solicit, demand, or accept, either directly or indirectly any compensation or gratuity for any services performed under this Agreement except as provided in Article 8 of this Agreement. D. Training. All drivers shall be trained and qualified in the operation of vehicles they operate and must possess a valid license, of the appropriate class, issued by the California Department of Motor Vehicles. Contractor shall provide adequate operations, health and safety training, and Hazardous Waste identification and handling training for all of its employees who use or operate equipment or who are otherwise directly involved in Collection or other related operations. E. Customer Courtesy. Contractor shall train its employees in customer courtesy, shall prohibit the use of loud or profane language, and shall instruct Collection crews to perform the work quietly. Contractor shall use its best efforts to ensure that all employees present a neat appearance and conduct themselves in a courteous mariner. If any employee is found to be discourteous or not to be performing services in the manner required by this Agreement, Contractor shall take all necessary corrective measures. If City has notified Contractor of a complaint related to a discourteous or improper behavior, Contractor will reassign the employee to duties not entailing contact with the public while Contractor is pursuing its investigation and corrective action process. 5.7 Material Processing 5.7.1 Receipt of Solid Waste Commencing August 6, 2010, the Contractor shall have in place or have made arrangements for a Materials Recovery Facility to receive and accept all deliveries of Recyclable Materials 16 Page 956 of 1192 Residential Recycling Services Agreement generated in the city. Contractor has designated the Tank Farm Road facility to be utilized as of the Effective date. 5.7.2 Status of Materials Recovery Facility Any Materials Recovery Facility used by contractor must be designed and constructed in accordance with all applicable state and local laws (e.g., CEQA, California Code of Regulations, etc). The Materials Recovery Facility must have all permits from federal, state, regional, county and city agencies necessary for it to operate as a Material Recovery Facility and must be in full regulatory compliance with all such permits. The selected Materials Recovery Facility must be authorized to accept, under its existing permit, and have sufficient uncommitted capacity to accept, all Recyclable Materials delivered to it by, or on behalf of, the City for the term of this Agreement. Contractor shall immediately notify City of any notice of breach or default received from Materials Recovery Facility. 5.7.3 Alternative Processing Facility If Contractor becomes unable to deliver the City's Recyclable Materials to the Materials Recovery Facility due to causes within its control and which could have been avoided by the exercise of due care, the Contractor shall arrange for it to be accepted at another Materials · Recovery Facility, in which case Contractor shall pay for any increased transportation costs, any differences in the fees charged at such Materials Recovery Facility and the fees then in effect under this Agreement. If Contractor's inability to deliver the City's Recyclable Materials to the Materials Recovery Facility is not due to causes within its control or which could have been avoided by the exercise of due care, then Contractor shall propose alternative Material Recovery Facilities including all related costs and City shall select the alternative to be used. 5.7.4 Disposition of Unauthorized Waste Contractor shall ensure that procedures to identify and reject materials delivered to the Materials Recovery Facility which are Hazardous Waste, or which otherwise may not be legally accepted at the Materials Recovery Facility under their permits, are in place. Contractor may, in the course of implementing such procedures, refuse to accept Recyclable Materials deposited from the City if they constitute Hazardous Waste, or otherwise may not be legally accepted at the Materials Recovery Facility, and Contractor shall be solely responsible of the materials which are accepted. If Contractor discovers Hazardous Waste, or other material which may not be legally accepted, among materials which it has accepted, it shall dispose of such waste at its own expense. Contractor may pursue all legal rights and remedies it may have against the Waste Generator(s) of such Solid Waste, ifthe Waste Generator(s) can be identified. 5.8 Disposal 17 Page 957 of 1192 Residential Recycling Services Agreement Contractor shall ensure that the residual Solid Waste from the City's Recyclable Materials delivered to the Materials Recovery Facility by the Contractor are disposed of at a permitted disposal site in full regulatory compliance. 5.9 Implementation Plan The parties recognize that substantial planning will be required in order to assure an orderly initiation of Residential Curbside Recycling Collection services on August 6, 2010, To that end, City has required Contractor to submit, as part of its proposal, a detailed implementation plan addressing, among other things, the steps Contractor will take and the schedule on which it will take them, to prepare for such an orderly initiation of service. The implementation plan shall cover Contractor's schedule for acquiring necessary equipment, personnel, storage and maintenance facilities, administrative offices, customer relations materials (including Collection schedules, route maps, billing forms, complaint forms, service request forms, etc.). Contractor agrees to adhere strictly to the implementation plan. The implementation shall be subject to the City's review and approval. Failure to adhere to the implementation schedule will constitute a breach of this Agreement, and, if incurred, an event of default, under Article 12, Default, Remedies, and Liquidated Damages. 18 Page 958 of 1192 . 6.1 Billing Residential Recycling Services Agreement ARTICLE6 OTHER SERVICES The City Council shall establish an integrated rate for the Green Waste, Recycling and Solid Waste services. Contractor shall bill and collect for its services at no more nor less than these rates. Contractor's billing plan, including billing frequency, and format shall be subject to approval by City, and City shall have the right to revise the billing format to itemize certain charges. The City may also direct Contractor to insert mailers relating to contractor provided services with the billings and shall be responsible for all labor costs with respect to the mailing inserts. The mailers must fit in standard envelopes and not increase the required postage. The City will provide not less than thirty (30) days notice to Contractor prior to the mailing date of any proposed mailers to permit Contractor to make appropriate arrangements for inclusion of City materials. Contractor shall maintain copies of said billings and receipts, each in chronological order, for a period of three (3) years after the date of service for inspection by the City. Contractor may, at its option, maintain those records in computer form, on microfiche, or in any other manner, provided that the records cannot be altered, and can be preserved and retrieved for inspection and verification in a timely manner. The owner of occupied Premises shall be responsible and liable for paying the Recycling fees for that property. · 6.2 Collection of Bills from Delinquent Customers Once each year, prior to a date established by the City, Contractor may take actions pursuant to Chapter 8.04 of the Municipal Code to collect delinquent accounts. 6.3 Periodic Performance or Billing Audit The City shall have the right to periodically, not less than annually, request a performance audit or billing audit be completed by the Contractor, the City or an independent third party. The City shall be entitled to select the type of consultant that it deems qualified to conduct said audits. The cost of such audits will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.5. 6.4 Customer Service 6.4.1 Office Office hours shall be, at a minimum, from 8:00 AM. to 5:00 P.M., Monday through Friday, exclusive of holidays. A responsible and qualified representative of Contractor shall be 19 Page 959 of 1192 Residential Recycling Services Agreement available during office hours for communication with the public. Telephone numbers shall either be a local or a toll free call to residents and businesses of the City. Contractor's telephone system shall be adequate to handle the volume of calls typically experienced on the busiest days. Contractor shall also maintain a local or toll free telephone number for use during other than normal business hours. Contractor shall have a representative, answering or message providing/receiving (voice-mail) service available at said after hours telephone number. 6.4.2 Complaint documentation All service complaints related to Recyclable Materials Collection shall be directed to Contractor. Daily logs of complaints concerning Coll~ction of Recyclable Materials shall be retained for a minimum of twenty-four (24) months and shall be available to City at all times during this Agreement upon twenty-four (24) hour notice. Contractor shall log all complaints received orally or in writing and said log shall include the date and time the complaint was received, name, address and telephone number of complainant to the extent that such information is provided by complainant, description of complaint, employee recording complaint and the action taken by Contractor to respond to and remedy complaint. All complaints received shall be responded to within twenty four (24) working hours of receipt. · All customer service records and logs kept by Contractor shall be available at all times during this Agreement to City upon twenty four (24) hour notice and at no cost to City. City shall, at any time during regular Contractor business hours, have access to Contractor's customer service department for purposes of monitoring the quality of customer service or researching customer complaints assessing liquidated damages or other matters related to Contractor's performance under this Agreement. 6.4.3 Resolution of Customer Complaints Contractor shall notify customers of this complaint procedure at the time customers apply for or are provided service, and subsequently, annually. A customer dissatisfied with Contractor's decision regarding a complaint may ask the City to review the complaint. The City's Utilities Director shall determine if the customer's complaint is justified, and if so, what remedy, if any shall be provided. The remedy under this Section shall be limited to a rebate of customer charges related to the period of breach of any of the Terms of this Agreement. Any resolution of these customer complaints shall not affect the City's rights to liquidated damages. 6.4.4 Government Liaison 20 Page 960 of 1192 Residential Recycling Services Agreement Contractor shall designate in writing a "Government Liaison" who shall be responsible for working with the City Manager, Utilities Director and/or one of their designated representative(s) to resolve customer complaints. 6.5 Education and Public Awareness Contractor acknowledges and agrees that education and public awareness are critical, key and essential elements of any efforts to achieve AB 939 requirements and has submitted a plan to this effect in Exhibit "A". Accordingly, Contractor agrees to cooperate with City in exploring opportunities to expand public and customer knowledge concerning needs and methods to reduce, reuse and recycle Solid Waste and "to cooperate fully with City in this regard. Contractor shall perform all necessary public education .activities related to the Recycling services as presented in Exhibit "A". This shall include, but not be limited to, annual mailings to all customers explaining the recycling program, mailings prior to the start of services, flyers handed out with Container delivery and follow-up mailings or handouts related to the collection of new materials. All Public education materials shall be approved in advance by the City. At the direction of the City Manager and/or Utilities Director, Contractor shall participate in and promote Recycling and other diversion techniques at community events and local activities. Such participation would normally include providing, without cost to the City, educational and publicity information promoting the goals of the City's AB 939 programs. 21 Page 961 of 1192 7.1 Franchise Fee Residential Recycling Services Agreement ARTICLE7 PAYMENTS TO CITY In consideration of the exclusive franchise provided for in this Agreement, Contractor shall pay the City ten percent (10%) of its gross revenues for residential recycling services; provided, however, that such franchise fee shall not exceed the costs incurred by the City to deliver service to properties. Such franchise fee shall be a "pass-through" expense for purposes of rate review. 7.2 AB 939 Fee If requested by City, Contractor shall pay an AB 939 fee, to be specified annually by the City. All AB 939 fees paid to the City shall be considered a pass through cost for purposes of rate setting. 7 .3 Business License Tax Contractor shall pay each annual business license tax. 7.4 Other Fees The City shall reserve the right to set "Other" Fees, as it deems necessary. These expenses will be determined and a fee designed to reimburse the City. Such fees shall be set annually by City resolution and may be considered a pass through cost for purposes of rate setting. 7.5 Time and Method of Payment If ContraCtor is directed to pay an AB 939, Franchise Fee or "Other" Fee, it shall do so on or before the fifteenth (15th) day of each month during the Term. Contractor shall remit to City a sum of money equal to the designated percentage of the gross revenue, including Recyclable Materials revenue, or a flat monthly fee as determined by the City. If any fees are not paid on or before the fifteenth (15th) day of any month, Contractor shall pay to City a late payment penalty in an amount equal to one percent (1 %) 'of the amount owing for that month. Contractor shall pay an additional late payment penalty of one percent (1 %) owing on any unpaid balance for each following thirty (30) day period the fee remains unpaid. Late payment penalty amounts shall not be included in any revenue requirement. 7.6 Adjustment of Fees The City may adjust the amount of fees annually. Such adjustment shall be reflected in the rates that the Contractor is allowed to charge and collect from customers. 7.7 Review of Fee Payments The City, or its agent, reserves the right to annually perform an independent review of fee payments, to verify that fees are being paid in accordance with Agreement. The cost of such 22 Page 962 of 1192 Residential Recycling Services Agreement reviews will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.5. 23 Page 963 of 1192 Residential Recycling Services Agreement ARTICLES CONTRACTOR'S COMPENSATION AND RATES 8.1 General Contractor's compensation provided for in this Article shall be the full, entire and complete compensation due to Contractor pursuant to this Agreement for all labor, equipment, materials and supplies, taxes, insurance, bonds, overhead, profit and all other things necessary to perform all the services required by this Agreement in the manner and at the times prescribed. The Contractor does not look to the City for payment of any sums under this Agreement. Contractor will perform the responsibilities and duties described in this Agreement in consideration of the right to charge and collect from customers for services rendered at rates fixed by the City from time-to-time and the right to sell compost generated from Green Waste. The City shall have the right to structure those rates as it deems appropriate so long as the revenues forecasted to be received by Contractor from charging such rates can reasonably be expected to generate sufficient revenues to provide for Contractor's compensation. 8.2 Initial Rates Contractor will submit required financial documentation for this service as part of an integrated solid waste rate application. The rate application will comply with the guidelines set forth in the City's "Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates". The portion of the rate attributable to this service shall be identified as part of the Council rate-setting process but will not be separated from the integrated rate. 8.3 Subsequent Rates Contractor may request rate revisions in future solid waste rate applications. The rate application must comply with the "City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates". 8.4 Right to Perform Rate Reviews City reserves the right to perform, or have a qualified third party perform, a detailed review of Contractor's expenses and revenues for the purposes of adjusting rates. The results of this detailed rate review will be used to adjust rates, and the Contractor's calculated revenue requirements will be used the following year to adjust rates according to Section 8.3 Contractor's Compensation for subsequent Rate Years. 8.5 Extraordinary Adjustments Contractor or City may request an adjustment to rates at times other than that required in Section 8.3 for unusual changes in the cost of providing service under this Agreement. Such changes may include, but are not limited to, changes in laws, ordinances, or regulations, and 24 Page 964 of 1192 Residential Recycling Services Agreement significant changes in Contractor's workload due to new residential or commercial development. However, when an extraordinary adjustment is requested, such adjustment shall consider changes in all costs and revenues from Contractor's proposed revenue requirement. For each such request, Contractor shall prepare a schedule comparing the original proposed costs and revenues by line item to the then current costs and revenues, including an estimates of the cost impact of the change, using an operating ratio of 93%, applied to Contractor's costs as calculated in Contractor's proposed revenue requirement. Such request shall be prepared in a form acceptable to City with support for assumptions made by Contractor in preparing the estimate. Contractor and City shall negotiate a mutually acceptable adjustment amount. 25 Page 965 of 1192 Residential Recycling Services Agreement ARTICLE9 RECORDS, REPORTS AND INFORMATION, STUDIES AND HEARING REQUIREMENTS 9.1 Records 9.1.1 General Contractor shall maintain records required to conduct its operations, to support requests it may make to City, and to respond to requests from City in the conduct of City business. Additionally, the Contractor shall also keep and maintain records reasonably necessary for audits, as required by this Agreement, and shall keep and maintain all records reasonably necessary to develop reports and financial statements required with respect to this Agreement. Adequate record security shall be maintained to preserve records from events that can be reasonably anticipated such as a fire, theft and earthquake. Electronically maintained data/records shall be protected and backed up. 9.1.2 Financial Records Financial records shall separate all records related to the services performed under this Agreement from any and all other types of businesses and operations conducted by the Contractor. 9.1.3 General Records City approved records (format) shall be maintained for the City separate from other jurisdictions relating to: • Customer services; • Weight of Recyclable Materials by type of materials. • Routes; • Facilities, inventory of equipment and personnel used; • Facilities and equipment operations, maintenance and repair; • Processing, marketing and sale of Recyclable Materials includ\ng name of the purchaser, the date of sales transaction, processing cost per ton, quantity purchased, value per ton and net sales records; • Complaints; and, • Missed pick ups. Contractor shall maintain records of all Recyclable Materials Collected in the City for the period of this Agreement. In the event Contractor discontinues providing Recycling services to City, Contractor shall provide all records of all Recyclable Materials Collected in City to City within thirty (30) days of discontinuing service. Records shall be in chronological and organized form and readily and easily interpreted. 26 Page 966 of 1192 Residential Recycling Services Agreement 9.2 Reports 9.2.1 Report Formats and Schedule Records shall be maintained in forms and by methods that facilitate flexible use of data contained in them to structure reports, as needed. Contractor may propose report formats that are responsive to the objectives and audiences for each report. The format of each report shall be approved by the City. Monthly reports shall be submitted within twenty (20) calendar days after the end of the month. being reported. Annual reports shall be submitted before September 30th, for the previous reporting year. 9.2.2 Monthly Reports The information listed shall be the minimum reported: • Recyclable Materials collected, sorted by type of Generator, in tons; by month, and cumulative for report year. • Complaint summary, for month and cumulative for report year. • Narrative summary assessment of problems encountered and actions taken with recommendations to City for improvement. • Number of accounts by category for each month of reporting year. • Participation rates. • Recyclable Materials Container distribution. • Materials Sales. Sales statement showing: kinds of material, quantity sold (in tons), value per ton, and net sales. The City may designate any additional information that it wishes provided in the monthly reports. 9.2.3 Annual Report The Annual Report is to be essentially in the form and content of the monthly reports. In addition, Contractor's annual audited financial reports/statements, with the operations related to the City services segregated, shall be included. The annual report shall also include a complete inventory of equipment used to provide all services. Financial statements shall include a supplemental schedule combining Contractor's results of operations, separating the specific revenues and expenses, including detailed information with respect to general overhead claimed by the Contractor, in connection with the operations provided for in this Agreement from others included in such financial statements. The financial statements, supplemental schedule, management letter and footnotes shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP) and audited, in accordance with Generally Accepted Auditing Standards (GAAS) by a certified public accountant (CPA) licensed (in good standing) to practice public accounting in the State of California as 27 Page 967 of 1192 Residential Recycling Services Agreement determined by the State of California Department of Consumer Affairs Board of Accountancy. The CPA opinion on Contractor's annual financial statements and supplemental schedule shall be unqualified, except as to uncertainties for which the ultimate outcome cannot be determined by the date of the CP A's opinion. 9.3 Right to Inspect Records City shall have the right to inspect or review the payroll tax reports, specific documents or records required expressly or by inference pursuant to this Agreement, or any other similar records or reports of Contractor that City shall deem, in its sole discretion, necessary to evaluate annual reports, compensation applications provided for in this Agreement and Contractor's performance provided for in this Agreement. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the records inspection. The cost of such inspection or review will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.5. 9.3.1 Right to Review Basis for Landfill Tipping Fee Increases The Contractor shall provide to the City a copy of Cold Canyon Landfill's request for an increase in tipping fees no later than five (5) days following submittal of said request to the County of San Luis Obispo. Additionally, the Contractor shall notify the City of the action taken by the Board of Supervisors regarding said request within five (5) days following said action, including letter to the Board of Supervisors and related executed resolution. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the review. The cost of such inspection or review will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.5. 9.4 Waste Generation/Characterization Studies Contractor acknowledges that the city must perform Solid Waste generation and disposal characterization studies periodically to comply with AB 939 requirements. Contractor agrees to participate and cooperate with City and its agents to accomplish studies and data collection and prepare reports as needed to determine weights and volumes of Solid Waste generated, diverted, disposed, transformed, or otherwise handled/processed to satisfy AB 939 requirements. 9 .5 Performance Hearing The City maintains the right to hold a public hearing at any time, not more than once each year, at which the Contractor shall be present and shall participate, to review its services and performance. The purpose of the hearing is to provide for a discussion and review of technological, economic, and regulatory changes in order to achieve a continuing, advanced Solid Waste management system; and to ensure customer service quality and any other areas 28 Page 968 of 1192 Residential Recycling Services Agreement that may be addressed regarding services are being provided with adequate quality, efficiency and economy. Sixty (60) days after receiving notice from City of a Performance Hearing, Contractor shall, at a minimum, submit a report to City indicating (1) changes recommended and/or new services to improve City's ability to meet the goals of AB 939 and to contain costs and minimize impacts on rates; and (2) any specific plans for provision of changed or new services by Contractor. 29 Page 969 of 1192 10.1 Indemnification Residential Recycling Services Agreement ARTICLE 10 INDEMNIFICATION, INSURANCE AND BOND Contractor shall indemnify and hold harmless City, its officers, Directors, employees, and agents from and against any and all loss, liability, penalty, forfeiture, claim, demand, action proceeding or suit of any and every kind and description (including, but not limited to, injury to and death of any Person and damage to property, or for contribution or indemnity claimed by third parties) to the extent arising or resulting from and in any way connected with (1) the negligence or willful misconduct of Contractor, its officers, employees agents and/or sub Contractors in performing services under this Agreement; (2) the failure of Contractor, its officers, employees, agents and/or subcontractors to comply in all respects with the provisions of this Agreement, applicable laws (including, without limitation, the Environmental Laws) and regulations, and/or applicable permits and licenses; (3) the acts of Contractor, its officers, employees, agents and/or subcontractors in performing services under this Agreement for which strict liability is Imposed by law (including, without limitation, the Environmental Laws). Contractor further agrees to and shall, upon demand of City, at Contractor's sole cost and expense, defend (with attorneys acceptable to City) the City, its officers, directors, employees, and agents against any claims, actions, suits or other proceedings, whether judicial, quasi- judicial or administrative in nature, arising or resulting from any events described in the immediately preceding paragraph to the extent arising from or related to Contractor's alleged or actual violations of Proposition 218 and/or its implementing legislation,. Contractor's duty to indemnify and defend shall survive the expiration or earlier termination of this Agreement. 10.2 Landfill Diversion The Contractor acknowledges that the City has adopted a SRRE which selects a single family curbside Recycling program as a means of diverting an estimated 3,643 tons in 1995 and 3,903 tons per year by the year 2000, and a multi-family curbside Recycling program as a means of diverting an estimated 308 tons in 1995 and 330 tons per year by the year 2000. It is therefore of foremost importance that the Recyclable Materials collected under this Agreement be converted into a functional and marketable product in order that the materials may be diverted from landfill disposal in compliance with the City's SRRE, and AB 939. The Contractor shall therefore use commercially reasonable efforts ensure that the processing method used shall, at all times, meet the intent of the City's SRRE and AB 939. Should the Contractor find it necessary to utilize another method of processing in order to meet the intent of the SRRE and AB 939, the City shall be given an opportunity to make its own determination as to the suitability and cost-effectiveness of such process and shall approve such process in writing. The City shall have the right to terminate this Agreement upon the giving of a six (6) month 30 Page 970 of 1192 Residential Recycling Services Agreement prior written notice to Contractor should it be determined that the Recycling program being implemented and/or proposed under this Agreement is ineffective in meeting the City's diversion goals and objectives. Upon termination, the Contractor shall be entitled only to revenues less expenses incurred to that date. All revenues received thereafter, including from Recyclable Materials sales, shall be the property of the City unless otherwise agreed. 10.3 AB 939 Indemnification Contractor agrees to indemnify and hold harmless City, its officers, Directors, employees, and agents from and against all fines and/or penalties imposed by the California Integrated Waste Management Board in the event the source reduction and Recycling goals or any other requirement of AB 939 are not met by City with respect to the waste stream Collected under this Agreement but only to the extent that such failure is due to the failure of Contractor to meet its obligations under this Agreement or for delays in providing information that prevents City from submitting reports required by AB 939 in a timely manner. 10.4 Insurance A. Minimum Limits of Insurance. Contractor shall maintain limits no less than: 1. Comprehensive General Liability: One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, Personal injury and property damage. 2. Automobile Liability: One Million Dollars ($1,000,000) combined single limit per accident for bodily injury and property damage. 3. Workers' Compensation and Employers Liability: Workers' compensation limits as required by the Labor Code of the State of California and Employers Liability limits of $1,000,000 per accident. B. Deductibles and Self-Insured Retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officials, directors and employees; or Contractor shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. C. Other Insurance Provisions. The policies are to contain, or be endorsed to contain, the following provisions: 1. General Liability and Automobile Liability Coverages a) The City, its officials, employees, and directors are to be covered as insured as respects:. liability arising out of activities performed by or on behalf of Contractor; products and completed operations of Contractor; Premises owned, leased or used by Contractor; or automobiles owned, leased, hired or borrowed by Contractor. The coverage shall contain no special limitations on the scope of protection afforded to the City, its officials, or employees. 31 Page 971 of 1192 Residential Recycling Services Agreement b) Contractor's insurance coverage shall be primary insurance as respects City, its officials, directors, and employees. Any insurance or self-insurance maintained by City, its officials, employees or volunteers shall be excess of Contractorts insurance and shall not contribute with it. c) Any failure to comply with reporting provisions of the policies shall not affect coverage provided to City, its officials, or employees. d) Coverage shall state that Contractor's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 2. Workers' Compensation and Employers Liability Coverage -The insurer shall agree · to waive all rights of subrogation against City, its officials, employees and volunteers for losses arising from work performed by Contractor for City. 3. All Coverages -Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or limits except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to City. D. Acceptability of Insurers. The insurance policies required by this Section shall be issued by an insurance contractor or companies admitted to do business in the State of California subject to the jurisdiction of the California Insurance Commissioner and with a rating in the most recent edition of Best's Insurance Reports of size category VII or larger and a rating classification of A or better. E. Verification of Coverage. Contractor shall furnish City with certificates of insurance and with original endorsements affecting coverage required by this clause. The certificates and endorsements for each insurance policy are to be signed by a Person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on forms provided by or acceptable to City and are to be received and approved by City before work commences. City reserves the right to require complete, certified copies of all required insurance policies, at any time. 10.5 Faithful Performance Bond Simultaneously with the execution of this Agreement, Contractor shall file with City surety bond, payable to City, securing Contractor's faithful performance of its obligations under this Agreement. The bond shall be in the amount of 125% of the total annual contract price 32 Page 972 of 1192 Residential Recycling Services Agreement guaranteeing the faithful performance of the contract, including any attorney's fees or other collection costs. 33 Page 973 of 1192 Residential Recycling Services Agreement ARTICLE 11 CITY'S RIGHT TO PERFORM SERVICE 11.1 General In the event that Contractor, for any reason whatsoever, fails, refuses or is unable to Collect, transport, process or market any or all recyclable Materials which it is required by this Agreement to Collect, process and market, at the time and in the manner provided in this Agreement, for a period of more than seven (7) calendar days, and if, as a result thereof, Recyclable Materials should accumulate in the City to such an extent, in such a manner, or for such a time that the City Manager should find that such accumulation endangers or menaces the public health, safety or welfare, then City shall have the right, but not the obligation, upon twenty-four (24) hour prior written notice to Contractor during the period of such emergency as determined by the City Manager, (1) to perform, or cause to be performed, such services itself with_ its own or other personnel without liability to Contractor; and/or (2) to take possession of any or all of Contractor's land, equipment and other property to Collect, transport, process and/or market any Recyclable Materials generated within the City which Contractor would otherwise be obligated to Collect, transport, process or market pursuant to this Agreement. In the event the City takes possession of the Contractor's equipment and other property, the City shall be entitled to have another contractor operate such equipment and property under City direction. Additionally, in the event the City takes possession of the Contractor's equipment and other property, the City does not guarantee repair of existing problems with equipment and facilities. Notice of Contractor's failure, refusal or neglect to Collect, transport, process or market Recyclable Materials may be given orally by telephone to Contractor at its principal office and shall be effective immediately. Written confirmation of such oral notification shall be sent to Contractor within twenty-four (24) hours of the oral notification. Contractor further agrees that in such event: • It will take direction from City to effect the transfer of possession of property to City for City's use. • It will, if City so requests, keep in good repair and condition all of such property, provide all motor vehicles with fuel, oil and other service, and provide such other service 'as may be necessary to maintain said property in operational condition. • City may immediately engage all or any personnel necessary or useful for the Collection, transportation, processing and/or marketing of Recyclable Materials, including, if City so desires, employees previously or then employed by Contractor, Contractor further agrees, if City so requests, to furnish City the services of any or all management or office personnel employed by Contractor whose services are necessary 34 Page 974 of 1192 Residential Recycling Services Agreement or useful for Recyclable Materials Collection, Transportation, processing and marketing operations and for the billing and collection of fees for these services. City agrees that it assumes complete responsibility for the proper and normal use of such equipment and facilities while in its possession. If the interruption or discontinuance in service is caused by any of the reasons listed in Section 12.4 (Excuse From Performance), City shall pay to Contractor the reasonable rental value of the equipment and facilities, possession of which is taken by City, for the period of City's possession, if any, which extends beyond the period of time for which Contractor has rendered bills in advance of service. Except as otherwise expressly provided in the previous paragraph, City's exercise of its rights under this Article 11 (1) does not constitute a taking of private property for which compensation must be paid; (2) will not create any liability on the part of City to Contractor; and (3) does not exempt Contractor from the indemnity provisions of Article 10, Indemnification, Insurance and Bond, which are meant to extend to circumstances arising under this Section, provided that Contractor is not required to indemnify City against claims and damages arising from the sole negligence of City officers, employees and agents in the operation of Collection vehicles during the time City has taken possession of such vehicles. 11.2 Temporary Possession of Contractor's Property If the City suffers an interruption or discontinuance of service as described in Section 11. I (including interruptions and discontinuance due to events described in Section 12.4, Excuse from Performance), City may take possession of and use all of Contractor's property described above until other suitable arrangements can be made for the provision of Recycling Services which may include the grant of a Contract to another company. The same notice requirements of Section 11.1 are applicable. 11.3 Billing and Compensation to City During City's Possession During such time that city is providing Recycling services, as above provided, Contractor shall continue to bill and collect payment from all users of the above-mentioned services. Contractor further agrees that, in such event, it shall reimburse City for any and all costs and expenses incurred by City in taking over possession of the above-mentioned property for Recycling service in such manner and to an extent as would otherwise be required of Contractor under the Terms of this Agreement. Such reimbursement shall be made from time to time after submission by City to Contractor of each statement listing such costs and expenses, but in no event later than five (5) working days from and after each such submission. The City shall have the right, at its sole discretion, to take over billing and payment collection activities. The City shall then pay any net revenues to the Contractor, after deducting all expenses, including City- incurred expenses. 35 Page 975 of 1192 Residential Recycling Services Agreement 11.4 City's Right to Relinquish Possession It is further mutually agreed that City may at any time at its discretion relinquish possession of any or all of the above-mentioned property to Contractor and thereupon demand that Contractor resume the Recycling services as provided in this Agreement, whereupon Contractor shall be bound to resume the same. 11.5 Duration of City's Possession City's right pursuant to this Article to retain temporary possession-of Contractor's facilities and equipment, and to render Collection services, shall terminate when City determines that such services can be resumed by Contractor, or when City no longer reasonably requires such facilities or equipment. In any case, City has no obligation to maintain possession of Contractor's property and/or continue its use for any period of time and may at any time, in its sole discretion, relinquish possession to Contractor. 36 Page 976 of 1192 Residential Recycling Services Agreement ARTICLE 12 DEFAULT, REMEDIES AND LIQUIDATED DAMAGES 12.1 Events of Default All provisions of this Agreement to be performed by Contractor are considered material. Each of the following shall constitute an event of default. A. Fraud or Deceit. If Contractor practices, or attempts to practice, any fraud or deceit upon city. B. Insolvency or Bankruptcy. If Contractor becomes insolvent, unable, or unwilling to pay its debts when due, or upon listing of an order for relief in favor of Contractor in a bankruptcy proceeding. The Contractor is also in default if there is an assignment for the benefit of its creditors. C. Failure to Maintain Coverage. If Contractor fails to provide or maintain in full force and effect the Workers' Compensation, liability, indemnification coverage or any insurance coverage or bond required under this Agreement. D. Violations of Regulation. If Contractor facilities fall out of full regulatory compliance or if Contractor violates any orders or filings of any regulatory body having jurisdiction over Contractor relative to this Agreement, provided that Contractor may contest any such orders or filings by appropriate proceedings conducted in good faith, in which case no breach of the Agreement shall be deemed to have occurred. E. Failure to Perform. If Contractor ceases to provide Recycling services as required under this Agreement for a period of two (2) days or more, for any reason within the control of Contractor. F. Failure to Pay/Report. If Contractor fails to make any timely payments, including liquidated damages and penalties, required under this Agreement and/or fails to provide City with required information, reports, and/or records in a timely manner as provided for in the Agreement. G. Acts or Omissions. Any other act or omission by Contractor which violates the terms, conditions, or requir"ements of this Agreement, the California Integrated Waste Management Act of 1989, as it may be amended from time to time, or any order, directive, rule, or regulation issued thereunder and which is not corrected or remedied within the time set in the written notice the violation or, if Contractor cannot reasonably correct or remedy the breach within the time set forth in such notice, if Contractor should fail to commence to correct or remedy such 37 Page 977 of 1192 Residential Recycling Services Agreement violation within the ~ime set forth in such notice and diligently effect such correction or remedy thereafter. H. False or Misleading Statements. Any representation or disclosure made to City by Contractor in connection with or as an inducement to entering into this Agreement, or any future amendment to this Agreement, which proves to be false or misleading in any material respect as of the time such representation or disclosure is made, whether or not any such representation or disclosure appears as part of this Agreement. I. Attachment. There is a seizure of attachment of, or levy on, the operating equipment of Contractor, including without limits its equipment, maintenance or office facilities, or any part thereof. J. Suspension or Termination of Service. There is any termination or suspension of the transaction of business by Contractor, including without limit, due to labor unrest including strike, work stoppage or slowdown, sickout, picketing, or other concerted job action lasting more than two (2) days. Upon default by the Contractor, the City Manager shall provide written notice to Contractor of the violation. The City Manager shall include in the notice, a demand that the Contractor correct the violation within 10 days following the delivery of said notice. For purposes of this Agreement and any notice required thereunder, the term "days" shall mean calendar days. 12.2 Right to Terminate Upon Default Upon a default by Contractor, City shall have the right to terminate this Agreement upon aten (10) days notice if the public health or safety is threatened, or otherwise a thirty (30) days notice, but without the need for any hearing, suit or legal action. This right of termination is in addition to any other rights of City upon a failure of Contractor to perform its obligations under this Agreement. · City's right to terminate this Agreement and to take possession of Contractor's equipment and facilities are not exclusive, and City's termination of this Agreement shall not constitute an election of remedies. Instead, they shall be in addition to any and all other legal and equitable rights and remedies which City may have. By virtue of the nature of this Agreement, the urgency of timely, continuous and high-quality service, the lead time required to effect alternative service, and the rights granted by City to Contractor, the remedy of damages for a breach hereof by Contractor is inadequate and City shall be entitled in injunctive relief. 12.3 Liquidated Damages 38 Page 978 of 1192 Residential Recycling Services Agreement A. General. City finds, and Contractor agrees, that as of the time of the execution of this Agreement, it is impractical, if not impossible, to reasonably ascertain the extent of damages which shall be incurred by City as a result of a breach by Contractor of its obligations under this Agreement. B. Service Performance Standards; Liquidated Damages for Failure to Meet Standards. The parties acknowledge that consistent, reliable Recycling service is of utmost importance to City and that city has considered and relied on Contractor's representations as to its quality of service commitment in awarding the Agreement to it. The parties further recognize that some quantified standards of performance are necessary and appropriate to ensure consistent and reliable service and performance. The parties further recognize that if Contractor fails to achieve the performance standards, comply with complaint resolution criteria, or fails to submit required documents in a timely manner, City and its residents will suffer damages and that it is and will be impractical and extremely difficult to ascertain arid determine the exact amount of damages which City will suffer. Therefore, without prejudice to City's right to treat such non- performance as an event of default under this Article 12, the parties agree that the following liquidated damage amounts represent a reasonable estimate of the amount of such damages considering all of the circumstances existing on the date of this Agreement, including the relationship of the sums to the range of harm to City that reasonably could be anticipated and the anticipation that proof of actual damages would be costly or inconvenient. Recognizing the importance ofresolving any failure to meet the service performance standard, the City shall contact Contractor within two (2) days of any failing reported directly to the City. Contractor agrees to pay (as liquidated damages and not as a penalty) the amounts set forth below: Collection Reliability and Quality • For each failure over five (5) annually to commence service to a new customer account within seven (7) days after order: • For each failure over ten (10) annually to Collect Recyclable Materials, which as been properly set out for Collection, from an established customer account on the scheduled Collection day: • For each failure to Collect Recyclable Materials which have been properly set out for Collection, from the same customer on two (2) consecutive scheduled pickup days: • For each occurrence over five (5) annually of damage to private property: • For each occurrence of discourteous behavior: • For each failure over ten (10) annually to clean up Recyclable Materials spilled from Bins: • For each occurrence over five (5) annually of Collecting 39 $150.00 $150.00 $150.00 $250.00 $250.00 $150.00 Page 979 of 1192 Residential Recycling Services Agreement • Recyclable Materials during unauthorized hours: • For each failure to respond to a customer complaint within twenty-four (24) working hours: Timeliness of Submissions to City $250.00 $100.00 REPORTS Any report shall be considered late until such time as a correct and complete report is received by City. For each calendar day a report is late, the daily assessment shall be: Monthly Reports: Annual Reports: For each infraction For each infraction $100 per day $500 per day Liquidated damages will only be assessed after Contractor has been given the opportunity but failed to rectify the dan:iages, as described in this Agreement (e.g., twenty-four (24) working hours to respond to a complaint). City may determine the occurrence of events giving rise to liquidated damages through the observation of its own employees or representative or investigation of customer complaints. Prior to assessing liquidated damages, City shall give Contractor notice of its intention to do so. The notice will include a brief description of the incident(s)/non-performance. Contractor may review (and make copies at its own expense) all information in the possession of City relating to incident(s)/non-performance. Contractor may, within ten (I 0) days after receiving the notice, request a meeting with City. If a meeting is requested, it shall be held by the City Manager or his/her designee. Contractor may present evidence in writing and through testimony of its employees and others relevant to the incident(s)/non performance. The City Manager or designee will provide Contractor with a written explanation of his or her determination on each incident(s)/non-performance prior to authorizing the assessment of liquidated damages. The decision of the City Manager or designee shall be final. C. Amount. The City Manager may assess liquidated damages for each calendar day or event, as appropriate, that Contractor is determined to be liable in accordance with this Agreement. D. Timing of Payment. Contractor shall pay any liquidated damages assessed by City within ten (10) days after they are assessed. If they are not paid within the ten (I 0) day period, City may proceed against the performance bond required by this Agreement or order the termination of this Agreement, or both. 12.4 Excuse from Performance The parties shall be excused from performing their respective obligations hereunder in the event they are prevented from so performing by reason of floods, earthquakes, other "acts of God", war, civil insurrection, riots, acts of any government (including judicial action), and other similar catastrophic events which are beyond the control of and not the fault of the party 40 Page 980 of 1192 Residential Recycling Services Agreement claiming excuse from performance hereunder. Labor unrest, including but not limited to strike, work stoppage or slowdown, sick-out, picketing, or other concerted job action conducted by Contractor's employees or directed at Contractor or its selected facilities is not an excuse from performance and Contractor shall be obligated to continue to provide service notwithstanding the occurrence of any or all such events. The party claiming excuse from performance shall, within two (2) days after such party has notice of such cause, give the other party notice of the facts constituting such cause and asserting its claim to excuse under this Section. The interruption or discontinuance of Contractor's services caused by one or more of the events excused shall not constitute a default by Contractor under this Agreement. Notwithstanding the foregoing, however, if Contractor is excused from performing its obligations hereunder for any of the causes listed in this Section for a period of seven (7) days or more, City shall have the right to review the circumstances under which the excuse from performance was granted. After such review, if the City determines the excuse from service is no longer valid, the City shall notify the Contractor in writing to resume service within two (2) days from the receipt of such notification. If the Contractor fails to resume service within the two (2) days, the City shall have the right to terminate this Agreement by giving ten (1 O) days notice, in which case the provisions relative to taking possession of Contractor's land, equipment and other property and engaging Contractor's personnel in Article 11, City's Right to Perform Services, and this Article 12 shall apply. 12.5 Financial Material Errors, Omissions or Irregularities The City may review, test and audit the books and records of the Contractor for the purpose of determining whether the Contractor is complying with the terms of the Agreement. In the event that material errors or omissions or irregularities are identified, then the cost associated with the audit, test or review shall be paid by the Contractor to the City. In the case of errors, materiality shall be deemed to be two percent (2%) or greater of the gross revenues of the Contractor from . activities performed under this agreement. Recovery of any over payment will be negotiated on a case by case basis, either immediately or through the next rate setting evaluation. 41 Page 981 of 1192 Residential Recycling Services Agreement ARTICLE 13 OTHER AGREEMENTS OF THE PARTIES 13.1 Relationship of Parties The parties intend that Contractor shall perform the services required by this Agreement as an independent Contractor engaged by City and not as an officer or employee of City nor as a partner of or joint venture with City. No employee or agent or Contractor shall be or shall be deemed to be an employee or agent of City. Except as expressly provided herein, Contractor shall have the exclusive control over the manner and means of conducting the Recycling services performed under this Agreement, and all Persons performing such services. Contractor shall be solely responsible for the acts and omissions of its officers, employees, subcontractors and agents. Neither Contractor nor its officers, employees, subcontractors and agents shall obtain any rights to retirement benefits, workers compensation benefits, or any other benefits Which accrue to City employees by virtue of their employment with City. 13.2 Compliance with law In providing the services required under this Agreement, Contractor shall at all times, at its sole cost, comply with all applicable laws of the United States, the State of California, City, and with all applicable regulations promulgated by federal, state, regional or local administrative and regulatory agencies, now in force and as they may be enacted, issued or amended during the Term. 13.3 Governing Law This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California. 13.4 Jurisdiction Any lawsuits between the parties arising out of this Agreement shall be brought and concluded in the courts of the State of California, which shall have exclusive jurisdiction over such lawsuits. 13.5 Assignment Except as may be provided for in Article 11, (City's Right to Perform Service), neither party shall assign its rights, nor delegate, subcontract or otherwise transfer its obligations under this Agreement to any other Person without the prior written consent of the other party. Any such assignment made without the consent of the other party shall be void and the attempted assignment shall constitute a material breach of this Agreement. The Contractor shall consent to any assignment to a joint powers authority, or any similar public entity assignee of the City. 42 Page 982 of 1192 Residential Recycling Services Agreement For purposes of this Section when used in reference to Contractor, "assignment" shall include, but not be limited to (1) a sale, exchange or other transfer of at least fifty-one percent (51 %) all of Contractor's assets dedicated to service under this Agreement to a third party; (2) a sale, exchange or other transfer of outstanding common stock of Contractor to a third party provided said sale, exchange or transfer may result in a change of control of Contractor;. (3) any dissolution, reorganization, consolidation, merger, re-capitalization, stock issuance or re- issuance, voting trust, pooling agreement, escrow arrangement, liquidation or other transaction to which results in a change of ownership or control of Contractor; ( 4) any assignment by operation oflaw, including insolvency or bankruptcy, making assignment for the benefit of creditors, writ of attachment for an execution being levied against this Agreement, appointment of a receiver taking possession of Contractor's property, or transfer occurring in the event of a probate proceeding; and (5) any combination of the foregoing (whether or not in related or contemporaneous transactions) which has the effect of any such transfer or change of ownership, or change of control of Contractor. Contractor acknowledges that this Agreement involves rendering a vital service to City's residents and businesses, and that City has selected Contractor to perform the services specified herein based on (1) Contractor's experience, skill and reputation for conducting its Solid Waste management operations in a safe, effective and responsible fashion, at all times in keeping with applicable Environmental Laws, regulations and best waste management practices, and (2) Contractor's financial resources to maintain the required equipment and to support its indemnity obligations to City under this Agreement. City has relied on each of these factors, among others, in choosing Contractor to perform the services to be rendered by Contractor under this Agreement. If Contractor requests City's consideration of and consent to an assignment, City may deny or approve such request in its complete discretion. The City is concerned about the possibility that assignment could result in significant rate increases, as well as a change in the quality of service. Accordingly, the following standards have been set to ensure that assignment will result in continued quality service. In addition, the City reserves the right to solicit competitive bids for these services ifthe assignment results in a request by the assignee for rate increases that are higher than the inflationary index and do not reflect value changes in service standards. At a minimum, no request by Contractor for consent to an assignment need be considered by City unless and until Contractor has met the following requirements: A. Contractor shall undertake to pay City its reasonable expenses for attorney's fees and investigation costs necessary to investigate the suitability of any proposed assignee; and to review and finalize any documentation required as a condition for approving any such assignment; 43 Page 983 of 1192 Residential Recycling Services Agreement B. Contractor shall furnish City with audited financial statements of the proposed assignee's operations for the immediately preceding three (3) operating years; C. Contractor shall furnish City with satisfactory proof: 1) that the proposed assignee has at least ten (1 O) years of Recyclable Material management experience on a scale equal to or exceeding the scale of operations conducted by Contractor under this Agreement; 2) that in the last five (5) years, the proposed assignee has not suffered any significant citations or other censure from any federal, state or local agency having jurisdiction over its Solid Waste management operations due to any significant failure to comply with state, federal or local Environmental Laws and that the assignee has provided City with a complete list of such citations and censures; 3) that the proposed assignee has at all times conducted its operations in an environmentally safe and conscientious fashion; 4) that the proposed assignee conducts its Recyclable Materials management practices in accordance with sound waste management practices in full compliance with all federal, state and local laws regulating the Collection, transportation, processing, marketing and disposal of Solid Waste including Hazardous Wastes; and, 5) of any other information required by City to ensure the proposed assignee can fulfill the Terms of this Agreement in a timely safe and effective manner. Under no circumstances shall the City be obliged to consider any proposed assignment by Contractor if Contractor is in default at any time during the period of consideration. 13.6 Subcontracting Except as approved in writing by the City, Contractor shall not enter into an agreement to have another Person perform Contractor's duties of this Agreement. Contractor shall undertake to pay City its reasonable expenses for attorney's fees and investigation costs necessary to investigate the suitability of any proposed subcontractor, and to review and finalize any documentation required as a condition for approving any such subcontracting agreement. 13. 7 Binding on Assigns The provisions of this Agreement shall inure to the benefit to and be binding on the permitted assigns of the parties. 13.8 Transition to Next Contractor If the transition of servfoes to another Contractor occurs through expiration of term, default and termination, or otherwise, Contractor will cooperate with City and subsequent Contractor(s) to assist in an orderly transition which will include Contractor providing route lists and billing information. Contractor will not be obliged to sell collection vehicles or Containers to the next Contractor. Depending on Contractor's circumstances at the point of transition, Contractor at its option may enter into negotiations with the next Contractor to sell (in part or all) Collection vehicles and/or containers. 44 Page 984 of 1192 Residential Recycling Services Agreement 13.9 Parties in Interest Nothing in the Agreement, whether express or implied, is intended to confer any rights on any persons other than the parties to it and their representatives, successors and permitted assigns. 13.10 Waiver The waiver by either party of any breach or violation of any provisions of this Agreement shall not be deemed to be a waiver of any breach or violation of any other provision nor of any subsequent breach of violation of the same or any other provision. The subsequent acceptance by either party of any monies which become due hereunder shall not be deemed to be a waiver of any pre-existing or concurrent breach or violation by the other party of any provision of this Agreement. 13.11 Contractor's Investigation Contractor has relied on its own investigations, and not on any representations of the City or its agents of the conditions and circumstances surrounding the Agreement and the work to be performed by it. 13.12 Notice All notices, demands, requests, proposals, approvals, consents and other communications which this Agreement requires, authorizes or contemplates shall be in writing and shall either be personally delivered to a representative of the parties at the address below or be deposited in the United States mail, first class postage prepaid, addressed as follows: Ifto City: If to Contractor: Utilities Director City of San Luis Obispo 879 Morro Street San Luis Obispo, CA 93401 Tom Martin San Luis Garbage Company 2945 McMillan #136 San Luis Obispo, CA 93401 The address to which communications may be delivered may be changed from time to time by a notice given in accordance with this Section. The notice, if mailed, is deemed served three (3) days after the mailing. 13.13 Representatives of the Parties References in this Agreement to the "City" shall mean the City Council and all actions to be taken by City shall be taken by the City Council except as provided below. The City Council may delegate, in writing, authority to the City Manager, Utilities Director, and/or to the City employees and may permit such employees, in turn, to delegate in writing some or all of such 45 Page 985 of 1192 Residential Recycling Services Agreement authority to subordinate employees. Contractor may rely upon actions taken by such delegates if they are within the scope of the authority properly delegated to them. Contractor shall, by the effective date, designate in writing a responsible officer who shall serve as the representative of Contractor in all matters related to the Agreement and shall inform City in writing of such designation and of any limitations upon his or her authority to bind Contractor. City may rely upon action taken by such designated representative as actions of Contractor unless they are outside the scope of the authority delegated to him/her by Contractor as communicated to City. 13.14 City Free to Negotiate with Third Parties City may investigate all options for the Collection, processing and marketing of Recyclable Materials after the expiration of the Term. Without limiting generality of the foregoing, City may solicit proposals from Contractor and from third parties for the provision of Recycling services, and any combination thereof, and may negotiate and execute Agreements for such services which will take effect upon the expiration or earlier termination under Section 12.1 (Events of Default) of this Agreement. 13.15 Compliance with City Code Contractor shall comply with those provisions of the City code which are applicable, and with any and all amendments to such applicable provisions during the Term of this Agreement. 13.16 Privacy Contractor shall strictly observe and protect the rights of privacy of customers. Information identifying individual customers or the composition or contents of a customer's waste stream shall not be revealed to any person, governmental unit, private agency, or contractor, unless upon the authority of a court of law, by statute, or upon valid authorization of the customer. This provision shall not be construed to preclude Contractor from preparing, participating in, or assisting in the preparation of waste characterization studies or waste stream analyses which may be required by AB 939. 46 Page 986 of 1192 14.1 Entire Agreement Residential Recycling Services Agreement ARTICLE 14 MISCELLANEOUS AGREEMENTS This Agreement, including the exhibits, represents the full and entire Agreement between the parties with respect to the matters covered herein. 14.2 Section Headings The article headings and section headings in this Agreement are for convenience of reference only and are not intended to be used in the construction of this Agreement nor to alter or affect any of its provisions. 14.3 References to laws and Other Agreements -AJ.l references in this Agreement to laws shall be understood to include such laws as they may be subsequently amended or recodified, unless otherwise specifically provided. This Agreement supersedes any and all Agreements for Recyclable Materials Collection, processing and/or marketing heretofore entered into by the parties and the City. 14.4 Interpretation This Agreement, including the exhibits attached hereto, shall be interpreted and construed reasonably and neither for nor against either party, regardless of the degree to which either party participated in its drafting. 14.5 Agreement This Agreement may not be modified or amended in any respect except by a writing signed by the parties. 14.6 Severability If any non-material provision of this Agreement is for any reason deemed to be invalid and unenforceable, the invalidity or unenforceability of such provision shall not affect any of the remaining provisions of this Agreement which shall be enforced as if such invalid or unenforceable provision had not been contained herein. 14. 7 Exhibit Exhibit "A" is attached hereto and incorporated herein and made a part hereof by this reference. 47 Page 987 of 1192 Residential Recycling Services Agreement IN WITNESS WHEREOF, City and Contractor have executed this Agreement as of the day and year first above written. The City of San Luis Obispo ("City") Attest: cf22_ :GZ City Clerk San Luis Garbage Company ("Contractor") By~--L---'=-4-=u::.._,_~__,_1-,,£=-+-~~ Name: Title: 48 Page 988 of 1192 Food and Green Waste Services Agreement AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND SAN LUIS GARBAGE COMPANY For Collection and D isposal of Food and Green Waste Within the City of San Luis Obispo This Agreement (Agreement) is made and entered into thislqday of Nol/, 20 15, in the State of California by and between the City of San Luis Obispo, a municipal corporation and charter city of the State of California, (City) and San Luis Garbage Company, a California corporation, (Contractor), for the Collection and processing of Food and Green Waste and the performance of other services related to meeting the goals and requirements of the California Integrated Waste Management Act of 1989. RECITALS This Agreement is entered into with reference to the following facts and circumstances: I. The Legislature of the State of California, by enactment of the California Integrated Waste Management Act of 1989 (AB 939) Division 30 of the California Public Resources Code, commencing with 40000, has declared that it is within the pub lic interest to authorize and require local agencies to make adequate provisions for Food and Green Waste handling within their jurisdictions. AB 939 requires a fifty percent (50%) reduction in the amount of waste which is landfilled by the year 2000; and 2. The separate Collection and processing of Food and Green Waste to produce usable compost was selected in the City 's Source Reduction and Recycling Element adopted , June 1994 hereinafter referred to as the SRRE, as a means of meeting the 2000 State mandated diversion goals of AB 939; and 3 . Since March 1997 Contractor has provided the City with green waste collection, transportation and disposal services for residential properties, multi-family dwelling units, institutional and commercial and industrial properties; and 4. On September 28, 2014, the Governor approved AB 1826 which requires each jurisdiction, on and after January 1, 2016, to implement an organic waste recycling pro gram to divert organic waste from certain businesses; and 5. In order to implement AB l 826's requirements, Contractor has proposed to enter into a long term agreement w ith Hitachi Zosen Inova to construct and operate a Kompogas faci lity at Contractor's property located at 7388 Old Santa Fe Road, San Luis Obispo, to compost food and green waste generated by the City, and 1 Page 989 of 1192 Food and Green Waste Services Agreement 6. In order to finance such facility, Contractor requires a twenty year commitment from the City to divert all food and green waste to Contractor; and 7. The City Council finds that an exclusive franchise granted to a private company for the collection and processing of Food and Green Waste is the most effective and efficient way to collect and divert residential Food and Green Waste within the City; and 8. The City Council further finds that the construction of a food and green waste processing facility is in the best interests of the City, will help promote the health , safety and welfare of the community and the environment and otherwise furthers the goals and objectives of AB 1286. NOW, THEREFORE, for and in consideration of the mutual promises herein contained, it is hereby agreed by and between the City and Contractor as follows: ARTICLE I DEFINITIONS 1.1 "AB 939 means the California Integrated Waste Management Act of 1989, as it may be amended from time to time. 1.2 "Affiliate" means all businesses (including corporations, limited and general partnerships and sole proprietorships) which are directly or indirectly related to Company by virtue of direct or indirect common ownership interest or common management shall be deemed to be "Affiliated with" Contractor and included within the term "Affiliates with" Contractor and included within the "Affiliates" as used herein. An Affiliate shall include a business in which Contractor owns a direct or indirect ownership interest, a business which has a direct or indirect ownership interest in Contractor and/ or a business which is also owned, controlled or managed by any business or individual which has a direct or indirect ownership interest exists, the constructive ownership provisions of Section 3 l 8(a) of the Internal Revenue Code of 198 6, as in effect on the date of this Agreement, shall apply; provided, however, that (i) "ten percent (10%)" shall be substilult:<l for "fifty percent (50% )" in Section 318(a)(2)(C) and in Section 318(a)(3)(C) thereof; and (ii) Section 318(a)(5)(C) shall be disregarded. For purposes of determining ownership under this paragraph and constructive or indirect ownership under Section 3 l 8(a), ownership interest of less than ten percent (10%) shall be determined on the basis of the percentage of voting interest or value which the ownership interest represents, whichever is greater. 1.3 "Agreement" means this Food and Green Waste Agreement (dated ll/1"/i5:°including all exhibits and attachments, and any amendments thereto) between City and Contractor for Collection, processing and marketing of Food and Green Waste and other services related to meeting the diversion goals and requirements of AB 939. 2 Page 990 of 1192 Food and Green Waste Services Agreement 1.4 "B illings" means any and a ll statements of charges for services rendered by Contractor pursuant to this Agreement. 1.5 "California Integrated Waste Management Act of 1989" means Public Resources Code §§ 40000 et. seq . 1.6 "City" means the City of San Luis Obispo, a municipal corporation and charter city, and all the territory lying within the municipal boundaries of the City as presently existing or as such boundaries may be modified during the term, acting through the City Council or the City Manager. 1.7 "Collect" or "Collection" means to take physical possession, transport, and remove Food and Green Waste within and from the City. 1.8 "Commercially Generated Food and Green Waste" means Food and Green Waste generated at commercial and/or industrial property and separated by the Waste Generator for Collection and which are excluded from the scope of this Agreement as described in Article 4, Scope of Agreement. 1.9 "Compost" means a stabilized humus product which is the result of composting. 1.10 "Composting means a controlled biological decomposition that converts raw organic matter into a stabilized humus product. 1.11 "Co ntainer" means any bin, vessel, can or receptacle used for Collection and storing Food and Green Waste before removal. 1.12 "Contractor" means San Luis Garbage Company, a corporation organized and operating under the laws of the State of California, and its officers, directors, employees, agents, companies and subcontractors where applicable. 1.13 "Environmental Laws" means all federa l and state statutes, county, local and City ordinances and regulations concerning public health, safety and the environment includ in g, by way of example and not limitation, the comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 USC 9601 et seq.; the Resource Conservation and Recovery Act, 42 USC 6902 et seq.; the Federal Clean Water Act, 33 USC 1251 et seq.; the Toxic Substances Control Act, 15 USC 1601 et seq.; the Occupational Safety and Health Act, 29 USC 65 1 et seq.; the California Hazardous Waste Control Act, California Health and Safety Code 25 l 00 et seq.; the California Toxic Substances Account Act, California Health and Safety Code 25300 et seq .; the Safe Drinking Water and Toxic Enforcement Act, California Health and Safety Code 25249 .5 et seq.; as currently in force or as hereafter amended, and all rules and regulations promulgated thereunder. 3 Page 991 of 1192 Food and Green Waste Services Agreement 1.14 "Facility" means any plant or site utilized by Contractor (or a subcontractor of Contractor) for the purposes of performing the duties to fulfill this Agreement, including, without limitation, processing the City's Ureen Waste and Food Waste. For purposes of Section 2.3 , "Facility" means a Kompogas facility (or other similar technology) capable of processing the City's Green Waste and Food Waste. 1.15 "Facility Operation Date" means the date on which, following its start-up, testing and commissioning, the Facility processes commercial quantities of Food and Green Waste. 1.16 "Fiscal Year" means the period commencing on January 1 and concluding December 31 for Contractor. For City it means the period commencing July 1 of one year and concluding June 30 of the subsequent year. 1.16 "Food Waste'' means a waste material of plant or animal origin that results from the preparation or processing of food for animal or human consumption and that is separated from the municipal solid waste stream. Food waste includes, but is not limited to, food waste from food facilities as defined in Health and Safety Code section 113789 (such as restaurants), food processing establishments as defined in Health and Safety Code section 111955, grocery stores, institutional cafokrias (such as prisons, schools and hospitals), and residential food scrap collection. Food waste does not include any material that is required to be handled only pursuant to the California Food and Agricultural Code and regulations adopted pursuant thereto. 1.17 "Green Waste" means tree trimmings, grass cuttings, dead plants, leaves, branches, dead trees and scrap wood (not more than six (6) inches in diameter) and similar materials generated at the premises. 1.18 "Hazardous Waste" means any discarded material or mixture of materials, which is toxic, corrosive, flammable, radioactive or which, because of its quantity, concentration, physical , chemical or infectious characteristics may do harm to either humans , animals or the environment, or as defined in Atiicle 2, Chapter 6.5 825117 of the Health and Safety Code and Public Resources Code 840141. 1.19 "Materials Recovery Facility" means a permitted Facility where Solid Waste, Recyclable Materials, Food o r Green Waste are sorted or separated for the purposes of Recycl ing, Composting or reuse. 1.20 "Multi-family Dwelling Unit" means any Premises, other than a Single Family Dwelling Unit, used for residential purposes, irre spective of whether residence therein is transient, temporary or permanent. 1.21 "Owner" means the person holding the legal title to the real property constituting the Premises to which Food and Green Waste collection service is to be provided under this Agreement. 4 Page 992 of 1192 Food and Green Waste Services Agreement 1.22 "Person" means any individual, firm, association, organization, partnership, corporation, business trust, joint venture, the United States, the State of California, the County of San Luis Obispo, local agencies, cities and special purpose districts. 1.23 "Premises" means any land or building in the City where Solid Waste is generated or accumulated. 1.24 "Recyclable Materials" means residential by-products or discards of economic value set aside, hand led, packaged or offered for Collection in a manner different from Solid Waste. Including, but not limited to, aluminum, newspaper, clear and colored glass, tin and bi-metal, High density Polyethylene (HDPE), Polyethylene Terephthalate (PET), cardboard, chipboard, and mixed paper. 1.25 "Recycling" means the process of separating for Collection, Collecting, treating and/or reconstituting Food and Green Waste which would otherwise be discarded without receiving compensation or returning them to the economy in the form of raw materials for new, reused, or reconstituted products. The Collection", transfer, transportation or disposal of Food and Green Waste not intended for, or capable of, reuse is not Recycling. 1.26 "Related Party Entity" means any Affiliate which has financia l transactions with Company. 1.27 "Single Family Dwelling Unit" means each Premises used for or designated as a single family resident ial dwelling, including each unit of a duplex or triplex in all cases in which there is separate or individual Solid Waste Collection services. 1.28 "Solid Waste" means all putrescible and non-putrescible refuse, garbage, green waste, construction and demolition debris, rubbish, and Recyclable Materials, and as otherwise defined in Pub li c Resources Code 40191. 1.29 "Term" means the term of this Agreement, as provided for in Article 2. 1.30 "Transfer Station" includes those facilities used to receive solid wastes, temporarily store, separate, convert, or otherwise process the materials in the solid wastes, or to transfer the solid wastes directly from smaller to larger vehicles for transport and those facilities used for transformations. 1.31 "Waste Generator" means a ny Person as defined by the Public Resources Code, whose act or process produces Solid Waste as defined in the Public Resources Code, or whose act fir st causes Solid Waste to become subject to regulation . 5 Page 993 of 1192 Food and Green Waste Services Agreement ARTICLE2 GRANT AND ACCEPTANCE OF AGREEMENT 2.1 Grant and Acceptance of Agreement Subject to Section 2.5 (Conditions to the Effectiveness of Agreement), City hereby grants to Contractor an exclusive franchise to collect and process Food and Green Waste accumulating at all Premises in the City that are offered for Collection to Contractor in accordance with this Agreement. Contractor hereby accepts the Agreement on the terms and conditions set forth in this Agreement. 2.2 Effective Date The effective date of this Agreement shall be Nov I~, 2015. 2.3 Term of Agreement Subject to Sect ion 2.3.1 below, the term of this Agreement shall commence at 12:01 a.m., NOV . / °/ , 2015, and expire at midnight on the twentieth (20111) annual anniversary of the Facility Operation Date, subject to extension as provided in Section 2.4 (Option to Extend). 2.3.1 Term Contingency The Contractor and City acknowledge that the foregoing twenty (20) year term of the Agreement is expressly contingent upon: (a) By no later than January 1, 2018, Contractor executing a definitive long-term agreement with Hitachi Zosen !nova U.S.A. LLC (or other company approved by City) for the development, construction and operation of a Kompogas Facility (or other similar technology) capable of processing the City's Green Waste and Food Waste; and (b) By no later than January 1, 2020, completion of a Kompogas Facility (or other simi lar technology) capable of processing the City's Green and Food Waste; provided, however, that in the event such Facility has not been completed by January 1, 2020, due to reasons beyond the reasonable control of, and not due to the fault or negligence of Contractor, such completion date shall be extended by the number of days reasonahly required to complete the Facility, but only to the extent that Contractor uses (and continues to use) due diligence to pursue completion of the Facility. Notwithstanding the foregoing, the term of this Agreement shall not exceed thirty five (35) years from the commencement date set forth in Section 2.3 above. 6 Page 994 of 1192 Food and Green Waste Services Agreement In the event Contractor does not enter into such definitive agreement and/or the facility is not constructed and operational within the time frames set forth in the Section 2.3.1, Contractor and City agree the that the term of this Agreement shall be until August 20, 2025. In the event of a change of law or technology which would render the collection and processing services to be implemented under this Agreement obsolete, unnecessary, impractical, undesirable, or illegal , the City reserves the right to terminate this Agreement upon the giving of a s ix (6) month prior written notice of City's election to so terminate this Agreement. It is understood between Contractor and City that this Agreement is motivated by the passage of AB 939, and that subsequent legislation could make this Agreement unnecessary and/or adverse to the best interests of the City. In particular, City and Contractor acknowledge the possibility of future legislation changing the requirements of AB 939, and/or requiring a coordination of the collection of Solid Waste, Food and Green Waste. 2.4 Option to Extend The City shall have the sole option to extend this Agreement up to 36 months in periods of least twelve (12) months each. If City elects to exercise this option, it shall give written notice not later than one hundred eighty (180) days prior to the initial termination date, or, if one extension has been exercised, one hundred eighty ( 180) days prior to the extended termination date . 2.5 Conditions to Effectiveness of Agreement The obligation of City to permit this Agreement to become effective and to commence performing its obligations under this Agreement is subject to the satisfaction of each and all of the conditions set out in this Section 2.5 below, each of which may be waived in whole or in part by City. A. Accuracy of Representations. The representations and warranties made by Contractor throughout this Agreement are accurate, true and correct on and as of the effective date of this Agreement. B. Absence of Litigation. There is no li tigation pending in any court challenging the award of thi s Agreement to Contractor or the execution of this Agreement or seeking to restrain or enjoin its performance. C. Furnishing of Insurance and Bonds. Contractor has furnished evidence of the insurance and bonds required by Article 10, Indemnification, Insurance and Bond. D. Effectiveness of City Council Action. The City's Ordinance No.l(JJ'j approving this Agreement, shall have become effective pursuant to California law on or prior to the effective date of this Agreement. 2.6 R espo n si bilities of C ity 7 Page 995 of 1192 Food and Green Waste Services Agreemenl The City does not assume any responsibility for, n0r shall it be held liable for damages for the failure on the part of any Person producing Food or Green Waste material within the City to deliver the same to Contractor; provided, however, it is mutually understood and agreed that the City and its officers will at all times during the period of this Agreement cooperate to enforce the terms of this exclusive Agreement as it relates to the Collection of Food and Green Waste within the City. 8 Page 996 of 1192 Food and Green Waste Services Agreement ARTICLE3 TERMS OF AGREEMENT 3.1 Contractor Status Contractor is duly organized, validly existing and in good standing under the laws of the State of California and has the financial ability to perform its obligations set forth in this Agreement. Additionally, the Contractor has no suits or threatened suits which would impair the financial ability of the Contractor to perform its obligations under this Agreement, and that the entering into this Agreement by Contractor wi ll not in any way constitute a breach of any other agreements entered into by Contractor with other parties, or constitute a violation of any law. 3.2 Contractor Authorization Contractor has the authority to enter into and perform its obligations under this Agreement. The Board of Directors of Contractor (or the shareholders, if necessary) have taken all actions required by law, its articles of incorporation, its bylaws or otherwise to authorize the execution of this Agreement. The persons signing this Agreement on behalf of Contractor have the authority to do so. 3.3 Compliance with Laws and Regulation s Contractor shall comply with all existing and future City, county, state, and federal laws, including all Environmental Laws, with particular note of Article X of the City Charter and Chapter 8.04 of the Municipal Code. 3.4 Serve Without Interruption Contractor shall Collect and process Food and Green Waste throughout the term of this Agreement without interruption except as described in Section 12.4. 3.5 Permits and Licenses Contractor shall procure, and keep in full force and affect, all permits and licenses, pay all charges and fees, and give all no tices as necessary. 3.6 Preservation of C ity Prope1·ty Contractor shall pay to the City, on demand, the cost of all repairs to public property made necessary by any of the operations of Contractor under this Agreement. 9 Page 997 of 1192 4.1 Sco pe of Agree m ent Food and Green Waste Services Agreement ARTICLE 4 SCOPE OF AGREEMENT Subject to Section 4.2 (Limitations to Scope), the Agreement granted to Contractor shall be exclusive for Food and Green Waste Collection, except where otherwise precluded by law. 4.2 Limitations to Sco pe The Agreement for the Collection and processing of Food and Green Waste granted to Contractor shall be exclusive e xcept as to the following categories of Food and Green Waste li sted in this Section. T he granting of this Agreement sha ll not preclude the catego ries of Food and Green Waste listed below from being delivered to and Collected and transported by others provided that nothing in this Agreement is intended to or shall be construed to excuse any per son from obtaining any authorization from City which is otherwise required by law: A. Green Waste wh ic h are separated at any Premises and which are transported by the owner or occupant of such Premises (or by his/her employee) to a Facility; B. Green Wask removed from Premises by a gardening, landscaping, or tree trimming company as in cide ntal part of a total service offered by that company. Contractor acknowledges and agrees that City may permit other Pers ons beside Contractor to Collect any or all types of the Green Waste li sted in this Section 4.2, without seeking or obtaining approval of Contractor under this Agreement. This Agreement to Collect, transport and process Food and Green Waste shall be interpreted to be consistent with state and federal laws, now and during the term of the Agreement, and the scope of this Agreement shall be limited by current and developing state and federa l laws with regard to Food and Green Waste h andling and related doctrines . ln the event that future interpretations of current law, enactment or developing legal trends limit the ability of the City to lawfully provide for the scope of services as specifically set forth herein, Contractor agrees that the scope of the Agreement will be limited to those serv ices and materials which are lawfully provided for under this Agreement. The City shall not be responsible for any lo st profits and/or damages c laimed by the Contractor as a result of changes in law. 4.3 Adminis tration of Agreement The City M anager shall administer this Agreement and the City's Utilities Director shall sup ervise Contractor's compliance with the Agreement terms and conditions. 4.4 Use of C itv Streets 10 Page 998 of 1192 Food and Green Waste Services Agreement This Agreement shall give Contractor the right and privilege to operate Food and Green Waste Collection vehicles and equipment on such streets, public ways, rights-of-way, or easements of the City as reasonably appropriate for Contractor to provide the services herein. 4.5 Annexation Contractor shall automatically extend all services herein described to any area annexed to the City, except that the City may permit a firm franchised by the County of San Luis Obispo before the annexation to continue service the area for a period not less than five (5) years. 4.6 City Right to Request Changes 4.6.1 General City may request Contractor to perform additional services (including new diversion programs, billing services, etc.) or modify the manner in which it performs existing services. Pilot programs and innovative services which may entail new Collection methods, different kinds of services and/or new requirements for Waste Generators are included among the kinds of changes which City may request. Contractor shall present, within 30 days of a request to do so by City, a proposal to provide additional or expanded diversion services pursuant to the terms of Section 4.6.2. Contractor shall be entitled to an adjustment in its compensation in accordance with Section 8.5 (Extraordinary Adjustments), for providing such additional or modified services. 4.6.2 New Diversion Programs Contractor shall present, within thirty (30) days of a request to do so by City, a proposal to provide additional or expanded diversion services. The proposal shall contain a complete description of the following: • Collection methodology to be employed (equipment, manpower, etc.) • Equipment to be utilized (vehicle number, types, capacity, age, etc.). • Labor requirements (number of employees by classification). • Type of Containers to be utilized. • Provision for program publicity/education/marketing. • A projection of the financial results of the program's operations for the remaining Term of the Agreement in a balance sheet and operating statement format including documentation of the key assumptions underlying the projections and the support for those assumptions. • Materials processing facility to be utilized. 4.6.3 City's Right to Acquire Services Contractor acknowledges and agrees that City may permit other Persons besides Contractor to provide additional Food and/ or Green Waste services not otherwise contemplated under Section 4.6 (City's Right to Request Changes). If pursuant to Section 4.6.2 (New Diversion Programs), Contractor and City cannot agree on terms and conditions of such services in ninety (90) days from the date when City first requests a proposal from Contractor to perform such 11 Page 999 of 1192 Food and Green Waste Services Agreement services, Contractor acknowledges and agrees that City may permit Persons other than Contractor to provide such services. 4.6 .4 Implementing New Servi ces If l) Contractor is capable of performing or developing the ability to perform a requested service or modifying an existing service; 2) City has agreed to have Contractor provide such additional service in accordance with Contractor's proposal; and 3) an adjustment in Contractor's compensation has been requested but has not been agreed upon or implemented within ninety (90) days, City may permit a third party to perform the request or modified existing service, and Contractor shall not be obligated, to perform such additional or modified service pursuant to the terms of Section 4.6.3. 4.7 O wner ship of Foo d a nd G r e en W as t e Once Food and Green Waste is placed in Containers and properly presented for Collection, ownership and the right to possession shall transfer directly from the Generator to Contractor by operation of this Agreement. Contractor is hereby granted the right to retain, recycle, process, reuse , compost and otherwise use such Food and Green Waste or any part thereof, in any lawfu l fashion or for any lawful purpose consistent with the hierarchy and goals of AB 939 and AB 1826. Subject to the provisions of this Agreement, Contractor shall have the right to retain any benefit resulting from its right to retain, recycle, process, compost or reuse the Food and Green Waste which it Collects. Food and Green Waste or any part thereof, which are delivered to a Facility (Facility, transformation Facility, transfer station, or Material Recovery Facility) shall become the property of the owner or operator of the Facility(ies) once deposited there by Contractor. 1?. Page 1000 of 1192 Food and Green Waste Services Agreement ARTICLE 5 DIRECT SERVICES 5.1 General The work to be done by Contractor pursuant to this Agreement shall include the furnishing of all labor, supervision, equipment, materials, supplies, and all other items necessary to perform the services required to collect Food and Green Waste The enumeration of, and specification of requ irements for , particular items of labor or equipment shall not relieve Contractor of the duty to furnish all others, as may be required, whether enumerated or not. The work to be done by Contractor pursuant to this Agreement shall be accomplished in a thorough and professional manner so that the customers within the City are provided reliable , courteous and high-quality Food and Green Waste Collection service at all times. The enumeration of, and specification of requirements for, particular aspects of service quality shall not relieve Contractor of the duty of accomplishing all other aspects in the manner provided in this Section, whether such aspects are enumerated elsewhere in the Agreement or not. 5.2 Food and Green Waste Services Contractor shall Collect and remove all Food and Green Waste placed in Containers at the designated Collection locations for Commercial, Single Family Dwelling Units and Multifamily Dwelling Units. Food and Green Waste Collection shall be a minimum of once each week on the same day of the week as Solid Waste Collection service. Contractor will notify customers of holiday Collection schedules. Should the collection day change, Contractor shall re-route Collections within sixty (60) days of the notification by the change in Solid Waste collection days to provide same day service. 5.3 Materials To Be Collected Green waste material to be collected include tree trimmings, grass cuttings, dead plants, leaves, branches and dead trees (not more than six (6) inches in diameter) and similar materials generated at the Premises. Food Waste materials to be collected include waste material of plant or animal origin that results from the preparation or processing of food for animal or human consumption and that is separated from the municipal solid waste stream. Food waste includes, but is not limited to, food waste from food facilities such as restaurants, food processing establishments, grocery stores, institutional cafeterias (such as schools and hospitals), and residential food scrap collection. 5.4 Refusal to Provide Collection Services Contractor may refuse to Food and Collect Green Waste and shall not be obligated to continue to provide Green Waste Container(s) to any participant in the Food and Green Waste program 13 Page 1001 of 1192 Food and Green Waste Services Agreement who, after reasonable warning, fai ls to properly sort and set out Food and Green Waste. Contractor shall report monthly to City any warning notices issued. 5.5 C h ris tmas T ree Collectio n Program Contractor shall operate an annual Christmas Tree Co ll ection and diversion program. The program shall include curbside and drop-off Collection of Christmas Trees targeting all S ingle Family and Multi-family Dwell ing Units and shall divert these Christmas Trees from landfi ll disposal. 5.6 End Uses for Food and Green Waste Contractor shall develop and implement plans and programs to divert from disposal materials collected through curbside Collection of Food, Green Waste and Christmas Tree Collection. Contractor must provide end uses for Food and Green Waste that maximizes d iversion credits for the City according to regulations established by the CalRecycle. 5.7 Opera tio ns 5.7.1 Schedules To preserve peace and quiet, no Food or Green Waste shall be Collected from o r within two- hundrcd (200) feet ofresidential Premises between 6 :30 P .M. and 6 :30 A.M. on any day and such Green Waste shall be Collected, Monday through Friday on the same day as Solid Waste collection. When the regularly scheduled Collection day falls on a holiday, Collection shall take p lace on the following regular ly scheduled collection day. In the event the Contractor misses the collection of set out Food or Green Waste, the Contractor shall collect the missed pickups with one (1) b u siness day of notification. 5.7.2 Vehicles A. General. Contractor shall provide a fleet of Collection vehicles sufficient in number and capacity to perform the work required by this Agreement and in strict accordance with its terms. Contractor shall have available on Collection days sufficient back-up vehicles in order to respond to complaints and emergencies. The fleet shall be maintained according to the requ irements of Municipal Code 8.04.030. B . Specifications. All vehicles used by Contractor in providing Food and Green Waste Collection services under this Agreement shall comply with all federa l, state, and local requirements for such vehicles as they now exist or may be amended in the future , and be registered with the Cal ifornia Department of Motor Vehicles. All such vehicles shall have water-tight bodies designed to prevent leakage, spillage or overfl ow. All such vehicles shall comply with U.S. Environmental Protection Agency noise emission regulations and other applicable noise control regulations. C . Condition 14 Page 1002 of 1192 Food and Green Waste Services Agreement 1) Contractor shall maintain all of its properties, facilities, and equipment used in providing service under this Agreement in a safe, neat, clean and operab le condition at all times. 2) Contractor shall inspect each vehicle daily to ensure that all equipment is operating properly. Vehicles which are not operating properly and represent a safety hazard shall be taken out of service until they are repaired and do operate properly and safely. Contractor shall perform all scheduled maintenance functions in accordance with the manufacturer's specifications and schedule. Contractor shall keep accurate records of al 1 vehicle maintenance, recorded according to date and mileage and shall make such records available to City upon request. 3) Contractor shall repair, or arrange for the repair of, all of its vehicles and equipment for which repairs a re needed because of accident, breakdown or any other cause so as to maintain all equipment in a safe and operable condition. Contractor shall maintain accurate records of repair, which shall include the date/mileage, nature of repair and the signature of a maintenance superv isor that the repair has been properly performed. 4) Contractor shall arrange all vehicles and other equipment in safe and secure location(s) in accordance with all applicable zoning regulations. D. Vehicle Identification. Each truck shall display in a prominent place a sign as required in Municipal Code section 8.04.090. E. Operation. Vehicles shall be operated in compliance with the California Vehicle Code, and all applicable safety and local ordinances. Contractor shall not load vehicles in excess of the manufacturer's recommendations or limitations imposed by state or local weight restrictions on vehicles. 5 .7.3 Food and Green Waste Containers Contractor shall supply each Single Family Dwelling Unit with a waste wheeler in size consistent with the City approved Food and Green Waste Collection program. In addition, Contractor will supply each Sing le Family customer a container to collect Food Waste inside a dwelling as approved by the City. Contractor shall supply each multi -family complex and commercial customer with the appropriate type of container to adequately service the needs. Containers shall be identified for Food and/or Green Waste only. Contractor agrees to provide additional appropriate Containers, as required. City and Contractor acknowledge that from time to time, a customer may damage or destroy a Container. City and Contractor also acknowledge that from time to time Containers may be stolen from the curb or damaged due to normal use. When notified of such occurrence, Contractor shall replace the Container, at no charge to the customer. 15 Page 1003 of 1192 Food and Green Waste Services Agreement 5.7.4 Litter Ab ateme nt Contracto r shall use due car e to prevent Food or Green Waste from bei ng spilled o r scattered during the Collection or transportation process. If any Food or Green Waste is spilled during Collection, Contractor shall promptly clean up all spilled materials. Each collection vehicle shall carry a broom and shovel at all times for this purpose. 5. 7 .5 Pers onnel A . Gen e ral. Contractor shall furnish qualified drivers, mechanical, supervisory, clerical, and other personnel as may be necessary to provide services required by this Agreement in a safe and efficient manner. B. I den tification . Contractor shall ensure that while on duty each Collection worker wears a clean uniform which displays the Contractor's company name and the worker's name or identification number. C. Fees & G ra tuities . Company shall not, nor shall it permit any agent, employee, or subcontractors employed by it to request, solicit, demand, or accept, either di rectly or indirectly any compensation or gratuity for any services performed under this Agreem ent except as provided in Article 8 of this Agreement. D . Training . All drivers shall be trained and qualified in the operation of vehicles they operate and must possess a valid license, of the appropriate class, issued by the California Department of Motor Vehicles. Contractor shall provide adequate operations, health and safety training, and Hazardous Waste id entification and handling training for all of its employees who use or operate equipment or who are otherwise directly involved in Collection or other related operations. E. C u sto m er Courtesy. Contractor shall train its employees in customer courtesy, shall prohibit the use of loud or profane language, and shall instruct Collection crews to perform the work quietly. Contractor shall use its best efforts to ensure that all employees present a neat appearance and conduct themselves in a courteous manner. If any employee is found to be discourteous or not to be performing services in the manner required by this Agreement, Contractor shall take all necessary corrective measures. If City has notified Contractor of a complaint related to a discourteous or improper behavior, Contractor wi ll reass ign the employee to duties not entailing contact with the publ ic while Contractor is pursuing its investigation and corrective action process. 5.8 Implementa tion Plan The parties recognize that substantial planning will be required in order to assure an orderly initiation of Food and Green Waste Collection services on January 1, 2016. To that end, the 16 Page 1004 of 1192 Food and Green Waste Services Agreement City will require Contractor to submit by November 1, 2015 a detailed implementation plan addressing, among other things, the steps Contractor will take and the schedule on which it will take them, to prepare for such an orderly initiation of service. The implementation plan shall cover Contractor's schedule for acquiring necessary equipment, personnel, storage and maintenance facilities, administrative offices, customer relations materials (including Collection schedules, route maps, billing forms, complaint forms, service request forms, etc.). Contractor agrees to adhere strictly to the implementation plan. The implementation shall be subject to the City's review and approval. Failure to substantially adhere to the implementation schedule will constitute a breach of this Agreement, and, if incurred, an event of default, under Article 12, Default, Remedies, and Liquidated Damages. 5.9 Food and Green Waste P r ocessing 5.9.1 Receipt of Food and Green Waste Commencing January 1, 2016, the Contractor shall have in place or have made arrangements for a Facility to receive and accept all deliveries of Food and Green Waste generated in the city. Contractor has designated the Engle and Gray facility to be utilized as of the Effective Date until the HZI Kompogas facility (or other similar technology) located at the Contractor's site (4388 Old Santa Fe Rd, San Luis Obispo) is constructed and operational. Contractor has designated Hitachi Zosen Inova (HZI) facility as the permanent processing site. If the HZI Kompogas facility is not constructed, Contractor will continue to utilize the Engle and Gray facility for Food and Green Waste Processing. 5.9.2 Status of Food and Green Waste Facility Any Facility used by contractor must be designed and constructed in accordance with all applicable state and local laws (e.g., CEQA, California Code of Regulations, etc). The Facility must have all permits from federal, state, regional , county and city agencies necessary for it to operate as a Food and/ or Green Waste Facility and must be in full regulatory compliance with all such permits. The selected Food and Green Waste Facility must be authorized to accept, under its existing permit, and have sufficient uncommitted capacity to accept, all Food and/ or Green Waste delivered to it by, or on behalf of, the City for the term of this Agreement. Contractor shall immediately notify City of any notice of breach or default received from Food and Green Waste Facility. 5.9.3 Alternative Processing Facility If Contractor becomes unable to deliver the City's Food and Green Waste to the Food and Green Waste Facility due to causes within its control or which could have been avoided by the exercise of due care, the Contractor shall arrange for it to be accepted at another Food and Green Waste Facility, in which case Contractor shall pay for any increased transportation costs, any differences in the fees charged at such Food and Green Waste Facility and the fees then in effect under this Agreement. If Contractor's inability to deliver the City's Food and Green 17 Page 1005 of 1192 Food and Green Waste Services Agreement Waste to the Food and Green Waste Facility is not due to causes within its control or which could have been avoided by the exercise of due care, then Contractor shall propose alternative Food and Green Waste Facilities including all related costs and City shall select the alternative to be used. 5.9.4 Disposition of Unauthorized Waste Contractor shall ensure that procedures to identify and reject materials delivered to the Food and Green Waste Facility which are Hazardous Waste, or which otherwise may not be legally accepted at the Food and Greer:i Waste Facility under their permits, are in place. Contractor may, in the course of implementing such procedures, refuse to accept Food and Green Waste deposited from the City if they constitute Hazardous Waste, or otherwise may not be legally accepted at the Food and Green Waste Facility, and Contractor shall be solely responsible of the materials which are accepted. If Contractor discovers Hazardous Waste, or other material which may not be legally accepted, among materials which it has accepted, it shall dispose of such waste at its own expense. Contractor may pursue all legal rights and remedies it may have against the Waste Generator( s) of such Solid Waste, if the Waste Generator( s) can be identified. 5.10 D ise>osal Contractor shall ensure that the residual Solid Waste from the City's Food and Green Waste delivered to the Food and Green Waste Facility by the Contractor are disposed of at a permitted disposal site in full regulatory compliance. 18 Page 1006 of 1192 6.1 Billing Food and Green Waste Services Agreement ARTICLE6 OTHER SERVICES The City Council shall establish an integrated rate for the Food and Green Waste, R ecycling and Solid Waste services. Contractor shall bill and collect for its services at no more nor less than these rates. Contractor's billing plan, including billing frequency, and format shall be suhjcct to approval hy City, and City shall have the right to revise the billing format to itemize certain charges. The City may also direct Contractor to insert mailers relating to contractor provided services with the bi llings and shall be responsible for a ll labor costs with respect to the mailing inserts. The mailers must fit in standard envelopes and not increase the required postage. The City will provide not less than thirty (30) days notice to Contractor prior to the mailing date of any proposed mailers to permit Contractor to make appropriate arrangements for inclusion of City materials. Contractor shall maintain copies of said billings and receipts, each in chronological order, for a period of three (3) years after the date of service fo r in spection by the City. Contractor may, at its option, maintain those records in computer form , on microfiche, or in any other manner, provided that the records cannot be a ltered, and can be preserved and retrieved for inspection and verification in a timely manner. The owner of occupied Premises shall be responsible and liable for paying the Food and Green Waste fees for that property. 6.2 Collection of Bills from Delinquent C ustomers Once each year, prior to a date established by the City, Contractor may take actions pursuant to Chapter 8.04 of the Municipal Code to co llect delinquent accounts. 6.3 Periodic Performance or Billing Audit The City shall have the right to periodically, not less than annually, request a performance audit or billing audit be completed by the Contractor, the City or an independent third party. The City shall be entitled to select the type of consultant that it deems qualified to conduct said audits. The cost of such audits will be an allowable cost under the rate setting methodology. 6.4 Customer Service 6.4.1 Office Office hours shall be, at a minimum , from 8:00 A.M. to 5:00 P.M., Monday through Friday, exclu sive of holidays. A responsible and qualified representative of Contractor shall be available during office hours for communication with the public. Telephone numbers shall either be a local or a toll free call to residents and businesses of the City. Contractor's telephone system shall be adequate to handle the volume of calls typically experienced on the busiest days. Contractor shall also maintain a local or to ll free telephone number for use during 19 Page 1007 of 1192 Food and Green Waste Services Agreement other than normal business hours. Contractor shall have a representative, answering or message providing/receiving (voice-mail) service avai lable at said after hours telephone number. 6.4.2 Complaint Documentation All service complaints related to Food and Green Waste Collection shall be directed to Contractor. Daily logs of complaints concerning Collection of Food and Green Waste shall be retained for a minimum of twenty-four (24) months and shall be avai lable to City at all times during this Agreement upon twenty-four (24) hour notice. Contractor shall log all complaints received ora ll y or in writing and said log shall include the date and time the complaint was received, name, address and telephone number of complainant to the extent that such information is provided by complainant, description of complaint, employee recording complaint and the action taken by Contractor to respond to and remedy complaint. All complaints received shall be responded to within twenty four (24) working hours ofreceipt. All customer service records and logs kept by Contractor shall be available at all times during this Agreement to City upon twenty four (24) hour notice and at no cost to City. City shall, at any time during regular Contractor business hours, have access to Contractor's customer service department for purposes of monitoring the quality of customer service or researching customer complaints assessing liquidated damages or other matters related to Contractor's performance under this Agreement. 6.4.3 Resolution of Customer Complaints Contractor shall notify customers of this complaint procedure at the time customers apply for or are provided service, and subsequently, annuall y. A customer dissatisfied with Contractor's decision regarding a complaint may ask the City to review the complaint. The City's Utilities Director shall determine if the customer's complaint is justified, and if so, what remedy, if any s hall be provided. The remedy under this Section s hall be limited to a rebate of customer charges related to the period of breach of any of the Terms of this Agreement. Any resolution of these customer complaints shall not affect the City's rights to liquidated damages. 6.4.4 Government Liaison Contractor shall designate in writing a "Goverrunent Liaison" who shall be responsible for working with the City M1mager, Utilities Director and/or one of their designated representative(s) to resolve customer complaints. 6.5 Education and Public Awareness Contractor acknowledges and agrees that education and public awareness are critical, key and essential elements of any efforts to achieve AB 939 and AB 1826 requirements. Accordingly, 20 Page 1008 of 1192 Food and Green Waste Services Agreement Contractor agrees to cooperate with City in exploring opportunities to expand public and customer knowledge concerning needs and methods to reduce, reuse and recycle Solid Waste and to cooperate fully with City in this regard . Contractor shall perform all necessary public education activities related to the Food and Green Waste services as directed by the City. This shall include, but not be limited to, annual mailings to all customers explaining the Food and Green waste program, mailings prior to the start of services, flyers handed out with Container delivery and follow-up mailings or handouts related to the collection of new materials. A ll public education materials shall be approved in advance by the City. At the direction of the City Manager and/or Utilities Director, Contractor shall participate in and promote Recycling, reuse and other diversion techniques at community events and local activities. Such participation would normally include providing, without cost to the City, educational and publicity information promoting the goals of the City's AB 939 and AB 1826 programs. 21 Page 1009 of 1192 7.1 Fr a nchi se Fee Food and Green Waste Services Agreement ARTICLE 7 PAYMENTS TO CITY In consideration of the exclusive franchise provided fo r in this Agreement, Contractor shall pay the City ten percent (10%) of its gross revenues for Food and Green Waste Co llection services; provided, however, that such franchise fee shall not exceed the costs incun-ed by the City to deliver service to properties. Such franchise fee shall be a "pass-through" expense for purposes of rate review. 7.2 AB 939 Fee If requested by City, Contractor shall pay an AB 939 fee, to be specified annually by the City. A ll AB 939 fees paid to the City shall be considered a pass through cost for purposes of rate setting. 7 .3 Business License Tax Contractor shall pay each annual business license tax. 7.4 Other Fees The City shall reserve the right to set "Other" Fees, as it deems necessary. These expenses will be determined and a fee designed to reimburse the City. Such fees shall be set annually by City resolution and may be considered a pass through cost for purposes of rate setting. 7.5 Time and Method of Paym ent If Contractor is directed to pay an AB 939, Franchise Fee or "Other" Fee, it shall do so on or before the fifteenth (15th) day of each month during the Term. Contractor shall remit to City a sum of money equal to the designated percentage of the gross revenue or a flat monthly fee as determined by the City. If any fees are not paid on or before the fifteenth (15th) day of any month, Contractor shall pay to City a late payment penalty in an amount equa l to one percent (1 % ) of the amount owing for that month. Contractor shall pay an additional late payment penalty of one percent (1 %) owing on any unpaid balance for each following thirty (30) day period the fee remains unpaid. Late payment penalty amounts shall not be included in any revenue requirement. 7 .6 Ad justm ent of Fees The City may adjust the amount of fees annua ll y. Such adjustment shall be reflected in the rates that the Contractor is allowed to charge and collect from customers. 7 . 7 Review of Fee Payments The City, or its agent, reserves the right to annuall y perform an independent review of fee payments, to verify that fees are being paid in accordance with Agreement. The cost of such reviews will be an allowable cost under the rate setting methodology. 22 Page 1010 of 1192 Food and Green Waste Services Agreement ARTICLES CONTRACTOR'S COMPENSATION AND RATES 8.1 General Contractor's compensation provided for in this Article shall be the full, entire and complete compensation due to Contractor pursuant to this Agreement for all labor, equipment, materials and supplies, taxes, insurance, bonds, overhead, profit and all other things necessary to perform all the services required by this Agreement in the manner and at the times prescribed. The Contractor does not look to the City for payment of any sums under this Agreement. Contractor will perform the responsibilities and duties described in this Agreement in consideration of the right to charge and collect from customers for services rendered at rates fixed by the City from time-to-time and the right to sell compost and other beneficial byproducts generated from the Food and Green Waste. The City shall have the right to structure those rates as it deems appropriate so long as the revenues forecasted to be received by Contractor from charging such rates can reasonably be expected to generate sufficient revenues to provide for Contractor's compensation. 8.2 Initia l Rates Contractor will submit required financial documentation for this service as part of an integrated solid waste rate application. The rate application will comply with the guidelines set forth in the City's "Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates". The portion of the rate attributable to this service shall be identified as part of the Council rate-setting process but will not be separated from the integrated rate. 8.3 S ubsequ ent Ra tes Contractor may request rate revisions in future solid waste rate applications. The rate app lication must comply with the City's "Rate Setting Process and Methodology Manual for Solid Waste Management Rates". 8.4 Ri ght to Pe rform Ra te Rev iews City reserves the right to perform, or have a qualified third party perform, a detai led review of Contractor's expenses and revenues for the purposes of adjusting rates . The results of this detai led rate review will be used to adjust rates, and the Contractor's calculated revenue requirements will be used the following year to adjust rates according to Section 8.3 Contractor's Compensation for subsequent Rate Years. 8.5 Extra ordin a ry Adju stm ents Contractor or City may request an adjustment to rates at times other than that required in Section 8.3 for unusual changes in the cost of providing service under this Agreement. Such changes may include, but are not limited to, changes in laws, ordinances, or regulations, and significant changes in Contractor's workload due to new residential or commercial development. However, when an extraordinary adjustment is requested, such adjustment shall consider changes in all costs and revenues from Contractor's proposed revenue requirement. 23 Page 1011 of 1192 Food nnd Green Wnste Services Agreement For each such request, Contractor shall prepare a schedule comparing the original proposed costs and revenues by line item to the then current costs and revenues, including an estimates of the cost impact of the change, using an operatin g ratio of 93%, applied to Contractor's costs as calculated in Contractor's proposed revenue requirement. Such request shall be prepared in a form acceptable to City with support for assumptions made by Contractor in preparing the estimate. Contractor and City shall negotiate a mutually acceptable adjustment amount. 24 Page 1012 of 1192 Food and Green Waste Serv i ces Agreement ARTICLE9 RECORDS, REPORTS AND INFORMATION, STUDIES AND HEARING REQUIREMENTS 9.1 Records 9.1.1 General Contractor shall maintain records required to conduct its operations, to support requests it may make to City, and to respond to requests from City in the conduct of City business. Additionally, the Contractor shall also keep and maintain records reasonably necessary for audits, as required by this Agreement, and shall keep and maintain all records reasonably necessary to develop reports and financial statements required with respect to this Agreement. Adequate record security shall be maintained to preserve records from events that can be reasonably anticipated such as a fire, theft and earthquake. Electronically maintained data/records shall be protected and backed up. 9.1.2 Financial Records Financial records shall separate all records related to the services performed under this Agreement from any and all other types of businesses and operations conducted by the Contractor. 9.1.3 General Records City approved records (format) shall be maintained for the City separate from other jurisdictions relating to: • Customer services; • Weight of Food and Green Waste; • Routes; • Facilities, inventory of equipment and personnel used; • Facilities and equipment operations, maintenance and repair; • Processing of Food and Green Waste and marketing and sale of Compost including name of the purchaser, the date of sales transaction, processing cost per ton, quantity purchased, value per ton and net sales records; • Complaints; and, • Missed pick ups. Contractor shall maintain records of all Food and Green Waste Collected in the City for the term of this Agreement. In the eve.nt Contractor discontinues providing Food and Green Waste services to City, Contractor shall provide all records of all Food and Green Waste Collected in City to City within thirty (30) days of discontinuing service. Records shall be in chronological and organized form and readily and easily interpreted. 9.2 Reports 9.2.1 Report Formats and Schedule 25 Page 1013 of 1192 Food and Green Waste Services Agreement Records shall be maintained in forms and by methods that facilitate flexible use of data contained in them to structure reports, as needed. Contractor may propose report formats that are responsive to the objectives and audiences for each report. The format of each report shall be approved by the City. Monthly reports shall be submitted within twenty (20) calendar days after the end of the month being reported. Annual reports shall be submitted before September 30th, for the previous reporting year. · 9.2.2 Monthly Reports The information listed shall be the minimum reported: • Food and Green Waste collected, sorted by type of Generator, in tons, by month, and cumulative for report year. • Complaint summary, for month and cumulative for report year. • Narrative summary assessment of problems encountered and actions taken with recommendations to City for improvement. • Number of accounts by category for each month of reporting year. • Participation rates. • Food and Green Waste Container distribution. The City may designate any additional information that it wishes provided in the monthly reports. 9.2.3 Annual Report The Annual Report is to be essentially in the form and content of the monthly reports. In addition, Contractor's annual audited financial reports/statements, with the operations related to the City services segregated, shall be included. The annual report shall also include a complete inventory of equipment used to provide all services. Financial statements shall include a supplemental schedu le combining Contractor's results of operations, separating the specific revenues and expenses, including detailed information with respect to general overhead claimed by the Contractor, in connection with the operations provided for in this Agreement from others included in such financial statement s. The financial statements, supplemental schedule, management letter and footnotes shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP) and audited, in accordance with UeneralJy Accepted Auditing Standards (GAAS) by a certified public accountant (CPA) licensed (in good standing) to practice public accounting in the State of California as determined by the State of California Department of Consumer Affairs Board of Accountancy. The CPA opinion on Contractor's annual financial statements and supplemental schedule shall be unqualified, except as to uncertainties for which the ultimate outcome cannot be determined by the date of the CPA's opinion. 26 Page 1014 of 1192 Food and Green Waste Services Agreement 9.3 Rig ht to In s p ect Reco rd s City shall have the right to inspect or review the payroll tax reports, specific documents or records required expressly or by inference pursuant to this Agreement, or any other simi lar records or reports of Contractor that City shall deem, in its sole discretion, necessary to evaluate annual reports, compensation app lications provided for in this Agreement and Contractor's performance provided for in this Agreement. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the records inspection. The cost of such inspection or review will be an allowable cost under the rate setting methodology. 9.3.1 Right to Review Basis for Landfill T ipping Fee Increases The Contractor shall provide to the City a copy of Cold Canyon Landfill's and/or the designated Food and Green Waste processing facility's request for an increase in tipping fees no later than five (5) days fo llowing submittal of said request to the County of San Luis Obispo and/or the designated processing faci lity. Additionally, the Contractor shall notify the City of the action taken by the Board of Supervisors and /or the designated processing facility regarding said request within five (5) days fo ll owing said action, including letter to the Board of Supervisors and related executed resolution and/or appropriate documentation from the designated processing faci lity. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the review. The cost of such inspection or review will be an allowable cost under the rate setting methodology unless there are findings pursuant to Section 12.5. 9.4 Waste Gen eration /Characterization Studies Contractor acknowledges that the city must perform Solid Waste generation and disposal characterization studies periodically to comply with AB 939 requirements . Contractor agrees to participate and cooperate with City and its agents to accomplish studies and data co ll ection and prepare reports as needed to determine weights and volumes of Solid Waste generated, diverted, disposed, transformed, or otherwise handled/processed to satisfy AB 939 requirements. 9.5 P er fo rma nce H ea ring The City maintains the right to hold a public hearing at any time, not more than once each year, at which the Contractor shall be present and shall participate, to review its services and performance. The purpose of the hearing is to provide for a discussion and review of technological, economic, and regulatory changes in order to ach ieve a continuing, advanced So lid Waste management system; and to ensure customer service quality and any other areas that may be addressed regarding services are being provided with adequate quality, efficiency and economy. Sixty (60) days after receiving notice from City of a Performance Hearing, Contractor shall, at a minimum, submit a report to City indicating ( l) changes recommended and/or new services to improve City's ability to meet the goals of AB 939 and Ab 1826 to contain costs and 27 Page 1015 of 1192 food and Green Waste Ser vices Agreement minimize impacts on rates; and (2) any specifi c plans for provision of changed or new serv ice s by Contractor. 28 Page 1016 of 1192 10.1 Indemnification Food and Green Waste Services Agreement ARTICLE 10 INDEMNIFICATION, INSURANCE AND BOND Contractor shall indemnify and hold harmless City, its officers, Directors, employees, and agents from and against any and all loss, liability, penalty, forfeiture, claim, demand, action proceeding or suit of any and every kind and description (including, but not limited to , injury to and death of any Person and damage to property, or for contribution or indemnity claimed hy third parties) to the extent arising or resulting from and in any way connected with (1) the negligence or willful misconduct of Contractor, its officers, employees agents and/or sub Contractors in performing services under this Agreement; (2) the failure of Contractor, its officers, employees, agents and/or subcontractors to comply in all respects with th e provisions of this Agreement, applicable laws (including, without limitation, the Environmental Laws) and regulations, and/or applicable permits and licenses; (3) the acts of Contractor, its officers, employees, agents and/or subcontractors in performing services under this Agreement for which strict liability is imposed by law (including, without limitation, the Environmental Laws). Contractor further agrees to and shall, upon demand of City, at Contractor's sole cost and expense, defend (with attorneys acceptable to City) the City, its officers, directors, employees, and agents against any claims, actions, suits or other proceedings, whether judicial, quasi-judicial or administrative in nature, arising or resulting from any events described in the immediately preceding paragraph to the extent arising from or related to alleged or actual violations of Proposition 218 and/or its implementing legislation,. Contractor's duty to indemnify and defend shall survive the expiration or earlier termination of this Agreement. 10.2 Landfill Diversion The Contractor acknowledges that the City has adopted a SRRE which selects Food and Green Waste Collection and Composting programs as a means of diverting an estimated 6,796 tons in 1995 and 8,248 tons per year by the year 2000. It is therefore of foremost importance that the Food and Green Waste and wood debris collected under this Agreement be converted into a functional and marketable product in order that the materials may be diverted from landfill disposal in compliance with the City's SRRE, and AB 939. The Contractor shall therefore use commercially reasonable efforts ensure that the processing method used shall, at all times, meet the intent of the City's SRRE and AB 939. Should the Contractor find it necessary to utilize another method of processing in order to meet the intent of the SRRE and AB 939, the City shall be given an opportunity lo make its own determination as to the suitability and cost- effectiveness of such process and shall approve such process in writing. The City shall have the right to terminate this Agreement upon the giving of a six (6) month prior written notice to Contractor should it be determined that the Food and Green Waste program being implemented and/or proposed under this Agreement is ineffective in meeting the City's diversion goals and objectives. Upon termination, the Contractor shall be entitled only to revenues less expenses incurred to that date. All revenues received thereafter shall be the property of the City unless otherwise agreed. 29 Page 1017 of 1192 Food and Green Waste Services Agreement 10.3 AB 939 Indemnification Contractor agrees to indemnify and hold harmless City, its officers, Directors, employees, and agents from and against all fines and/or penalties imposed by the California Integrated Waste Management Board in the event the source reduction and recycling goals or any other requirement of AB 939 are not met by City with respect to the waste stream Collected under this Agreement but only to the extent such failure is due to the failure of Contractor to meet its obligations· under this Agreement or for delays in providing information that prevents City from submitting reports required by AB 939 in a timely manner. 10.4 Insurance A. Minimum Limits of Insurance. Contractor shall maintain limits no less than: 1. Comprehensive General Liability : One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, Personal injury and property damage. 2. Automobile Liability: One Million Dollars ($1,000,000) combined single limit per accident for bodily injury and property damage. 3. Workers' Compensation and Employers Liability: Workers' compensation limits as required by the Labor Code of the State of California and Employers Liability limits of $1,000,000 per accident. B. Deductibles and Self-Insured Retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officials, directors and employees; or Contractor shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses. C. Other Insurance Provisions. The policies are to contain, or be endorsed to contain, the following provisions: 1. General Liability and Automobile Liability Coverages a) The City, its officials, employees, and directors are to be covered as insured as respects: liability arising out of activities performed by or on behalf of Contractor; products and completed operations of Contractor; Premises owned, leased or used by Contractor; or automobiles owned, leased, hired or borrowed by Contractor. The coverage shall contain no special limitations on the scope of protection afforded to the City, its officials, employees or volunteers. b) Contractor's insurance coverage shall be primary insurance as respects City, its officials, directors, employees and volunteers. Any insurance or self-insurance maintained by City, its officials, or employees shall be excess of Contractor's insurance and shall not contribute with it. c) Any failure to comply with reporting provisions of the policies shall not affect coverage provided to City, its officials, or employees. 30 Page 1018 of 1192 Food and Green Waste Services Agreement d) Coverage shall state that Contractor's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's li ability . 2. Workers' Compensation and Employers Liability Coverage -The insurer shall agree to waive all rights of subrogation against City, its officials, and employees for losses arising from work performed by Contractor for City. 3. All Coverages -Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or limits except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to City. D. Acceptability of Insurers. The insurance policies required by this Section shall be issued by an insurance contractor or companies admitted to do business in the State of California subject to the jurisdiction of the California Insurance Commissioner and with a rating in the most recent edition of Best's Insurance Reports of size category VII or larger and a rating classification of A or better. E. Verification of Coverage. Contractor shall furnish City with certificates of insurance and with original endorsements affecting coverage required by this clause. The certificates and endorsements for each insurance policy are to be signed by a Person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on forms provided by or acceptable to City and are to be received and approved by City before work commences. City reserves the right to require complete, certified copies of all required insurance policies, at any time. 10.5 Faithful Performance Bond Simultaneously with the execution of this Agreement, Contractor shall file with City surety bond, payable to City, securing Contractor's faithful performance of its obligations under this Agreement. The bond shall be in the amount of 125% of the total annual contract price guaranteeing the faithful performance of the agreement, including any reasonab le attorney's fees or other collection costs. 31 Page 1019 of 1192 Food and Green Waste Services Agreement ARTICLE 11 CITY'S RIGHT TO PERFORM SERVICE 11.1 General In the event that Contractor, for any reason whatsoever, fails, refuses or is unable to Collect, transport or process any or all Food and Green Waste materials which it is required by this Agreement to Collect and process, at the time and in the manner provided in this Agreement, for a period of more than seven (7) calendar days, and if, as a result thereof, Food and Green Waste should accumulate in the City to such an extent, in such a manner, or for such a time that the City Manager should find that such accumulation endangers or menaces the public health, safety or welfare, then City shall have the right, but not the obligation, upon twenty-four (24) hour prior written notice to Contractor during the period of such emergency as determined by the City Manager, ( 1) to perform, or cause to be performed, such services itself with its own or other personnel without liability to Contractor; and/or (2) to take possession of any or all of Contractor's land , equipment and other property to Collect, transport or process any Food and/or Green Waste generated within the City which Contractor would otherwise be obligated to Collect, transport, process or market pursuant to this Agreement. In the event the City takes possession of the Contractor's equipment and other property, the City shall be entitled to have another contractor operate such equipment and property under City direction. Additionally, in the event the City takes possession of the Contractor's equipment and other property, the City does not guarantee repair of existing problems with equipment and facilities. Notice of Contractor's failure, refusal or neglect to Collect, transport or process Food and Green Waste may be given orally by telephone to Contractor at its principal office and shall be effective immediately. Written confirmation of such oral notification shall be sent to Contractor within twenty-four (24) hours of the oral notification. Contractor further agrees that in such event: • It will take direction from City to effect the transfer of possession of property to City for City's use. • It will, if City so requests, keep in good repair and condition all of such property, provide all motor vehicles with fuel, oil and other serv ic e, and provide such other service as may be necessary to maintain said property in operational condition. • City may immediately engage all or any personnel necessary or useful for the Collection, transportation and processing Green Waste, including, if City so desires, employees previously or then emp loyed by Contractor, Contractor further agrees, if City so requests, to furnish City the services of any or a ll management or office personnel employed by Contractor whose services are necessary or useful for Green Waste Collection, Transportation and processing operations and for the billing and collection of fees for these services. 32 Page 1020 of 1192 Food and Green Waste Services Agreement City agrees that it assumes complete responsibility for the proper and normal use of such equipment and facilities while in its possession. If the interruption or discontinuance in service is caused by any of the reasons listed in Section 12.4 (Excuse From Performance), City shall pay to Contractor the reasonable rental value of the equipment and facilities, possession of which is taken by City, for the period of City's possession, if any, which extends beyond the period of time for which Contractor has rendered bills in advance of service. Except as otherwise expressly provided in the previous paragraph, City's exercise of its rights under this Article I 1 (I) does not constitute a taking of private property for which compensation must be paid; (2) will not create any liability on the part of City to Contractor; and (3) does not exempt Contractor from the indemnity provisions of Article 10, Indemnification, Insurance and Bond, which are meant to extend to circumstances arising under this Section, provided that Contractor is not required to indemnify City against claims and damages arising from the sole negligence of City officers, employees and agents in the operation of Collection vehicles during the time City has taken possession of such vehicles. 11.2 Temporary Possession of Contractor's Property If the City suffers an interruption or discontinuance of service as described in Section 11. l (including interruptions and discontinuance due to events described in Section 12.4, Excuse from Performance), City may take possession of and use all of Contractor's property described above until other suitable arrangements can be made for the provision of Food and Green Waste Services which may include the grant of a Contract to another company. The same notice requirements of Section 11.1 are applicable. 11.3 Billing and Compensation to City During City's Possession During such time that city is providing Green Waste services, as above provided, Contractor shall continue to bill and collect payment from all users of the above-mentioned services. Contractor further agrees that, in such event, it shall reimburse City for any and all costs and expenses incurred by City in taking over possession of the above-mentioned property for Food and Green Waste service in such manner and to an extent as would otherwise be required of Contractor under the Terms of this Agreement. Such reimbursement shall be made from time to time after submission By City to Contractor of each statement listing such costs and expenses, but in no event later than five (5) working days from and after each such submission. The City shall have the right, at its so le discretion, to take over billing and payment collection activities. The City shall then pay any net revenues to the Contractor, after deducting all expenses, including City-incurred expenses. 11.4 City's Right to Relinquish Possession It is further mutually agreed that City may at any time at its discretion relinquish possession of any or all of the above-mentioned property to Contractor and thereupon demand that Contractor resume the Food and Green Waste services as provided in this Agreement, whereupon Contractor shall be bound to resume the same. 33 Page 1021 of 1192 Food and Green Waste Services Agreement 11 .5 D uratio n of C ity's Possess ion C ity's right pursuant to this Article to retain temporary possession of Contractor's faci lities and equipment, and to render Collection services, shall terminate when City determines that such services can be resumed by Contractor, or when City no longer reasonably requires such facilities or equipment. In any case, City has no obligation to maintain possession of Contractor's property and/or continue its use for any period of time and may at any time, in its sole discretion, relinquish possession to Contractor. 34 Page 1022 of 1192 Food and Green Waste Services Agreement ARTICLE 12 DEFAULT, REMEDIES AND LIQUIDATED DAMAGES 12.1 Events of Default All provisions of this Agreement to be performed by Contractor are considered material. Each of the following shall constitute an event of default. A. Fraud or Deceit. If Contractor practices, or attempts to practice, any fraud or deceit upon city. B. Insolvency or Bankruptcy. If Contractor becomes insolvent, unable, or unwilling to pay its debts when due, or upon listing of an order for relief in favor of Contractor in a bankruptcy proceeding. The Contractor is also in default if there is an assignment of this contract for the benefit of its creditors. C. Failure to Maintain Coverage. If Contractor fails to provide or maintain in full force and effect the Workers' Compensation, liability, indemnification coverage or any insurance coverage or bond required under this Agreement. D. Violations of Regulation. If Contractor facilities fall out of full regulatory compliance or if Contractor violates any orders or filings of any regulatory body having jurisdiction over Contractor relative to this Agreement, provided that Contractor may contest any such orders or filings by appropriate proceedings conducted in good faith, in which case no breach of the Agreement shall be deemed to have occurred. E. Failure to Perform . If Contractor ceases to provide Food and Green Waste services as required under this Agreement for a period of two (2) days or more, for any reason within the control of Contractor. F. Failure to Pay/Report. If Contractor fails to make any timely payments, including liquidated damages and penalties, required under this Agreement and/or fails to provide City with required information, reports, and/or records in a timely manner as provided for in the Agreement. G. Acts or Omissions. Any other act or omission by Contractor which violates the terms, conditions, or requirements of this Agreement, the California Integrated Waste Management Act of 1989, as it may be amended from time to time, or any order, directive, rule, or regulation issued there under and which is not corrected or remedied within the time set in the written notice the violation or, if Contractor cannot reasonably correct or remedy the breach within the time set forth in such notice, if Contractor should fail to commence to correct or remedy such violation within the time set forth in such notice and diligently effect such correction or remedy thereafter. 35 Page 1023 of 1192 Food and Green Waste Services Agreement H. F alse or M is leading State ments. Any representation or disclosure made to City by Contractor in connection with or as an inducement to entering into this Agreement, or any future amendment to this Agreement, which proves to be false or m isleading in any material respect as of the time such representation or disclosure is made, whether or not any such representation or disclosure appears as part of this Agreement. I. Attachment. There is a seizure of attachment ot: or levy on, the operating equipment of Contractor, including without l imits its equipment, maintenance or office facilities, or any part thereof. J . Suspension or Ter mination of Service. There is any termination or suspension of the transaction of business by Contractor, including without limit, due to labor unrest including strike, work stoppage or s lowdown, sickout, picketing, or other concerted job action lasting more than two (2) days. Upon default by the Contractor, the City Manager shall provide written notice to Contractor of the violation. The City Manager shall include in the notice, a demand that the Contractor correct the violation within 10 days following the delivery of said notice. If the violation is not corrected within the 10 days, the C ity shall have the right to terminate the Agreement per the provisions provided in Section 12.2. For purposes of this Agreement and any notice required thereunder, the term "days" shall mean calendar days. 12.2 Right to Terminate U p on Default Upon a default by Contractor, City shall have the right to terminate this Agreement upon a ten ( 10) days notice if the public hea lth or safety is threatened, or otherwise a thirty (30) days notice, but without the need for any hearing, suit or legal action. This right of termination is in addition to any other rights of City upon a failure of Contractor to perform its obligations under this Agreement. City's right to terminate this Agreement and to take possession of Contractor's equipment and fac ililies are not exclusiv~, aml City's termination of this Agreement shall not constitute an e lection of remedies . Instead, they shall be in addition to any and all other legal and equitable rights and remedies which City may have. By virtue of the nature of this Agreement, the urgency of timely, continuous and high-quality service, the lead time required to effect alternative service, and the rights granted by City to Contractor, the remedy of damages for a breach hereof by Contractor is inadequate and City shall be entitled in injunctive relief. 12.3 Liquida t ed D a m ages A. Gener al. C ity finds, and Contractor agrees, that as of the time of the execution of this Agreement, it is impractical, if not impossible, to reasonably ascertain the extent of 36 Page 1024 of 1192 Food and Green Waste Services Agreement damages which shall be incurred by City as a result of a breach by Contractor of its obligations under this Agreement. B. Service Performance Standards; Liquidated Damages for Failure to Meet Standards. The parties acknowledge that consistent, reliab le Green Waste service is of utmost importance to City and that city has considered and relied on Contractor's representations as to its quality of service commitment in awarding the Agreement to it. The parties further recognize that some quantified standards of performance are necessary and appropriate to ensure consistent and reliable service and performance. The parties further recognize that if Contractor fai ls to achieve the performance standards defined in this Section, comply with complaint resolution criteria, or fails to submit required documents in a timely manner, City and its residents will suffer damages and that it is and will be impractical and extremely difficult to ascertain and determine the exact amount of damages which City will suffer. Therefore, without prejudice to City's right to treat such non-performance as an event of default under this Article 12, the parties agree that the following liquidated damage amounts represent a reasonable estimate of the amount of such damages considering all of the circumstances existing on the date of this Agreement, including the relationship of the sums to the range of harm to City that reasonably could be anticipated and the anticipation that proof of actual damages would be costly or inconvenient. Recognizing the importance of resolving any failure to meet the service performance standard, the City shall contact Contractor within two (2) days of any failing reported directly to the City. Contractor agrees to pay (as liquidated damages and not as a penalty) the amounts set forth below: Coll ectio n Reliabili ty and Quality • For each failure over five (5) annually to commence service to a new customer account within seven (7) days after order: $150.00 • For each failure over ten (10) annually to Collect Food and/or Green Waste, which as been properly set out for Collection, from an established customer account on the scheduled Collection day: $150.00 • For each failure to Collect Food and/or Green Waste which have been properly set out for Collection, from the same customer on two (2) consecutive scheduled pickup days: $150.00 • For each occurrence over five (5) annually of damage to private property: $250.00 • For each occurrence of discourteous behavior: $250.00 • For each failure over ten (10) annually to clean up Food and/or Green waste spilled from Bins: • For each occurrence over five (5) annually of Collecting 37 $150.00 Page 1025 of 1192 Food and Green Waste Services Agreement Food and/ or Green Waste during unauthorized hours: • Por each failure to respond to a customer complaint within twenty-four (24) working hours: Timeliness of Suhmjs,o;;ions to City $250.00 $100.00 REPORTS Any report shall be considered late until such time as a correct and complete report is received by City. For each calendar day a report is late, the daily assessment shall be: Monthly Reports: Annual Reports: For each infraction For each infraction $100 per day $500 per day Liquidated damages will only be assessed after Contractor has been given the opportunity but failed to rectify the damages, as described in this Agreement (e.g., twenty-four (24) working hours to respond to a complaint). City may determine the occurrence of events giving rise to liquidated damages through the observation of its own employees or representative or investigation of customer complaints. Prior to assessing liquidated damages, City shall give Contractor notice ofits intention lo do so. The notice will include a brief description of the incident(s)/non-performance. Contractor may review (and make copies at its own expense) all information in the possession of City relating to incident(s)/non-performance. Contractor may, with in ten (10) days after receiving the notice, request a meeting with City. If a meeting is requested, it shall be held by the City Manager or his/her designee. Contractor may present evidence in writing and through testimony of its employees and others relevant to the incident(s)/non performance. The City Manager or designee will provide Contractor with a written explanation of his or her determination on each incident(s)/non-performance prior to authorizing the assessment of liquidated damages. The decision of the City Manager or designee shall be final. C. Amount. The City Manager may assess liquidated damages for each calendar day or event, as appropriate, that Contractor is determined lo be liable in accordance with this Agreement. D. Timing of Payment. Contractor shall pay any liquidated damages assessed by City within ten (I 0) days after they are assessed. If they are not paid within the ten (10) day period, City may proceed against the performance bond required by this Agreement or order the termination of this Agreement, or both pursuant to the terms of this Agreement. 12.4 Excuse from Performance The parties shall be excused from performing their respective obligations hereunder in the event they are prevented from so performing by reason of floods, earthquakes, other "acts of God", war, civil insurrection, riots, acts of any government (including judicial action), and 38 Page 1026 of 1192 Food and Green Waste Services Agreement other similar catastrophic events which are beyond the control of and not the fault of the party claiming excuse from performance hereunder. Labor unrest, including but not limited to strike, work stoppage or s lowdown, sick-out, picketing, or other concerted job action conducted by Contractor's emplo yees or directed at Contractor or its selected facilities is not an excuse from performance and Contractor shall be obligated to continue to provide service notwithstanding the occurrence of any or a ll such events. The party claiming excuse from performance shall, within two (2) days after such party has notice of such cause, give the other party notice of the facts constituting such cause and asserting its claim to excuse under this Section. The interruption or discontinuance of Contractor's services caused by one or more of the events excused shall not constitute a default by Contractor under this Agreement. Notwithstanding the foregoing, however, if Contractor is excused from performing its obligations hereunder for any of the causes li sted in this Section for a period of seven (7) days or more, City shall have the right to review the circumstances under which the excuse from performance was granted. After such review, if the City determines the excuse from serv ice is no longer valid, the City shall notify the Contractor in writing to resume service within two (2) days from the receipt of such notification. If the Contractor fails to resume service within the two (2) days, the City shall have the right to terminate this Agreement by giving ten (10) days notice, in which case the provisions relative to taking possession of Contractor's land, equipment and other property and engagin g Contractor's personnel in Article 11, City's Right to Perform Services, and this Article 12 shall apply. 12.5 Financial Material Errors, Omissions or Irregularities The City may review, test and audit the books and records of the Contractor for the purpose of determining whether the contractor is complying with the terms of the Agreement. In the event that material errors or omissions or irregularities are identified, and then the cost associated w ith the audit, test or review shall be paid by the Contractor to the City. In the case of financial errors, materiality shall be deemed to be two percent (2%) or greater of the gross revenues of the Contractor from activities performed under this agreement. Recovery of any overpayment will be negotiated on a case by case basis, either immediately or through the next rate setting evaluation. 39 Page 1027 of 1192 Food and Green Waste Services Agreemenl ARTICLE 13 OTHER AGREEMENTS OF THE PARTIES 13.1 Relationship of Parties The parties intend that Contractor shall perform the services required by this Agreement as an independent Contractor engaged by City and not as an officer or employee of City nor as a partner of or joint venture with City. No employee or agent or Contractor shall be or shall be deemed to be an employee or agent of City. Except as expressly provided herein, Contractor shall have the exclusive control over the manner and means of conducting the Green Waste services performed under this Agreement, and all Persons performing such services. Contractor shall be solely responsible for the acts and omissions of its officers, employees, subcontractors and agents . Neither Contractor nor its officers, employees, subcontractors and agents shall obtain any rights to retirement benefits, workers compensation benefits, or any other benefits which accrue to City employees by virtue of their employment with City. 13.2 Compliance with law In providing the services required under this Agreement, Contractor shall at all times, at its sole cost, comply with all applicable laws of the United States, the State of California, City, and with all applicable regulations promulgated by federal, state, regional or local administrative and regulatory agencies, now in force and as they may be enacted, issued or amended during the Term. 13.3 Governin g Law This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California. 13.4 Jurisdiction Any lawsuits between the parties arising out of this Agreement shall be brought and conclud ed in the courts of the State of California, which shall have exclusive jurisdiction over such lawsuits. 13.5 Assign ment Except as may be provided for in Article 11 , (City's Right to Perform Service), neither party shall assign its rights, nor delegate, subcontract or otherwise transfer its obligations under this Agreement to any other Person without the prior written consent of the other party. Any such assignment made wi thout the consent of the other party shall be void and the attempted assignment shall constitute a material breach of this Agreement. The Contractor shall consent to any assignment to a joint powers authority, or any similar public entity assignee of the City. For purposes of this Section when used in reference to Contractor, "assignment" shall include, but not be limited to ( 1) a sale, exc hange or other transfer of at least fifty -one percent (51 % ) all of Contractor's assets dedicated to service under this Agreement to a third party; (2) a sale, exchange or other transfer of outstanding common stock of Contractor to a third party provided 40 Page 1028 of 1192 Food and Green Waste Services Agreement said sale, exchange or transfer may result in a change of control of Contractor; (3) any dissolution, reorganization, consolidation, merger, re-capitalization, stock issuance or re- issuance, voting trust, pooling agreement, escrow arrangement, liquidation or other transaction to which results in a change of ownership or control of Contractor; ( 4) any assignment by operation of law, including insolvency or bankruptcy, making assignment for the benefit of creditors, writ of attachment for an execution being levied against this Agreement, appointment of a receiver taking possession of Contractor's property, or transfer occurring in the event of a probate proceeding; and (5) any combination of the foregoing (whether or not in related or contemporaneous transactions) which has the effect of any such transfer or change of ownership, or change of control of Contractor. Contractor acknowledges that this Agreement involves rendering a vital service to City's residents, and that City has selected Contractor to perform the services specified herein based on (1) Contractor's experience, skill and reputation for conducting its Solid Waste ·management operations in a safe, effective and responsible fashion, at all times in keeping with applicable Environmental Laws, regulations and best waste management practices, and (2) Contractor's financial resources to maintain the required equipment and to support its indemnity obligations to City under this Agreement. City has relied on each of these factors, among others, in choosing Contractor to perform the services to be rendered by Contractor under this Agreement. If Contractor requests City's consideration of and consent to an assignment, City may deny or approve such request in its complete discretion. The City is concerned about the possibility that assignment could result in significant rate increases, as well as a change in the quality of service. Accordingly, the following standards have been set to ensure that assignment will result in continued quality service. In addition, the City reserves the right to solicit competitive bids for these services if the assignment results in a request by the assignee for rate increases that are higher than the inflationary index and do not reflect value changes in service standards. At a minimum, no request by Contractor for consent to an assignment need be considered by City unless and until Contractor has met the following requirements: A. Contractor shall undertake to pay City its reasonable expenses for attorney's fees and investigation costs necessary to investigate the suitability of any proposed assignee, and to review and finalize any documentation required as a condition for approving any such assignment; B. Contractor shall furnish City with audited financial statements of the proposed assignee's operations for the immediately preceding three (3) operating years; C. Contractor shall furnish City with satisfactory proof: 1) that the proposed assignee has at least ten (10) years of Green Waste management experience on a scale equal to or exceeding the scale of operations conducted by Contractor under this Agreement; 2) that in the last five (5) years, the proposed assignee has not suffered any significant citations or other censure from any federal, state or local agency having jurisdiction 41 Page 1029 of 1192 Food and Green Waste Services Agreement over its Solid Waste management operations due to any significant failure to comply with state, federal or local Environmental Laws and that the assignee has provided City with a complete list of such citations and censures; 3) that the proposed assignee has at all times conducted its operations in an environmentally safe and conscientious fashion; 4) that the proposed assignee conducts its Green Waste management practices in accordance with sound waste management practices in full compliance with all federal, state and local laws regulating the collection, transportation, processing, marketing and disposal of Solid Waste including Hazardous Wastes; and, 5) of any other information required by City to ensure the proposed assignee can fulfill the Terms of this Agreement in a timely safe and effective manner. Under no circumstances shall the City be obliged to consider any proposed assignment by City if Contractor is in default at any time during the period of consideration. 13.6 Su bcon tracting Except as approved in writing by the City, Contractor shall not enter into an agreement to have another Person perform Contractor's duties of this Agreement. Contractor shall undertake to pay City its reasonable expenses for attorney's fees and investigation costs necessary to investigate the suitability of any proposed subcontractor, and to review and finalize any documentation required as a condition for approving any such subcontracting agreement. 13.7 Bindin g on Assigns The provisions of this Agreement shall inure to the benefit to and be binding on the permitted assigns of the parties. 13.8 Transition to Next Contractor If the transition of services to another Contractor occurs through expiration of term, default and termination, or otherwise, Contractor will cooperate with City and subsequent Contractor(s) to assist in an orderly transition which will include Contractor providing route lists and billing information. Contractor will not be obliged to sell collection vehicles or Containers to the next Cunlraclur. Depending un Contractor's circumstances at the point of transition, Contractor at its option may enter into negotiations with the next Contractor to sell (in part or all) Collection vehicles and/or containers. 13.9 Parties in Interest Nothing in the Agreement, whether express or implied, is intended to confer any rights on any persons other than the parties to it and their representatives, successors and permitted assigns. 13.10 Waiver The waiver by either party of any breach or violation of any provisions of this Agreement shall not be deemed to be a waiver of any breach or violation of any other provision nor of any subsequent breach of violation of the same or any other provision. The subsequent acceptance by either party of any monies which become due hereunder shall not be deemed to be a waiver 42 Page 1030 of 1192 Food and Green Waste Services Agreement of any pre-existing or concurrent breach or violation by the other party of any provision of this Agreement. 13.11 Co ntracto r's Inves ti ga ti o n Contractor has relied on its own investigations, and not on any representations of the City or its agents of the conditions and circumstances surrounding the Agreement and the work to be performed by it. 13.12 Notice All notices, demands , requests, proposals, approvals, consents and other communications which this Agreement requires, authorizes or contemplates shall be in writing and shall either be personally delivered to a representative of the parties at the address below or be deposited in the United States mail, first class postage prepaid, addressed as follows: If to City: If to Contractor: Utilities Director City of San Luis Obispo 879 Morro Street San Luis Obispo , CA 93401 Mike Dean San Luis Garbage Company 4388 Old Santa Fe Road San Luis Obispo, CA 93401 The address to which communications may be delivered may be changed from time to time by a notice given in accordance with this Section. The notice, if mailed, is deemed served three (3) days after the mailing. 13.13 Representatives of the Parties References in this Agreement to the "City" shall mean the City Council and all actions to be taken by City shall be taken by the City Council except as provided below. The City Council may delegate, in writing , authority to the City Manager, Utilities Director, and/or to the City employees and may permit such employees, in turn, to delegate in writing some or all of such authority to subordinate employees. Contractor may rely upon actions taken by such delegates if they are within the scope of the authority properly de legated to them. Contractor shall, by the etlective date, designate in writing a responsible officer who shall serve as the representative of Contractor in all matters related to the Agreement and shall inform City in writing of such designation and of any limitations upon his or her authority to bind Contractor. City may rely upon action taken by such designated representative as actions of Contractor unless they are outside the scope of the authority delegated to him/her by Contractor as communicated to City. 13.14 C itv Free to Negotiate with Third Parties 43 Page 1031 of 1192 Food and Green Waste Services Agreement City may investigate all options for the Collection and processing of Food and Green W <1ste after the expiration of the Term. Without limiting generality of the foregoing, City may solicit proposals from Contractor and from third parties for the provi sion of Food and Green Waste services, and any combination thereof, and may negotiate and execute Agreements for such services which will take effect upon the expiration or earlier termination under Section 12.1 (Events of Default) of this Agreement. 13.15 Compliance with City Code Contractor shall comply with those provisions of the City code which are applicable, and with any and all amendments to such applicable provisions during the Term of this Agreement. 13.16 Privacy Contractor shall strictly observe and protect the rights of privacy of customers. Information identifying individual customers or the composition or contents of a customer's waste stream shall not be revealed to any person, governmental unit, private agency, or contractor, unless upon the authority of a court oflaw, by statute, or upon valid authorization of the customer. This provision shall not be construed to preclude Contractor from preparing, participating in, or assisting in the preparation of waste characterization studies or waste stream analyses which may be required by AB 939. 44 Page 1032 of 1192 14.1 E ntire Agreeme n t Food and Green Waste Services Agreement ARTICLE 14 MISCELLANEOUS AGREEMENTS This Agreement, including the exhibits, represents the full and entire Agreement between the parties with respect to the matters covered herein. 14.2 Section Headings The article headings and section headings in this Agreement are for convenience of reference only and are not intended to be used in the construction of this Agreement nor to alter or affect any of its provisions. 14.3 References to law s a nd O th er Agreeme n ts All references in this Agreement to laws shall be understood to include such laws as they may be subsequently amended or recodified, unless otherwise specifically provided. This Agreement supersedes any and all Agreements for Food and Green Waste Collection, processing and/or marketing heretofore entered into by the parties and the City. 14.4 I nterpret atio n . This Agreement, including the exhibits attached hereto, shall be inre.J:pret~d and .cQnstrued reasonably and neither for nor against either party, regardless of the degree t~ which either party participated in its drafting. 14.S Agreeme n t This Agreement may not be modified or amended in any respect except by a writing signed by the parties. 14.6 Scvcra bility If any non-material provision of this Agreement is for any reason deemed to be invalid and unenforceable, the invalidity or unenforceability of such provision shall not affect any of the remaining provisions of this Agreement which shall be enforced as if such invalid or unenforceable provision had not been contained herein. 45 Page 1033 of 1192 Food and Green Waste Services Agreement rN WITNESS WHEREOF, City and Contractor have executed this Agreement as of the day and year first above written. The City of San Luis Obispo ("City") Attest: San Luis Garbage Company ("Contractor") 46 Page 1034 of 1192 Notice of Public Hearing Regarding Proposed Solid Waste Rate Increase Residential Property Owners and Tenants - Customers: This notice is intended to inform you that the City of San Luis Obispo (the “City”) will hold a public hearing regarding rate adjustments (the “Proposed Rate Increase”) proposed by San Luis Garbage Company (the “Garbage Company”) for properties and customers receiving solid waste, recycling, and green waste services within the City. The Proposed Rate Increase will be considered by the San Luis Obispo City Council at the date, time, and location specified below. Consistent with the requirements of Proposition 218, this notice also provides you with the following information: ● The Amount of the Proposed Rate Increase; ● The Date, Time, and Place of the Public Hearing; ● The Majority Protest Procedures; ● The Reason for the Proposed Rate Increase; and ● The Basis for the Proposed Rate Increase. NOTICE OF PUBLIC HEARING The Public Hearing for the Proposed Rate Increase within the City limits will be held on: Date: April 19, 2022 Time: 6:00 pm Place: San Luis Obispo City Hall, 990 Palm Street, San Luis Obispo, CA At the Public Hearing, the City Council will consider all public comment in support of and in opposition to the Proposed Rate Increase and whether or not a Majority Protest exists pursuant to the California Constitution (as described below). If approved, the Proposed Rate Increase would become effective on May 1, 2022. HOW DO I PROTEST THE PROPOSED RATE INCREASE? Pursuant to Section 6 of Article XIII D of the California Constitution, the following persons may submit a written protest against the Proposed Rate Increase to the City Clerk before the close of the Public Hearing referenced above. ▪ An owner(s) of property (parcel(s)) receiving solid waste services within the City limits. If the person(s) signing the protest, as an owner, is not shown on the last equalized assessment roll as the owner of the parcel(s) then the protest must contain or be accompan ied by written evidence that such person signing the protest is the owner of the parcel(s) receiving services; or ▪ A tenant(s) whose name appears on the Garbage Company’s records as the customer of record for the corresponding parcel receiving solid waste services within the City limits (tenant-customer). A valid written protest must contain a statement that you protest the Proposed Rate Increase, the address or Assessor’s Parcel Number (APN) of the parcel or parcels which receive solid waste, recycling, a nd green waste services, and a signature by either the owner or the tenant -customer of the parcel or parcels. One written protest per parcel shall be counted in calculating a majority protest to the Proposed Rate Increase subject to the requirements of Section 6 of Article XIII D of the California Constitution. Written protests will not be Page 1035 of 1192 accepted by e-mail or by facsimile. Verbal protests will not be counted in determining the existence of a majority protest. To be counted, a protest must be received in writing by the City Clerk before the close of the Public Hearing referenced above. Written protests regarding the solid waste rate increase may be mailed to: City of San Luis Obispo Attn: City Clerk 990 Palm Street San Luis Obispo, CA 93401-3249 Written protests may also be personally delivered to the City Clerk at San Luis Obispo City Hall located at 990 Palm Street, San Luis Obispo, California. If valid written protests are presented by a majority of owners and/or tenants-customers of parcels receiving solid waste, recycling, and green waste services within the City limits, then the City will not adjust/increase the rates for the services. Reason for the Proposed Rate Increase The Proposed Rate Increase is 17.75 percent for solid waste, recycling, and green waste/organics collection services. In addition, there will be a temporary 8.88 percent increase to account for a deficit in funding due to this rate increase being delayed from January 1, 2022 to May 1, 2022. The temporary 8.88 percent increase will expire January 1, 2023. The increase is necessary for the Garbage Company to continue to provide safe, environmentally sound, and reliable solid waste, recycling, green waste/organics collection, transportation, and disposal and processing services to the City. Several factors contributed to this rate increase including, but not limited to: increased costs associated with the purchase and operation of collection vehicles, fuel costs, labor costs, and increased costs associated with the organics digester facility. California Senate Bill 1383 (SB 1383) is a recent state law passed with the goal of reducing methane through a reduction in landfilled organic waste. Methane is a potent greenhouse gas, with more than 80 times the warming power of carbon dioxide and is a major component of decomposing organic waste. In response to the harmful effects of methane gas, the California Department of Resources Recycling and Recovery adopted regulations implementing SB 1383 in the Fall of 2020. Added responsibilities associated with SB 1383 include diverting organic materials (facilitated by the local organics digestion facility), expanding organic waste collection programs to include food waste, monitoring organics carts for contamination, and reporting data. Basis of the Proposed Rate Increase The Proposed Rate Increase of 17.75 percent is based on the following cost increases incurred by the Garbage Company: 1. 3.84 percent of the Proposed Rate Increase is for capital investment costs of new collection vehicles, replacement containers and additional containers to meet the demands of SB 1383 compliance. 2. 3.70 percent of the Proposed Rate Increase is for increased capital equipment investments and escalating operating expenses related to the Anaerobic Digester. 3. 1.99 percent of the Proposed Rate Increase is for market wage adjustments to attract and retain safe, quality employees. 4. 1.06 percent of the Proposed Rate Increase is for increases in insurance premiums. Page 1036 of 1192 5. 1.55 percent of the Proposed Rate Increase is for increased AB 939 fee costs, which are used to fund the City waste diversion programs associated with California Assembly Bill 939 and Senate Bill 1383. 6. 5.61 percent of the Proposed Rate Increase is for increases in other operational expenses including a Consumer Price Index increase of 5.3 percent. The additional 8.88 percent temporary increase is for the delayed rate implementation that was no fault of the Garbage Company. The total rate increase implemented May 1, 2022 will be 26.63 percent. The 8.88 percent temporary increase will expire January 1, 2023, net of any Consumer Price Index adjustment as discussed next. Regularly scheduled interim year rate increases shall commence on January 1, 2023 and January 1, 2024 and are based on the following: 1. Increases, if any, in the Consumer Price Index (CPI) for Bureau of Labor Statistics’ Consumer Price Index for Urban Consumers based on the All U.S. City Average, Bureau of Labor Statistics for the month of June 2022 for January 1, 2023 and June 2023 for January 1, 2024. The January 1, 2023 CPI rate adjustment will be applied after the 8.88 percent temporary rate increase is removed. Additionally, at the March 9, 2022 San Luis Obispo County Integrated Waste Management Authority (IWMA) Board Meeting, a fee increase to account for operational and capital cost increases due largely to implementation of SB 1383 will be presented for adoption. If adopted, the fee increase will be implemented starting July 1, 2022 and will not exceed 5.4%. If adopted, the Garbage Company is authorized to bill this fee to the rate payers benefiting from these additional services in compliance with Proposition 218. The IWMA is a Joint Powers Authority formed to plan and implement regional solid waste and hazardous waste programs mandated by State law. The Joint Powers Agreement between the City of San Luis Obispo and the IWMA can be made available by the City upon request or on the IWMA website at www.iwma.com. A copy of the 2022 Base Year Rate Adjustment Application, which provides additional information on the proposed rate increases, is available at the City Clerk’s office located at 990 Palm Street, San Luis Obispo, California and online at sanluisgarbage.com. Page 1037 of 1192 SAN LUIS GARBAGE COMPANY, INC. APPROVED BASE RATE INCREASE CITY OF SAN LUIS OBISPO SERVICE DESCRIPTION PICK UPS PER WEEK CURRENT RATE APPROVED RATE ADJUSTMENT $ NEW MONTHLY RATE EFFECTIVE 5/1/2022 SINGLE FAMILY AND MULTI-UNIT RESIDENTIAL (4 UNITS OR LESS) Price per month for specified waste-wheeler container collected once each week. One Greenwaste container and one recycling container service is included at no additional charge. MINI-CAN SERVICE One 19 gallon waste wheeler container 1 $11.14 $2.97 $14.11 ECONOMY RATE One 32 gallon waste wheeler container 1 $17.78 $4.73 $22.51 STANDARD RATE One 64 gallon waste wheeler container 1 $35.56 $9.47 $45.03 PREMIUM RATE One 96 gallon waste wheeler container 1 $53.35 $14.21 $67.56 PREMIUM PLUS RATE One 96 gallon waste wheeler at the premium rate plus an additional charge of: One 32 gallon waste wheeler container 1 $16.21 $4.31 $20.52 One 64 gallon waste wheeler container 1 $32.45 $8.64 $41.08 One 96 gallon waste wheeler container 1 $48.64 $12.95 $61.58 DESIGNED MANUAL SERVICE (determined by city staff) MINI-CAN SERVICE 1 $18.09 $4.82 $22.91 ECONOMY RATE 1 $28.94 $7.70 $36.64 STANDARD RATE 1 $57.92 $15.42 $73.34 PREMIUM RATE 1 $86.83 $23.12 $109.94 One 96 gallon waste wheeler at the premium rate plus an additional charge of: PREMIUM PLUS 32 GALLON CAN RATE 1 $25.94 $6.91 $32.85 PREMIUM PLUS 64 GALLON CAN RATE 1 $51.89 $13.82 $65.71 PREMIUM PLUS 96 GALLON CAN RATE 1 $77.86 $20.73 $98.59 LONG TERM VACANT RATE (UNFURNISHED) 1 $9.14 $2.43 $11.57 SERVICE AWAY FROM THE STREET CURB Additional per month per can or container charge $12.12 $3.23 $15.35 USED OIL COLLECTION - no charge (Call for details and pick up information). Page 1038 of 1192 SERVICE DESCRIPTION PICK UPS PER WEEK CURRENT RATE APPROVED RATE ADJUSTMENT $ NEW MONTHLY RATE EFFECTIVE 5/1/2022 LATE MAKEUP COLLECTIONS WITH GARBAGE TRUCK (Phone call required) Per trip charge plus charges identified below for any extra containers or equivalent volume. $17.94 $4.78 $22.72 Additional charge per 32 gallon can or equivalent volume per collection (i.e. 64-gallon x2, 96-gallon x3). $8.90 $2.37 $11.27 RESIDENTIAL - OTHER CHARGES: TAX LIEN CERT. MAIL FEE $4.05 $1.08 $5.13 SPECIAL TRIP FEE $53.81 $14.33 $68.14 LOOSE CARDBOARD $9.54 $2.54 $12.08 RESTART FEE-RESIDENTIAL $26.90 $7.16 $34.06 WHITE GOODS $33.61 $8.95 $42.56 XTRA RECYCLE 64 OR 96 GAL CART $3.73 $0.99 $4.72 XTRA GREENWASTE 64 OR 96 GAL CART $6.92 $1.84 $8.76 EXTRA COLLECTIONS WITH PICKUP OR FLATBED TRUCK (Phone call required) Per trip, plus applicable amount below: $26.90 $7.16 $34.06 Per garbage can or equivalent volume. (Over 6 cans by quotation) $8.90 $2.37 $11.27 Per recycling can or equivalent volume. (Over 6 cans by quotation) $4.45 $1.18 $5.63 Per white good article/ appliance. (Once a month only) $19.88 $5.29 $25.17 Per piece of furniture. $19.88 $5.29 $25.17 Per mattress or boxspring. $19.88 $5.29 $25.17 Other Service Notes: 1. Customers requesting Temporary Bins or Roll-off Box Service can call the office for current rates 2. Polystyrene (Styrofoam, Plastic #6) is not collected for recycling and should be thrown away as trash. Please bag Styrofoam packing peanuts before placing in trash container. 3. This solid service fee for trash collections (container with black or gray lid) includes once a week pick -up of one greenwaste/organics container (green lid), one recycling container (blue lid). 4. It is encouraged to bag your trash in the garbage container but do not bag your recyclables or green waste in their respective containers and keep it loose. 5. Recycling, Greenwaste/Organics and Garbage containers should be spaced 3 feet apart away from any obstacles (i.e mailboxes, cars, etc) before 6:00am on collection service day. 6. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees, which are separately noted on the billings. 7. Cleaning fees will be billed on a time and materials basis 8. Late Fees are imposed for residential customers over 30 days delinquent. The fee is 1.5% per month of the outstanding charge, with a minimum fee of $5.00. No prior notice is required, as this late fee policy is stated at the bottom of every bill. Effective date for rates in Current Rate column was: 1/1/2021 This increase is approximately : 26.63% Effective Date: 5/1/2022 Page 1039 of 1192 Page 1040 of 1192 N otice of Public Hearing Regarding Proposed Solid Waste Rate Increase Commercial Property Owners and Tenants-Customers: This notice is intended to inform you that the City of San Luis Obispo (the “City”) will hold a public hearing regarding rate adjustments (the “Proposed Rate Increase”) proposed by San Luis Garbage Company (the “Garbage Company”) for properties and customers receiving solid waste, recycling, and green waste services within the City. The Proposed Rate Increase will be considered by the San Luis Obispo City Council at the date, time, and location specified below. Consistent with the requirements of Proposition 218, this notice also provides you with the following information: ● The Amount of the Proposed Rate Increase; ● The Date, Time, and Place of the Public Hearing; ● The Majority Protest Procedures; ● The Reason for the Proposed Rate Increase; and ● The Basis for the Proposed Rate Increase. NOTICE OF PUBLIC HEARING The Public Hearing for the Proposed Rate Increase within the City limits will be held on: Date: April 19, 2022 Time: 6:00 pm Place: San Luis Obispo City Hall, 990 Palm Street, San Luis Obispo, CA At the Public Hearing, the City Council will consider all public comment in support of and in opposition to the Proposed Rate Increase and whether or not a Majority Protest exists pursuant to the California Constitution (as described below). If approved, the Proposed Rate Increase would become effective on May 1, 2022. HOW DO I PROTEST THE PROPOSED RATE INCREASE? Pursuant to Section 6 of Article XIII D of the California Constitution, the following persons may submit a written protest against the Proposed Rate Increase to the City Clerk before the close of the Public Hearing referenced above. ▪ An owner(s) of property (parcel(s)) receiving solid waste services within the City limits. If the person(s) signing the protest, as an owner, is not shown on the last equalized assessment roll as the owner of the parcel(s) then the protest must contain or be accompanied by written evidence that such person signing the protest is the owner of the parcel(s) receiving services; or ▪ A tenant(s) whose name appears on the Garbage Company’s records as the customer of record for the corresponding parcel receiving solid waste services within the City limits (tenant-customer). A valid written protest must contain a statement that you protest the Proposed Rate Increase, the address or Assessor’s Parcel Number (APN) of the parcel or parcels which receive solid waste, recycling, and green waste services, and a signature by either the owner or the tenant -customer of the parcel or parcels. One written protest per parcel shall be counted in calculating a majority protest to the Proposed Rate Increase subject to Page 1041 of 1192 the requirements of Section 6 of Article XIII D of the California Constitution. Written protests will not be accepted by e-mail or by facsimile. Verbal protests will not be counted in determining the existence of a majority protest. To be counted, a protest must be received in writing by the City Clerk before the close of the Public Hearing referenced above. Written protests regarding the solid waste rate increase may be mailed to: City of San Luis Obispo Attn: City Clerk 990 Palm Street San Luis Obispo, CA 93401-3249 Written protests may also be personally delivered to the City Clerk at San Luis Obispo City Hall located at 990 Palm Street, San Luis Obispo, California. If valid written protests are presented by a majority of owners and/or tenants -customers of parcels receiving solid waste, recycling, and green waste services within the City limits, then the City will not adjust/increase the rates for the services. Reason for the Proposed Rate Increase The Proposed Rate Increase is 17.75 percent for solid waste, recycling, and green waste/organics collection services. In addition, there will be a temporary 8.88 percent increase to account for a deficit in funding due to this rate increase being delayed from January 1, 2022 to May 1, 2022. The temporary 8.88 percent increase will expire January 1, 2023. The increase is necessary for the Garbage Company to continue to provide safe, environmentally sound, and reliable solid waste, recycling, green waste/organics collection, transportation, and disposal and processing services to the City. Several factors contributed to this rate increase including, but not limited to: increased costs associated with the purchase and operation of collection vehicles, fuel costs, labor costs, and increased costs associated with the organics digester facility. California Senate Bill 1383 (SB 1383) is a recent state law passed with the goal of reducing methane through a reduction in landfilled organic waste. Methane is a potent greenhouse gas, with more than 80 times the warming power of carbon dioxide and is a major component of decomposing organic waste. In response to the harmful effects of methane gas, the California Department of Resources Recycling and Recovery adopted regulations implementing SB 1383 in the Fall of 2020. Added responsibilities associated with SB 1383 include diverting organic materials (facilitated by the local organics digestion facility), expanding organic waste collection programs to include food waste, monitoring organics carts for contamination, and reporting data. Basis of the Proposed Rate Increase The Proposed Rate Increase of 17.75 percent is based on the following cost increases incurred by the Garbage Company: 1. 3.84 percent of the Proposed Rate Increase is for capital investment costs of new collection vehicles, replacement containers and additional containers to meet the demands of SB 1383 compliance. 2. 3.70 percent of the Proposed Rate Increase is for increased capital equipment investments and escalating operating expenses related to the Anaerobic Digester. 3. 1.99 percent of the Proposed Rate Increase is for market wage adjustments to attract and retain safe, quality employees. 4. 1.06 percent of the Proposed Rate Increase is for increases in insurance premiums. Page 1042 of 1192 5. 1.55 percent of the Proposed Rate Increase is for increased AB 939 fee costs, which are used to fund the City waste diversion programs associated with California Assembly Bill 939 and Senate Bill 1383. 6. 5.61 percent of the Proposed Rate Increase is for increases in other operational expenses including a Consumer Price Index increase of 5.3 percent. The additional 8.88 percent temporary increase is for the delayed rate implementation that was no fault of the Garbage Company. The total rate increase implemented May 1, 2022 will be 26.63 percent. The 8.88 percent temporary increase will expire January 1, 2023, net of any Consumer Price Index adjustment as discussed next. Regularly scheduled interim year rate increases shall commence on January 1, 2023 and January 1, 2024 and are based on the following: 1. Increases, if any, in the Consumer Price Index (CPI) for Bureau of Labor Statistics’ Consumer Price Index for Urban Consumers based on the All U.S. City Average, Bureau of Labor Statistics for the month of June 2022 for January 1, 2023 and June 2023 for January 1, 2024. The January 1, 2023 CPI rate adjustment will be applied after the 8.88 percent temporary rate increase is removed. Additionally, at the March 9, 2022 San Luis Obispo County Integrated Waste Management Authority (IWMA) Board Meeting, a fee increase to account for operational and capital cost increases due largely to implementation of SB 1383 will be presented for adoption. If adopted, the fee increase will be implemented starting July 1, 2022 and will not exceed 5.4%. If adopted, the Garbage Company is authorized to bill this fee to the rate payers benefiting from these additional services in compliance with Proposition 218. The IWMA is a Joint Powers Authority formed to plan and implement regional solid waste and hazardous waste programs mandated by State law. The Joint Powers Agreement between the City of San Luis Obispo and the IWMA can be made available by the City upon request or on the IWMA website at www.iwma.com. A copy of the 2022 Base Year Rate Adjustment Application, which provides additional information on the proposed rate increases, is available at the City Clerk’s office located at 990 Palm Street, San Luis Obispo, California and online at sanluisgarbage.com. Page 1043 of 1192 SAN LUIS GARBAGE COMPANY, INC. APPROVED BASE RATE INCREASE CITY OF SAN LUIS OBISPO Description Frequency Current Rate Increase $ New Rate LATE MAKEUP COLLECTIONS WITH GARBAGE TRUCK (Phone call required) Per trip charge plus charges identified below for any extra containers or equivalent volume. Per Trip $18.10 $4.82 $22.92 Additional charge per 32 gallon can or equivalent volume per collection (i.e. 64-gallon x2, 96-gallon x3). Unit $9.70 $2.58 $12.28 EXTRA COLLECTIONS WITH PICKUP OR FLATBED TRUCK (Phone call required) Per trip, plus applicable amount below: $27.13 $7.22 $34.35 Per garbage can or equivalent volume. (Over 6 cans by quotation) $9.70 $2.58 $12.28 Per recycling can or equivalent volume. (Over 6 cans by quotation) $4.49 $1.20 $5.69 Per white good article/ appliance. (Once a month only) $19.93 $5.31 $25.24 Per piece of furniture. $19.93 $5.31 $25.24 Per mattress or boxspring. $19.93 $5.31 $25.24 Delivery Charge Per Trip $29.35 $7.81 $37.16 Commercial maintenance fee Per Trip $27.13 $7.22 $34.35 COMMERCIAL GARBAGE CANS SERVICE PER MONTH One 32 Gallon Waste Wheeler 1 $31.63 $8.42 $40.05 One 32 Gallon Waste Wheeler 2 $49.64 $13.22 $62.86 One 32 Gallon Waste Wheeler 3 $67.76 $18.04 $85.80 One 32 Gallon Waste Wheeler 4 $85.78 $22.84 $108.62 One 32 Gallon Waste Wheeler 5 $103.82 $27.64 $131.46 One 32 Gallon Waste Wheeler 6 $121.89 $32.46 $154.35 One 32 Gallon Waste Wheeler 7 $139.91 $37.25 $177.16 Two 32 Gallon Waste Wheelers 1 $40.64 $10.82 $51.46 Two 32 Gallon Waste Wheelers 2 $63.25 $16.84 $80.09 Two 32 Gallon Waste Wheelers 3 $85.80 $22.85 $108.65 Two 32 Gallon Waste Wheelers 4 $108.37 $28.86 $137.23 Two 32 Gallon Waste Wheelers 5 $131.00 $34.88 $165.88 Two 32 Gallon Waste Wheelers 6 $153.56 $40.89 $194.45 Two 32 Gallon Waste Wheelers 7 $176.13 $46.90 $223.03 Three 32 Gallon Waste Wheelers 1 $49.67 $13.23 $62.90 Three 32 Gallon Waste Wheelers 2 $76.83 $20.46 $97.29 Three 32 Gallon Waste Wheelers 3 $103.89 $27.66 $131.55 Three 32 Gallon Waste Wheelers 4 $131.05 $34.90 $165.95 Three 32 Gallon Waste Wheelers 5 $158.11 $42.10 $200.21 Three 32 Gallon Waste Wheelers 6 $185.21 $49.31 $234.52 Three 32 Gallon Waste Wheelers 7 $212.34 $56.54 $268.88 Four 32 Gallon Waste Wheelers 1 $58.72 $15.64 $74.36 Four 32 Gallon Waste Wheelers 2 $90.35 $24.06 $114.41 Four 32 Gallon Waste Wheelers 3 $121.93 $32.47 $154.40 Page 1044 of 1192 Description Frequency Current Rate Increase $ New Rate Four 32 Gallon Waste Wheelers 4 $153.57 $40.89 $194.46 Four 32 Gallon Waste Wheelers 5 $185.18 $49.31 $234.49 Four 32 Gallon Waste Wheelers 6 $216.83 $57.73 $274.56 Four 32 Gallon Waste Wheelers 7 $248.39 $66.14 $314.53 Five 32 Gallon Waste Wheelers 1 $67.78 $18.05 $85.83 Five 32 Gallon Waste Wheelers 2 $103.87 $27.66 $131.53 Five 32 Gallon Waste Wheelers 3 $140.01 $37.28 $177.28 Five 32 Gallon Waste Wheelers 4 $176.12 $46.89 $223.01 Five 32 Gallon Waste Wheelers 5 $212.30 $56.53 $268.82 Five 32 Gallon Waste Wheelers 6 $248.37 $66.13 $314.50 Five 32 Gallon Waste Wheelers 7 $284.49 $75.75 $360.24 Six 32 Gallon Waste Wheelers 1 $76.83 $20.46 $97.29 Six 32 Gallon Waste Wheelers 2 $117.42 $31.26 $148.68 Six 32 Gallon Waste Wheelers 3 $158.04 $42.08 $200.12 Six 32 Gallon Waste Wheelers 4 $198.70 $52.91 $251.61 Six 32 Gallon Waste Wheelers 5 $239.30 $63.72 $303.02 Six 32 Gallon Waste Wheelers 6 $279.95 $74.54 $354.49 Six 32 Gallon Waste Wheelers 7 $320.57 $85.36 $405.93 1. Rates for all “Waste Wheeler Container Service” customers include recycling or greenwaste/organics pickup once per-week. Customers can choose from a 64 or 96 gallon blue waste wheeler once per week for commingled recycling or a 32 or 64 gallon organics green lid waste wheeler once per week for organics collections. More frequent than once-per-week pickup can be provided at 25% of the garbage service rate for the specified level of service requ ired. Due to potential weight issues, organics is only collected in 32 or 64 gallon green lidded waste wheelers. COMMERCIAL WASTE WHEELER CONTAINER SERVICE PER MONTH One 96 Gallon Waste Wheeler 1 $56.37 $15.01 $71.38 One 96 Gallon Waste Wheeler 2 $90.25 $24.03 $114.28 One 96 Gallon Waste Wheeler 3 $124.13 $33.05 $157.18 One 96 Gallon Waste Wheeler 4 $157.98 $42.06 $200.04 One 96 Gallon Waste Wheeler 5 $191.90 $51.10 $243.00 One 96 Gallon Waste Wheeler 6 $225.73 $60.10 $285.83 One 96 Gallon Waste Wheeler 7 $259.61 $69.13 $328.74 Two 96 Gallon Waste Wheelers 1 $92.39 $24.60 $116.99 Two 96 Gallon Waste Wheelers 2 $142.02 $37.81 $179.83 Two 96 Gallon Waste Wheelers 3 $191.70 $51.04 $242.74 Two 96 Gallon Waste Wheelers 4 $241.34 $64.26 $305.60 Two 96 Gallon Waste Wheelers 5 $291.03 $77.49 $368.52 Two 96 Gallon Waste Wheelers 6 $340.65 $90.70 $431.35 Two 96 Gallon Waste Wheelers 7 $390.39 $103.95 $494.34 Three 96 Gallon Waste Wheelers 1 $128.41 $34.19 $162.60 Three 96 Gallon Waste Wheelers 2 $193.87 $51.62 $245.49 Three 96 Gallon Waste Wheelers 3 $259.35 $69.06 $328.41 Three 96 Gallon Waste Wheelers 4 $324.82 $86.49 $411.31 Three 96 Gallon Waste Wheelers 5 $390.31 $103.93 $494.24 Three 96 Gallon Waste Wheelers 6 $455.75 $121.35 $577.10 Page 1045 of 1192 Description Frequency Current Rate Increase $ New Rate Three 96 Gallon Waste Wheelers 7 $521.23 $138.79 $660.02 Four 96 Gallon Waste Wheelers 1 $164.41 $43.78 $208.19 Four 96 Gallon Waste Wheelers 2 $245.70 $65.42 $311.12 Four 96 Gallon Waste Wheelers 3 $327.72 $87.26 $414.98 Four 96 Gallon Waste Wheelers 4 $408.25 $108.70 $516.95 Four 96 Gallon Waste Wheelers 5 $489.55 $130.35 $619.90 Four 96 Gallon Waste Wheelers 6 $570.78 $151.98 $722.76 Four 96 Gallon Waste Wheelers 7 $652.13 $173.64 $825.77 Five 96 Gallon Waste Wheelers 1 $200.44 $53.37 $253.81 Five 96 Gallon Waste Wheelers 2 $297.59 $79.24 $376.83 Five 96 Gallon Waste Wheelers 3 $394.62 $105.07 $499.69 Five 96 Gallon Waste Wheelers 4 $491.71 $130.93 $622.64 Five 96 Gallon Waste Wheelers 5 $588.78 $156.77 $745.56 Five 96 Gallon Waste Wheelers 6 $685.89 $182.63 $868.51 Five 96 Gallon Waste Wheelers 7 $811.68 $216.12 $1,027.80 Six 96 Gallon Waste Wheelers 1 $236.48 $62.97 $299.45 Six 96 Gallon Waste Wheelers 2 $349.38 $93.03 $442.41 Six 96 Gallon Waste Wheelers 3 $462.27 $123.09 $585.36 Seven 96 Gallon Waste Wheelers 1 $272.49 $72.55 $345.04 Eight 96 Gallon Waste Wheelers 1 $308.52 $82.15 $390.67 Eight 96 Gallon Waste Wheelers 7 $1,175.60 $313.02 $1,488.62 1. Rates for all “Waste Wheeler Container Service” customers include recycling or greenwaste/organics pickup once per-week. Customers can choose from a 64 or 96 gallon blue waste wheeler once per week for commingled recycling or 32 or 64 gallon organics green lid waste wheeler once per week for organics collections. More frequent than once- per-week pickup can be provided at 25% of the garbage service rate for the specified level of service required. Due to potential weight issues, organics is only collec ted in 32 or 64 gallon green lidded waste wheelers. MULTI-UNIT RESIDENTIAL DUMPSTER CONTAINERS (PER MONTH) 1 Yd Dumpster 1 $128.71 $34.27 $162.98 1 Yd Dumpster 2 $187.46 $49.91 $237.37 1 Yd Dumpster 3 $246.11 $65.53 $311.64 1 Yd Dumpster 4 $304.81 $81.16 $385.97 1 Yd Dumpster 5 $363.56 $96.80 $460.36 1 Yd Dumpster 6 $422.20 $112.42 $534.62 1 Yd Dumpster 7 $480.91 $128.05 $608.96 1.5 Yd Dumpster 1 $149.02 $39.68 $188.70 1.5 Yd Dumpster 2 $230.29 $61.32 $291.61 1.5 Yd Dumpster 3 $311.60 $82.97 $394.57 1.5 Yd Dumpster 4 $392.86 $104.60 $497.46 1.5 Yd Dumpster 5 $474.13 $126.25 $600.38 1.5 Yd Dumpster 6 $555.40 $147.88 $703.28 1.5 Yd Dumpster 7 $636.66 $169.52 $806.18 Page 1046 of 1192 Description Frequency Current Rate Increase $ New Rate 2 Yd Dumpster 1 $169.33 $45.09 $214.42 2 Yd Dumpster 2 $270.95 $72.14 $343.09 2 Yd Dumpster 3 $372.53 $99.19 $471.72 2 Yd Dumpster 4 $474.13 $126.24 $600.37 2 Yd Dumpster 5 $575.72 $153.30 $729.02 2 Yd Dumpster 6 $677.32 $180.35 $857.67 2 Yd Dumpster 7 $778.89 $207.39 $986.28 3 Yd Dumpster 1 $209.95 $55.90 $265.85 3 Yd Dumpster 2 $352.23 $93.79 $446.02 3 Yd Dumpster 3 $494.46 $131.66 $626.12 3 Yd Dumpster 4 $636.73 $169.54 $806.27 3 Yd Dumpster 5 $778.93 $207.40 $986.33 3 Yd Dumpster 6 $921.21 $245.29 $1,166.50 3 Yd Dumpster 7 $1,063.46 $283.16 $1,346.62 4 Yd Dumpster 1 $250.62 $66.73 $317.35 4 Yd Dumpster 2 $435.75 $116.02 $551.77 4 Yd Dumpster 3 $620.94 $165.33 $786.27 4 Yd Dumpster 4 $806.10 $214.64 $1,020.74 4 Yd Dumpster 5 $991.22 $263.93 $1,255.15 4 Yd Dumpster 6 $1,176.41 $313.24 $1,489.65 4 Yd Dumpster 7 $1,361.62 $362.55 $1,724.17 6 Yd Dumpster 1 $331.87 $88.37 $420.24 6 Yd Dumpster 2 $600.56 $159.91 $760.47 6 Yd Dumpster 3 $869.28 $231.46 $1,100.74 6 Yd Dumpster 4 $1,137.98 $303.00 $1,440.98 6 Yd Dumpster 5 $1,406.70 $374.55 $1,781.25 6 Yd Dumpster 6 $1,728.09 $460.13 $2,188.22 6 Yd Dumpster 7 $1,962.15 $522.45 $2,484.60 COMMERCIAL DUMPSTER CONTAINER SERVICE - In cubic yards 1 Yd Dumpster 1 $112.89 $30.06 $142.95 1 Yd Dumpster 2 $158.04 $42.08 $200.12 1 Yd Dumpster 3 $203.22 $54.11 $257.33 1 Yd Dumpster 4 $248.37 $66.13 $314.50 1 Yd Dumpster 5 $293.51 $78.15 $371.66 1 Yd Dumpster 6 $338.69 $90.18 $428.87 1 Yd Dumpster 7 $383.85 $102.21 $486.06 1.5 Yd Dumpster 1 $126.45 $33.67 $160.12 1.5 Yd Dumpster 2 $185.13 $49.29 $234.42 1.5 Yd Dumpster 3 $243.81 $64.92 $308.73 1.5 Yd Dumpster 4 $302.54 $80.56 $383.10 1.5 Yd Dumpster 5 $361.23 $96.18 $457.41 1.5 Yd Dumpster 6 $419.96 $111.82 $531.78 1.5 Yd Dumpster 7 $478.66 $127.45 $606.11 Page 1047 of 1192 Description Frequency Current Rate Increase $ New Rate 2 Yd Dumpster 1 $139.98 $37.27 $177.25 2 Yd Dumpster 2 $209.97 $55.91 $265.88 2 Yd Dumpster 3 $280.02 $74.56 $354.58 2 Yd Dumpster 4 $349.98 $93.19 $443.17 2 Yd Dumpster 5 $419.99 $111.83 $531.82 2 Yd Dumpster 6 $489.99 $130.47 $620.46 2 Yd Dumpster 7 $559.98 $149.10 $709.08 3 Yd Dumpster 1 $167.08 $44.49 $211.57 3 Yd Dumpster 2 $264.14 $70.33 $334.47 3 Yd Dumpster 3 $361.23 $96.18 $457.41 3 Yd Dumpster 4 $458.33 $122.04 $580.37 3 Yd Dumpster 5 $555.40 $147.88 $703.28 3 Yd Dumpster 6 $652.50 $173.74 $826.24 3 Yd Dumpster 7 $749.62 $199.60 $949.22 4 Yd Dumpster 1 $194.14 $51.69 $245.83 4 Yd Dumpster 2 $320.60 $85.36 $405.96 4 Yd Dumpster 3 $447.01 $119.02 $566.03 4 Yd Dumpster 4 $573.48 $152.70 $726.18 4 Yd Dumpster 5 $699.90 $186.36 $886.26 4 Yd Dumpster 6 $826.33 $220.02 $1,046.35 4 Yd Dumpster 7 $952.81 $253.70 $1,206.51 6 Yd Dumpster 1 $248.32 $66.12 $314.44 6 Yd Dumpster 2 $426.71 $113.62 $540.33 6 Yd Dumpster 3 $605.12 $161.12 $766.24 6 Yd Dumpster 4 $783.51 $208.62 $992.13 6 Yd Dumpster 5 $961.91 $256.12 $1,218.03 6 Yd Dumpster 6 $1,140.28 $303.62 $1,443.90 6 Yd Dumpster 7 $1,318.71 $351.13 $1,669.84 8 Yd Dumpster 1 $302.51 $80.55 $383.06 8 Yd Dumpster 2 $532.80 $141.87 $674.66 8 Yd Dumpster 3 $763.13 $203.19 $966.32 8 Yd Dumpster 4 $993.47 $264.53 $1,258.00 8 Yd Dumpster 5 $1,223.80 $325.86 $1,549.66 8 Yd Dumpster 6 $1,454.07 $387.17 $1,841.24 8 Yd Dumpster 7 $1,684.41 $448.50 $2,132.91 Sunday Service * $79.04 $21.05 $100.09 The rates shown above include the monthly container rental fee and are the same for bins and garwoods, when volume is identical. (Bins and garwoods are types of containers) UNSCHEDULED EXTRA COLLECTIONS FOR COMMERCIAL CUSTOMERS & MULTI- UNIT 1 CUBIC YARD Per Lift $51.96 $13.84 $65.80 1.5 CUBIC YARD Per Lift $57.62 $15.34 $72.96 Page 1048 of 1192 Description Frequency Current Rate Increase $ New Rate 2 CUBIC YARDS Per Lift $67.77 $18.04 $85.81 3 CUBIC YARDS Per Lift $83.54 $22.24 $105.78 4 CUBIC YARDS Per Lift $99.34 $26.45 $125.79 Rates for all commercial customers for unscheduled extra collections of recycling can be provided at a 25% of the garbage service rate for the specified level of service required. COMMERCIAL - OTHER CHARGES: LOOSE CARDBOARD Per Yard $9.61 $2.56 $12.17 LOOSE YARDAGE (SOLID WASTE) Per Yard $38.38 $10.22 $48.60 RENTAL Per Month $45.20 $12.04 $57.24 TEMPORARY RENTAL CHARGE Per Day $1.51 $0.40 $1.91 WHITE GOODS Per Unit $33.88 $9.02 $42.90 TAX LIEN CERT. MAIL FEE Per Mailing $4.08 $1.09 $5.17 LOCK CHARGE-FRONT Per Month $84.78 $22.57 $107.35 LOCK CHARGE-REAR Per Month $73.11 $19.47 $92.58 STAND BY TIME Per Minute $1.26 $0.34 $1.60 COMPACTORS (PER TON) Per Ton $55.78 $14.85 $70.63 COMPACTORS (HAUL RATE) Per Hour $173.33 $46.15 $219.49 RECYCLING SERVICES CARDBOARD & COMMINGLED RECYCLING COLLECTION OF COMMERCIAL DUMPSTER CONTAINERS 1 Yd Dumpster 1 INCLUDED * INCLUDED * 1 Yd Dumpster 2 INCLUDED * INCLUDED * 1 Yd Dumpster 3 $50.81 $13.53 $64.34 1 Yd Dumpster 4 $62.31 $16.59 $78.90 1 Yd Dumpster 5 $73.35 $19.53 $92.88 1 Yd Dumpster 6 $84.70 $22.55 $107.25 1 Yd Dumpster 7 $95.95 $25.55 $121.49 1.5 Yd Dumpster 1 INCLUDED * INCLUDED * 1.5 Yd Dumpster 2 INCLUDED * INCLUDED * 1.5 Yd Dumpster 3 $60.96 $16.23 $77.19 1.5 Yd Dumpster 4 $75.62 $20.13 $95.75 1.5 Yd Dumpster 5 $90.29 $24.04 $114.33 1.5 Yd Dumpster 6 $104.96 $27.95 $132.91 1.5 Yd Dumpster 7 $119.67 $31.86 $151.53 2 Yd Dumpster 1 INCLUDED * INCLUDED * 2 Yd Dumpster 2 INCLUDED * INCLUDED * 2 Yd Dumpster 3 $69.99 $18.64 $88.63 2 Yd Dumpster 4 $87.49 $23.30 $110.79 2 Yd Dumpster 5 $104.97 $27.95 $132.92 2 Yd Dumpster 6 $122.52 $32.62 $155.14 2 Yd Dumpster 7 $140.00 $37.28 $177.27 3 Yd Dumpster 1 INCLUDED * INCLUDED * 3 Yd Dumpster 2 INCLUDED * INCLUDED * 3 Yd Dumpster 3 $90.29 $24.04 $114.33 3 Yd Dumpster 4 $114.62 $30.52 $145.14 3 Yd Dumpster 5 $138.86 $36.97 $175.83 Page 1049 of 1192 Description Frequency Current Rate Increase $ New Rate 3 Yd Dumpster 6 $163.13 $43.44 $206.57 3 Yd Dumpster 7 $187.40 $49.90 $237.30 4 Yd Dumpster 1 INCLUDED * INCLUDED * 4 Yd Dumpster 2 INCLUDED * INCLUDED * 4 Yd Dumpster 3 $111.79 $29.77 $141.56 4 Yd Dumpster 4 $143.37 $38.17 $181.54 4 Yd Dumpster 5 $175.00 $46.60 $221.60 4 Yd Dumpster 6 $206.63 $55.02 $261.65 4 Yd Dumpster 7 $238.19 $63.42 $301.61 6 Yd Dumpster 1 INCLUDED * INCLUDED * 6 Yd Dumpster 2 INCLUDED * INCLUDED * 6 Yd Dumpster 3 $151.30 $40.29 $191.59 6 Yd Dumpster 4 $195.89 $52.16 $248.05 6 Yd Dumpster 5 $240.50 $64.04 $304.54 6 Yd Dumpster 6 $285.06 $75.90 $360.96 6 Yd Dumpster 7 $329.68 $87.78 $417.46 8 Yd Dumpster 1 INCLUDED * INCLUDED * 8 Yd Dumpster 2 INCLUDED * INCLUDED * 8 Yd Dumpster 3 $181.17 $48.24 $229.41 8 Yd Dumpster 4 $235.85 $62.80 $298.65 8 Yd Dumpster 5 $290.53 $77.36 $367.89 8 Yd Dumpster 6 $353.21 $94.05 $447.26 8 Yd Dumpster 7 $409.11 $108.93 $518.05 *Rates for all commercial customers include recycling pickup twice per week free of charge for up to 4 cubic yards. If you need more frequent service, it can be provided at a 25% discount from the garbage service rates for the specified level of service required. 1. Customers requesting Temporary Bins or Roll-off Box Service can call the office for current rates. 2. Polystyrene (Styrofoam, Plastic #6) is not collected for recycling and should be thrown away as trash. Please bag Styrofoam packing peanuts before placing in trash container. 3. It is encouraged to bag your trash in the garbage container but do not bag your recyclables or green waste/organics in their respective containers and keep it loose. 4. Recycling, Greenwaste/Organcis and Garbage waste wheelers should be spaced 3 feet apart away from any obstacles (i.e mailboxes, cars, etc) before 6:00am on collection service day. 5. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees, which are separately noted on the billings. 6. Cleaning fees will be billed on a time and materials basis. 7. Late Fees are imposed for residential and commercial customers over 30 days delinquent. The fee is 1.5% per month of the outstanding charge, with a minimum fee of $5.00. No prior notice is required, as this late fee policy is stated at the bottom of every bill. Effective date for rates in Current Rate column was: 1/1/2021 This increase is approximately : 26.63% Effective Date: 5/1/2022 Page 1050 of 1192 FINAL REPORT City of San Luis Obispo Submitted electronically on October 22, 2020 Submitted electronically: March 28, 2022 Review of 2022 Base Year Rate Adjustment Page 1051 of 1192 1512 Eureka Road, Suite 220, Roseville, CA 95661 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com March 28, 2022 Ms. Jordan Lane Solid Waste and Recycling Coordinator Public Utilities 879 Morro, San Luis Obispo, CA 93401 submitted via email: jlane@slocity.org SUBJECT: Review of San Luis Garbage Company’s 2022 Base Year Rate Application – Final Report Dear Ms. Lane, R3 Consulting Group (R3) is engaged by the City of San Luis Obispo (City) to review the 2022 Base Year Rate Applications of its franchised hauler, San Luis Garbage Company (SLG). This report presents the results of R3’s review the revised 2022 Base Year rate adjustment for SLG. SLG’s original 2020 Base Year Rate Application calculated a net shortfall in revenues for 2022 of approximately $2,080,000, which equates to a rate increase of 18.71%. Subsequent to completion of the review, the Rate Application was revised to reflect a rate increase of 17.75%, based on a revised revenue shortfall of approximately $1,820,700. * * * * * * * We appreciate the opportunity to be of service to the City and would like to thank SLG’s staff for their support during the review. Staff were very responsive and provided us with requested information in a timely fashion. Sincerely, Jordan Muratsuchi | Sr. Project Analyst Garth Schultz | Principal R3 Consulting Group, Inc. R3 Consulting Group, Inc. 916.655.2104 | jmuratsuchi@r3cgi.com 510.292.0853 | gschultz@r3cgi.com Page 1052 of 1192 TABLE OF CONTENTS City of San Luis Obispo | Base Year Rate Adjustment TOC 1. Introduction page 1 2. Review of Rate Application page 3 3. Calculation of the Percent Change in Rates page 8 4. Findings page 9 Page 1053 of 1192 1. INTRODUCTION City of San Luis Obispo | Base Year Rate Adjustment 1 of 9 Background Service Areas The City has exclusive franchise agreements with SLG to collect and remove for disposal and recycling, residential and commercial solid waste and recyclable materials, which expire in 2025, with the City’s option to extend up to three years. The City has a separate agreement with SLG for the collection and processing of organic waste at the Kompogas Facility, which expires 20 years after commencement of facility operation. In addition to the City, SLG also services accounts in unincorporated San Luis Obispo County. SLG’s parent company, Waste Connections, services multiple franchise regions with individual agreements. Overview of Rate Setting Process Per Article 9 of the City’s franchise agreement (Agreement) with SLG, the “Franchisee” (SLG) shall submit to applications to the City for rate review annually, which shall be in accordance with the procedures described in the “City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates” (Rate Manual), except as that may be modified by the City from time to time. That methodology primarily involves two distinct rate setting methodologies: 》 Interim Year Rate Setting Process; and 》 Base Year Rate Setting Process. Base year rate adjustments occur every three (3) years with indexed based rate adjustments used to set the rates for the two (2) years between rate adjustments. The City and SLG both recognize that updates to the Rate Setting Manual, established in 1994, are warranted to reflect modern industry standard practices and a changing regulatory environment. Base Year Rate Setting Process For the upcoming rate year (January 1, 2022 - December 31, 2022) the current rates are to be adjusted based on the Base Year Rate Setting Process. With the Base Year Rate Application, the franchised hauler submits financial statements for the previously completed fiscal year, which serve as the base documents for the Rate Application. The Base Year Rate Application is based on three years of data: 》 Actual results for the most recently completed year (2020), which are based on the audited financial statements; 》 Projected results for the current year (2021), which are to be based on year-to-date information available at the time the application is submitted; and 》 Projected results for the next year (2022 - the Base Year). Rates are established for each Base Year based on the hauler’s projected revenue requirement. The revenue requirement is defined as the sum of the following: 》 Allowed costs; 》 Allowable operating profit; and 》 Pass through costs. Page 1054 of 1192 Introduction City of San Luis Obispo | Base Year Rate Adjustment 2 of 9 Scope of Analysis The review of the Base Year Rate Application included but was not limited to the following: 》 Reviewed and documented the prior 2018 Base Year Rate Application adjustments, and their potential application to the 2022 Base Year Rate Application; 》 Reviewed the 2022 Base Year Rate Application for consistency with the Rate Setting Manual Methodology; 》 Reviewed the 2022 Base Year Rate Application for mathematical accuracy; 》 Reviewed SLG’s 2019 and 2020 audited financial statements; 》 Reviewed 2021 and 2022 projected revenues and expenses for reasonableness, including general consistency with changes in reported revenues, accounts, and tonnages; 》 Reviewed SLG’s survey of rates in neighboring communities. Page 1055 of 1192 2. REVIEW OF RATE APPLICATION City of San Luis Obispo | Base Year Rate Adjustment 3 of 9 Allowable Operating Ratio Costs Direct Labor SLG projected a 6.98% increase in Direct Labor costs for 2022 as compared to 2021 (a 7.92% increase projected in 2022 compared to 2020). SLG attributed the increased cost from 2020 to 2021 to several factors including the need for additional staff as well as increased competition for employees, stating that they are finding it difficult to retain drivers. SLG reported that multiple drivers have left the company in recent years, some of whom have joined other municipalities and others who left California entirely citing high living expenses. SLG believes that the underlying reason for losing employees is low wages and benefits. Additionally, SLG specifically noted that competing with public pension benefits has been difficult. SLG offers a 401k retirement plan however they note that it’s not as desirable as a public pension unless additional funds can be used to offset the amount that employees are paying into the 401k. This is opposed to a public pension which is fully provided for. Assessment SLG’s requested a 6.98% increase in total direct labor in 2022 compared to 2021. R3 understands there is a national driver shortage across the solid waste industry, leading to high competition in most areas. Furthermore, due to the effects of the COVID-19 pandemic the labor market as a whole is seeing high demand for employees and as a result, an overall increase in wages. R3 concurs that increased competition for solid waste employees is real and that an increase to SLG’s labor rates may be reasonable in light of that reality. SLG provided limited data for comparison. R3 suggested an alternative and justifiable adjustment method using standard labor data from the Bureau of Labor Statistics (BLS). R3 suggested an overall increase to Direct Labor of 3.60% (from 2021 expenses), consistent with the Bureau of Labor Statistics (BLS) findings on year-over-year (ending June 2021) total compensation growth in the private industry in California (Pacific Division). Upon discussion between the City and SLG, it was determined that no adjustment to the Rate Application was necessary. Adjustments No adjustment. Corporate Overhead SLG projected a 6.14% increase Corporate Overhead between 2020 and 2022, which includes a 5.30% increase from 2021 to 2022. Assessment According to page I-6 in the Rate Setting Manual, SLG’s Corporate Overhead expense to the City cannot exceed $120,000 per year in 1994 dollars. SLG calculated their actual Corporate Overhead, and then subtracted out the appropriate limitation such that the total Corporate Overhead being assigned to the City is at the maximum amount. Adjustments No adjustment. Office Salaries SLG’s projected 2022 Office Salary expense is 8.68% higher than its 2021 reported expense, 84.82% higher than its 2020 reported expense, and 19.51% higher than its 2019 reported expense. SLG experienced a decrease in office salaries in 2020 compared to 2019, in part due to COVID-19. The 2021 projected office salaries expense is 10% above 2019 levels. Page 1056 of 1192 Review of Rate Application City of San Luis Obispo | Base Year Rate Adjustment 4 of 9 Assessment SLG’s projected 2022 Office Salaries were calculated based on increases in employee wages, in the same fashion as Direct Labor, described in the previous section. SLG attributed its projected increase in Office Salaries to both increased wages and additional positions.R3 concurs that there are changes currently occurring in the economy and labor market as the COVID-19 pandemic continues. The labor market, as a whole, is seeing high demand for employees and as a result, wages have increased in most, if not all industries. R3 suggested an overall increase to Office Salaries by 3.60% (from 2021 expenses), which is consistent with BLS findings on year-over-year total compensation growth in the private industry in California (Pacific Division). Upon discussion between the City and SLG, it was determined that no adjustment to the Rate Application was necessary. Adjustments No adjustments. General and Administrative Costs G&A costs represent the single largest overall expense category for SLG and include a wide range of expenses. SLG projects a 22.53% increase in total G&A costs, which is mainly the result of increases in Depreciation (e.g., vehicles, equipment) (38.95% / $341,716 increase), insurance (10.98% / $109,178 increase), interest (31.58% / $41,432 increase) and Outside Services (71.05% / $462,658 increase). We assessed each expense item included in G&A costs and noted only minor increases to most expense items. In addition to further analyzing the specific expenses listed above, we also looked further into Bad Debt. Assessment SLG’s total G&A expenses decreased 1.23% in 2020 (from 2019) and are projected to decrease by 3.73% in 2021 compared to 2020. SLG projects a 22.53% increase in the 2022 compared to 2021, which corresponds to a 16.51% increase compared to 2019. SLG projects minor increases in expense for most items covered under G&A, however we further analyzed the items noted below: Depreciation SLG used a 7-year straight-line method for calculating its depreciation on vehicles and containers, which is in alignment with the Rate Setting Manual. However, today most franchises agree to a more realistic 10-year depreciation schedule. Additionally, SLG is currently operating vehicles and utilizing containers that have passed the designated 7-year mark. SLG allocates depreciation from their total company amount to each individual franchise based on percentages of container counts, customer counts, and vehicle driver hours. R3 recommends the City and SLG incorporate a 10-year depreciation schedule for all new vehicles and containers into future updates to the Rate Setting Manual. Modifying the depreciation schedule for vehicles and containers is a key potential component for the Rate Setting Manual update. Insurance SLG’s provided the supporting documentation for the increase in insurance costs, including an email from its insurance company and the respective insurance quote. SLG provided calculations for the insurance increase based on the quote for all their franchise collection areas, and then proportioned the City’s individual cost based on prior percentage allotments. SLG’s calculations follow logical consistency and are accurate based on the quote from the insurance agency. Page 1057 of 1192 Review of Rate Application City of San Luis Obispo | Base Year Rate Adjustment 5 of 9 Interest SLG provided the sources and amounts of total company debt, as well as their calculation of interest rates. Using a weighted interest rate and the debt net book value, SLG calculated the associated interest expense for all company operations and then allocated an amount to the City using the percentage of City franchise depreciation (debt) to the company. SLG’s interest calculations for 2022 and 2023 are logically consistent and match the rate application, however R3 notes that SLG used the 2022 Allocation Factor when allocating 2021 interest to the City. The difference in the allocation factor to the City between 2021 and 2022 is 1%, thus the result is immaterial. Outside Services The majority of expenses incurred under Outside Services is the organic processing that occurs at the Hitachi Zosen Inova (HZI) Facility; however, this category also includes costs for outsourced repair, disposal of rejected material from HZI, engineering fees, monitoring, and maintenance fees. SLG projects a 2022 increase of 71.05% from 2021, which amounts to $462,658. This increase is due almost entirely to HZI requesting an increase in its service fee (organics processing fee). SLG reported this increase to be $457,500 in 2022. SLG provided documentation supporting the increase of $457,500, including a copy of the requesting letter from HZI, excerpts from SLG’s agreement with HZI, and detailed calculations for the total Outside Services expense. SLG was only able to provide a few excerpts from their agreement with HZI due to confidentiality. These excerpts support HZI’s ability to request an adjustment to their service fee, however HZI’s ability to increase their fee is contingent on SLG receiving a corresponding rate increase from the City. Furthermore, since the fees being paid to HZI are for organic waste post-processing, an adjustment was made to reclassify HZI expenses as pass-through Tipping Fees, not subject to SLG’s operating margin. This adjustment removed the full HZI 2022 expense ($1,011,109) from Outside Services and relocated them to Tipping Fees. The Rate Setting Manual defines tipping fees to include “transfer station, transformation facility, and landfill charges”. As Tipping Fees, payments to HZI are considered pass- through costs. It is standard industry practice for such expenses to be treated as pass-through costs. This adjustment would reduce SLG’s operating profit. Bad Debt SLG increased their allowance for bad debt from $3,349 in 2020 to $12,017 in 2021, 2022, and 2023, citing an increase in Bad Debt due to the City pausing enforcement on the property lien process in lieu of COVID-19. However, the City documented that Bad Debt placed on property liens closely hovered around an average of $2,500 in recent years. Thus, Bad Debt was adjusted to $2,500. This projected Bad Debt is less than 1% of commercial and residential rate revenues, this falls within what we consider to be a reasonable range. Adjustments Depreciation: No Adjustment.; Insurance: No Adjustment; Interest: No Adjustment; Outside Services: Recategorized $1,011,109 in HZI fees as Pass-Through costs (refer to Pass-Through Costs section below); Bad Debt: Reduced by $9,517. Operating Ratio The Rate Setting Manual establishes a range of from 90% to 94% for the target operating ratio (profit) used to calculate the Base Year rate adjustment. Page 1058 of 1192 Review of Rate Application City of San Luis Obispo | Base Year Rate Adjustment 6 of 9 Assessment SLG’s Rate Application set its 2022 profit level equal to an 93% operating ratio, consistent with the range set forth in the Rate Setting Manual. Adjustments The above adjustments reduced SLG’s projected operating profit by $76,821. Pass-Through Costs (Not Allowable on Profit Ratio) Tipping Fees SLG provided supporting documentation, including letters from Cold Canyon signaling the changes in tipping fees. Assessment As noted previously, an adjustment to Outside Services expense was made which reclassifies HZI organic processing expenses as tipping fees (pass-through costs). With this adjustment, the $1,011,109 in HZI fees would be added to this Tipping Fees category. This is consistent with the Rate Setting Manual. Adjustments Incorporated $1,011,109 in HZI fees as Tipping fees in this category and removed HZI fees from G&A (Outside Services). Franchise Fees & IWMA Fees SLG remits to the City a monthly Franchise Fee of 10% of gross revenues. This fee is considered a pass- through cost adjusted each year equal to any rate adjustment. In addition to franchise fees, SLG also remits an IWMA fee to San Luis Obispo Integrated Waste Management Authority. During review of this Rate Application, and due to shifts in the the Authority’s approach to IWMA fee setting, it was determined that the best course of action was to review IWMA fee revenue and expense from the rate application. Assessment SLG projects a 2022 Franchise Fee / IWMA Fee expense increase of approximately 15%. SLG provided supporting documentation for its historical Franchise Fees (matching the City’s record) and IWMA fees. SLG provided calculations for projected Franchise Fees and IWMA Fees, delineating the two fees individually. The fees are based on the total revenue matching the rate application, and SLG incorporates the revised IWMA fee structure into the projected 2022 values. R3’s analysis idenfitied a recommended adjustment to the Rate Setting Manual’s franchise fee calculation methodology to match projected revenue more accurately with required revenue. This is described in more detail later in this report. Adjustments Decreased IWMA fee expense by $363,770. Decreased Revene Offsets by $191,165. AB 939 Fees SLG remits to the City a fixed AB 939 fee every month to support the City’s AB 939 program(s). This fee is considered a pass-through cost adjusted each year equal to any rate adjustment. Page 1059 of 1192 Review of Rate Application City of San Luis Obispo | Base Year Rate Adjustment 7 of 9 Assessment SLG provided supporting documentation for its historical and projected AB 939 fees, which matched the City’s records. The City and SLG also agreed to increase the AB 939 fee by an additional $100,000 annually to recover reveues to implement unfunded State mandate SB 1383. Adjustments $100,000 City-directed increase to AB 939 Fee. Lease Payment to Affiliate Companies SLG reported that it leases the operations center and offices located at Old Santa Fe Road from an affiliated entity, as disclosed in the audited financial statements. Lease payments are adjusted annually by CPI. Assessment SLG projects a 2022 increase of 5.30% in Lease Payments, in comparison to 2021, and a 6.78% increase compared to 2020. Adjustments No adjustment. Total Projected Expenses SLG’s total projected expenses are comprised of Allowable Costs (those from which profit can be generated on), Operating Profit, and Pass-through costs. The sum of these expenses yields the total revenue requirement - the total annual revenue required from rate payers. The total revenue requirement based on the revised Rate Application is $13,983,124, reduced from the original Rate Application of $14,430,723. Total Projected Revenues SLG projected a 1.00% increase in total revenues for 2022 as compared the current 2021 projected revenues. The total revenues projected for 2022 are 13.96% higher than 2019 reported revenues. Assessment SLG provided actual total revenues for years 2019 and 2020 in support of its projected revenues. Additionally, SLG projects continued increases in number of accounts serviced, tonnage collected, and revenue. 2020 residential revenue was reported to have increased compared to 2019. We assessed the reasonableness of SLG’s projected residential and commercial revenues and based on this analysis we found SLG’s revenue projections to be reasonable. Adjustments No adjustment. Page 1060 of 1192 3. CALCULATION OF THE PERCENT CHANGE IN RATES City of San Luis Obispo | Base Year Rate Adjustment 8 of 9 The Rate Setting Manual’s methodology for calculating the total percent change in existing rates should be adjusted when the Rate Setting Manual is revised. The Rate Setting Manual calculates the “Percent Change in Residential and Non-Residential Revenue Requirement” (line 22 of the application) by dividing the net revenue shortfall/surplus by the total rate revenue expected without a Base Year increase. The Rate Setting Manual then instructs the applicant to further adjust the calculated result, to account for additional franchise fees to be paid on the net revenue shortfall (line 24 of the application). The following calculations demonstrate the current Rate Setting Manual’s methodology: A % Change in Rate Rev. Requirement (Line 22)ൌ ୣ୲ ୗ୦୭୰୲ୟ୪୪ ሺୗ୳୰୮୪୳ୱሻ ୭୲ୟ୪ ୖୟ୲ୣ ୖୣ୴ୣ୬୳ୣ ୵୧୲୦୭୳୲ ୟ୬ ୢ୨୳ୱ୲୫ୣ୬୲ ∗ 100% B % Total Change in Existing Rates (Line 24)ൌ % Change in Rate Rev. Requirement ଵ%ି୰ୟ୬ୡ୦୧ୱୣ ୣୣ %∗ 100% The reccomended calculation for future update to the Rate Setting Manual is presented below: % Change in Existing Rates ൌ Revenue Requirement Total Rate Revenue without an Adjustment െ 1 ∗ 100% This change is recommended to be included in updates to the 1994 Rate Setting Manual, which all parties have expressed interest in modifying. Page 1061 of 1192 4. FINDINGS City of San Luis Obispo | Base Year Rate Adjustment 9 of 9 Revised Rate Adjustment SLG’s original 2022 Base Year Rate Application calculated a net shortfall in revenues for 2022 of approximately $2,080,000, which equates to a rate increase of 18.71%. The revised increase subsequent to completion of this review is 17.75%. That is based on a revised revenue shortfall of approximately $1,820,700 and is primarily due to the adjustment categorizing the anaerobic digester cost as pass- through tipping fees. The difference between the adjusted rate adjustment and SLG’s calculated rate adjustment is due to the following: 》 Reduced Bad Debt expense by $9,517 to align with City’s records of average bad debt place on property lien process. 》 Reassigned HZI expenses ($1,011,109) to be pass-through costs, removing them from the “Outside Services” (line 39) expense and adding them into the “Total Tipping Fee” (line 52) expense. The Rate Setting Manual defines tipping fees to include “transfer station, transformation facility, and landfill charges”. As tipping fees, payments to HZI are considered pass-through costs. This is standard practice in the industry for such expenses to be treated as pass-through costs and additionally, HZI cannot increase SLG’s fees without the City approving and associated rate increase. 》 Reduced operating profit by $76,821 because of the above adjustments. 》 Increased AB 939 fees by $100,000 as a City-directed change to recover reveunes for compliance with SB 1383. 》 Removed IWMA fees from revenues and expenses. Page 1062 of 1192 San Luis Garbage, Co. Base Year Rate Adjustment Application Summary Digester Expense 3.7%IWMA & Franchise Fees 1.6% Capital Purchases 3.8%Market Rate Wage Adjustment 2.0% Insurance 1.1%Fuel 0.7% Commingle Processing Fee -0.7%CPI/Other Operational 5.6% 1.Rate Increase Requested 17.75% Current Increased Adjustment New Rate Schedule Rate Rate (a)Rate Single Family Residential 2.20 gallon Waste Wheeler 11.14$ $13.12 $13.12 3.32 gallon Waste Wheeler 17.78$ $20.94 $20.94 4.64 gallon Waste Wheeler 35.56$ $41.87 $41.87 5.96 gallon Waste Wheeler 53.35$ $62.82 $62.82 (a) Calculated rates are rounded up to the nearest $0.01. 6.Multiunit Residential and Non-residential Rate increases of 17.75% will be applied to all rates in each structure with each rate rounded to the nearest $0.01 Certification To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions provided by the Rate Setting Manual. Name:Jeff Clarin Title:District Manager Signature:Date:08/09/21 Fiscal Year: 1-1-2022 to 12-31-2022 Pg. 1 of 6 Summary of Significant Requested Increase Components Rate Schedule Page 1063 of 1192 San Luis Garbage, Co. Base Year Rate Adjustment Application Current Financial Information Base Year 2019 2020 2021 2022 2023 (from Pg. 4) 6.Direct Labor $3,134,333 $3,027,286 $3,054,099 $3,267,172 $3,343,141 7.Corporate Overhead $215,657 $219,323 $221,077 $232,794 $239,778 8.Office Salaries $345,473 $223,396 $379,893 $412,887 $424,230 9.Other General and Admin Costs $4,723,608 $4,665,589 $4,491,597 $4,483,040 $4,862,523 10 Total Allowable Costs $8,419,071 $8,135,594 $8,146,666 $8,395,893 $8,869,672 11.Operating Ratio 116.2%108.8%100.3%93.0%93.0% 12.Allowable Operating Profit ($1,366,795)($711,979)($24,026)$631,949 $667,610 13.Tipping Fees $2,296,042 $2,339,139 $2,409,313 $3,375,834 $3,390,822 14.Franchise Fees $1,179,293 $1,240,004 $1,338,391 $1,177,209 $1,188,981 15.AB939 Fees $186,065 $203,968 $206,918 $240,832 $248,057 16.Lease Pmts to Affiliated Companies $124,200 $148,444 $150,671 $158,657 $163,416 Transportation to Affiliated Companies $1,952 $9,644 $2,750 $2,750 $2,750 17.Total Pass Through Costs $3,787,552 $3,941,199 $4,108,043 $4,955,282 $4,994,026 18.Revenue Requirement $13,983,124 $14,531,308 19.Total Revenue Offsets $10,839,828 $11,364,814 $12,230,684 $12,162,426 $12,477,419 (from Page 3) 20.Net Shortfall (Surplus)$1,820,698 21.Total Residential and Non-residential Revenue without increase in Base Year (pg.3, lines 32+40)$12,147,084 22.Percent Change in Residential and Non-residential Revenue Requirement 14.99% 23.Franchise Fee Adjustment Factor (1 - 10 percent)90.00% 24.Percent Change in Existing Rates 16.65% Additional AB939 Fees for the City of SLO $100,000 City of SLO Revenue $10,126,623 Additional Price Increase 0.99% Franchise Fee Adjustment Factor (1 - 10 percent)90.00% Percent Change in Existing Rates 1.10% Total Percent Change in Existing Rates 17.75% Fiscal Year: 1-1-2022 to 12-31-2022 Pg. 2 of 6 Section V - Net Shortfall (Surplus) Historical Projected Section I-Allowable Costs Section II-Allowable Operating Profit Section III-Pass Through Costs Section IV - Revenue Requirement Page 1064 of 1192 San Luis Garbage, Co. Base Year Rate Adjustment Application Revenue Offset Summary Current Base Year 2019 2020 2021 2022 2023 Residential Revenue (without increase in Base Yr.) Current Projected Annualized Account Type Rate/Mo.Mo.'s Accounts Revenue 25.20 gallon Waste Wheeler 11.14$ 12 1,662 222,176$ 26.32 gallon Waste Wheeler 17.78$ 12 5,448 1,162,385$ 26.5 64 gallon Waste Wheeler 35.56$ 12 3,948 1,684,691$ 27.96 gallon Waste Wheeler 53.35$ 12 1,094 700,379$ Adj unincorp/supplemental svcs 12,152 28.Single Family Residential $3,485,712 $3,813,946 $4,182,830 $4,179,625 $4,266,905 Multiunit Residential Dumpster 29. Number of Accounts 297 298 298 30. Revenues $1,263,540 1,471,248.52 $1,440,024 $1,454,424 $1,468,969 31.Less Allowance for Uncollectible Resid Accounts 32.Total Residential Revenue $4,749,252 $5,285,195 $5,622,854 $5,634,050 $5,735,874 Non-residential Revenue (without increase in Base Yr.) Account Type Non-residential Can 33. Number of Accounts 369 373 373 34. Revenues $242,173 $256,232 $245,868 $248,325 $250,808 Non-residential Wastewheeler 35. Number of Accounts 383 387 387 36. Revenues $522,159 $552,801 $636,939 $643,308 $649,741 Non-residential Dumpster 37. Number of Accounts - - 1,433 1,447 1,447 38. Revenues $5,293,159 $5,226,825 $5,710,428 $5,621,402 $5,825,209 39.Less: Allowance for Uncollectible Non-resid 40.Total Non-residential Revenue $6,057,491 $6,035,858 $6,593,234 $6,513,034 $6,725,758 45.Interest on Investments $0 $0 $0 $0 $0 46.Other Income $33,086 $43,762 $14,595 $15,342 $15,787 47.Total Revenue Offsets $10,839,828 $11,364,814 $12,230,684 $12,162,426 $12,477,419 Fiscal Year: 1-1-2022 to 12-31-2022 Pg. 3 of 6 Section VII - Revenue Offsets Historical Projected Page 1065 of 1192 San Luis Garbage, Co. Base Year Rate Adjustment Application Cost Summary for Base Year Description of Cost BASE YEAR BASE YEAR 2019 2020 2021 2022 2023 Labor $2,907,950 $2,813,388 $2,835,660 $3,033,591 $3,102,553 Payroll Taxes $226,383 $213,898 $218,439 $233,581 $240,588 48.Total Direct Labor $3,134,333 $3,027,286 $3,054,099 $3,267,172 $3,343,141 49.Corporate Overhead $291,594 $306,513 $367,318 $386,786 $398,390 Less limitation (enter as negative)($75,937)($87,190)($146,241)($153,992)($158,611) Total Corporate Overhead $215,657 $219,323 $221,077 $232,794 $239,778 Office Salaries $321,990 $200,127 $351,383 $382,067 $392,486 Payroll Taxes - Office $23,483 $23,269 $28,510 $30,820 $31,744 50.Total Office Salaries $345,473 $223,396 $379,893 $412,887 $424,230 Bad Debt $529 $3,349 $12,017 $2,500 $2,500 Allocated expenses $0 $0 $0 $0 $0 Bonds expense $5,324 $4,325 $3,600 $3,791 $3,905 Depreciation $845,345 $1,087,445 $877,346 $1,219,062 $1,479,472 Drive Cam fees $29,055 $15,886 $17,614 $18,548 $19,104 Dues and Subscriptions $11,684 $2,905 $10,006 $10,537 $10,853 Facilities $30,610 $21,456 $14,637 $15,413 $15,875 Gas and oil $825,923 $774,199 $821,852 $825,994 $850,158 Insurance $1,122,107 $857,364 $994,256 $1,103,434 $1,136,537 Interest Expense $190,215 $285,527 $131,205 $172,637 $200,185 Laundry (Uniforms)$33,514 $24,183 $25,163 $26,497 $27,291 Legal and Accounting $33,575 $23,213 $25,705 $26,998 $27,768 Miscellaneous and Other $26,610 $2,656 $2,577 $2,713 $2,795 Office Expense $189,252 $140,845 $145,129 $152,844 $157,442 Operating Supplies $58,287 $68,727 $63,196 $66,545 $68,542 Other Taxes $36,778 $36,995 $31,476 $33,145 $34,139 Outside Services $619,299 $657,187 $651,191 $102,740 $105,822 Public Relations and Promotion $8,817 $4,305 $3,827 $3,834 $3,839 Permits $58,311 $82,759 $79,007 $83,194 $85,690 Postage $22,826 $4,384 $6,571 $6,920 $7,127 Relocation $17,372 $15,396 $12,898 $12,898 $12,898 Rent $0 $0 $1,315 $2,054 $2,116 Telephone $37,709 $20,752 $20,233 $21,305 $21,944 Tires $97,837 $104,931 $123,170 $129,698 $133,589 Travel $26,242 $4,509 $6,228 $6,558 $6,755 Truck Repairs $380,228 $404,552 $394,966 $415,899 $428,376 Utilities $16,159 $17,739 $16,412 $17,282 $17,801 51.Total Other Gen/Admin Costs $4,723,608 $4,665,589 $4,491,597 $4,483,040 $4,862,523 52.Total Tipping Fees $2,296,042 $2,339,139 $2,409,313 $3,375,834 $3,390,822 53.Total Franchise Fee $1,179,293 $1,240,004 $1,338,391 $1,177,209 $1,188,981 54.Total AB 939/Regulatory Fees $186,065 $203,968 $206,918 $240,832 $248,057 55.Total Lease Pmt to Affil Co.'s $124,200 $148,444 $150,671 $158,657 $163,416 56 Total Transportation to Affil Co.'s $1,952 $9,644 $2,750 $2,750 $2,750 57 Total Cost $12,206,623 $12,076,793 $12,254,709 $13,351,175 $13,863,698 Fiscal Year: 1-1-2022 to 12-31-2022 Pg. 4 of 6 Page 1066 of 1192 San Luis Garbage, Co. Base Year Rate Adjustment Application Base Year Revenue Offset Summary For Information Purposes Only Description of Revenue Overall Franchise Non-franchise Total Total SLO City SLO County CMC/Cal Poly Residential Revenue (without increase in Base Year) 57.Single Family Residential $4,179,625 $4,179,625 $3,768,364 $411,261 $0 Multiunit Residential Dumpster (Considered Non-residential revenue) 58. Number of Accounts 298 298 298 - - 59. Revenues $1,454,424 $1,454,424 $1,454,424 $0 $0 60.Less Allowance for Uncollectable $0 $0 $0 $0 $0 61.Total Residential Revenue $5,634,050 $5,634,050 $5,222,789 $411,261 $0 Non-residential Revenue (without increase in Base Year) Account Type Non-residential Can 62. Number of Accounts 373 372 368 4 1 63. Revenues $248,325 $248,151 $246,693 $1,458 $174 Non-residential Wastewheeler 64. Number of Accounts 387 384 359 25 3 65. Revenues $643,308 $640,433 $621,301 $19,132 $2,875 Non-residential Dumpster 66. Number of Accounts 1,447 1,339 1,094 245 108 67. Revenues $5,621,402 $4,998,229 $4,035,840 $962,389 $623,172 68.Less: Allowance for Uncollectible Non-residential Accounts $0 $0 $0 $0 $0 69.Total Non-residential Revenue $6,513,034 $5,886,813 $4,903,834 $982,979 $626,221 74.Interest on Investments $0 $0 $0 $0 $0 75.Other Income $15,342 $15,342 $13,497 $1,845 $0 76.Total Revenue Offsets $12,162,426 $11,536,205 $10,140,121 $1,396,084 $626,221 Fiscal Year: 1-1-2022 to 12-31-2022 Pg. 5 of 6 Section VII-Revenue Offsets Refuse Collection Page 1067 of 1192 San Luis Garbage, Co. Base Year Rate Adjustment Application Operating Information Percent Percent Percent Base Year Percent 2019 Change 2020 Change 2021 Change 2022 Change 2023 Residential Garbage 77.Accounts 12,123 1.2%12,263 1.3%12,417 1.0%12,541 1.0%12,667 78.Routes 5 7.2%6 -10.8%5 0.0%5 0.0%5 79.Tons Collected 7,050 -5.5%6,661 3.0%6,861 3.0%7,067 1.0%7,137 80.Direct Labor Hours 10,881 7.2%11,660 -10.8%10,397 0.0%10,397 0.0%10,397 Non-residential Garbage 80.Accounts 2,341 -1.0%2,318 0.3%2,325 1.0%2,348 1.0%2,372 81.Routes 11 7.2%12 -10.8%11 0.0%11 0.0%11 Tons Collected 29,419 -5.5%27,795 3.0%28,629 3.0%29,488 1.0%29,783 82.Direct Labor Hours 23,436 7.2%25,113 -10.8%22,394 0.0%22,394 0.0%22,394 Recyclable Materials - Commingled Recycling 83.Accounts 14,464 0.8%14,581 1.1%14,742 1.0%14,889 1.0%15,038 Routes 10 7.2%10 -10.8%9 0.0%9 0.0%9 Tons Collected 10,731 -10.1%9,650 3.0%9,940 3.0%10,238 1.0%10,341 84.Direct Labor Hours 19,798 7.2%21,215 -10.8%18,918 0.0%18,918 0.0%18,918 Recyclable Materials - Greenwaste Collection 85 Accounts 12,123 1.2%12,263 1.3%12,417 1.0%12,541 1.0%12,667 Routes 3 7.2%3 -10.8%3 0.0%3 0.0%3 Tons Collected 7,319 -4.8%6,970 3.0%7,179 3.0%7,394 1.0%7,468 Direct Labor Hours 6,622 7.2%7,096 -10.8%6,327 0.0%6,327 0.0%6,327 Fiscal Year: 1-1-2022 to 12-31-2022 Pg. 6 of 6 Historical Current Projected Section IX-Operating Data Page 1068 of 1192 San Luis Garbage Company Financial Statements Years Ended December 31, 2020 and 2019 Page 1069 of 1192 C O N T E N T S Page(s) Independent Auditors’ Report 1 - 2 Financial Statements Statements of revenues and expenses - regulatory basis 3 Notes to financial statements 4 - 11 Independent Auditors’ Report on Supplementary Information 12 Schedules of allowable costs - regulatory basis 13 - 14 Page 1070 of 1192 CALIBERAUDIT & ATTEST, LLPIndependent Auditors' ReportTo Management of San Luis Garbage CompanySan Luis Obispo, CaliforniaWe have audited the accompanying financial statements of San Luis Garbage Company, whichcomprise the statements of revenues and expenses - regulatory basis for the years ended December 31,2020 and 2019, and the related notes to the financial statements.Management's Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financial statements inaccordance with the financial reporting provisions of the Rate Setting Process and MethodologyManual for Integrated Solid Waste Management Rates of the City of San Luis Obispo. Management isalso responsible for the design, implementation, and maintenance of internal control relevant to thepreparation and fair presentation of financial statements that are free from material misstatement,whether due to fraud or error.Auditors' ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audit to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditors' judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity'spreparation and fair presentation of the financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity's internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness of significantaccounting estimates made by management, as well as evaluating the overall presentation of thefinancial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.-1-805 Aerovista P1, Ste 103, San Luis Obispo, CA 93401 Phone: (805) 888-0200 Fax: (805) 888-0201Page 1071 of 1192 CALIBERAUDIT & ATTEST, LLPIndependent Auditors' Report -ContinuedOpinionIn our opinion, the financial statements referred to above present fairly, in all material respects, theresults of the operations of San Luis Garbage Company for the years ended December 31, 2020 and2019, in accordance with the financial reporting provisions of the Rate Setting Process andMethodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo asdescribed in Note 1.Basis ofAccountingWe draw attention to Note 1 of the financial statements, which describes the basis of accounting. Thefinancial statements are prepared on the basis of the financial reporting provisions prescribed orpermitted by the City and County of San Luis Obispo, which is a basis of accounting other thanaccounting principles generally accepted in the United States of America, to comply with therequirements of the City and County of San Luis Obispo. Our opinion is not modified with respect tothat matter.Restriction on UseThis report is intended solely for the information and use of the management of San Luis GarbageCompany and the City and County of San Luis Obispo and is not intended to be and should not be usedby anyone other than these specified parties.rY7HC44 _PSan Luis Obispo, CaliforniaMarch 19, 2021-2-805 Aerovista P1, Ste 103, San Luis Obispo, CA 93401 Phone: (805) 888-0200 Fax: (805) 888-0201Page 1072 of 1192 - 3 - 2020 2019 Revenues Hauling revenue 11,321,053$ 10,806,742$ Other income 43,762 33,086 Total revenue 11,364,815 10,839,828 Allowable Costs Direct labor 3,027,286 3,134,333 Corporate overhead 219,323 215,657 Office salaries 223,396 345,473 Other general and administrative costs 4,380,062 4,533,393 Total allowable costs 7,850,067 8,228,856 Allowable Pass-Through Costs Tipping fees, related party 2,339,139 2,296,042 Franchise fees and taxes 1,443,972 1,365,358 Related party rent 148,444 124,200 Interest, related party 285,527 190,215 Transportation - compactors, related parties 9,644 1,952 Total pass-through costs 4,226,726 3,977,767 Total allowable and pass-through costs 12,076,793 12,206,623 Loss before non-allowable costs (711,978) (1,366,795) Non-Allowable Costs Charitable and political contributions 324 726 Corporate overhead 87,190 75,937 Entertainment 2,008 17,346 Gain on disposal of assets (15,533) (43,386) Penalties 14 - Total non-allowable costs 74,003 50,623 Net loss (785,981)$ (1,417,418)$ See Notes to Financial Statements. San Luis Garbage Company Statements of Revenues and Expenses - Regulatory Basis Years Ended December 31, 2020 and 2019 Page 1073 of 1192 San Luis Garbage Company Notes to Financial Statements - 4 - Note 1. Summary of Significant Accounting Policies Nature of business: San Luis Garbage Company (the Company) became a wholly-owned subsidiary of Waste Connections US, Inc. as of April 1, 2002. The Company operates a garbage collection service for residential, commercial, and governmental entities within the city and vicinity of San Luis Obispo, California. The Company services collection routes by use of Company- owned equipment and employees of the Company. The Company extends credit in the form of accounts receivable to customers in its service area. Prescribed accounting practices: The County of San Luis Obispo and the City of San Luis Obispo require the Company to utilize the accounting principles prescribed by the Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo (the Manual) in its financial statement reporting for rate setting purposes. The primary purpose of the accounting principles prescribed by the Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo is to determine integrated solid waste management rates which are fair to residents and which provide adequate revenue to the hauler. The basis of presentation prescribed by the Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo differs from U.S. generally accepted accounting principles (U.S. GAAP) in that the following expenses are non-allowable costs: charitable donations and political contributions, entertainment expenses, income tax expenses, and profit sharing payments not related to an Internal Revenue Service approved pension program. The Manual also specifies a limitation on corporate overhead, which is defined as salaries of corporate officers that can be treated as allowable costs. Bonus costs and allocated facilities costs are included as allowable costs and are not part of the corporate overhead pool subject to limitation. Although not specifically listed as non- allowable costs in the Manual, management has also historically classified the following costs as non-allowable: loss (or gain) on disposal of assets, penalties, and certain employee relocation costs. In addition, according to the accounting principles prescribed by the Rate Setting Process and Methodology Manual for Integrated Solid Waste Management, the operations of the individual garbage districts are considered separate entities for rate setting purposes. Given this, the financial statements for each company have not been consolidated with the other subsidiaries of Waste Connections US, Inc., as would have been specified by U.S. generally accepted accounting principles. Change in accounting policies: In 2020, management of the Company changed the accounting policy for the allocation of general and administrative costs. Historically, the general and administrative costs were specifically tracked by Company rather than through allocations. Management of the Page 1074 of 1192 San Luis Garbage Company Notes to Financial Statements - 5 - Company believes that because these costs are shared, allocating these costs between the companies receiving the benefits through charges and credits to intercompany receivable and payable accounts is the most effective way to track and record the costs at the standalone district (Company) level. These costs are allocated based on truck hours or customer count, depending on the nature of the cost. Costs that are administrative are allocated on customer count, and costs that are direct are allocated on truck hours, consistent with the direct labor (direct) and office salaries (administrative) allocations. The change in accounting policy has been applied prospectively beginning in 2020. Interest: Interest expense is allocated using an estimated internal interest rate and applying that interest rate to the average net book value of fixed assets at the stand-alone district level. The Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo includes interest expense as an allowable cost. Income tax: As noted above, income tax expense is a non-allowable cost resulting in a difference between the presentation of the Company’s statements of revenue and expenses – regulatory basis under the principles prescribed by the Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo and U.S. generally accepted accounting principles. The income tax expense, which would be reported in the non-allowable costs portion of these financial statements, does not present, in accordance with U.S. generally accepted accounting principles, a provision for current or deferred income taxes of the Company or any allocation of income tax expense from its parent, Waste Connections US, Inc. Franchise fees and taxes: U.S. generally accepted accounting principles would require that tax and franchise fees that are assessed by governmental authorities that are directly imposed on a revenue-producing transaction between a seller and a customer be presented on a net basis (excluded from revenues). However, in accordance with the Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo, franchise fees and taxes have been shown gross on the statements of revenues and expenses – regulatory basis and are included in revenues and shown as an allowable cost. Use of estimates: The preparation of financial statements in conformity with practices prescribed or permitted by the Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates of the City of San Luis Obispo, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and Page 1075 of 1192 San Luis Garbage Company Notes to Financial Statements - 6 - the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Revenue recognition: Revenues are recognized when services are transferred to customers in an amount that reflects consideration that is expected to be received. Nature of revenue: The Company’s solid waste collection business involves the collection of waste from residential, commercial and industrial customers for transport directly to the landfill, transfer stations or recycling centers. Solid waste collection services include both recurring and temporary customer relationships. The services are performed under service agreements or franchise agreements with governmental entities. Residential and commercial collection services are provided on a subscription basis with individual households or businesses. The fees received for collection services are based primarily on the market, collection frequency, level of service, route density, type and volume or weight of the waste collected, type of equipment and containers furnished, the distance to the disposal or processing facility, the cost of disposal or processing, and prices charged by competitors for similar services. Disaggregation of revenue: The following table presents the Company’s revenue disaggregated by contract type: 2020 2019 Hauling revenues - residential customers 3,813,946$ 3,485,712$ Hauling revenues - commercial customers 7,507,107 7,321,030 Total 11,321,053$ 10,806,742$ The factors that impact the timing and amount of revenue recognized for each type of revenue may vary based on the nature of the service performed. Generally, the Company recognizes revenue at the time it performs a service. Certain customers are billed in advance (bi-monthly billing) and, accordingly, recognition of the related revenues is deferred until the services are provided. Contract balances: The timing of revenue recognition, billings and cash collections results in billed accounts receivable (contract assets), and customer deposits and deferred revenue (contract liabilities) on the Company’s balance sheet. Performance obligations: Service performance obligations of a long-term nature, such as solid waste collection service contracts, are satisfied over time, and revenue is recognized based on the value Page 1076 of 1192 San Luis Garbage Company Notes to Financial Statements - 7 - provided to the customer during the period. The amount billed to the customer is based on variable elements such as the number of residential homes or businesses for which collection services are provided, the volume of waste collected, transported and disposed, and the nature of the waste accepted. The Company does not disclose the value of unsatisfied performance obligations for these contracts as its right to consideration corresponds directly to the value provided to the customer for services completed to date and all future variable consideration is allocated to wholly unsatisfied performance obligations. Costs to obtain a contract: The incremental direct costs of obtaining a contract, which consist of sales incentives, would be recognized on the Company’s balance sheet as a deferred sales incentive to be amortized to expense over the life of the customer relationship. There were no contract acquisition costs recorded at the stand-alone district level. Accounts receivable: Accounts receivable are stated at the amount management expects to collect from outstanding balances. The Company estimates its allowance for doubtful accounts based on historical collection trends, types of customers, the age of the outstanding receivables, and existing economic conditions. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements. Property and equipment: Repairs, maintenance and small equipment purchases are charged to expense when incurred. Expenditures, which significantly increase asset values or extend useful lives, are capitalized and recorded at cost. Depreciation expense is calculated on the straight-line method over the following useful lives: Years Buildings and improvements 25 Vehicles 7 Containers 7 Equi pment 7 Office e qui pment 5 Page 1077 of 1192 San Luis Garbage Company Notes to Financial Statements - 8 - Depreciation expense for the years ended December 31, 2020 and 2019 was $1,087,445 and $845,345, respectively. Advertising costs: The Company expenses advertising costs as incurred. Insurance: Waste Connections US, Inc., the sole shareholder and parent of the Company is effectively self-insured for automobile liability, general liability, employer’s liability, environmental liability, as well as for certain employee group health claims, property and workers’ compensation. Waste Connection’s insurance accruals are based on claims filed and estimates of claims incurred but not reported and are developed by corporate management with assistance from its third-party actuary and its third-party claims administrator. The insurance accruals are influenced by past claims experience factors, which have a limited history, and by published industry development factors. Insurance expense and allocated insurance expense for the Company are recorded in other general and administrative costs on the statements of revenues and expenses – regulatory basis. Economic dependency: The Company provides disposal services to residential and commercial customers under the terms of franchise agreements with the City of San Luis Obispo and the County of San Luis Obispo. Collection rates are determined annually based on historical expenses, future budgeted expenses, and a reasonable rate of return. On January 1, 2019, an anaerobic digester came on line in San Luis Obispo, which triggered a technology-related extension of the Company’s franchise agreements with the City of San Luis Obispo and County of San Luis Obispo until December 31, 2039, which is 20 years past the Facility Operation Date. In consideration for the grant of the exclusive franchise to provide services to the respective municipalities, the Company has agreed to pay a franchise fee based upon a percentage of annual gross solid waste revenues provided to each grantee, as follows: City of San Luis Obispo 10% County of San Luis Obispo (unincorporated) 10% The Company is required to submit audited financial statements to the City of San Luis Obispo within four months of their year-end and to the County of San Luis Obispo within six months of their year-end. The contracts allow for an extension of time if mutually agreed upon by both parties. Page 1078 of 1192 San Luis Garbage Company Notes to Financial Statements - 9 - Related party rent: The Company accounts for intercompany leases as related party rent expense and has not adopted the new U.S. GAAP lease guidance because the intercompany leases eliminate on a consolidated level for Waste Connections US, Inc. COVID-19 impact: The COVID-19 coronavirus outbreak in the United States and related shelter in place directives resulted in operational challenges for many of the Company’s customers and certain industries. Garbage collection services remain an essential service, although there was impact to the Company’s commercial customers. Management will be closely monitoring the results and will take actions necessary to, as much as possible, mitigate the impact on the Company’s operations. Note 2. Related Party Transactions The Company has entered into various related party transactions. The nature of related party transactions and amounts not specifically identified elsewhere in the financial statements are as follows: Overhead: San Luis Garbage Company is a wholly-owned subsidiary of Waste Connections US, Inc. Waste Connections US, Inc. provides management and administrative services to San Luis Garbage Company. These costs are included as corporate overhead allowable and non- allowable in the accompanying statements of revenues and expenses - regulatory basis. Tipping fees: Waste Connections US, Inc. is also the sole shareholder in Cold Canyon Land Fill, Inc., which operates the sanitary landfill that the Company utilizes for the disposal of garbage collected, and the Materials Recovery Facility (MRF) for the disposal of recyclable material. These costs are included in tipping fees, related party in the accompanying statement of revenues and expenses – regulatory basis. Transportation: The Company also pays other related companies for transportation costs of garbage to the landfill. The transportation costs – compactors, related parties are included in the accompanying statement of revenues and expenses – regulatory basis. Allocated insurance: The Company incurs expenses for insurance costs that are allocated from a related party company that is a subsidiary of Waste Connections US, Inc. The amount of the insurance cost allocated totaled $857,364 and $1,122,107 for the years ended December 31, 2020 and 2019, respectively, which is included in other general and administrative costs. Page 1079 of 1192 San Luis Garbage Company Notes to Financial Statements - 10 - Allocated facilities: The Company incurs expenses for regional facilities costs that are allocated from the regional division of Waste Connections US, Inc. The amount of the facilities cost allocated totaled $21,456 and $30,610 for the years ended December 31, 2020 and 2019, respectively, which is included in other general and administrative costs. Allocated labor: The related companies pay for labor and services on behalf of each other. These costs are allocated between the companies receiving the benefits through charges and credits to intercompany receivable and payable accounts based upon the actual costs incurred. The allocated labor costs are recorded to direct labor or office salaries. Direct labor costs are allocated to the companies based on truck hours. Office salaries are allocated to the companies based on customer count. Allocated other general and administrative costs: The Company incurs other general and administrative costs that are shared between the related companies. These costs are allocated between the companies receiving the benefits through charges and credits to intercompany receivable and payable accounts. Previous to 2020, the general and administrative costs were specifically tracked by company, rather than allocation. Starting in 2020, these costs are allocated based on truck hours or customer count, depending on the nature of the cost. Costs that are administrative are allocated on customer count, and costs that are direct are allocated on truck hours, consistent with the direct labor (direct) and office salaries (administrative) allocations. Allocated bonuses: Bonus costs to the local level employees allocated from corporate are included in direct labor and office salaries. Allocated interest: Interest expense is allocated to the stand-alone district level based on the policy as described in Note 1, and is shown as interest, related party. Note 3. Employee Benefit Plan The Company’s employees can participate in the 401(k) profit sharing plan (the Plan) offered by Waste Connections US, Inc. Waste Connections US, Inc. made matching contributions to a trust, for the benefit of qualified employees, subject to certain limitations imposed by the Internal Revenue Service for the years ended December 31, 2020 and 2019. Effective January 1, 2019, the Company matches 100% of employee contributions up to 5% of compensation and the match vests immediately. Substantially all employees are eligible who are 21 years of age and have at least one year of service. As of June 1, 2020, the employer match was suspended in response to the impact of COVID-19. The match will resume on January 1, 2021. For the years ended December 31, 2020 and 2019, the Company’s contribution amounted to $39,237 and $106,641, respectively.SL The total Page 1080 of 1192 San Luis Garbage Company Notes to Financial Statements - 11 - amount of the retirement costs are recorded in the financial statements as part of direct labor and office salaries. Note 4. Related Party Lease The Company has a lease for office and yard space with a related party, Corral de Piedra Land Company. The lease is renewed annually. The base rent is allocated to the stand-alone districts. The monthly base rent for the Company’s yard and office space for the years ended December 31, 2020 and 2019 was $12,370 and $10,350, respectively. The base rent is subject to an annual increase based on the Consumer Price Index (CPI), and is also subject to allocation adjustments. Related party rent expense for the years ended December 31, 2020 and 2019 was $148,444 and $124,200, respectively. Note 5. Commitments and Contingencies The Company has a workers’ compensation claim outstanding at the end of the year. The ultimate responsibility for these claims is held by Waste Connections US, Inc., the sole shareholder and parent of the Company. The liability and expense is allocated from the corporate consolidated level to a related entity, Corral de Piedra, which serves as the Company’s insurance manager and whose sole shareholder is also Waste Connections US, Inc. Management does not anticipate any amount related to these claims becoming a liability of the Company on a stand-alone basis. As such, the liability and expense for these claims has not been recorded to the financial statements of the Company. Note 6. Subsequent Events The date to which events occurring after December 31, 2020 have been evaluated for possible adjustment to the financial statements or disclosure is March 19, 2021, which is the date on which the financial statements were available to be issued. Page 1081 of 1192 CALIBERAUDIT & ATTEST, LLPIndependent Auditors' Report on Supplementary InformationTo Management of San Luis Garbage CompanySan Luis Obispo, CaliforniaWe have audited the financial statements of San Luis Garbage Company for the years endedDecember 31, 2020 and 2019, and our report thereon dated March 19, 2021, which expressed anunmodified opinion on those statements, appears on page one. Our audits were conducted for thepurpose of forming an opinion on the financial statements as a whole. The schedules of allowable costs— regulatory basis are presented for purposes of additional analysis and are not a required part of thefinancial statements. Such information is the responsibility of management and was derived from andrelates directly to the underlying accounting and other records used to prepare the financial statements.The information has been subjected to the auditing procedures applied in the audits of the financialstatements and certain additional procedures, including comparing and reconciling such informationdirectly to the underlying accounting and other records used to prepare the financial statements or tothe financial statements themselves, and other additional procedures in accordance with auditingstandards generally accepted in the United States of America. In our opinion, the information is fairlystated in all material respects in relation to the financial statements as a whole.San Luis Obispo, CaliforniaMarch 19, 2021LLP- 12 -805 Aerovista P1, Ste 103, San Luis Obispo, CA 93401 Phone: (805) 888-0200 Fax: (805) 888-0201Page 1082 of 1192 - 13 - 2020 2019 Direct Labor Labor 2,813,388$ 2,907,950$ Payroll taxes 213,898 226,383 Total direct labor 3,027,286$ 3,134,333$ Corporate Overhead Allowable 219,323$ 215,657$ Non-allowable 87,190 75,937 Total corporate overhead 306,513$ 291,594$ Office Salaries Office salaries 200,127$ 321,990$ Payroll taxes 23,269 23,483 Total office salaries 223,396$ 345,473$ San Luis Garbage Company Schedules of Allowable Costs - Regulatory Basis Years Ended December 31, 2020 and 2019 Page 1083 of 1192 - 14 - 2020 2019 Other General and Administrative Costs Bad debt 3,349$ 529$ Bond 4,325 5,324 Depreciation 1,087,445 845,345 Drive cam fees 15,886 29,055 Dues and subscriptions 2,905 11,684 Facilities - allocated expenses from related parties 21,456 30,610 Gas and oil 774,199 825,923 Insurance - allocated expenses from related parties 857,364 1,122,107 Laundry and uniforms 24,183 33,514 Legal and accounting 23,213 33,575 Miscellaneous and other 2,656 26,610 Office 140,845 189,252 Operating supplies 68,727 58,287 Other taxes 36,995 36,778 Outside services 136,553 99,023 Non-related party tipping fees 520,634 520,276 Permits and licenses 82,759 58,311 Postage 4,384 22,826 Public relations and promotions 4,305 8,817 Relocation 15,396 17,372 Telephone 20,752 37,709 Tires 104,931 97,837 Travel 4,509 26,242 Truck repairs 404,552 380,228 Utilities 17,739 16,159 Total other general and administrative costs 4,380,062$ 4,533,393$ San Luis Garbage Company Schedules of Allowable Costs - Regulatory Basis - Continued Years Ended December 31, 2020 and 2019 Page 1084 of 1192 City of San Luis Obispo Current Rates Service Description Line of Business Current RESIDENTIAL Residential MSW 19 WW /CURB RESIDENTIAL MSW 11.14$ 19WW/YARD/HRDSHP RESIDENTIAL MSW 11.14$ 20 WW YARD HARDSHIP RESIDENTIAL MSW 11.14$ 32 GAL ADDITIONAL RESIDENTIAL MSW 16.21$ 32 WW /CURB RESIDENTIAL MSW 17.78$ 32 WW HDCP / IN YD RESIDENTIAL MSW 13.33$ 32WW LOW INCOME RESIDENTIAL MSW 13.33$ 32WW/YARD/HRDSHP RESIDENTIAL MSW 17.78$ 64 IN YARD TRASH WHEELED RESIDENTIAL MSW 47.69$ 64 WW /CURB RESIDENTIAL MSW 35.56$ 64GAL ADDITIONAL RESIDENTIAL MSW 32.45$ 64WW/YARD/HRDSHP RESIDENTIAL MSW 35.56$ 96 IN YARD TRASH WHEELED RESIDENTIAL MSW 65.46$ 96 WW /CURB RESIDENTIAL MSW 53.35$ 96GAL ADDITIONAL RESIDENTIAL MSW 48.64$ 96WW/YARD/HRDSHP RESIDENTIAL MSW 53.35$ DESIGNED MANUAL SERVICE RESIDENTIAL MSW 18.09$ DESIGNED MANUAL SERVICE RESIDENTIAL MSW 18.09$ DESIGNED MANUAL SERVICE RESIDENTIAL MSW 28.94$ DESIGNED MANUAL SERVICE RESIDENTIAL MSW 57.92$ DESIGNED MANUAL SERVICE RESIDENTIAL MSW 86.83$ RESIDENTIAL 20 GALLON RESIDENTIAL MSW 11.14$ SLO CO WASTE MGMT AUTH RESIDENTIAL MSW 0.30$ SPECIAL TRIP FEE RESIDENTIAL MSW 26.91$ VACANT RATE RESIDENTIAL MSW 9.14$ VACATION RESIDENTIAL MSW 9.14$ CITY CLEAN UP RESIDENTIAL MSW 6.14$ RESIDENTIAL EXTRAS RESIDENTIAL MSW 4.45$ XTRA 32GAL GREEN WASTE RESIDENTIAL MSW 3.46$ RESTART FEE-RESIDENTIAL RESIDENTIAL MSW 13.45$ SMALL EXTRA RESIDENTIAL MSW 9.94$ RESI TRIP CHARGE RESIDENTIAL MSW 8.97$ 20 GL IN YARD RESIDENTIAL MSW 23.26$ 32 IN YARD TRASH WHEELED RESIDENTIAL MSW 29.91$ Residential Recycle 32 RECYCLE/IN YARD RESI RECYCLING 12.12$ 64 RECYCLE/IN YARD RESI RECYCLING 12.12$ 96 RECYCLE/IN YARD RESI RECYCLING 12.12$ XTRA 32GAL RECYCLE RESI RECYCLING 0.94$ XTRA 64GAL RECYCLE RESI RECYCLING 0.94$ XTRA 96GAL RECYCLE RESI RECYCLING 0.94$ EXTRA RECYCLE RESI RECYCLING 2.23$ Residential Green Waste 32 GREEN WASTE/IN YARD RESIDENTIAL GW 12.12$ RATES Page 1 of 5Page 1085 of 1192 96 GREEN WASTE/IN YARD RESIDENTIAL GW 12.12$ COMM GW 96GAL 2X WKLY RESIDENTIAL GW 11.27$ XTRA 32GAL GREEN WASTE RESIDENTIAL GW 3.48$ XTRA 96GAL GREEN WASTE RESIDENTIAL GW 3.48$ ORGANICS Organics 32 GAL 3X WKLY ORGANICS ORGANICS 16.94$ 64 GAL 3X WKLY ORGANICS ORGANICS 23.99$ XTRA 32 GAL ORGANICS ORGANICS 1.88$ XTRA 64 GAL ORGANICS ORGANICS 1.88$ COMMERCIAL Commercial MSW 1 CAN 1X WEEKLY COMMERCIAL MSW 31.63$ 1 CAN 2X WEEKLY COMMERCIAL MSW 49.64$ 1 CAN 3X WEEKLY COMMERCIAL MSW 67.76$ 1 CAN 4X WEEKLY COMMERCIAL MSW 85.78$ 1 CAN 5X WEEKLY COMMERCIAL MSW 103.82$ 1 CAN 7X WEEKLY COMMERCIAL MSW 139.91$ 1.5YD 1X WEEKLY COMMERCIAL MSW 126.45$ 1.5YD 2X WEEKLY COMMERCIAL MSW 185.13$ 1.5YD 3X WEEKLY COMMERCIAL MSW 243.81$ 1.5YD 5X WEEKLY COMMERCIAL MSW 361.23$ 1.5YD 6X WEEKLY COMMERCIAL MSW 419.96$ 1.5YD 7X WEEKLY COMMERCIAL MSW 478.66$ 1.5YD APT 1X WKLY COMMERCIAL MSW 149.02$ 1.5YD APT 2X WKLY COMMERCIAL MSW 230.29$ 1.5YD APT 3X WKLY COMMERCIAL MSW 311.60$ 1.5YD APT 4X WKLY COMMERCIAL MSW 392.86$ 1.5YD APT 6X WKLY COMMERCIAL MSW 555.40$ 1YD 1X WEEKLY COMMERCIAL MSW 112.89$ 1YD 2X WEEKLY COMMERCIAL MSW 158.04$ 1YD 3X WEEKLY COMMERCIAL MSW 203.22$ 1YD 4X WEEKLY COMMERCIAL MSW 248.37$ 1YD 7X WEEKLY COMMERCIAL MSW 383.85$ 1YD APARTMENT COMMERCIAL MSW 128.71$ 1YD APT 2X WKLY COMMERCIAL MSW 187.46$ 2 96GAL 1X WEEKLY COMMERCIAL MSW 92.39$ 2 96GAL 2X WEEKLY COMMERCIAL MSW 142.02$ 2 96GAL 3X WEEKLY COMMERCIAL MSW 191.70$ 2 96GAL 4X WEEKLY COMMERCIAL MSW 241.34$ 2 96GAL 6X WEEKLY COMMERCIAL MSW 340.65$ 2 96GAL 7X WEEKLY COMMERCIAL MSW 390.39$ 2 CANS 1X WEEKLY COMMERCIAL MSW 40.64$ 2 CANS 2X WEEKLY COMMERCIAL MSW 63.25$ 2 CANS 3X WEEKLY COMMERCIAL MSW 85.80$ 2 CANS 5X WEEKLY COMMERCIAL MSW 131.00$ 2 CANS 6X WEEKLY COMMERCIAL MSW 153.56$ 2 CANS 7X WEEKLY COMMERCIAL MSW 176.13$ 2 YD 7X WEEKLY COMMERCIAL MSW 778.89$ 2YD 1X WEEKLY COMMERCIAL MSW 139.98$ 2YD 2X WEEKLY COMMERCIAL MSW 209.97$ 2YD 3X WEEKLY COMMERCIAL MSW 280.02$ 2YD 4X WEEKLY COMMERCIAL MSW 349.98$ 2YD 6X WEEKLY COMMERCIAL MSW 489.99$ 2YD 7X WEEKLY COMMERCIAL MSW 559.98$ 2YD APARTMENT 1X WK COMMERCIAL MSW 169.33$ 2YD APT 2X WKLY COMMERCIAL MSW 270.95$ Page 2 of 5Page 1086 of 1192 2YD APT 3X WKLY COMMERCIAL MSW 372.53$ 2YD APT 4X WKLY COMMERCIAL MSW 474.13$ 3 96GAL 1X WEEKLY COMMERCIAL MSW 128.41$ 3 96GAL 2X WEEKLY COMMERCIAL MSW 193.87$ 3 96GAL 5X WEEKLY COMMERCIAL MSW 390.31$ 3 CANS 1X WEEKLY COMMERCIAL MSW 49.67$ 3 CANS 5X WEEKLY COMMERCIAL MSW 158.11$ 3 CANS 6X WEEKLY COMMERCIAL MSW 185.21$ 3 CANS 7X WEEKLY COMMERCIAL MSW 212.34$ 3YD 1X WEEKLY COMMERCIAL MSW 167.08$ 3YD 2X WEEKLY COMMERCIAL MSW 264.14$ 3YD 3X WEEKLY COMMERCIAL MSW 361.23$ 3YD 4X WEEKLY COMMERCIAL MSW 458.33$ 3YD 5X WEEKLY COMMERCIAL MSW 555.40$ 3YD 6X WEEKLY COMMERCIAL MSW 652.50$ 3YD 7X WEEKLY COMMERCIAL MSW 749.62$ 3YD APARTMENT COMMERCIAL MSW 209.95$ 3YD APT 2X WKLY COMMERCIAL MSW 352.23$ 3YD APT 3X WKLY COMMERCIAL MSW 494.46$ 3YD APT 4X WKLY COMMERCIAL MSW 636.73$ 3YD APT 6X WKLY COMMERCIAL MSW 921.21$ 3YD APT 7X WKLY COMMERCIAL MSW 1,063.46$ 4 96GAL 1X WEEKLY COMMERCIAL MSW 164.41$ 4 96GAL 2X WEEKLY COMMERCIAL MSW 245.70$ 4 96GAL 3X WEEKLY COMMERCIAL MSW 327.72$ 4 96GAL 5X WEEKLY COMMERCIAL MSW 489.55$ 4 CANS 2X WEEKLY COMMERCIAL MSW 90.35$ 4 CANS 5X WEEKLY COMMERCIAL MSW 185.18$ 4YD 1X WEEKLY COMMERCIAL MSW 194.14$ 4YD 2X WEEKLY COMMERCIAL MSW 320.60$ 4YD 3X WEEKLY COMMERCIAL MSW 447.01$ 4YD 4X WEEKLY COMMERCIAL MSW 573.48$ 4YD 5X WEEKLY COMMERCIAL MSW 699.90$ 4YD 6X WEEKLY COMMERCIAL MSW 826.33$ 4YD 7X WEEKLY COMMERCIAL MSW 952.81$ 4YD APARTMENT 1X WKLY COMMERCIAL MSW 250.62$ 4YD APT 2X WKLY COMMERCIAL MSW 435.75$ 4YD APT 3X WKLY COMMERCIAL MSW 620.94$ 4YD APT 4X WKLY COMMERCIAL MSW 806.10$ 4YD APT 5X WKLY COMMERCIAL MSW 991.22$ 4YD APT 6X WKLY COMMERCIAL MSW 1,176.41$ 5 96 GAL 1X WEEKLY COMMERCIAL MSW 200.44$ 5 96GAL 2X WEEKLY COMMERCIAL MSW 297.59$ 6 96 GAL 2X WEEKLY COMMERCIAL MSW 349.38$ 6 YD APT 6X WEEK COMMERCIAL MSW 1,728.09$ 6YD 1X WEEKLY COMMERCIAL MSW 248.32$ 6YD 2X WEEKLY COMMERCIAL MSW 426.71$ 6YD 3X WEEKLY COMMERCIAL MSW 605.12$ 6YD 6X WEEKLY COMMERCIAL MSW 1,140.28$ 6YD 7X WEEKLY COMMERCIAL MSW 1,318.71$ 6YD APARTMENT COMMERCIAL MSW 331.87$ 6YD APT 2X WKLY COMMERCIAL MSW 600.56$ 6YD APT 3X WKLY COMMERCIAL MSW 869.28$ 6YD APT 4X WKLY COMMERCIAL MSW 1,137.98$ 8 96GAL 1X WEEKLY COMMERCIAL MSW 308.52$ 8-96GAL WW 7X WKLY COMMERCIAL MSW 1,175.60$ 96GAL 1X WEEKLY COMMERCIAL MSW 56.37$ 96GAL 2X WEEKLY COMMERCIAL MSW 90.25$ 96GAL 3X WEEKLY COMMERCIAL MSW 124.13$ 96GAL 4X WEEKLY COMMERCIAL MSW 157.98$ Page 3 of 5Page 1087 of 1192 96GAL 5X WEEKLY COMMERCIAL MSW 191.90$ 96GAL 6X WEEKLY COMMERCIAL MSW 225.73$ 96GAL 7X WEEKLY COMMERCIAL MSW 259.61$ RENTAL COMMERCIAL MSW 45.20$ SILVER CITY / CREEKSIDE COMMERCIAL MSW 2.81$ SUNDAY PICKUP COMMERCIAL MSW 79.04$ 1.5YD APT 7X WKLY COMMERCIAL MSW 636.66$ 2YD 5X WEEKLY COMMERCIAL MSW 419.99$ 3 96GAL 6X WEEKLY COMMERCIAL MSW 455.75$ 3 96GAL 7X WEEKLY COMMERCIAL MSW 521.23$ BIN CLEANING COMMERCIAL MSW 62.31$ EXTRA BAGS, BXS, CANS COMMERCIAL MSW 9.70$ XTRA 32GAL GREEN WASTE COMMERCIAL MSW 6.96$ LOOSE YARDAGE COMMERCIAL MSW 38.38$ SMALL EXTRA COMMERCIAL MSW 19.93$ Delivery Charge COMMERCIAL MSW 29.35$ Temporary Rental Charge COMMERCIAL MSW 1.51$ Special Pickup 1.5yd COMMERCIAL MSW 57.62$ Special Pickup 1yd COMMERCIAL MSW 51.96$ Special Pickup 2yd COMMERCIAL MSW 67.77$ Special Pickup 3yd COMMERCIAL MSW 83.54$ Special Pickup 4yd COMMERCIAL MSW 99.34$ Special Pickup 6 yd COMMERCIAL MSW 121.12$ STANDBY COMMERCIAL MSW 1.26$ 1 CAN 6X WEEKLY COMMERCIAL MSW 121.89$ 2YD APT 6X WEEKLY COMMERCIAL MSW 677.32$ 4 96GAL 7X WEEKLY COMMERCIAL MSW 652.13$ 6YD 5X WEEKLY COMMERCIAL MSW 961.91$ 8YD 1X WEEKLY COMMERCIAL MSW 302.51$ SPECIAL TRIP FEE COMMERCIAL MSW 27.13$ Commercial Recycle 1.5YD CARDBOARD COMM RECYCLING 1.5YD CARDBOARD 3X WKLY COMM RECYCLING 60.96$ 1.5YD RECYCLE 3X WKLY COMM RECYCLING 60.96$ 1.5YD RECYCLE 4X WKLY COMM RECYCLING 75.62$ 1.5YD RECYCLE 6X WKLY COMM RECYCLING 104.96$ 1YD CARDBOARD 3X WEEKLY COMM RECYCLING 50.81$ 1YD CARDBOARD 5X WKLY COMM RECYCLING 73.35$ 1YD CARDBOARD 6X WKLY COMM RECYCLING 84.70$ 1YD RECYCLE 3X WKLY COMM RECYCLING 50.81$ 1YD RECYCLE 5X WKLY COMM RECYCLING 73.37$ 2-96 GAL COMM RECY 6XWK COMM RECYCLING 85.15$ 2YD CARDBOARD 3X WKLY COMM RECYCLING 69.99$ 2YD CARDBOARD 6X WKLY COMM RECYCLING 122.52$ 2YD RECYCLE 3X WEEKLY COMM RECYCLING 69.99$ 2YD RECYCLE 4X WEEKLY COMM RECYCLING 87.49$ 2YD RECYCLE 6X WEEKLY COMM RECYCLING 122.52$ 3YD CARDBOARD 3X WKLY COMM RECYCLING 90.29$ 3YD CARDBOARD 4X WKLY COMM RECYCLING 114.62$ 3YD CARDBOARD 6X WKLY COMM RECYCLING 163.13$ 3YD RECYCLE 3X WEEKLY COMM RECYCLING 90.29$ 3YD RECYCLE 4X WEEKLY COMM RECYCLING 114.62$ 3YD RECYCLE 5X WEEKLY COMM RECYCLING 138.86$ 3YD RECYCLE 6X WEEKLY COMM RECYCLING 163.13$ 4YD CARDBOARD 3X WKLY COMM RECYCLING 111.79$ 4YD CARDBOARD 5X WKLY COMM RECYCLING 175.00$ 4YD CARDBOARD 6X WKLY COMM RECYCLING 206.63$ 4YD RECYCLE 3X WEEKLY COMM RECYCLING 111.79$ 4YD RECYCLE 4X WEEKLY COMM RECYCLING 143.37$ 4YD RECYCLE 5X WEEKLY COMM RECYCLING 175.00$ Page 4 of 5Page 1088 of 1192 4YD RECYCLE 6X WEEKLY COMM RECYCLING 206.63$ 6YD RECYCLE 3X WKLY COMM RECYCLING 151.30$ 6YD RECYCLE 6X WKLY COMM RECYCLING 285.06$ 8 YD RECYCLE 3X WKLY COMM RECYCLING 181.17$ 8 YD RECYCLE 5X WKLY COMM RECYCLING 290.53$ CMML RECY 32G 2X WKLY COMM RECYCLING 12.45$ CMML RECY 32G 3X WKLY COMM RECYCLING 16.94$ CMML RECY 32G 4X WKLY COMM RECYCLING 21.45$ CMML RECY 32G 5X WKLY COMM RECYCLING 25.97$ CMML RECY 32G 6X WKLY COMM RECYCLING 30.45$ CMML TRIP CHARGE COMM RECYCLING 18.10$ COMM RECY 64 GAL 2X WKLY COMM RECYCLING 16.91$ COMM RECY 64GAL 6X WKLY COMM RECYCLING 38.39$ COMM RECY 96GAL 2X WKLY COMM RECYCLING 22.54$ COMM RECY 96GAL 3X WKLY COMM RECYCLING 31.02$ COMM RECY 96GAL 4X WKLY COMM RECYCLING 39.49$ COMM RECY 96GAL 5X WKLY COMM RECYCLING 47.95$ COMM RECY 96GAL 6X WKLY COMM RECYCLING 56.42$ LOOSE CARDBOARD COMM RECYCLING 9.61$ 6YD RECYCLE 4X WKLY COMM RECYCLE 195.89$ EXTRA RECYCLE COMM RECYCLE 4.49$ 1.5YD RECYCLE 5X WKLY COMM RECYCLE 90.29$ 2YD RECYCLE 5X WEEKLY COMM RECYCLE 104.97$ 8 YD RECYCLE 4X WKLY COMM RECYCLE 235.85$ LOOSE CARDBOARD COMM RECYCLE 9.54$ 3YD CARDBOARD 5X WKLY COMM RECYCLING 138.86$ COMMERCIAL MAINT FEE ADJUSTMENT 27.13$ TAX LIEN CERT. MAIL FEE ADJUSTMENT 4.08$ DISPOSAL WHITE GOODS DISPOSAL 33.88$ WHITE GOODS DISPOSAL 33.61$ MATTRESS DISPOSAL 19.93$ Page 5 of 5Page 1089 of 1192 Page 1090 of 1192 Page 1091 of 1192 Rate Comparisons for Garbage ServiceService SizeSan Luis Obispo (current)San Luis Obispo (Proposed)Pismo Beach 1South County Urban 1Arroyo Grande 1Atascadero Templeton San MiguelPaso Robles2City of Santa Maria 3,4Santa Barbara County (Northern)4City of Santa Barbara20 Gallon 11.14$ 13.23$ 35 Gallon17.78$ 21.11$ 17.31$ 25.60$ 19.46$ 28.55$ 31.40$ 28.33$ 30.90$ 25.84$ 45.30$ 65 Gallon 35.56$ 42.22$ 34.63$ 34.04$ 25.29$ 44.50$ 45.01$ 44.48$ 51.12$ 30.6927.89$ 56.15$ 95 Gallon53.35$ 63.34$ 51.94$ 47.46$ 31.13$ 55.77$ 45.95$ 61.06$ 57.25$ 34.8129.86$ 67.00$ 2 yard (1X WK)168.15$ 199.64$ 120.91$ 129.25$ 122.10$ 146.79$ 129.54$ 103.98$ 168.68$ 166.72167.72$ 248.79$ Notes:1 Scheduled increases in 1/1/2022 2 Paso Robles does 40 gallon cart pricing3 65 gallon Scheduled to increase to $32.70 in 1/1/22 and $34.71 in 7/1/22, and 95 gallon Scheduled to increase to $38.07 in 1/1/22 and $41.34 in 7/1/224 Weekly Trash pick-up but every other week recycling and green waste pick-up.Page 1092 of 1192 2022 Solid Waste Rate Study and Resolution Establishing Integrated Solid Waste RatesCity Council MeetingApril 19, 20221 Adopt a resolution (Attachment A) entitled “A Resolution of the City Council of the City of San Luis Obispo, California, Establishing Integrated Solid Waste Rates.”Recommendation2 3San Luis Garbage Company Has Proposed Rate Increases for City Customers1.Submitted a Rate Application to the City that staff have evaluated in partnership with R3 Consulting Group. 2.Three different changes are proposed.3.Increases are needed to provide sustainably based solid waste, recycling, and green waste collection compliant with state laws.4.The resolution this evening has been prepared consistent with Prop 218 and adopted Rate Setting Manual between the City and the Garbage Company. Three-Year Solid Waste Rate Setting Current Cycle: Base Year (2022)1.Includes thorough review of Garbage Company financial statements2.Accounts for recovery of net costs3.Accounts for seven percent profit4.Pre-approves CPI and AB 939 increases for interim yearsInterim Years (2023 & 2024)1.Landfill Tipping Fees and AB 939 Related Fees2.Changes to CPI4 Notice of Public HearingLegal notification 45 days prior to public hearing April 19 hearing date, official notification date of March 5March 5 San Luis Garbage mailed 12,232 notices Protest guidelines were posted to our City’s solid waste rates pageProposition 218 Notification5 A protest is valid when received from a property owner or an account holder responsible for solid waste service chargesOne protest is valid per service addressCustomer may protest the integrated solid waste rate12,232 active accounts6,117 protests required to establish a successful protest (50% +1) Proposition 218 Protest Validation6 7Solid Waste Rate StudyRate Study:Total Cost of ServiceEquitable RatesCompliant Rate Structure 8Proposed Rate Increase17.75%Base Year 20228.88% Temporary FeeUp to 5.4% IWMA Fee Proposed Rate Increase: Base Year17.75%San Luis Garbage Base Year Rate Increase Effective May 1, 20229 San Luis Garbage Base Year: 17.75%3.84%, Capital Investment3.70%, HZI Digester1.99%, 1.55%, Franchise and AB 939/SB 1383 Fees1.06%, Insurance5.61%, Other General 10 3.84%, Capital InvestmentSan Luis Garbage Base Year11 San Luis Garbage Base Year3.70%, HZI Digester12 San Luis Garbage Base Year1.99%, Labor13 San Luis Garbage Base Year1.55%, Franchise and AB 939/SB 1383 Fees14 San Luis Garbage Base Year5.61%, Other General 15 8.88%San Luis Garbage Temporary Rate Increase Effective May 1, 2022 -Expires January 1, 2023Proposed Rate Increase: Base Year16 Proposed Rate Increase5.4%IWMA FeeEffective July 1, 202217 18ResidentialProposed RatesService Level Current Rate Proposed Rate May 1Proposed Rate July 1Mini-Can Service (20 gallon container)$11.14 $14.11 $14.87Economy Rate (32 gallon container)$17.78 $22.51 $23.70Standard Rate (64 gallon container)$35.56 $45.03 $47.46Premium Rate (96 gallon container)$53.35 $67.56 $71.21 19Service Level Current Rate Proposed Rate May 1Proposed Rate July 13 Yd Dumpster Service 1x Weekly$167.08 $211.57 $222.99Proposed RatesCommercial $22.51 $20.94 $24.62 $- $10 $20 $30 $40 $50 $60 $70 $80Comparison of Residential 32-Gal Monthly Rates (45% of City Customers)20 21Customer Assistance Program15% of Customer BillAutomatic qualification based on Water/Sewer statusPending late Summer - early Fall Adopt a resolution (Attachment A) entitled “A Resolution of the City Council of the City of San Luis Obispo, California, Establishing Integrated Solid Waste Rates.”Recommendation22 Questions23 Process for Reviewing Base Year ApplicationBase Year Rate AdjustmentThe last Base Year rate adjustment was completed in 2019Expenses for the coming rate year are projected based on actual expenses in prior years plus projected changesRevenues prior to rate adjustments are based on current rates and subscription levelsThe difference between projected expenses and projected revenues at current rates yields a revenue shortfall (or surplus)Shortfall divided by current revenues yields percentage increase Rate Study FindingsR3 Adjusted Base Year Rate AdjustmentCalculated one-time increase of +17.75%Findings reviewed and agreed to by Garbage CompanyAdjustments included:Reassigned HZI expenses ($1,011,109) to be pass-through costs, removing them from the “Outside Services” expense and adding them into the “Total Tipping Fee” expenseReduced Bad Debt expense by $9,517 to align with City’s records of average bad debt place on property lien processReduced operating profit by $76,821 because of the above adjustmentsIncreased AB 939 fees by $100,000 as a City-directed change to recover revenues for compliance with SB 1383Removed IWMA fees from revenues and expenses Presentation Outline1.Rate Setting Process and Prop 218 Compliance2.Summary of Tonight’s Proposed Rate Increase3.Discussion of Each Component of the Rate Increase4.Summary of Rate Study5.Magic 218 Slides6.Reiterate Rec26 IWMA Fee IncreaseResidential Customers paying < $50/monthResidential Customers paying > $50/monthCommercial Customers2%$0.305.4%Current27Effective July 1 1010 Marsh St., San Luis Obi; (805) 546-8208 . FAX (W PROOF OF PUBLICATION (2015.5 C.C.P.) Proof of STATE OF CALIFORNIA, County of San Luis Obispo, I am a citizen of the United States and a resident of the county aforesaid; I am over the age of eighteen years, and not a party interested in the above entitled matter. I am the principal clerk of the printer of the New Times, a newspaper of general circulation, printed and published weekly in the City of San Luis Obispo, County of San Luis Obispo, and which has been adjudged a newspaper of general circulation by the Superior Court of the County of San Luis Obispo, State of California, under the date of February 5, 1993, Case number CV72789: that notice of which the annexed is a printed copy (set in type not smaller than nonpareil), has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to -wit-. in the year 2022 I certify (or declare) under the the penalty of perjury that the foregoing is true and correct. Dated at San Luis Obis o, Ca forma, this day % of V 1 2022. Patricia Horton, New Times Legals Ad-.&Nm41.JTMG.Adm1NTMG off-MUSNfiSS/N,M.cN, ,/P,wfof N.b SAN LUIS OBISPO CITY COUNCIL NOTICE OF PUBLIC HEARING The San Luis Obispo City Council invites all interested persons to attend a public hearing on Tuesday, April 19, 2022 el 6:00 p.m. held in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo. Please note that Zoom participation will not he supported, as this will he an in -person meeting. Meetings can be viewed remotely on Government Access Channel 20 or streamed live from the Citys YouTube channel at http://youtubesloxffy. Public comment, prior to the start of the meeting, may be submitted in writing via U.S. Mail delivered to the City Clerk's office at 990 Palm Street San Luis Obispo, CA 93401 or by email to emailcouncil®slocity.ara. PUBLIC NEARING ITEMS: • A Public Hearing to consider adopting a Resolution approving the Z022 Base Year Integrated Solid Waste Rates, In accordance with the City's Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates, a franchised waste hauling company has an opportunity to apply fora rate increase reflecting increases in operational and non. operational casts every three years. The City of San Luis Obispo received a rate application from San Luis Garbage Company proposing a May 1, 2022 increase to curbside waste collection. The proposed solid waste rates were prepared in compliance with Proposition 218 and the City's Hate Setting Manual. For more information, you are invited to contact Jordan Lane of the City's Utilities Department at (W5)761-7213orbyemail atilane®slaciteora • A Public Hearing to introduce an Ordinance amending and restating its existing franchise with San Luis Garbage Company to implement Senate Bill 1383 JSB 1383) requirements. The City has three existing franchise agreements with San Luis Garbage Company that include the collection of solid wain, recyclables, and organic waste. These agreements must be amended to comply with the requirements of SB 1383, the state's new and extensive organics recycling law, and to provide consistency with the City's recently adopted Ordinance No. 1706 (2021 Series) addressing waste and recycling matters also required by SB 1383. For more information, you are invited to contact Tina Clark of the CWs Udii hies Department at (805) 441-1066erby email attclark®slocdyora • A Public Hearing to introduce an Ordinance to approve the policy and continued use of military equipment by the agency in accordance with Assembly Bill No. 481. The San Luis Obispo Police Department invites all interested persons to provide comments on Policy 709 Military Use Equipment. The policy is available an the Chy's websi[e here: hisus/7www sloc'ty oralluen showoublishaddocumem/37899. Comments maybe submitted to Lieutenant Fred Mickel Email: Mae kel(alsiocitvom Mail: Police Department Attn: Lieutenant Fred Mickel, 1042 Walnut Street San Luis Obispo, CA 9=1 The City Council may also discuss other hearings or business items before or after the items listed above. If you challenge the proposed project in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the City Council at or prior to, the public hearing. Council Agenda Reports for this meeting will be available for review one week in advance of the meeting date an the Citys wele ite, under the Public Meeting Agendas web page: httos//www.slocitv.om/oovernmem/mavor- and-city-council/aoendas-and-minutes. Please call the City Clerk's Office at 1805) 781-7100 for more information. The City Council meeting will be televised live on Charter Cable Channel 20 and live streaming on the City's YouTube channel httns-//voutubesio.eiN. April 7, 2022