HomeMy WebLinkAbout10/26/1993, C-3 - REQUEST FOR PROPOSALS FOR REFUSE RATES AND FRANCHISE ANALYSIS III��INIII�IIIIIIIII aI�IU y� 1 MEETING DATE:
CI � San L%AI5 OBISpO October 26, 1993
COUNCIL AGENDA REPORT ITEM NUMBERC-3
FROM: John Moss, Acting Director of Utilities
Prepared by: Sue Baasch, Administra a Analyst
SUBJECT: REQUEST FOR PROPOSALS FOR REFUSE RATES AND FRANCHISE
ANALYSIS
CAO RECOMMENDATION
By motion, (1) approve Specifications No. 93-52 for consultant services to perform refuse rates and
franchise analysis, and (2) authorize soliciting of proposals.
DISCUSSION
In the September 21 Council report recommending a rate adjustment in the solid waste program,
staff identified the need for a comprehensive analysis of the refuse rates and franchise. Approval
of this request would authorize the solicitation of proposals for this service. Upon selection of a
qualified consultant, staff will seek Council's approval to award and proceed with the work.
The scope of work in the Request for Proposal is divided into three primary tasks:
■ REFUSE RATES EVALUATION
Goal: Establish a standard to clarify and simplify the rate evaluation process.
■ RATE STRUCTURE ANALYSIS
Goal: Establish a rate structure that reflects Council solid waste goals.
■ FRANCHISE ADMINISTRATION TASKS
Goal: Develop a franchise agreement including all existing and proposed terms and
conditions.
Refuse Rates Evaluation
Currently, the City's solid waste franchisee, San Luis Garbage, submits rate increase requests using
a standard developed by a consultant named Peasley several years ago. Peasley developed the
method using the Public Utilities Commission's (PUC) guidelines for evaluating rate increase
requests from small utilities, such as a small water district with an annual budget of about $2
million. Solid waste is not PUC-regulated with its own guidelines.
The Peasley method served well when solid waste was a simple, low cost waste collection and
disposal system. Our solid waste system has since evolved into a complex, integrated system of
highly-regulated waste disposal, waste diversion and recycling programs with major expenses
having significant rate implications. Staff is no longer confident that the Peasley model
accomplishes the City's rate review objectives, or is capable of ensuring the best interests of City
residents and business operators.
A refuse rate evaluation will set a clear standard for evaluating requests for rate increases. This
includes a determination of the city's "baseline" refuse operations costs and a reasonable rate of
return based on industry standards. The evaluation will identify the costs of requested refuse
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Hii% COUNCIL AGENDA REPORT
Request for Proposals for Refuse Rates and Franchise Analysis
Page 2
activities that go beyond refuse collection and hauling, and will set a standard for including them
into the rates. The consultant will examine whether approved landfill tipping fee increases should
be "passed through" by appropriate franchise language. The analysis will also set a standard for
regular audits and annual financial reporting.
Rate Structure Analysis
Council has adopted certain rate review objectives for other city-operated utilities. The consultant
is asked to review these goals and present to Council the findings and any recommendations for
change based on industry standards.
The rate objectives for other City-operated utilities and proposed objectives for solid waste are as
follows:
■ Comply with legal requirements
■ Ensure revenue adequacy to fully meet system operating and capital needs
■ Encourage conservation
■ Provide equity and fairness between classes of customers
■ Be easy to understand by customers and easy to administer
■ Provide for ongoing review in order to facilitate rate stability
Following council study, the consultant will produce for adoption the resulting rate structure based
on these established goals.
Franchise Administration Tasks
The terms of the existing franchise are in the Municipal Code. A separate agreement does not
exist. The consultant will be asked to review all the franchise terms, including the recommended
changes based on the previous tasks and industry standards, and develop an appropriate separate
agreement. In addition, the consultant will be identifying appropriate language to include in the
franchise to ensure that as the emphasis on regional solid waste programming increases, city
customers can be certain that they pay only for city refuse activities.
CONCURRENCES
The City Finance Director has reviewed and approved the recommendations in this report and the
scope of work in the request for proposal. San Luis Garbage agrees that adoption of a rate
evaluation method able to respond more quickly to changing economic and programmatic issues is
the best way to ensure stable rates and good operations.
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AIMAGe COUNCIL AGENDA REPORT
Request for Proposals for Refuse Rates and Franchise Analysis
Page 3
FISCAL MPACT
While an accurate cost of the proposed services cannot be identified at this point, staff has taken
a number of steps to ensure financial control of the final cost. Bidders must submit a detailed
listing of the tasks and associated costs to meet each of the previously identified goals. Payment
will be on a time and material basis, with a not to exceed final compensation. Staff has reserved
the right to negotiate the final work scope and compensation with the selected consultant prior to
recommending award to Council.
As with all consultant services, the selection will not be based solely on price, but on a combination
of factors determined to be in the best interest of the city.
SUMMARY
San Luis Garbage has stated that their costs have increased to the point that they will be seeking
a double digit rate increase as soon as this study is completed. They also note that such increases
may become the pattern for the future. The City is expanding its solid waste and recycling
activities. The landfill tipping fees will be increasing significantly to fund the construction of the
landfill expansion and to comply with federal laws to ensure landfills do not pollute the air and
ground water. San Luis Garbage operations have grown from a$2.5 million dollar budget in 1988
to a projected $5 million dollars in 1994.
The proposed analysis will ensure that staff has a solid base from which to review the expected rate
requests. The result of this will be increased community confidence in the rate-setting procedure,
a must as rates escalate.
Note: The Request for Proposals packet is available in the Council Office
for review.
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