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HomeMy WebLinkAbout01/25/1994, 3 - AGREEMENTS RELATED TO SOLID WASTE RATE AND FRANCHISE ANALYSIS SERVICESollIgI11111pp, city of san GUIs OBISPO ON COUNCIL AGENDA REPORT FROM: John Moss, Director of Utilities Prepared by: Sue Baasch, Administrative Analyst ] MEETING DATE: January 25 1994 ITEM NUMBER: /J SUBJECT: AGREEMENTS RELATED TO SOLID WASTE RATE AND FRANCHISE ANALYSIS SERVICES CAO RECOND4E IDATION By motion, approve the appropriation of $50,000 from General Fund balance for solid waste consultant services; then, approve and authorize the Mayor to execute (1) an agreement with Ernst and Young to provide solid waste rate and franchise analysis consultant services in an amount not to exceed $49,978; and (2) an agreement with San Luis Garbage Company to reimburse the City for half of the cost of the services. DISCUSSION Following a competitive selection process, staff is recommending the award of a contract in an amount not to exceed $49,978 to the firm of Ernst and Young for solid waste consultant services. Ernst and Young will be working with staff and San Luis Garbage Company to accomplish three main objectives: ■ Establishing a method anc standard to clarify and simplify the solid waste rate evaluation process. ■ Establishing a rate stre.;ture. accurately reflecting Council solid waste goals. ■ Developing a solid wa .te franchise agreement including all existing and proposed conditions. On October 26, 1993, Co- ,cil approved soliciting consultant proposals to perform solid waste and franchise analysis. The • .ed for these services was described in the September 21 Council agenda report which recommer ad Council approve a 3.18% garbage rate increase due to the increase in landfill tipping fees a- .. noted that future rate increase requests could potentially be significant. Staff recommended, th San Luis Garbage Company's concurrence, that a new rate evaluation and setting method be a ipted prior to the review and approval of future rate increase requests. Selection Proces• A request for r oposals to provide solid waste consultant services was circulated from October 27 to November 8, 1993. Six proposals were received, with estimated compensations ranging from a low of $S 985 to a high of $65,660. When the cost estimates were compared to estimated 3— city of San LUIS OBE Spo i HNiGn COUNCIL AGENDA REPORT Agreements Related to Solid Waste Rate and Franchise Analysis Services Page 2 number of hours to complete the analysis, the lowest estimate reflected only 86 hours of work, while the majority of proposals estimated around 400 hours. Staff felt that the 400 hour estimate was more realistic about the time necessary to do an adequate job. Ernst and Young's proposal was to complete the work in 380 hours during February and March, at an estimated cost of $49,978. (Of the six proposals, three identified similar compensation requirements of about $50,000. Based on the initial screening of the written proposals, the review committee (composed of the Finance Director, Utilities Director, Recycling Coordinator, Utilities Analyst) invited two firms to an interview. The proposal from Ernst and Young, as confirmed during the interview, was very complete, identifying how each of the goals would be met with a very detailed task analysis. The same Ernst and Young team who recently completed a very similar analysis for the City of Concord will be performing our solid waste rate analysis. A copy of the rate setting process and methodology manual developed for the City of Concord is available for review in the Council office. A similar manual, based on the City of San Luis Obispo's solid waste goals and operations will be developed as a result of this project. Work Plan Ernst and Young's proposal is available for review in the Council office. The following is a summary of the work plan: Summary of Tasks Phase I: Develop Rate Setting Policies Task 1 Initiate and Administer Project Task 2 Review Current Policies and Procedures Task 3 Clarify Rate Setting Goals and Policies Task 4 Determine Levels and Corresponding Rate Structure Phase II: Develop Rate Setting Process Task 5 Develop Rate Setting Process and Methodology Task 6 Develop Rate Setting Procedures and Tools Task 7 Prepare Draft and Final Rate Setting Manual Task 8 Forecast Future Rates Phase III: Assist with Franchise Administration Task 9 Draft Franchise Agreement During Task 3, a study session will be held with Council to clarify rate setting goals and policies. Ernst and Young will compare or "benchmark" the City's practices against practices used by other City of San LUIS OBISpo COUNCIL AGENDA REPORT Agreements Related to Solid Waste Rate and Franchise Analysis Services Page 3 communities in the state. This information will provide a perspective on the policies used by other Cities and should assist the Council in refining or confirming the City's goals and policies. Rate structure issues will be included in the discussion at this study session. This work plan does not include a formal evaluation of the first rate change request submitted by San Luis Garbage Company (anticipated to occur as soon as the method is approved and adopted). Ernst and Young has provided the city a letter offering to assist with the first evaluation for a cost not to exceed $15,000. If at the end of the process staff feels that the community is best served by this option, staff will return with this recommendation. This would include examining supporting financial and operating data to determine if they are sufficient to justify costs of service, and key operating and performance statistics of the hauler, such as accounts serviced per route and tons collected per driver, to indicate the efficiency of the operation relative to the costs of service. Finally, this review would determine the effective increase in rates for both commercial and residential customers using the adopted method. Summary San Luis Garbage Company 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. Within the next five years, the City will be expanding solid waste and recycling programs to meet the requirements of state law AB 939, the Integrated Waste Management Act, which requires significant waste diversion goals, and will involve local .and regional waste management planning and program implementation. In addition, landfill tipping fees will be increasing to cover both the costs of regional recycling programs and facilities, and federal landfill requirements to protect air and groundwater quality. The proposed project will provide a clear and meaningful approach to evaluating rate increase requests. The result of this will be increased community confidence in the rate- setting procedure and process, a must as rates are predicted to increase significantly to assure protection of our environment. Also, the analysis will provide a rate structure and franchise agreement reflecting current and approved conditions and policies. It should be noted that during this period when a new rate evaluation method is being developed, the existing approach requiring San Luis Garbage to submit by February 28 any request for a rate increase shall be suspended. 3 -3 Q11QM1§J city of San Luis OBISPO COUNCIL AGENDA REPORT Agreements Related to Solid Waste Rate and Franchise Analysis Services Page 4 CONCURRENCES The City Finance Director participated in the proposal review and selection process, and supports the recommendations in this report. San Luis Garbage Company 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. San Luis Garbage Company supports the recommendations in this report and has agreed to pay one -half of the project costs. FISCAL EMPACT The proposed services will cost a total of $49,978, half of which will be paid by the City. This is a one -time cost, and funding is not currently identified in the Financial Plan; therefore, it is recommended that $50,000 be appropriated from the General Fund Unappropriated Fund Balance to the Solid Waste budget. San Luis Garbage Company will reimburse the General Fund its prorata share ($24,989) at the conclusion of the project. A separate recommendation would come to Council for the initial rate evaluation services, if staff determines such services to be in the best interest of the community. The total cost of these services is $15,000, which would be shared equally by the City and San Luis Garbage. Sharing project costs between the City and San Luis Garbage Company is recommended as garbage ratepayers will be the direct beneficiaries of this process. Attachments: 1. Agreement with Ernst and Young 2. Agreement with San Luis Garbage Company 3- AGREEMENT THIS AGREEMENT is made and entered into in the City of San Luis Obispo on this day of , by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as City, and Ernst and Young, hereinafter referred to as Contractor. WITNESSETH: WHEREAS, City requested proposals for consultant services for refuse rates and franchise administration analysis per Specification No. 93 -52. WHEREAS, pursuant to said request, Contractor submitted a proposal which was accepted by City for said services. NOW THEREFORE, in consideration of their mutual promises, obligations, and covenants hereinafter contained, the parties hereto agree as follows: 1. TERM. The term of this Agreement shall be from the date this Agreement is made and entered, as first written above, until completion and acceptance of said services. 2. INCORPORATION BY REFERENCE. City Specification No. 93 -52 and Contractor's proposal dated November 29, 1993, are hereby incorporated in and made a part of this Agreement. 3. CITY'S OBLIGATIONS. For providing services as specified in this Agreement, City will pay and Contractor shall receive therefor compensation in a total sum not to exceed $49.978 (Forty -nine thousand nine hundred and seventy -eight dollars). 4. CONTRACTOR'S OBLIGATIONS. For and in consideration of the payments and agreements hereinbefore mentioned to be made and performed by City, Contractor agrees with City to do everything required by this Agreement and the said specifications. 5. AMENDMENTS. Any amendment, modification, or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Council. 6. COMPLETE AGREEMENT. This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding, or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral 3 -5 Page 2 agreement, understanding, or representation be binding upon the parties hereto. 7. NOTICE. All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows: City City Clerk City of San Luis Obispo P.O. Box 8100 San Luis Obispo, CA 93403 Contractor Ernst and Young 555 Capitol Mall Suite 650 Sacramento, CA 95814 8. AUTHORITY TO EXECUTE AGREEMENT. Both City and Contractor do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. ATTEST: Diane Gladwell, City Clerk APPROVED AS TO FORM: �gWfG. or a City Attorney CITY OF SAN LUIS OBISPO, A Municipal Corporation By: Peg Pinard, Mayor CONTRACTOR AGREEMENT This contract, made this _ day of , by and between the City of San Luis Obispo (hereinafter referred to as "City "), and San Luis Garbage Company, (hereinafter referred to as Franchisee "). WITNESSETH: WHEREAS, City and Franchisee desire to engage a consultant to provide refuse rate and franchise administration analysis by reason of its qualifications and experience for performing such services; WHEREAS, Ernst and Young (Consultant) has offered to provide the required services on the terms and in the manner set forth in the Agreement between the City and Consultant and a side letter to the City; WHEREAS, City and Franchisee have agreed to share the cost of such services on an equal basis, with each party paying 50% of the total cost. NOW, THEREFORE, in consideration of their mutual covenants, the parties hereto agree as follows: 1. The Franchisee will reimburse the City upon the completion of the project and receipt of an invoice from the City. Franchisee will pay this bill within 30 days of receipt. 2. CONSULTANT COMPENSATION a. Ernst and Young will perform the solid waste analysis described in City Specification No. 93 -52 and their proposal dated November 29, 1993 for a total of $49,978. The City and the Franchisee agree to pay $24,989 each (50% of total). b. If the City elects, Franchisee agrees to share in the cost of the initial rate review, proposed to cost $15,000. The City and the Franchisee agree to pay $7,500 each (50% of the total). 3. AMENDMENTS Any amendment, modification, or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Council. 3-7 4. COMPLETE AGREEMENT This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding, or representation not reduced to writing and specifically incorporated here shall be of any force or effect, nor shall any such oral agreement, understanding or representation be binding upon the parties hereto. S. NOTICE All written notices to the parties hereto shall be sent by the United States mail, postage prepared by registered or certified mail addressed as follows: City: City Clerk City of San Luis Obispo 955 Morro Street San Luis Obispo, CA 93401 Franchisee: San Luis Garbage Company 970 Monterey San Luis Obispo, CA 93401 6. AUTHORITY TO EXECUTE AGREEMENT Both City and Franchisee do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party- IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written. ATTEST: CITY OF SAN LUIS OBISPO, A Municipal Corporation Diane Gladwell, City Clerk APPROVED AS TO FORM: ff G. orge en, ity Attorney By: Peg Pinard, Mayor CONTRACTOR By: By: 2 3 -8