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HomeMy WebLinkAbout02/01/1994, 8 - AGREEMENTS RELATED TO SOLID WASTE RATE AND FRANCHISE ANALYSIS SERVICES I�IuA�yllllllllllll�l� p II _ MEETING DATE: ltll III IIIIII CI o San tuiS OBISpo Februar 1, 1994 COUNCIL AGENDA REPORT ITEM NUMBER: FROM: John Moss, Director of Utilities Prepared by: Sue Baasch, Admi{iistrative Analyst SUBJECT: AGREEMENTS RELATED TO SOLID WASTE RATE AND FRANCHISE ANALYSIS SERVICES CAO RECOMMENDATION By motion, (1) approve an agreement with Ernst and Young for solid waste rate and franchise consultant services in an amount not to exceed $49,978; (2) approve the appropriation of $50,000 from the General Fund to pay for these services; (3) approve an agreement with San Luis Garbage Company to reimburse the General Fund for the full cost of these services over a two year period. DISCUSSION At the January 25, 1993 meeting; Council considered staff's recommendation for award of a solid waste consultant services contract to Ernst and Young. Council directed staff to review the City of Concord model to see if it could be adapted to the City's use and eliminate the need for a consultant. Staff has reviewed the manual and has prepared alternative recommendations for Council consideration. Following this review, staff continues to recommend the use of a expert third party to assist in the identification of critical solid waste rate policy points and the timely development of a resulting rate evaluation and setting method, and franchise agreement. The consultant's cost is not primarily for drafting a manual and accounting forms. Exhibit V to the consultant's proposal is attached, identifying the hours for each step of the work scope. Actual preparation of the manual, Task 7 of Phase II, is projected at 68 hours. This is 19% of the total work scope. Analysis of City of Concord model The City of Concord paid $80,000 in 1992/93 for the development of this rate manual for residential solid waste fees. It does not directly address commercial issues, such as allocation of possible cross-subsidies between residential and commercial activities. It is not intended to capture information to analyze commercial hauling activities. The adaptation of this model to the needs of the City of San Luis Obispo would require identification and resolution of key issues which are incorporated into the Concord model. These range from broad questions of subsidy of solid waste programs to smaller points of mh�l�►II�IIIII�IIPD��N City of San Luis OBISPO COUNCIL AGENDA REPORT Agreements Related to Solid Waste Rate and Franchise Analysis Services Page 2 agreement on the type of costs which are allowed in the rate-setting model and which costs are allowed to have profit. As part of the manual development, Ernst and Young performed a pilot test of the forms and required documentation to ensure that the methodology was technically sound and that the information could actually be obtained from Concord's waste hauler's accounting records. ISSUES Council raised other significant issues: Is the use and expense of a consultant in the best interest of the community? While recognizing that there is a cost to involving a consultant, staff feels that expenditure of these funds now will have significant long term benefits: ■ The cost implications of solid waste issues facing this community are significant. We need to have a clear and adequate financial and operational reporting system. Our community is committed to the protection of the environment and supports the spirit of the regulatory changes impacting the solid waste industry. The cost associated with the expansion and closure of landfills to protect ground and air quality is large. There are significant future costs in implementing the AB 939 diversion programs, such as recycling, source reduction, and the development of major regional facilities to sort and transfer garbage. ■ The cost implications of some decisions have already impacted the franchisee. Delays in considering a request for a rate evaluation will increase the size of the rate increase. Whether a consultant is approved or not, the franchisee has stated that a sizeable rate increase request will be submitted to the City. Speed and accuracy of review will control the amount of any increase. Staff will need longer than the consultant to develop a new rate-setting and review process. ■ A third party expert will analyze and report on current collection operations. Although not a performance review, the consultant will analyze current solid waste operations. The consultant will also review financial records, accounting practices and procedures pertaining to solid waste and collection recycling services. This will be the basis for providing a benchmark of our operations with other communities in the state. This is not an audit, but the new rate evaluation method is likely to set a standard for ��� ► iuulllllllllP°�°►�pUlll city of San LUIS OBISp0 IMM COUNCIL AGENDA REPORT Agreements Related to Solid Waste Rate and Franchise Analysis Services Page 3 regular accounting audits. In fact, the value of requiring annual audits by an independent certified public accountant is one of the questions to be addressed in the work scope. ■ As a part of the rate setting_process, the consultant will provide recommendations for lone term cost efficiencies. In setting rate policies, we will be able to consider cost savings programs that will provide long term incentives for cost savings for the franchisee and rate payers. Other communities are facing similar issues. Couldn't current staff use a methodology developed by one of these communities? ■ While solid waste haulers perform the same basic tasks in each community, each community has developed its own practices in regards to garbage collection, recycling. and city and franchisee responsibilities. The City acknowledged the need to have a consultant develop a rate setting method when it contracted with a consultant named Peasley a number of years ago to develop the current rate setting and evaluation method. The Peasley method was developed when solid waste operations consisted of collecting garbage and hauling it to the landfill. This City is actively planning to meet the full mandate of AB 939, and the implications of implementing these new activities is beyond the scope of the Peasley method. Each community has developed its own action plan to meet state and federal mandates based on the capacity of its landfill, the ownership and regulatory requirements facing the landfill, and the need to develop regional solid waste facilities. ■ The combination of financial and operational exRgrtise necessary for the project does not exist within current staff resources. Even if staff had the financial and operational expertise, it is not clear how the project could be divided between existing staff. The City has one position dedicated to solid waste issues. Currently, the solid waste coordinator spends 100% of her time on AB 939 planning. The speed of development would depend on reprioritizing of current workloads and staff's ability to reach agreement with the franchisee on policy points. Once completed, staff's version might not have the same credibility as one developed by a third party expert. ALTERNATIVES 1. Council could direct staff to proceed with Phase I and Phase II of the consultant services work scope. Phase III, preparation of the Franchise Agreement setting forth existing and ���H�i�►uullllllllll�1°nu►►nllll City Of San tins OBISPO Mij% COUNCIL AGENDA REPORT Agreements Related to Solid Waste Rate and Franchise Analysis Services Page 4 revised terms and conditions, would be done by staff. While this would reduce the contract by $8,000, staff resources to work on this project are very limited. It would, however, ensure the timely development of a rate setting and evaluation process so that the franchisee's request could be evaluated on schedule. If this alternative is approved, staff will evaluate available resources to work on this project. Due to the number of planning issues facing the city in the next few months, the solid waste coordinator would not be able to devote very much time to this project until May or June. This position is at present funded only through June 1994. Due to the limited staff resources to complete this task in a timely manner, this alternative is not recommended. 2. Council could direct staff to keep the current system of rate setting and evaluation for this year and work toward a new method for 1995. Under the current system, the franchisee will submit a request for rate review by February 28 for a July increase. When the most recent rate increase was approved in September, the franchisee projected a rate increase request of up to 37%. With this sizeable increase pending, it is important that an appropriate rate evaluation method be in place and that the resulting rates reflect important solid waste program policy decisions. For these reasons, this alternative is not recommended. CONCURRENCES The City Finance Director and San Luis Garbage Company agree with the recommendations in this report. FISCAL EAPACT To complete Phase I, II and III of the contract work scope, the total cost is $49,978. As proposed, this would initially be paid by the City's General Fund. The General Fund would be reimbursed by the ffanchisee over a two year period. If Alternative 1 is selected, the consultant services cost would be reduced by $8,000, but the savings would be partially offset by staff costs to perform the work. Attachments: 1. Agreement with Ernst and Young 2. Agreement with San Luis Garbage Company V. Project Costs On Exhibit V-1, below,we present.our Our practice is to bill monthly for the number proposed total hours by task, and corresponding of hours expended in the prior month, extended charges. Based on our estimated project schedule by the hourly billing rates included in Exhibit V-2, and number of hours, we are submitting a fixed price on the following page. Also, our monthly billing bid of$19,976 for Phase I, Develop Rate Setting includes out-of-pocket expenses incurred by our Policies, $21,912 for Phase II, Prepare Rate Setting consultants in the prior month. Process and Procedures Manual, and $8,090 for Phase This price quotation is effective for 90 days. III, Assist % th Franchise Administration. These prices include all salary, overhead, fees, and expenses. Exhibit V-1 Project Hours and Cost by Task Hours Fees and Expenses Phase I Develop Rate Setting Policies Task 1 Initiate and Administer 12 $2,688 Project Task 2 Review Current Policies and 40 4,576 Procedures Task 3 Clarify Rate Setting Goals and 46 5,534 Policies Task 4 Determine Service Levels 48 7,000 and Corresponding Rate Structure Sub-total Phase I 146 $19,976 Phase 11 Develop Rate Setting Process Task 5 Develop Rate Setting 34 $4,406 Process and Methodology Task 6 Develop Rate Setting 38 4,522 Procedures and Tools Task 7 Prepare Draft and Final Rate 68 8,316 Setting Manual Task 8 Forecast Future Rates 32 4,668 Sub-total Phase II 172 $21,912 Phase III Assist mfth Franchise Administration Task 9 Draft Franchise Agreement. 62 $8,090 Sub-total Phase III 62 $8,090 TOTAL 380 .: $49,978 O � 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, a California Corporation (hereinafter referred to as "Franchisee"). WITNESSETH: WHEREAS, City and Franchisee desire to engage a consultant to provide solid waste 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 that the consultant services will be paid initially by the City and the Franchisee wil reimburse the City for all costs within a two year period. NOW, THEREFORE, in consideration of their mutual covenants, the parties hereto agree as follows: 1. REIMBURSEMENT a. The Franchisee will reimburse the City in the amount of $49,978. Franchisee will pay 50% of this amount upon completion and acceptance of the project and within 30 days of receipt of an invoice from the City. Franchisee will have an additional twelve months to pay the balance. b. If the City elects, Franchisee agrees to reimburse the City for the additional cost of the initial rate review, proposed by Ernst and Young to cost $15,000. C. Any amounts paid by the Franchisee under this Agreement shall be recognized as gross expenses for rate-setting purposes. 2. 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. 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. 4. 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 5. 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 pant'- 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 By: Diane Gladwell, City Clerk Peg Pinard, Mayor APPROVED AS TO FORM: FRANCHISEE San Luis Garbage Company A California Corporation e y G Jor sen ity Attorney By: Charles Cattaneo P. Terence Schubert Attorneys for San Luis Garbage Company 2 �Z MEETING AGENDA DATE ��'�' ITEM # MEMORANDUM February 1, 1994 TO: City Councilmembers VIA: John Dunn, City AdministrativebfficcE-3 � FROM: John Moss, Utilities Director Sue Baasch, Administrative Pnalystl--o SUBJECT: Proposed Agreement between City and San Luis Garbage Council Agenda Item Number 8 - February 1, 1994 In your Agenda packet for tonight's meeting is a proposed contract between the City and San Luis Garbage regarding reimbursement for the cost of solid waste consultant services. The attached contract clarifies the amount of time allowed to reimburse the City for the costs (see paragraph 1). Half of the payment is due upon completion and acceptance of the project, with the balance due in twenty months, or February 1, 1996, whichever comes first. This is consistent with the recommendation to allow San Luis Garbage to reimburse the City over a two-year period. F iCOUNCIL ❑AD]DR —, 0 CAO RrFIN . 4ep �. Q�y4CA0 ❑ FlR�TTORNEY ❑ PtlFEB 1 1994 CLERWORIG ❑ PO❑ MGMT TEAM ❑ REciTY CLERK ❑ C EAD FILE [e3�UTISAN LUIS OoISPO.CA LE ❑ PE 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, a California Corporation (hereinafter referred to as "Franchisee"). WITNESSETH: WHEREAS, City and Franchisee desire to engage a consultant to provide solid waste 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 that the consultant services will be paid initially by the City and the Franchisee wil reimburse the City for all costs within a two year period. NOW, THEREFORE, in consideration of their mutual covenants, the parties hereto agree as follows: 1. REIMBURSEMENT a. The Franchisee will reimburse the City in the amount of $49,978. Franchisee will pay 50% of this amount upon completion and acceptance of the project and within 30 days of receipt of an invoice from the City. Franchisee will have an additional twenty months, or until February 1, 1996, whichever comes first, to pay the balance. b. If the City elects, Franchisee agrees to reimburse the City for the additional cost of the initial rate review, proposed by Ernst and Young to cost$15,000. Franchisee will pay 50% of this amount upon completion and acceptance of the project and within 30 days of receipt of an invoice from the City. Franchisee will have an additional twenty months, or until February 1, 1996, whichever comes first, to pay the balance. C. Any amounts paid by the Franchisee under this Agreement shall be recognized as gross expenses for rate-setting purposes. 2. 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. 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. 4. 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 5. 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 Panh'• 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 By: Diane Gladwell, City Clerk Peg Pinard, Mayor 2 Page 3 APPROVED AS TO FORM: FRANCHISEE San Luis Garbage Company A California Corporation ff G. rgen n, Pty Attorney By: Charles Cattaneo P. Terence Schubert Attorneys for San Luis Garbage Company 3 1 In The Superior Court of The State of California In and for the County of San Luis Obispo AFFIDAVIT OF PUBLICATION No. dv# 13964-0-6 City of SLO STATE OF CALIFORNIA, "0° ""ll(I city of ss. san wis ostspo CITY COUNCIL County of San Luis Obispo PUBLIC HEARINGS On Tuesday, February 1, 1994, the San Luis Obispo I am a citizen of the United States and a resident of the City Council will hold public hearings beginning at 7:00 p.m.in the Council Chambers County aforesaid; I am over the age of eighteen and not of City Hall, 990 Palm Street, on the items listed below. The reports will be available for review in the City Clerk's Matter interested in the above-entitled Department on the Wednes- day before the meeting. For more information, please call I am now, and at all times embraced 781-7103. The Council may also dis. cuss other hearings or busi. in the publication herein mention was, the principal clerk ness items before or after those listed. If you challenge any one of the proposed of the printers and publishers of the SAN LUIS OBISPO actions described below in court, you may be limited to raising only those issues you COUNTY TELEGRAM-TRIBUNE, a newspaper of general or someone else raised at the Public hearing described in this notice, or in written circulation, printed and published daily, Sundays ex- correspondence delivered to the City Council at,or prior to, the public hearing. CLAY STREET ABANDON- cepted, at the City of San Luis Obispo in the above MENT-to consider the aban- donment of the Clay Street right-of-way between Dana named county and state; that Notice street and Brizzolara street. (20 min.) TRANSPORTATION DE- VELOPMENT IMPACT FEES- to consider establishing transportation development impact fees to become effec- tive May 2,1994.(1 hr.) at which the annexed clipping is a true printed co was LOT LINE ADJUSTMENT- pP g P Py GRAND AVENUE - to consi- published in the above-named newspaper and not in any der a lot line adjustment between two lots, creating supplement thereof — on the following dates, to-wit: two lots from two lots with exceptions to lot size and depth at 411 Grand Avenue. 1/22 (30 min.) PUBLIC SAFETY FEES-to consider updating public safety fees such as finger. printing,police reports,occu- pancy permits, and plan checking.(30 min.) CAMPAIGN REGULA- TIONS - to consider amend- that said newspaper was duly and regularly ascertained ments to the Electiori Cam. paign Regulations ordinance. and established a newspaper of general circulation by (30 min.) Diane R.Gladwell, Decree entered in the Superior Court of San Luis Obispo City Clerk Jan.22,1994 dv13964 County, State of California, on June 9, 1952, Case #19139 under the provisions of Chapter 1, Division 7, Title of the Government Code of the State of California. I certify (or declare) under penalty of perjury that the foregoing is true and correct. rYYI off, G�o�o (Signature of Principal Clerk) Date 1/22 19 94 J In The Superior Court of The State of California In and for the County of San Luis Obispo AFFIDAVIT OF PUBLICATION CMYOF No. dv# 14534-0-4 ��san►uts oBispo!: ORDINANCE NO.d263. ,F• • , , '11884SERIESIEN ._'1; • City o£ SLO AMDING THE SIGN:. , REGULATIONS RELATING:" :;,TO SIGN ILLUMINATION-.,. "y y WITHIN THE CITY S.5. .461',gFRCE(0)ZONlN ;;t7 ' STATE OF CALIFORNIA, Dislcrs, -ri On.�Jenuery,'A8,'7994;.;tfie: 55. Son Luis Obispo Cit Vit; cil ,voted Ato,•1liia-pa voting no), County of San Luis Obispo to introduce.'Ordinance,No.. '.1253)(1994 Series), Which amends,;Sections,05.40.020;