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HomeMy WebLinkAbout06/15/2010, C4 - RESOLUTION OF INTENT TO GRANT SAN LUIS GARBAGE COMPANY A FRANCHISE FOR SOLID WASTE, RECYCLING, AND Marine Daae council -j"ruse j acEnc)a Report �N G CITY OF SAN LU I S OBISPO FROM: Came Mattingly, Utilities Director Prepared By: Ron Munds, Conservation Manager SUBJECT: RESOLUTION OF INTENT TO GRANT SAN LUIS GARBAGE COMPANY A FRANCHISE FOR SOLID WASTE, RECYCLING, AND GREEN WASTE SERVICES. RECOMMENDATION Adopt a resolution declaring the City's intent to grant a franchise to San Luis Garbage Company for solid waste, recycling, and green waste service, and set a public hearing for July 6, 2010 to introduce an ordinance to grant the franchise. DISCUSSION Request for Franchise Agreement Renewal In December 2009, staff received a request from San Luis Garbage Company(Attachment 1) for a fifteen year renewal of the existing franchise agreements for solid waste, recycling, and green waste services. The current fifteen year franchise agreements expire in March, 2012. According to the City's Charter, a franchise may be renewed anytime within a three year period before the term expires. Prior to granting a franchise; the City Council must pass a resolution declaring its intention to grant the franchise. Additionally, the resolution must state the character of the franchise and the terms and conditions upon which it is proposed to be granted. A public hearing to pass an ordinance to grant the franchise must be set no less than twenty days and no more that sixty days after the passage of the resolution. The public hearing has been tentatively scheduled for July 6, 2010. Planning for the Future and Paying For It The basis for the request at this time from San Luis Garbage Company is two-fold. The first issue is that Cold Canyon Landfill has about two years of solid waste disposal capacity remaining. Waste Connections, the owner of the landfill and San Luis Garbage Company, has filed an application with the County to expand the landfill and is currently going through the Environmental Impact Report review process. The expansion will provide for approximately thirty years of future disposal capacity and other enhancements to the landfill's composting and recycling capabilities. The landfill is a very important resource not only to the City of San Luis Obispo but to other communities from San Simeon to Nipomo in that it provides recycled material processing, green waste composting, household hazardous waste processing, construction debris recycling, and solid waste disposal services. If the landfill were to close, alternative sites would be further from the City creating associated environmental impacts and added costs. Cy- ( Solid Waste Franchise Agreement Page 2 In order to secure the loans for the expansion, estimated at over $9,000,000, the bank requires Waste Connections to secure long term franchise agreements with the local communities that utilize the landfill. To date, the cities of Pismo Beach, Arroyo Grande, Grover Beach, Morro Bay and the County of San Luis Obispo have approved fifteen year contract extensions in support the landfill expansion. The second reason for the request is the significant investment that San Luis Garbage Company needs to make in its fleet to comply with new air pollution regulations and the mandates of AB 32, the State's greenhouse gas reduction initiative. The request expresses San Luis Garbage Company's concern regarding the recovery of the costs associated with the investment in the fleet and the impacts on the rates charged to the City of San Luis Obispo. The longer the term of the contract, the less impact there will be on the rates since San Luis Garbage Company will be able to recoup their costs over a longer period of time. The attached resolution (Attachment 2) satisfies the requirements of the City Charter by providing the following information relative to the franchise: 1. Type: Exclusive 2. Term: Maximum 15 year term 3. Franchise fee: 10%of gross revenue paid to the General Fund 4. Agreement Highlights: • Semi-Annual clean-up weeks for single and multi-family properties • Flexibility to add or change solid waste collection programs • Periodic performance evaluations • Performance incentives • Regulatory reporting requirements • Public education • Assignment of contract provisions Background 60 Year Relationship Between the City and San Luis Garbage Company For over sixty years San Luis Garbage Company has provided solid waste services to the community. In 2002, Waste Connections Incorporated purchased the company from the long time local owners, the Cattaneo and Rizzoli families, and the City agreed to allow the assignment of the contract to Waste Connections Incorporated. During the sixty year period, San Luis Garbage Company has provided a high level of service to the community at reasonable rates.. Historically, ten year solid waste franchise agreements were granted up until 1997. During the franchise agreement update and subsequent negotiations in 1997, the City Council agreed to a fifteen year contract in exchange for a one percentage point decrease on the garbage company's profit as guaranteed in the City's rate setting policies at the time. This has resulted in significant dollar savings to the rate payers over the term of the agreement and will continue as part of the franchise agreement renewal. Separate contracts for recycling and green waste collection were awarded to San Luis Garbage Company in 1996 and were extended in 1997 to coincide with the term of the solid waste franchise which is to the year 2012. Based on the "track record" of San cL4 - a I \ Solid Waste Franchise Agreement Page 3 Luis Garbage Company over the years, the need to expand Cold Canyon Landfill and the upcoming investment in the solid waste vehicle fleet upgrades, staff is recommending the franchise agreement be granted for a fifteen year term to 2025. CONCURRENCES The San Luis Obispo County Integrated Waste Management Authority, which regionally coordinates waste diversion activities in the county, has supported the extension of solid waste hauling contracts in areas that utilize Cold Canyon Landfill and concurs with the recommendation made in this report. FISCAL IMPACT There are no direct fiscal impacts associated with this action. Solid waste rates are adjusted as part of the annual solid waste rate setting process for all customers, including the City accounts, normally in the late fall. ALTERNATIVES Do not adopt the Resolution of Intent. Council could decide not to move forward with the franchise agreement renewal process and direct staff to develop and solicit a request for proposal (RFP) or bid package for solid waste, recycling and green waste services. This would be a viable alternative if the Council believes it could secure better services at a more competitive rate. Waste Connections/San Luis Garbage Company is able to provide very competitive rates because it is the parent company of all the solid waste service companies south of Cuesta Grade (in San Luis Obispo County) and the north coast including Mission Country Disposal, South County Sanitary and Monro Bay Garbage. The City's customers benefit from the relationship with the other solid waste companies through shared cost for bulk buying of gas, oil, tires and other operating related expenses. If the Council decided to go out to bid or RFP but wanted to contract with a local company, there are several smaller waste haulers in the north county that service Paso Robles and the unincorporated areas. The City of Atascadero contracts with Waste Management Incorporated based out of Santa Maria. Though these companies may be viable options logistically, it would be reasonable to assume that the cost of service would be higher than what is currently being charged with potentially higher environmental impacts because of the distance of their operations from the City. Because of the historical relationship, high level of service and reasonable rates San Luis Garbage Company has provided, staff does not recommend this alternative. ATTACHMENTS 1. Letter of Request from San Luis Garbage Company 2. Resolution of Intent Attachment 1 San Luis Garbage Company 2925 McMillan Avenue • Suite 202 • San Luis Obispo, CA 93401 805-543-0815. City of San Luis Obispo Ron Munds 879 Morro St San Luis Obispo, CA 93401 December 15, 2009 Dear Ron The franchise agreement between San Luis Garbage and the city expires April 23, 2012. Given that lawyers are involved,we need to get started. There are two significant changes coming that will effect our new agreement. The first one is the Cold Canyon Landfill expansion. We are down to roughly two year's worth of capacity. The expansion project has been filed with the County of San Luis Obispo and the EIR is being prepared. The expansion will provide 30 years of future disposal capacity, an elevated C&D recycling line and an improved public recycling area. We are estimating it will require us to spend a minimum of$9,000,000 plus county required mitigations. As before, Cold Canyon must borrow the funds and the Bank of America wants proof they will be paid back. They want to see long-term franchises from Cold Canyon's customers so the tonnage is committed. The second change is the Air Pollution Control District's push to reduce emissions. In order to comply with the requirements we will need to upgrade our truck fleet substantially. Our upgrades should provide a good part of the reductions that APCD will set as the goal for San Luis Obispo. We have started to replace our trucks with CNG powered garbage trucks. However, given the number of remaining diesel trucks and the cost of a CNG truck it will take many years. The biggest concern fora garbage company is recovering the cost of the variousadvance expenditures. The longer tens we have for recovery, the less impact.it has on rate changes. All of the South County cities have signed 15 year contracts. Mission Country Disposal has 15 year franchise agreements with the Cayucos & Los Osos Sanitary Districts. Monro Bay Garbage has a 15 year contract with Morro Bay. The County of SLO has signed 15 year contracts with San Luis Garbage, Mission Country Disposal, and South County Sanitary. The City of SLO will be mirroring the actions of all the other entities that use Cold Canyon for garbage &recycling. I would like to meet with you to discuss to discuss a 15 year co tract. U Tom in, General Manager �y J Attachment 2 RESOLUTION NO. (2010 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO DECLARING THE CITY'S INTENT TO GRANT AN EXCLUSIVE FRANCHISE TO SAN LUIS GARBAGE COMPANY FOR SOLID WASTE,RECYCLING,AND GREEN WASTE SERVICES AND SETTING A PUBLIC HEARING FOR JULY 6,2010. WHEREAS, public health and safety demand the orderly and periodic collection and safe disposal of solid waste,recyclables, and green waste; and WHEREAS,it has been determined that an exclusive franchise granted to a private company is the most effective and efficient way to collect and remove solid waste, recyclables, and green waste within the City; and WHEREAS, the City has granted San Luis Garbage Company (Franchisee) an exclusive franchise for the collection and disposal of solid waste, recycling and green waste within the City; and WHEREAS, the Franchisee has provided a high level of service and reasonable rates for solid waste services for the term of the current franchise agreement; and WHEREAS,the current franchise agreement contains the following key provisions: • Type: Exclusive • Term: 15 year term • Franchise fee: 10% of gross revenue • Agreement highlights: • Semi-annual clean-up weeks for single and multi-family properties • Flexibility to add or change solid waste related programs ■ Periodic performance evaluations if requested by the City ■ Comprehensive reporting requirements • Public Education • Assignment of contract provisions NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo to adopt a resolution declaring the City's intent to grant an exclusive franchise to San Luis Garbage Company for solid waste, recycling, and green waste services SECTION 1. A public hearing will be held on July 6,.2010 at 7:00 pm in the City Council Chambers at which time it is the intention of the City Council to grant a fifteen year franchise to San Luis Garbage Company. SECTION 2. Any persons having any interest in the franchise or any objections to the granting of the franchise may appear before the Council and be heard thereon. SECTION 3. The City Clerk will publish this resolution at least once within fifteen days of its passage in a newspaper in the City of San Luis Obispo. l�T _J Resolution No. (2010 Series) Attachment 2 Page 2 Upon motion of seconded by and on the following vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of 2010. Mayor David F. Romero ATTEST: Elaina Cano City Clerk APPROVED AS TO FORM: . Christine Dietrick City Attorney CA