HomeMy WebLinkAboutSolid Waste Rate Setting Manual 6-19940
City of san lugs oBIspo
Rate Setting Process
and Methodology
Manualfor Integrated
Solid Waste
Management Rates
June 1994
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
=I ERNST & YOUNG
555 Capitol Mall, Suite 650
Sacramento, California 95814
June 1994
Printed on Recycled Paper
Rate Setting Process and Methodology Manual
for Integrated Solid Waste Management Rates
Table of Contents
Section L, Rate Setting Overview
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
Section IL• Rate Setting Process
A. Base Year Rate Setting Process
----'' 1. Preparation and Submission of Rate Adjustment Application
2. Verification of 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 New Rates
B. Timing of Base Year Rate Setting Process
C. 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
D. Timing of Interim Year Rate Setting Process
Page
I-1
I-1
I-1
I-2
I-3
I-5
I-5
I-7
II -9
II -20
II -22
II -24
II -25
II -26
II -27
II -29
II -29
II -30
Page
Table of Contents (cont.)
Page
Section III: Base Year Rate Setting Methodology
III -i
1.
Entry of Operating Costs
III -9
2.
Determination of Revenues without Rate Increase
III -13
3.
Calculation of Allowable Operating Profit and
Revenue Requirement
III -15
4.
Calculation of Percent Change In Rates
III -17
5.
Preparation of Summary Form
III -18
6.
Survey of Rates in Similar Areas
III -19
Section IV Interim Year Rate Setting Methodology
IV -1
1.
Determination of Base Year. Costs and Weightings
IV -5
2.
Calculation of Percent Changes in Controllable and .
Pass Through Costs
IV -7
3.
Calculation of Weighted Change in Rates
IV -8
4.
Preparation of the Summary Form
IV -9
5.
Survey of Rates in Similar Areas
IV -10
6.
Application Certification
IV -11
Appendix
Appendix A Blank Forms and Worksheets A-1
Appendix B Chart of Accounts B-1
Page H
Page iii
Exhibits
Exhibit
Page
I-1
Organization of Each Step
I-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
III -3
III -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
Section I
Rate Setting Overview
L Rate Setting Overview
This section of the manual provides
an overview of the rate setting process.
This section is organized as follows:
A. Introduction
R Rate Setting Objectives
O 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.
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 II.- 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.
R Rate Setting Objectives
The primary 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:
❑ 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
City of San Luis Obispo Page 1-1
Section 1. Rate Setting Overview
should include only allowable and
pass through costs, and provide
accountability for all expenditures.
❑ 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.
❑ 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.
❑ 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.
G 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
recycling objectives. Four objectives were
utilized in developing the City's rate
structure:
❑ 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.
❑ 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.
❑ 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
Page 1-2 City of San Luis Obispo
Section 1. 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.
❑ 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:
❑ 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.
❑ 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
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, which 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.
❑ Retroactive rate increase. There will
be no allowance for a retroactive
increase in rates.
❑ 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
City of San Luis Obispo Page 1-3
Section 1. 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.
❑ 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
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 are 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.
Page 1-4 City of San Luis Obispo
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:
❑ 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)
❑ Change in costs for tipping fees, and
AB 939 and regulatory fees estimated
to occur in the next interim year
❑ 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.
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 (50/6) 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.
City of San Luis Obispo Page 1-5
Section 1. 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
and services
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,
Promotion
including wages, overtime, payroll taxes, health and welfare
.
benefits, workers compensation, and pension benefits.
Other General and
All general and administrative costs with the exception of corporate
Administrative Costs
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
•
Travel
• Licenses
•
Trucking
• Medical expenses
•
Utilities
A few costs of providing collection service
need to be clarified because of special
treatment for purposes of rate setting. These
are discussed below.
❑ Interest Expense. Interest
expense is included as an allowable
cost on which profit is allowed.1
❑ 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.
Lease payments to affiliated
companies are a pass through cost.
❑ 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(a) Years
Office Equipment SL 5 years
Vehicles and Equipment SL 7 years
Buildings and Leasehold
Improvements SL 25 years
(a) SL = straight line depreciation
Page 1-6 City of San Luis Obispo
Section 1. Rate Setting Overview
❑ 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:
❑ Charitable and political
contributions
❑ Entertainment
❑ Income taxes
❑ Profit sharing payments not
- 3 related to an IRS approved
pension program.
Pass Tbrough 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:
❑ 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
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.
❑ 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).
❑ 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.
❑ 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.
City of San Luis Obispo Page 1-7
Section 1. 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:
❑ Base year rate adjustment
application
❑ Interim year rate adjustment
application
❑ Interim year rate adjustment
worksheet
❑ Solid waste fee survey.
Appendix B is a copy of a "standardized"
chart of accounts which contains a proposed
basis for allocating indirect costs of the
hauler.
Page 1-8 City of San Luis Obispo
11:
Organization of Each Step
— Manual Organization —
I. Section
A. Subsection
1. Step
a. Task M
Process or Activity Party Responsible for
Where This Step Occurs Section Number and Name Completing the Step
.Step Section II: Rate Setting Process
Number
When
the Step
Base Year
Responsibility: Franchise Hauler
Should Be
i
Timing: Completed 120 days prior to the date rates
00,
Completed
become effective
Step
Tasks
Title
preprat
i
Tasks: a. Prepare Cost Information
Required
b. Prepare Revenue Information
to Complete
S?sbnYZSSZII�fZ.
c. Prepare Operating Information
the Step
.
. d. Survey Residential and
`4df us�m�?Z�
Non-residential Solid Waste Rates
Ap1ZZClitit101
and Charges in Similar Service Areas
e. Prepare and Submit Rate
Detailed
Adjustment Application and
Descriptions
Supporting Documents
of the
Actions
Required in
Description of Tasks
Each Task
Overview
I a. Prepare Cost Information
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 provided by the franchise
hauler is for five years:
Calendar year two years prior to
current year (year one)
0 Lastest completed calendar year
prior to current year (year two)
Current calendar year (year three)
D Projected base calendar year
(year four)
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, 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 solidwaste
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
Section II
Rate Setting Process
Section IT. 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
Timing of Base Year
Rate Setting Process
G Interim Year Rate Setting
Process
D. Timing of Interim Year
Rate Setting Process.
Topics covered in this section of the manual
include:
❑ Who is responsible for the
various steps in each process
❑ What tasks must be completed
within each step
❑ 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
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 Year Rate 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 II -1, following this page,
provides an overview of the base year rate
setting process. Exhibit H-2, following
Exhibit II -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 II -13 of this manual.
City of San Luis Obispo Page II -1
EXHIBIT U-1
PAGE 1 OF 2
Base Year Rate Setting Process
1. Preparation and Submission of Rate Adjustment
Application Franchise Hauler
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 City
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 City
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 Franchise Hauler
a. Provide Additional Information, If Requested
b. Prepare and Submit Response
Page II -2
Base Year Rate Setting Process
(continued)
5• Preparation of Draft Council Agenda Report
a. Prepare Draft Council Agenda Report
EX Mrr U-1
PAGE 2 OF 2
City
6. Review of Draft Council Agenda Report Franchise Hauler
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 City
a. Incorporate Franchise Hauler's Changes in Final Report
b. Prepare Final Report and Recommendations
8. Presentation of Agenda Report to City Council City
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 Franchise Hauler
a. Prepare Notification of Rate Adjustment
b. Implement Rate Adjustment
Page II -3
EXHIBIT II -2
Base Year Rate Setting Process Diagram
Participant Process Document
gi
Preparation and Submission • Rate Application
Franchise Hauler of Rate Adjustment • Audited Financial Statements.
Application • Supporting Financial Infomation
• Summary Survey of Other Cities
Verification of Completeness
City I of Rate Adjustment I Letter to Franchise Hauler
City
Review of Rate
Adjustment Application and
• Letter to Franchise Hauler
Preparation of Responses
'Workpapers
i
Y
Response to Additional
Franchise Hauler
Information Requests
• Additional Documents, If Necessary
from City
I
Preparation of
• Draft Council Agenda Report
City
Draft Council Agenda
• Supporting Documentation
Report
Review of
Franchise Hauler
Draft Council Agenda
• Response Letter to
Report
Draft Council Agenda Report
Y'
Preparation of
City
Final Council Agenda
• Final Council Agenda Report
Report
W
Presentation of
City
Agenda Report
:Notice of Public Hearing
to City Council
•Approved Resolution
Implementation
Franchise Hauler
of
*Notification to Customer
New Rates
•Rate Schedule
Page II -4
Section II. Rate Setting Process
Responsibility: Franchise Hauler
Timing: Completed 120 days prior to the date rates
become effective
Tasks: 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:
❑ Calendar year .two years prior
to current year (year one)
❑ Latest completed calendar
year prior to current year
(year two)
❑ Current calendar year
(year three)
❑ Projected base calendar year
(year four)
❑ Projected calendar year after
base year (year five).
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.
City of San Luis Obispo Page 11-5
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 franchise
hauler to report these allocations.
In the application, costs are further grouped
into the following major cost categories:
❑ Allowable Costs
Direct Labor
- Corporate Overhead
- Office Salaries
- Other General and Administrative
Costs
❑ 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 an 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
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:
❑ Residential
❑ Non-residential
❑ Revenue from the processing facility
❑ Interest -on investments
❑ 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
Page II -6 City of San Luis Obispo
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:
❑ Accounts served
❑ Routes
❑ Tons collected
❑ 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:
❑ Management Representation Letter
The management representation letter
transmits the application to the City, and
City of San Luis Obispo Page 11-7
Section 11. 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.
❑ 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.
❑ 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.
❑ Chart of Accounts
Although not required, it is requested
that the franchise hauler submit a
"standardized" chart of accounts for
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.
Page II -S City of San Luis Obispo
Section 11. Rate Setting Process
Responsibility- City
Timing: Completed within fifteen (15) days
after the hauler submits the Base Year
Rate Adjustment Application
Tasks: a. Verify Financial Data and Format
b. Verify Supporting Documents 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:
❑ Has the applicant included all
required forms?
❑ Are all forms complete?
❑ Are all financial calculations
mathematically correct?
❑ Has the applicant completed the
survey of other cities and
provided a survey summary?
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.
City of San Luis Obispo Page II -9
Section II. Rate Setting Process
Responsibility: City
Timing: Completed within fifteen (15) days after
determining that the application package is
complete
Tasks: 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
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
Page II -10 City of San Luis Obispo
Section II. Rate Setting Process
application are verified. Any changes in
the number of customers serviced 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 served.
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
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 of the following:
❑ Costs
❑ Non-residential revenues
❑ Residential revenues
City of San Luis Obispo Page II -11
Section II. Rate Setting Process
❑ Revenues from the processing facility
❑ Interest on investments
❑ 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
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.
Page II -12 City of San Luis Obispo
Section II. Rate Setting Process
Responsibility: Franchise Hauler
Timing: Completed during the second week of
step 3.
Tasks: 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
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.
City of San Luis Obispo Page II -13
Section 11. Rate Setting Process
Responsibility: City
Timing: Completed fifteen (15) days after the review of
rate adjustment application and preparation of
responses (step 3) is complete
Tasks: 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:
❑ Chief Administrative Officer
Recommendation
❑ Discussion of Rate Application
and Review
❑ Effect of Rate Adjustment on
Customers
❑ Potential Future Rate Adjustments
❑ Concurrences
❑ Attachments.
Each of these report topics is discussed
below:
❑ Chief Administrative Officer
Recommendation
This is one or two paragraphs
recommending the new integrated
solid waste management rates. This
may include a chart showing current
and proposed rates, and the
recommended rate adjustment.
❑ 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 Service 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.
❑ Effect of Rate Adjustment
on Customers
City staff would prepare an analysis of
how the monthly bills for customer
Page II -14 City of San Luis Obispo
Section II. Rate Setting Process
classifications will change. This would
also include a comparison of existing
and recommended new rates.
❑ 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.
❑ Concurrences
This is a paragraph stating concurrences
by the Finance and Utilities
Departments for the recommended rate
adjustment.
City of San Luis Obispo
❑ 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 II -15
Section II. Rate Setting Process
Responsibility: Franchise Hauler
Timing: Completed within seven (7) days after the
City's completion of the draft council agenda
report (step 5)
Tasks: 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 c. Prepare Response to
The franchise hauler reviews the City's Draft Council Agenda Report
draft of the Council Agenda Report. The A written response to the draft report is
franchise hauler also may provide additional prepared, if the hauler deems it necessary.
information related to any issues identified The response may cover one or more of the
by the City. following topics:
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:
❑ Correct data are included
❑ City staff analysis is accurate and fair
❑ 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.
❑ If data discrepancies exist in any of
the areas noted in the prior task, the
City should be notified of these
discrepancies
❑ If the analysis conducted by City
staff can be clarified or considered
differently, this information should
be provided to the City staff
❑ If the report is acceptable and no
clarification or comments can be
offered, this should be relayed to
City staff.
Page 11-16 City of San Luis Obispo
Section II. Rate Setting Process
Responsibility: City
Timing: Completed eight (8) days after receiving
hauler's comments on the draft agenda report
(step 6)
Tasks: a. Incorporate Franchise Hauler's
Changes in Final Report
b. Prepare Final Council Agenda
Report
Description of Tasks
Overview franchise hauler. Final solutions to
The City prepares the Final Council outstanding issues are included in the
Agenda Report, incorporating relevant Council Agenda Report.
comments from the franchise hauler during
this step. b. Prepare Final Report and
Recommendations
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
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.
City of San Luis Obispo Page II -17
Section 11. Rate Setting Process
Responsibility: City
Timing: Completed thirty (30) days after Final Report
and Recommendations are complete
Tasks: 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.
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.
Page 11-18 City of San Luis Obispo
Section II. Rate Setting Process
Responsibility: Franchise Hauler
Timing: Completed thirty (30) days after Council
approves application and resolution
Tasks: 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
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.
Z
City of San Luis Obispo Page II -19
Section If. 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
to the City by June 1 in order to meet the
October 1 implementation date.
Exhibit U-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.
Page II -20 City of San Luis Obispo
r,.
D►4 1, Ili 1
Timing of Base Year Rate Adjustment Process
Month -2 Month -1 I Month 1 I Month 2 1 Month 3 Month 4
Process Franchise Hauler 15 pay Formal
Activity Preparation I RevMem City Review !Implement
1. Preparation and Submission
of Rate Adjustment Application
2. Verification of the Completeness
of Rate Adjustment Application Step -ii 2 O
I
I
3. Review of Rate Adjustment
Application and Preparation of SI3
Responses
I
4. Response to Additional
Information Requests from City Step "4
5. Preparation of Draft Council
j
Agenda Report Steps: I i O
I.
6. Review of Draft Council
Agenda Report Stub G
7. Preparation of Final Council
Agenda Report
8. Presentation of Agenda Report
to City Council
9. Implementation
of the New Rates
Milestones
A. Rate Adjustment Application
B. Acceptance/Return Letter
C. Draft Council Agenda Report
D. Final Council Agenda Report
E. Public Hearing
F. Resolution Adopting New Rates
G. New Rates Effective
Page 11-21
Section 11. Rate Setting Process
G 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:
❑ Historical changes in the U.S.
National Consumer Price Index
(CPI) published by the Bureau of
Labor Statistics in their Monthly
Labor Review
❑ Projected changes in tipping fees
❑ Projected changes in AB 939 and
regulatory fees
❑ 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
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 (S%). 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 II4, 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.
Page II -22 City of San Luis Obispo
Interim Year Rate *0u ent Process
EXHIBIT II -4
1. U.N H/IK
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 II -23
Section 11. Rate Setting Process.
Responsibility: Franchise Hauler
Timing: Completed 120 days prior to the date new
rates become effective
Tasks: 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
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:
❑ Tipping fees
❑ 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.
Page 11-24 City of San Luis Obispo
Section 11. Rate Setting Process
Responsibility: City
Timing: Completed fifteen (15) days after the Interim
Year Rate Adjustment Application is submitted
Tasks: 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 on 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:
❑ Chief Administrative Officer
Recommendation
This is one paragraph which recommends
the required rate adjustment.
❑ 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.
❑ Effects of Rate Adjustment on
Customers
This section includes an analysis of
the impact on monthly bills due to
the rate adjustment.
❑ 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.
City of San Luis Obispo Page II -25
Section 11. Rate Setting Process
Responsibility: Franchise Hauler
Timing: Completed twenty (20) days after
preparation of rate adjustment indices
Tasks: a. Review Draft Council Agenda
Report with City Staff
b. Prepare and Submit Response
Description of Tasks
Overview b. Prepare and Submit
The franchise hauler reviews the draft Response
report to ensure that any analysis completed A written response to the draft report is
by City staff are fair, reasonable, and prepared. The response may cover one or
justified. more of the following topics:
a. Review Draft Council Agenda Report
with City Staff
The franchise hauler reviews the draft
report to ensure the following:
❑ Correct data are included
❑ City staff analysis is accurate and fair.
❑ Data discrepancies in any of
the areas noted in the prior
task
❑ Clarification for the City or
alternative analysis of the
application
❑ Responses to the City's request
for additional information.
Page II -26 City of San Luis Obispo
Section II. Rate Setting Process
Responsibility: City
Timing: Completed twenty-five (25) days after review
and response to City analysis and calculations
Tasks: 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
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.
City of San Luis Obispo Page II -27
Section 11. Rate Setting Process
Responsibility: City
Timing: Completed thirty (30) days after preparation
of final agenda report
Tasks: a. Distribute Report to Council
Members
b. Post Notice of Public Hearing
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.
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 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.
Page II -28 City of San Luis Obispo
Section 11. Rate Setting Process
Responsibility: Franchise Hauler
Timing: Completed thirty (30) days after the Council
approves the application and resolution
Tasks: a. Notify Customers
b. Implement Rate Adjustment
Description of Tasks
Overview b. Implement Rate Adjustment
After new rates have been approved by During this final task, the franchise
City Council, the final step in the process is hauler enters new rates into their billing
to implement the new rates. system and includes the new rates on the
next appropriate customer invoice. If the
a. Notify Customers billing cycle is two months or more, and if
a rate adjustment occurs during the middle
After a formal resolution is adopted by of the billing cycle, unbilled amounts are
Council, a notification of a rate adjustment calculated and included in the next billing
should be made to all customers. This cycle.
notification may be included with a regular
billing or mailed separately.
City of San Luis Obispo
Page II -29
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.
Exhibit II -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.
Page II -30 City of San Luis Obispo
EXI MU II -5
Timing of Interim Year Rate Adjustment Process
Process
Month -1
1 Month 1 I Month 2 1 Month 3 Month 4
Francbise Hauler
Activity
Preparation
Formal City Review Implement
1. Preparation and Submission
i
i
i
1 ''
of Rate Adjustment
I�
Application
2. Preparation of Draft Council
Agenda Report
Slep2
3. Review and Response top
Draft Council Agenda Report
4. Preparation of Final Report
and Recommendations
step 4 0
s
5. Presentation of Final Report and
Recommendations to City Council
Step S j
6. Implementation
of the New Rates
Step 6
0
Milestones
A. Application Submitted to City
B. Final Report and Recommendation
C. Public Hearing
D. Resolution Adopting New Rates
E. New Rates Effective
Page II -31
u
Section III
Base Year Rate Setting
Methodology
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 III -1, following this page,
provides an overview of the steps and
related tasks which must be completed to
prepare the application form. Exhibit III -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 rejlect
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
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:
❑ Historical (columns 1 and 2) —
includes audited financial information
for the franchise hauler's prior two
years.
❑ 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.
❑ 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.
City of San Luis Obispo Page III -1
EIOiIBIT III -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 III -2
EXHIBIT III -2
Page 1 of 6
Sample Base Year Rate Adjustment Application
City of San Luis Obispo
Base Year Rate Adjustment Application
Summary
Requestedancroaae _
1. Rate Increase Requested 10.0%
(a) Calculated rates are rounded up to the nearest $0.05.
5. Multiunit Residential and Non-residential Rate increases of 1 10.0 % will be applied
to all rates in each structure with each rate rounded up to
the nearest $1.00.
Certifieetion
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 of 6
Page ill -3
Ratei Schedule
_
Increased
New
Rate Schedule
Current Rate
Rate
Adiustment
Rate
0.02
20.10
Single Family Residential
2. Economy Service (collection)
$ z.00
$ zzo
$000
$ z.2o
Economy Service (orange bags)
$1.00
$1.10
$0.00
$1.10
3. Standard Service
4. Premium Service
(a) Calculated rates are rounded up to the nearest $0.05.
5. Multiunit Residential and Non-residential Rate increases of 1 10.0 % will be applied
to all rates in each structure with each rate rounded up to
the nearest $1.00.
Certifieetion
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 of 6
Page ill -3
_
13.40
14.74
0.01
14.75
18.25
20.08
0.02
20.10
(a) Calculated rates are rounded up to the nearest $0.05.
5. Multiunit Residential and Non-residential Rate increases of 1 10.0 % will be applied
to all rates in each structure with each rate rounded up to
the nearest $1.00.
Certifieetion
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 of 6
Page ill -3
IES
Sample Base Year Rate Adjustment Application
City of San Luis Obispo
Base Year Rate Adjustment Application
Financial Information
6. Direct Labor
7. Corporate Overhead
8. Office Salaries
9. Other General and Administrative Costs
10. Total Allowable Costs
EXHIBIT III -2
Page 2 of 6
Historical
Current Pro'ected
1992
1993
Base Yeas
1994 1 1995
1996
(from Pg. 4)
r._.Section-l-AllowableZosta:
1 ODO 000!
1 Oy 50 000
1 100 000$1248.600$1.260.000
840 000
$850 000
108,000
114000
190 000
126,000
132,000
245 000
255 000
50,000
268 00
275,000
1 680 000
1.690.000
11820
a74
200
1 825 000
945 000 !
3109000
$3
3.463 000
$3.492.000
Section 11-A11ovrabla Operating. Profit
11. Operating Ratio 11 96.3% 95.4% 96.4% 92.0%
12. Allowable Operating Profit 115,000 §150,000 E120,000 1301,13C $250 000
Section W-Pew:Ttwugh:Ccsta
13. Tipping Fees
14. Franchise Fees
15. AB 939 and Regulatory Fees
16. Lease Pavments to Affiliated Comoanies
17. Total Pass Through Costs
$750 000
$770 000
800 000
$1,90"000
840 000
$850 000
170 000
180 000
190 000
200000
210,000
0
0
50,000
:: 100.000
100,000
25 000
25,000
25 ODO
25,000
25,000
945 000 !
$975.000_$1.065.000
1 165 0001
185 000
Section IV -Revenue Requirement
18. Revenue Requirement $4,093,000 1 S4,234,000 $4,405,000 1 $4,929,136 11 $4,927.000
19. Total Revenue Offsets (from Pg. 3) 11 $4,093,000 ! $4,234,000 $4,405,000 $4,535,760 11 S4,736,160
Section, V-HM;Shorttall (Surplus)
20. Net Shortfall (Surplus) 93 370
.:. Section VI-PenxM Change In Rates.
21. Total Residential and Non-residential Revenue without increase
in Base Year (from Pg. 3, lines 32 + 40) y7;
22. Percent Change in Residential and Non-residential Revenue Requirement
23. Franchise Fee Ad'ustment Factor 1 - 6.0 ercent
24. Percent Change in Existing Rates
Fiscal Year: Page 2 of 6
Page 111-4
Sample Base Year Rate Adjustment Application
City of San Luis Obispo
Base Year Rate Adjustment Application
Revenue Offset Summary
. ._Section ;YB-Revenue:Offsets,
Residential Revenue (without Increase in Base Yr.)
28. Single Family Residential
Multiunit 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
EXHIBIT III -2
Page 3 of 6
Historical Current 11
Current
Projected Price per No. of
Account Type
Rate/Month Months Accounts Packa a Packages
25. Economy Service
52.00
12 2,980 10 14 304
26. Standard Service
13.40
126 200
27. Premium Service
18.25
12 660
28. Single Family Residential
Multiunit 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
EXHIBIT III -2
Page 3 of 6
Historical Current 11
Projected
1992
1993 1994
Base Year
1995 1996
Total
$214;560
996 960
144 540
§1.100,000 I 11,175,000 1 $1,300,000 1.356 060 $1.450.000
490
500
510
520
535
110000
$640,000
§650,000
660,000
§670,00(
$700.000
$40,000
31 A00
$34,500
H1,200
HO,600 11$43
000
§1,708,600 I
11,790,500
$1,918,800 11
11,985,460 H$2
107 000
490 500 1 5101 520 530
$120,000 $125,000 1130,000 $135,000 145 000
245 1 250 1 255 1 260 265
$160.000 1 $170000 1 $180.000 J1 $190000 0 $200,000 11
1.100 1.125 1 1.150 1 1,175 1200
;1.850,000 I 11,870,000 1 885 000 1,910,000 $1,9,90,00n
600 $41,500 1 $48,800 9 $44,700 $45,900
2 089 400 1 $2,123,500 1 $2.146,200 11 $2.190,300 $2,249.100
105 000
110000
$115.000
120 000
125 000
110000
120 000
$130,000
140 000
$150,000
$30 000
$40,000
$45,000 `
50000
$55,000
45 000
270 000
90 000
$310,000
S330,000
45.
Interest on Investments
$50,000 $50,000 1
$50.000 17
$5F500 $50,000
46.
Other Income
I so I so I
$0 :
so $0 11
47. Total Revenue Offsets
$4,093,000 1 $4,234,000 1 $4.405,000 H $4.535.760 11 $4,736,100
Fiscal Year. Page 3 of 6
I
Page III -5
Sample Base Year Rate Adjustment Application
City of San Luis Obispo
Base Year Rate Adjustment Application
Cost Summary for Base Year For Information Purposes Only
Sectionvul-Base Year CostABoestlat .
Description of Coat
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
EXHIBIT III.2
Page 4 of 6
19000
$138,195
U
CSO
Adjacent
Processing
Total
Ci
4,350
Uninco orated
Facility
1' 148500"
$717,950
$86,500
$60,550
$283,500
100.100J1
62,250 K
7 500
1 5,250 1
25,100
$1248 600:
$780,200 R
$94,000
1 $65.800 1
$306 600
11 126000 11
1104,580
$12,600
;8,820 1
$0
19000
$138,195
$16,650
$11,655S52.500
$84.000
49'
36 105
4,350
3,045
5.7 0
68
$174,300
$21,000 1
$14,700 1
$58 200
52.
Total Tipping Fees
000>
$697,200
$84.000
$58,800 10
53.
Total Franchise Fes
000:
$200.000
0
54.
Total AS 939 and Regulatory Fees 1-7
$100.0w1l
$83.000
$10.000 1
E,000 0
55.
Total Lease Payments to Affiliated Companies
5 000 °
$20,750
2500
$1,750
56.
Total Cost F
.$4.M,000: 11
M429.530 1
$389,100 1
$272,370 1 $537 000
Fiscal Year: Page 4 of 6
Page ill -6
City of San Luis Obispo
Sample Base Year Rate Adjustment Application
Base Year Rate Adjustment Application
EXHIBIT III -2
Page 5 of 6
Base Year Revenue Offset Summary For Information Purposes Only
Section VIF•RevenueGffaeta
CSU Adjacent Processing
Total Ci SLO I Unincorporated Factili
Residential Revenue (without Increase in Base Yr.)
i
57. Single Family Residential
Multiunit Residential Dumpster
58. Number of Accounts
59. Revenues
60. Less Allowance for Uncollectible Residential Accounts
61. Total Residential Revenue
Processing Facility Revenues
70. Scrap Payments for all Materials Sold
71. California Redempgon Value (CRV) and Processing Fees
72. Fees from Other Cities
73. Revenues from Processing Facility
g1,356,0601 $1,152,6511 $122.0451 $81,364 Soll
5201
Non-residential Revenue (without Increase in Base Yr.)
201
Account Type
0
Non-residential Can
62.
Number of Accounts
63.
Revenues
_
Non-residential Waste Wheeler
�. 64.
Number of Accounts
_ 65.
Revenues
$1.687.6411
Non-residential Dumpster
66.
Number of Accounts
67.
Revenues
68.
Less: Allowance for Uncollectible
21910001
Non-residential Accounts:
69.
Total Non-residential Revenue
Processing Facility Revenues
70. Scrap Payments for all Materials Sold
71. California Redempgon Value (CRV) and Processing Fees
72. Fees from Other Cities
73. Revenues from Processing Facility
g1,356,0601 $1,152,6511 $122.0451 $81,364 Soll
5201
3801
201
1201
0
$67010001
$569,5001
$60.300 1
$40.200
$0
$40.6001
$34,5101
$3.6541
$2.436
SO
$1,985A601
$1.687.6411
S178,6911$119.128
+260
$0
.:,52014421
0
471
31
0
$0 $0
L135=01
$114,7501
$12,1501
$8,1001
$011
$ 50,000
10000
$0 $0
$0
$310000
i
+260
2211
231
16
0
21910001
$161,5001
$17,1001
$11400
$0
:1,1751
999
1061
71
0
I
§1.910.0001
$1,623,5001
SIZI.2ggl
$114600
SO
$44�7001
$37.9951
r4,0231
S2,682
$0
$2,190=01
$1,861,7551
$197,1271
$131418
SO
120 000
0
0
$120 000
$14D'000
$0 $0
$0
$140.000
000
SO $0
$0
$ 50,000
10000
$0 $0
$0
$310000
74. Interest on Investments 1 $50.0001 $50,0001 $50,0001 $50,000 $0
75. Other Income
76. Total Revenue Offsets
7sol Sol
$0
_$01
ioll
535760 S3,599.3961
$425,8181
$300.54
$310000
I
Fiscal Year: Page 5 of 6
Page III -7
Sample Base Year Rate Adjustment Application
City of San Luis Obispo
Base Year Rate Adjustment Application
Operating Information
Percent 1 I Percent 11 1 Percent II Base Year I Percent
EXHIBIT III -2
Page 6 of 6
Non-residential
81. Accounts
W. Routes
83. Tons Collected
84. Direct Labor Hours
Recyclable Materials
85. Fees from Other
86. Tons from Other Cities
87, Cost per Ton
9,250
2.2%
9,450
2.1 %
Section iX-Operating_Data
2.0 %
9,840
1.6%1
t 0,000
4
0.0%
Residential
0.0°/,
4
0.0%
4
0.0%
4
11,350
1.8%
11,550
77.
Accounts
2.1%
12,000.
1.7%
12,200
15,700
0.6 %
15,800
0.6 %
15,900
0.6%1
78.
Routes
7 6.100
79.
Tons Collected
14
80.
Direct Labor Hours
Non-residential
81. Accounts
W. Routes
83. Tons Collected
84. Direct Labor Hours
Recyclable Materials
85. Fees from Other
86. Tons from Other Cities
87, Cost per Ton
9,250
2.2%
9,450
2.1 %
9,650 i
2.0 %
9,840
1.6%1
t 0,000
4
0.0%
4
0.0°/,
4
0.0%
4
0.0%
4
11,350
1.8%
11,550
1.7°/,
11,750
2.1%
12,000.
1.7%
12,200
15,700
0.6 %
15,800
0.6 %
15,900
0.6%1
18,000
0.6%1
7 6.100
1,835 1
2.2%1
1,875 1
2.1%1
1,9151
2.1%1
1,955 1
2.0%1
1,995
41
0.0%1
4 1
0.0%
4 1
0.0%1
41
0.0%1
4
18,700 1
2.1%1
19,100 1
2.1%1
19,500 1
1.5%1
19AM 1
2.01/6 1
20,200
9,700 1
1.0%1
9,800 1
1.0o/61
9,900 1
1.0%1
10:0001
1.0%1
10,100
$30,000 1 33.3%1 $40,000 1 12.5% i $45,000 1 11.1%1 $50,000,.1 10.0%1 $55,000
750 1 20.0%1 900 1 5.6%1 950 15.3%1 1:000 1 5.0%1 1,050
40-F 10.0% 1 441 6.8%1 47 1 6.4%1 501 4.01/6 1 52
Fiscal Year. Pg. 6 of 6
Page III -8
Section III. 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. 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 Corporate Overhead
Line 8 Office Salaries
Line 9 Other General and
Administrative Costs
Line 13
Tipping Fees
Line 14
Franchise Fees
Line 15
AB 939 and Regulatory Fees
Line 16
Lease Payments to Affiliated
Companies.
The specific components of these cost
categories are described in Exhibit III -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.
El
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:
❑ San Luis Obispo (within city limits)
❑ California State University at San
Luis Obispo (CSU SLO)
❑ Adjacent unincorporated areas
❑ 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 III -9
Definition of Financial Terms from
Base Year Rate Adjustment Application
Line lVunsber/Item Definition
6. 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
7. 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 (the $120,000
will be adjusted annually by the Consumer Price Index as published by .
the Bureau of Labor Statistics in their Monthly Labor Review).
8. 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
9. Other General and
All general and administrative costs with the exception of corporate
Administrative Costs
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
10. Total Allowable Costs
Sum of direct labor, corporate overhead, office salaries, and other
general and administrative costs
11. Operating Ratio
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.
12. Allowable Operating
Established by the allowable operating ratio
Profit
13. Tipping Fees
Costs to dispose of solid waste at transfer stations, transformation
facilities, or landfills
14. Franchise Fees
Payments to the City of 6.0 percent of gross revenues (revenues from
residential and commercial billings only; excludes recyclable material
sales)
15. AB 939 and Regulatory I
Payments to the City of San Luis Obispo to meet AB 939 Droizrams
Fees
16. Lease Payments to Lease payments for trucks, office space, and other operating facilities
Affiliated Companies made to affiliated companies
Page III -10
Section M. 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 are 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
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:
❑ Accounts served
❑ Routes
❑ Tons of solid waste collected
❑ Direct labor hours
❑ 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.
City of San Luis Obispo Page III -11
Section 111. 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.
These totals should agree with the account
information used to calculate residential and
non-residential revenue (page 3 of the
application).
Page III -12 City of San Luis Obispo
Section III. 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)
Description of Tasks
a. Determine 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:
Rate per month
Multiplied by Twelve months
Equals Rate per year
Multiplied by Projected average
number of single family
residential accounts
during year
Equals Revenue by service type
For economy service an additional
amount is added for bag package purchases
as follows:
Rate per package of
bags
Multiplied by Number of packages
purchased
Equals 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.
City of San Luis Obispo Page III -13
Section M. 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 provided 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 related to the
Page III -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 (CRV) 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:
Line 32 Total residential revenue
Plus
Line 40 Total non-residential
revenue
Plus
Line 44 Revenues from processing
facility
Plus
Line 45 Interest on investments
Plus
Line 46 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.
J ERNST &YOUNG
Section 111. 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
f
b. Determine Franchise Fee
c. Calculate Revenue Requirement
Description of Tasks
a. Calculate Allowable Operating ❑ Direct labor
Profit
❑ Corporate overhead
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:
J ERNST &YOUNG
❑ Office salaries
❑ 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:
Allowable costs
Divided by Operating ratio
Equals Allowable revenues
Minus Allowable costs
Equals Allowable operating profit.
Page III -15
Section III. Base Year Rate Setting Methodology
b. Determine Franchise Fee
The franchise fee is six percent (60/6) 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
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:
❑ Allowable costs
❑ Allowable operating profit
❑ Pass through costs.
The revenue requirement is entered on
line 18 of the application.
Page III -16 J ERNST & YOUNG
Section M. 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)
�CutZOiZ Tasks: a. Calculate Net Surplus/Shortfall
PG's" Cent b. Calculate Percent Change In Rates
:`hcin�cre
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 Net shortfall/surplus
Divided by
Line 21 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:
Line 22 Percent change in rates
without franchise fee
adjustment
Divided by
Line 23 Franchise fee
adjustment factor
(1 — franchise fee)
Equals Percent change in
existing rates.
The percent change in existing rates is
entered on line 24 of the application.
City of Sun Luis Obispo Page III -17
Diaration
Of
a. Calculate New Rates
Section III. 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 New Rates
b. Sign and Submit the Application
Description of Tasks
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 III -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
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. 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
i
both residential and non-residential service.
Exhibit III -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:
❑ Monthly rates for all residential
service types
❑ Monthly rate for standard non-
residential services (i.e., one to six
cubic yard bins picked up once per
week)
❑ Tipping fees charged the hauler
❑ 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.
City of San Luis Obispo Page III -19
EXHIBIT III -4
Page 1 of 2
�cs�nyee �uczu wccsce ree �uivey - ,
City of San Luis Obispo
Solid Waste Fee Survey
Section I --introduction
1.
Name of City/County
2.
Contact Person
3.
Tide of Contact Person
4.
Telephone Number
5.
Date Contacted
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 III -20
Page 1 of 2
Section I -- General, Information
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?
Section III -- 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 III -20
Page 1 of 2
Sample Solid Waste Fee Survey
City of San Luis Obispo
Solid Waste Fee Survey
Section.11l -- Residential' Service.
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
24.
a curbside recycling
25.
program?
19.
Is there an additional
27.
charge to residents for this
28.
program, or is it included in
the monthly charge for
solid waste collection?
20.
If separate, what is the
charge per month?
Section V -- Non-residential
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.
1 112 cubic yards
25.
2 cubic yards
26.
3 cubic yards
27.
6 cubic yards
28.
Effective period of
ratesquoted:
EX rr III -4
Page 2 of 2
(continued)
O
Fiscal Year. Page 2 of 2
Page III -21
Section IV
Interim Year Rate
Setting Methodology
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
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.
City of San Luis Obispo Page 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 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
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
EXMff N 2
Page 1 of 2
Sample Base Year Rate Adjustment Application
City of San Luis Obispo
Interim Year Rate Adjustment Application
Summary
Requested Increase ..
1. Rate Increase Requested 4.9%
(a) Calculated rates are rounoeo up to the nearest $0.05.
5. Multiunit Residential and Non-residential Rate increases of 4.9% 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: 9ohnBrawn Date: May 1, 19mc
Fiscal Year. Pg. 1 of 2
Page IV -3
Rate Schedule
Increased
New
Rate Schedule
Current Rate Rate
Adjustment
Rate
Single Family Residential
2. Economy Service (collection)
$2.00 $2.10 $0.00
$2.10
Economy Service (orange bags)
$ 1.00 $ 1.05
$0.00
$1.05
3. Standard Service
13.40 14.06
0.04
14.10
4. Premium Service
(a) Calculated rates are rounoeo up to the nearest $0.05.
5. Multiunit Residential and Non-residential Rate increases of 4.9% 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: 9ohnBrawn Date: May 1, 19mc
Fiscal Year. Pg. 1 of 2
Page IV -3
18.25
19.14
0.01
19.15
(a) Calculated rates are rounoeo up to the nearest $0.05.
5. Multiunit Residential and Non-residential Rate increases of 4.9% 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: 9ohnBrawn Date: May 1, 19mc
Fiscal Year. Pg. 1 of 2
Page IV -3
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
Section 1 -Base Year Costs
Base Year Controllable Costs
6. Total Allowable Costs $2,926,000 '
7. Plus Allowable Operating Profit 254,435
8. Plus Lease Payments to Affiliated Companies 25,000
9. Equals Total Controllable Costs 1 $3,20 5--,43-51 77.3%
10.
11.
12.
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) 4 14 4
Section 11 -Changes in Cost
Change in Controllable Cost
14. Historical Percentage Change in Consumer Price Index 4.0%
24.
Change in Pass Through Cost
Weighted Percent Change in Controllable Costs
15.
Weighted Change in Pass Through Costs
Prior Year Tipping Fees
$840,000
Pass Through Costs as a Percent of Base Yr. Revenue Requirements
16.
Plus:
Prior Year AB 939 and Regulatory Fees
100,000
Equals
17.
Equals:
Total Prior Year Pass Through Costs
$940,000 11
28.
18.
Total Percent Change in Cost
Projected Interim Year Tipping Fees
$880,000
Adjustment for Franchise Fee (1 - 6.0 percent)
19.
Plus:
Projected interim Year AB 939 and Regulatory Fees
120,000
20.
Equals:
Total Projected Interim Year Pass Through Costs
$1 000 000
21.
Projected Percentage Change in Pass Through Costs
6.4%
Section III–Calculation of Percent Change in Rates
Weighted Change in Controllable Costs
22•
23.
Multiplied by
Controllable Costs as a Percent of Base Year Revenue Requirements
Percent change in CPI
d n°1 11
24.
Equals
Weighted Percent Change in Controllable Costs
Weighted Change in Pass Through Costs
25.
Pass Through Costs as a Percent of Base Yr. Revenue Requirements
26.
Multiplied by
Percent Change in Pass Through Costs
27.
Equals
Weighted Percent Change in Pass Through Costs
Total Change
28.
Total Percent Change in Cost
29.
Divided by
Adjustment for Franchise Fee (1 - 6.0 percent)
30.
Equals
Percent Change in Existing Rates
Fiscal Year: Page 2 of 2
Page IV -4
of
Section IV. Interim Year Rate Setting Methodology
Responsibility: Franchise Hauler
Timing: Prepared during step 2 of the
interim year rate adjustment process
(refer to Section II -C)
�et��YiZ2ilatZO Tasks:
a. Identify Prior Base Year
Of BaSf' Y6qS
Application
Controllable Costs
&i.6 6dnd
Line Number
b. Identify Prior Base Year
Line Item
10.
Pass Through Costs
eZglJtZylg`
12.
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
Ic
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 Year
Interim Year
Application
Application
Name of
Line Number
Line Number
Line Item
10.
6.
Total Allowable Cost
12.
7.
Allowable Operating
Profit
16.
£i.
i Lease Payments to
Affiliated Companies
i
J 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.
Page IV -5
Section IV. Interim Year Rate Setting Methodology
Base Year Interim Year I Controllable Costs Weighting
Application Application Name of
Line Number Line Number Line Item Line 9 Total controllable costs
13. 10. I Tipping Fees
15. 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 (line 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
Divided by
Line 13 Base year revenue
requirement
Equals 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
Line 12 Total pass through costs
Divided by
Line 13 Base year revenue
requirement
Equals 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
Section IV. Interim Year Rate Setting Methodology
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
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 (line
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
-c.,aicuaaz�n of
weighted
Chane in
Section IV. Interim Year Rate Setting Methodology
Responsibility: Franchise Hauler
Timing: To be prepared during step 2 of the
interim year rate adjustment process
(refer to Section II -C)
Tasks: 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
(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 (1.00 —
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.
Page IV -8 City of San Luis Obispo
Section IV. Interim Year Rate Settin
Description of Tasks
a. Enter Rate Adjustment The adjusted rates then are rounded up to
The rate adjustment identified on line 30 the nearest five cent increment. The adjustment
should be entered on page 1, lines 1 and 5 amount required to reach the nearest five cent
of the application. increment is calculated and entered on the third
column of lines 2 through 4.
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.
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.
City of San Luis Obispo Page IV -9
Section IV. Interim Year Rate Setting Methodology
Responsibility: Franchise Hauler
Timing: Prepared during step 2 of the
interim year rate adjustment process
(refer to Section II -C)
Tasks: 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 III -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:
❑ Monthly rates for all residential
service types
❑ Monthly rate for standard non-
residential services (i.e., one
to six cubic yard bins picked up
once per week)
❑ Tipping fees charged the hauler
❑ 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.
City of San Luis Obispo Page IV -10
Section IV. Interim Year Rate Setting Methodology
Responsibility: Franchise Hauler
Step 6
Timing: Prepared during step 2 of the
Appi c a t i'itinterim year rate adjustment process
(refer to Section II -C)
Tasks: 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
Appendix A
Blank Forms and
Worksheets
City of San Luis Obispo
Base Year Rate Adjustment Application
Summary
Requested°;increase
i. Rate Increase Requested
Rate Schedule
Increased New
Rate Schedule Current Rate Rate Adjustment (a) Rate
Single Family Residential
2. Economy Service (collection)
Economy Service (orange bags)
3. Standard Service
4. Premium Service
(a) Calculated rates are rounded up to the nearest $0.05.
5. Multiunit Residential and Non-residential Rate increases of 11 : :] 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 of 6
City of San Luis Obispo
Base Year Rate Adjustment Application
Financial Information Historical Current Projected
F_ j=Eftl
(from Pg. 4)
Sectional -Allowable Coats
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 Pavments to Affiliated COmDanieS
17. Total Pass Through Costs
Section II— Operating Profit;
Section 114 -Pass Through Costs
Section IV—Revenue Requirement
18. Revenue Requirement
19. Total Revenue Offsets (from Pg. 3) 1 1 J��l
Section V-NetrShortfall (Surplus):'
20. Net Shortfall (Surplus)
Section Vi—Percent Change in 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 oercent)
24. Percent Change in Existing Rates
Fiscal Year: Page 2 of 6
t
City of San Luis Obispo
Base Year Rate Adjustment Application
Revenue Offset Summary
sectlanNS=Rsvetwe:oNaeta
Historical Curtent Projected
Base Year
Residential Revenue (without Increase in Base Yr.)
Current Projected Price per No. of
Account Type Rate/Month Months Accounts Package Packages
25. Economy Service = 12
26. Standard Service L 1 12
27. Premium Service 12
28. Single Family Residential
Multiunit 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.)
39. Less: Allowance for Uncollectible
Non-residential Accounts:
40. Total Non-residential Revenue
Processing Facility Revenues
41. Scrap Payments for all Materials Sold
42. Califomia 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
Total
Fiscal Year: Page 3 of 6
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. Califomia 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
Total
Fiscal Year: Page 3 of 6
City of San Luis Obispo
Base Year Rate Adjustment Application
Cost and Revenue Summary for Base Year For Information Purposes Only
Section vilt-Ban yow cost Allocation
Description of Cost(��� CSU AdjacentProcessing
Total Cit SLO Unincor orated Facilit
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 AS 939 and Regulatory Fees 0
55. Total Lease Payments to Affiliated Companies 0
56. Total Cost 0
Fiscal Year: page 4 of 6
City of San Luis Obispo
Base Year Rate Adjustment Application
Base Year Revenue Offset Summary For Information Purposes Only
: <swoon vif-Revenuaoffsets -
CSU Adjacent =oc-
TotalCit SLO Uninco rated
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.)
69. Total Non-residential Revenue
Processing Facility Revenues
70. Scrap Payments for all Materials Sold
71. California Redemption Value (CRV) and Processing Fees
72. Fees from Other Cities
73. Revenues from Processing Facility
74. Interest on Investments
75. Other Income
76. Total Revenue Offsets
Fiscal Year. Page 5ot 6
Account Type
Non-residential Can
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. California Redemption Value (CRV) and Processing Fees
72. Fees from Other Cities
73. Revenues from Processing Facility
74. Interest on Investments
75. Other Income
76. Total Revenue Offsets
Fiscal Year. Page 5ot 6
City of San Luis Obispo
Base Year Rate Adjustment Application
Operating Information
Reyclable Materials
85. Fees from Other Cities
86. Tons from Other Cities
87. Cost per Ton
Fiscal Year: Pg. 6 of 6
Historical
�- Current Projected
Accounts
82.
Percent
Change
ent
Peenae
Ch
Tons Collected
Percent Base Year Percent
Chan e ' Chan e
Direct Labor Hours
Reyclable Materials
85. Fees from Other Cities
86. Tons from Other Cities
87. Cost per Ton
Fiscal Year: Pg. 6 of 6
Non-residential
81.
Accounts
82.
Routes
83.
Tons Collected
84.
Direct Labor Hours
Reyclable Materials
85. Fees from Other Cities
86. Tons from Other Cities
87. Cost per Ton
Fiscal Year: Pg. 6 of 6
City of San Luis Obispo
Interim Year Rate Adjustment Application
Summary
Requested: Increase
1. Rate Increase Requested
RateSchedule•
Increased New
Rate Schedule Current Rate Rate Adjustment (a) Rate
Single Family Residential
2. Economy Service (collection)
Economy Service (orange bags)
3. Standard Service
4. Premium Service
5. Multiunit Residential and Non-residential
(a) Calculated rates are rounded up to the nearest $0.05.
Rate increases of 11 11, 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 of 2
City of San Luis Obispo
Interim Year Rate Adjustment Application
Financial Information
Section l—Base' 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
10.
11.
12.
Base Year Pass Through Costs
Tipping Fees
Ohm AQ 09n -A [
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.
22.
23.
24.
25.
26.
27.
28.
29.
Change in Pass Through Cost
Prior Year Tipping Fees
Equals.
Total Prior Year Pass Through Costs
Projected Interim Year Tipping Fees
Total Projected Interim Year Pass Through Costs
Projected Percentage Change in Pass Through Costs 1
Section III -Calculation of Percent Change in Rates
Weighted Change in Controllable Costs
Controllable Costs as a Percent of Base Year Revenue Requirements
Equals Weighted Percent Change in Controllable Costs
Weighted Change in Pass Through Costs
Pass Through Costs as a Percent of Base Yr. Revenue Requirements
Equals
Total Change
Weighted Percent Change in Pass Through Costs
Total Percent Change in Cost
Percent Change in Existing Rates
Fiscal Year: Page 2 of 2
City of San Luis Obispo
Solid Waste Fee Survey
Section l -- introduction
1. Name of City/County
2. Contact Person
3. Title of Contact Person
4. Telephone Number
5. Date Contacted
Section ii . - General ;Information
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-111 -- 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?
OI
Fiscal Year. Page 1 of 2
City of San Luis Obispo
Solid Waste Fee Survey
Section III - 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?
Section V -- Non-residential'Service
21. Are non-residential rates
3 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. Page 2 of 2
Appendix B
Chart of Accounts
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).
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.
City of San Luis Obispo Page B-1
Sample Chart of Accounts
Accounts Receivable
A
Accumulated Depreciation
A
Buildings
A
Certificate of Deposit
A
Checking Account
A
Containers
A
Furniture, Fixtures and Equipment
A
Income Tax Receivable
A
Investments
A
Land
A
Money Market
A
Notes Receivable
A
Petry Cash
A
Prepaid Expenses
A
Prepaid Life Insurance
A
Savings Account
A
Stockholders -Advance
A
Tax Refund Receivable
A
Trucks and Automobiles
A
Accounts Payable
L
Accrued Liabilities
L
Capital Stock
L
Deferred Interest
L
Equipment Loans
L
Retained Earnings
L
A = Asset
L = Liability
R = Revenue
E = Expense
Page B-2
D = Direct revenue or cost
I = Indirect revenue or cost
EIBIB1T A
Page 1 of 3
EXIMrr A
Page 2 of 3
Page B-3
Sample Chart of Accounts
(continued)
Dividend Income
R
D/I
Direct where possible, otherwise
number of accounts
Garbage Service
R
D
None
Interest Income
R
D/I
Direct where possible, otherwise
number of accounts
Other Income
R
D/I
Direct where possible, otherwise
number of accounts
Recycling Materials Sales
R
D
None
Sorting Line Revenue
R
D
None
Computer
E
I
Number of accounts
Depreciation
E
D/I
Direct where possible, otherwise
number of accounts
Dues
E
I
Number of accounts
Equipment Rental
E
D/I
,- -, Federal Income Taxes
E
I
Number of accounts
' Fines
E
D
None
Franchise Tax
E
D
None
Fuel
E
D
None
Interest Expense
E
I
Number of accounts
Labor
E
D
None
Landfill
E
D
None
Laundry
E
I
Number of accounts
Legal & Accounting
E
D/I
Direct where possible, otherwise
number of accounts
Meals and Entertainment
E
D
None
Miscellaneous and Other
E
I
Number of accounts
Office Expenses
E
I
Number of accounts
A = Asset
D
= Direct revenue or cost
L = Liability
I
= Indirect revenue or cost
R = Revenue
E = Expense
Page B-3
E HIBU A
Page 3 of 3
Sample Chart of Accounts
(continued)
Office Salary
E
D/I
Direct where possible, otherwise
number of accounts
Officers Salary
E
I
Percent of operating wages
Operating Supplies
E
I
Number of accounts
Other Insurance
E
D/I
Direct where possible, otherwise
number of accounts
Outside Services
E
I
Number of accounts
Payroll Taxes
E
D/I
Direct where possible, otherwise
number of accounts
Payroll Taxes
E
I
Direct where possible, otherwise
number of accounts
Pr & Promotion
E
I
Number of accounts
Profit Sharing
E
D
None
Recycling Expense
E
D
None
Rent
E
I
Trucks
Repairs
E
D/I
Direct where possible, otherwise
factored truck hours
State Income Taxes
E
I
Number of accounts
Taxes & Licenses
E
D/I
Direct where possible, otherwise
factored truck hours
Telephone
E
I
Number of accounts
Travel
E
D/I
Direct where possible, otherwise
number of accounts
Truck Insurance
E
D/I
Direct where possible, otherwise
factored truck hours
Truck Licenses
E
D
None
Utilities
E
I
Number of accounts
A = Asset
L = Liability
R = Revenue
E = Expense
Page B-4
D = Direct revenue or cost
I = Indirect revenue or cost