HomeMy WebLinkAbout06/00/1990, 2 - GARBAGE SERVICE RATE ADJUSTMENTS AND RECYCLING IMPROVEMENTS j�I�ll� City Of San LUIS OBISPO - June�"Gs, 11990
OftZe COUNCIL AGENDA REPORT "u
FROM: David F. Romero, Public Works Directorg)
PREPARED BY: David Elliott, Administrative Analyst
SUBJECT: Garbage Service Rate Adjustments an cling
Improvements
CAO RECOMMENDATIONS:
1) Adopt the resolution which:
a) increases San Luis Garbage Company's commercial service
rates by 10 percent effective with the first billing
period after 7/1/90
b) increases San Luis Garbage Company's residential
service rates by 10 percent effective with the first
billing period after 9/1/90
2) By motion conceptually approve the recycling improvements
described in this report
3) By motion direct staff to draft municipal code and solid
waste franchise revisions which would allow and encourage
the proposed recycling improvements
DISCUSSION
Ratemaking History:
over the last five years the city has granted the following
garbage service rate increases to San Luis Garbage Company:
10 percent on June 1, 1986
10 percent on January 1, 1987
12.6 percent on July 1, 1988
6 percent on April 1, 1990
The increases in 1986 and 1987 kept pace with inflation and paid
for extraordinary increases in liability insurance costs. The
increases in 1988 and 1990 covered substantial boosts in tipping
fees at Cold Canyon Landfill.
The franchise held by San Luis Garbage Company since March 1987
allows it to request rate adjustments once every two years. It
must submit a request by February 28 in one year for two later
adjustments: one on July 1 of the same year and on July 1 of the
following year. (The 6 percent increase scheduled for 7/1/89 was
postponed until 4/1/90 because it was contingent on a tipping fee
adjustment which didn't take effect unti �y
JUN i W
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�►►mIiIII11M-IN city of sar,__aIs OBISPO
MINMe COUNCIL AGENDA REPORT
Garbage Service Rate Adjustments/Recycling Improvements
page 2
San Luis Garbage Company has submitted a request for garbage
service rate adjustments of 9.5 percent for 1990 and 5.8 percent
for 1991.
Over the past 12 years the city has established garbage service
rates which:
• provide a fair return on rate base
• provide a fair operating ratio
• compare favorably to rates in other cities.
Return on Rate Base. A public utility's rate base is essentially
its capital investment and includes land, buildings, and
equipment (less depreciation) plus working cash. The return on
rate base is the ratio of net operating income (after taxes) to
rate base. The California Public Utilities Commission allows
returns ranging from 11 to 14 percent, and the city uses that
range as a ratemaking guide. San Luis Garbage Company's returns
over the last three years (1987-89) have been 10.5, 4. 0 and 12.8
percent.
operating Ratio. A public utility's operating ratio is the ratio
of its operating expense (including income taxes) to its
operating revenue. The California PUC considers an operating
ratio of 90 to 95 percent to be acceptable and fair, and the city
follows that standard. Lower ratios are advantageous to a
company, while higher ratios are undesirable. San Luis Garbage
Company's operating ratios over the last three years (1987-89)
have been 93.8, 97.9 and 94.6 percent.
During a telephone conversation in May 1990, Gary Fiske, a
utilities ratemaking economist from Oakland, confirmed that
ranges of it to 14 percent for return on rate base and 90 to 95
percent for operating ratio remain typical for the solid waste
collection industry.
Comparison to Other Cities. After calculating return on rate
base and operating ratio, the city as a final check compares its
residential rates to rates among similar cities in California and
among communities in San Luis Obispo County. A 1985 survey
showed that San Luis Obispo's rates then were slightly higher
than rates in the areas surveyed. A similar survey in 1988
showed that San Luis Obispo's rates were somewhat lower than
average.
Ratemaking Calculations for 1990 and 1991:
Using financial statements submitted by San Luis Garbage Company
Qllfl�P,1111city of San LUIS OBISPO
COUNCIL AGENDA REPORT
Garbage Service. Rate Adjustments/Recycling Improvements
page 3
(actual for 1987, 1988 and 1989 and projected for 1990 and 1991) ,
staff assembled the attached Worksheet E which shows a
substantial increase in operating expense between 1989 and 1990.
Beyond ordinary increases for expenses like salaries, fuel, parts
and services, San Luis Garbage Company will incur extraordinary
increases for:
• miscellaneous insurance costs, up 18 percent because of
higher employee health insurance premiums
• depreciation, up 10 percent to cover costs of three
replacement loaders and a new recycling truck
• landfill tipping fees, up 55 percent to pay for expansion
and closure costs and for solid waste planning services
mandated by the recently enacted Assembly Bill 939 (see
Worksheet F)
• residential billing
• recycling improvement (discussed fully in the next section
of this report)
Worksheet A is a composite income statement for San Luis Garbage
Company which calculates return on rate base and operating ratio
for 1987, 1988 and 1989 (actual) and for 1990 and 1991
(projected) . This worksheet shows that a 10 percent service rate
increase in 1990 will give the company an average it percent
return on rate base and an average 95.1 percent operating ratio,
both within accepted standards. The additional revenue would
allow the company to cover its rising expenses and preserve a
fair rate of return to its stockholders. Also, it would probably
preclude another rate increase until 1992.
The proposed rate resolution grants San Luis Garbage Company a 10
percent increase for commercial rates effective with the first
billing after 7/1/90. It also grants a 10 percent increase for
residential rates effective with the first billing after 9/1/90,
giving San Luis Garbage Company time to introduce volume-based
residential service rates, a part of the proposed recycling
improvement discussed in the next section of this report. No
increases are proposed for 1991.
RECYCUNG IMPROVEMENT
In July 1989 San Luis Garbage Company asked the council to reduce
the landfill operating hours stipulated in the solid waste
franchise. In return the council asked that San Luis Garbage
Company work with city staffinembers to improve recycling efforts
within the city. The council specifically asked for expanded
collection of recyclable materials (glass, aluminum, paper,
GENJ111AMIJ city of San _ais o61Spo
COUNCIL AGENDA REPORT
Garbage Service Rate Adjustments/Recycling Improvements
page 4
cardboard and yard waste) and for composting or mulching of
organic material if feasible. The ratemaking calculations for
1990 and 1991 include implementation and costs of several
proposed recycling improvements. A brief description of each
follows.
Volume-Based Residential Service Rates:
The existing residential service rates are fixed -- customers pay
a flat rate for weekly collection of up to one cubic yard of
refuse (the equivalent of six 35-gallon garbage cans) . Recent
solid waste ratemaking studies have concluded that shifting from
fixed service rates to volume-based service rates can persuade
more people to reduce the garbage they send to the landfill. If
customers can save money by putting out less garbage, they will
more likely separate recyclable materials from their garbage or
avoid wasteful packaging and non-recyclable materials in the
first place.
The resolution proposes three monthly rate levels for residential
customers. A standard rate of $11.00 (equivalent to the existing
$8.10 fixed rate plus 10 percent plus $2.50 per month for
wastewheeler rental, all rounded down to the nearest dollar at
the request of San Luis Garbage Company) would pay for weekly
collection of a wastewheeler container, which holds as much as
three standard garbage cans. A premium rate of $15.00 would pay
for weekly collection of up to one cubic yard or six standard
garbage cans. An economy rate would allow customers to buy
special 33-gallon bags from San Luis Garbage Company for $1.00
each. San Luis Garbage Company would then pick these bags up
whenever they were placed at the curb on collection days at no
additional cost to the customer -- the cost of the bags would be
the service rate. By using special bags and limiting disposable
refuse, customers could reduce their garbage bills. By limiting
refuse to the equivalent of about one garbage can a week, a
customer would pay only about $4.00 per month. For two bags per
week, a customer would pay about $8.00 per month.
There are several reasons for basing the standard rate on the
wastewheeler container:
• Wastewheelers allow use of automated lifting equipment which
reduces labor and worker's compensation costs.
• Emptying one wastewheeler instead of several garbage cans
increases route efficiency.
• Customers like the convenience of wastewheelers.
• Wastewheelers limit the standard volume from 1 cubic yard to
1/2 cubic yard.
city of san _ai s oBi spo
COUNCIL AGENDA REPORT
Garbage Service Rate Adjustments/Recycling .Improvements
page 5
Because of their attached lids and rugged construction,
wastewheelers are more sanitary than standard garbage cans.
why not just charge a flat rate per can or a progressively
increasing rate per can? Because it would place a heavy burden
on collection workers and create service inefficiency. Depending
on how the rates were set up, collection workers would have to
either record the number of cans set out by each customer each.
week or keep track of how many cans each customer was .entitled. to
place at the curb.
Offering this choice of service to residential customers creates
some uncertainty in projecting revenue. Ratemaking calculations
assume that about 15 percent of customers would choose the
economy rate and use about six bags each month, but a more
enthusiastic response to the economy rate could cause problems.
For example, if 50 percent chose the economy rate and used only
about four bags per month, it would be great for diverting
material from the landfill but not so great for San Luis Garbage
Company's operating revenue, which would decline sharply. Why?
Because the $1.00 per bag rate is set artificially low to create
an incentive. It does not even cover fixed operating expenses,
much less variable expenses like tipping fees. The point: if the
economy rate becomes extremely popular from the start, the city
will have to consider further rate adjustments.
Residential Curbside Recycling Improvement:
To encourage separation of recyclable material from refuse, San
Luis Garbage Company will distribute new orange recycling bins to
the 3,000 single family residential customers who don't have them
now. These bins will be a little larger than the existing bins
(18 gallon vs. 15 gallon) and will have three compartments
instead of two. Also, San Luis Garbage Company will begin
collecting plastic beverage containers along with the glass,
aluminum and newsprint now collected. Additional cost: $3,600
per year.
Commercial Recycling Improvement:
The recent demise of Coast Recycling, which collected bar and
restaurant glass in San Luis Obispo, showed that widely
fluctuating markets often prevent commercial recycling activities
from paying for themselves solely through sale of collected
materials. With a subsidy provided through commercial service
rates, San Luis Garbage Company can begin and continue collecting
separated glass/aluminum/plastic beverage containers, cardboard
and office paper from all its commercial customers. Additional
• 5
61111I1111!200111 city of san .pis osespo
same COUNCIL AGENDA REPORT
Garbage Service Rate Adjustments/Recycling Improvements
page 6
cost: $30,300 per year (net after applying revenue from the sale
of collected material) .
Recycling Promotion:
Over the past two years San Luis Garbage Company has budgeted
about $16,000 each year for recycling promotion. To introduce
the various proposed recycling improvements and further educate
customers about recycling, San Luis Garbage will nearly double
its promotion activities with stepped up advertising (television,
radio and newspaper) , printables (brochures, driver tip sheets,
flyers and door hangers) , video presentations, and neighborhood
walks. All proposed recycling promotion will be included in an
annual plan which must be approved by the city. To coordinate
this promotion along with other recycling activities, San Luis
Garbage Company recently hired a new employee. Additional cost:
$14,000 per year (for paid promotion, not wages) .
Reporting Recycling Activities:
San Luis Garbage Company will begin submitting quarterly reports
of its recycling activities, including levels of participation,
amounts of waste diverted from the landfill, and income
statements. Additional cost: none.
Contract Recycling Coordinator.
The city will recruit a half-time contract employee to coordinate
activities recommended in the adopted recycling improvement plan
and to aggressively monitor San Luis Garbage Company's recycling
efforts. The cost of this employee would be covered by a one
percent increase in the franchise fee. (Details of this proposed
recruitment are presented in a separate report prepared for the
6/18/90 council meeting agenda.) Additional cost: $25,000 per
year.
Yard Waste Recycling:
San Luis Garbage Company cannot begin collecting separated yard
waste right now because there's no place to take it for
composting, mulching or other processing. Cold Canyon Landfill
has no room for such processing, although it now chips separated
construction materials for immediate shipment to a biomass
incinerator in Soledad. Nonetheless, various solid waste
organizations are actively seeking solutions to keep yard waste
out of the: landfill. ECOSLO is negotiating with the county to
start yard waste composting on county-owned land near the
airport, but making such an operation consistent and reliable
crty Or San Lacs OBISPO
swarms COUNCIL AGENDA REPORT
Garbage Service Rate Adjustments/Recycling Improvements
page 7
will take at least several months. Cal Poly is studying
agricultural applications for mulch and compost. Also, the
integrated solid waste management planning required by AB939 must
address the issue of recycling organic material like yard waste.
But until there is a reliable destination for such material,
collecting separated yard waste won't be possible.
Franchise revisions will require San Luis Garbage to collect
separated yard waste as destinations for it become available and
revenues (from rates and sales of materials) can be arranged.
FISCAL IMPACT
The most common .measure of a rate change's financial effect on
ratepayers is a comparison to service rates in other cities and
communities. Worksheet G tabulates the current residential
service rates among two groups: comparable cities in California
and comparable communities in San Luis Obispo County. This
worksheet shows that the standard rate proposed for San Luis
Obispo 1) compares favorably with the cost of similar service
among other cities in California and 2) falls below the mean and
median of rates for similar service among other communities in
San Luis Obispo County.
ALTERNATIVES
1) Grant no service rate increases. The effects of this
alternative are projected on Worksheet H. San Luis Garbage
Company's net operating income would decline sharply in 1990
but would recover somewhat in 1991 if customer growth rates
held. Average return on rate base would fall to 8.1 percent
and average operating ratio would rise to 96.2 percent, both
outside of accepted standards. This alternative .is not
recommended because it would not fairly compensate San Luis
Garbage Company for its reasonable -- and in some areas,
unavoidable -- cost increases.
2) Grant increases of 9.5 percent for 1990 and 5.8 percent for
1991. San Luis Garbage Company requested these adjustments,
and their effects are projected on Worksheet I. These
increases would give the company an average 13.2 percent
return on rate base and an average 94.3 percent operating
ratio, both comfortably within the minimum accepted
standards. The company could easily cover its rising
expenses and preserve a fair rate of return to its
stockholders. This alternative is not recommended because
� ►�i�1I�IIp ► � city Of Sar _JIS OBISPO
COUNCIL AGENDA REPORT
Garbage Service Rate Adjustments/Recycling Improvements
page 8
it could create an unacceptably high return on rate base for
1991, particularly if drought-related development
restrictions are lifted and previous customer growth rates
resume.
CODE AND FRANCHISE REVISIONS
The proposed recycling improvements will require various
municipal code and solid waste franchise revisions. As changes
are proposed, staff will meet with San Luis Garbage Company and
the city attorney to draft specific franchise provisions allowing
the city flexibility to alter recycling activities as local and
regional needs and opportunities become clearer. These code and
franchise revisions will come to the council in July.
Attachments:
Resolution
Worksheet A - Return on .Rate Base and Operating Ratio
Worksheet B - Estimated Operating Revenue — Residential Service
Worksheet C - Estimated Operating Revenue - Commercial Service
Worksheet D - Estimated Total Operating Revenue
Worksheet E - Estimated Operating Expense
Worksheet F - Estimated Tipping Fees
Worksheet G - Comparison of Residential Garbage Service Rates
Worksheet H - Return on Rate Base and Operating Ratio under
Alternative 1
Worksheet I - Return on Rate Base and Operating Ratio under
Alternative 2
a-�
RESOLUTION NO. (1990 SERIES)
C•'
A RESOLUTION OF THE SAN LUIS OBISPO CITY COUNCIL
ADJUSTING RATES FOR SOLID WASTE COLLECTION AND DISPOSAL
EFFECTIVE JULY 1, 1990 AND SUPERCEDING ,RESOLUTION NO. 6792'
BE IT RESOLVED by the San Luis Obispo City Council as
follows:
1. Effective July 1, 1990. the rates for solid waste
collection and disposal shall be those listed on the attached
rate schedule dated July 1, 1990 and- incorporated- here by
reference. These rates shall be applied to all service bills
issued after July 1, ' 1990.
2. Upon passage, this resolution shall supercede
Resolution No. 6792 (1990 Series) .
3. The city clerk shall furnish copies of this resolution,
as executed, to finance department, public works department and
San Luis Garbage Company.
On motion of seconded by ,
and on the following roll call vote:
AYES:
NOES'
ABSENT:
the foregoing resolution was passed and adopted this day of
1990.
Mayor Ron Dunin
Attest: '
City Clerk
City inistrati Officer t tt "n6
Director Finance is Works Director
CITY OF SAN LUIS OBISPO
RATE SCHEDULE FOR SOLID WASTE COLLECTION AND DISPOSAL
7/1/90
SINGLE FAMILY and MULTI-UNIT RESIDENTIAL
GARBAGE CANS or WASTE WHEELER CONTAINERS(PER MONTH)
$8.10 1 cubic yard, 1 collection per week
$4.20 per can or container for collection away from the street curb
Maximum volume and weight per garbage can:35 gallons and 80 pounds
There shall be charged a month)y rental fee fora waste wheeler container.
These rates shall be superceded by volume-based rates effective 9/1/90.
MULTI-UNIT RESIDENTIAL DUMPSTER CONTAINERS(PER MONTH)
size of COLLECTIONS PER WEEK
container
(cubic yards) 1 2 3 4 5 6 7
1 $43.00 $64.00 $77.00 $107.00 $134.00 $150.00 $193.00
1.5 $50.00 $73.00 $92.00 $121.00 $145.00 $158.00 $223.00
2 $58.00 $62oo $107.00 $134.00 $156.00 $167.00 $253.00
3 $71.00 $101.00 $139.00 $178.00 $232.00 $251.00 $337.00 _J
4 $86.00 $129.00 $18200 $248.00 $309.00 $335.00 $418.00
6 $117.00 $179.00 $251.00 $371.00 $428.00 $47200 $558.00
8 1 $150.00 1 $221.00 $335.00 1 $495.00 $618-001 $669.00 1 $755.00
The rates stated above for dumpstercontainers shall include the monthly container rental fee.
COMMERCIAL GARBAGE CANS(PER MONTH)
number COLLECTIONS PER WEEK
Of
cans 1 2 3 4 5 6 7
1 $9.00 $15.00 $22.00 $25.00 $27.00 $30.00 $34.00
2 $11.00 $2200 $30.00 $33.00 $36.00 $39.00 $45.00
3 $14.00 $27.00 $37.00 $40.00 $42.00 $45.00 $53.00
4 $17.00 $31.00 $43.00 $47.00 $51.00 $55.00 $65.00
5 $20.00 $36.00 $49.00 $54.00 $60.00 $65.00 $77.00
6 $23.00 $40.00 $55.00 $62.00 $69.00 $76.00 $89.00
7 $26.00 $45.00 $61.00 $70.00 $79.00 $86.00 $101.00
8 $29.00 $49.00 $67.00 07.00 $87.00 $97.00 $113.00
9 $32.00 $53.00 $73.00 $84.00 $95.00 $106.00 $125.00
10 $35.00 $56.00 $80.00 $93.00 1 $105-001 $117.00 1 $137.00
Maximum volume and weight per garbage can:35 gallons and 80 pounds
Additional charge per can per collection:$3.00
P
Rate Schedule for Solid Waste Collection and Disposal-7/1/90 ,
Page 2
COMMERCIAL WASTE WHEELER CONTAINERS(PER MONTH)
number COLLECTIONS PER WEEK
of
containers 1 2 3 4 5 _ 6 7
1 $15.00 $2200 $27.00 $37.00 $46.00 $52.00 $67.00
2 $30.00 $44.00 $53.00 $74.00 $93.00 -$104.00 $134.00
3 $35.00 $50.00 $64.00 $83.00 $101.00 $110.00 $154.00
4 $40.00 •557.00 $74.00 $93.00 $108.00 $116.00 3175.00
5 $45.00 $63.00 $85.00 $106.00 $135.00 $145.00 $204.00
6 $49.00 $70.00 $97.00 $124.00 $161.00 $174.00 $233.00
7 $54.00 $79.00 $111.00 $148.00 $188.00 $203.00 $261.00
8 $60.00 $89.00 $126.00 $172.00 $215.00 $232.00 $289.00
9 $65.00 $97.00 $138.00 $193.00 $235.00 $255.00 $348.00
10 $70.00 $106.00 $150.00 $215.00 $256.00 $279.00 $406.00
11 $76.00 $115.00 $16200 $236.00 $276.00 $308.00 $464.00
12 1 $81.00 1 $124.00 1 $174.001 $257.00 1 $297.00 1 $327.00 1 $523.00
In addition to the collection rates stated above for waste wheeler containers.there shall be charged a
monthly rental fee for each container.
COMMERCIAL DUMPSTER CONTAINERS(PER MONTH)
size of OOLLECTIOfJS PER WEEK
container
(cubic.yards) 1 2 3 4 5 6 7
1 382A0- 548.00 558.00 $80.00 $101.00 $113.00 $145.00
1.5 $38.00 $55.00 $69.00 $90.00 5109.00 $119.00 $167.00
2 $43.00 $61.00 $80.00 $100.00 $117.00 $125.06 $190.00
3 $53.00 $76.00 $105.00 $134.00 $174.00 $188.00 $252.00
4 $65.00 $97.00 $137.00 $186.00 $23200 $251.00 $314.00
6 $88.00 $134.00 $186.00 $276.00 $321.00 $354.00 $416.00
8 $113.00 $166.00 $251.00 $371.00 $464.00 $50200 1 $566.00
The rates stated above for dumpster containers shall Include the monthly container rental fee.
UNSCHEDULED EXTRA COLLECTIONS
$1.1.00 1 cubic yard(minimum charge)
$14.00 2 cubic yards
$21.00 3 cubic yards
$28.00 4 cubic yards
i
Rate Schedule for Solid Waste Collection and Disposal—7/1/90
Page 3
SINGLE FAMILY and MULTI-UNIT RESIDENTIAL
VOLUME-BASED RATES
(Effective 9/1/90)
ECONOMY RATE
$1.00 per special 33-gallon bag distributed by San Luis Garbage Company
(payable when bags are issued)
STANDARD RATE
$11.00 per month for one wastewheeler container collected once each week
PREMIUM RATE
$15.00 per month for up to one cubic yard(six standard garbage cans)collected
once each week
Maximum volume and weight per garbage can:35 gallons and 80 pounds
SERVICE AWAY FROM THE STREET CURB
$4.00 additional per month per can or container
I
WORKSHEET A
RETURN ON RATE BASE AND OPERATING RATIO
WITH RECOMMENDED SERVICE RATE ADJUSTMENTS (10 PERCENT INCREASE FOR 1990; NO INCREASE FOR 1991)
1987 1988 1989 1990 1991 1987-1991
(actual) (actual) (actual) (projected) (projected) (average)
Service Rate Increase 10.0% 12.6% 6.0% 10.0% 0.0% 7.7%
Date of Increase 1/1/87 7/1/88 4/1/90 7/1/90 7/1/91
Operating Revenue $2,354,984 $2,572,553 52,863,773 $3,298,839 $3,706,261
Operating Expense $2,106,758 $2,498,266 $2,603,774 53,067,497 53,279,815
Operating Income $248,226 474,287 5259,999 S231,342 $426,445
Income Taxes $103,143 520,481 $108,830 $91,501 $175,981
Net Operating Income 5145,083 $53,806 $151,169 $139,841 5250,464
Rate Base $1,377,046 $1,336,752 51,181,109 $1,382,462 51,446,601
RETURN ON RATE BASE 10.5% 4.0% 12.8% 10.1% 17.3% 11.0%
OPERATING RATIO 93.8% 97.9% 94.7% 95.8% 93:2% 95.1%
NOTES:
1. Revenue estimates assume monthly growth rates of .107 percent for residential customers and .30 percent
for commercial customers.
2. Expense estimates assume an annual inflation rate of 4.1 percent.
3.. Rate base = land, buildings, and equipment (less depreciation) plus working cash.
4. Return on rate base = net operating income/rate base
5. Operating ratio = operating expensetincome taxes/operating revenue
�It
C� O
WORKSHEET B
ESTIMATED OPERATING REVENUE
RESIDENTIAL SERVICE (a)
WITH RECOMMENDED SERVICE RATE ADJUSTMENTS (10 PERCENT INCREASE FOR 1990; NO INCREASE FOR 1991)
Monthly Growth Rate: 0.107% (b)
service estimated estimated
estimated rate revenue revenue
revenue increase 1990 1991
January 1990 565,757
February 1990 $65,828,
March 1990 $65,898
April 1990 $69,927 6.0%
May 1990 570,002
June 1990 $70,077
July 1990 $70,153
August 1990 570,228
September 1990 (c) 587,343 10.0%
October 1990 $87,437
November 1990 587,531
December 1990 (87,625 5897,805
January 1991 587,719
February 1991 587,813
March 1991 587,907 O
April 1991 588,001
May 1991 588,096
June 1991 588,190
July 1991 $88,285
August 1991 588,380
September 1991 588,475
October 1991 $88,570
November 1991 588,665
December 1991 588,760 $1,058,861
ESTIMATED OPERATING REVENUE - RESIDENTIAL SERVICE $897,805 $1,058,861
(a) Residential service includes all single-family residential customers and those mufti-family
residential customers not using dumpsters.
(b) Based on 7,573 customers in January 1988 and 7,973 customers in December 198.9 with the growth
rate halved because of drought-related development restrictions.
(c) September revenue is based on 8,050 total customers and volume-based rates with 15% using the
economy rate, 70% using the standard rate and 15% using the premium rate..
O
WORKSHEET C
ESTIMATED OPERATING REVENUE
COMMERCIAL SERVICE
WITH RECOMMENDED SERVICE RATE ADJUSTMENTS (10 PERCENT INCREASE FOR 1990; NO INCREASE FOR 1991)
Monthly Growth Rate: 0.30% (a)
service estimated estimated
estimated rate revenue revenue
revenue increase 1990 1991
January 1990 $175,964
February 1990 5176,493
March 1990 5177,024
April 1990 6188,210 6.0%
May 1990 6188,776
June 1990 $189,343
JULY 1990 6208,904 10.0%
August 1990 6209,532
September 1990 E210,162
October 1990 6210,794
November 1990 5211,428
December 1990 5212,064 52,358,694
January 1991 $212,702
February 1991 $213,341
March 1991 5213,983
\ ApriL 1991 5214,626
May 1991 5215,272
June 1991 6215,919
July 1991 $216,568
August 1991 $217,220
September 1991 6217,873
October 1991 $218,528
November 1991 $219,185
December 1991 5219,844 62,595,060
ESTIMATED OPERATING REVENUE - COMMERCIAL SERVICE 52,358,694 $2,595,060
(a) Based on 7,573 customers in January 1988 and 7,973 customers in December 1989 with the growth
rate halved because of drought-related development restrictions.
sL9
WORKSHEET D
ESTIMATED OPERATING REVENUE
WITH RECOMMENDED SERVICE RATE ADJUSTMENTS (10 PERCENT INCREASE. FOR 1990; NO INCREASE FOR 1991)
ESTIMATED OPERATING REVENUE - RESIDENTIAL SERVICE 5897,805 $1,058,861
ESTIMATED OPERATING REVENUE - COMMERCIAL SERVICE 52,358,694 $2,595,060
MISCELLANEOUS OPERATING REVENUE:
Auto Rental $2,340 52,340
Sale of Recyclable Materials $40,000 $50,000
TOTAL ESTIMATED OPERATING REVENUE 53,298,839 53,706,261
WORKSHEET E
ESTIMATED OPERATING EXPENSE
WITH RECOMMENDED SERVICE RATE ADJUSTMENTS (10 PERCENT INCREASE: FOR 1990; NO INCREASE FOR 1991)
1989 1990 1991
actual estimated estimated
.......... ---------- ----------
Expense Subject to Inflation at 4.1%: (a)
Salaries and Benefits $1,013,132 $1,054,670 $1,097,912
Office Expense $95,234 $99,139 $103,203
Utilities $32,079 $33,394 $34,763
Services $29,183 $30;380 $31,625
Travel $5;459 $5,683 $5,916
Supplies $162,290 $168,944 $175,871
Truck Insurance $71,032 $73,944 $76,976
Licenses and Fees $37,047 $38,566 $40,147
Rents and leases $11,488 $11,959 $12,449
Promotion and Dues 548,115 $50,088 $52,141
Franchise Fees (b) (c) $130,472 $174,769 5219,235
Miscellaneous Insurance $386,802 $456,413 5420,134
Depreciation Calculated Straight line $228,829 5251,220 $251,220
Profit Sharing $19,750 $19,750 $19,750
Landfill Tipping Fees $332,862 $515,304 5580,723
Residential Billing (net) --- $30,830 $2.8,414
Recycling Improvement:
Increased Promotion --- $14,000 (14,000
Depreciation on Additional Recycling Containers --- $1,200 $3,600
Bags for Volume-based Rates --- $4,345 $13,035
Bag Delivery -- $4,800 $14,400
Depreciation on Additional Wastewheelers --- 518,000 554,000
Commercial Recycling (net) --- $10,100 $30,300
TOTAL ESTIMATED OPERATING EXPENSE 52,603,774 $3,067,497 53;279,815
(a) Based on the change in the Consumer Price Index for small cities in the West: 173.8 in January 1987
and 195.1 in December 1989
(b) San Luis Garbage,Cempany's records show 587,388 paid in franchise fees for 1989. This amount does
not include the $43,084 in fees paid o0residential revenue. Because the city was collecting residential
revenue and deducting the franchise fee, Sen Luis Garbage Company did not recognize the deducted fee as
an expense. This worksheet shows the total franchise fees paid for 1989: 5130,472 ($87,388 + 543,084).
(c) Calculations assume.an increase in the franchise fee from 5% to 6% of operating revenue effective
September 1990.
Oq
o
WORKSHEET F O
ESTIMATED TIPPING FEES
estimated estimated
estimated expense expense
tons rate per ton 1990 1991
---------- ---------- ---------- ----------
January 1990 3,353 58.50 $28,501
February 1990 to June 1990 16,763 $12.30 $206,185
July 1990 to December 1990 (a) 20,116 $13.95 5280,618
January 1991 to December 1991 (b) 40,896 $14.20 5580,723
(a) The increase in July 1990 covers a $1.00 per ton surcharge for A8939 planning services, a E.25 per ton
surcharge for state integrated waste management board operations, and a $.40 per ton surcharge for
development of additional landfill area.
(b) The increase in January 1991 covers an additional $.25 per ton surcharge for state integrated solid
waste management board operations.
WORKSHEET G
COMPARISON OF RESIDENTIAL GARBAGE SERVICE RATES (FOR 1 WASTEWHEELER/3 CANS COLLECTED ONCE PER WEEK)
IN SAN LUIS OBISPO AND SIMILARLY SITUATED CITIES
COMPARABLE CITIES IN CALIFORNIA:
Chico $8.00
Davis $16.15
Lompoc $9.68
Monterey 55.50
Napa $19.17
Pleasanton $13.91
Redding $8.00
Salinas 57.11
San Clemente $12.98
Santa Cruz 515.30
Santa Maria 58.65
Mean (arithmetic average) $11.31
Median (middle number) 89.68
SAN LUIS OBISPO (current) $10.60 (a)
SAN LUIS OBISPO (7/1/90) $11.00 (b)
(a) 6 percent below the mean and 10 percent above the median
(b) 3 percent below the mean and 14 percent above the median
COMMUNITIES IN SAN LUIS OBISPO COUNTY:
Arroyo Grande/Pismo Beach 510.50
Atescadero $13.65
Cayucos 612.10
Grover City 511.00
Los Osos 511.85
Morro say $10.50
Hipomo 510.67
North County Unincorporated Area 513.50
Paso Robles 511.39
San Simeon 512.00
South County Unincorporated Area $15.50
Mean (arithmetic average) $12.06
Median (middle number) 512.00
SAN LUIS OBISPO (current) $10.60 (c)
SAN LUIS OBISPO (7/1/90) $11.00 (d)
(c) 12 percent below the mean and median
(d) 9 percent below the mean and median
C,
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WORKSHEET H
RETURN ON RATE BASE AND OPERATING RATIO
UNDER ALTERNATIVE 1 (NO INCREASES FOR 1990 OR 1991)
1987 1988 1989 1990 1991 1987-1991
(actual) (actual) (actual) (projected) (projected) (average)
Service Rate Increase 10.0% 12.6% 6.D% 0.0% 0.0% 5.7%
Date of Increase 1/1/87 7/1/88 4/1/90 7/1/90 7/1/91
Operating Revenue $2,354,984 $2,572,553 $2,863,773 53,174,996 53,443,009
Operating Expense $2,106,758 52,498,266 52,603,774 53,060,582 53,264,430
---------- ---------- ---------- ----------
Operating Income 5248,226 $74,287 $259,999 $114,414 $178,578
Income Taxes $103,143 $20,481 $108,830 $40,871 $68,654
Met Operating Income $145,083 $53,806 1151,169 $73,543 $109,924
Rate Base $1,377,046 $1,336,752 $1,181,109 $1,382,462 $1,446,601
RETURN ON RATE BASE 10.5% 4.0% 12.8% 5.3% 7.6% 8.1%
OPERATING RATIO 93.8% 97.9% 94.7% 97.7% 96.8% 96.2%
NOTES:
1. Revenue estimates assume monthly growth rates of .107 percent for residential customers and .30 percent
for commercial customers.
2. Expense estimates assume an annual inflation rate of 4.1 percent.
3. Rate base = land, buildings, and equipment (less depreciation) plus working cash.
4. Return on rate base = net operating income/rate base
5. Operating ratio = operating expens"income taxes/operating revenue
WORKSHEET I
RETURN ON RATE BASE AND OPERATING RATIO
UNDER ALTERNATIVE 2 (9.5 PERCENT INCREASE FOR 1990; 5.8 PERCENT INCREASE FOR 1991)
1987 1988 1989 1990 1991 1987=1991
(actual) (actual) (actual) (projected) (projected) (average)
Service Rate Increase 10.0% 12.6% 6.0% 9.5% 5.8% 6.8%
Date of Increase 1/1/87 7/1/88 4/1/90 4/1/90 1/1/91
Operating Revenue $2,354,984 $2,572,553 $2,863,773' $3,378,114 $3,921,197
Operating Expense 82,106,758 82,498,266 52,603,774 53,070,865 53,291,357
Operating Income 'S248,226 $74,287 $259,999 5307,249 5629,840
Income Taxes $103,143 $20,481 5108,830 5124`,369 $264,051
Net Operating Income $145,083 $53,806 $151,169 5182,880 $365;789
ORate Base $1,377,046 51,336,752 51,181,109. 51,382,462 $1,446,601
RETURN ON RATE BASE 10.5% 4.0% 12.8% 13.2% 25.3% 13.2%
OPERATING RATIO 93.8% 97.9% 94.7% 94.6% 90:7% 94.3%
NOTES:
1. Revenue estimates assume monthly growth rates of .107 percent for residential customers and .30 percent
for commercial customers.
2. Expense estimates assume an annual inflation rate of 4.1 percent.
3. Rate base = land, buildings, and equipment (less depreciation) plus working cash.
4. Return on rate base = net operating income/rate base
5. Operating ratio = operating expense+income taxes/operating revenue