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Home My WebLink About07-21-2015 C4 Franchise Resolution of Intent - San Luis Garbage Franchise for Green WasteCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Carrie Mattingly, Utilities Director Prepared By: Ron Munds, Utilities Services Manager SUBJECT: RESOLUTION OF INTENT TO GRANT SAN LUIS GARBAGE COMPANY A FRANCHISE FOR GREEN WASTE SERVICES RECOMMENDATIONS 1. Adopt a resolution declaring the City’s intent to grant a franchise to San Luis Garbage Company for green waste services, and 2. Set a public hearing for August 18, 2015 to introduce an ordinance to grant the franchise. DISCUSSION Background For over sixty years, San Luis Garbage Company (Waste Connections, Inc. owners since 2002) has provided solid waste services to the community. The City has three separate contracts with San Luis Garbage Company for the collection and disposal of 1) solid waste, 2) recycling, and 3) green waste. Based on the outstanding track record of San Luis Garbage Company, and the requirements associated with expanding Cold Canyon Landfill, the City Council granted San Luis Garbage Company fifteen year franchise agreements for all three contracts with each term ending in 2025. Green Waste Disposal Alternatives / Mandatory Commercial Organics Recycling Organic waste (organics) is defined as waste from greenery, food, landscaping, pruning, nonhazardous wood and food-soiled paper mixed in with food waste. Since the closure of the green waste composting facility at Cold Canyon Landfill in late 2010, alternatives for redirecting organics from the landfill have been researched. A tentative agreement has now been reached between San Luis Garbage Company and Hitachi Zosen Inova (HZI), a world-wide leader in the production of energy from waste, to provide a Kompogas Anaerobic Digestion Plant. 2014 legislation requiring mandatory organics recycling supports this facility. San Luis Garbage Company proposes to enter into a long-term agreement with HZI. It would provide land for the Kompogas plant at its Old Santa Fe Road facility and delivery of organics to the plant through 2035. In return, HZI would agree to design, build, finance, operate and maintain a Kompogas plant at San Luis Garbage Company’s facility through 2035. HZI would receive a negotiated fee from the Garbage Company subject to cost of living increases and other adjustments. In order to move to the next step in San Luis Garbage Company/HZI negotiations, agreements for the guaranteed delivery of material to the proposed facility through 2035 are needed. San July 21, 2015 C4 C4 - 1 Resolution of Intent to Grant a Franchise for Green Waste Services Page 2 Luis Garbage Company has requested the City grant it a green waste franchise agreement through 2035 (current term is through 2025) on the condition the Kompogas plant is built. A similar commitment will be needed from the other cities in Waste Connection’s service area. On the regulatory front, California Assembly Bill 1826 requires local jurisdictions to have an organics recycling program in place by January 1, 2016. Businesses will be required to recycle their organic waste on or after April 1, 2016 depending on the amount of waste they generate per week. The law requires that fifty percent of organics are diverted from landfills statewide by Fall 2020 or CalRecycle will take further action to reach the target. The construction of a Kompogas facility would assist in this endeavor. City Charter Requirements to Grant a Franchise Agreement In alignment with the City’s Charter, the request to extend the green waste contract an additional ten years requires the granting of a franchise. Prior to granting a franchise, the City Council must pass a resolution declaring its intention to grant the franchise. Additionally, the resolution must state the character of the franchise and the terms and conditions upon which it is proposed to be granted. A public hearing to pass an ordinance to grant the franchise must be set no less than twenty days and no more than sixty days after the passage of the resolution. The public hearing has been tentatively scheduled for August 18, 2015. The attached resolution (Attachment 1) satisfies the requirements of the City Charter by providing the following information relative to the franchise: 1. Type: Exclusive 2. Term: 20 year term 3. Franchise fee: 10% of gross revenue paid to the General Fund 4. Agreement Highlights: • Flexibility to add or change solid waste collection programs • Periodic performance evaluations • Performance incentives • Regulatory reporting requirements • Public education • Assignment of contract provisions Should City Council adopt the Resolution of Intent, staff would propose an ordinance at the August 18, 2015 City Council meeting that would, on the condition the Kompogas plant is built, grant the new green waste franchise agreement through 2035. Cost for Organics Diversion Program As part of its regular course of business, San Luis Garbage Company submitted its base year application for the City’s consideration on June 11, 2015. It includes a plan to implement a new organics diversion program. City Council will be considering the solid waste rate increase during a public hearing at its August 18, 2015 meeting. The details behind the increase will be presented at that public hearing. The cost for the organics diversion program is included in the proposed rates. C4 - 2 Resolution of Intent to Grant a Franchise for Green Waste Services Page 3 CONCURRENCES The San Luis Obispo County Integrated Waste Management Authority, which regionally coordinates waste diversion activities in the county, supports the extension of the green waste franchise agreement and concurs with the recommendation made in this report. FISCAL IMPACT There are no direct fiscal impacts associated with this action. The cost and associated rate increase to support the implementation of the organics diversion program will be discussed at the August 18, 2015 public hearing on solid waste rates at the City Council meeting. ALTERNATIVES Do not adopt the Resolution of Intent. Should Council decide not to adopt the Resolution of Intent it should do so only if it does not support the proposed organics diversion program. Five years of research and study has taken place in the development of a new organics diversion program. Staff supports the proposed program as a long-term solution to meet the AB 1826 mandates and it aligns with Council’s expressed desire to compost green waste. ATTACHMENTS 1. Resolution of Intent T:\Council Agenda Reports\2015\2015-07-21\Franchise Granting Resolution of Intent C4 - 3 THIS PAGE IS INTENTIONALLY LEFT BLANK C4 - 4 Attachment 1 RESOLUTION NO. (2015 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO DECLARING THE CITY’S INTENT TO GRANT AN EXCLUSIVE FRANCHISE TO SAN LUIS GARBAGE COMPANY FOR GREEN WASTE SERVICES AND SETTING A PUBLIC HEARING FOR AUGUST 18, 2015. WHEREAS, public health and safety demand the orderly and periodic collection and safe disposal of green waste; and WHEREAS, it has been determined that an exclusive franchise granted to a private company is the most effective and efficient way to collect and remove green waste within the City; and WHEREAS, the City has granted San Luis Garbage Company (Franchisee) an exclusive franchise for the collection and disposal of green waste within the City; and WHEREAS, California state law requires the City to divert food waste from the landfill starting in 2016; and WHEREAS, in order to comply with the new and future composting regulations, a new organics composting facility will need to be constructed; and WHEREAS, securing the financing to construct the composting facility requires a guarantee of the delivery of compostable material; and WHEREAS, the Franchisee has provided a high level of service and reasonable rates for green waste services for the term of the current franchise agreement. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. That the City hereby intents to grant an exclusive franchise to San Luis Garbage Company for green waste services based on the following terms and conditions: a) Type: Exclusive b) Term: 20 year term c) Franchise fee: 10% of gross revenue SECTION 2. That a public hearing will be held on August 18, 2015 at 6:00 pm in the City Council Chambers at which time it is the intention of the City Council to grant such franchise. SECTION 3. Any persons having any interest in the franchise or any objections to the granting of the franchise may appear before the Council and be heard thereon. C4 - 5 Resolution No. _______________ (2015 Series) Attachment 1 Page 2 SECTION 4. The City Clerk will publish this resolution at least once within twenty days of its passage in a newspaper in the City of San Luis Obispo. Upon motion of _______________________, seconded by _______________________, and on the following vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _____________________ 2015. ____________________________________ Mayor Jan Marx ATTEST: ____________________________________ Anthony Mejia City Clerk APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney C4 - 6