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Report regarding a resolution confirming the change in solid waste collection rates to be collected by the South San Francisco Scavenger Company effective July 1, 2023. (Paul Harris, Financial Services Manager)
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RECOMMENDATION
Recommendation
It is recommended that the City Council adopt a resolution confirming the change in solid waste collection rates to be collected by the South San Francisco Scavenger Company effective July 1, 2023.
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BACKGROUND/DISCUSSION
On July 9, 1997, the City Council approved a franchise agreement (“Franchise Agreement”) for collection and disposal of solid waste with the South San Francisco Scavenger Company (“SSFSC”). In 2013, the City entered into an amended agreement with SSFSC that provides for a rolling 20-year franchise term. The longer term was implemented to allow SSFSC to have a longer period to obtain financing for their investment in capital improvements. As part of the approval of that amendment, the Council asked SSFSC to provide an annual update on the status of their capital improvement program. Representatives of SSFSC will be at the Council meeting on June 28th to present this information.
Under the terms of the Franchise Agreement, solid waste rates are adjusted every three years based on a rate survey of cities throughout the San Francisco Bay Area. For the two years following the survey year, rates are adjusted based on 80% of the change in Consumer Price Index (CPI) for San Francisco-Oakland-Hayward published by the United States Bureau of Labor Statistics. FY 2023-24 is the second year in which the 80% of CPI adjustment will be applied. The next rate study is due by March 31, 2024 which will set the rates for FY2024-25. SSFSC is required to provide a Notice of Intent to the City of their intention to adjust the collection rates by March 31 preceding the fiscal year in which the new rates become effective. This Notice and the new rate schedule is shown in Attachment 1.
Based on data from the United States Bureau of Labor Statistics, staff has confirmed that 80% of the CPI change from February 2022 to February 2023 is 3.9% as presented in the documents submitted by SSFSC. The CPI adjustment, while still elevated, is lower than the prior year (5.19%) as inflationary pressures have subsided somewhat as the national economy has returned to a more normalized state following the COVID-19 pandemic, although energy prices, cost of capital equipment, and wages and benefits still remain high in comparison to historic levels.
The Second Amendment to the Franchise Agreement, regarding the transport of sewage sludge (biosolids), states that the tonnage rate is also subject to the same increase based on 80% of CPI change. Under this amendment, the current rate of $66.57 per ton would increase to $69.17. However, to comply with SB 1383 which now classifies biosolids as an organic waste and in accordance with section 6.3 of the Franchise Agreement, the current rate for biosolids transportation is proposed to increase to $120 effective July 1, 2023, and subsequently to $154 effective January 1, 2024. City staff partnered with the SSFSC to negotiate this progressive rate change. Additionally, plant management projected cost center impacts to the City’s Sewer enterprise fund and the increases have been incorporated into the respective budgets. Continued operational refinement by plant staff have already improved biosolids dryness resulting in lower recycling cost. Furthermore, proposed infrastructure improvements in FY 2023-24 at the Water Quality Control Plant (WQCP) will lead to even dryer biosolids, lowering hauling tonnages and further decreasing recycling cost. More background information on this proposed increase can be found in Attachment Two.
The Fourth Amendment to the Franchise Agreement states that the monthly Source Reduction and Recycling Element Franchise fee (“SRRE fee”) that SSFSC pays to the city is also subject to the 80% of CPI adjustment and would therefore increase from $18,340.26 per month to $19,055.53 per month.
At the June 8, 2022 City Council meeting, during which the proposed SSFSC solid waste collection rates for FY2022-23 were presented, questions were raised about the potential provision of large item pick-up services to multi-family units. Since then, the City Manager’s Office have worked closely with SSFSC on a voucher-based pilot program as well as another pilot program offering a debris box service to multi-unit residential buildings. Details of these programs can be seen in Attachment 3.
FISCAL IMPACT
The City will receive an additional $8,583.24 SRRE fee over the course of the next fiscal year from SSFSC, to support landfill monitoring, landfill remediation and to help reduce the City’s stream of solid waste within the city boundaries. The City also receives a franchise fee from SSFSC each month which equals 10% of the prior month’s gross revenues collected by SSFSC from customers within the City limits.
The increase in biosolids transportation rates in response to the SB 1383 compliance requirements will result in an increased cost to the City’s Sewer enterprise fund which has been accounted for in the City’s budget.
RELATIONSHIP TO STRATEGIC PLAN
Acceptance of the proposed fees aligns with the City’s strategic plan under Priority Area 3, ensuring fiscal stability.
CONCLUSION
Adopting the associated resolution will confirm that the Scavenger’s solid waste proposal satisfies the terms of the Franchise Agreement with the City.
Attachments:
1. Rate Application Letter and Calculation from South San Francisco Scavenger Company including Rate Schedule
2. Sewage Sludge (biosolids) Hauling proposal letter
3. Multi-unit large item pick-up voucher and Multi-Unit Pilot Program Debris Box details
4. Franchise Agreement and all Amendments between City and South San Francisco Scavenger
Company
5. SSFSC Presentation