HomeMy WebLinkAbout8.2 Garbage Collection Service and Rates Report Flo -30
CITY OF DUBLIN
AGENDA STATEMENT
CITY COUNCIL MEETING DATE:
SUBJECT: 1990 Garbage Collection Service and Rates
Report Prepared by: Richard C. Ambrose, City
Manager & Phillip S. Molina, Finance Director
EXHIBITS ATTACHED: 1) Memorandum from Finance Director dated
December 15, 1989
2) Joint Refuse Rate Review Committee 1989 Rate
Application Chronology of Events
3) Comparative Schedule of Refuse Collection
Rates, May, 1989
4) Joint Refuse Rate Review Committee Review of
Oakland Scavenger Company's 1990 through 1991
Rate Application dated 11/21/89
5) Garbage Franchise Agreement
RECOMMENDATION: 1) Receive presentation from Staff and Consultant
2) Discuss service options
3) Maintain the current backyard service
arrangement with Waste Management Inc. , and
approve in concept an across-the-board garbage
rate increase for basic garbage service
4) Provided the Council concurs with the inclusion
of recycling and/or household hazardous waste
programs as part of the rate base, direct Staff
to prepare the appropriate resolution modifying
the rates for Council consideration at its
meeting of January 8, 1990.
FINANCIAL STATEMENT: See Below
DESCRIPTION: The Finance Director has prepared a report (see
attached) regarding the recommendation of the Alameda County Joint
Refuse Rate Review Committee (JRRRC) , regarding the Refuse Rate
Application for 1989 and 1990 presented to the Committee by Waste
Management Inc. As indicated in the Finance Director's memo, the City
of Dublin currently enjoys one of the lowest garbage rates in the Bay
Area. The garbage rate was last increased in 1983 . Commercial
garbage rates were actually reduced in Dublin in 1986 by more than
11%.
As a result of increased costs incurred by OSC and its successor,
Waste Management Inc. , over the last six years, the JRRRC is
recommending a 16% increase in garbage rates for all participating
cities. This recommendation is based on an analysis by the firm of
Hilton, Farnkopf & Hobson which has provided consulting services to
the JRRRC. Staff has arranged for a representative of the firm to be
present at the City Council meeting to provide a brief summary of the
report and answer any questions.
Service Options
Due to the size of the proposed increase, Staff met with
representatives from Waste Management Inc. , for the purpose of
identifying other garbage service options which might reduce the rate
increase.
During that meeting, Waste Management indicated that Waste Management
presently has 4 ,935 residential customers in the-City of Dublin, and
that there are 433 households which are not receiving garbage
collection services. These households are disposing of their garbage
----------------------------------------------------------------------
COPIES TO:
ITEM NO. &.9.2
at their place of business, taking their garbage directly to the dump,
or disposing of their garbage by other means.
Waste management representatives indicated that approximately 40% of
City of Dublin residential customers had single can service.
Waste Management identified the following service options which it
might offer the City and the impact each option could have on rates:
GARBAGE SERVICE OPTIONS
1. Curbside Collection - Rate Per Can
The City's franchise agreement presently provides for backyard
collection service.
Waste Management has indicated that if the City was interested in
having a curbside collection program in which residents would be
required to bring their garbage cans to the street, the existing rate
structure could be maintained.
Advantage
Maintain existing rates.
Disadvantage
Reduced level of service. May create problems for senior citizens,
handicapped persons or other individuals who may have difficulty in
moving cans to the street.
2 . Curbside Collection - Single Rate - Unlimited Cans
Waste Management indicated it could provide a curbside collection
program which would allow residential customers an unlimited number of
cans at a fixed rate of approximately $7 .90 per month.
Advantage
All customers would have ability to dispose of more garbage at a fixed
rate. Two plus can customers would realize a reduction in their
rates.
Disadvantage
Single can customers (approximately 40%) would experience a
significant increase in garbage service rates.
Reduced service level, as discussed in Option 1 above.
3 . - Fully Automated Curbside Collection
Under this program, Waste Management would provide a 90 gallon
container on wheels to each customer, and would pick-up each container
automatically at curbside. The fixed rate would be approximately
$8. 00-$8 . 50 per month, including the cost of the container.
Advantage
Garbage can would be easier to handle. Two can customers would be
able to dispose of more garbage at approximately the same monthly
rate.
Three can customers would be able to dispose of approximately same
amount of garbage at a reduced rate.
Disadvantage
Single can customers would experience a significant increase in
garbage service rates.
AGENDA STATEMENT
2
Somewhat reduced service level as described in Options 1 and 2,
although 90 gallon container with wheels would be easier to move to
curbside than individual cans.
Recommendation
1. Due to the large number of single can customers in the City, it
is Staff's recommendation that the City Council maintain the current
backyard service arrangement with Waste Management Inc. , and approve
in concept an across-the-board garbage rate increase for basic garbage
service.
2 . If the City Council concurs with Staff's recommendation and is
interested in pursuing the inclusion of recycling and/or household
hazardous waste programs as part of the rate base, direct Staff to
prepare the appropriate resolution modifying the rates for Council
consideration at its meeting of January 8, 1990.
AGENDA STATEMENT
3
December 15, 1989
TO: City Manager
Richard Ambrose
FROM: Phillip S. Molina
SUBJECT: Garbage rate increase
The Alameda County Joint Rate Refuse Review Committee (JRRRC)
recently concluded a long process to determine an appropriate
rate increase for Waste Management Incorporated (WMI) , the
company that currently provides garbage pick-up service to the
residents and commercial establishments in Dublin. The JRRRC was
able to conclude the rate review process with a recommendation of
a 16% increase to take affect January 1, 1990.
The 16% increase is actually the result of two annual increases.
The first is for the 1989 calendar year and equals 7%. The second
for the 1990 calendar year and equals 9%.
This is the first rate increase that the JRRRC has proposed in
over six years. This rate increase is needed in order to provide
a Return on Equity to WMI of 17%, which is the ROE that the JRRRC
identified as being reasonable. In comparison, the consumer price
index rose an average of 3 .5% for each of those same six years.
The JRRRC originally contracted with the accounting firm of Price
Waterhouse and later obtained the services of Hilton Farnkopf &
Hobson to review the detailed data presented to the JRRRC by WMI.
During the review process, the JRRRC requested specific
information concerning administrative costs. Because WMI said
that the answers were proprietary in nature, representatives of
Hilton Farnkopf & Hobson flew to Chicago to obtain the
information face to face from the corporate controller. The final
outcome of the entire review process was to:
1. allow for a 2% of revenue administrative charge;
2. disallow the $8,000,000 lawsuit costs from the
current rate request;
3 . adjust interest income and interest charge
allocation methods to be more consistent with benefits
gained for the rate payers by providing that interest
income internally generated are allotted to the JRRRC
based upon interest rates that more closely approximate
market rates, and by assuring that interest costs are
allocated to the JRRRC in a manner consistent with the
amount of service rendered;
EXHIBIT 1.
December 15, 1989
4. to provide for the allowance of additional costs
associated with State legislation (AB939) , which added
$ .50 per ton tipping fees beginning January 1, 1990.
The following material provides in greater detail some of the
issues that were discussed during the year long review process.
Also included is some material from the Hilton Farnkopf & Hobson
report.
HISTORIC BACKGROUND:
The City of Dublin became a member of the Joint Rate Refuse
Review Committee (JRRRC) when it became the franchisor for solid
waste collection in April 1986. The City originally negotiated
with the waste collection company of Oakland Scavenger Inc. for
the current rate structure. Except for a decrease in commercial
rates in 1985, the rates have not changed in over six years.
Both prior to and subsequent to Dublin's joining the Joint Rate
Refuse Review Committee, the JRRRC processed a number of rate
increase requests from Oakland Scavenger Company (OSC) . For all
but the most current request the JRRRC determined that the rate
increases being asked for were not appropriate.
The main reason that the JRRRC was able to deny the previous
rate increase requests was that the amount of the increases
requested were mollified by using the excess revenue reserves
that were determined to have existed at the time. Those reserves
were the results of "excess profits" earned by the company above
the profit level allowed by the JRRRC.
The determination that OSC had excess profits was made by the
firm of Price Waterhouse. Representatives from Price Waterhouse,
who were experienced in the area of waste collection rate
settlements, reviewed the financial documents presented by OSC
and they identified specific questionable expenditures. Some of
the questionable expenditures were disallowed by JRRRC because
they were inconsistent with a reasonable cost of providing
service. These disallowed costs would in affect be added back to
the corporate's profits, which in turn would be compared to the
predetermined allowable profit. Any difference would be "excess
profit" .
During the rate increase request review process for 1989, the
JRRRC realized that the "excess profits" would be used up, and it
was determined that a rate increase of 7% would be needed to
provide Oakland Scavenger Company Inc. a reasonable profit level.
The profit level that was determined reasonable by the JRRRC
was/is a return on equity of 17%.
JRRRC Garbage Rate Increase report page-2-
December 15, 1989
Oakland Scavenger Inc. merged with Waste Management Incorporated
just before the beginning of the 1989 rate review process.
The 1989 rate review procedure took an exceptionally long time.
The process began on August 24 , 1988. Neither members of the
JRRRC nor representatives of the Company were happy with the time
delay. It is generally agreed, however, that the bulk of the
delay was caused by the changes in the Company after it merged
with Waste Management Incorporated. Attached to this memo is an
exhibit that shows some of the important dates leading up to the
delay in processing the rate request.
FINANCIAL BACKGROUND:
The JRRRC identified that there was $7,700 ,000 of excess profits
(reserves) being held by Oakland Scavenger Inc. in 1985. The
amount of the reserves generally decreased each year (except for
1987) until it was fully consumed in 1989. The reserve balances
for each year from 1985 through 1989 were as follows:
balance at year end
1985 $7,700 ,000
1986 5,600,000
1987 6,500,000
1988 900,000
1989 - 19,100,000
The Company requested at the start of the 1989 review to change
methods of rate determination. The JRRRC decided to retain the
Return on Equity (ROE) method rather than change because the ROE
method provides for profits commensurate with the net ownership
of the assets after all corporate liabilities are covered.
Administrative costs:
The JRRRC struggled with the 1989 rate request because the
Company began to change the way in which it accounted for costs.
After the auditors analyzed all costs they identified and
separated the customary operating costs from administrative
costs. Interest costs are identified as part of administrative
rather than operating costs. The JRRRC subsequently began to
question areas of intercompany interest charges and interest
income allocation. The JRRRC made the Company change its methods
of allocating interest charges and interest income so as to deal
consistently with both. The JRRRC than questioned whether the 4%
administrative overhead charges should be allowed. The Company
JRRRC Garbage Rate Increase report page-3-
December 15, 1989
wanted the JRRRC to approve a 4% of revenue charge for District,
Regional and Local overhead costs, but did not substantiate to
the JRRRC's satisfaction the justification for the 4% rate.
After considerable debate among the members, it was determined
that the appropriate way in which to arrive at an allowance for
administrative overhead was to use the documented cost savings
from the corporate merger as a base for determining allowable
overhead costs. (The merger had improved some cost factors such
as workers compensation costs, which decreased due to more
favorable rates at Waste Management than at Oakland Scavenger
Company. )
Depreciation costs:
Some depreciation costs, which are associated with assets at the
Altamont Landfill , should start in 1991 or 1992, but were
erroneously posted in 1989. These costs were adjusted out of the
rate request.
Franchise fees:
Because franchise fees, which are paid to each city by WMI, are
calculated as a percentage of the revenues,. it is obvious that
when revenues go up the franchise fees go up too. The garbage
rate increase also provides enough gross receipts to generate
revenues net of franchise fees and all other expenses and still
provide for the necessary net income to meet the JRRRC's
approved ROE.
Costs of a lawsuit:
The JRRRC presently excluded the cost of a settlement by OSC on a
lawsuit relative to the Company's violations of Title VII of the
Civil Rights Act. The JRRRC will study this matter in future rate
requests. The Company wants the rate payers to pay for the
$8 , 000,000 settlement; but the JRRRC will no doubt question why
the rate payers should pay for this settlement.
Other cost increases of landfill operations:
Additionally, there were increased cost to the Company from
increased expenses at the Altamont and Durham Road landfills. The
increase occurred mostly in 1988, but the average annual increase
amounted to 30. 3%. Though the auditors expressed concerns about
the increase they also felt that the costs were reasonable given
the recent regulatory changes in landfill operations. (AB939
October 6, 1989 surcharge per ton on landfills. )
JRRRC Garbage Rate Increase report page-4-
December 15, 1989
Because the Company requested some delays and forced other delays
in the rate review process, the JRRRC recommended that the rate
increase be effective on July 1, 1989 rather than January 1,
1989. The JRRRC first considered the following rate increases:
1. 7% for July through December 1989, and
2 . 6% for 1990.
The 6% was based upon the information received from the auditors
as to their understanding of the minimum needs of the Company in
the coming rate increase request.
On September 1989 the auditors received the 1990 rate increase
request, which showed cost increases above those previously
estimated. This difference caused the auditors to increase the
recommended 1990 rate from 6% to 9%. This produced the following
proposed rate increase:
1 . 7% for July through December 1989, and
2. 9% for 1990,
3 . The two rate increases to take affect January 1, 1990.
Since the rates are intended to take affect on January 1, 1990
the total increase in rates needed at that time is 16%.
CONCLUSION:
Various factors led to the recommendation of the JRRRC that a 16%
garbage rate increase is needed at this time. Those factors are:
The JRRRC experienced a growth in the tons of garbage
processed between 1984 and 1989. Hilton Farnkopf &
Hobson provided information showing that the tonnage of
garbage increased both actual and estimated from 1984
through 1990 by 40%.
The San Francisco-Oakland-San Jose Consumer Price Index
for All Urban Wage Earners shows an increase of 38% for
labor, 31% for all other costs relevant to this study.
The actual plus estimated percentage increase in WMI
labor costs is 32% from 1984 to 1990. This should be
compared to the CPI labor cost increase of 38%.
The change in other WMI costs (excluding the costs of
disposal and vehicles) reflects an increase of 65%. The
consultants for the JRRRC compare this increase to the
combined change of both growth in garbage of 40% plus
JRRRC Garbage Rate Increase report page-5-
December 15, 1989
the change in the CPI of 31%. This provides a 71%
expected change and should be compared to the 65%
change in other costs.
The percentage increases in WMI vehicle costs is 42%
for the same time period. Vehicle costs for the Company
includes the repair, maintenance, fuel, supplies, and
depreciation for the various garbage trucks.
Considering both the change in the CPI plus the tonnage
growth (71%) , the WMI cost increase is reasonable.
Finally, the disposal costs have increased by 128% over
the same time period. Even when comparing this increase
to the combined increase in the growth of tonnage plus
the change in the CPI of 71% there is a 57% excess
(128%-71%=57%) increase for WMI. The disposal costs
include transfer station operating expenses,
engineering expenses, and depreciation on landfill
equipment. The 57% excess increase is due primarily to
WMI's change in operating methods at the landfill to
stabilize slopes, to provide for expansion of usage
space, and to comply with regulatory requirements for
monitoring and reporting of water and air quality.
The recommended rate increase of 16% would result in changes
to existing garbage rates as shown below. The assumption
made is that every rate would be increased by 16%:
CURRENT RATE ADJUSTED RATE
Residential backyard
1 can 4 .90 5.68
2nd can rate 3 .40 3 .94
Multiple-- apartments
One 32 gal can 4 .90 5.68
Commercial Services
One 32 gal can 4 .90 5.68
2nd can rate 4.90 5.68
One Yard Bin
once a week 25. 35 29.40
twice a week 50.65 58 .75
rate per cubic yard 50.65 58.75
Two Yard Bin
Once a week 45. 10 52. 32
twice a week 81. 10 94 .08
rate per cubic yard 40.55 47.03
JRRRC Garbage Rate Increase report page-6-
December 15, 1989
Four Yard Bin
Once a week 82 .60 95.82
Twice a week 153 . 85 178.46
Rate per cubic yard 38 .46 44 .61
Drop Box services
Largest container 30 .00 34 .80
rate per pull 180.00 208.80
rate per cubic yard 4 .66 5.40
The rate increases include the amount necessary for the
franchise fees.
Attached is an exhibit that compares existing garbage rates
of 29 agencies before the rate increases are applied. You
can see that Dublin has the lowest rates of any jurisdiction
in the residential one and two can services, and except for
West Sacramento, Dublin has the lowest commercial one and
two 32 gallon can service.
Staff recommends that Council consider, review and approve
the rate increase of 16% starting January 1, 1990.
JRRRC Garbage Rate Increase report page-7-
E X H I B I T
JOINT REFUSE RATE REVIEW COMMITTEE
1989 RATE APPLICATION
CHRONOLOGY OF EVENTS
Date Description of Events
August 24, 1988 PW letter to AA status of fee review
September 1, 1988 JRRRC meeting to review rate review
schedules
September 8 , 1988 WMI audit work plan submitted to JRRRC
September 23 , 1988 Letter to OSC requesting isolation of special
services in rate application
September 29, 1988 Technical submittal of 1989 Rate Application
October 14, 1988 JRRRC meeting and presentation by OSC of 1989
Rate Application - request of OSC for additional
information to justify extraordinary expenses
November 2, 1988 PW status letter on audit indicating acceptance
by AA of audit workplan and indicating hope
audit would be completed by end of November
November 11, 1988 Telephone with PW concerning AA and WMI request
for modifications to audit workplan
December 2 , 1988 Letter to OSC requesting additional information
December 20, 1988 PW status report to JRRRC on fee review
indicating delays by AA in completion of audit
January 17 , 1989 - Meeting with AA, WMI , PW and Causey to
review audit results - list of questions
left with WMI for completion of audit
- Letter from Girsch on meeting
January 18, 1989 Letter JRRRC to OSC again requesting additional
information
January 19 , 1989 - Letter Causey to WMI Girsch documenting
meeting of 1/17/89 in Chicago
- AA audit report received by JRRRC
EXHIBIT 2
Joint Refuse Rate Review Committe
Chronology of 1989 Rate Review
Page 2 of 3
February 1 , 1989 Letter from JRRRC, Contra Costa group to WMI
Girsch documenting concerns on audit
February 9, 1989 - Letter OSC to JRRRC providing additional
information requested 10/14/88
- JRRRC meeting on status of rate review and
AA audit
February 10, 1989 - Meeting Causey, PW and OSC to discuss 2/9/89
letter and JRRRC activity from here
- Causey phone conversation with Girsch
March 9, 1989 PW receives additional information from OSC on
capital projects, change in overhead charging
and 1988 financials
March 17, 1989 JRRRC meeting direction to PW to finalize rate
review including no indirect fees or District
charges
April 7, 1989 JRRRC meeting receiving PW first review and
presentation by OSC asking JRRRC to consider
accepting information from WMI on proprietary
basis
April 17, 1989 PW meeting with WMI Girsch to receive
proprietary information and answers to 1/17/89
questions
May 10, 1989 PW meeting with OSC to receive additional
information requested at 4/17/89 meeting on
regional charges
May 31, 1989 PW report on indirect charges completed and
transmitted to JRRRC
June 6 , 1989 PW review of 1989 rate request completed and
transmitted to JRRRC with philosophic decisions
for JRRRC regarding fees, return on equity and
District charges
June 23, 1989 JRRRC meeting to formulate final recommendation
to OSC and agencies - requested PW to compute
affect of 187 escalation of General and
Administrative expenses
June 30, 1989 JRRRC meeting to finalize recommendation to OSC
and agencies
July 14, 1989 JRRRC meeting to present final findings to OSC
Joint Refuse Rate Review Committe
Chronology of 1989 Rate Review
Page 3 of 3
Definition of Acronyms
AA Arthur Anderson
JRRRC Joint Refuse Rate Review Committee
OSC Oakland Scavenger Company
PW Price Waterhouse
WMI Waste Management Inc.
-Attachment 3
()oWARATIYE SCHEDULE OF REFUSE COLLECTION RATES Page 1 of 4
WAY 1989
Walnut crwek
city Danville Lafayette Moraga Orinda Pacheco (city) San Ramon Pleasant Hill Ail tioch Clayton
Effective Data of Rates 7/1/88 7/1/88 7/1/88 7/1/88 . 7/1/88 4/1/89 12/1/88 8/18/88 7/1/88 5/1189'
Description of Service
Residential badryand "rvicet
One 32 gallon can per week 12.95 12.95 12.45 13.95 12.00 13.11 7.09 10.50 11.75 17.00
Second can rate 5.85 5.85 5.75 6.45 7.05 5.45 6.06 4.20 4.50 9.50
Weekly trimmings quantity 2 cans 2 cans 1 can 1 can 1 can 2 cans -- Yaries 3 cans 2 cans
Seasonal cleanup servicet 3 3 2 1 1
Frequency per year 3 3 3 3 3
Quantity 2 cu yds 2 cu yds 2 cu yds 2 cu yds 2 cu yds 2 cu yds 3 cu yds 5 begs 2 cu yds 2 cu yds
Multi-Apartaent serrvicet
One 32 gallon can per week 10.65 10.55 10.00 10.00 9.50 11.28 13.53 10.50 11.75 --
C;crmorcial services
One 32 gallon can per week 14.75 14.75 15.00 15.00 12.80 16.72 13.53 10.50 11.75 7.
Second can rate 5.80 5.80 6.60 6.60 12.80 16.72 3.39 4.20 11.75 17.00
One Yard Bin
One pick-up weekly 55.55 55.55 57.45 57.45 75.45 54.54 50,97 .70.21 83.00 83.00
Two pick-ups weekly 94.90 94.90 101.20 101.20 122.50 100.73 87.11 89.95 132.00 132.00
Rate per cubic yard (2 p/u) 94.90 94.90 101.20 101.20 122.50 100.73 87.11 89.95 132.00 132.00
Two Yard Bin
One pick-up weekly 94.90 94.90 101.20 101.20 102.70 77.40 87.11 87.76 100.00 100.00
Two pick-ups weekly 173.65 173.65 188.00 188.00 205.45 143.20 139.39 131.64 172.00 172.00
Rate per cubic yard (2 p/u) 86.83 86.83 94.00 94.00 102.73 71.60 79.70 65.82 86.00 86.00
Four Yard Bin
One pick-up weekly 173.65 173.65 - -- 199.00 144.00 159.39 131.64 168.00 168.00
Two pick-ups weekly 330.65 330.65 -- --- 399.75 254.55 303.50 205.14 336.00 336.00
Rate per cubic yard (2 p/u) 82.66 82.66 -- -- 99.94 63.64 75.88 51.29 84.00 84.00
Percent of coeeeercial custo-rs (Note 1) WA WA 3% 2% 10% WA 12% WA WA WA
Drop box services 20
Largest containers Size (cu yd) 30 30 20 20 20 30 30 20 20
304.20 165.63 165.70 145.00 195.00
Rate per pull 289.40 289.40 203.60 203.60 250.00
Rate per cubic yard 9.65 9.65 10.18 10.18 12.50 10.14 0.85 8.29 9.75 9.75
As T is 0 L, S, U
Re.er.nce to footnotes
Demographics s
1 Refuse tipping sites Corti
Landfill (LF) Acste Fill Acme Fill Acme Fill Acme Fill Rate Fill Anne Fill Acate F111 Acme Fill. Contra stService WasteaService
IIIIINNIMININ Meteg
Transfer station (TS)
mate
tsttateea®es Tipping Foot
-!6 F" per ton pd by
collector LFt 47.00 47.00 47.00 47.00 47.00 47.00 47.00 47,00 30.00 30.00
` TSt
Terraint
"`eee Fl at X X X X
Fb dorately hilly X X X X - _
Hilly X _ X
w-ii'MAi lY E SCrtc.wi.E Or niFUSs. W1.LEL I x1111• KA,LJ
WAY 1989
Fa1K ax Fairfax Larkspur Larkspur
City Concord Dublin Kartinez E1 Cerrito (Flat) (Hilly) Hillsborough (Flat) (Hilly f3) Livermore
Effective Date of Rates, 5/1/09 4/1/06 11/1/87 1/1/09 1/1/09 1/1/89 10/1/84 5/1/09 5/1/89 9/1/85
Description of Service
Residential backyard services 6.40
One 32 gallon can per week 14.00 . 4.90 12.00 9.00 10.80 12.00 9.98 10.40 13.65
cond can rate 4.90 3.40 10.00 5.S0 8.00 8.00 6.96 5.75 7.00 3.70
Se
1 cu yd/mo 1 cu yd/
Xeekly trin*mings quantity 2 cans Hone Unlimited )lone Ino Clone 1 can 1 can Hone
Seasonal cleanup services 2 2 2 2 1 1 2
Frequency per year I 4 2
Quantity 2 cu yds Unlimited Unlimited 1-1/2 cu yds Unlimited Unlimited 6-32 gal cans 3 cu yds 3 cu yds Unlimited
multi-Apart"ni: "rvicet 10.80 12.80 - 10.40 13.65 6.40
One 32 gallon can per week 1.3.50 4.90 12.00 9•�
Ccn+tercial services 4.90 12.00 9.00 9.55 11.55 -- 10.40 13.65 6.
One 32 gallon can per week 13.50 9.50 5.50 9.55 11.55 -- 5.7S 7.00 3.
Second can rate 13.50 4.90
Cne Yard Bin 25.35 -- 60.15 59.17 59.17 - 59.00 59.00 27.55
One pick-up wreklY - SO.GS - 98.30 100.34 100.34 --- 98.65 98.65 52.10
Two pick-ups weekly -' 98.30 100.34 100.34 - 90.65 98.65 52.10
Rate per cubic yard (2 p/u) --- 50.65
Three Yard Bin Three Yard Bin
Two Yard Bin - 128.05 128.05 49.95
One pick-up weekly 110.00 45.10 195.00 109.30 102.17 102.17 - 232.45 232,45 91.55
Two pick-ups weekly 179.00 81.10 195.00 185.60 182.34 182.34 - 77.48 77.48 45.78
Rate per cubic yard (2 p/u) 89.50 40.55 92.80 91.17 91.17
Four Yard Bin Three Yard Bin - _- Three Yard Bin Thne Yard Bin _ Five Yard Bin Five Yard Bin
145.17 1.45.17 178.60 178.60 93.95
one pick-up we+k1Y _- -- 264.34 264.34 - 332.60 332.60 177.15
144.00 82.80
Two pick-ups weekly 247.50 153.85 - �_ 88.11 88.11 -- 66.52 66.52 44.29
Rate per cubic yard (2 p/u) 82.50 38.46
40i OS 5%
Percent of commercial customers (}late 1) W A )1/A 3%
4x 6x 0� Ox
Drop box servic•t -' 18 18 50
Largest containers Siz• (cu yd) 20 30 24 20 - -_ - 150.00 190.00 240.x^
9
Rate per pull 180.00 139.75 275.00 19 .00 - - - 10.56 10.56 4
Rate per cubic yard 9.00 4.66 11.45 9.50
N
R B, H H, X H, X C, F I, P I' P B
Reference to footnotes
Demographics t
Refuse tipping sitst
Landfill (LF) Acme Fill Altamont Acs• Fill Nest Contra Redwood Redwood Ox Mountain Redwood Rydw ood
Costa Sanitary Sanitary Sanitary Sanitary L.F. Sanitary Sanitary
BFI, San Karin Karin
Transfer rtation (TS) Carlos Sanitary Sanitary
Tipping fees
Fee per ton pd by 00 31.20 14•.25 14.25 7.50 14.T5 14.25 W A
collector LFt 47.00 WA 47. 31.00 (Note 2) (Mote 2)
TS t
Terrains X X 30X
Flat X X
Moderately hilly X
• X 70%
Hilly
Rb!use collector Concord Livermore/ Har-tinez East Bay
Fairfax Fairfax Browning- Karin )Sarin Livenor./
Disposal Dublin Sanitary Sanitary Gartage Garbage Farris Sanitary Sa^nary Disposal Dublin
,lrm r)I rPntial Disposal Industrins
/1 t.k.QU11111Clt C .S
COWARATIYE SCHEDULE OF REFUSE COLLECTION PATES Page 3 of 4
MY 1989
Nest
Los Altos Oakland/
R
City Los Altos Hills Montclair Dist Piedmont Redwood City Richmond San Jose Sausalito Sac 1/1/89
7/1/88 7/1/88 1/1/88 1/1/89
Effective Date of Rates 7/1/88 12/1/87 7/1/85 7/1/85 10/1/84
Description of Service
Residential backyard sorylcot
One 32 gallon can per week 11.70 10.95 6.40 6.40 5.60 10.27 6_65 16.15 .0
1.98 4,90 4.30 4.30 5.94 Non Non
Second can rate Hone Unlimited None Unlimited
weekly trisvmings quantity Hone None None None 1 can
Seasonal cleanup services 4 1 0 2 2 0 4 1
Frequency per year 2
Quantity Unlimited Unlimited Unlimited None 2 cu yd 1 cu yd None 3 cu yds Unlimited
multi-Apartment sorvicet
--- 5.45 5.45 6.60 10.27 6.65 10.15 3.37
One 32 gallon can per week 11.70
Comsorcial seryicet
One 32 gallon can per we 5
week 10.96 9.65 6.40 6.40 .60 13.90 6_65 9.15 .3
Second can rate 10.96 9.65 6.40 6.40 5.94 13.90 9.15 2.01
One Yard Bin 1.5 Yard Bin 1.5 Yard Bin
One pick-up weekly 66.83 66.05 29.35 29.35 43.68 67.70 32.91 31.85 15.54
Two pick-ups weekly 122.37 116.90 58.70 58.70 82.83 113.90 51.93 63.70 31.08
Rate per cubic yard (2 p/u) 81.58 77.93 58.70 58.70 82.83 113.90 51.93 63.70 31.08
Two Yard Bin Three Yard Bin Three Yard.Bin
One pick-up weekly 111.61 116.90 53.70 53.70 82.83 108.50 51.38 63.70 31.09
Two pick-ups weekly 216.79 203.20 99.20 99.20 117.60 191.20 99.59 ' 127.40 62.18
Rate per cubic yard (2 p/u) 72.26 67.73 49.60 49.60 58.80 95.60 49.00 63.70 31.09
Four Yard Bin Six Yard Bin Six Yard Bin Three Yard Bin
One pick-up weekly 201.26 170.20 99.75 99.75 92.28 185.80 97.44 _.-
_- 62.18
Two pick-ups weekly 312.06 269.30 189.00 189.00 159.38 337.90 190.61 ^- 124.36
Rate per cubic yard (2 p/u) 52.14 44.88 47.25 47.25 53.13 84.48 47.65 31.09
Percent of cosssercial custcr"rs (Note 1) 15% 1% 0% WA 5% WA 5% 18% 24%
Drop box sorvicot 40 20 40 50 WA
Largest containers Size (cu yd) 40 --- SO 50
Rate per pull ' 185.00 -- 255.00 255.00 355.00 186.00 224.80 510.00 WA
Rate per cubic yard 4.63 -- 5.10 5.10 8.88 9.30 5.62 10.20 WA
Reference to footnotes D, Y D. P B. E B F, Q Et Q H K, X Y
Demographics t
Refuse tipping sib t Ox mountain Nest Contra Newby Island Redwood Yolo County
Landfill (LF) Nw by Island Newby Island Sanitary L.F. Costa Sanitary Sanitary
Transfer station (TS) Oakland Oakland BFI, San Carlos
Scavanger Scavenger
Tipping Feet
Fee per ton pd by 1.S0 (Note 2) 8.50 14.25 8.00
collector LFt 31.00 31.00 (Note 2) (Note 2) 31.00
TSt
Terraint X
Flat X X X
Moderately hilly X X X X
Hilly X
Refuse Collector Los Altos Los Altos Oakland Oakland Browning- Richmond Naito Bay Cities Neste
Garbage Garbage Scavanger Scavanger Ferris Sanitary Ngmnt. Refuge Tmgmnt.
JOINT REFUSE RATE REVIEW COAEM=E
REVIEW OF
OAKLAND SCAVENGER COMPANY'S
1990 THROUGH 1991 RATE APPLICATION
NOVEMBER 21, 1989
EXHIBIT Aq
HILTON FARNKOPF&HOBSON
Advisory Services to
Municipal Management
39350 Civic Center Drive,Suite 380
Fremont,Califomia 94538
Telephone:415/797.0654
Fax:415/797-0615
November 21, 1989
Joint Refuse Rate Review Committee
c/o Mr. Paul Causey, Chairman
Oro Loma Sanitary District
2600 Grant Ave.
San Lorenzo, CA 94580
REVIEW OF OAKLAND SCAVENGER COMPANY'S
1990 THROUGH 1991 RATE APPLICATION
Dear Members:
This report documents our review of Oakland Scavenger Company's (OSC)
rate application dated September, 1989, for the years 1989 through 1991 on
behalf of the Joint Refuse Rate Review Committee (JRRRC).
RECO1VIN ENDATION
Based on our review of OSC's support for its rate application, we recommend
that the JRRRC member agencies increase collection rates 16% effective
January 1, 1990. This would result in an increase of$0.77 to $1.10 per month
for a residential (one-can) customer and $1.50 to $1.70 per month for a
residential (two can) customer, depending on service area.
Because of the uncertainty of future costs, we make no recommendation with
regard to the January 1, 1991, rate adjustment. However, assuming a 10%
annual increase in operating costs and a 3% growth in revenues, and based
on OSC's current projections; the JRRRC member agencies should anticipate
another 16% rate increase in 1991 followed by annual rate increases of
approximately three to five percent through 1994.
DISCUSSION
This is the first rate increase in more than six years and is the first rate
adjustment since 1985, when commercial rates were reduced. During this
period, rate increases have been avoided, in large part, by using revenues
from prior years that were in excess of those required to compensate OSC for
its costs and provide a reasonable profit.
November 21, 1989
Joint Refuse Rate Review Committee
- Page 2
The amount of the increase, after more than six years, compares favorably to
the 30% increase in the Bureau of Labor Statistic's Consumers Price Index for
the San Francisco-Oakland-San Jose Area for the same period.
The rates, even after the increase, remain relatively low when compared to
comparable services provided in other Bay Area jurisdictions.
The rate increase does not consider the effects of OSC's $8 million settlement
of a lawsuit in which OSC was found to have violated certain civil rights laws.
We believe that there is reason to question whether or not the cost of this set-
tlement should be included as a reasonable and necessary cost associated with
OSC's provision of services to the ratepayers. In addition, this settlement was
only first brought to light in OSC's rate application in late September, 1989,
and only a verbal presentation was provided to the JRRRC prior to October 31,
1989. Therefore, since there has been inadequate time for the JRRRC to obtain
a legal evaluation of the issue, we recommend that the JRRRC review this
matter prior to the next rate application and incorporate, if appropriate, its
findings in the next rate adjustment.
We appreciate having had the opportunity to be of continued service to the
member agencies of the JRRRC. We would also like to express our apprecia-
tion to the JRRRC for their direction and to the Oakland Scavenger Company
.and their auditor for their cooperation and assistance.
Sincerely,
Robert D. Hilton
Partner
Attachment -
As stated
REVIEW OF OAKLAND SCAVENGER COMPANY'S
1990 THROUGH 1991 RATE APPLICATION
TABLE OF CONTENTS
SECTION DESCRIPTION PAGE
I BACKGROUND 1
1983-1988 Rate Period 1
OSC's 1989-1991 Rate Period 2
I I SCOPE OF REVIEW 4
III OBSERVATIONS AND FINDINGS 5
Cost Factors Leading to the OSC's Increase 5
OSC Originated Adjustments 7
Hilton Farnkopf& Hobson Originated Adjustments 7
Policy Issues 8
IV RECONIlVIENDATIONS 11
`7 RATE ENIPACT OF RECONMIENDATIONS 13
SECTION I-BACKGROUND
1983-1988 RATE PERIOD
The last rate increase occurred in 1983 and amounted to 5.5%. During the
past 6 years, no rate increase has occurred, while an 11% reduction in com-
mercial rates occurred in 1985. No other jurisdiction in the Bay Area, of
which we are aware, has enjoyed this experience of rate stability:
In general, this experience occurred because of the growth in the customer
base and OSC's ability, until recently, to minimize cost increases. The rate
regulation process also contributed to these results. Specifically, since the
rate regulation process sets the profit to be earned by OSC, the income in
excess of this approved profit has been used to offset the need for rate
increases in recent years.
Despite the reduction of commercial rates in 1985, OSC's cumulative excess
income continued at a significant level until 1988, as shown in Exhibit 1.
Exhibit 1
Excess Income
Cumulative Balance
Year ($ Millions)
1985 7.7
1986 5.6
1987 6.5
1988 0.8
The rapid decline occurred as the result of an $11 million increase (18%) to
OSC's revenue requirement (costs plus profit) between 1987 and 1988 , as
shown in Exhibit 2.
Exhibit 2
Increase from
Year Revenue Requirement Prior Year
($ Millions) $ Millions
1985 57.8 1.2 2
1986 61.2 3.4 6
1987 60.5 (0.7) (1)
1988 71.5 11.0 18
The increases resulted in part from the $3.8 million (69%) increase to
expenses at the Altamont and Durham Road Landfills, as shown in Exhibit 3.
Exhibit 3
Altamont & Durham Rd. Increase from
Landfill Expenses Prior Year
Year ($ Millions) Millions
1985 4.2 0.9 27
1986 5.2 1.0 24
1987 5.5 0.3 6
1988 9.3 3.8 69
While OSC's landfill expense increases are substantial, an increase of landfill
expenses does not appear unreasonable in light of recent regulatory changes
and other landfill operators' experience.
Starting with the rate report for 1986, the JRRRC was informed that while no
rate increase was then required, an increase would be necessary in 1989 or
1990; since the accumulated excess income would by then be exhausted. The
1987 and 1988 rate reports again anticipated the necessity of a rate increase in
1989.
OSC'S 1989-1991 RATE PERIOD
September, 1988 Application
OSC's first rate application for the three year period 1989 through 1991 was
submitted in September, 1988. At the request of OSC, the report on the rate
application was delayed until June, 1989, to allow OSC time to present addi-
tional information regarding both projected capital costs and Corporate,
Regional and Administrative expenses to OSC by Waste Management of North
America, Inc. As a result, the Committee:.
• Approved a higher cost of service, but instead of a January 1, 1989,
effective date, authorized a July 1, 1989, effective date; and, ,
• Delayed raising rates until January 1, 1990 to incorporate both the six
months of the higher costs in 1989 and the adjustment for 1990.
2
Based on OSC's projections, as adjusted, the 1989 rate report anticipated the
following revenue requirements by year (not including the cumulative deficit
results of operations):
Exhibit 4
($ Millions)
Pre-Tax Revenue
Year Expenses Profit Requirement
1989 64.5 6.6 71.1
1990 67.1 7.7 74.8
1991 69.6 9.0 78.6
Based on the JRRRC's decisions and these projections, it was anticipated that
a 7% increase would be required January 1, 1990 and a 6% increase would be
required January 1, 1991.
Sey+pmber. 1989 Applicatio n
OSC's September, 1989, application contained revised projections for the
period 1989 through 1991 (not including the cumulative deficit results of
operations), as shown in Exhibit 5.
Exhibit 5
($ Millions)
Pre-Tax Revenue
Year Expenses Profit Requirement
1989 80.0 6.6 86.6
1990 76.1 8.3 84.4
1991 80.2 9.0 89.2
This current projected revenue requirement for the three year period reflects
an increase of 16% from the 1988 projections, as shown in Exhibit 6.
Exhibit 6
($ Millions)
1988 Projected 1989 Projected
Revenue Revenue Increase/ Inc./(Dec.)
Year Reauirement Requirement (Decrease) Percentage
1989 71.1 86.6 15.5 22%
1990 74.8 84.4 9.6 13%
1991 78.6 89.2 10.6 13%
Total 224.5 260.2 35.7 16%
3
SECTION II-SCOPE OF REVIEW
Our review was conducted in accordance with the June 1, 1989, proposal to the
JRRRC and the Rate Review Procedures Manual dated April 6, 1986. Our
procedures included:
• Reviewing the rate application for mathematical accuracy and compli-
ance with the rate review procedures.
• Agreeing the rate application to OSC's unaudited 1988 financial state-
ments. (The audit of the financial statements was not finalized, since
OSC was of the opinion that the JRRRC's actions with regard to 1988
Corporate and Regional costs were not final. While the testing of the
draft financial statements was complete, the audit opinion was not
issued, since the above issue could expand the audit testing as it relates
to that issue.)
• Reviewing the revenue and expense projections contained in the appli-
cation for reasonableness in terms of OSC's prior experience and our
knowledge of industry experience.
• Calculating the approved profit, based on a 17% return on franchised
equity.
• Calculating the cumulative excess;deficit income from operations for
the period ending September 30, 1988.
• Calculating the revenue increase required to finance OSC's revenue
requirement and comparing this to changes in the Consumer Price
Index.
• Recalculating representative rates resulting from the required revenue
increase and comparing these to rates in other Bay Area communities.
The scope of our review did not comprise an audit of OSC's financial
statements. Such an audit is performed by the firm of Armanino, Jones and
Lombardi.
Our review was based on OSC 's September, 1989, projection of the results of
operations for the three years ending December 31, 1991. The actual results of
operations will usually differ from projections, because events and circum-
stances frequently do not occur as expected, and the difference may be signifi-
cant.
4
SECTION III - OBSERVATIONS AND FINDINGS
Our observations and findings are organized into four categories.
• First, an overview of the factors included in OSC's rate application
leading to the increase in rates in 1990;
• Second, a summary of the adjustments to the rate application made
by OSC subsequent to its filing;
• Third, a description of the adjustments of a technical nature which
we identified in the course of our review to correct errors made by
OSC; and
• Fourth, a discussion of policy issues, wherein the costs have been
incurred by OSC but their inclusion for rate purposes may be ques-
tioned.
A. COST FACTORS LEADING TO OSC's INCREASE
OSC's 16% increase to the pr(-,.jected 1989 through 1991 revenue requirement
results from five major factors, as shown in Exhibit 7:
Exhibit 7
($Millions)
1989 1990 1991
1,988 Projections, as adjusted 71.1 74.8 78.6
Cost Factors
1. Lawsuit 8.0 - -
2. Dumping Fees 4.7 4.1 5.1
3. Wages and Salaries 1.3 1.4 1.2
4. Administrative Expense 1.2 1.2 1.3
5. Various Other (0.1) 1.8 1.1
6. Franchise Fees 0_4 1_1 1_9
1989 Projections 86.6 84.4 89.2
1. Lawsuit Settlement:
As shown in Exhibit 7 and described on page 8 below, OSC's inclusion in 1989
of the settlement of the lawsuit increased the revenue requirement by $8
million.
5
2. Dumping Fees:
Landfill and transfer station expenses are anticipated to continue to increase
to: comply with state regulations; expand the Durham Road landfill; perform
capital improvements at the Davis Street transfer station; and reflect
increased waste volumes.
3. Wages and Salaries:
Wages and Salaries are projected to increase 8% more than anticipated in
1988, due largely to increased headcount and overtime expense, in part, based
on projected growth in commercial waste collection.
4. Administrative Expenses:
Effective January 1, 1989, WMI policy for allocating Corporate, Regional and
Administrative expenses changed from 4% of revenue to 2% of revenue plus
Administrative expenses directly charged. OSC included projected
Administrative expenses in its 1989 rate application each year.
5. Various Other
Other miscellaneous expenses are projected to increase more than anticipated
due to anticipated growth in collection activities.
6. Franchise Fees:
Franchise fees are calculated as a percentage of revenues and, therefore, as
revenues increase, so does this expense. In 1989, OSC projected franchise fees
assuming a rate increase of 9%, effective January 1, 1990.
B. OSC ORIGINATED ADJUSTMENTS
Subsequent to the submission of the rate application, OSC requested an in-
crease of expenses in 1990 and 1991 totalling $149,000 and $341,000 respec-
tively. These increases resulted from adjustments which had either been in-
put incorrectly or had not been included in-the rate application. We reviewed
these adjustments and found them reasonable.
C. HILTON FARNKOPF &HOBSON ORIGINATED ADJUS174ENIS
Our review identified the need for the following five adjustments to the rate
application.
6
1. Depreciation Expense:
Depreciation expense for certain 1991 fixed assets associated with the
Altamont Landfill had been erroneously depreciated starting in 1989. We
have reduced depreciation expense in 1989 ($350,000), 1990 ($1,260,000), and
1991 ($56,000) to reflect the appropriate amounts.
In addition, depreciation expense associated with the Altamont Landfill fu-
ture acquisitions was not allocated by the Company to its non-franchised activ-
ities. We have reduced depreciation expense for the non-franchised portion of
these future acquisitions in 1989 ($24,000), 1990 ($136,000), and 1991 ($449,000).
2. Public Revenue:
Per the rate application, public revenue projections were to reflect an as-
sumed 3.3% growth in revenue at both the Davis Street Transfer Station and
the Durham Road Landfill. Based on our analysis of the last five years, we be-
lieve that this growth estimate is reasonable. Additionally, a price increase of
25% at both locations is scheduled to take effect on January 1, 1990.
We noted that the 1990 revenue projections did not reflect the impact of the
3.3% growth. (This growth was accounted for in 1991.) We have increased
public revenues by $326,000 in 1990 to reflect the anticipated growth.
3. Interest Income:
:Interest income calculations for the period under review :did not include the
effects:of tl.e payment.of quarterly incoma taxes by Waste Management on be- ..
': Half of Oakland.Scavenger. :,Additionally, the effects of an intercompany re-
ceivable`due from the non-franchised operations was also excluded as part of
th*e.interest income calculations
We have decreased interest income by $72,000 in 1989, 1990 and 1991 to reflect
the adjustments for the above mentioned items.
4. Input Errors:
During our review, we noted an instance where escalation rates and other ad-
justments had been erroneously input.
We reduced expense levels to reflect these items by $153,000 in 1990 and
$227,000 in 1991.
7
5. State Legislation:
As noted by the Company during its October 6, 1989, presentation of its rate re-
quest, it had not included the impact of recently enacted State legislation (AB
='939).` The'legislation places a surcharge on landfills of$0.50 per ton effective
January 1, 1990; $0.75 per ton effective July 1, 1990; and $1.00 per ton effective
July 1, 1991. We have included in the projected costs for fiscal years 1990 and
1991, $590,000 and $843,000, respectively, for this purpose.
D. POLICY ISSUES
The following three key policy issues have arisen during the course of the re-
view.
1. Settlement of Litigation:
In January, 1975, OSC employees filed a complaint that the owners of OSC
.were given preferences in employment opportunities'tha' t-violated Title VII of
-the Civil Rights Act of 1964 as well as the Civil Rights Act of 1870. At the end
of 1986, the court ruled that OSC could not show that there was a business ne-
cessity behind its actions and found for the plaintiffs against OSC. Shortly be-
fore the damages phase of the trial in mid-May, 1989, and after several weeks
of negotiations. OSC obtained the plaintiffs' agreement to a dollar settlement
of$8.millior__.
While the $8 million'was included in OSC's rate application delivered in
September, the first presentation of this matter to the JRRRC occurred on
October 6, 1939. At this meeting, the JRRRC requested, from OSC's Attorney,
a written summary of the lawsuit. This summary was received by the JRRRC
on October 31, 1989.
We recommend that the JRRRC defer a decision on the appropriateness of the
inclusion of the effects of the lawsuit settlement until it has had sufficient
time to fully understand and consider this issue.
2. Administrative Expenses:
In 1987, after the acquisition of OSC by Waste Management of North America,
Inc., OSC requested reimbursement for Corporate, Regional and
Administrative expenses which were allocated to OSC on the basis of a
percentage of revenues. Since OSC was not able to provide adequate support to
the JRRRC.on the reasonableness of the expenses, they were denied by the
JRRRC. Instead, on a one time basis, the JRRRC allowed OSC to retain
certain savings in operating costs which approximated 2% of gross revenues.
In 1988, the JRRRC agreed to allow OSC reimbursement for allocated
Corporate, Regional and Administrative expenses to a maximum of 4% of
8
revenues based on the submission to and approval by the JRRRC of both the
justification of the expenses and the indirect cost allocation methodology.
In the spring of 1989, Price Waterhouse reported that a 3% charge for these
expenses did not appear unreasonable based on verbal representations by
Waste Management and OSC officials. However, based on the failure of OSC
and Waste Management to provide documentation of their representations,
and based on the savings achieved in 1987, the JRRRC approved the reim-
bursement of allocated Corporate, Regional and Administrative expenses in
the amount of 2% of gross revenues. At the same time, the JRRRC communi-
cated to OSC that it would consider an amount in addition to the 2% for OSC
Administrative expenses as part of the 1990 rate application.
In its 1990 rate application, OSC has included both the 2% of gross revenues
for Corporate and Regional expenses as well as an additional $1.2 million in
1989 and 1990 and $1.3 million in 1991 for Administrative expenses.
At its meeting of November 14, 1989, the Committee directed that the
reimbursement of Corporate, Regional and Administrative expenses should
be limited to 2% of gross revenues.
3. Phasing of Rate Adjustment:
As described in Section 1, cumulative excess income was available in prior
years to finance OSC's revenue requirement. Revenue generated from
collection rates were less than adjusted expenses by $5.7 million in 1988 .and
$7.9 million in 1.989. At the end of 1988, there remained approximately $0.8
-million in excess income available to finance OSC's 1989 revenue
requirement.
Since a rate increase did not occur in 1989, and since expenses increased sig-
nificantly, the excess income changed from an amount due from OSC to the
ratepayers to $7.2 million owed by the ratepayers to OSC. Therefore, the rates
would have to be increased in 1990 by approximately $7.2 million to
compensate OSC for what it was owed at the end of 1989 in addition to the 1990
deficit. (In keeping with the agreement between the JRRRC and OSC, interest
income is paid to the ratepayers on a cumulative excess and interest expense
is paid to OSC on a cumulative deficit. Beginning in 1989, interest expense is
being paid on the cumulative deficit.)
The amount of the 1990 rate increase needed to fully compensate OSC by the
end of 1990 (as shown in Exhibit 8 and Attachment 1) would be unreasonably
high from the ratepayers perspective. An increase of$7.2 million is required
to offset the effects of prior years, but would not be required in 1991. As a
result, the dramatic increase in 1990 would be followed by a reduction in rates
of 5% in 1991.
9
Exhibit 8
$Millions
1989 1990 1991
Projected Revenue 67.1 69.5 92.9
Projected Expenses (Adjusted)
70.5 73.8 79.4
Allowed Earnings (Pre-tax) 6.6 8.3 9.0
Franchise Fees & Corp. Expenses - 1..7 (0.2)
Interest on Cumulative Deficit 0.3
Cumulative Deficit - 7.2 . 0.2
Total Revenue Requirement 77.4 91.0 88.0
`Profit/(Loss) ("Before Rate increase) (10.3) -(21.5) . 4.9 /
Rate Increase (Decrease)
N/A -21.5 (4.7)
$ NIA 31% (5%)
'By phasing in the rate adjustment, the 1990 rate adjustment, franchise fees
and corporate charges (which are based on a percentage of revenue.) vn.11. be
less than that shown above and the deficit would be reimbursed to OSC over
two years, as shown in Exhibit 9 and Attachment 2.
Exhibit 9
$Millions
1989 1990 1991
Projected Revenue 67.1 69.5 82.3
Projected Expenses (Adjusted) 70.5 73.8 79.4
Allowed Earnings (Pre-tax) 6.6 8.3 9.0
Franchise Fees & Corp. Expenses - 0.5 0.6
Interest on Cumulative Deficit 0.3 0.3 0.1
Cumulative Deficit _:_ 7.2 9.4
Total Revenue Requirement 77.4 90.1 98.5
Profit/(Loss) (Before Rate Increase) (10.3) (20.6) (16.2)
Rate Increase
- 11.1 - 13.2
$ - 16% 16%
We recommend that the JRRRC set rates effective January 1, 1990 and
January 1, 1991, which will be sufficient to compensate OSC for its cumulative
result of operations through 1991. It is recommended that a longer period not
be taken, since some agencies' current franchise agreements with OSC
terminate shortly after 1991.
10
SECTION IV- SMYMARY OF R.ECOM1 MgDATIONS
We recommend the following five specific actions by the JRRRC.
1. We recommend that the JRRRC accept OSC's rate filing as adjusted.
2. We recommend that the JRRRC defer a decision on the appropriateness
of.the inclusion of the effects of the lawsuit settlement until it has had
sufficient time to fully understand and consider this issue.
3. . Lased on the JRRRC's direction, we have used a total of 2% of gross rev-
enues for Corporate, Regional and Administrative expenses.
.4. We recommend that the JRRRC set rates effective January 1, 1990 and
January 1, 1991 winch ��rill be sufficient to compensate OSC for its cumu-
lative result of operations through 1991. It is recommended that a longer
period not be taken, since some agencies' current franchise agreements
with OSC terminate shortly after 1991.
5. We recommend that the JRRRC approve a rate increase of 16% effective
January 1, 1990. Assuming this increase and based on OSC's current
projection, the JRRRC member agencies should anticipate an additional
rate increase- of 16% in 1991. Based on current assumptions regarding
management's plans and inflation, future annual rate increases of less
than those in 1990 and 3.991 may be anticipated.
11
Based on these recommendations, we have summarized the effects on the
OSC projections, as shown in Exhibit 9:
Exhibit 9
($000's)
1989 1990 1991
September 1989 Projected
Revenue Requirement 86,596 84,419 89,262
OSC October Adjustments 149 341
OSC Adjusted Projection 86,596 84,568 89,603
HF&H Adjustments
1. Depreciation (ref. pg. 7) (374) (1,396) (505)
2: Public Revenue (ref. pg. 7) - (326) -
3. Interest Income (ref. pg. 7) 72 72
4. . Input Errors (ref. pg. 7) (.1553 3) (227)
5. State Legislation (ref. pg. 8) 590 843
6. Litigation Settlement (ref. pg. 8) (8,000) - -
7. Administrative Expenses
(ref. pg. 8) (1,200) (1,221) (1,343)
8. Franchise Fees/Corporate
Expenses (ref pg. 10) - 534 632
9. Interest (ref pJ. 91% 276 275 92
Adjusted Revenue Requirement 77,370 82,943 89,167
12
SECTION V-RATE EVIPACT OF RECOMN ENDATIONS
Based on our recommendations, we have prepared the following rate impact
analysis:
Residential
Livermore/
Northern Central Southern Dublin
Current 2 Can* $10.55 $10.53 $9.35 $9.20
16% Rate Increase
Adjusted Rate $12.24 $12.21 $10.85 $10.67
Commercial
Livermore/
Northern Central Southern Dublin
Current 2 Yard* $55.43 $55.43 $45.25 $47.53
16% Rate Increase
Adjusted Rate $64.30 $64.30 $52.49 $55.13
Drop Box
Livermore/
Northern Central Southern Dublin
Current 20 Yard* $131.03 $122.00 $99.00 $104.48
16% Rate Increase
Adjusted Rate $151.99 $141.52 $114.84 $121.20
*Current Rate quoted for all service categories and all Divisions are average
rates.
These rates compare favorably to a recent Bay Area survey of rates conducted
by the Central Contra Costa Sanitary District and included as Attachment 3.
13
Disk:JRRRC-1989 Attachment 1
File:ROE-Committee Final-1 year
Inflation rate 0.1
Revenue growth rate 0.02
Interest rate 0.06
A. FQUTTY CALCULATIONS 1988 1989 1990 1991 1992 1993 1994
1. Beginning Stockholders'Equity 21,230,522 23,362,453 29,311,655 31,879,100 34,588,824 37,528,874 40,718,828
2. Less S.F's Portion of Altamont -268 -119,004 '70,004
3. Beginning Equity for ROE 21,230,254 23,243,459 29,381,659 31,879,100 34,588,824 37,528,874 40,718,828
4. Working Capital Adjustment -1,555,000 2,116,808
5. Stockholder Buyouts and Dividends
6. Allowed Earnings(post tax) 3,687,209 3,951,388 4,994,8£2 5,419,447 5,880,100 6,379,909 6,922,201.
7. Retained Earnings(post tax) -2,497,441 .2,709,724 •2,940,050 3,189,954 -3,461,100
8. Ending Equity for ROE 23,362,463 29,311,655 31,879,100 34,588,824 37,528,874 40,718,828 44,179,928
Reconciliation to Franchise F/S
R. S.F.'s portion of Altamont(temp diM 847,809
9. Excess Net Income(see below) 124
10.Cumulative Unadjusted Working Capital 2,11.6,808
11.1988 Adj for Management Fees
12.Ending Equity per FiS 26,327,204
B. ALLOWED FARNTNGS
1. Beginning Equity for ROE 21,230,254 23,243,459 29,381,659 31,879,100 34,588,824 37,528,874 40,718,828
2. ROE Percentage(%) 17% 17% 17% 17% 17% 17% 17%
3. Allowed Post-tax Earnings 3,609,143 3,951,388 4,994,882 5,419,447 5,880,100 6,379,909 6,922,201
4. Adjustments per 1989 HF&H Report
5. Prior Management Incentives 78,066
6. Current Management Incentives
7. Adjusted Allowed Earnings 3,687,209 3;151,388 4,994,882 5,419,447 5,8II0,100 6,379,909 6,922,201.
C. RFVF.NL'F.RF. LQ TRF.MF.NTS____
1. Adjusted Allowed Earnings 3,95140% 4,994,882 5,419,447 5,880,4100%0 6,37940%9 6'92240%
2. Gross up for tax 40% 40% 40%
3. Pre-Tax Income 6,585,647 8,324,803 9,032,412 9,800,167 10,633,181 11,537,001
4. Forecasted Expenses 80,010,016 76,094,319 80,229,765 88,252,742 97,078,016 106,785,817
5. Adjustment per HF&H Pate Review -302,000 -1,654,000 -319,000
6. Other--lawsuit settlement -8,000,000
?. Other--AB 933 590,000 843,000 982,000 1,003,000 1,022,000
S. Other--overhead charges -1,200,000 -1,221,000 -1,343,100 -1,477,410 -1,625,151 -1,787,666
77,093,663 82,134,122 88,443,077 97,557,498 107,089,046 117,557,152
8. Revenue Required
- L'Yn�es Revenue Revenu1F IPR -T4X1
1. Forecasted Re 67,100,745 69,534,891 92,912,521 90,032,233 99,179,508 110,261,777
0 21,555,816 -4,645,626 7,202,579 8,926,155 8,821,422
2. Rate Increase
3. Adjusted Revenue 67,100,745 91,090,707 88,266,895 97,234,812 108,105,164 119,089,199
77,093,66.4 82,134,122 88,443,077 97,557,498 107,089,046 117,557,152
4. Revenue Required
5. Additional Franchise Fees,Corp Charges 1,656,505 -159,189 774,997 960,454 949,185
6. Interest on Cumulative Excess(Deficit) 276,779 -4,376 -3,997 28,813 27,993 11,347
7. Adjusted Required Revenue 77,370,442 83,786,251 88,279,890 98,361,309 108,077,493 118,517,684
(Deficit) -5,745,863 -7,921,171 7,304,456 -12,995 -1,126,497 28,171 571.,515
8. Excess(De
9. Cumulative Excess(Deficit) 766,946 -7,154,225 150,231 137,236 -989,262 -961,091 -389,576
10. Pate Adjustment Required
31% -5% 8% 9% 8%
DiskuMRRC-1989 Attachment 2
Ffle:ROE-Committee Final
Inflation rate 0.1
Revenue growth rate 0.02
Interest rate 0.06
A EQUITY CALCULATIONS 1988 1999 1990 1991 1992 1993 1994
1. Beginning Stockholders'Equity 21,2.10,522 23,362,4W '!.9,311,655 31,879,100 34,588,824 37,528,874 40,718,828
2. Less S.F's Portion of Altamont -268 -119,004 70,004
3. Beginning Equity for ROE 21,230,254 23,243,459 29,381,659 31,879,100 34,588,824 37,528,874 40,718,828
4. Working Capital Adjustment -1,555,000 2,116;808
5. Stockhcider Bnyouts and Dividends 5,880,100 6,379,909 6,922,201
6. Allowed Earnings(post tax) 3,687,09 3,9:)],388 4,994,882 5,419,447
7. Retained Earnings(post tax) -2,497,441 -2,709,724 -:2,940,050 -3,189,954 -3,461,100
8. Ending Equity for ROE . 1 23,362,463 29,311,655 31,879,100 34,588,824 37,528,874 40,718,828 44,179,928
Reconciliation to Franchise FM
8. S.F.'s porticn of Altamont(temp di°.l) (147,809
9. Excess Net Income(see below) 124
10.Cumulative Unadjusted Working Capital 2,116,808
11.1988 Adj for Management Fees
1.2.Ending Equity per FIS 26,327,204
,j}. ALLOWED EARNINGS
1. Beginning Equity for ROE 21,230,254 23,243,459 29,381,659 31,879,100 34,588,824 37,528,874 40,718,828
2. ROE Percentage(%) 17% 17% 17% 17% 17% 17% 17%r
3. Allowed Posbtax Earnings 3,609,143 3,951,388 4,994,882 5,419,447 5,880,100 6,379,909 6,922,201
4. Adjustments per 1989 HF&H Report
5. Prior Management Incentives 78,066
6. Current Management Incentives
7. Adjusted Allowed Earnings 3,687,209 3,951,388 4,994,882 5,419,447 5,880,100 6,379,909 6,922,201
C. REVENUE.RV UIRF,MF.NTS
1. Adjusted Allowed Earnings 3,951,388 4,994,882 5,419,447 5,880,100 6,379,909 6,922,201
2. Gross up for tax 40% 40% 40% 40% 40% 40%
3. Pre-Tax Income 6,585,647 8,324,803 9,032,412 9,800,167 10,633,181 11,537,001
4. Forecasted Expenses 80,010,016 76,094,319 80,229,765 88,252,742 97,078,016 106,785,817
5. Adjustment per HF&H Rate Review -302,000 -1,654,000 -319,000
6. Other--lawsuit settlement -8,000,000
7. Other--AB 939 590,000 843,000 982,000 1,003,000 1,022,000
8. Other--overhead charges -1,200,000 -1,221,000 -1,343,100 -1,477,410 -1,625,151 -1,787,666
8. Revenue.Required 77,093,663 82,134,122 88,443,077 97,557,498 107,089,046 117,557,152
D. EXCESS RF�TWUF.(PRE-TAX)
1. Forecasted Revenue 67,100,745 69,534,891 82,273,683 97,346,222 104,257,804 111,660,108
2. Rate Increase 0 11,125,583 13,163,769 4,867,311. 5,212,890 3,349,803
3. Adjusted Revenue 67,100,745 80,660,474 95,437,47'2 102,213,533 109,4')0,594 115,009,911
4. !!avenue Required 77,093,663 82,134,122 88,443,077 97,557,498 107,089,046 117,557,152
5. Additional Franchise Fees,Corp Charges 534,212 632,079 523,723 560,907 360,439
6. Interest on Cumulative Excess(Deficit) 276,779 274,863 92,239 -28,963 -84,454 242
7. Adjusted Required Revenue 77,370,442 82,943,197 89,167,395 98,052,258 107,565,498 117,917,834
8. Excess(Deficit) -5,745,863 -7,921,171 -2,282,723 6,270,078 4,161,275 1,905,196 .2,907,923
9. Cumulative Excess(Deficit) 766,946 -7,154,225 9,436,948 -3,166,870 994,405 2,899,600 -8,322
16% 16% 5% 570 3 TO
10. Rate Adjustment Required
OAKLAM SCAVENGER COMPANY
REQUEST FOR REFUSE RATES REVISION
FOR" REV-1
ASSurffMG NO RATE RKREASFS
1969
1966 1967 1988 Actual 1990 1991
Actual Actual Actual Proiected Projected Proiectod
FROM FRANCHISED-OPERATIONS:
TOTAL EXPENSES $56,381,515 $55,279,560 $65,305,663 $80,010,016 $76,094,319 $80,229,765
RETURN ON EQUITY (Pre Tax) 2,727,243 6,139,596 ( 577,999) (12,909,271) (6,5599428) ( 8,990,989)
TOTAL REVENUE 59,108,758 61,419,156 642727,664 67,100,745 69,534,891 71,238,776
ASSUKTM ALLONED R.O.E.
TOTAL EXPENSES $56,381,515 $55,279,560 $65,305,663 $80,010,016 $76,094,319 $80,229,765
RETURN ON EQUITY (Pre Tax) 4,815,444 5,204,411 6,145,349 6,603,543 7,726,146 9,039,590
TOTAL REVENUE 61,196,959 60,483,971 71,451,012 86,613,559 83,820,465 89,269,355
ASST KrM NO RATE D*3zE LSE UNTIL EXCESS
ABED T)EN RETURN TO ALLOWD R.O.E.
TOTAL EXPENSES $56,381,515 $55,279,560 $65,305,663 $80,010,016 $76,094,319 $80,229,765
RETURN ON EQUITY (Pre Tax) 2,727,243 6,139,596 (577,999) (12,909,271) 7,726,146 9,039,590
TOTAL REVENUE 59,108,758 61,419,156 64,727,664 67,100,745 83,820,465 89,269,355
September 15, 1989
TNO054
OAKLAND SCAVENGER COMPANY
STATEMENT OF OPERATIONS - COLLECTION DIVISION
ACTUAL 1986
Liv.
North. Centr. South. Dublin Drop Cont. Disp. Liv.
ter- Opar. Oper• Disp. rim Sere. Ro`yc. Disp. TOTAL
EXPENSE CLASSIFICATIONS:
Wages S Salaries 8,745,351 3,021,295 2,321,334 274,726 2,831,446 2,212,985 64,177 671,178 20,142,492
Other Payroll Costs 3,917,635 1,310,769 1,066,152 104,851 1,024,480 743,209 30,563 310,771 8,508,430
Truck Expense 11904,474 589,617 409,690 86,358 1,744,828 1,908,245 10,953 153,832 6,807,997
Other Equipment 75,433 7,956 318,639 197,958 1,024 144 601,154
Office Expenses 11852,108 539,968 527,010 87,874 439,901 503,910 2,504 171,809 4,125,084
Dumping Fees 2,749,250 907,001 100,644 24,698 3,062,248 1,640,783 102,409 8,587,033
Other Operating Expense 921,180 299,619 149,432 27,773 668,817 582,787 3,060 46,448 2,699,116
Franchise Fees 1,365,292 _591,367 491,046 27,774 955,883 1,396,720 141,469 4,969,551
Interest Expense 106,797 61,950 10,412 42,624 77,377 2,475 301,635
General E Administration 669,138 212,314 173,666 33,745 410,993 208,111 11513 52,139 1,761,619
Division Expense 22,306,658 7,541,856 5,249,386 667,799 11,499,859 9,472,085 113,794 1,652,674 58,504,111
Less Other Income (611,493) (3850081 (114,5511 (46,569) (264,4891 (665,0841 (3,1621 (35,199) (2,125,555)
Division Expense
Less Other Income 21,695,165 7,156,848 5,134,835 621,230 11,235,370 8,807,001 110,632 1,617,475 56,378,556
Division Revenue (19,046,159) (5,980,313 1(4,912,237) (466,086)(11,817,714)(15,401,351) (35,470)(1,449,428)(59,108,758)
(Income) Loss Before Tax 2,649,006 1,176,535 222,598 155,144 (582,344) (6,594,350) 75,162 168,047 (2,730,202)
TN0055
OAKLAND SCAVENGER COMPANY
STATEMU OF OPERATIONS - SERVICE DIVISION
ACTUAL 1986
Truck
Davis St. Transfer Altai t East Bay Realty i Truck Maint.
Transfer Vehicle Sanitary Rubbish Investment !taint. A Tire
Operations Operations landfill Disposal Division Div. [Sher. TOTAL
E)PENSE CULcMFTCATT0NS•
Wages I Salaries 1,137,352 1,690,096 585,407 512,827 11982,505 5,908,187
Other Payroll Costs 319,525 473099 171,105 142,057 692,201 1,798,787
Truck Expense 14,347 1,493,039 60,753 32,499 218531882 861,015 51,315,535
Other Equipment 652,154 55,496 1,087,560 366,274 33,684 1.4,489 480 2,210,137
Office Expenses 197,317 44,566 26,493 54,504 1,515 48011 372,406
Other Operating Expense 1,372,271 126,663 942,314 1,059,472 239,809 227,479 6,889 3,974,89997 7
Franchise Fees 482,997
Interest Expense 1,272,275 203,448 1,632 240 31,161 1,508,756
General E Administration 79,707 27,898 _ 15,902 1291081 21988 10,751 209 266,536
Division Expense 5,527,945 4,115,105 2,891,166 2,296,954 277,996 5,860,479 868,593 21,838,238
Less Other Income (228,307) (36,378) (18,8511 19,525) (312011 (100,210) (396,472)
Division Expense
Less Other Income 5,299,638 4,078,727 2,872,315 2,287,429 274,795 5,760,269 868,593 21,441,766
Revenue - Collection Divs: (274,795) (274,795)
Rent (5,760,269) (868,593) (6,628,862)
Truck Expense (8,315099)
Dump Fees (983,779) 14,075,9581 (2,871,877) (384,285)
Revenue - Public (4.315,830) (338) (11903,0831 (6,219,251)
(Income) Loss Before Tax 29 2,769 100 61 0 0 0 2,959
TN0056
OAKLAND SCAVENGER COMANY
STAT0cmT OF OPERATIOILS - COLLECTION DIVISION
ACTUAL 1987
Liv.
North. Cantr. South. Dublin Drag Cant. Disp. Liv.d
Op- fir• oper. Disp. Dmc Sarv. R cd Disp. TOTAL
EXPENSE CLASSIFICATIONS:
Hages E Salaries 81181,964 2,913,413 2,350,424 194,577 2,932,474 2,093,095 35,144 695,070 19,396,161
Other Payroll Costs 3,591,993 1,238,784 1,001,914 73,288 1,003,650 821,710 8,855 323,292 8,063,486
Truck Expense 1,801,367 532,174 458,295 81,881 1,538,139 1,823,006 9,879 136,112 6,380,853
Other Equipment 79,398 8,195 2,371 58 311,742 191,348 3,775 852 597,739
Office Expenses 1,663,756 558,461 503,804 66,644 469,862 628,096 2,312 170,328 4,534,194
Dumping Fees 3,146,724 988,236 1 84',1491 17,126 2,825,004 1,496,925
Other Operating Expense 928,378 20 ,563 146,797 26,563 534,866 601,313 2,520 59,219 2,501,219
1
Franchise Fees 1,382,336 601,092 515,366 18,699 1,025,138 1,516,298 146,697 5,211,626
Interest Expense 89,135 11,T.84 6,732 (193) 32,854 184,396 88 882 1,927 326,103
General 8 Administration 883,456 31.3,632 239,192 40,788 671,432 929,939 99,033 3,178,354
Division Expense 21,748,507 7,3723,834 5,140,746 519,431 11,345,161 10,286,126 63,335 1,777,379 58,253,519
Less Other Income (1,186,407) (568,817) (292,3841 (33,0021 (378,0891 (393,364) (4,7841 (117,1121 (2,973,9591
Division Expense
Less Other Income 20,562,100 6,804,017 4,848,362 486,429 10,967,072 9,892,762 58,551 1,660,267 55,279,560
Division Revenue (19,195,983) (6,117,412) (5,155,218) (390,270)(12,494,7211 (16,506,4281 (57,096)(1,502,028)(61,419,156)
(Income) Loss Before Tax 1,366,117 686,605 (306,856) 96,159 (1,527,649) (6,613,666) 1,455 158,239 (6,139,596)
TN0057
OAKLAm SCAVENGER COMPANY
STATEMENT OF OPERATIONS - SERVICE DIVISION
ACTUAL 1987
Truck
Davis St. Transfer Al hmm t East Bay Truck Maint.
Transfer vehicle Sanitary Rubbish Bain+. i Tire
Operations r%jerations Landfill Dis=,osaI Division Over. TOTAL
E30"ENSE CLASSTFICATICW:
stages I Salaries 1,165,033 1,902,142 784,685 802,666 1,915,317 6,569,843
Other Payroll Costs 331,600 552,708 217,055 214,133 632,569 12,948,065
Truck Expense 27,130 1,627,415 47,624 41,550 3,130,409 916,520 5,790,648
Other Equipment 863,244 37,640 1,297,366 617,330 13,822 436 2,829,838
Office Expenses 234,452 54,490 (1,782) 95,822 19,642 18 402,642
Other Operating Expense 1,341,309 168,599 858,155 443,190 188,176 8,861 3,560,022
Franchise Fees 560,022 1,433,733
Interest Expense 1,248,474 204,187 (25,097) (21,214) 27,383
General 8 Administration 233,417 74,662 62,772 126,907 7,038 304 505,100
Division Expense 6,004,681 4,621,843 3,240,778 2,320,384 5,934,356 926,139 23,048,181
Less Other Income (217,448) (73:1011 (25,3671 (23,778) (132,3571 ( 15) t 472,066)
Division Expense
Less Other Income 5,787,233 4,548,742 3,215,411 2,296,606 5,801,999 926,124 22,576,115
Revenue - Collection Divs:
(51801,999) (926,124) ( 6,728,123)
Truck Expense
Dump Fees
( 858,065) (4,548,742) 13,215,411) 550,100 1 8,072,118)
Reverx-e - Public (4,929,1681 (2,846,7061 1 7,775,874)
(Income) Loss Before Tax 0 0 0 0 0 0 0
TNO058
OA)kLAM SCAVENGER C0MPANY
sTAT1iau OF OPERATIONS - COLLECTION DIVISION
ACTUAL - 1988
North. Centr. South. Dublin Drop Cant. Disp. Liv.
( gr. Oer. Offer. Disp. BOX Sere. Rrc. Disp. TONAL
EM ENSE CLASSIFICATIONS:
►cages & Salaries 8,279,922 2,941,951 2,390,420 203,477 3,356,869 2,545,521 37,379 756,272 20,511,811
Other Payroll Costs 3,6103,197 1,251,483 1,054013 66,508 1,126,148 1,051,830 12,838 346,623 8,520,540
Truck Expense 2,0591972 647,721 570,619 77,249 1,873,034 2,051,311 111252 170,319 7,461,477
Other Equipment 67,248 9,065 8,522 338 292,212 218,160 1,623 37,032 634,200
Office Expenses 1,766,841 618,564 605,449 60,260 641,488 836,643 2,569 196,459 4,728,273
Dumping Fees 3,901,474 1,365,809 394,460 46,062 4,156,912 2,463,954 132,952 12,461,623
Other Operating Expense 1,107,312 223,874 224,831 31,595 720,400 763,309 1,434 62,999 3,135,754
Franchise Fees 1,394,748 638,689 534,908 20,283 1,117,554 1,701,524 151,747 5,559,453
Interest Expense 90,856 12,344 7,680 1 .33,716 71,165 1,780 217,542
General E Administration 1,296,131 485,055 395,972 561988 887,686 8441617 6,089 148,804 4,121,342
Division Expense 23,574,701 8,194,555 6,187,774 562,761 14,206,019 12,548,034 73,184 2,004,987 67,352,015
Less Other Income (323,8231 (625,7841 (364,395) (48,2771 (261,8181 (264,5641 (8281 (156,863) (2,046,352)
Division Expense
Less Other Income 23,250,878 7,568,771 5,823,379 514,484 13,944,201 12,283,470 72,356 1,848,124 65,305,663
Division Revenue (19,400,965) (6,3411384) (5,3851906) (422,958)(13,460,368) (18,079,]031 (81,a09)(1, 55,971)(64,727,664)
(Income) Loss Before Tax 3,849,913 1,227,387 437,473 91,526 483,833 (5,795,633) (8,653) 292,153 577,999
TN0059
OAKLAND SCAVENGER COMPANY
STATEMENT OF 0PERATIONS - SERVICE DIVISION
ACTUAL - 1988
Truck
Davis St. Transfer AZta.ont East Bay Trick Maint.
Transfer Vehicle Sanitary Rubbish Maint. I Tiro
,erationts Operations Landfill Disposal Division Oper. TOTAL
Oo
EXPENSE CLASSIFICATIONS:
Wages 3 Salaries 1,290,274 2,378,536 957,334 1,014,431 2,165,153 7,805,728
Other Payroll Costs 382,382 644,059 290,521 313,497 673,452 21 2,303,932
Truck Expense 26,677 1,7223,117 131,181 100,391 3,297,732 863,492 6,141,590
Other Equipment 956,406 6,591 1,789,664 832,193 23,907 19 31608,780
Office Expenses 319,298 114,479 121,179 172,976 24,265 9 752,206
Other Operating Expense 1,837,048 143,832 1,248,616 1,173,925 260,919 5,876 4,670,216
Franchise Fees 463,979 463,979
Interest Expense 1,226,516 196,030 618,050 107,777 43,044 2,191,417
General E Administration 332,066 _289,505 237,324 198,991 51890 252 1,064,028
Division Expanse 6,834,646 5,495,149 5,393,869 3,914,181 6,494,362 869,669 29,001,876
Less Other Income (404,6871 (287,861 ) (38,227) (34,001) (32,935) (797,7111
Division Expense
Less Other Income 6,4291959 5,207,288 5,355,642 3,880,180 6,461,427 869,669 28,204,165
Revenue - Collection Divs:
(6,461,427) (869,669) (7,331,096)
Truck Expense
Dump Fees
(624,135) (5,207,288) (5,355,642) (7201102) [11,907,167)
Revenue - Public (5,805,824) (3,160,078) (8,965,99.2)
(Incase) Loss Before Tax 0 0 0 0 0 0 0
TN0060
OAKLAND SCAVENGER COMPANY
STATEME)ff OF OPERATIONS - COLLECTION DIVISION
ACTUAL- PROJECTED 1989
Liv.
North. Cont. South. Dublin Drop Cant. Disp. Liv.
Oper. Opor. Oper. Dish. P_ Serv. Recyc. Dlsp. TOTAL
CLASSIFICATIONS: _
Wages E Salaries 11,667,825 4,321,666 3,698,661 287,458 5,103,436 31802,160 50,309 1,122,214 30,053,729
Other Payroll Costs 3,661,977 1,362,231 1,117,323 75,343 1,234,925 1,019,863 18,432 342,262 8,832,356
Truck Expense 21170,882 863,223 597,582 75,862 1,991,661 2,261,691 9,507 223,570 8,193,978
Other Equipment 59,118 10,171 21,716 1,148. 320,061 297,906 691 4,578 715,389
Office Expenses 1,605,756 697,714 622,495 54,038 682,842 919,417 7,029 189,158 4,778,449
Dumping Fees 4,800,609 11747,707 447,534 73,376 5,237,406 3,811,404 151,000 16,269,036
Other Operating Expense 943,782 241,428 171,444 21,106 651,048 761,765 975 82,551 2,874,099
Franchise Fees 1,391,499 689,315 560,139 23,213 1,207,536 1,840,833 167,120 5,879,655
Interest Expense 159,634 10,072 6,584 950 49,838 80,734 1,475 309,287
General E Administration 1,301,884 420,283 381,116 45,183_ 612,094 680,757 4,292 130,526 3,576,135
ro
Division Expense 27,762,966 10,363,810 7,624,594 657,677 17,090,847 15,476,530 91,235 2,414,454 81,482,113
J
Less Other Income (135,8261 (580,819) (325,0301 (32,378) (226,417) (_32_,5831 (3,771) (135,273) (1,472,097) J-
Division Expense
Less Other Income 27,627,140 9,782,991 7,299,564 625,299 16,864,430 15,443,947 87,464 2,279,181 80,010,016
Division Revenue (19,316,800) (6,485,2841 (5,613,000) (483,540)(14,092,0931 (19,325,677) (70,000)(1,714,351)(67 100,745)
(Income) Loss Before Tax 8,310,340 3,297,707 1,686,564 141,759 2,772,337 (3,881,730) 17,464 564,830 12,909,271
TN0061
OAKLAND SCAVENGER COMPANY
STATEMENT OF OPERATIONS - SERVICE DIVISION
ACTUAL-PROJECTED 1989
Truck
Davis St. Transfer Altamont East Bay Truck Maint.
Transfer Vehicle Sanitary Rubbish Maint. f Tire
Operations Operations Landfill Disposal Division Okrer. TOTAL
r n
EXPENSE CLASSIFICATIONLS-
Wages & Salaries 1,654,899 2,590,683 1,227,032 1,167,746 2,220,230 8,860,590
Other Payroll Costs 510,749 732,139 360,657 351,114 736,785 0 29691,444
Truck Expense 82,165 1,914,687 171,829 98,725 3,383,568 812,083 6,463,057
Other Equipment 1,390,918 27,758 2,134,703 816,297 20,093 4,389,769
Office Expenses 416,914 195,661 173,914 247,966 37,016 0 1,071,471
Other Operating Expense 2,136,754 183,928 2,537,360 1,743,584 265,204 4,771 6,871,601
Franchise Fees 614,024 614,024
Interest Expense 1,176,712 188,281 481,882 251,555 46,280 2,144,710
General 8 Administration 272,548 236,003 218,677 183,551 4,619 199 915,597
Division Expense 8,255,683 6,069,140 7,306,054 4,860,538 6,713,795 817,053 34,022,263
Less Other Income (287,1301 (114,384) (99,410) (21,950) (522,874)
Division Expense
Less Other Income 7,968,553 5,954,756 7,206,644 4,860,538 6,691,845 817,053 33,499,389
Revenue - Collection Divs:
(6,691,845) (817,053) (7,508,898)
Truck Expense
Dump Fees
(943,553) (5,954,756) (7,206,644) (1,511,938) (15,616,891)
Revenue - Public (7,025,000) (3,348,600) (10,373,600)
(Inoaoe) Loss Before Tax 0 0 0 0 0 0 0
TNO062
OAKLAND SCAVENGER COMPANY
STATEMENT OF OPERATIONS - COLLECTION DIVISION
PROJECTED 1990
Liv.
North. Centr. South. Dublin Drag Cont. Disp. Liv.
fir. Oper. er. Disp. Boot Se-V R Disp. TOTAL
EXPENSE CLASSIFICATIONS:
Wages & Salaries 8,826,343 3,411,728 2,977,242 213,257 4,035,046 2,880,999 52,183 858,495 23,255,293
other Payroll Costs 41042,541 1,468,730 1,193,971 81,486 1,326,263 11095,881 20,841 369,131 9,598,844
Truck Expense 2,282,959 972,286 656,307 81,027 2,114,005 2,476,433 9,906 312,411 8,905,334
Other Equipment 61,681 15,452 41,052 6,163 280,992 343,171 701 11,824 761,036
office Expenses 1,709,484 738,592 660,127 57,290 718,671 973,114 7,384 202,327 5,066,989
Dumping Fees 4,782,495 1,741,112 392,285 843,808 51094,028 3,759,339 168,100 16,022,167
Other operating Expense 969,231 258,292 181,134 22,523 873,804 809,393 1,034 91,643 3,207,054
Franchise Fees 1,535,087 761,691 626,559 26,466 1,360,725 2,084,063 190,614 6,585,205
Interest Expense 155,714 91589 6,269 1,200 48,439 77,541 1,401 300,153
General 3 Administration 1,330,360 448,111 497,683 48,376 651,543 665,572 3,600 137,826 3,783,071
Division Expense 25,695,895 9,825,583 7,232,629 622,596 163,5033,516 15,165,506 95,649 2,343,772 77,485,146
Less Other Inoome (123,685) (544,684) (325,054) (35,017) (212,9701 ( 21,944) (4,1651 (123,308) (1,390,827)
Division Expense
Less other Income 25,572,210 9,280,899 6,907,575 587,579 16,290,546 15,143,562 91,484 2,220,464 76,094,319
Division Revenue (19,663,200) (6,631,3551 (5,781,200) (507,720)(14,730,657) (20,350,678) (70,000)(1,800,081)(69,534,891)
(Income) Loss Before Tax 51909,010 2,649,544 1,126,375 79,859 1,559,889 (5,207,116) 21,484 420,383 6,559,428
TH0063
OAKLAND SCAVEM ER COMPANY
STATEMENT OF OPERATIONS - SERVICE DIVISION
PROJECTED 1990
Truck
k
Davis St. Transfer Altanont East Bay Truck Maint.
Transfer vehicle Sanitary Rubbish Maint. E Tire
erations Operations Lan r,
Landfill Disosal Division ,e . TOTAL
Op Op
EXPENSE CLASSIFICATIONS:
Wages I Salaries 13,670,631 2,648,871 1,311,690 1,323,831 2,264,736 9,219,759
Other Payroll Costs 542,365 785,111 385,854 381,240 791,661 2,886,231
Truck Expense 118,695 1,966,359 216,547 114,642 3,593,573 860,809 6,870,625
Other Equipment 1,643,905 17,446 3,242,177 1,119,748 20,335 6,043,611
Office Expenses 433,515 203,588 207,920 285,426 37,884 1,168,333
Other Operating Expense 2,189,268 194,934 2,159,313 1,812,060 281,116 5,058 6,641,749
Franchise Fees 650,865 650,865
Interest Expense 111551902 184,892 5081,182 263,648 46,360 2,158,984
General & Administration 284,452 242,062 239,610 224,691 4,896 211 995,922
Division Expense 8,689,598 6,243,263 8,271,293 5,525,286 7,040,561 866,078 36,636,079
Less Other Income (285,8591 (120,649) (30,1741 (12,9291 (449,611)
Division Expense
Less Other Income 8,403,739 6,122,614 8,241,119 5,525,286 7,027,632 866,078 36,186,468
Revenue - Collection Divs:
(7,027,632) (866,078) (7,893,710)
Truck Expense
Dump Fees
377,061 (6,122,614) (8,241,119) (1,325,286) (15,311,958)
Revenue - Public (8,780,800) (4,200,000) (12,980,800)
(Income) Loss Before Tax 0 0 0 0 0 0 0
TH0064
OAKLAND SCAVENGER COQANY
STATEMENT OF OPERATIONS - COLLECTION DIV1WON
PROJECTED 1991
Liv.
North. Centr. South. Dublin Drop Cont. Disp. Liv.
er. OP-r- Oiler. Disp. gox So". Ric. Disp. TOTAL
EXPENSE CLASSIFICATIONS:
Nages E Salaries 8,922,338 3,558,672 3,216,458 218,353 4,324,994 3,009,647 54,066 887,842 24,192,370
Other Payroll Costs 4,267,224 1,552,087 1,262,544 86,227 1,404,147 1,159,649 22,232 389,512 10,143,622
Truck Expense 2,454070 10789827 758,007 82,393 2,315,707 2,650,037 10,291 353,090 9,702,422
Other Equipment 50,154 23,368 37,948 7,308 264,702 419,594 713 13,374 817,161
Office Expenses 1,780,425 770,995 685,847 60,532 746,085 1,017,424 7,683 209,532 5,278,523
Dumping Fees 4,759,829 11732,860 566,407 81,725 5,310,783 3,947,046 181,550 16,580,200
Other Operating Expense 1,026,300 270,608 191,406 23,817 763,144 857,486 1,097 77,376 3,211,234
Franchise Fees 1,666,063 849,572 704,258 29,606 1,522,558 2,327,013 213,140 7,312,210
Interest Expense 151,990 9,132 5,971 300 47,110 74,508 1,331 290,342
General & Administration 1,414,928 480,171 5395310 51,712 684,115 728,235 3,679 147,585 41049,735
Division Expense 26,493,321 10,326,292 7,968,156 641,973 17,383,345 16,190,639 99,761 2,474,332 81,577,819
Less Other Income (123,685) (492,474) (325,079) (40,610) (203,610) (131028) 14,9991 (144,5691 (1,348,0541
Division Expense
Less Other Income 26,369,636 9,833,818 7,643,077 601,363 17,179,735 16,177,611 94,762 2,329,763 80,229,765 .
Division Revenue (19,666,834) (6,830,3301 (5,983,3321 (522,970)(15,203,324) (21,107,906) (70,000)(1,854,080)(71,238,7761
(Income) Loss Before Tax 6,702,802 3,003,488 1,659,745 78,393 1,976,411 (4,930,295) 24,762 475,683 8,990,989
TH0065
OJUCum SCAVENGER COMPANY
STATEWNT OF OPERATIONS - SERVICE DIVISION
PROJECTED 1991
Truck
Davis St. Transfer Altmont East Bay Truck paint.
Transfer vehicle Sanitary Rubbish paint. I Tire
Operations Oterations Landfill Disposal Division -operr TOTAL
E)GIENSE CLASSIFICATIONS:
Wages E Salaries 1,697,298 2,708,024 1,336,062 1,405,741 2,310,136 9,457,261
Other Payroll Costs 570,589 829,128 405,714 404,174 837,337 3,046,942
Truck Expense 137,714 11995,992 224,010 125,393 3,812,889 912,457 7,208,455
Other Equipment 1,794,282 10,344 2,685,565 1,468,663 20,681 5,979,535
Office Expenses 448,329 207,194 225,569 308,687 39,337 1 229,116
Other Operating Expense 2,290,512 206,599 2,329,947 2,057,963 297,983 5,362 7,188,366
Franchise Fees 689,917 689,917
Interest Expense 1,100,962 181,564 536,071 276,467 46,579 2,141,643
General 3 Administration 295,754 233,364 236,304 242,849 51190 224 1,013,685
Division Expense 9,025,357 6,372,209 7,979,242 6,289,937 7,370,132 918,043 37,954,920
Less Other Income (284,8371 (127,2901 (41,5841 (12,9071 (466,6181
Division Expense
Less Other Income 8,740,520 6,244,919 7,937,658 6,289,937 7,357,225 918,043 37,488,302
Revenue - Collection Divs:
(7,357,225) (918,043) 1 8r275,268)
Truck Expense
Dump Fees
268,581 (6,244,919) (7,937,658) (1,913,537) (15,827,533)
Revenue - Public (91009,101) (4,376,400) (13,385,501)
(Income) Loss Before Tax 0 0 0 0 0 0 0
TNO066
AGREEMENT BETWEEN THE CITY OF DUBLIN AND
OAKLAND SCAVENGER COMPANY REGARDING WASTE
COLLECTION AND DISPOSAL
THIS AGREEMENT entered into this 10thda y of March ,
198 6, by and between the City of Dublin, a municipal
corporation of the State of California (hereinafter " the City" )
and Oakland Scavenger Company, a California corporation
( hereinafter " the Company" ) .
W I T N E S S E T H
WHEREAS, the provision of adequate and reliable solid waste
management and disposal services is essential to the preservation
of the health , safety, and well-being of residents of the City;
and
WHEREAS, the State of California has found and declared that
the rapidly increasing volume of solid waste resulting from
population growth, industrial expansion and other factors compels
an organized and comprehensive approach to solid waste management
(Cal . Gov. Code §§ 66701 and 66702) ; and
WHEREAS, the Company now provides solid waste hauling and
disposal services in the City of Dublin, subject to a vigorous
rate review process ; and
WHEREAS, the regulated rate structure established in
connection with Oakland Scavenger Company franchise agreements in
Alameda County has been designed fairly to allocate the cost of
developing , maintaining and operating a comprehensive solid waste
collection and disposal system for the community, each segment of
the community benefitting from the existence of these services
-1-
EXHIBIT
and facilities , and a loss of revenue from that rate structure
injures the community as a -whole and impairs the City' s ability
fairly to distribute those costs; and
WHEREAS, as an essential part of the State ' s comprehensive
program for solid waste management and for the preservation,
health, safety, and well-being of the public, the State of
California has declared that it is in the public interest that
local public agencies make adequate provisions for solid waste
handling and, pursuant to those State policies, has expressly
authorized the City to make such provisions ( Cal . Gov. Code §§
66755, 66756) ; and
WHEREAS, the State of California has .expressly recognized
that the City may determine all aspects of solid waste handling
which are of local concern, including , but not limited to,
frequency of collection, means of collection and transportation,
level of services, charges and fees, nature, location, and extent
of providing solid waste handling services, and has expressly
declared that the City may determine whether any such services
are to be provided by means of exclusive or non-exclusive
franchises, contracts , licenses , permits, or other means and that
the City may grant to others authority to provide solid waste
handling services under such terms and conditions as the City may
prescribe ( Cal . Gov. Code §§ 66756 , 66757) ; and
-2-
WHEREAS, use of an exclusive franchise for the transpor-
tation of solid waste generated in the City is an appropriate and
useful means to provide for the public health, safety, and
well-being , and the efficient and orderly collection and disposal
of all such waste [Cal . Gov. Code § 66757(b) ] .
NOW, THEREFORE, in consideration of the premises set forth
above and of the mutual covenants and agreements contained
herein, the parties agree as follows:
ARTICLE I. Definitions.
For the purpose of this agreement, unless a different
meaning is clearly required, the definitions contained in this
Article shall govern the construction of this agreement.
Section 1 . 1 .
"Collection" shall mean collection and disposal or recycling
of solid waste.
Section 1 . 2.
"Coordinating Jurisdiction" (of the Refuse Rate Review
Committee ) shall mean the City of Oakland acting through its
designated representative to the Refuse Rate Review Committee.
Section 1 . 3.
"Delivery" of solid waste shall be deemed to occur when
solid waste is deposited in a receptacle or at a location that is
designated for collection pursuant to this chapter, or is
otherwise discarded.
-3-
Section 1 .4.
"Demolition Debris" shall mean used construction materials
removed from a site during the razing or renovation of a
structure as part of a total service offered by a duly licensed
demolition contractor ( C-21 license) .
Section 1 . 5.
"Designated Waste" shall mean waste not permitted for
disposal at the Company' s landfill under discharge requirements
or other rules or orders of the Regional Water Quality Control
Board.
Section 1 .6.
"Establishment" shall mean any place of waste generation
other than a residential dwelling .
Section 1 . 7.
"Hazardous Waste" shall mean any waste now or hereafter
classified as hazardous pursuant to applicable federal , state or
local law. All substances defined as Hazardous Wastes by the
United States Environmental Protection Agency, pursuant to the
Resource Conservation and Recovery Act, or defined as hazardous
or extremely Hazardous Wastes by the California Department of
Health Services under the California Administration Code, Title
22, Division 4, Chapter 30 ( "Minimum standards for hazardous and
extremely Hazardous Wastes" ) shall be considered "Hazardous
Waste" in this agreement.
-4-
Section 1.8.
"Joint Refuse Rate Study" shall mean that refuse rate study
report, dated May 23, 1972, which was prepared by Price
Waterhouse & Co. pursuant to the Agencies ' Agreement for Joint
Refuse Rate Study
Section 1.9.
"Joint Solid Waste Committee" or "Refuse Rate Review
Committee" shall mean that Committee comprised of members
designated as representatives of thirteen (13) public agencies
which executed or have adopted an agreement entitled "Agreement
Establishing Joint Solid Waste Committee" dated January, 1972.
Section 1 . 10.
"Junk Dealer" shall mean a person or business which law-
fully, and in accordance with all local ordinances, collects
without charge to the Waste Generator or purchases used articles
for purposes of restoration and/or resale, including antique
dealers, used building supply dealers , and automobile salvagers.
This definition does not include a person or business which
collects or accepts waste for recycling after source separation.
Section 1 . 11.
"Legislation" shall mean any formal enactment of the
governing body of the City which now exists or which may here-
after be adopted which governs the operation of the Company
within or about the political boundaries of the City.
-5-
Section 1 . 12.
"Person" means any individual , corporation , partnership,
joint venture, association, joint-stock company or unincorporated
organization or any governmental unit or agency or political
subdivision.
Section 1 . 13.
"Recycling" shall mean the process of collecting, treating
and reconstituting solid waste without charge to the Waste
Generator for the purpose of using the altered form. The
Collection, handling , transfer or disposal of wastes not Source
Separated or not intended for, or capable of, recycling is not
"Recycling" within the meaning of this Agreement. Putrescible
solid waste is rebuttably presumed to be not capable of being
recycled. "Recycling" also does not include the Processing or
use of Solid Waste for conversion to energy.
Section 1. 14.
"Solid Waste" shall mean all putrescible and non-putrescible
solid, semi-solid and liquid waste accumulating or placed for
collection and disposal within the City, whether combustible or
non-combustible. " Solid Waste" includes garbage, trash, refuse ,
paper, rubbish , ashes, industrial or commercial waste, discarded
home and industrial appliances, animal wastes or remains other
than fecal matter, vegetable wastes, and other discarded solid
and semi-solid waste, but does not include sewage, abandoned
-6-
automobiles and Hazardous Waste. "Solid Waste" also includes
waste offered for recycling , unless otherwise specifically
excepted herein.
Section 1. 15.
"Source Separation" shall mean the segregation into separate
containers by the Waste Generator, prior to Delivery, of indivi-
dual components of Solid Waste, such as glass bottles , cans,
newspapers and corrugated containers, for the sole purpose of
Recycling , as defined herein.
Section 1 . 16.
"Waste Generator" shall mean the property owner, resident,
occupant or business in the City which produced the waste in the
first instance . This definition excludes any person or business
which collects from or accepts shipments of waste from another
person for the purpose of separating , Recycling or otherwise
disposing of waste.
ARTICLE II. The Contract.
Section 2.1 . Exclusive franchise.
The City hereby gives and grants to the Company for a period
of ten ( 10) years from the 1st day of April , 1986, the exclusive
franchise , right and privilege to collect, remove , and dispose of
all Solid Waste accumulating in the City. The Company agrees to
collect and dispose of all Solid Waste delivered according to
this agreement, as provided by local ordinance. The City shall
monitor waste collection and disposal within its jurisdiction
-7-
and , by ordinance , ensure that Solid Waste is delivered to and
collected by the Company. Solid Waste which is not required to
be accumulated and offered for Collection includes:
a. Materials source-separated for Recycling ; and
b . Lawn and garden trimmings and dead leaves removed from
a site by a gardening , landscaping or tree trimming contractor,
as an incidental part of a total service offered by that con-
tractor, rather than as a hauling service ;
C. Demolition debris as defined herein which is removed in
accordance with such definition.
d. Nonputrescible Solid Waste separated by the Waste
Generator for collection and transportation by a Junk Dealer, but
not as a hauling service ; and
e . Animal waste and remains from slaughterhouses or
butcher shops for use as tallow.
f. Solid waste transported by the owner or occupant of
any residence to a fully licensed public disposal facility,
provided that such person may not transport solid waste from more
than one residential unit.
Special handling or preparation may be required of the Waste
Generator for animal wastes, liquid wastes, construction mate-
rials, industrial appliances, waste which cannot be collected by
normal waste collection vehicles in standard use by the Company,
and any other wastes to the extent required by law.
-8-
Section 2. 2. Extension of Agreement.
Not fewer than nine months prior to the termination date of
this agreement, either party to the agreement may give notice of
its intention to extend the agreement for the further period of
ten (10) years upon the same terms and conditions as set forth in
this agreement. Unless said notice is given and accepted within
90 days of the date of notice , the agreement shall expire upon
the expiration date set forth in Section 2 of this Article.
Section 2. 3. Conditional Extension of Agreement.
If, for new facilities substantially different in location,
size or kind from those existing at commencement of this
agreement, major investments are required in order to
provide the services specified for in this agreement, the
Company may request and the City shall consider an extension to
the term of this agreement on the basis of written, detailed
physical plans and related financial projections.
Section 2.4. Removal of Hazardous Waste.
If the Company determines that waste placed in any container
for Collection or delivered to any facility of the Company is
Hazardous Waste, Designated Waste, or other waste which is not
acceptable for incorporation into the Company' s landfill or for
Processing at the Facility, the Company shall have the right to
refuse to accept such waste. If the owner cannot be identified
or fails to remove the waste, the Company shall arrange for
proper disposal , the cost of which shall be an appropriate
operating expense under Article III. The Company shall make a
-9-
good faith effort to recover the cost from the Waste Generator,
and the cost of that effort shall also be an appropriate
operating expense.
ARTICLE III. Collection Rates and Review.
Section 3.1 . Service Rates.
In connection with the exclusive rights and privileges
granted in Section 2.1 , the Company shall have the right to
charge and collect the Collection Rates authorized by the City
from tenants, occupants and owners of each dwelling unit and
Establishment served. The Collection Rates shall be no less than
the Company' s fully allocated costs of providing the collection
and disposal services and facilities required by this agreement,
plus a reasonable return on investment.
Section 3. 2. Rate review.
The Company shall submit an application for rate review
under this Article III, once each three years, commencing
September 30, 1988. The complete application shall be submitted
not later than September 30 for the three-year period starting
January 1 of the next calendar year. The Company shall submit
any and all data reasonably requested by the City in the format
prescribed by the City. The application ' s format will be
generally that set forth in the Joint Refuse Rate Study, as may
be more particularly delineated and prescribed by the City.
Generally, the application shall : ( 1 ) set forth the actual
revenues and expenses of the Company for the most recently
-10-
completed annual operating period preceding the September 30
application date based on an unqualified opinion audit of annual
statements in accordance with Section 4.4 ; ( 2) contain projected
operating costs for each of the three 12-month fiscal periods
based on actual costs experienced, as modified by fully docu-
mented changes in price levels, operations, or experience as
between the actual operating period and projected periods of
operation. In the event the Company shall fail to meet the
aforementioned September 30 date, a revision of rates for the
three-year period starting January 1 shall not be authorized
until the first day of the first calendar month following a
90-day period from the date that the complete application is
submitted.
Section 3. 3. Special interim rate review.
(a) The Company may apply to the City for consideration of
a special , interim rate review based on the occurence of an event
or circumstance which jeopardizes the economic operation of the
Company. The City may initiate a special , interim rate review at
its option.
(b) A special application by the Company shall be
considered by the City if:
(1 ) An event or circumstance occurs which was not
reasonably foreseeable , and is extraordinary and not a usual
business risk of the Company, or
( 2) An event or circumstance occurs whch is beyond the
control of the Company, or
-11-
( 3) It is necessary for the Company to make a
substantial change in its operation, or substantial capital
investment in order to perform its obligations under, this
agreement , or
(4) Changes to operations are mandated as provided for
under Section 5. 4 of this agreement.
(c) Any rate review, whether initiated by the City or the
Company, will follow the format specified for a regular rate
review. If initiated by the Company, the complete application
must be submitted at least ninety ( 90) days prior to the date it
may become effective. If initiated by the City, the Company
shall submit requested data within sixty (60) days of the date
that notice is provided to the Company.
Section 3.4. Publication of rates.
The Company shall provide written notice to subscribers of
rate changes. The notice may be provided with, or as part of, a
regular billing . In the case of interim rate changes, the
Company shall file the intended notice of change with the City
Clerk or other official of the City not fewer than 7 days prior
to the effective date of the rate change.
Section 3.5. Issuance of receipts.
The Company shall either prepare and issue formal billings
for services rendered or issue receipts for services rendered on
a cash basis. The Company shall maintain copies of said billings
and receipts, each in chronological order, for a period of 3
years after the date of service for inspection and verification
-12-
by the City. The Company may, at its option, maintain those
records in computer form, on microfiche, or in any other manner,
provided that the records can be preserved and retrieved for
inspection and verification.
Section 3. 6. Franchise fee.
In consideration of the exclusive franchise provided for in
Section 1 of Article II of this agreement, the Company shall pay
to the City 4.8percent ( 4. 89) of the gross revenue derived by
the Company from Collection services provided in the City under
this agreement. The franchise payment amount shall be computed
and paid based on Service Rate billings issued each calendar
month , plus receipts for services transacted on a cash basis.
Gate collections at any landfill or transfer station and revenue
from rental of compactors, balers and similar special handling
equipment shall not be included in the computation base. The
Company shall prepare and mail its remittance each month not
later than 20 calendar days after the end of each month. The
remittance will be accompanied by a report setting forth the
basis and calculations used for computing the amount paid . The
figures used shall coincide with revenues recorded on the general
books of account of the Company.
Section 3. 7. Exclusions for bad debts.
The full gross revenues for Collection services shall be
subject to the franchise payment except as specifically exempted
in Section 3. 7 and as follows: Bad debt write-offs, less bad
debt recoveries.
-13-
r
ARTICLE IV. Records , Reports and Audit.
Section 4. 1 . Right to prescribe records.
The Company shall maintain such accounting and statistical
records as may be necessary to develop the financial statements
and reports prescribed by the City of Dublin in accordance with
the principles of the Joint Refuse Rate Study and/or modifying or
additional requirements specified by the Refuse Rate Review
Committee under its authority hereinafter delineated.
Section 4. 2. Right to require annual reports.
The Company shall submit to the City annual franchised
operations financial statements consisting of a balance sheet ,
related consolidated statement of operations, reports of opera-
tions prescribed by the Joint Refuse Rate Study, and such
additional financial or statistical data as may be prescribed by
the City and reasonably related to these franchised operations.
All such statements and reports shall be submitted not later than
four ( 4) months following the end of the Company' s annual
accounting period.
Section 4. 3. Right to inspect records.
The City shall have aright to inspect or review the income
tax returns, payroll tax reports, specific documents or records
required pursuant to this agreement, or any other such records
or reports of the Company as may be reasonably necessary to
evaluate the annual reports and rate review applications provided
for in this agreement.
-14-
Section 4.4. Right to have consultant review of annual audit.
Annual financial statements and reports prepared for the
Company and audited and certified by an independent certified
public accounting firm mutually approved by the City and the
Company shall be made available for review to the independent
consultant appointed by the Refuse Rate Review Committee , or by
the City if the City is not a member of the Refuse Rate Review
Committee. The Company will bear the expense of said audit, but
audit fees will be allowed as an operating expense for rate
setting purposes. If the Company and City fail mutually to agree
on the selection of a certified public accounting firm within
five ( 5) months prior to the end of the annual accounting period
to be audited, the City shall submit the names of five certified
public accounting firms from which the Company shall select one.
The Company shall notify the City of its choice not later than
fifteen ( 15) days from date of receipt of that list.
ARTICLE V. Standards
Section 5.1 . Performance.
The Company shall perform its services in the City in
accordance with the terms of this agreement and with continuing
liaison with the representative designated by the City.
-15-
Section 5. 2. Inspection of operations.
The designated representative of the City shall have the
right to observe and review Company operations and enter Company
premises for the purposes of such observation and review at all
reasonable hours with reasonable notice.
Section 5. 3. Compliance with law and regulations.
Company shall comply with all requirements of all applicable
local , state, and federal authorities now in force or which
hereafter may be enacted,and with any applicable Legislation of
the City existing at the time of this agreement.
Section 5.4. Mandated changes.
The City may require changes in Collection or disposal
methods and the Company shall comply, provided that if such
changes result in increased costs to the Company, the Company
shall have a right to apply for a rate review and adjustment
pursuant to Section 3. 3. Also, the Company will have the right
to apply for rate review and adjustment for changes in disposal
methods or site operations mandated by any political body which
may now or in the future have legal jurisdiction.
Section 5. 5. Container size and weight limit.
The standard size container for residential and commercial
services shall not exceed 32 gallons and the combined weight of
the container and contents shall not exceed 75 pounds. The
provisions of this section shall not prohibit the Company from
providing front loader, drop box or other mechanized container
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service. The Company may also provide automated or semi-
automated residential curb service using wheeled containers
where authorized by the City.
Section 5. 6. Transfer of loads on public streets.
The Company is prohibited from transferring loads from one
vehicle to another on any public thoroughfare unless it is
necessary to do so because of mechanical failure or accidental
damage to a vehicle, or when required by law or public authority.
Section 5. 7. Identification and lettering of vehicles.
The Company shall letter each vehicle and each Company-owned
Collection container used in Collection activities to include a
vehicle identification number, the name of the Company, and the
local business telephone number of the Company. The lettering
size shall be not less than 2-1/2" high except on the Collection
containers.
Section 5. 8. Packer equipment.
The Company shall use, in the Collection of Solid Waste,
modern garbage Collection motor vehicles having water-tight
bodies designed to prevent spillage or overflow therefrom. The
Company shall maintain the outside of the bodies in a clean and
sound mechanical condition and shall clean and wash the inside of
the bodies frequently enough to keep them reasonably odor free.
The Company shall also operate the vehicles in a manner so as to
ensure that the contents thereof do not spill or overflow onto
city streets or highways.
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Section 5. 9. Service interval .
The Company shall provide residential and commercial pickup
service not less than once per week. Commercial establishments
may request service up to five days per week.
ARTICLE VI. Joint Solid Waste Committee
Section 6.1 . Delegation of rights and authority.
The Company shall support an application by the City to
become a member of the Refuse Rate Review Committee. The City,
subject to acceptance as such member, designates the Committee to
exercise certain rights and authority on behalf of the City, and
the Refuse Rate Review Committee or Coordinating Jurisdiction
may be appropriately substituted where the City is designated
with respect to certain provisions of this agreement hereafter
delineated.
Section 6. 2. Authority of Joint Solid Waste Committee.
The Refuse Rate Review Committee shall function as an
advisory body to the City for purposes of evaluating Company
operations and for rate setting purposes. The Committee, in the
person of the officials of the Coordinating Jurisdiction or
designated representatives of the Committee, shall exercise all
those rights given to the City under this agreement with respect
to the following sections of this agreement:
Art. III , Sec. 3. 2 - Rate review
Art. III, Sec. 3. 3 - Special .interim rate review
Art. IV, Sec. 4.1 - Right to prescribe records
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Art. IV, Sec. 4. 2 - Right to require annual reports
Art. IV, Sec 4.3 - Right to inspect records
Art. IV, Sec. 4. 4 - Right to require annual audit
Also, the Committee may exercise any rights of the City under any
other section of this agreement which the City chooses to
delegate to the Committee.
ARTICLE VII. Miscellaneous Provisions.
Section 7. 1 . Enforcement.
Each party agrees to do any act, including taking any
administrative or legal action, as is reasonable and necessary
for the continued enjoyment by all parties of the benefits of
this agreement- during its full term, or any extension thereof ,
regardless of any change in available methods or processes for
the Collection, handling, disposal or resource recovery of Solid
Waste or the manner in which these acts are performed. The City
agrees to take such actions as necessary to ensure the continued
exclusivity of the franchise. Each party agrees to execute and
deliver any instruments and to perform any acts that may be
necessary or reasonably requested in order to give full effect to
this agreement provided such instruments or acts are not
inconsistent with, or create obligations in addition to those
obligations created by the terms of this agreement.
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Section 7. 2. No added taxes.
No special licenses, taxes or other burdens shall be levied
against the Company in addition to the franchise fee . This
provision shall not operate in any way to prohibit the City and
the Company from adjusting the franchise fee rate set herein, or
to prohibit the City from adopting Legislation implementing new
types of taxes or licenses or adjusting .existing rates or
schedules which are generally applicable to all businesses. Any
such new types of general taxes or licenses or adjustments to
existing rates or schedules shall be allowed as operating
expenses for rate setting purposes, and if such changes result in
increased costs to the Company, the Company shall have the right
to apply for a rate review pursuant to Section 3. 3 of this
agreement.
Section 7 . 3. Surety Bond.
The Company hereby agrees to furnish simultaneously with the
execution of this agreement a surety company bond in the sum of
Fifty thousand dollars ( $50, 000) , in a form to be approved by the
City. Said surety company bond is to be payable to the City and
conditioned and guaranteed for the faithful performance by the
Company, its employees and agents.
Section 7.4. Hold harmless.
The Company is an independent contractor for all purposes
contemplated by this agreement and the Company shall at all times
protect , defend, indemnify and save harmless the City, its
officers , agents and employees, past, present and future, from
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and against all liabilities, obligations, claims, damages,
penalties, causes of action, costs and expenses ( including ,
without limitation, reasonable counsel fees and expenses) imposed
upon or incurred by or asserted against the City of such officers ,
agents or employees on account of (a) any failure of the Company
to comply with any of the terms of this Agreement or (b) any loss
or damage to property or any injury to or death of any person
that may be occasioned by the Company' s operations under the
franchise granted herein.
Section 7. 5. Liability Insurance.
The Company shall carry automobile , public liability and
property damage insurance covering the operation of all vehicles
of the Company, and blanket, all risks, liability insurance
including excess limits on the automobile coverage. The basic
auto policy shall have minimum limits of $100, 000 for injury to
one person , $300,000 for injury to more than one person, and
$25, 000 property damage. The blanket policy shall have a minimum
limit of $3, 000,000. The policies shall name the City of Dublin,
its officials, agents , and employees as additional insured
parties and a copy of insuring agreements shall be furnished to
the City of Dublin for approval by the City Attorney.
Section 7.6. Services to jurisdiction.
The Company shall provide to the City, without fee , those
services described in Schedule 1 to this Agreement and such
services as shall henceforth be established or altered by
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agreement of the parties. The cost of providing those services
shall be allowed as an operating expense for rate-setting
purposes .
Section 7 . 7. Notices.
Any notice which either party is required to give or which
either party may choose to give to the other party shall be in
writing . Such notice shall be served either by personal delivery
to a managing officer of the other party, by personal delivery to
the principal office of the other party as set forth below, or by
deposit in the United States mail as registered or certified mail
enclosed in a sealed envelope with postage fully prepaid
addressed to other party at its address as follows:
City: Richard Ambrose, City Manager
City of Dublin
6500 Dublin Boulevard
P. 0. Box 2340
Dublin, CA 94568
Company: Peter Borghero, President
Oakland Scavenger Company
2601 Peralta Street
Oakland, California 94607
Such address may be changed from time to time by either party by
giving notice as herein provided.
Section 7. 8. Rates.
The rates shall be established by Resolution of the City
Council pursuant to this agreement and the Ordinance Regulating
Solid Waste Management .
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Section 7. 9. Ownership of refuse.
It is. expressly understood that all Solid Waste that is
collected or received for disposal by the Company shall be the
property of the Company.
Section 7.10. Distribution of proceeds of city enforcement
efforts.
If the City, or any legal representative of the City,
recovers, by an actual or potential civil action, through
settlement, judgment or otherwise , any proceeds intended to
replace any loss of revenues to the City' s Solid Waste management
and disposal system, the City shall pay such proceeds, less the
reasonable costs of collection, to the Company within 15 days of
their receipt. Such proceeds shall then be treated as revenues
under Article III.
ARTICLE VIII. Construction of Agreement.
Section 8.1 . Amendments.
This agreement constitutes the entire understanding between
the Company and the City with regard to the subject matter
contained herein. No amendment to this agreement shall become
effective unless it is set forth in writing and duly authorized
and executed by the Company and by the City.
Section 8. 2. State Law.
This agreement shall be governed by and construed in
accordance with the laws of the State of California.
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Section 8. 3. Waiver.
Neither the Company nor the City shall be deemed to have
waived any terms, condition, or pledge of this agreement unless
such waiver is in writing and signed by the waiving party. A
failure by the Company or the City to insist upon strict
performance of any term, condition , or pledge in this agreement
shall not be construed as a waiver or relinquishment of such
term, condition, or pledge , unless such waiver is in writing and
signed by the waiving party. Any such written waiver shall be
confined to the terms specifically contained therein.
Section 8.4. Execution in counterpart.
This Agreement may be executed in counterparts , either of
which shall be regarded for all purposes as a duplicate
original .
Section 8. 5. Severability.
In the event that any provision of this agreement shall , for
any reason, be determined to be invalid , illegal and unenforce-
able in any respect, the parties hereto shall negotiate in good
faith and attempt to agree to such amendments, modifications or
supplements to this agreement that , to the maximum extent
practicable in light of such determination, shall implement and
give effect to the intentions of the parties as reflected herein,
and the other provisions of this agreement shall , as so amended,
modified or supplemented, or otherwise affected by such action,
remain in full force and effect.
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ARTICLE IX. Termination.
Section 9.1 . Assignment of agreement rights.
The Company may assign and transfer all or any part of its
rights and obligations under this agreement, subject to written
consent by the City, which consent shall not be withheld
unreasonably. No consent shall be required for any assignment to
a person directly or indirectly controlling , controlled by or
under common control with the Company, provided that the assignee
is financially capable of carrying out all obligations of the
Company under this Agreement.
Section 9 . 2 Effect of breach.
a . If the Company fails or neglects to comply with any of
the terms or provisions of this agreement or any laws, ordinances
or regulations above referred to for a period of thirty ( 30) days
after having been notified in writing to do so on the order of
the governing body of the City, then after a hearing upon ten
(10) days written notice to the Company, the City shall be
entitled to terminate this agreement, which remedy shall not be
deemed an election and shall be in addition to any and all rights
and remedies against the Company which the City may have by law
under this agreement.
b. Each party specifically recognizes that damages is an
inadequate remedy for default of this agreement and agrees that
the other is entitled to bring suit for injunctive relief,
mandamus, or specific performance or to exercise other legal or
equitable remedies to enforce the obligations and covenants of
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this agreement. For purposes of this section, all cities
participating on the Refuse Rate Review Committee and having
exclusive franchise agreements with the Company for solid waste
collection and disposal shall be deemed third-party beneficiaries
of all such agreements.
Section 9. 3. Attorneys Fees.
In the event that either party brings any legal action
against the other for enforcement of this agreement, the
prevailing party shall be entitled to recover its reasonable
attorneys fees and expenses of litigation.
IN WITNESS WHEREOF, the parties hereto have caused this
contract to be executed on the day and year first above written.
City of u lin Oakland Scavenger Company
C
fla yor President
ATTEST:
I
City Clerk
APP OVED AS TO FORM:
City Attorney
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SCHEDULE 1
Services to be provided to the City of Dublin at no charge
pursuant to Section 7 . 6 . Services to jurisdiction. The City
shall reserve the right to request the elimination of free
services at any of the locations through a written request by the
Director. The following are all locations where governmental
activities are taking place:
Quantity Type of Service-Weekly Location
1 3 yard bin 7494 Donahue (Fire Station No. 1)
1 6 yard bin Dublin Sports Grounds
1 3 yard bin 7051 Dublin Blvd (DSRSD Offices )
1 2 yard bin it if " " If
1 2 yard bin 8151 Village Parkway (Valley Swim Ctr)
2 4 yard bins 11600 Shannon Avenue (Shannon Park &
Community Center)
1 4 yard bin (on wheels) Scarlett Court Terminus (City
Corporation Yard)
"Exhibit A"
Letter of Intent
Dated February 20, 1986
By and Between the City of Dublin ("City") and
Oakland Scavenger Company (OSC)
Background
The Dublin San Ramon Services District was the agency
responsible for the solid waste franchise in the City of Dublin
between July 1, 1985 to March 31, 1986. The Board of Directors
elected not to implement an 11 percent rate reduction in
commercial fees as recommended by the Refuse Rate Review Committee
(RRRC) . If the recommendation had been implemented it is
estimated that approximately $77,000 would have not been realized
as profit by Oakland Scavenger Company (OSC) . The exact amount
can only be determined after all collections are completed on
billings through March 31, 1986.
It is the belief of both parties that this windfall should
not be spread over the return of investment realized as a benefit
by all communities serviced by OSC. The benefit should be
retained within the community in which it was generated.
Definition of Amount of Funds
It is proposed that OSC shall prepare documentation of the
amount of the total gain realized between July 1, 1985 and
March 31, 1986 due to the fact that the rate reduction was not
implemented. OSC shall take steps to have the proposal reviewed
by the RRRC. The current estimate of available funds is
approximately $77,000.
Proposed Use
It is proposed that these funds be utilized to provide for
two (2) residential clean-ups each year. These clean-ups would be
in addition to the two included in the rates for residential
service. The cost of the first two clean-ups shall not exceed
$8,000 for each clean-up.
OSC would provide the City with an ongoing accounting of the
balance remaining. As OSC provided these services the cost would
be deducted from the existing balance and appropriate
documentation would be provided. Nothing shall prevent the two
parties from determining other uses for these funds which are
mutually agreed to.
Intent
It is the intent of both parties to enter into a written
agreement based on this letter of intent, once final details and
necessary approvals are received.
For For Oakland Scavenger Company:
Peter W. Snyder, MYyor Pet orghero, Presi dent
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