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HomeMy WebLinkAbout8.1 - 2280 Update on AVI Agreement Page 1 of 4 STAFF REPORT CITY COUNCIL DATE: November 8, 2018 TO: Honorable Mayor and City Councilmembers FROM: Christopher L. Foss, City Manager SUBJECT: Update on Agreement with Amador Valley Industries Prepared by: Colleen Tribby, Director of Administrative Services EXECUTIVE SUMMARY: The City Council will receive an update on the City of Dublin’s current contract with Amador Valley Industries (AVI) for the collection, disposal, and recycling of residential and commercial solid waste, and provide direction on the potential extension of the contract beyond its current expiration date of June 30, 2020. Should the City Council desire Staff to engage AVI in an extended contract, the negotiations would include the incorporation of new capital equipment needs and increases in operational costs, as well as the potential to opt into Alameda County Waste Management Authority’s Mandatory Recycling Ordinance (MRO). While Staff plans to present a full discussion of the MRO and its impacts on the City and rate payers at a City Council meeting in the near future, it would be helpful to have direction now whether to include this as a component of the contract negotiations with AVI. STAFF RECOMMENDATION: Receive the report and provide direction. FINANCIAL IMPACT: There is no direct impact on City funds resulting from this report. Should the City begin negotiations with AVI, any requested cost adjustments, including capital equipment replacement and operational cost increases, will be incorporated into the annual rates. Costs associated with opting into the Mandated Recycling Ordinance (MRO) (at a later date) would also need to be factored into the rate calculation, which could occur in conjunction with the contract negotiations. DESCRIPTION: At the meeting of August 21, 2018, the City Council discussed a request by Amador Valley Industries (AVI) to begin negotiations with the City to extend its current service agreement, which expires June 30, 2020, in order to make necessary investments in new equipment over the next several years. The City Council directed Staff to bring Page 2 of 4 back a review of the existing contract arrangement, along with a brief discussion of potential focus areas of contract negotiations. Contract with Amador Valley Industries On December 6, 2004, the City Council approved a Collection Services Agreement with AVI for the collection and disposal of solid waste in the City of Dublin. T he agreement, executed on January 12, 2005, requires the City to annually adopt a rate schedule to produce a specified revenue amount as identified therein. Furthermore, the agreement provides that the City will receive franchise fees in return for authorizing the collection of solid waste. Since 2005, five amendments to the Agreement have been executed to include, among other things, collection of recyclable materials produced by commercial units, provision of large item collection and construction and demolition debris collection services, adjustments to the compensation model and franchise payments, and collection of an annual community benefit payment for small business assistance. On June 1, 2010, the City Council extended the term of the Agreement , which was set to expire on June 30, 2012, for an additional eight years, terminating on June 30, 2020. This was a mutually beneficial term provision which allowed the City to lock in the low rate structure for the long term and to maintain the City’s position as a low-cost service provider in the Tri-Valley. The extension also benefited AVI as it allowed the restr ucture of its financing obligations at a lower cost because of the guaranteed additional service provision period. Rate Comparison Throughout the contract arrangement with AVI, the City of Dublin’s solid waste collection rates have remained very competitive compared to rates charged for similar services in surrounding communities. In all cases, Dublin’s services are at least comparable to, and often better than, those offered in surveyed cities. For example, Pleasanton does not offer any bulky waste pick-ups, and Livermore and San Ramon charge extra for many items, such as electronic waste and appliances, which AVI will pick up at no additional cost for Dublin residents. Therefore, Dublin customers have more services included within the base cost of services. For most rate categories, the proposed Dublin rates are similar and, in many cases, below the average of the Tri - Valley agencies surveyed. The following is a comparison of garbage rates among selected neighboring cities. FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 32-35 Gallon (Residential) Livermore $13.08 $13.08 $15.89 $16.21 $19.29 $22.96 $26.96 $27.51 $28.76 $32.96 $34.81 $37.67 $38.42 Pleasanton $22.50 $22.50 $22.50 $29.13 $29.13 $29.13 $29.13 $30.59 $32.98 $33.80 $33.80 $33.80 $33.80 San Ramon $16.45 $16.45 $21.58 $23.05 $24.12 $24.84 $25.64 $25.89 $26.25 $27.16 $27.54 $27.94 $28.54 Average Other Agency $17.34 $17.34 $19.99 $22.80 $24.18 $25.64 $27.24 $28.00 $29.33 $31.31 $32.05 $33.14 $33.59 Dublin $12.84 $13.04 $13.56 $14.25 $17.99 $18.65 $19.51 $20.31 $21.10 $22.06 $23.14 $24.94 $26.09 Dublin % Lower than Average -26%-25%-32%-37%-26%-27%-28%-27%-28%-30%-28%-25%-22% FY 06-07 FY 07-08 FY 08-09 FY 09-10 FY 10-11 FY 11-12 FY 12-13 FY 13-14 FY 14-15 FY 15-16 FY 16-17 FY 17-18 FY 18-19 1 Yard x 1 Time (Commercial) Livermore $61.47 $61.47 $74.65 $76.14 $89.73 $103.30 $116.72 $116.72 $116.72 $116.72 $116.72 $116.72 $116.72 Pleasanton $94.69 $94.69 $94.69 $122.73 $135.97 $138.59 $138.59 $145.51 $156.87 $156.87 $168.23 $168.23 $168.23 San Ramon $101.50 $101.50 $104.43 $111.70 $113.19 $115.19 $118.76 $118.76 $119.96 $123.66 $133.00 $134.54 $137.41 Average Other Agency $85.89 $85.89 $91.26 $103.52 $112.96 $119.03 $124.69 $127.00 $131.18 $132.42 $139.32 $139.83 $140.79 Dublin $54.98 $55.81 $60.46 $63.53 $80.21 $90.46 $94.64 $98.54 $102.35 $107.03 $112.26 $121.02 $126.59 Dublin % Lower than Average -36%-35%-34%-39%-29%-24%-24%-22%-22%-19%-19%-13%-10% Page 3 of 4 Focus Areas for Contract Negotiations AVI Operational Needs As mentioned above, AVI is seeking a term extension to have the time to invest in equipment needed to serve the community of Dublin. Without such an extension in the near term, AVI would not be able to take such actions t o improve its fleet and sorting operations. In addition, a declining commodities market has resulted in increased processing costs for recycled waste, which are not currently being recovered through rates. During negotiations, Staff would work with AVI to satisfy the need for new capital assets and offsets to processing costs while minimizing the impact on rate payers. Mandatory Recycling Ordinance In 2012, the Alameda County Waste Management Authority passed Ordinance 2012- 01, known as the Mandatory Recycling Ordinance (MRO), placing new requirements on commercial and multi-family properties to provide separate containers and service for recyclable and organic materials. Following Staff’s recommendations, the City of Dublin passed resolutions in February 2012 and in December 2013, opting out of Phases 1 and 2 of the MRO, respectively (Resolutions 21-12 and 206-13). At the time, Staff was concerned that participation in either phase of the MRO would trigger dramatic rate increases due to an immediate, sizeable shift in service level subscription from garbage to recycling which would significantly alter AVI’s operational costs. Other agencies including the cities of Newark and Pleasanton, and the Oro Loma Sanitary District, had opted out of the MRO Phase II as well. Additionally, the cities of Fremont, Oakland, and San Leandro , and the Castro Valley Sanitary District, were participating on a limited basis by deferring participation in the organics diversion requirement until a later date. Today, the City of Dublin is the only jurisdiction in Alameda County that is not participating in the MRO. Since the Resolutions of 2012 and 2013 opting out of the progr am, the number of Dublin businesses diverting waste through recycling and organics programs has grown significantly. AVI has also seen service level changes happen gradually in neighboring cities that participate in the MRO. Both City Staff and AVI staff believe that Dublin’s current rate increase mechanism should be able to absorb this gradual shift without causing dramatic rate increases. Additionally, beginning in 2012 the State of California passed several bills (AB 341, AB 1826, and SB 1383) that regulate the diversion of recyclable and organic material. While these requirements continue to expand, many of them align with activities guided by the MRO. Opting into the MRO sooner rather than later will prepare Staff for these future mandates. City Council Direction Needed Staff is seeking direction on the City Council’s desire to begin negotiations on a contract extension and if so, what sort of changes the City Council would like to address in the negotiations. Beginning negotiations now would be beneficial particularly as it relates to the consideration of a future Mandatory Recycling Ordinance. Implementation of a fee change related to the MRO can take time because it would need to be added to the Page 4 of 4 County tax roll effective July 1, 2020. There has also been a past practice to begin negotiations two years prior to the term ending as was the case in 2010. STRATEGIC PLAN INITIATIVE: None. NOTICING REQUIREMENTS/PUBLIC OUTREACH: None. ATTACHMENTS: None.