HomeMy WebLinkAboutRes 06-103 C17230 Waste Management of the DesertCITY OF PALM DESERT
Community Services Division
Staff Report
REQUEST: CONSIDERATION OF REQUESTS BY WASTE MANAGEMENT OF THE
DESERT FOR APPROVAL OF ANNUAL PRODUCER PRICE INDEX (PPI)
RATE INCREASE, ONE-YEAR EXTENSION OF FRANCHISE
AGREEMENT, AND EXTENSION OF TIME FOR REPLACEMENT OF SIX
ALTERNATIVE FUEL VEHICLES DESTROYED BY FIRE
SUBMITTED BY: Frankie Riddle, Acting Director of Special Programs
DATE: June 22, 2006
CONTENT: 1. Waste Management of the Desert letter dated May 26, 2006,
regarding additional revenues generated by the 100% PPI rate
increase, with Exhibits 5A, 5B, and 5C rate sheets
2. Waste Management of the Desert letter dated May 16, 2006,
requesting 100% PPI increase and one-year extension of franchise
agreement
3. Waste Management of the Desert letter dated May 16, 2006,
requesting an extension of the contract variance granted
August 25, 2005, relative to replacement of alternative fuel vehicles
4. Resolution No. 06-103
5. Bureau of Labor Statistics Producer Price Index reflecting an
increase of 5.6% for 2006
RECOMMENDATION:
1) Waive further reading and adopt Resolution No. 06-103 , approving the new adjusted rate
schedule of fees (Exhibits 5A, 5B, and 5C) for the collection, recycling, and disposal of
municipal solid waste and residential/commercial recycling contained in Contract No.
C17230 - Solid Waste Management Services;
2) By Minute Motion, approve a one-year extension of the Waste Management of the Desert
(WMD) franchise agreement to February 28, 2009;
3) By Minute Motion, approve an amendment to the existing franchise agreement with WMD
to provide for an automatic annual 100% PPI increase versus the 50% currently approved;
4) By Minute Motion, approve a second time extension of the agreement with WMD (to
June 30, 2006) for replacement of CNG trucks destroyed by fire and direct staff to
implement the $100/day fee thereafter until the trucks are replaced and in service.
BACKGROUND:
The current franchise agreement allows Waste Management of the Desert (WMD) to apply for an
annual rate increase of 50% of PPI; however, VVMD is requesting that the agreement be amended
CITY COUNCIL STAFF REPORT JUNE 22, 2006
RE: CONSIDERATION OF REQUESTS BY WASTE MANAGEMENT OF THE DESERT FOR
APPROVAL OF ANNUAL PRODUCER PRICE INDEX (PPI) RATE INCREASE, ONE-
YEAR EXTENSION OF FRANCHISE AGREEMENT, AND EXTENSION OF TIME FOR
REPLACEMENT OF SIX ALTERNATIVE FUEL VEHICLES DESTROYED BY FIRE
to provide for an extension to February 28, 2009, and a 100% of PPI increase (5.6% for 2006). If
approved, the rate increases for residential customers will depend on the type of service, size of
container, and number of weekly pickups (a residential customer with a 96-gallon container will pay
approximately $.50 more per month). This increase will generate revenue of approximately
$104,766 in Fiscal Year 2005/2006, $147,396 in Fiscal Year 2006/2007, and $207,270 in Fiscal
Year 2007/2008, for a total of approximately $459,432, which would allow WMD to recoup the costs
to implement the automated collection system. The estimated capital outlay to implement this
system is $2.1 million, which would include 24,000 refuse and recycling carts as well as five (5)
trucks. (It should be noted that the trucks more than likely are not for Palm Desert use only.)
As indicated in the letters from WMD, it was their belief that the amendments for the time extension
and 100% of PPI increase had been approved last year; however, none of the official records
reflect that approval. Neither of these items was brought forward by staff last year; however, staff
is supporting WMD's request this year and recommending that the City Council amend the
franchise agreement accordingly (see Exhibits 5A, 5B, and 5C). This increased percentage is
consistent with other cities and other franchises.
Additionally, at its meeting of August 25, 2005, the City Council approved a six-month extension,
or variance, (through February 2006) for replacement of the six (6) WMD alternative fuel trucks
destroyed by fire in 2005. This issue was adcressed as part of Mr. Ezzet's report regarding the
Assignment of the Franchise Agreement to Burrtec, and WMD has submitted an official request
for a second time extension. The recommendation in Mr. Ezzet's report was to grant an extension
to June 30, 2006, (or approve an alternate date) and to apply a $100/day fee for each day
thereafter until the vehicles are replaced and in service.
Staff recommends that the City Council approve the new adjusted rate schedule of fees for the
collection, recycling, and disposal of municipal solid waste and residential/commercial recycling as
outlined in Exhibits 5A, 5B, and 5C of the May 26, 2006, letter from WMD, approve a one-year
extension of the franchise agreement to February 28, 2009, approve an amendment to the existing
franchise agreement to provide for an automatic annual 100% PPI increase, approve a second time
extension of the agreement for replacement of CNG trucks destroyed by fire, and direct staff to
implement the $100/day fee thereafter until the trucks are replaced and in service.
FRANKIE RIDDLE
-ACTING DIR. OF SPECIAL PROGRAMS
At(2/
/4b(
SHEILA R. r ILLIGAI)V'
ACM/COMMUNITY S,VICES
2
CARLOS L. OR11GA
CITY MANAGER
PAUL S. GIBSON
DIRECTOR OF FINANCE
CITY COUNCIL TION:
APPROVED +/ DENIED
RECEIVED OTHER Ndop& q —
ME DATE -lUiq-- .R.•Uq
AYES: �Ca! 'l . C.n 14S , KQl (�,U,r aL Sp'
NOES: atiisti, �CS�
AMEN '� W , jj
ABSTAIN:
VERIFIED 8'i
Original on File with City Clerk's Offic0
RESOLUTION NO. 06-103
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF PALM DESERT, CALIFORNIA, APPROVING THE
NEW ADJUSTED RATE SCHEDULE OF FEES (EXHIBIT
5A, 5B, AND 5C) FOR THE COLLETION, RECYCLING,
AND DISPOSAL OF MUNICIPAL SOLID WASTE AND
RESIDENTIAL/COMMERCIAL RECYCLING CONTAINED
IN CONTRACT NO. C17230 — SOLID WASTE
MANAGEMENT SERVICES
WHEREAS, on the 31st day of January 2001, the City entered into an exclusive
contract with Waste Management of the Desert to provide solid waste collection and
residential and commercial recycling services became effective with the approval from
the City Council of the City of Palm Desert; and
WHEREAS, the franchise agreement sets forth rates for solid waste collection
and recycling services within the City of Palm Desert as provided in Exhibits 5A, 5B,
and 5C and commencing on the third year of said agreement new rates may be applied
at 50% of the PPI and to become effective July 1st of each year; and
WHEREAS, in 2005 the City approved a rate increase of 100% of the PPI to
offset costs associated with the implementation of the new automated collection system;
and
WHEREAS, Waste Management is requesting a one-year extension to the
Franchise Agreement extending the term to February 28, 2009, and is also requesting a
continued rate increase of 100% of PPI (Exhibits 5A, 5B, and 5C) to be approved until
the end of the existing or extended contract term date in order to continue to offset 2.1
million dollar expense associated with purchase and implementation of the automated
collection system throughout the City.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Palm
Desert, California, as follows:
1. The City Council of the City of Palm Desert, California, effective July 1,
2006, approves a rate increase of 100% of PPI to the existing or extended contract term
date.
2. The new rate increase for 2006 is reflected in Exhibits 5A, 5B, and 5C to
become effective July 1, 2006.
3. The Franchise Agreement term has been approved for a one-year
extension to February 28, 2009.
Resolution No. 06-103
4. Waste Management of the Desert shall forward to the City on a monthly
basis an amount equal to $8.25 per ton in tipping fees as provided for within the
Agreement to be directed to the "Waste and Recycling Fee."
5. All other solid waste service rates, services, 8°lo franchise fee, any other
fees, reports, etc. shall be in accordance with the Agreement currently in effect.
PASSED, APPROVED, AND ADOPTED this 22nd day of June, 2006, by the City
Council of the City of Palm Desert, California, by the following vote, to wit:
AYES:
NOES:
ABSENT:
ABSTAIN:
ATTEST:
RACHELLE D. KLASSEN, CITY CLERK
CITY OF PALM DESERT, CALIFORNIA
2
JIM FERGUSON, MAYOR
41-575 Eclectic Street
Palm Desert, CA 92260
(760) 340-5901
(760) 340-2732 Fax
www.wttidesert.com
May 26, 2006
Ms. Sheila Gilligan
Assistant City Manager
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260
RE: Additional revenues from 100% PPI
Dear Ms. Gilligan,
Thank you for your inquL*y regarding the additional revenues generated by the 100% PPI rate
increase. We anticipate the additional revenues generated in 2005/2006 to be approximately
$104,766. We project that 2006/2007 will generate $147,396 and 2007/2008 the additional
revenues should generate approximately $20 7,270.
I have also included the attached rate sheets supporting our earlier rate increase request.
I am available at your convenience should you have any questions.
Sincerely,
Frank ®rlett
District Manager
cc: file
EXHIBIT 6A
Rpn-,idential Rates Adjustmma
City of PIMM Desert
rj�xarnple Rak) Adjustment
.9tmj One: Deduct franchise `ree3 from gross rate revenue
Revenue Component (inutuding franchise fools) Annual Amount (a)
GFoc* Residential Rate Revenue 2,770,168
Residential Franchise Fee (b) $ 171,390
Reaidential Rate Revenue Net of Franchise Fees $ 2,598,778
`;fete Two: I lctotmine di3posal estpzn5e, recycling fees, and servico revenue as a liereent of actual rate revenue not of franchise fee:;
Percent of Rate idoveave Met
1 Revenue ('amponent (net of Franchise Fees) Annual Amount lof Franchise Feed (Calc'd)
Residential Rate Revenue Net of Franchise Fees ( c) $ 2,598,778 100.00/6
Less: Actual Residential Refuse Disposal Expense $ 558,095 21.4%
Less: Acival Residential Recycling Fees $ 119,835 4.6%
jRcsidentiai Survice Revenue ( $ 1,922,848 74.0%
Step'Chree: Calculate percenfaipie change In adjustment factors
Allowable Portion of Rate Component Percent
Adiustr,ient rac¢or Old New Index Change Index Change Change (d)
Dh posal "ripping Fee per ion j 34.97 $ 36.38 4.0% 100.0% 4.0%
Recycling Foe per T on ! $ 8.25 3 8.25 0.0% 100.0% 0.0%
Pe-)dueer Price Index: + 151.50 160.00 5.8% 100.0% 5.6%
S¢ep Four: Calculate weighed perxcn¢age change in single family rates
Component (Rate Component
CoMlzoner+tu ur A( ual ht:venue Weight (0) Percent Change (f) Weighted hate adjustment
Refuse Disposal 21.4%I 4.0% 0.8628%
Ret7ycling Foe 4,6% 0.0% 0,0000%
Srvice 74.0% 5.6% 4.1513%
feiel 100.0%1 5,0141%
Step Five: Apply tvelghted parzentago change to single famiiv rateu
Current
Monthly Rate
(Example Only) Weighted Rate
Sei vice (9) Adjustment (h) Rate Change Adjusted Monthly Rate (i)
9S Gallon Automated Cart Collection S 9.93 5.0% $ 0.50 $ 10.43
UHala-in Senhce, Fee premium $ 8,20 5.0% $ 0.41 $ 8.61
(a) For the iwelve inonths ending on the date, six months prior to the effective date of the rate adjustment. For example, for a rate
adjustment effective July 1, 2005, the revenue used should be for the twelve months ending December 31,2004.
(L-) Franchise Fee is 8.0% of Gross Revenue less Disposal Fees and per ton Recycling Fees; For Example: (($1,400,000 - $398,222) X 8.0%)
(c ) From Step One above
(d) 'Index Change" multiplied by "Allowable Portion of Index Change"
(e) From "Percent of Rate Revenue Net of Franchise Fees" in Step Two
(f) From last column in Step Threa
W T),e v✓sighied rate adjustrnEnt should be applied to the total rate, including Franchise Fee portion of the rate
(h) From weighted rate adjustment in Stap Four
Q) Current Monthly Rate" plus "Rate Change".
i'OiC: Nate adjustment For residential service billad directiy by Waste Management not shown, but the adjustment would follow the same methodology.
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EXHIBIT S
Roo M Box Rates Adjustrneft�
City of PWm beznert
Example Date Aajustmen'�
calculate percentage ch�r�_ge In Producer's Price Index
�— -�.. _.
Old
Now Index Change I
Allowa6le Padion of Rate Component perv'int
Index Cha 9� (�--
_ '160.0%1
Produc;'r Prire Index
151.50
160.00 5.6%
5.6%
SLeRpjuds: .&9 900% of percentage change in Producer Price Index to ServiPe Portion of Roll -off Rates
Current
Monthly Rate
(Example Only) Weighted Date
_ — ,,e vlce __.. �.w _ _ Adjustment (h) Rate ha
Ad_ �a�Et��f 6Y1® R�xe s� r
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6.34
Standard Roll -off Charge Per Load (40yd Box)) (c) $ 107.34 5.6% $
6.02.
$
'113.36
Compactor Charge Por Lead $ 182..38 5.6% $
10.23
$
'192.61
Relocation Charge $ 16.01 5.6% $
U.90
;$
16.91
f�elivcrrt;ha ..._... _�......�.._ Y— _._�._.....�..$ 16.01 �. .. 5.6%..$
0.90..
5 ... 16.911
(.r) 100% of the Porceni change in PPI is allowed
(Ir) "PPI Index % Change" mi.kiplied by 100%
(c) E cluding Disposal. Disposal is billed at actual rout on the based on the flipping free per ton at the landfill or transfer station
used by the Company, plus Recycling Fees, rnuhiplied by the number of tons.
HloLe: 1aLe adljustmeni fur "Other Services" riot shown, br.d the adjustment would 'follow the same methodology.
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May 16, 2006
Ms. Sheila Gilligan
Assistant City Manager
City of Palm Desert
73 -5 10 Fred Waring Drive
Palm Desert, CA 92260
RE: Request for 100% PPI increase
Dear Ms. Gilligan,
41-575 Eclectic Street
Palm Desert, CA 92260
(760) 340-5901
(760) 340-2732 Fax
Wwwwindesert.com
Waste Management of the Desert respectfully requests a rate increase of 100% of PPI. On May
24, 2005 Waste Management of the Desert (WM) and City staff met to discuss the
implementation of mandatory residential automation in gated communities. During the
discussion, WM proposed several changes to the existing franchise agreement in order for WM to
recover the additional capital cost of the implementation (follow up correspondence attached).
The items were; exercise of the one year option giving WM 3.8 years remaining on the contract,
changing the annual PPI increase from 50% to 1001/6 for the remainder of the term, and an
increase for `walk in' service due to additional time required. Staff (Mr. Kohn) indicated to WM
at that meeting that the request was justified and they would bring it to council for consideration.
On June 23, 2005 the City council approved Ordinance No 1094 requiring automated recycling at
all single-family residential units. The staff report for Ordinance No 1094 (Discussion, paragraph
6) outlines Waste Management's requested contract changes. The Ordinance passed. At the same
council meeting, a rate increase request for 100% PPI and an increase in the `walk in' service fee
(Resolution 05-51) was approved. In the Resolution staff report, City staff referenced that the
100% PPI was related to the cost of the automated recycling implementation.
It was represented to Waste Management by Mr. Kohn that City Council approved the requested
contract changes outlined in the Staff report of Ordinance No 1094. We respectfully request City
Council approve said changes as intended.
I would be happy to discuss this request at your earliest convenience.
Sincerely,
Frank Orlett
Distract Manager
cc: ale
41-575 Eclectic Street
Palm Desert, CA 92260
(760)340.2113
(760)340-0417 Fax
www.wmdesert.com
May 24, 2005
Ms. Sheila Gilligan
Assistant City Manager
City of Palm Desert
73-510 Fred Waring Drive
Palm Desert, CA 92260
Re: Mandatory Automation Implementation
Dear Mrs. Gilligan:
Thank you for meeting with me today to discuss the Mandatory Automation
Implementation schedule. As we also discussed, Waste Managements' capital outlay for
this project will be approximately $2.1 million for refuse and recycling carts, (24,000)
and for the purchase of five collection vehicles.
Our current Franchise Agreement with the City expires on February 28, 2008, leaving
two years and eight months. The typical residential automated cart and collection
vehicles are amortized over an eight -year period. Since we do not have eight years
remaining on our current agreement, Waste Management would respectfully request the
City to consider several changes to the current agreement as follows:
® The City to exercise its option of a one-year extension in accordance with
ARTICLE 2.4. This will increase the remainder of the term to 3.8 years.
® The City to allow Waste Management to receive 100% of PPI for the remainder
of the term vs. 50%. This request is to help cover the additional capital expense
due to the limited years remaining in the agreement. Also, please note that the
PPI for Natural Gas (index attached) has increased 69% from December 2002
through December 2004.
Because Of the additiona.i labor cost for back yard service, we also request co
inc.-ease the current rate for walk-in service from $3.87 a month to $8.20.
VWFA7- �
WASTE MANAGEMENT
Attached for your review and comment, is an updated rate sheet incorporating the
change to 100% of PPI, the new walk in rate of $8.20 and the anticipated disposal
increase of $.46 a ton at the Edom Hill Transfer Station.
For further discussion on these issues, please let me know when it will be most
convenient to meet with you and other City staff.
Sincerely,
Frank Orlett
District Manager
Attachment
Cc: Robert Kohn, Director of Special Programs
Deborah McGarrey, Municipal Marketing Manager
FO/ph
y
=Earn zvey-jday coll?c ion to protection, fhiak �r2en: ThinkJYQSt? 'I arcc;2fn'?at.
May 16, 2006
Ms. Sheila Gilligan
Assistant City Manager
City of Palm Desert
73 -5 10 Fred Waring Drive
Palm Desert, CA 92260
RE: Request for an Extension of the Franchise Agreement Variance
Dear Ms. Gilligan,
41-575 Eclrctic Strut
Palin Desert, CA 92260
(760) 340-5901
(760) 340-2732 Fax
uwxv.wmdesert.com
Waste Management of the Desert respectfully requests an extension of the contract variance
granted on August 25, 2005 related to alternative fuel vehicles. We request the variance to be
extended to June 30, 2006.
Waste Management is currently running four (4) residential diesel trucks, and will eliminate
the use of them at the end of June.
Thank you for your consideration regarding this matter, I am available at your convenience to
answer any question you may have.
Sincerely,
Frank Drlett
District Manager
cc: file
Bureau of Labor Statistics Data
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Data extracted on. June 13, 2006 (5:44:35 PM)
Producer Price Index -Commodities
Series Id: WP�JJSOP3000
Not Seasonally Adjusted
Group: Stage of orocessing
Item: Finished goods
Base Date: 8200
Year Jan
1996 129.4
1997 132.6
1998 130.3
1999 131.4
2000 134.7
2001 141.2
2002 137.4
ticEgalIN
2004 145.4
2005 151.4
2006 159.9
12 Months Percent Change
Series Id: WP'-'SOP3000
Not Seasonally Adjusted
Group: Stage of orocessing
Item: Finished goods
Base Date: 8200
Year Jan
1996 2.2
1997 2.5
1993 -1.7
1999 0.8
2000 2.5
More Formattina Ontionsuv#o►
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2001 4.8
2002 -2.7
2003 2.5
2004 3.3
2005 4.1
06 5.6
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