REPORT TO COUNCIL
SUBJECT
Title
Public Hearing: Action on a Resolution Setting Rates for Overall Solid Waste Service and Annual Clean-up Campaign in the Exclusive Franchise Area
Report
COUNCIL PILLAR
Deliver and Enhance High Quality Efficient Services and Infrastructure; Promote Sustainability and Environmental Protection
EXECUTIVE SUMMARY
The City has agreements with outside contractors for the collection and processing of garbage and recyclables. In 2021, Council approved a Solid Waste Rate Study performed by R3 Consulting, Inc. (R3) that developed a model to calculate equitable solid waste rates based on current contractor costs, subscription levels, and disposal data. The model has been updated with FY 2024/25 cost data to calculate solid waste rates for FY 2024/25, which will enable the program to achieve cost recovery. The monthly solid waste rates for FY 2024/25 are contained in Table A of the Resolution (Attachment 1).
Notices (Attachment 2) were sent to all solid waste rate payers on April 17, 2024, informing them of the proposed rate increases and date of the Public Hearing to approve the rates, as required by Article XIII D § 6 of the California Constitution. Following the close of the Public Hearing, staff recommends that Council adopt the subject Resolution, which establishes the solid waste rates effective for the utility bills issued for services rendered on and after July 1, 2024.
BACKGROUND
In November 1996, California voters approved Proposition 218, which amended the state Constitution and imposed new substantive and procedural requirements for imposing or increasing property-related fees and charges. Under these requirements, water, sewer, and solid waste service fees or charges may only be increased if a majority of rate payers do not protest the increase. The City must mail a written notice of the proposed increases and hold a public hearing on the proposed increase not less than 45 days after mailing the notice. At the public hearing, all protests against the proposed fees or charges are tabulated and if the number of protests from rate payers equals or exceeds 50 percent plus one, the fees or charges cannot be imposed. The public hearing for the City’s FY 2024/25 solid waste rates is scheduled for June 4, 2024. If there is not a majority protest, the Council can adopt the proposed monthly rate increases contained in Table A of the Resolution (Attachment 1).
The City sets rates and collects bundled charges from customers to fund the solid waste program in the exclusive franchise area (which is comprised of all properties not zoned for an Industrial use). Customers are only charged for the specific components for which they receive service. The bundled solid waste rate is comprised of one or more of the following components.
• Garbage
• Yard trimmings
• Residential recycling
• Annual Clean-up Campaign (CUC)
In 2019, City Council approved moving forward with 15-year solid waste agreements with Recology South Bay (Recology), Mission Trail Waste Systems (MTWS), and GreenWaste Recovery, Inc. (GWR). An existing agreement with Republic Services/BFI (Republic) for landfill disposal and composting of yard trimmings is in place and expires after December 31, 2024. The services provided under these agreements enable the City to comply with the new organic waste collection program and diversion requirements for the purpose of reducing greenhouse gas emissions from landfills mandated by Senate Bill 1383 (SB 1383).
Following the execution of the current solid waste agreements, a Solid Waste Rate Study (Rate Study) was completed to ensure that rates were based on the true costs of service and were equitable. Each rate for garbage, yard trimmings, residential recycling, and CUC service was developed to equitably incorporate the following cost elements:
• Compensation paid to service providers to collect and transport solid waste
• Compensation paid to process, compost, and/or dispose of solid waste
• City program costs (billing and internal costs, street sweeping, household hazardous waste, leaf vacuum, and holiday tree collection services, franchise fees, landfill post closure costs, and SB 1383 compliance costs)
The same methodology used to prepare the Rate Study was utilized to develop the proposed solid waste rates that will meet the projected costs of the City’s solid waste services for FY 2024/25. The subsequent discussion summarizes upcoming changes to the various cost elements and associated impacts on the proposed FY 2024/25 rates.
DISCUSSION
Cost Adjustments Required by the Agreements with Recology, Mission Trail Waste Systems (MTWS), GreenWaste Recovery (GWR), and Republic Services/BFI (Republic)
The primary reason for rate increases is additional revenue to cover the FY 2024/25 compensation adjustments paid to service providers for the collection, processing, recycling, composting, and disposal of solid waste in compliance with state laws and current market conditions, as required per the agreements.
Each agreement specifies annual cost of living adjustments (COLA) based on annual changes to price indices. The agreement with Recology contains a provision for route growth in which the percentage change in the number of container lifts over the calendar year is added to the COLA to determine the total compensation adjustment. The number of container lifts increased by 0.3 percent in 2023.
Below are summaries of the approximate compensation adjustment percentages effective July 1, 2024 based on the agreements previously approved by Council.
• Recology: +5.3% (COLA + route growth)
• MTWS: +5.0% COLA
• GWR: +2.6% COLA
• Republic: +3.0% COLA (July 1 - December 31, 2024 only)
Landfill Disposal and Yard Trimmings Composting Services Procurements
The agreement with Republic for landfill disposal and yard trimmings composting services will expire after December 31, 2024. The processing agreement with GWR contains a landfill disposal provision that can be exercised upon the expiration of the agreement with Republic which would reduce annual landfill disposal costs in the second half of FY 2024/25. Landfill disposal costs under the GWR processing agreement are factored into the proposed garbage rates. However, a formal procurement is currently in process to determine if even lower disposal costs can be obtained.
A formal procurement for yard trimmings composting services is also underway. The City has a very low composting services rate under the current agreement with Republic which has been effective since 1989. Based on the current market costs for this service it is anticipated that the City’s price per ton to compost will increase over the current rate, beginning January 1, 2025.
DPW will present recommendations for future landfill disposal and yard trimmings composting services for Council consideration later this summer. The new costs for both services will be phased into rates during FY 2024/25 and FY 2025/26 because the new agreements will take effect midway through FY 2024/25. Estimated expenditure changes and their effect on the rates have been incorporated into the proposed FY 2024/25 Amended Operating budget.
Monthly Bundled Solid Waste Rates
The individual garbage, yard trimmings, recycling and CUC components are bundled together to create the overall solid waste rates that are charged to residential cart customers monthly. The rates for each service are based on the cost to provide collection, disposal, processing and/or composting, and City program costs. The table below summarizes the monthly individual rate component increases for residential cart customers.
|
Service Type |
FY 2023/24 Monthly Rate |
FY 2024/25 Monthly Rate |
Change in Monthly Rate |
|
20-gallon garbage cart |
$19.83 |
$20.45 |
$0.62 |
|
32-gallon garbage cart |
$27.54 |
$28.35 |
$0.81 |
|
64-gallon garbage cart |
$51.16 |
$52.67 |
$1.51 |
|
96-gallon garbage cart |
$74.70 |
$76.89 |
$2.19 |
|
Yard trimmings |
$14.25 |
$15.14 |
$0.89 |
|
Recycling |
$7.33 |
$8.02 |
$0.69 |
|
CUC |
$6.28 |
$6.59 |
$0.31 |
Each customer pays a rate that is dependent on cart size subscription and whether they pay for yard trimmings or CUC services. Below is a summary of FY 2024/25 bundled monthly rates for single-family residential and townhouse cart customers that will enable the City to achieve cost recovery for the solid waste services it provides to its residents. Townhouse residential cart customer rates are the FY 2024/25 bundled monthly rate for garbage cart size less the $15.14 yard trimmings rate since they do not receive this service. Monthly rates for cart customers that do not participate in the CUC are $6.59 less than the bundled rates shown in the table.
|
Garbage Cart Size |
Monthly Garbage Rate |
Monthly Yard Trimmings Rate |
Monthly Recycling Rate |
Monthly CUC Rate |
FY 24/25 Bundled Monthly Rate |
|
20-gallon single-family |
$20.45 |
$15.14 |
$8.02 |
$6.59 |
$50.20 |
|
20-gallon townhouse |
$20.45 |
$0.00 |
$8.02 |
$6.59 |
$35.06 |
|
32-gallon single-family |
$28.35 |
$15.14 |
$8.02 |
$6.59 |
$58.10 |
|
32-gallon townhouse |
$28.35 |
$0.00 |
$8.02 |
$6.59 |
$42.96 |
|
64-gallon single-family |
$52.67 |
$15.14 |
$8.02 |
$6.59 |
$82.42 |
|
64-gallon townhouse |
$52.67 |
$0.00 |
$8.02 |
$6.59 |
$67.28 |
|
96-gallon single-family |
$76.89 |
$15.14 |
$8.02 |
$6.59 |
$106.64 |
|
96-gallon townhouse |
$76.89 |
$0.00 |
$8.02 |
$6.59 |
$91.50 |
The table below shows the increase in each residential cart bundled rate.
|
Garbage Cart Size |
FY 23/24 Monthly Bundled Rate |
FY 24/25 Monthly Bundled Rate |
Change in Monthly Rate |
Percentage Change |
|
20-gallon single-family |
$47.69 |
$50.20 |
$2.51 |
5.3% |
|
20-gallon townhouse |
$33.44 |
$35.06 |
$1.62 |
4.8% |
|
32-gallon single-family |
$55.40 |
$58.10 |
$2.70 |
4.9% |
|
32-gallon townhouse |
$41.15 |
$42.96 |
$1.81 |
4.4% |
|
64-gallon single-family |
$79.02 |
$82.42 |
$3.40 |
4.3% |
|
64-gallon townhouse |
$64.77 |
$67.28 |
$2.51 |
3.9% |
|
96-gallon single-family |
$102.56 |
$106.64 |
$4.08 |
4.0% |
|
96-gallon townhouse |
$88.31 |
$91.50 |
$3.19 |
3.6% |
Monthly Garbage Bin Rates
Garbage bin rates include the costs for collection, processing, disposal, and City program costs. Loose garbage bin charges will be increasing between 2.9 percent to 3.1 percent and compacted garbage bin charges will be increasing between 1.8 percent to 2.2 percent in FY 2024/25, depending on service level. The loose garbage bin and compacted garbage bin rates are shown in Section II.D and Section II.E of Attachment 1.
Monthly Services Billed by MTWS
The City sets the rates and bills for residential and commercial cart and bin garbage service. MTWS bills customers directly for commercial business recycling, voluntary commercial organics collection, and the loose and compacted roll-off debris bin collection services that it provides as prescribed in the agreement. The City needs to notice the rate increases in accordance with Proposition 218 requirements and approve the rates at a Public Hearing for increases to take effect. If the proposed rate increases for services that are billed by MTWS are not approved by the City Council, the City is contractually obligated to pay MTWS the increased compensation and has to absorb the shortfall between cost of service and revenue collected.
Commercial Recycling
MTWS is required to provide up to 96-gallons of commercial recycling services to businesses at no separate charge to the City under the agreement. The rates for additional service above 96-gallons per week are based on container size and frequency of service, plus a 10 percent markup for billing and franchise fees. Commercial recycling service rates charged to cart and bin customers will increase by 5 percent in FY 2024/25 (Sections II.B and II.F of Attachment 1).
MTWS remits 5 percent of the amount collected from customers to the City as franchise fees that get deposited in the General Fund for all services that it provides billing for, which includes the services described below.
Voluntary Food Scraps and Organic Waste Service
MTWS provides voluntary source separated food scraps and organic waste service to commercial business customers under the agreement. The rates for collection and processing are based on container size and frequency of service, plus a 10 percent markup for billing and franchise fees. Collection and processing rates charged to customers with cart and bin source separated food scrap and organic waste service will be increasing by 5 percent in FY 2024/25 (Section II.C and Section II.G of Attachment 1).
Loose and Compacted Roll-Off Debris Bin Service
MTWS provides scheduling, collection, and billing for loose and compacted roll-off debris box service in the exclusive franchise area. The collection rate component is based on container size and frequency of service, plus a 10 percent markup for billing and franchise fees. MTWS will be receiving a 5 percent increase to its tariffs in FY 2024/25. Customers are also billed the actual charges incurred for the disposal, processing, and/or recycling of collected contents plus 10 percent markup for billing and franchise fees. Section II.H of Attachment 1 contains rates for these services.
Countywide Rate Comparison
The Santa Clara County Residential Cart Rate Comparison (Attachment 3) provides a comparison of monthly solid waste rates for residential collection services in Santa Clara County (County). Most jurisdictions have indicated they will also be seeking rate increases in FY 2024/25 but were unable to share that information at this time. As a result, the comparison is based on comparing Santa Clara’s proposed FY 2024/25 monthly rates to the current FY 2023/24 monthly rates in other jurisdictions. The survey is for bundled solid waste services that include garbage, yard trimmings, and recycling services.
Santa Clara is the only city in the county that offers a townhouse service rate in which customers do not subscribe to yard trimmings service. The townhouse rates are lower than countywide averages for the same size container across the board. It should also be noted that the City’s rates that are presented for comparison do not include the proposed $6.59 per month charge for the CUC because no other jurisdiction in the County has a comparable program. The table below summarizes the City’s single-family and townhouse rates compared to the countywide averages.
|
|
20-gallon |
32-gallon |
64-gallon |
96-gallon |
|
Monthly FY 2023/24 countywide average |
$36.44 |
$44.82 |
$78.18 |
$115.92 |
|
Monthly FY 2024/25 Santa Clara single-family rate* |
$43.61 |
$51.51 |
$75.83 |
$100.05 |
|
Monthly FY 2024/25 Santa Clara townhouse rate* ** |
$28.47 |
$36.37 |
$60.69 |
$84.91 |
*Excludes CSC Clean-up Campaign Cost
**No other city offers reduced townhouse rates
The Santa Clara County Commercial Bin Rate Comparison (Attachment 4) provides a comparison of monthly solid waste rates for commercial bin collection services in the County. Most jurisdictions in the County have indicated that rate increases will be occurring in FY 2024/25 but were not able to share details, so the City’s proposed FY 2024/25 rates are compared to other jurisdictions’ FY 2023/24 rates. Santa Clara multi-family and commercial business customers that subscribe to frontload bin garbage service are not required to subscribe to an additional organics container to meet SB 1383 requirements because the contents of the garbage bins will be taken to the GWR mixed waste processing facility to recover the organics for composting. This is not the case for some other jurisdictions. The cost savings of not subscribing to an additional container for organics is not captured in the countywide comparison, which only shows the cost to subscribe to a specific garbage service level.
Rate Assistance Program
Under the current agreement, MTWS provides the City with a $3 per month decrease in tariff for residential accounts that qualify through the Silicon Valley Power (SVP) low income Rate Assistance Program. On March 10, 2021 the City Council approved to increase the rate discount to $10 per month. MTWS will continue to fund $3 per month and a transfer from the General Fund to cover the additional $7 per month, per resident, is included in the FY 2024/25 operating budget.
ENVIRONMENTAL REVIEW
The proposed activity has been reviewed for compliance with the California Environmental Quality Act (“CEQA”) and it has been determined that the activity does not constitute a “project” pursuant to CEQA Guidelines section 15378(a) because it will not result in a physical change in the environment. Notwithstanding the foregoing, it has also been determined that the activity qualifies for an Exemption pursuant to Section 15061(b)(3) of CEQA Guidelines. Thus, no environmental review is required.
FISCAL IMPACT
In total, with the rate increases the solid waste customer charges will generate approximately $41 million of revenue in FY 2024/25. These revenues have been incorporated into the Solid Waste Fund operating budget in the Proposed FY 2024/25 and FY 2025/26 Biennial Capital Budget. A transfer from the General Fund to the Solid Waste Fund in the amount of $35,364 has also been programmed to fund the additional $7 per month for qualifying customers in the Rate Assistance Program for FY 2024/25.
COORDINATION
This report has been coordinated with the Finance Department and the City Attorney’s Office.
PUBLIC CONTACT
On April 17, 2024 notices were mailed to solid waste customers, which provided information on the proposed FY 2023/24 rate increases, instructions on how to protest the rate increases, and details on how to access the public hearing. Additionally, public contact was made by posting the Council agenda on the City’s official-notice bulletin board outside City Hall Council Chambers. A complete agenda packet is available on the City’s website and in the City Clerk’s Office at least 72 hours prior to a Regular Meeting and 24 hours prior to a Special Meeting. A hard copy of any agenda report may be requested by contacting the City Clerk’s Office at (408) 615-2220, email clerk@santaclaraca.gov <mailto:clerk@santaclaraca.gov> or at the public information desk at any City of Santa Clara public library.
ALTERNATIVES
1. Adopt a Resolution setting the overall rates to be charged to rate payers for the collection and disposal of garbage, refuse, yard trimmings, recycling, and annual Clean-up Campaign in the exclusive franchise area, effective for the utility bills issued for services rendered on and after July 1, 2024; or
2. Do not adopt a Resolution to increase the proposed rates to be charged to rate payers for collection and disposal of garbage, refuse, yard trimmings, recycling, and annual Clean-up Campaign in the exclusive franchise area and subsidize FY 2024/25 expenditures with funds from the General Fund.
RECOMMENDATION
Recommendation
Alternative 1: Adopt a Resolution setting the overall rates to be charged to rate payers for the collection and disposal of garbage, refuse, yard trimmings, recycling, and annual Clean-up Campaign in the exclusive franchise area, effective for the utility bills issued for services rendered on and after July 1, 2024.
Staff
Reviewed by: Craig Mobeck, Director of Public Works
Approved by: Jovan D. Grogan, City Manager
ATTACHMENTS
1. Resolution
2. Notice
3. Santa Clara County Residential Cart Rate Comparison
4. Santa Clara County Commercial Bin Rate Comparison