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HomeMy WebLinkAboutMINUTES - 08121997 - C73 7J Contra f Costa c�rTq c uric; TO: BOARD OF SUPERVISORS County FROM: VAL ALEXEEFF DIRECTOR , GROWTH MANAGEMENT & ECONOMIC DEVELOPMENT AGENCY DATE: AUGUST 12, 1997 SUBJECT: APPROVE AND AUTHORIZE THE COMMUNITY DEVELOPMENT DIRECTOR TO EXECUTE A CONTRACT FOR A SOLID WASTE RATE REVIEW FOR THE UNINCORPORATED COUNTY AREAS SERVED UNDER THE COUNTY'S FRANCHISE AGREEMENT WITH BROWNING-FERRIS INDUSTRIES (BFI) SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: AUTHORIZE the Community Development Department Director or his designee to execute a contract with NewPoint Group to complete a solid waste rate review for the unincorporated area served under the County's Franchise Agreement with BFI. The amount of the expenditure will be $58,200. FINANCIAL IMPACT: The costs associated with the rate review and processing of rate application shall be paid by Contractor (BFI) and shall be allowed as a pass - through cost in the rate application process. No financial impact. CONTINUED ON ATTACHMENT: X YES SIGNATURE:� _RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITT E APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ONaJ997 _APPROVED AS RECOMMENDED OTHER APPROVED the recommendations as set forth above and CLARIFIED 'forr'NewPoint"Group that the Board of Supervisors anticipates having an opportunity to review the survey conducted by BFI and make its own determination about whether the survey meets the County's intent of the applicable franchise agreement requirement for this first base year rate application with the understanding that if the Board does not make a favorable VOTE OF SwAAm the survey that there may be an additional step required of NewPoint Group J UNANIMOUS (ABSENT _-Ir I HEREBY CERTIFY(THAT THIS IS A TRUE AND AYES: NOES: CORRECT COPY OF AN ACTION TAKEN AND ABSENT: ABSTAIN: ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE SHOWN. Contact: Linda Moulton (510) 335-1238 cc: Community Development Department(CDD) ATTESTED 1917 PHIL BA CHELOR, dLERk OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR Attachment BY. , DEPUTY LM:mI RLM1\bod\8-12BFI.7BD .• C73 Board Order Funding of contract for BFI rate setting August 12, 1997 -Page 2- BACKGROUND/REASONS FOR RECOMMENDATIONS: On June 3, 1997, the Board of Supervisors voted to authorize the Community Development Director to execute a contract with NewPoint Group to develop a solid waste rate setting process and methodology manual to be used to facilitate a rate review which had been requested by Browning-Ferris Industries (BFI). See Attachment 1. NewPoint Group has been working with BFI to develop the methodology and the manual to be used for the rate review and the draft of the rate setting process should be completed by the end of August 1997. In order to facilitate the rate review in timely manner, the Board Of Supervisors' Ad Hoc Solid Waste Committee at their June 19, 1997 meeting authorized staff to request proposals from consultants and place the item on the Board Of Supervisors' agenda as a consent item if the cost was over $25,000. (See Attachment 2, item #5) NewPoint Group's proposal is labeled Attachment 3. The proposal includes a time schedule which would allow new rates to be effective as of January 1, 1998. The unincorporated communities which would be effected by this rate review include: Part of Bay Point Unincorporated area near Concord Alhambra Valley Morgan Territory Unincorporated area north of Lafayette Rodeo Mountain View Pacheco Unincorporated area in Central Sanitary Area Clyde Canyon Camino Tassajara The Franchise Agreement with BFI specifies that: "all costs associated with County review and processing of rate applications shall be paid by Contractor and shall be allowed as a pass-through cost in the rate application process." (See Attachment 4, Paragraph 3). Approximately 7,100 households would be affected by the rate review. The cost per household would be approximately $8.19. If the pass-through costs were spread over 24 months, the cost per household would be approximately 35 cents per month. The Franchise Agreement with BFI and the County was signed August 1, 1995. BFI had taken over the contract from Pleasant Hill Bayshore Disposal. A rate review was not done at that time and rates for the various localities did not change. This is the first rate review request for these areas. Currently, the rates are not standard for the communities. For example: single can rates vary from $15.15 to $18.00 per month; 64 gallon carts from $17.50 to $36.20; and 95 gallon carts from $18.15 to $35.43 per month. The rate review has a high level of complexity due to the large number of communities, various rate schedules and the diverse geographical areas. This is a far more extensive process than examining rates from only one community. The goal is to reach a standardized rate which also takes into account modifications for hard to serve and remote areas. LM:ml RLM1\bod\:8-12BFI.7bd ATTAC HMEN ' 1 :,i!f•it:t.� �UJ1f, 97 MAR 20 PM 2: 1.8 cc,{i4f I.j-rV ' •i'li'7 71x.1 DEVEt011111_'ENT DEPT March 19, 1997 Mary Fleming Solid Waste Manager Contra Costa County 651 Pine Street, 4th Floor-North Wing Martinez, CA 94553-0095 Re: BFI Rate Increase Request. Dear Mary: BFI of Contra Coata County is requesting a rate increase on the garbage collection and recycling being performed under the franchise contract with the County. Please advise me on the application process and methodology that will be required for a rate change in our service area. If you have any questions, please feel free to call me at 468-1017. Very truly yours, Ken Etherin on Manager Bar Area Franchise Contracts Golden Gate Division•6601 Owens Drive•Suite 250•Pleasanton,California 94588 Fax 510-468-1120 3M PW-Con r 6' ATTACHMENT 2 CONTRA C05TA COUNTY 130ARD OF 5UPERV15OR59 AD HOC 501-11) WASTE COMMITTEE MEETING DATE: June 19, 1997 SUMMARY OF ACTION5/DEC1510N5 1. CON5IDER IMP051NG FRANCHISE FEE FOR THE UNINCORPORATED AREAS SERVED BY GARAVENTA ENTERPRI5E5 AND BFI/PLEASANT HILL 15AY5HORE D15POSAL. Committc a approved a 5% Franchise Fee for the unincorporated areas served by Garaventa & BFI/PHBD which is to be effective on July 1, 1997 however not to be collected now in rates charged by the haulers until a rate review occurs in the near future, so that only one change in rates will occur. The Committee agreed that the cost of providing solid waste & recycling programs will require the entire franchise fee income and therefore allocated all solid waste franchise fees to solid waste program operation (except where up to 2% is allocated to special districts/local groups through MOUS if that district/group assumes responsibility for some AB 939 activities). 2. CON51DEK ALLOCATING FUNDING FOR THE 1995 BAY AREA WIDE WASTE REDUCTION CAMPAIGNS TO A55URE OUR COUNTY'S PARTICIPATION IN THESE IMPORTANT EFFORTS (SHOP SMART, EDIBLE FOOD DONATION CAMPAIGN & BU51NE55 WASTE PREVENTION CAMPAIGN). Staff provided an oral report, no direction was provided by the Committee. No objection was raised to participation. 3. CON51DEK TENTATIVE MEMORANDUM OF UNDERSTANDING WITH IRONHOUSE SANITARY DISTRICT. Committee agreed to move this item to the full Board of Supervisors for approval after staff has finalized the MDU. Pagel Committee asked staff to agendize MOUS/Franchises on future Ad Hoc Committee meeting agenda to allow forum for discussion of other MOUS/Franchises based on input/request from interested parties representing Rodeo & Mt. View Sanitary Districts and Kensington Community 5ervice6 District. 4. CON5IDEK CORRE5PONDENCE FROM WCCIWMA REGARDING VOTING MEMBEK5HIP. Committee asked staff to bring this matter to the full Board of 5upervisors so they can provide direction to stafF, if a letter is to be sent to the WCCIWMA Board or Member Agencies the Committee indicated it should come from the full Board of 5upervisors. 5. 5RIEF STAFF REPORTS. ® RATE REVIEW METHODOLOGY CONTRACT5: 5taff reported that the two contracts for (1) K55 Rate Methodology Review and (2) Development of a Rate Methodology for 5F1, Garaventa and Bay View have been signed and work is progressing. In order to facilitate the rate reviews in a timely manner, the committee authorized staff to request proposals from consultants and either proceed if the cost was less than $25,000 or if greater than $25,000 place on the Board of 5upervi5or'5 agenda as a consent item. ® ALL REMAINING ITEM5: 5taff provided oral reports, no action was taken by the Committee. 6. PUBLIC COMMENT. The public provided some comments, no action taken by the Committee. DEMADHOCOMMIN Page 2 ATTAINT 3 NewPoint Group L Management Consultants July 28, 1997 Dr. Linda Moulton Community Development Department Contra Costa County County Administration Building 651 Pine Street 4'Floor,North Wing Martinez, California 94553-0095 Regarding: Solid Waste Rate Setting for BFI -Pleasant Hill Bayshore Disposal, Inc. Dear Dr. Moulton: Thank you for requesting that NewPoint Group, Inc. submit a proposal for solid waste rate setting for Pleasant Hill Bayshore Disposal, Inc.. This company is a wholly- owned subsidiary of BFI. A BFI letter dated March 19, 1997, requested a rate increase on the garbage collection and recycling being performed under the franchise contract with the County. NewPoint Group is currently in the process of developing a solid waste rate setting manual for the unincorporated portions of Contra Costa County (County). At the same time, the County has received the solid waste rate change request from BFI. It is expected that our draft rate setting process and methodology will be complete by the end of August, 1997, and that BFI will be able to submit its first formal application for a rate change using this process by mid-September, 1997. Below we discuss the proposed project scope, and following this we present our project work plan. At the end of this proposal letter we present our project time schedule and professional fees. A. Project Scope BFI has an exclusive franchise with the County to collect, and remove for - disposal and recycling, all residential and commercial solid waste, including recyclable materials. BFI has a twenty year franchise with the County, beginning with an effective date of August 1, 1995. - 555 Capitol Mall,Suite 650,Sacramento, California 95814 - Phone: (916)449-3400 - Fax: (916)446-8149 NewPoint Group Monagement Consultants Dr. Linda Moulton Page 2 July 28, 1997 Under the franchise,the County has the right to set maximum residential and commercial solid waste rates. This is the first time that rates will be set for this hauler by the County. It is expected that because this is the first base year rate setting process, that several unique financial issues will need to be identified and resolved. For example,this hauler owns its own landfill, and critical decisions will have to be made on how to treat landfill tipping fees and related profits. The preliminary 1996 financial statements provided by this hauler show significant operating losses. This hauler has not had a CPI increase for approximately five years. Also, their recycling rates do not reflect true cost-of-service. An overall rate increase is to be expected with this hauler, though the exact magnitude of increase is unknown at this time. Also the impact of any potential rate increase on ratepayers is unknown. These different impacts will all have to be considered during this rate setting proj ect. This hauler serves nine (9) geographic areas, all with different rate schedules, as follows: • Bay Point • Concord • Alhambra Valley • Morgan Territory • North Lafayette • Town of Rodeo • Mountain View • Pacheco • Central Sanitary Area. In addition, many of these nine geographical areas have multiple rate schedules within them, there by expanding the array of, and complexity of, the different rate schedules. Some of the geographical areas have Senior rates, and some do not. One of the goals of the County, besides having fair and justifiable rates, is to move to more of a uniform county-wide rate structure, thereby reducing the number and complexity of remaining rate structures. NewPoint Group Management Consultants Dr. Linda Moulton Page 3 July 28, 1997 The franchise agreement specifies that the hauler shall accompany its rate application by an audited financial statement. It was mutually agreed that for this first base year rate application that BFI internal financial statements will be satisfactory. However, for the second base year application, three years hence, audited financial statements will be required. The franchise agreement also specifies that the hauler, prior to a rate application, shall conduct a survey of customers within its franchise area to determine customer satisfaction. BFI has represented that they just completed a mail survey of their customers, though we have not yet seen this survey. We are assuming that this survey will meet the County's intent of the applicable franchise agreement requirement for this first base year rate application. Though the County can regulate both residential and commercial rates through its franchise agreement, the County has decided to focus the first BFI ratesetting application on just residential solid waste rates and residential recycling rates. Commercial revenues made up approximately 28 percent of BFI's total 1996 revenues for this franchise area. BFI claims that commercial rates already subsidize residential rates. For now, it was mutually agreed by both the County and the hauler to focus only on residential rates at this time. Ultimately the County would like to have mini-can rates and variable rate structures with unit pricing of municipal solid waste. Also, BFI wants to eventually add a green waste program. However, it is mutually agreed by both the County and the hauler that for this first base year rate application that rates be set based on existing rate structures, and known associated historical financial information. For those additional new programs that the County and hauler want to eventually add, it was agreed that pilot projects should be demonstrated,there by developing actual sample financial data,before the rate structure is modified further. B. Project Work Plan This section presents our work plan to assist the County to review the forthcoming rate change application from its franchised solid waste hauler, BFI - Pleasant Hill Bayshore Disposal, Inc. We will conduct the rate setting review in accordance with the County's forthcoming draft rate setting manual. For each task, we describe the task NewPoint Group Management Consultants Dr. Linda Moulton Page 4 July 28, 1997 objectives, identify the subtasks included, and present the key deliverable(s) for each task. It should be noted that the County's rate setting manual will provide details for specific"steps"which the contractor will perform on behalf of the County. We will perform these specific steps of your manual during Task 2 of our proposed work plan. Therefore, we do not repeat the detailed description of every rate setting review step in this proposal, but rather provide a summary of these steps. Task 1. Initiate and Administer Project At the formal kick-off meeting with the County's project manager, we will verify the project's scope and objectives, discuss key project issues, obtain additional background information, and set up initial interviews. If discussions at the kick-off meeting significantly alter the objectives or scope of the engagement, we will revise the task plan and schedule, if necessary. We will prepare monthly progress reports,which will summarize work completed in the prior month, work planned for the next month, and any problems which may have arisen. We also will prepare monthly invoices, which summarize level of effort and charges to-date. Subtasks 1.1 Conduct Project Kick-Off Meeting 1.2 Submit Request for Relevant Documents and Data 1.3 Coordinate Initial Interviews with the County and BFI 1.4 Modify Work Plan, If Necessary 1.5 Revise Project Schedule As Needed 1.6 Perform Ongoing Project Management 1.7 Prepare Monthly Written Status Reports. Deliverables ❑ Revised Work Plan, If Necessary ❑ Monthly Progress Reports. NewPoint Group Manogement Consultonts Dr. Linda Moulton Page 5 July 28, 1997 Task 2. Review Rate Change Application The base year process to be presented in the County's rate setting manual describes eleven steps, seven of which are the responsibility of the County. The franchise hauler is responsible for the other four steps. In conducting our work,we will assume the role of the "County"as described in the manual for seven work tasks. In Figure 1, on the next page, we identify these seven tasks and their deliverables. The actual work we will perform during each of these seven tasks is described in the County's forthcoming rate setting manual. We assume that BFI will provide complete and detailed financial statements for fiscal years 1994, 1995, and 1996, as well as a financial statement through the most recent month for calendar year 1997. The new base year will be estimated fiscal year 1998, based on projected costs for fiscal year 1997. We are assuming that the new rates will be effective January 1, 1998. NewPolnt Group Management Consultants Dr. Linda Moulton Page 6 July 28, 1997 Figure 1 BFI Rate Application Review Work Tasks and Deliverables Work Task Deliverable 1. Verify Completeness of Rate Change • Letter Notifying BFI that Application is Application Either Complete or Incomplete 2. Review Rate Change Application and • Documentation of Review Findings Prepare Response . Request to BFI for Additional Data and Clarification, if necessary 3. Survey Rates in Similar Service Areas • Summary of Survey Results for Selected Bay Area Communities 0 Residential service and rates 0 Commercial service and rates 0 Trucking costs 0 Office space costs 4. Prepare Draft Report and • Draft Report and Recommendations Recommendations 5. Conduct Public Hearing • Public Hearing 6. Prepare Final Report and • Final Report and Recommendations Recommendations 7. Assist County Staff With Presenting • County Board of Supervisors Final Report and Recommendations to Presentation County Board of Supervisors Task 3. Review the Company's Financial Statements and Supporting Documentation BFI will submit financial statements with its rate application. We will review the financial information and examine company records where necessary,to assure the accuracy and veracity of the financial information provided to the County in the rate application. NewPotnt Group Management Consultants Dr. Linda Moulton Page 7 July 28, 1997 Subtasks 3.1 Obtain and Review the Company's Financial Statements Provided with Rate Application 3.2 Review Supporting Documentation, if Necessary. Deliverables ❑ Workpaper Documentation of Impact on Financial Statements and Rate Application. Task 4. Prepare Draft and Final Reports and Present Recommendations In this task, we will prepare the draft and final reports. This report will include all findings and recommendations from the rate review. Much of what will be in the report will already have been discussed with the County, so there should be no surprises and the report should reflect feedback from the County in response to working meetings. Once we have completed a final draft report, we will present this document to the County and BFI during a scheduled meeting. Our presentation also will include an "Executive Level" discussion of the results. Comments received from the County and BFI will be incorporated into the report, as appropriate. After the presentation to the County, we will prepare the final rate setting manual. Finally, we will provide assistance with one public hearing and one presentation to the County Board of Supervisors. Subtasks 4.1 Develop Initial Draft Report 4.2 Review Draft Report with the County and BFI 4.3 Revise Report, as Necessary 4.4 Present Final Draft Report to the County 4.5 Revise Final Draft Report, as Required, and Submit Final Report 4.6 Present Final Recommendations to the County Board of Supervisors. NewPolnt Group Management Consultants Dr. Linda Moulton Page 8 July 28, 1997 Deliverables ❑ Draft Report ❑ Presentation Materials for County and Hauler Meeting(s) ❑ Public Hearing ❑ Final Report ❑ Board of Supervisors Presentation. C. Project Schedule and Costs As required, we will assist the County to bring the rate review to the County Board of Supervisors for the public review within ninety calendar days from the receipt of your notice to proceed. In order to complete the project within the 90-day timeframe, we assume that the hauler will submit a correctly completed rate application in September, and the County and BFI will respond to our requests for information, interviews, and deliverable reviews in a timely manner. Also, documents for the public hearing in December 1997 will include at least summary-level exhibits and charts of the project's findings, conclusions, and recommendations. Figure 2 shows our anticipated project schedule and assumes a September 16, 1997, start date. Figure 2 BFI Rate Setting Project Schedule 1997 September October November December Task 1: Initiate and Administer - Project Task 2: Review Rate Change Application Task 3: Review the Company's Financial Statements and Supporting Documentation Task 4: Prepare Draft and Final Reports and Present Recommendations NewPotnt Group Management Consultants Dr. Linda Moulton Page 9 July 28, 1997 We will conduct this engagement for a not-to-exceed total fees and expenses of$58,200. Our costs reflect expenses for administration, word processing,report production, and travel. Our professional fees include one presentation before the County Board of Supervisors. NewPoint Group will bill monthly for our services. We look forward to the opportunity to continue to assist Contra Costa County with its future waste management rate setting needs. Please do not hesitate to contact Dr. James Gibson in Sacramento at (916) 449-3510 should you have any questions regarding this work plan or our qualifications to serve you. Very truly yours, NEWPOINT GROUP,INC. 4;�X'. �-� aures A. Gibson, Ph.D. Director a ATTACHMENT 4 Excerpt from BFI franchise Agreement determined by the County during the rate review process. Rates fixed by County shall be maximum rates which Contractor may charge the Customers. The maximum rates fixed by the County at this time shall be the highest commercial rate and the highest residential rate being charged by Contractor within the Franchise Area immediately before the effective date of this Agreement as set forth in Exhibit C . Nothing in this Agreement precludes Contractor from charging rates less than the maximum rates fixed by the County. Pending a rate review by the County, the maximum rates chargeable shall be those rates charged on the effective date of this Agreement. Following consultation with the Contractor and examination of industry norms and trends, the County, in its sole discretion, 911all determine the method of determining Contractor profitability. All costs associated with County review and processing of rate applications shall be paid by Contractor and shall be allowed as a pass-through cost in the rate application process. Contractor will offer a mini-can program at reduced rates as directed by the County following consultation with Contractor. 9. RATE APPLICATIONS. Rate applications shall be prepared In accordance with such forms and in such detail as required by the County. The application shall include one reproducible hard copy, 15 hard copies bound in an appropriate manner and one copy on disk formatted pursuant to County specifications. G� Contractor shall submit its first rate application as directed by the County. All rate applications shall include information from the previous rate change to the present, or such other period of time as is selected by the County. Every three years, a rate application shall be accompanied by an audited financial statement covering the entire period since the last audited rate application together with supporting documentation as required to segregate its County regulated activities from other business activities. j The County Administrator may, in writing, allow the rate application to be submitted without an audited financial statement provided the County Administrator is satisfied that the level of verifiable detail allows for adequate assessment of the Contractor's income, expenses, assets and liabilities. Rate changes may be initiated by County at any time or by Contractor under the conditions allowed in this section. In either case, Contractor shall prepare a rate application in accordance with the requirements of this section. May 3, 1995 6