HomeMy WebLinkAboutMINUTES - 08092011 - D.1RECOMMENDATION(S):
APPROVE revised “Rate Setting Process and Methodology Manual for Solid Waste
Collection Charges As Applied to Garaventa Enterprises” dated July 2011, prepared
by NewPoint Group, containing the changes being recommended by staff following
consultation with Garaventa Enterprises (EXHIBIT A);
1.
REQUIRE Garaventa Enterprises (Contractor) to implement 3-cart residential
recycling collection services, as described in EXHIBIT B, in the unincorporated
communities within the County Franchise Area on or before January 15, 2012;
2.
APPROVE a new effective date of January 15, 2012 for implementation of the
Contractor’s previously approved 3-cart residential rate structure for customers served
within the County's Franchise Area to coincide with the launch of 3-cart residential
recycling services pursuant to Section 12(c) of the County’s Franchise Agreement with
Garaventa Enterprises ("Franchise Agreement"):
3.
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On: 08/09/2011 APPROVED AS RECOMMENDED OTHER
Clerks Notes:See Addendum
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Gayle B. Uilkema, District II
Supervisor
Mary N. Piepho, District III
Supervisor
Karen Mitchoff, District IV
Supervisor
Federal D. Glover, District V
Supervisor
Contact: Deidra Dingman,
925-335-1224
I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the
Board of Supervisors on the date shown.
ATTESTED: August 9, 2011
David Twa, County Administrator and Clerk of the Board of Supervisors
By: June McHuen, Deputy
cc:
D. 1
To:Board of Supervisors
From:Catherine Kutsuris, Conservation & Development Director
Date:August 9, 2011
Contra
Costa
County
Subject:RECOMMENDED CHANGES TO GARAVENTA ENTERPRISES RATE SETTING MANUAL AND
THREE CART RESIDENTIAL COLLECTION IMPLEMENTATION SCHEDULE
RECOMMENDATION(S): (CONT'D)
Service Level
(Cart Size)*
Monthly Rate
(Maximum)
20-gallon $25.00
32-gallon $31.20
64-gallon $36.20
95-gallon $43.05
* Minimum cart sizes specified, the actual cart sizes provided to customers may be up to 5 gallons larger (with the exception of the 20-gallon
size). Contractor may increase rates in 2012 up to the applicable annual percent change in the Consumer Price Index without Board Approval
pursuant to the Franchise Agreement and revised Rate Manual.
4. REQUIRE the Contractor to provide the Department of Conservation and Development (DCD) with monthly
reports, beginning September 1, 2011, reflecting the distribution of residential customers by service level in
sufficient detail to allow the Director to determine timing and effect of 3-cart rate implementation including
whether or not it is appropriate to request submittal of an additional base year rate application;
5. APPROVE and AUTHORIZE the Chair of the Board of Supervisors to execute the third amendment to the
Franchise Agreement attached as Exhibit C; and,
6. APPROVE in concept a fourth amendment to the Franchise Agreement consistent with Exhibit D, in a form
approved by County Counsel, that removes customers obligation to provide garbage containers, modifies
description of “County Agent”, updates County Department name and noticing contacts, corrects Section
number references and incorporates new/revised language acknowledging the County approved Rate Manual
pursuant to Exhibit D.
FISCAL IMPACT: No impact to the County General Fund. The costs for County staff time spent administering
the Franchise Agreement is covered by solid waste/recycling collection franchise fees. BACKGROUND: The
County has a solid waste and recycling collection Franchise Agreement with Garaventa Enterprises (Contractor)
for service to the following unincorporated areas/regions:
Bay Point - portion (remainder of Bay Point falls within the area served under the
County’s Franchise with Allied Waste);
Bethel Island;
Brentwood, unincorporated;
Concord, unincorporated - portion (remainder of unincorporated Concord falls
within the area served under the County’s Franchise with Allied Waste);
Discovery Bay;
Knightsen; and
Oakley, unincorporated.
The County’s service area includes portions of Supervisorial Districts III, IV and V. Byron Sanitary District
administers its own solid waste collection franchise agreements and regulates the residential rates for about 100
customers that fall within its boundaries.
On January 25, 2011, the Board of Supervisors approved a number of recommendations related to rate and
collection services changes for customers served by Garaventa Enterprises under the County’s Franchise
Agreement. Five of these previously approved recommendations were contingent upon the launch of new 3-cart
services and expected to be implemented simultaneously. At that time, staff expected 3-cart services to be
launched on or about September 1, 2011.
Contractor specified that the new carts needed to launch 3-cart services would not be ordered until the Board of
Supervisors approved a revised Rate Manual. The 3-cart services launch date was selected based upon
Contractor’s five-month timeline for purchasing and delivering carts. As discussed in more detail below, staff
was not able to finalize consultation with Contractor for these Rate Manual changes in time to return to the
Board in late March. Accordingly, this has impacted the Contractor’s proposed timeline for implementing 3-cart
services. If the Board approves the revised Rate Manual on or before August 15, 2011, Contractor would be
expected to launch 3-cart services by January 15, 2012.
Rate Setting Process & Methodology Manual Changes
The County’s rate setting process is governed by terms of the Franchise Agreement which were mutually agreed
upon in 1995. Rate setting is also guided by the parameters specified within the County’s “Rate Setting
Process and Methodology Manual for Solid Waste Collection Charges As Applied to
Garaventa Enterprises” (“Rate Manual”) originally approved by the Board in November 1999. The Rate
Manual specifies details about the approach and process selected by the County to help ensure that rate setting
authority is exercised in a consistent manner.
The Contractor suggested that the County consider a number of changes to the Rate Manual prior to approval of
proposed 3-cart services in January 2011. County staff agreed to recommend official review of the Rate Manual
for the purpose of identifying changes expected to either provide more certainty about the rate setting process or
facilitate consistency in the Contractor’s treatment of costs in Rate Applications. County staff also expressed
willingness to consider any other minor administrative changes that would not be expected to negatively impact
rate payers. Although the Franchise Agreement does not call for Contractor’s review or acceptance of the Rate
Manual, County staff involved the Contractor in the Rate Manual review and revision process with the
understanding that the County has sole authority to approve any Rate Manual changes.
On January 25, 2011, the Board of Supervisors directed staff, in consultation with the Contractor, to identify
potential recommended revisions to the Rate Manual and any associated changes potentially needed to related
terms in the County's Franchise Agreement in order to report back to the Board. Since that time, staff had many
meetings with Contractor's representatives as well as exchanged written information related to Rate Manual
changes desired by both parties. Unfortunately, the Board's consideration of this matter had to be delayed in
order for staff to complete our consultation with Contractor about the Rate Manual revisions.
The County's consultant, NewPoint Group, incorporated staff recommended changes into a revised version of
the “Rate Setting Process and Methodology Manual for Solid Waste Collection Charges
As Applied to Garaventa Enterprises” dated July 2011, which is attached as EXHIBIT A.
RATE MANUAL CHANGES RECOMMENDED TO ADDRESS ISSUES RAISED BY
CONTRACTOR
Provided clarification or added specificity where needed to minimize Contractor's
potential uncertainty related to future expected treatment of costs (e.g. Contractor's
actual costs for providing the franchise required free drop boxes for community
clean-ups) when preparing/reviewing rate applications;
Acknowledged changed circumstances since the original Rate Manual was
approved in 1999. Examples include providing for an alternative method of
factoring recyclables revenue into rate setting, and specifying a different means for
determining reasonableness of trucking lease costs in the absence of the required
comparable lease rates;
Delineation of the method Contractor proposes to allocate/segregate costs for
regulated and non-regulated operations. The Contractor is required to obtain the
County’s written approval of its method of segregating its financial records
between County-regulated and non-County regulated operations pursuant to the
terms of the Franchise Agreement (Section 7);
Revised schedule for Base Year Rate Setting from every four years to every three
years consistent with terms of the Franchise Agreement (Section 9);
Established streamlined process for Consumer Price Index (CPI)-only rate changes
consistent with terms of the Franchise Agreement (Section 9);
Simplified Interim Year process by eliminating use of adjusted CPI in Interim
Years which was intended to account for variations between projected and actual
change in CPI; and
Specified process for requesting extraordinary rate changes pursuant to the
Franchise Agreement (Section 9).
REVISIONS TO INCORPORATE PREVIOUSLY APPROVED CHANGES OR
UPDATED CIRCUMSTANCES
Eliminated rounding to the nearest $0.05 when establishing recommended rate
changes (approved by the Board in May 2007);
Added detail related to certain diversion program costs to ensure household
hazardous waste (HHW) fees paid to the Delta Diablo Sanitation Distrtict for
operating the household hazardous waste (HHW) facility serving East County are
treated as a “pass-through” expense and not allowed with profit (approved by the
Board in May 2007); and
Eliminated $3.00 per month toter rental charge in future rate years (included in
Base Rates approved in 2011, but not intended to be included in allowed rates
charged in 2012 and beyond).
REVISIONS REQUESTED BY THE CONTRACTOR BUT NOT RECOMMENDED BY
STAFF
There were some Rate Manual changes which were requested by the Contractor but are not being recommended
by Staff because of the potential for negatively impacting rate payers now or in the future and/or implications
for the County's other franchise areas. Following is a summary of the key Contractor requested Rate Manual
changes which are not being recommended by staff:
Limit County's rate setting authority to residential only;
Incorporate fixed operating ratio which is expected to increase profit level;
Incorporate Rate Manual into Franchise, requiring any future changes to be
mutually-agreed upon;
Change rate setting index from the CPI to a different pricing index which is
generally higher than CPI;
Incorporate annual negotiated salary/benefit increases specified in labor
agreements in addition to pricing-based index used for interim year rate
adjustments;
Allow profit on HHW fees paid by Contractor;
Allow profit on entire per ton tipping fee charged at the Recycling Center &
Transfer Station owned by Contra Costa Waste Service (an affiliated company); and
Increase cap on General & Administrative costs to a higher fixed percentage.
Implementation of 3-Cart Residential Collection Services & Rate Structure
The Contractor is expected to implement the enhanced 3-cart services described in EXHIBIT B on January 15,
2012. Contractor is expected to order sufficient quantity of covered wheeled garbage, recycling and greenwaste
carts to serve the intended residential customers (about 8,428 as of July 15, 2011) as directed by the County
DCD. The Contractor is expected to place an order for residential carts on or before August 15, 2011, following
Board consideration of the recommended revisions to the Rate Manual.
Third Amendment to the County's Franchise Agreement with Garaventa Enterprises
On January 25, 2011, the Board of Supervisors authorized execution of a third amendment to the Franchise
Agreement that extended the term of the Franchise Agreement by a total of 10 years and specifies that the
Agreement that extended the term of the Franchise Agreement by a total of 10 years and specifies that the
franchise fee will be 7% upon implementation of 3-cart services, pursuant to the terms specified in that board
order and in a form approved by County Counsel. To address any uncertainty about applicable terms and ensure
language is acceptable to the Board, staff is recommending that the Board approve the Third Amendment to the
Franchise Agreement which is attached as EXHIBIT C. The extension provided for in the Third Amendment
will not take effect until the Contractor demonstrates implementation of the enhanced residential services
described in EXHIBIT B and will only remain in effect as long as the County required services remain in place.
Fourth Amendment to the County's Franchise Agreement with Garaventa
Enterprises
On January 25, 2011, the Board of Supervisors directed staff, in consultation with the Contractor, to identify
changes potentially needed to the terms of the Franchise Agreement based upon the Rate Manual in order to
report back to the Board. Staff is recommending conceptual approval of a fourth amendment to the Franchise
Agreement to incorporate the changes recommended by staff which are described in Exhibit D. The fourth
amendment will be prepared in a form approved by County Counsel at which time the amendment will be
scheduled for consideration by the Board of Supervisors.
There were some Franchise Agreement changes pertaining to rate setting which were requested by the
Contractor but are not being recommended by staff because of the potential for negatively impacting rate payers
now or in the future. Following is a summary of the key rate setting Franchise Agreement changes requested by
the Contractor but not recommended by staff:
Limit the County's rate setting authority to residential services only;
Incorporate fixed operating ratio which is expected to increase profit level; and
Incorporate Rate Manual into Franchise, requiring any future changes to be
mutually-agreed upon.
Letter from Garaventa Enterprises
Garaventa Enterprises submitted the attached letter addressed to the Chair of the Board of Supervisors on July
25, 2011. The letter requests a reduction of the minimum cart sizes specified in the 3-cart residential rate
structure approved by the Board in January of 2011. These previously approved minimum cart sizes were
recommended following extensive discussions with the Contractor. This issue was not raised in the staff
discussions with the Contractor, the results of these discussions form the basis of the recommendations included
within this report. Since a Third Amendment to the Franchise Agreement (Exhibit C) has been prepared
pursuant to the Board’s direction in January of 2011, it incorporates the approved cart size minimums while
allowing for purchase and use of increased cart sizes.
Specifically, the Contractor is requesting the ability to purchase smaller carts that would have up to 2-5 gallons
less capacity than the previously approved minimum cart sizes. The Contractor’s letter asks that the 32-gallon
minimum be changed to a 30- gallon cart size. Currently, the Contractor could provide a cart of 32, 33, 34 or 35
gallons with no changes. The largest potential deviation would be for the 95 gallon rate structure, in which a cart
would be 5 gallons smaller according to this new proposal. The approved 3-cart rates to be charged to residential
customers were calculated based on the pricing for the larger cart sizes.
The Contractor’s letter indicates that this change is requested because it is expected to “lower cart costs for the
benefit” of their County customers. Therefore, the Department believes that the reduction of minimum cart sizes
would warrant consideration if it would result in direct savings to customers (via lower rates) and would not
impact the timeframe in which the 3-cart collection services would be implemented (no later than January 15,
2012). If the Board wishes to have this proposal considered, the Department recommends the following
language modification:
"If the Contractor wishes to purchase carts that are smaller than the minimum sizes specified herein, the
Contractor must submit such request in writing to DCD in conjunction with all applicable price quotes/bids
received from cart manufacturers at least five days prior to the purchase of carts. The DCD Director is
authorized to allow purchase of smaller carts, if the Director determines this would directly benefit ratepayers in
the County's Franchise Area (based upon the assumed cart costs used for setting the previously approved 3-Cart
rates and the actual cart price quotes/bids submitted by Contractor) and would allow implementation of the
3-cart residential collection services on or before January 15, 2012."
(applicable to the “3-Cart Collection System” exhibit to the Third Amendment to the Franchise Agreement and
the previously approved cart-size minimums identified in Recommendation 3)
CONSEQUENCE OF NEGATIVE ACTION: Contractor would not be willing to proceed with capital
investment needed to purchase carts for their residential customers in the unincorporated East County area and
therefore enhanced 3-cart services would not be implemented. CHILDREN'S IMPACT STATEMENT: Not
applicable. CLERK'S ADDENDUM
Speakers: Mike Bonnifield, Garaventa Enterprises. ADOPTED the recommendations as presented, with the
inclusion of the language modification: "If the Contractor wishes to purchase carts that are smaller than the
minimum sizes specified herein, the Contractor must submit such request in writing to DCD in conjunction
with all applicable price quotes/bids received from cart manufacturers at least five days prior to the purchase
of carts. The DCD Director is authorized to allow purchase of smaller carts, if the Director determines this
would directly benefit ratepayers in the County's Franchise Area (based upon the assumed cart costs used for
setting the previously approved 3-Cart rates and the actual cart price quotes/bids submitted by Contractor)
and would allow implementation of the 3-cart residential collection services on or before January 15, 2012."
And with the understanding the contractor may directly contact and work the Board subcommittee
Transportation, Water and Infrastructure Committe (TWIC) with future concerns.
ATTACHMENTS Exhibit A - Revised Rate Methodology & Manual Exhibit B - 3-Cart Recycling Collection
System Exhibit C - 3rd Amendment to Franchise Exhibit D - Changes Proposed for Fourth Amendment Exhibit
E - Garaventa Letter to BOS
Rate Setting Process
and Methodology Manual for
Solid Waste Collection Charges
Contra Costa CountyContra Costa County
As Applied to
Garaventa Enterprises
Department of Conservation and DevelopmentDepartment of Conservation and Development
July 2011
Version 2
Rate Setting Process
and Methodology Manual
for Solid Waste Collection
Charges
July 2011
Version 2
Contra Costa County
As Applied to Garaventa
Enterprises
Printed on Recycled Paper
Rate Setting Process and
Methodology Manual
for Solid Waste Collection Charges
As Applied to Garaventa Enterprises
Prepared for
Contra Costa County
Prepared by
2555 Third Street, Suite 215
Sacramento, California 95818
(916) 442-0508
www.newpointgroup.com
Version 2 – July 15, 2011
Version 1 (Original) – June 28, 1999
Contra Costa County i Garaventa Enterprises
Rate Setting Process & Methodology Manual for Solid Waste Collection Charges
Table of Contents
Page
I. Rate Setting Overview
A. Introduction to the Manual ................................................................................... 1
B. Goals of Rate Setting Process .............................................................................. 5
C. Policies Guiding Rate Setting Manual ................................................................. 8
D. Rate Change Application Process ........................................................................ 14
E. Allowable Costs, Pass Through Costs, Allowable Profits, and Non-
Allowable Costs ................................................................................................... 16
E.1 Allowable Costs.......................................................................................... 16
E.2 Pass Through Costs .................................................................................... 21
E.3 Allowable Profits ........................................................................................ 22
E.4 Non-Allowable Costs ................................................................................. 25
F. Other Rate Setting Policies .................................................................................. 27
II. Base Year Rate Setting Process
A. Overview of the Base Year Rate Setting Process ................................................ 31
B. Timing of the Base Year Rate Setting Process .................................................... 32
C. Special Extraordinary Rate Applications ............................................................. 32
D. Steps of the Base Year Rate Setting Process ....................................................... 32
1. Preparation and Submission of Rate Change Application .......................... 35
2. Verification of the Completeness of Rate Change Application ................. 39
3. Review of Rate Change Application and Preparation of Responses .......... 40
4. Response to Additional Information Requests from City ........................... 43
5. Survey of Rates in Similar Service Areas ................................................... 44
6. Preparation of Draft Report and Recommendations ................................... 46
7. Review of Draft Report and Recommendations ......................................... 48
8. Optional Public Hearing ............................................................................. 49
9. Preparation of Final Report and Recommendations ................................... 51
10. Presentation of Final Report and Recommendations .................................. 52
11. Implementation of New Rates .................................................................... 53
III. Base Year Rate Setting Methodology
A. Preparation of the Base Year Rate Change Application ...................................... 55
1. Entry of Operating Costs and Profit ............................................................ 63
2. Determination of Residential & Commercial Revenues ............................. 70
3. Calculation of Allowable Operating Profit and Revenue
Requirement ................................................................................................ 73
4. Calculation of Percent Change In Rates ...................................................... 75
5. Preparation of Summary Form ................................................................... 76
B. Survey of Rates in Similar Areas ......................................................................... 77
Contra Costa County ii Garaventa Enterprises
Rate Setting Process & Methodology Manual for Solid Waste Collection Charges
Table of Contents (continued)
Page
IV. Interim Year Rate Setting Process
A. Interim Year Rate Adjustments............................................................................ 81
B. CPI-Based Rate Adjustments ............................................................................... 81
C. Extraordinary Rate Adjustments .......................................................................... 81
D. Timing of Interim Year and CPI-Based Rate Setting .......................................... 82
E. Steps of the Base Year Rate Setting Process ....................................................... 86
1. Preparation and Submission of Rate Change Application ....................... 86
2. Preparation of Rate Adjustment Indices .................................................. 87
3. Review and Response to County Analysis and Calculations ................... 89
4. Preparation of Final Report and Recommendations ................................ 90
5. Presentation of Final Report and Recommendations to the
Board of Supervisors ............................................................................... 91
6. Implementation of New Rates ................................................................. 92
V. Interim Year Rate Setting Methodology
A. Preparation of the Interim Year Rate Change Application ............................... 93
1. Report of Changes in Tipping Fee Costs ................................................. 96
2. Explanation of Changes in Tipping Fee Costs ......................................... 97
3. Application Certification ......................................................................... 98
B. Preparation of the Interim Year Rate Change Worksheet ................................. 99
1. Determination of Base Year Costs and Weighting .................................. 102
2. Projection of Change in Consumer Price Index ....................................... 104
3. Calculation of Percent Changes in Tipping Fee Costs ............................. 105
4. Calculation of Weighted Change in Residential Rates ............................ 107
5. Presentation of Summary Form ............................................................... 109
Appendices
Appendix A - Contra Costa County Franchise Agreement with Garaventa Enterprises
Appendix B - Rate Application Forms and Worksheets
Contra Costa County iii Garaventa Enterprises
Rate Setting Process & Methodology Manual for Solid Waste Collection Charges
List of Exhibits & Figures
Exhibit Page
I-1 Garaventa Enterprises - Unincorporated East Contra Costa County
Solid Waste & Recycling Collection Service Areas ........................................................ 3
I-2 Organization of Each Step ............................................................................................... 4
I-3 Solid Waste Collection Rate Setting Philosophy ............................................................. 7
I-4 Solid Waste Collection Rate Setting Policies .................................................................. 9
I-5 Allocation Bases to Use for Unincorporated County Area Costs
Shared with Other Jurisdictions ...................................................................................... 13
I-6 Timing and Financial Statement Requirements of Rate Setting Process ......................... 15
I-7 Definition of Financial Terms .......................................................................................... 18
II-1 Base Year Rate Setting Process Overview....................................................................... 33
II-2 Timing of the Base Year Rate Change Process ............................................................... 34
II-3 Sample Public Hearing Announcement ........................................................................... 50
III-1 Preparation of the Base Year Rate Change Application .................................................. 56
III-2 Sample Base Year Rate Change Application ................................................................... 57
III-3 Base Year Projection Methodology Guidelines ............................................................... 66
III-4 Sample Solid Waste Rate Survey..................................................................................... 78
IV-1 Interim Year Rate Change Process .................................................................................. 83
IV-2 Timing of the Interim Year Rate Change Process ............................................................. 85
V-1 Preparation of the Interim Year Rate Change Application .............................................. 94
V-2 Sample Interim Year Rate Change Application ............................................................... 95
V-3 Preparation of the Interim Year Rate Change Worksheet ................................................ 99
V-4 Sample Interim Year Rate Change Worksheet ................................................................100
Figure Page
I-1 Example Cost Sharing Methodology ......................................................................... 28
I-2 Garaventa Enterprises – Affiliated Companies .......................................................... 30
II, III, IV & V??
Chapter I
Rate Setting Overview
Contra Costa County 1 Garaventa Enterprises
I. Rate Setting Overview
This introduction chapter provides an
overview of the rate setting process and also
details significant guiding policies, which
are used throughout the manual. The process
for how rates are changed is described. Also
included is a description of how the refuse
collection hauler’s costs are treated for rate
setting purposes.
This chapter reviews how to use the
manual and identifies what future
enhancements might be made as the County
and hauler continue to gain experience using
the process. The chapter includes the
following six (6) sections:
A. Introduction to the Manual
B. Goals of Rate Setting Process
C. Policies Guiding Rate Setting Manual
D. Rate Change Application Process
E. Allowable Costs, Pass Through Costs,
Allowable Profits, and Non-Allowable
Costs
F. Other Rate Setting Policies
A. Introduction to the Manual
This manual provides a step-by-step
guide for Contra Costa County (County) and
one of its franchise haulers, Garaventa
Enterprises (Garaventa), to prepare, evaluate
and recommend changes to solid waste
collection charges for specified
unincorporated areas of Contra Costa
County. The manual details procedures for
setting refuse collection service charges in
the County’s franchise area which includes
the following portions (regions) of
unincorporated East County:
1. Bay Point (portion)
2. Bethel Island
3. Byron
4. Discovery Bay
5. Knightsen
6. North Concord
7. Unincorporated Brentwood
8. Unincorporated Oakley.
These areas are depicted in the six regions
shown on Exhibit I-1.
The manual provides a formal structure
for establishing solid waste charges. Prior to
adoption of this manual in 1998, no formal
rate setting process or methodology existed
for this portion of the County. The manual
was developed with input and direction from
the County’s Department of Conservation
and Development in consultation with
Garaventa.
The manual is based on the County’s
current franchise agreement with Garaventa
and existing Garaventa operating conditions
in the County. As the County and Garaventa
continue to use the rate setting methodology,
the process should be updated, revised, and
improved in future base years.
The manual establishes rate change
policies, provides application forms,
specifies reporting formats, identifies
required supporting documentation, and
describes procedures for requesting,
reviewing, and adopting rate changes. Cost
and revenue information is required for all
residential, commercial, and light industrial
services.
Chapter I. Rate Setting Overview
Contra Costa County 2 Garaventa Enterprises
The rate setting process and
methodology described in this manual is
generally consistent with similar manuals
adopted by the County for use in remaining
unincorporated County areas serviced by
other franchised waste haulers. For example,
Richmond Sanitary Service, the hauler
providing service to western portions of
unincorporated Contra Costa County, is
regulated based on a similar methodology
adopted to replace an outdated manual used
by the County and City of Richmond in the
early 1990s.
Much of the structure and processes
described in this manual may apply to these
other haulers’ operations. However, other
haulers may provide different services with
different corresponding rates and rate
structures, and may maintain entirely
different accounting and financial records.
This manual is organized into five
chapters as follows:
q I. Rate Setting Overview
This chapter provides an introduction to
the manual and discusses the policies
followed in establishing the rate setting
processes.
q II. Base Year Rate Setting Process
A detailed discussion of the base year rate
setting process is provided in this chapter.
This discussion focuses on responsibilities
of participants in the process, describes
activities performed, and identifies the
timing of these activities.
q III. Base Year Rate Setting Methodology
This chapter provides detailed instructions
on how to complete forms used to establish
new residential rates in base years.
q IV. Interim Year Rate Setting Process
A detailed discussion of the interim year
rate setting process is provided in this
chapter. This discussion focuses on
responsibilities of participants in the
process, describes activities performed,
and identifies the timing of these activities.
q V. Interim Year Rate Setting Methodology –
In this chapter, detailed instructions are
provided for completing forms used to establish
new rates in interim years.
The manual also contains the following
two appendices:
A. Franchise Agreement Between
County and Garaventa Enterprises
B. Blank Forms and Worksheets.
Each chapter of the manual has been
divided into a number of sections. A
section begins with a capital letter and
includes a discussion related to a major
topic. Many sections of this manual
include a series of “steps” which must be
completed during a process. Each step
begins at the top of a page and is
prominently marked for easy reference.
The organization of each step is shown in
Exhibit I-2.
The manual also contains blank
worksheets and forms, which are used
during the various processes. These
materials are located in Appendix B.
Chapter I. Rate Setting Overview
Contra Costa County 3 Garaventa Enterprises
Exhibit I-1
1. Bay Point
2. Brentwood, unincorporated
3. Byron
4. Discovery Bay
5. Bethel Island, Knightsen & Oakley, unincorporated
6. North Concord, unincorporated
Chapter I. Rate Setting Overview
Contra Costa County 4 Garaventa Enterprises
Organization of Each Step
Exhibit I-2
Chapter I. Rate Setting Overview
Contra Costa County 5 Garaventa Enterprises
B. Goals of Rate Setting Process
The primary goal of the rate setting
process and methodology is to determine
solid waste collection charges which are fair
and equitable to Contra Costa County
customers, and which provide a reasonable
profit to the franchise hauler.
There is no contractual obligation by the
County to provide the hauler with a fair rate
of return through this review process. The
County reviews revenues, costs, and profits
as a basis for recommended changes to solid
waste collection rates. Charges should be set
at a level sufficient to cover costs of
operations and allow a reasonable profit to
the hauler. However, this profit level is not
guaranteed.
The County shall recommend rates for
all of the unincorporated areas serviced by
Garaventa Enterprises. The Byron Sanitary
District will have ultimate responsibility for
approval and implementation of the rates in its
area (approximately 100 residential accounts).
At the time of this manual’s development in
1998, representatives for this Sanitary District
indicated a willingness to use the guidelines
established in this manual and an intention to, in
the future, implement rates recommended
through the County’s rate review process,
with certain possible exceptions.
A small unincorporated island area in the
center of the City of Concord has historically
had the same rates as those of the City. The
company that services this area is Concord
Disposal Service, Inc. (CDS), a subsidiary of
Garaventa Enterprises. At the time of the
manual’s development, this North Concord
area included approximately 250 residential
customers. In an effort to maintain continuity
of services and rates with neighboring City of
Concord customers, it is assumed that future
rates charged and services provided to these
unincorporated County customers will be the
same as services and rates for the City
customers unless otherwise directed by the
County.
The County has common rates in the
following Franchise area regions Bay Point
(portion), Bethel Island, Discovery Bay,
Knightsen, Unincorporated Brentwood, and
Unincorporated Oakley. Current 32-gallon
rates and rate structures, at the time of this
second version of the manual, for the
unincorporated East County areas serviced by
Garaventa are provided below:
Monthly Residential Rates - 2011
32-Gallon
Bay Point (portion) $32.85
Bethel Island/Knightsen &
Unincorporated Oakley $32.85
Brentwood, unincorporated $32.85
Byron (Sanitary District area) $29.61
Discovery Bay $32.85
In conjunction with submittal of the 2010
base year rate application, Garaventa
proposed a new three-cart system for
residential services. The new three-cart
residential rates approved by the County
Board of Supervisors in 2011 are provided
below:
Proposed Rate
Service* (per customer,
per month)
20-gallon mini-can $25.00
32-gallon cart $31.20
64-gallon cart $36.20
96-gallon cart $43.05
* Minimum cart sizes specified, the actual cart sizes
provided to customers may be up to 5 gallons larger
(with the exception of the 20-gallon size)
Chapter I. Rate Setting Overview
Contra Costa County 6 Garaventa Enterprises
A total of seven (7) key rate setting
process goals are summarized in Exhibit I-3,
and described in detail below:
1. The County and hauler should start with a
strong and committed partnership. The
current franchise agreement between the
County and Garaventa extends through
May 2015 (to be extended 10 years
contingent upon 3-cart residential
services). The County and hauler should
view this franchise as a long-term business
partnership where both parties commit to
use the formal rate setting methodology,
and plan continuous communication on
rate setting throughout the franchise term.
2. The charges requested by the franchise
hauler must be justifiable and
supportable. A formal request to change
refuse collection charges, submitted by a
franchise hauler, should be based on
adopted guidelines for expenses and
profits which include only allowable and
necessary costs. In determining rates, the
County shall consider both the need for
fairness to the ratepayer and the need for
the hauler to be compensated fairly and
consistently with the methodology.
3. The process should ensure that revenues
are adequate to fully meet reasonable
costs-of-service. Estimated costs of service,
and resulting solid waste management
charges, should be reasonable. Granting a
franchise for solid waste collection
implicitly recognizes the private sector’s
ability to provide quality services at
reasonable costs. Further, the County
acknowledges that maintenance of quality
service is related to providing adequate
compensation and financial incentives for
continued good performance. Revenues
generated should be adequate to fully meet
reasonable costs-of-service. The resulting
monthly charges for solid waste service
should be approximately comparable to
those charged in other jurisdictions
providing similar services with similar cost
structures, assuming some efficiency of
operations in these other jurisdictions.
4. The rate setting process should provide
mechanisms for ongoing rate review and
long-term charge stability. A periodic
formal and thorough County review of
financial and operating data will set an
expectation for the hauler, and ultimately
will protect the ratepayer. The process
should be designed to prevent large,
unexpected fluctuations in charges due to
changes in costs or from the need to fund a
broadening scope of waste management
services.
5. The process should be easy to administer,
while still ensuring that any rate request is
justifiable and reasonable. The process
should be easy to explain and not place an
undue cost on either the County or the
franchise hauler to implement. Rate
changes ultimately should be easily
explained and defensible to ratepayers.
6. The County and Garaventa should strive to
maximize opportunities to improve
performance and service quality while
maintaining cost competitiveness in the
marketplace.
7. The County should not micro-manage the
hauler’s operation. A policy to
micromanage Garaventa operations is
counterproductive, requiring additional
administration, which ultimately increases
costs to the ratepayer. This methodology
requires base year rate reviews every three
years, and optional interim year
adjustments. These reviews should be
sufficient to efficiently manage Garaventa.
Overuse of time-and-motion studies,
performance audits, and other efficiency
and effectiveness studies requires additional
administration time, and costs, for both the
County and the hauler.
Chapter I. Rate Setting Overview
Contra Costa County 7 Garaventa Enterprises
Exhibit I-3
Chapter I. Rate Setting Overview
Contra Costa County 8 Garaventa Enterprises
C. Policies Guiding Rate
Setting Manual
A total of five (5) guiding policies were
considered in developing the processes and
methodologies described in this manual.
These policies and their impacts are
identified in Exhibit I-4. The remainder of
this section describes each of these policies.
1. Allow no retroactive rate increases.
There will be no allowance for a
retroactive increase in rates, except by
special agreement, or by party default.
Retroactive reimbursements cause rates
not to be aligned with actual costs of
providing service. This process and
methodology codifies strict rate review
timelines and responsibilities. If the
County and hauler adhere to these time
frames for submission and rate change
approval, and no party defaults on these
time frames, all future rates should be
established such that there is no need for
retroactive rate increases.
2. Allow no balancing accounts. This rate
setting process is based on projecting
results during base years. Thus, actual
base year results likely will differ from
base year projections. In some regulatory
environments, these differences are
“balanced” in subsequent years by using
a balancing account.
Balancing accounts are occasionally
used in the waste industry as an
accounting-based approach to true up a
previous year’s projections to actual
financial results. A balancing account
can then be used to address differences
between actual and projected results. A
balancing account requires substantial
administration, reporting, and control
measures which determine how funds in
the account are invested and managed.
When a balancing account is established,
terms and conditions related to these accounts
are clearly documented as part of a rate
setting process and methodology manual.
Also, terms and conditions are specifically
incorporated by reference into contractual
agreements between the respective parties.
Balancing accounts are not commonly
utilized. The problem with balancing
accounts is that by funding surpluses and
deficits using rate revenues, rates charged to
customers ultimately do not reflect the true
cost of providing service to customers
because they include retroactive components.
Over time, current ratepayers can end up
ultimately subsidizing, or benefiting from,
prior generations of ratepayers. For example,
if rates are raised to pay off a balancing
account, then current ratepayers bear the
responsibility of what previous ratepayers
should have paid for initially.
Municipal finance principles generally
require a strong nexus between (1) cost-
of service and benefits and (2) cost-of-
service and rates. Use of a balancing
account generally breaks down this
nexus and results in rate inequalities.
A balancing account also frequently is less
useful when a long-term franchise exists.
With a long-term business partnership
there is less need to recover variances
between actual and projected results on a
year-to-year basis. These variances can
often be absorbed over the course of a long
term franchise, such as is the case between
the County and Garaventa.
Balancing accounts are not designed for
accounting for differences between “rates
asked for” and “rates received.” They also are
not designed for accounting for differences
between “rates received” and “a fair rate of
return.” Balancing accounts, by their very
nature, result in retroactive rates, which do
not reflect cost-of-service based rates.
Chapter I. Rate Setting Overview
Contra Costa County 9 Garaventa Enterprises
Exhibit I-4
Solid Waste Rate Setting Policies
Impact
The hauler should provide these
services to the County, with costs
allowable in rates
The hauler should work with the County
to implement these programs with costs
allowable in rates
Rates are set prospectively and are
not trued up in subsequent years
Rates are never increased in one
period for activity of a prior period
Assure that related party transactions
from affiliated companies are
consistent with market transactions
Policy
4. Provide free drop box and bin
service as directed by County
2. Allow no balancing accounts
1. Allow no retroactive rate increases
5. Indirectly regulate affiliated
companies
3. Fund source reduction and
HHW programs
Chapter I. Rate Setting Overview
Contra Costa County 10 Garaventa Enterprises
3. Fund costs to implement State
mandated source reduction and
household hazardous waste programs.
The County has adopted the Source
Reduction and Recycling Element
(SRRE) and Household Hazardous
Waste Element (HHWE) as required by
the Integrated Waste Management Act of
1989 (AB 939). These elements contain
a number of recommended programs
whose costs are projected to be funded
by solid waste collection charges.
The franchise hauler will work closely
with the County to meet diversion goals
mandated by the California Department
of Resources Recycling and Recovery
(CalRecycle)). The franchise hauler and
County shall agree on specific programs
and activities to show a good faith effort
to meet CalRecycle diversion goals.
Examples of these efforts may include:
(1) developing a separate green waste
program, (2) increasing materials
collected via the current curbside
recycling program, (3) maximizing
diversion activities at the transfer station,
or other disposal facilities that the
franchise hauler may use, and (4)
providing economic incentives to reduce
residential solid waste generation through
variable can rates. Generally, costs
associated with these AB 939 diversion
goals are considered allowable costs for
rate setting purposes whereby the
franchise hauler will be allowed a profit
on these costs. Where AB 939/HHW
costs are transactional in nature, they will
be treated as pass through costs (see
Section D for a further discussion of the
rate treatment of these costs).
4. Provide the County drop box and bin
service. The franchise hauler shall
provide solid waste collection and
disposal services at County buildings at
no charge to the County upon request
pursuant to terms of the franchise. Costs
associated with the franchise hauler
providing these services are allowable
costs for rate setting. The hauler also
shall provide drop boxes pursuant to
terms of the franchise for community
cleanup projects with these costs also
allowable for rate setting.a
5. Indirectly regulate affiliated
companies. Transactions between
Garaventa and affiliates, or related
parties, should be examined for
reasonableness. These “related party
transactions” have potential for
mistreatment in rate setting. For
example, if a cost of a related party
already includes a profit component, and
that cost is allowed for rate setting with a
profit, a double-counting of profit can
occur. For each related party transaction,
the hauler should disclose the nature of
the relationship and whether the
transaction is a market-based transaction.
The hauler should provide
documentation to support the
reasonableness of these transactions. In
particular, leasing of trucks and
equipment, or office space, are often
related party transactions.
At the time a base year rate change
application is submitted, the franchise
hauler is required to provide the County
with at least three comparable rates for
trucking charges, office space, and
warehouse space (i.e., a minimum of
nine comparable rates). County staff will
be responsible for determining if these
charges are reasonable.
a Allowable community cleanup costs for rate setting are
based on actual costs of providing drop boxes used for
community cleanup projects for which Garaventa has
received concurrence in advance from the County
Department of Conservation and Development (DCD)
pursuant to the terms of Section 20 of the Franchise.
Chapter I. Rate Setting Overview
Contra Costa County 11 Garaventa Enterprises
In the absence of three comparable truck
lease rates, the franchised hauler will
provide the County, or its agents, access
to the trucking company’s accounting
records so that the County can determine
the reasonableness of trucking lease rates
charged to County customers. The
County will treat the trucking company
expenses consistent with how it treats
other regulated costs for rate setting
purposes, in terms of allowable, pass
through, and non-allowable costs as well
as the operating ratio.
If the franchise hauler leases trucks and
other equipment from an affiliated or
parent company, then all trucking
charges are considered a pass-through
cost and no additional profit is allowed.
Additionally, if the franchise hauler rents
office and/or warehouse space from a
parent or affiliated company, then rent
charged by its parent company will be
compared with rent charged by property
managers for comparable office and
warehouse space.
At the time this manual was developed,
Garaventa had related-party transactions
with the following affiliated service
providers:
q Concord Disposal Service:
Services the City of Concord and
a small area of unincorporated
County, called North Concord.
q Oakley Disposal Service: A sole
proprietorship of Garaventa
Enterprises, services
Unincorporated Oakley,
Knightsen, and Bethel Island
areas.
q Byron Disposal Service:
Services the area covered under
the current franchise agreement
between the Byron Sanitary
District and Byron Disposal
Service, which began in October
1991.
q Discovery Bay Disposal
Service: Provides primarily
residential service to the
Discovery Bay area of the
unincorporated County. This
company was purchased by
Garaventa Enterprises in 1986.
q Pittsburg Disposal Service:
Services the City of Pittsburg and
the unincorporated area of Bay
Point. Bay Point is split into two
service areas, partially within
Pleasant Hill Bayshore Disposal
(now a Republic Services Inc.
company) and Garaventa
Enterprises.
q Brentwood Disposal Service:
Purchased by Garaventa in 1984,
this company provided service to
Discovery Bay areas prior to
Garaventa’s purchase of Discovery
Bay Disposal Service in 1986.
Now, Brentwood Disposal services
rural areas around Discovery Bay
and Brentwood.
q Delta Debris Box: Provides
debris box services to all of the
east unincorporated County
customers covered by the County
franchise with Garaventa.
Garaventa also has related-party
transactions with the following companies:
q Contra Costa Waste (d.b.a. Pittsburg
Recycling Center and Transfer
Station): This recycling center and
transfer station located in the City of
Pittsburg handles all waste collected by
Garaventa Enterprises from
unincorporated County customers. This
waste is consolidated into transfer
trailers and transported to an approved
Chapter I. Rate Setting Overview
Contra Costa County 12 Garaventa Enterprises
landfill (currently Potrero Hills Landfill
in Solano County). The current disposal
agreement between Garaventa and
Potrero Hills Landfill expires in 2015.
q Mt. Diablo Paper Stock: Handles all
of the recyclable materials that are
collected by Garaventa Enterprises
companies.
q SEG Trucking: SEG leases vehicles to
other Garaventa affiliated companies,
which are used for collection and to
haul waste from the Pittsburg Recycling
and Transfer Station to the approved
landfill (currently Potrero Hills
Landfill).
Exhibit I-5 shows the approved
allocation bases that the County and
Garaventa agree will be used for allocating
indirect costs between Garaventa-served
County areas and other non-regulated
jurisdictions. Garaventa shall provide
written explanations for deviations from
these allocation bases, and these alternative
allocation bases must be approved by the
County.
Chapter I. Rate Setting Overview
Contra Costa County 13 Garaventa Enterprises
Exhibit I-5
Allocation Bases to Use for Unincorporated County Area Costs Shared with
Other Jurisdictions
Cost Category Allocation Base
Direct Labor Labor hours
Tipping Fees (with profit) Tonnage multiplied by verifiable tipping fee rate
Corporate and local general and administrative costs
· Accounting Accounts
· Computer services Accounts
· Dues and subscriptions Accounts
· Insurance Accounts
· Laundry Accounts
· Legal Direct
· Management fees Accounts
· Miscellaneous and other Accounts
· Office expense Accounts
· Operating supplies Accounts
· Outside services Accounts
· Public relations and promotion Accounts
· Taxes and licenses Accounts
· Telephone Accounts
· Travel Accounts
· Utilities Accounts
Depreciation and other operating costs
· Depreciation – buildings Square footage
· Depreciation - containers Direct
· Other operating costs Accounts
Services provided to County Direct
County administrative fee Direct
Trucking and equipment For each truck or equipment item, the number of equipment
pieces/units multiplied by a verifiable SEG Trucking lease rate
Tipping fees (pass through) Tonnage multiplied by verifiable fee rate
Franchise fees Direct
Chapter I. Rate Setting Overview
Contra Costa County 14 Garaventa Enterprises
D. Rate Change Application Process
A Base Year Rate Change Application
from the franchise hauler is required once
every three years as shown in Exhibit I-6, on
the following page. This process requires
detailed financial and operating information
which is carefully reviewed and analyzed by
the County. These detailed reviews are
referred to as “base” years in the methodology.
With the Base Year Rate Change
Application, the hauler submits annual
audited financial statements for the previous
year. These statements serve as the base
documents of the application. Financial
forms contained in the application should be
reconciled to the audited financial
statements to provide assurance that all of
the company’s activities are accounted for.
At the time a Base Year Rate Change
Application is submitted, the County shall
survey rates and services provided in at least
six other municipalities of comparable size
and service.
In the event that a Base Year rate review
occurs, outside of the normal three (3) year
cycle, the three (3) year timing for the next
Base Year will reset. This means that the
County and franchise hauler will plan that
next Base Year rate change will occur
exactly three (3) years following the
implementation date of the most recently
completed Base Year.
In each of the “interim” two years, rate
adjustments will be based on the annual
percentage change in the following three items:
q Annual change in the most recent actual,
not forecasted, Consumer Price Index
(CPI) for all Urban Consumers for the
San Francisco Oakland-San Jose area
published by the Bureau of Labor
Statistics in their Monthly Labor Review.
This CPI is applied to costs of the
franchise hauler other than tipping fees
and regulatory fees.
q Change in costs for tipping fees and
regulatory fees estimated to occur in the
next interim year
q An adjustment for the franchise fee,
which is based on a percentage of gross
annual revenues generated from
residential and non-residential integrated
solid waste collection service.
The franchise hauler has the option to
submit an Interim Year Rate Change
Application for a rate increase between base
years. The scope of each interim year
application is much more limited than a base
year request. A formal application is
required each year the company requests a
rate change. The hauler can adjust rates
following the County’s interim year rate
review of its application, but is not obligated
to do so. The County or franchise hauler
may request an extraordinary adjustment
outside of the base year and interim year
adjustment schedules. For example, an
extraordinary adjustment might result from
a change in service or additional program
requested by the County. The franchise
hauler requesting an extraordinary cost
change shall demonstrate, to the satisfaction
of the County, that it has incurred
extraordinary cost change (see Chapter II,
subsection C).
The County may request an interim year
rate change when there are extraordinary
changes, either up or down, in tipping fees
charged to the hauler. For example, if there
is a large drop in tipping fees paid by the
hauler, the County can request a rate
decrease in an interim year.
Chapter I. Rate Setting Overview
Contra Costa County 15 Garaventa Enterprises
Exhibit I-6
Timing and Financial Statement Requirements
of Rate Setting Process
Base Year Every 3 Years
Interim
Year 1
Interim
Year 2
Interim
Year 1 . . . .
Timing of
Base Year
Rate Change
Process is
8 months
(See Exhibit
II-2)
Beginning of Year (January 1)
2010 2011 2012 2013 2014 2015. . . .
Base
Year 1
Base
Year 2
Submit
Base Year
Application
TIMING
FUTURE FINANCIAL STATEMENT REQUIREMENTS
Actual Audited
(Actual)Base
Year
20142011201220132014
2017 2014 2015 2016 2017
2020 2017 2018 2019 2020
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
ProjectedEstimated
Chapter I. Rate Setting Overview
Contra Costa County 16 Garaventa Enterprises
E. Allowable Costs, Pass Through
Costs, Allowable Profits, and Non-
Allowable Costs
Rates are established for each base year
based on the hauler’s projected revenue
requirement. The revenue requirement is
defined as the sum of the following:
q Allowable costs
q Pass through costs
q Allowable profits.
Thus, for purposes of computing the revenue
requirement, it is necessary to determine
which of the franchise hauler’s costs are (1)
allowable costs, (2) pass through costs, and
(3) non-allowable costs.
When a cost is said to be “allowable,”
that cost, plus a profit component associated
with that cost is included in rates charged to
the ratepayers. Allowable costs are often
those costs that are usual, customary, and
reasonable to the hauler’s operation and/or
are associated with actual activity performed
by the hauler.
Pass through costs are costs which also
are included in rates charged to customers,
however these costs do not have an
associated profit component. Pass-through
costs are for activities that have little or no
risk to the hauler. Pass through costs are
generally transactional in nature and often
are thought of as costs not associated with
any significant effort performed by the
hauler. An example of a pass through cost is
franchise fees paid to the County based on a
percentage of revenues.
Non-allowable costs are not allowed in
rates charged to ratepayers. These costs are
disallowed because (1) they may not be
associated with the business, or
(2) they were specifically agreed to in
Section E.4.
The remainder of this subsection is
organized as follows:
E.1 Allowable Costs
E.2 Pass-Through Costs
E.3 Allowable Profits
E.4 Non Allowable Costs.
E.1 Allowable Costs
The hauler is allowed to earn a profit on
certain costs. The majority of allowable costs
are direct labor, corporate and local general and
administrative costs, trucking and equipment
costs, tipping fees, and interest on capital
purchases. These allowable costs are defined in
Exhibit I-7, on the following page. The
following costs of providing collection service
are clarified because of their special treatment
for rate setting.
q Tipping Fees – Profit is allowed on
tipping fees in each base year. The
franchise hauler is allowed to include
tipping fees of up to a set amount per ton
in the calculation of profit described
above. The County has the discretion to
establish and adjust the amount of
Tipping Fees for which profit will be
allowed. At the time of this rate
manual’s development, tipping fees were
set by the County at a cap of $45.00 per
ton with profit. Any amounts over this
limit are considered pass through costs,
and profit is not allowed, If the tipping
fee is less than the established limit,
actual fees paid are used to calculate
total tipping costs.
This tipping fee limit allows the franchise
hauler to make a reasonable profit on
tipping fees, but removes excess profits
caused by dramatically increasing tipping
fees. The franchise hauler must conduct
certain activities related to tipping fees such
as keeping records and making payments
Chapter I. Rate Setting Overview
Contra Costa County 17 Garaventa Enterprises
to the disposal facility. As tipping fees
increase, the franchise hauler’s workload
does not change. To allow the full amount
of the tipping fees in the calculation of
profit may give the franchise hauler excess
and unreasonable profits.
Tipping fees include (1) costs of Garaventa
managing and consolidating the material at
the transfer station, (2) costs incurred by
Garaventa to long haul the material from
the transfer station to the landfill, and (3)
costs to dispose of the material at a landfill
owned by a third-party (not related to
Garaventa). Garaventa currently does not
own or operate the landfill used for final
disposal of County waste, Potrero Hills
Landfill in Solano, California. Garaventa
currently pays another unrelated landfill
company (owned by Waste Connections) a
landfill tipping fee to dispose of this
material, which presumably includes a
profit to that landfill company. The
payments Garaventa makes to the landfill
company for landfill disposal are
transactional in nature. The $45 per ton
(with profit) allowance is intended to
provide Garaventa with a profit on that
portion of the tipping fee expenses which
relate to services Garaventa provides
directly (i.e., transfer station operations and
transfer hauling, as opposed to landfill
disposal which Garaventa does not
provide).
Another argument for limiting profit on
tipping fees is that the total tipping fee rate
allowed in the County rate base for
franchised waste (i.e., waste collected by
Garaventa) is typically set equal to the
regulated tipping fee rate charged by
Garaventa for all waste taken to the Contra
Costa Waste & Transfer Station (i.e., self
haul and franchised material). This rate is
theoretically already intended to fully cover
the costs of operations at the transfer station
and include a reasonable profit to the
company.
Further, more of the sorting-related
activities performed at the Contra Costa
Waste & Transfer Station are typically for
self-hauled materials, as opposed to
Garaventa franchised loads which often are
transferred directly into transfer trailers and
hauled to the landfill. These factors suggest
that even with the $45 per ton cap on
tipping fees (with profit), County ratepayers
are paying their fair share of profit for
Garaventa transfer station and long hauling
related activities.
Chapter I. Rate Setting Overview
Contra Costa County 18 Garaventa Enterprises
Exhibit I-7
Definition of Financial Terms
Application Line Number/Item Definition
Allowable Costs
1. Direct Labor Wages and related benefits paid to refuse collection, dispatch and customer service
representatives, including wages, overtime, payroll taxes, health and welfare
benefits, workers compensation, and pension benefits.
2. Tipping Fees (Profit Allowed) Costs to dispose of solid waste at transfer stations, transformation facilities, or
landfills. These fees are capped with profit at a set amount per ton. The per ton limit
is established by the County and is currently $45.00 per ton.
3. Corporate and Local General
and Administrative Costs
All general and administrative costs in addition to corporate overhead. The amount
of this item cannot exceed 12.2 percent of total costs in the initial base year. This
item includes the following costs:
• Accounting • Management fees
• Accounting staff • Postage
• Collection fees • Office supplies
• Computer equipment • Office repair and maintenance
• Dues and subscriptions • Telephone
• Insurance • Travel
• Janitorial • Utilities
• Legal services
• Licenses .
4. Depreciation and Other
Operating Costs
Principally includes depreciation and leases of real estate/facilities, building
maintenance, use taxes , cart repairs, laundry and uniform expenses , and medical
expenses for drug testing.
5. Services Provided to County Cost of services provided to collect and dispose of waste from County -owned
facilities.
6. Curbside Recycled Materials
Processing Costs (If Option is
Used by County).
Costs of processing curbside recycled materials collected from County customers,
including materials recovery facility (MRF) sort line labor costs, equipment costs , and
related general and administrative costs.
7. Total Allowable Costs Sum of lines 1 through 6.
Allowable Operating Profit
8. Operating Ratio Determines allowable operating profit, and is the ratio of total operating costs to total
operating revenue. The operating ratio must be between 88 and 92 percent. If the
franchised hauler’s actual operating ratio is outside this range, the operating ratio is
to be set at 90 percent during the base year .
9. Allowable Operating Profit Established by the allowable operating ratio and equal to total allowable costs (line 7)
÷ 0.90 – Line 7.
Pass Through Costs
10. County Administration Fee Fee associated with the franchise. This fee can be used for rate review costs, audits,
or other studies.
11. Household Hazardous Waste
Fees
Fees paid to the County to support the County’s share of HHW facility costs incurred
by Delta Diablo Sanitary District . This category does not include operational costs
associated with providing on-call used oil and filer recycling collection services (which
are an allowable expense when not funded from another source (e.g., a grant ).
12. Trucking and Equipment Includes deprecation of trucks, fuel expense, licenses, parts, tires, and associated
repair and maintenance expenses. Includes SEG Trucking leases.
13. Tipping Fees (w/o profit) Cost to dispose of solid waste at transfer stations, transformation facilities, or
landfills. These are fees above the $45.00 per ton limit.
25. Residential/Commercial/Light
Industrial Franchise Fees
Franchise fees are va riable and set by the County as a percentage of gross revenues
(i.e., residential, commercial, light industrial, and recycling revenues). The current
franchise fee is five (5) percent of gross revenues. With implementation of 3-cart
services, the franchise fee will increase to seven (7) percent of gross revenues.
31. Total Pass Through Costs Sum of lines 14, and 25.
Chapter I. Rate Setting Overview
Contra Costa County 19 Garaventa Enterprises
If the franchise hauler utilizes a
transfer/disposal facility owned by an
affiliated company (i.e., the Pittsburg
Transfer Station), as is the case currently
with Garaventa, the tipping fee limit still
applies. However, the tipping fee
charged by the disposal facility to the
franchise hauler must be equal to, or less
than, the rate charged to other non-
affiliated franchise haulers for the same
service. Tipping fees are defined to
include both transfer station and landfill
disposal costs.
In each interim year, tipping fees would
not be automatically adjusted by the CPI,
as is proposed for all controlled costs.
Rather, a projection would be made of
what tipping fees would be in the new
interim year, and then a comparison
made with this cost item in the previous
year.
q General and administrative costs –
Corporate and local general and
administrative (G&A) are allowed up to
a capped limit set by the County.
General and administrative costs often
can include costs which may be
misstated in rate setting such as: (1)
accounting and tax planning expenses,
(2) legal costs, (3) management fees, and
(4) officers salaries.
Table I-1 shows that at the time of this
version of the Manual’s development,
weighted average ratios of G&A to total
revenues over a recent five-year period
(from 2006 to 2010), for nine (9)
publicly held waste management
companies,b ranged from 10.38 to 11.83
b The nine companies included: Allied Waste Industries,
Browning Ferris Industries, Casella Waste Systems, Inc.
Republic Services, Inc. Superior Services, Inc. Waste
Connections, Inc. Waste Management, Inc. Waste
Industries, Inc., and WCA Waste Corp.
percent, with an average of 11.07
percent. Average ratios of G&A to total
revenues over the same five-year period
(from 2006 to 2010), for nine (9)
publicly held waste management
companies, ranged from 10.45 to 11.36
percent, with an average of 10.79
percent. With an additional 10 percent
margin to account for variability in the
distribution of G&A costs by company,
the hauler is thus allowed a cap of 12.2
percent of the total revenue requirement,
for the combination of corporate,
regional, and local G&A in base years
(11.07% * (1+ 10%) = 12.2%).
In any base year, if total G&A costs, as a
percent of the total revenue requirement,
exceed the capped limit, total G&A costs
will be set to equal 12.2 percent of the
total revenue requirement. The capped
limit may be re-calculated each base
year, The franchise hauler may re-
calculate the proposed G&A cap
consistent with the approach described in
this Section and request consideration of
the new G&A cap at the time the Base
Year Application is submitted. The
franchise hauler must submit their
proposed new G&A cap and associated
calculation/data in conjunction with
submission of its Base Year Application.
If not requested by the hauler, the
County may elect to re-calculate the
G&A cap upon receipt of the hauler's
Base Year Application. County staff
would advise the hauler if the G&A cap
is re-calculated accordingly. This cap
may be based on ten (10) percent above
the average G&A (as a percent of total
revenue) of publicly traded companies
(and will be calculated similar to the
mean shown in Table 1-1), over the prior
five-year period.
Chapter I. Rate Setting Overview
Contra Costa County 20 Garaventa Enterprises
Table I-1
Publicly Held Waste Management
Companies General and Administrative
(G&A) Operating Ratiosa
Expressed as a Percent of
Total Revenue
(2006 to 2010)
Weighted Average Average
Year G&A Ratio G&A Ratio
2006 10.38% 10.71 %
2007 10.73% 10.45 %
2008 11.27% 10.55 %
2009 11.83% 10.87 %
2010 11.13% 11.36 %
Mean 11.07% 10.79 %
Median 11.13% 10.71 %
Minimum 10.38% 10.45 %
Maximum 11.83% 11.36 %
a On an earnings before interest and tax (EBIT) basis.
Source: Published company 10-k reports.
q Recycling – costs of providing residential
curbside recycling and non-residential
recycling services provided to the County
by the franchise hauler would be an
allowable cost. Therefore, solid waste
management rates charged to customers
include recovery of allowable costs of
providing recycling services, and a profit
is allowed on these costs.
q Costs to implement State mandated
source reduction and household
hazardous waste programs – the
County has adopted the Source
Reduction and Recycling Element
(SRRE) and Household Hazardous
Waste Element (HHWE) as required by
AB 939. These elements contain a
number of recommended programs
whose costs are paid for by the hauler
and funded by solid waste management
rates. With the exception of the caps on
HHW facility fees and other costs as
noted in this section, the franchise hauler
will be allowed a profit on these AB 939
costs.
Examples of the rate setting treatment of
related household hazardous waste costs
are described below:
· Certain HHW costs are operational
costs incurred by Garaventa
associated with actual on-call used
oil and filter recycling collection
services offered to residential
customers. These expenses are
detailed by Garaventa in quarterly
invoices sent to the County, which
are paid using grant funding from
CalRecycle. Any such expenses not
paid for by the grant would be
allowed with profit consistent with
treatment of comparable operational
cost categories (e.g. labor, trucking).
When these on-call used oil and filer
recycling services are reimbursed
through grant funding, as has been
the case in the past, they will be
treated as non-allowable costs for
rate setting purposes (to allow these
costs would create a situation where
these costs are covered both by rates
and by grant funding).
· Certain HHW costs are transactional
costs paid to Delta Diablo Sanitary
District for a portion of the actual
cost their agency incurs operating the
HHW facility that serves East
County. These costs are a pass-
through cost in rate setting pursuant
to Board of Supervisors direction. In
1997, the Board authorized the
County to require haulers to help pay
for the County’s HHW program and
allowed these costs to be pass-
through expenses (i.e., without a
Chapter I. Rate Setting Overview
Contra Costa County 21 Garaventa Enterprises
profit component) in rate setting.
[Reference: Board Order approved
by Board on June 3, 1997] The
Board reiterated this direction in
1998 at the time they approved a rate
increase for Garaventa which
included these HHW costs.
[Reference: Board Order approved
by Board on June 16, 1998] Since
that time the County has sent
quarterly letters to Garaventa
requesting payment for a portion of
these agency-operated HHW
program costs. These quarterly
letters reiterate that these HHW costs
are treated as a pass-through cost for
rate setting purposes.
q Depreciation – the following Table I-2
identifies depreciation methods and
useful lives are recommended for
amortizing future capital costs for rate
setting purposes:
Table I-2
Depreciation Methods
Capital Item Type(a) Years
Office Equipment SL 5 years
Vehicles and Equipment SL 8 years
Carts SL 10 years
Buildings and Leasehold
Improvements SL 20 years
(a) SL = straight line depreciation
Useful lives in Table 1-2 are for new
capital purchases.
q Lease payments to non-affiliated
companies – lease payments to non-
affiliated companies are an allowable
expense.
q Free services provide to County – The
costs of free collection services provided
to the County pursuant to requirements
in the franchise are an allowable cost for
rate setting purposes. The costs of
providing these free services are not
required to be specifically delineated in
the Base Year Rate Application as a
separate line item. Rather the costs of
free collection services are internalized
in the franchise hauler’s overall costs
(including Direct Labor, Trucking and
Equipment, etc.).
q Costs of community clean up services
– The costs of community clean ups
provided by the franchise hauler are an
allowable cost for rate setting purposes.
The franchise agreement requires the
franchise hauler to provide the
equivalent of ten (10) 20-cubic yard drop
boxes per year, per region in the
Franchise Area for community clean ups,
however, the County may agree to
include the costs of more than the
required number of drop boxes for
community clean ups in the Base Year
Rate Application. The cost of servicing
community clean-up drop boxes that
were pre-authorized by the Department
of Conservation & Development are an
allowable cost with profit. In the future,
the franchise hauler will request
authorization from the Department of
Conservation & Development prior to
providing any community clean-up drop
boxes which the hauler wishes to have
treated as an allowable cost for rate
setting purposes.
E.2 Pass Through Costs
The following pass through costs do not
earn a profit, but are included in determining
total revenue requirements to establish solid
waste management charges:
q Tipping Fees (pass through) – Any
Tipping Fee amounts over the County’s
established cap for Tipping Fees with
Profit (currently $45.00 per ton) are
Chapter I. Rate Setting Overview
Contra Costa County 22 Garaventa Enterprises
considered pass through costs, and profit
is not allowed. The County can adjust
this cap in a reasonable manner during
subsequent base years if determined
appropriate based on changed
circumstances (e.g., the franchise hauler
no longer continues to use a third-party
for landfill disposal). If the tipping fee is
less than the established cap, actual fees
paid are used to calculate total tipping
costs and there is no pass through
component of tipping fees.
q Franchise Fees – Franchise Fees paid to
the County by Garaventa are set equal to
five (5) percent of gross revenues
generated from the performance of
collection services under the franchise.
The County Board of Supervisors has
authorized preparation of a Franchise
Agreement amendment in 2011 which
would set Franchise Fees at seven (7)
percent in conjunction with
implementation of 3-cart residential
recycling services. The Board of
Supervisors has discretion over the use
of these Franchise Fees. In 2011,
Franchise Fees helped provide funding
for (1) administering the Franchise
Agreement and (2) solid waste services
and programs provided by the County,
including State required program
development, implementation and
reporting for the unincorporated County
area." These fees are paid to the County
in return for providing an exclusive
franchise to the hauler.
q County administrative fee – this fee
may be established by the County to pay
for costs associated with services
provided by the County in administering
the franchise; services and programs
pertaining to solid waste provided by the
County; rate reviews; policies and
procedures development; performance
audits, and other studies. This fee is in
addition to the franchise fee and is
intended for costs that may not be paid
for by the franchise fee.
q Trucking and equipment charges –
trucking charges from companies
affiliated with the franchise hauler will
be a pass-through cost, and no profit is
allowed to the franchise hauler. This
applies whenever profits are already
included in the trucking charges paid by
the franchise hauler.
E.3 Allowable Operating Profits
q Provide allowable profit –an operating
ratio which ranges from 88 to 92
percent, with a target of 90 percent. In
the first base year, the operating ratio
was set at 90 percent. In each succeeding
base year (once every four years), the
operating ratio can range from 88 to 92
percent without a rate change, which will
help stabilize rate changes and afford the
company an incentive to reduce costs. In
any succeeding base year, if the company
earns an operating ratio outside this 88 to
92 percent range, then in that base year
rates are reset to a 90 percent operating
ratio.
The operating ratio determines the profit
allowed to the franchise hauler on
operating costs. The operating ratio is
frequently used in the waste management
industry as a basis for determining profit.
The operating ratio (OR) is based on the
following formula:
Allowable Expenses OR = Allowable Expenses + Profit
The rate of return on operating expenses
corresponding to each operating ratio
between 88 and 92 percent is shown in
Table I-3:
Chapter I. Rate Setting Overview
Contra Costa County 23 Garaventa Enterprises
Table I-3
Operating Ratio as Compared to
Return on Operating Expenses
Rate of Return
Operating Ratio on Allowable
(%) Operating Expenses
88 13.64
89 12.36
90 11.11
91 9.89
92 8.70
The 90 percent targeted operating ratio
corresponds to a 11.11 percent return on
allowable operating expenses.
The operating ratio is the most
commonly used method for refuse rate
regulation. Our recommended operating
ratio is supported by recently available
information for publicly-held companies,
privately-held companies, and
neighboring jurisdictions.
As support for a target operating ratio of
90 percent we compared recent financial
data available for publicly and privately
held waste management companies.
Because available financial data is for
combined collection, transportation, and
disposal operations, the corresponding
operating ratios are lower than for
businesses providing exclusively waste
collection services (i.e., without disposal).
Operating ratios for collection operations
alone are generally higher than for
disposal operations alone because disposal
companies require greater returns due to
the significant environmental and
regulatory risks of operating landfills.
We reviewed financial information for
nine (9) large publicly held waste
management companies between 1997
and 2010. The nine companies included:
1. Allied Waste Industries
2. Browning Ferris Industries
3. Casella Waste Systems, Inc.
4. Republic Services, Inc.
5. Superior Services, Inc.
6. Waste Connections, Inc.
7. Waste Management, Inc.
8. Waste Industries, Inc.
9. WCA Waste Corp.
These panel data are from published
company 10-k reports. The data set
contains financial information on the
nine (9) companies observed over a
recent five year period (between 2006
and 2010).
There were actually eighteen (18)
publicly held waste management
companies between 1993 and 2010.
There has been significant recent
acquisition and merger activity in the
waste management industry, so some of
these companies are now part of other
companies. As an example, Waste
Management acquired USA Waste,
Philip, and Sanifill. Likewise, Allied
Waste Industries acquired Laidlaw, and
Browning Ferris Industries. Republic
Services and Allied Waste Services have
merged. We believe however that using
historic data for all of these companies
represents the best available information
for publicly held companies for the
period of 2006 to 2010.
Table I-4 summarizes weighted average
operating ratios and average operating
ratios, both on an earnings before
interest and tax (EBIT) basis, for
publicly held waste management
companies, from 2006 to 2010. The
Chapter I. Rate Setting Overview
Contra Costa County 24 Garaventa Enterprises
mean weighted average operating ratio,
between 2006 and 2010, was 83.95
percent, while the mean average
operating ratio during the same period
was 86.93 percent. The median weighted
average operating ratio, between 2006
and 2010, was 83.64 percent, and the
median average operating ratio during
the same period was 85.44 percent.
The data for this period indicates that a
few larger companies performed better
than the average company, thus
decreasing the weighted average
operating ratio.
Robert Morris & Associates (RMA)
publishes its “Annual Statement Studies”
for an array of industries, including
privately held waste management
companies. RMA data are for companies
doing business as refuse systems (SIC
Code 4953). These are systems
“primarily engaged in the collection and
disposal of refuse by processing or
destruction or in the operation of
incinerators, waste treatment plants,
landfills, or other sites for disposal of
such materials.” These data “do not
include companies primarily engaged in
collecting and transporting refuse
without disposal.”
As shown in Table I-5, on page 25, the
weighted-average operating ratios, on an
EBIT basis, of over 66 companies
surveyed in each of the nine years from
2001 to 2010, ranged from 88.80 to
97.70 percent. The data were sorted by
company sales, as follows:
· $1 million to $3 million
· $3 million to $5 million
· $5 million to $10 million
· $10 million to $25 million.
The mean operating ratio, between 2001
and 2010, was 94.61 percent, and the
median operating ratio during the same
period was 94.70 percent.
Profit methods other than the operating
ratio often are harder to determine, or
don’t compensate the hauler sufficiently.
For example, a return on assets profit
methodology might encourage a hauler
to over-invest in assets, or alternatively,
over time might cause a hauler’s profits to
decrease as book assets are depreciated.
A return on equity calculation may be
problematic as limited comparable
benchmark data exists, determining
equity contributions is difficult, and
returns can be insufficient for less
capitalized companies.
Table I-4
Publicly Held Waste Management
Companies Operating Ratiosa
(2006 to 2010)
Weighted Average Average
Year Operating Ratio Operating Ratio
2006 84.37% 85.04%
2007 83.30% 85.44%
2008 85.33% 91.08 %
2009 83.64% 87.90 %
2010 83.10% 84.48%
Mean 83.95% 86.93 %
Median 83.64% 85.44%
Minimum 83.10% 84.48 %
Maximum 85.33% 91.80 %
a On an earnings before interest and tax (EBIT) basis.
Source: Published company 10-k reports.
Chapter I. Rate Setting Overview
Contra Costa County 25 Garaventa Enterprises
Table I-5
Privately Held Waste Management Companies Operating Ratiosa
(2001 to 2010)
Weighted Average Operating Ratio
for Various Annual Revenue Levels Year Total Number of
Companies $1 to $3M $3 to $5M $5 to $10M $10 to
$25M
2001 to 2002 162 96.70% 91.10% 94.10% 92.00%
2002 to 2003 66 95.90% 97.00% 97.70% 88.80%
2003 to 2004 94 96.70% 96.20% 97.70% 94.70%
2004 to 2005 96 95.20% 96.20% 95.40% 90.30%
2005 to 2006 109 92.70% 94.20% 94.20% 96.30%
2006 to 2007 142 92.70% 97.20% 94.70% 93.80%
2007 to 2008 127 94.30% 93.40% 93.00% 93.30%
2008 to 2009 171 95.00% 95.40% 96.40% 93.30%
2009 to 2010 211 94.70% 94.70% 96.30% 94.60%
Weighted Average Operating Ratio Mean 94.61%
Weighted Average Operating Ratio Median 94.70%
Weighted Average Operating Ratio Range 88.80% to 97.70%
a For SIC Code 4953, Refuse Systems, on an earnings before interest and tax (EBIT) basis.
Source: Robert Morris & Associates Annual Statement Studies.
E.4 Non-Allowable Costs
The following costs are not allowable for
rate setting, and as a result will not be
passed on to the ratepayers:
q Amortization of franchise purchases –
consistent with the waste management
industry, we recommend that the County
disallow amortization of franchise
purchases. The operating ratio is
designed to provide a return to the hauler
sufficient to compensate Garaventa for
its investment in the business.
q Charitable and political contributions
– this category includes charitable, or
political, contributions and donations of
cash, property, and services. Also non
allowable are costs associated with
attempting to influence the outcomes of
any federal, state, or local election,
referendum, initiative, or similar
procedure, through in kind or cash
contributions, endorsements, publicity,
or similar activities.
q Fines and penalties – costs associated
with violations of, or failure of, the
hauler to comply with federal, state,
local, or foreign laws and regulations.
This category of non-allowable costs can
also include costs in connection with
alteration or destruction of records, or
other false or improper charging or
recording of costs.
q Income taxes – the operating ratio is
typically provided on a pre-tax basis. To
allow income tax expense would
Chapter I. Rate Setting Overview
Contra Costa County 26 Garaventa Enterprises
unnecessarily add complexity to the rate
review process.
q Interest expenses – interest expenses,
other than for capital purchases, are not
allowed. Consistent with the waste
management industry, the operating ratio
is typically used on a before interest and
tax basis. Interest expenses are not
allowed in the profit calculation in this
methodology, which differs from the
practice in some municipalities.
Allowing profit on interest expense may
provide an artificial incentive for the
hauler to increase use of debt-financing.
Further, in cases where the operating
ratio used is on an after interest basis, the
operating ratio often is adjusted upward
(i.e., the hauler earns less profit) to
account for interest as an allowable
expense.
q Other costs on a case-by-case basis –
all costs incurred to provide solid waste
services to areas outside of
unincorporated Contra Costa County are
not allowed. Additionally, consistent
with reasonable practices in the waste
management industry, certain costs may
be determined non-allowable for rate
setting through the course of the Base
Year rate setting process. A cost that is
determined non-allowable in one Base
Year may be determined allowable in a
future base year.
Chapter I. Rate Setting Overview
Contra Costa County 27 Garaventa Enterprises
F. Other Rate Setting Policies
The County may from time to time apply
one or more of the following three (3)
following additional policies:
q Cost-Savings Program – The franchise
hauler may be allowed to share in cost-
savings due to improvements
implemented by the hauler. This savings
program provides an incentive to the
franchise hauler to reduce costs. Under
the rate setting process described in this
manual, if the franchise hauler is able to
reduce costs, the benefits of these cost-
reduction efforts are passed on to the
ratepayers in the next base year.
Applying this policy could serve as a
direct incentive for the franchise hauler
to identify and implement cost-savings
activities while also lowering rates for
customers.
Examples of cost-savings programs
include:
· Investing in new equipment
· Redesigning collection routes
· Automating administrative
functions
· Streamlining administrative
processes.
Opportunities for cost-savings would be
identified by the franchise hauler during
the base year process...
Monitoring actual savings achieved is
the most difficult task in developing a
cost-savings program. Cost, and in
some cases, operating data must be
identified and carefully reviewed.
Without careful monitoring, the
program may be abused.
Adjusting rates to reflect the savings
also is difficult because rate
adjustments for each interim year are
determined by a change in the
consumer price index instead of by an
examination of base year costs. The
hauler may, in fact, lower costs of
operation through a cost-savings
program, though the rates would not
automatically be lowered. Cost savings
cannot be included simply by
reflecting the savings as a reduction in
total cost.
The amount of cost-savings should be
identified initially during development
of a proposed new program and then
monitored during implementation of the
new program. Savings is shared by the
franchise hauler and the ratepayers on a
pre-determined basis.
Figure I-1 depicts the County-hauler
cost sharing methodology. In this
method, revenue or cost savings are
treated differently depending upon the
cause of the difference. Controllable and
uncontrollable cost categories are created
as follows
Uncontrollable
· Tipping fees
· Regulatory charges
Controllable
· Direct labor
· Depreciation and other operating
costs
· Trucking and equipment costs
· General and administrative costs.
In this example, the hauler is allowed to
keep 100% controllable cost savings
which are not detrimental to the
customers, County, and employees. The
hauler shares 50%/50% on
uncontrollable cost savings. The hauler
is allowed 100 percent of all
Chapter I. Rate Setting Overview
Contra Costa County 28 Garaventa Enterprises
Figure I-1
uncontrollable cost increases, however,
the hauler would not be reimbursed for
any controllable cost increases.
Because the hauler has little control over
revenues received, increases in revenues
from the projections would be paid back
to the ratepayers, whereas decreases in
revenues would be reimbursed to the
hauler. In each case, these cost savings
or reimbursements could be based on
real dollars (without interest) and will be
amortized in the rates over the base year
and next two interim years until the next
base year rate setting occurred.
q Occasional Performance Audits –
While rates for residential services are
evaluated in detail during each base year
rate change process, the rate review
focuses on actual costs and does not
address opportunities for the franchise
hauler to improve general operational
efficiency. If actions can be taken to
improve the franchise hauler’s
efficiency, this could result in lower total
costs, and correspondingly, lower rates for
customers.
In order to address this issue, performance
audits of the franchise hauler may be
occasionally conducted. The timing of
these audits are independent of the rate
change process described in this manual.
In order to maintain objectivity, these
audits would be conducted by an
independent organization which is selected
by the County.. The County will keep
information affecting the competitiveness
of the hauler confidential (e.g., routes) to
the extent permitted by law, pursuant to
terms of the franchise.
A two-phase approach may be
appropriate for these audits. An overall
diagnostic review would be conducted in
Phase I, and more detailed and focused
work in selected areas would be
conducted in Phase II, based on the
Phase I findings.
Chapter I. Rate Setting Overview
Contra Costa County 29 Garaventa Enterprises
The County may include performance
audit costs in rates as a pass through cost
(e.g., as part of County administrative
fees). The franchise hauler will
reimburse the County for its costs of
conducting performance audits.
q Review Tipping Fees – Garaventa owns
and operates the Pittsburg Transfer
Station, a separate business from the
various companies providing collection
services to unincorporated County
customers, as shown in Figure I-2.
Thus, we cannot determine true transfer
station costs, which should be charged to
unincorporated County ratepayers unless
a separate review is conducted. The
County has established a limit on the
amount of Tipping Fees allowed with
profit (currently $45.00 per ton) and the
remaining amount of Tipping Fees are
treated as a pass-through expense. This
issue was discussed in greater detail
previously in Sections E.1 and E.2.
Chapter I. Rate Setting Overview
Contra Costa County 30 Garaventa Enterprises
Figure I-2
1 Not a related party to Garaventa, but rather now owned by Waste Connections. CCWS also takes a small
amount of refuse to Vasco Road Landfill, also not a related party to Garaventa, but rather owned by Republic
Services (current tipping fee of $31.78 per ton). CCWS takes a small amount of organic materials to Northern
Recycling (also not a related party to Garaventa) in Zamora, California (current tipping fee of $18.00 per ton).
2 Includes depreciation; interest; direct labor for repair and maintenance (welders and mechanics); parts; fuel and
oil; and overhead.
Chapter II
Base Year
Rate Setting Process
Contra Costa County 31 Garaventa Enterprises
II. Base Year Rate Setting Process
Contra Costa County rate setting follows
a three-year cycle. In the first year of the
cycle, the franchise hauler is required to
submit a Base Year Rate Change
Application. In the second and third years,
the franchise hauler is allowed to submit an
Interim Year Rate Change Application. The
cycle repeats itself in year four. This chapter
describes the detailed processes and steps
involved, from the franchise hauler
completing a base year application through
to the County’s approval of new rates.
Topics covered in this chapter of the
manual include:
q Who is responsible for the various steps
in each process
q What tasks must be completed within
each step
q When each task should be performed.
Information about how to complete
worksheets and forms for the Base Year
Rate Change Application is provided in
Chapter III of this manual. This chapter is
organized into four sections:
A. Overview of the Base Year Rate Setting
Process
B. Timing of the Base Year Rate Setting
Process
C. Special Extraordinary Rate Applications
D. Steps of the Base Year Rate Setting
Process.
A. Overview of the Base Year
Rate Setting Process
The base year rate setting process requires
the franchise hauler to submit to the County a
Base Year Rate Change Application every
three years. In this application, the franchise
hauler completes a number of forms, and
provides supporting financial and operational
information. Unlike the Interim Year Rate
Change Application and the CPI-Based Rate
Change Application which are optional, the
Base Year Rate Change Application is
mandatory regardless of whether it will result
in a rate change.
Exhibit II-1 overviews the base year
rate setting process. For each of the eleven
(11) steps, participant responsibilities, tasks,
and associated outcomes (i.e., documents or
deliverables) are identified for each step.
After reviewing the application, the
County evaluates whether proposed rate
changes will be fair to both residents of the
County and the franchise hauler. Fairness is
demonstrated through an analysis of the
franchise hauler’s actual and projected
revenues and expenses included in the Base
Year Rate Change Application.
Information required in the rate setting
process which is considered confidential by
the franchise hauler (e.g., routes, employee
compensation, and certain tonnage data) will
not be disclosed at any public meeting (i.e.,
County Board of Supervisor meetings). This
might include routing employee compensation
and certain tonnage information. The hauler
should make the County aware of such
confidential information.
Chapter II. Base Year Rate Setting Process
Contra Costa County 32 Garaventa Enterprises
B. Timing of the Base Year Rate
Setting Process
Timing of the base year rate setting
process is shown in Exhibit II-2. Most of
the time frames are recommended; however,
certain key points are noted in the exhibit by
circled letters. The rate change process
should begin eight months prior to the
beginning of the new calendar year.
Base Year Rate Change Applications are
submitted by the franchise hauler at least six
(6) months in advance of when the proposed
base year rate change would take effect on
January 15 of that base year (reflecting that
Garaventa’s current billing cycles end on the
14th of each month). The County has up to
thirty (30) days to verify the application is
complete. After the County verifies that the
hauler’s application is complete, the process is
scheduled to take five (5) months until rates
are implemented. New rates are to become
effective on January 15 of each base year.
The franchise hauler should begin
preparing the application during the prior
May, with the document submitted to the
County on July 1. The total time required to
complete this process will depend on the
complexity of changes in operating
conditions and the resulting application.
In order to avoid potentially delaying the
implementation of any requested rate change
ultimately approved by the Board of
Supervisors, it is critical that the Contractor
and County start and complete each Step on
schedule within the timing specified in this
Manual.
C. Special Extraordinary
Rate Applications
Special extraordinary rate applications
are allowed outside of the annual schedules
of the base year, interim year, and CPI
adjustments. Both the County and the
franchise hauler may initiate the
extraordinary rate adjustment process. For
these adjustments, the franchise hauler will
provide necessary information and
documentation so the County can make a
judgment as to the reasonableness of such a
rate adjustment. An extraordinary rate
adjustment can only be implemented by the
franchise hauler if approved by the Board of
Supervisors and the required rate change
notice has been provided to customers 30
days in advance.
This extraordinary adjustment will only
be considered in a case where the franchise
hauler can demonstrate that a change in one
of the cost line items specified in the Base
Year Rate Change Application will exceed
two (2) times the most recent change in the
Consumer Price Index for the San Francisco-
Oakland-San Jose area published by the
Bureau of Labor Statistics.
D. Steps of the Base Year Rate
Setting Process
The remainder of this chapter describes
each of the eleven steps of the base year rate
setting process. Each step includes an
overview of the step and a detailed description
of the tasks required to complete the step.
Step 1 of 11 describes, in general, the
elements of the Base Year Rate Change
Application, for the benefit of both the
County and hauler. Chapter III describes in
detail how to prepare the Base Year Rate
Change Application, primarily for the
benefit of the franchise hauler.
Contra Costa County 33 Garaventa Enterprises
Exhibit II-1
Base Year Rate Setting Process Overview
Document(s)/Deliverable(s)
•Rate Application
•Audited Financial Statements
•Supporting Financial Information
•Notification Letter to Franchise
Hauler
•Summary of Survey of Other
Jurisdictions
Responsibility
Franchise
Hauler
County
County
Steps
1. Preparation and
Submission of Rate Change
Application
2. Verification of Completeness
of Rate Change
Application
5. Survey Rates
in Similar
Service Areas
Tasks
a.Prepare Cost Information
b.Prepare Revenue Information
c.Prepare Operating Information
d.Prepare and Submit Rate Change Application and
Supporting Documents
a.Verify Financial Data and Format
b.Verify Supporting Documents and Schedules
c.Notify the Franchise Hauler
•Final Board of Supervisor Report
County
9. Preparation of
Final Report
and Recommendations
a.Incorporate Franchise Hauler’s Changes in Final Report
b.Incorporate Comments from Public Hearing
c.Prepare Final Report and Recommendations
•Notice of Board Review
•Approved ResolutionCounty
10. Presentation of Final Report
and Recommendations
to Board of Supervisors
a.Distribute Report and Summary to Board of Supervisors
b.Obtain Board of Supervisor Approval
Franchise
Hauler
•Notification to Customer
•Rate Schedule
11. Implementation
of
New Rates
a.Prepare Notification of Rate Change
b.Implement Rate Change
•Draft Board of Supervisor Report
•Supporting DocumentationCounty
6. Preparation
of Draft Report
and Recommendations
a.Prepare Draft Report and Recommendations
•Response Letter to Draft
•Board of Supervisor ReportFranchise
Hauler
7. Review of
Draft Report
and Recommendations
a.Review Draft Report and Recommendations with
County Staff
b.Resolve Any Remaining Issues
c.Prepare Response to Draft Report and
Recommendations
•Public Hearing
County
8. Conduct
Public
Hearing (Optional)
a.Post Notice of Public Hearing
b.Conduct Public Hearing
•Letter to Franchise Hauler
•WorkpapersCounty
3. Review of Rate Change
Application and Preparation
of Responses
a.Review Actual and Projected Revenue Requirements
b.Review Actual and Projected Revenues
c.Review and Verify Operating Ratio
d.Determine Components of Requested Change in Rates
e.Review Performance Data
f.Request Additional Data and Clarification, If Necessary
g.Document Staff Review and Prepare Written Response
•Additional Documents, If NecessaryFranchise
Hauler
4. Response to Additional
Information Requests
from County
a.Provide Additional Information, if Requested
b.Prepare and Submit Response
a.Survey Residential and Commercial Solid Waste Rates
and Charges in Similar Service Areas
b.Summarize Survey Results
c.Prepare and Submit Summary to the Franchise Hauler
Base Year Rate Setting Process Overview
Chapter II. Base Year Rate Setting Process
Contra Costa County 34 Garaventa Enterprises
Exhibit II-2
Timing of Base Year Rate Change Process
Step
Preparation
30 Day
Review
Formal Review Process
Implement
Month 1 Month 2 Month 3 Month 4 Month 5 Month 6 Month 7 Month 8
1. Preparation and
Submission of
Rate Change Application
2. Verification of
Completeness of
Rate Change Application
3. Review of Rate Change
Application and Preparation
of Responses
4. Response to
Additional Information
Requests from County
5. Survey Rates
in Similar
Service Areas
6. Preparation of
Draft Report and
Recommendations
7. Review of
Draft Report and
Recommendations
8. Conduct
Public
Hearing (Optional)
9. Preparation of
Final Report and
Recommendations
10. Presentation of Final Report
and Recommendations to
Board of Supervisors
11. Implementation of
New Rates
Legend
A. Submit Rate Change Application to County
B. Acceptance/Return Letter
C. Additional Information from Hauler
D. Letter Review of Draft Report
E. Notification of Public Hearing
F. Public Hearing
G. Final Report and Recommendations
H. Application Approved
I. Customer Notification
J. New Rates Implemented on January 15
Step 1
Step 2
Step 3 Step 3
St 4
Step 5
Step 6
St 7
Step 8
Step 9
Step 11
Step 10
A
B
C
D
G H
I
F E
J
Chapter II. Base Year Rate Setting Process
Contra Costa County 35 Garaventa Enterprises
STEP 1
Base Year
Preparation and
Submission of Rate
Change Application
Responsibility: Franchise Hauler
Timing: Completed six months prior to the date
new rates become effective
Tasks: a. Prepare Cost Information
b. Prepare Revenue Information
c. Prepare Operating Information
d. Prepare and Submit Rate Change
Application and Supporting Documents
Description of Tasks
Overview
During this step, the franchise hauler
prepares the Base Year Rate Change
Application. The franchise hauler should be
able to complete the application over a two
month period. Instructions for preparing the
application forms referred to in this step,
are available in Chapter III of this manual.
Blank forms are provided in Appendix B to
this manual.
In general, information provided by the
franchise hauler is for four fiscal years.
Actual data is required for the first two
years, estimated data for year three (based
on actual results to date), and projected
data for year four. Subsequent base years
will replicate the data requirements in this
example.
Actual
q Year 1 – Last Base Year
q Year2 – Prior Year
Estimated
q Year 3 – Current Year
Projected
q Year 4 – Base Year.
a. Prepare Cost Information
Cost information from the franchise
hauler is provided in the Base Year Rate
Change Application. Cost information is
reported for the three most recently
completed fiscal years, the current fiscal
year, and the new base year. Information
reported in each line item is the total cost for
residential, commercial, and light industrial
waste and recycling services. A segregation
of costs by residential, commercial, and light
industrial services is not required.
Chapter II. Base Year Rate Setting Process
Contra Costa County 36 Garaventa Enterprises
The cost information, which is reported,
includes:
q Allowable Costs
– Direct Labor
– Tipping Fees (Up to a Cap)
– Corporate and Local General and
Administrative Costs
– Depreciation and Other Operating
Costs
– Services Provided to County
- Curbside Recycled Materials
Processing Costs (if option selected
by County).
q Pass Through Costs
– County Administrative Fee
- Household Hazardous Waste Fees
– Trucking and Equipment
– Tipping Fees (Above a Cap)
– Franchise Fees.
By aggregating costs into these line items,
it is possible to focus on major changes
without becoming distracted by large changes
in insignificant cost components. For
example, if office equipment maintenance
doubled from $10,000 in the current year to
$20,000 in the base year (i.e., a 100 percent
increase), this might only cause Corporate
and Local General and Administrative Costs
to increase by one percent, resulting in little
impact on the overall rate. Minor components
of Corporate and Local General and
Administrative Costs may decrease between
the current year and the base year, while
others may increase.
If one of the major cost line items in the
application changes at an unusual rate, then
the hauler should provide an explanation for
the change. An unusual change in cost is any
increase which is greater than the change in
the San Francisco-Oakland-San Jose
Consumer Price Index, or any decrease. The
Consumer Price Index used in the analysis
should be based on the change in the prior
April to April San Francisco Oakland-San
Jose Metropolitan Area. This information is
available from the United States Department
of Labor, Bureau of Labor Statistics, and is
prepared monthly.
Cost information for the current year and
base year must account for any increases or
decreases in the number of customers
served, or tons of waste and recyclable
material collected. Actual increases in costs
also must be included. For example, if labor
costs will increase in the base year as a
result of existing labor agreement terms, this
additional cost should be included. If these
costs are not included, a rate increase will
not be sufficient to compensate the franchise
hauler for actual costs and will result in a
reduction of the franchise haulers actual
profits.
Cost information provided in the
application is used with operating profit to
calculate the franchise hauler’s revenue
requirement. The revenue requirement is
equal to the sum of the following three
categories:
q Allowable costs
q Allowable operating profits
q Pass through costs.
This revenue requirement is compared to
anticipated revenues, if a shortfall exists,
rates may need to increase, and if a surplus
exists, rates may need to decrease.
b. Prepare Revenue Information
Revenue information is provided in this
task. Similar to cost information, revenues
are reported for the two most recently
completed fiscal years, the current fiscal
Chapter II. Base Year Rate Setting Process
Contra Costa County 37 Garaventa Enterprises
year, and the projected base year. Revenue is
reported in three separate categories:
q Residential
q Commercial and light industrial
q Recycled material sales.
Residential revenue in the base year is
projected without any changes in rates.
Revenue projections are prepared based on
existing rates and number of customers
which the franchise hauler anticipates
serving in the base year.
For the base year, the amount of
commercial and light industrial revenue
without any changes in rates the hauler
anticipates receiving also is reported. This
figure should include changes in revenue
from servicing more or fewer accounts.
In the case where the County is not using
a flat $5.00 per ton net revenue, recycled
material sales revenues represents the actual
amount of revenue the franchise hauler
anticipates receiving during the base year.
Again, this would include any projected
changes in scrap prices, or quantities of
recycled material sold.
Allowances for uncollectible residential
accounts and commercial and light industrial
accounts (i.e., bad debt expenses) are
identified in the application. This provides
for a more accurate determination of the
franchise hauler’s revenue in the base year,
as a small number of customers do not pay
the franchise hauler for service rendered.
Once all revenues have been reported in
the application, total revenue without a rate
change is calculated. This total revenue is
subtracted from the revenue requirement to
determine the net surplus/shortfall. A net
shortfall determines the amount of a rate
change. If there is a net surplus, the
franchise hauler should determine if the
operating ratio can be reduced to eliminate
the surplus (i.e., the franchise hauler retains
the surplus as additional profit).
If the operating ratio is calculated at 88
percent, which provides the franchise hauler
with the maximum amount of profit
allowable under current policy, and a surplus
still exists, the County must determine if
rates will be lowered, and over what period
of time.
c. Prepare Operating Information
During this task, non-financial operating
information is compiled by the franchise
hauler. Information to be provided
independently for residential, commercial,
and light industrial sectors includes:
q Number of accounts
q Quantity of waste tonnage collected
q Quantity of recyclable tonnage collected
q County bins provided
q County drop boxes provided
q Drop boxes for cleanups.
This information allows both the County
and the franchise hauler to monitor changes
in the service characteristics, to estimate
total revenues at existing rates, and to
compare these to changes in total costs.
Operating information also is provided on a
form in the Base Year Rate Change
Application.
With the Base Year Application, the
franchised hauler also will include a
schedule of “free” services provided to the
County. This schedule will identify each
County service location, the service level at
that location, and the value of the service
provided (i.e., the rate that would be charged
to a non-County customer for similar
service).
Chapter II. Base Year Rate Setting Process
Contra Costa County 38 Garaventa Enterprises
d. Prepare and Submit Rate Change
Application and Supporting
Documents
The completed Base Year Rate Change
Application is submitted by the franchise
hauler to the County. The application should
include the following items:
q Management Representation Letter
The management representation letter
transmits the application to the County,
and should provide a listing of included
documents. The letter should identify the
requested adjustment in rates and include
a discussion of specific issues which
impact new rates (e.g., significant
increases in tipping fees). The letter
should state that:
· Management reviewed and accepts
responsibility for the rate application
· The application is based upon
management’s judgment of the most
likely set of conditions and course of
action
· All significant relevant information
are made available
· Assumptions are reasonable and are
accurate.
q Base Year Rate Change Application
The franchise hauler should provide a
Base Year Rate Change Application,
including completed application forms
and supporting documentation.
Supporting documentation includes the
current rate schedules for residential,
commercial, and light industrial
customers.
q Supplemental Audited Financial
Information
For applications received after 1999,
audited financial statements for the most
recently completed fiscal year should be
included, as well as other documentation
which support operating and financial
data provided in the application. Because
audited financial statements serve as
base documents for the application,
statements of revenues and expenses and
other reports contained in the application
shall be reconciled to the audited
financial statements to provide assurance
that all activities are accounted for.
Once the application materials have been
prepared, the franchise hauler submits one
reproducible hard copy, and one electronic
copy formatted to the County’s
specifications. They are submitted to the
County. The thirty (30) day review for
completeness will begin upon receipt of the
application.
The penalty to the franchise hauler for an
incomplete application would be a loss of
any additional revenue which would have
been generated through a timely and
approved rate adjustment application.
Similarly, for missing any other deadlines
specified in the rate setting process (i.e.,
responding to County requests for additional
information or reviewing the County’s draft
agenda report) the franchise hauler would
lose revenue due to later implementation of
rates. If the County fails to meet established
time frames for its responsibilities (i.e., steps
2, 3, 5, 6, 8, 9, and 10), at no fault of the
franchise hauler, the County will include the
value of revenue lost due to the delay, as
part of the pending Base Year Rate Change
Application.
Chapter II. Base Year Rate Setting Process
Contra Costa County 39 Garaventa Enterprises
STEP 2
Base Year
Verification of
Completeness of Rate Change
Application
Responsibility: County
Timing: Completed within thirty (30) days after
the rate change application is submitted
Tasks: a. Verify Financial Data and Format
b. Verify Supporting Documents and
Schedules
c. Notify Franchise Hauler, and Franchise
Hauler Provide Additional Information if
Necessary
Description of Tasks
Overview
During this step, the County ensures that
the application has been fully completed by
the franchise hauler and that the data
provided are consistent. During the 30-day
period, the County will obtain from the
franchise hauler any information necessary
to complete the application. During this 30-
day period, the franchise hauler could
request that the County allow subsequent
submission of a revised Base Year
Application.
a. Verify Financial Data and Format
County representatives review the
application package to determine if it is
complete and ready for analysis. Detailed
analysis of the contents of the application
occurs during Step 3. The County reviewer
should determine the following:
q Has the applicant included all required
forms?
q Are all forms complete?
q Are audited financial statements included?
q Are all financial calculations
mathematically correct?
b. Verify Supporting Documents
and Schedules
Various documents may be included in the
application package to support the rate change. The
purpose of these supporting documents should be
clearly identified by the franchise hauler.
c. Notify Franchise Hauler and Franchise
Hauler Provide Additional Information, if
Necessary
If the application is complete the County will
notify the franchise hauler that it will begin the
process of evaluating the proposed rate adjustment. If
incomplete, the County will attempt to obtain from
the hauler additional required information to
complete the application, within the 30-day
verification period. The County will inform the
hauler which items on the Application checklist are
missing or incomplete.
Chapter II. Base Year Rate Setting Process
Contra Costa County 40 Garaventa Enterprises
STEP 3
Base Year
Review of Rate
Change Application and
Preparation of Responses
Responsibility: County
Timing: Completed within one month after
determining that the application package
is complete
Tasks: a. Review Actual and Projected Revenue
Requirements
b. Review Actual and Projected Revenues
c. Review and Verify Operating Ratio
d. Determine Components of Requested Change in
Rates
e. Review Performance Data
f. Request Additional Data and Clarification, if
Necessary
g. Document Staff Review and Prepare Written
Response
Description of Tasks
Overview
During this step, County representatives
evaluates the entire rate change application.
This review includes examining significant
changes in costs or operating performance
and evaluating explanations of these changes
provided by the franchise hauler.
a. Review Actual and Projected Revenue
Requirements
In this task, costs and operating profit are
reviewed and analyzed for reasonableness.
Reconciliations of costs to audited financial
statements shall be checked for consistency.
Explanations are sought from the hauler for
items significantly different than would
otherwise normally be expected.
Absolute and percentage changes in costs
for the four years identified on the application
should be calculated and reviewed. Projections
prepared from previous years in prior Base
Year Rate Change Applications are compared
with actual results. Costs are correlated with
operating collection efficiency statistics
provided by the hauler.
Any unusual trends or variances in aggregate
areas should be explained by the franchise
hauler. An unusual increase would be a change
in cost which is greater than the change in the
San Francisco-Oakland-San Jose Consumer
Price Index, published by the Bureau of Labor
Statistics, and which cannot be attributed to
Chapter II. Base Year Rate Setting Process
Contra Costa County 41 Garaventa Enterprises
changes in the number of customers serviced or
tons of waste or recyclable materials collected.
if these unusual changes are not adequately
explained in the application, the County should
request additional clarification from the
franchise hauler.
The County should review the allocation
methodology used by the hauler to obtain
unincorporated County costs, if applicable.
At a minimum, the County should check that
allocations assign costs to unincorporated
County customers consistent with the
allocation methodology detailed in Exhibit III-
2.
The County should verify that the franchise
fee percentage specified in the Base Year
Application is consistent with the County’s
approved franchise fee percentage. The County
should verify that prior franchise fees paid by
the hauler, as shown as actual prior year
franchise fee costs in the Base Year
Application, are consistent with official County
records of franchise fee received by the County.
The County should verify that actual
Household Hazardous Fee amounts shown in
the Base Year Application are consistent with
County records.
In the case where the County is not using
the flat $5.00 per ton net revenue amount for
curbside recycled materials processing, the
County should review the costs of curbside
recycled processing provided in the Base Year
Application. Processing costs will include such
costs as sort line labor costs, materials recovery
facility (MRF) equipment depreciation and/or
leases (e.g., for the MRF sort line), and
allocations of reasonable expenses necessary to
process the County’s curbside recyclables.
b. Review Actual and Projected Revenues
Actual and projected revenues should be
reviewed in this task. Current residential,
commercial, and light industrial rates provided
in the application are verified. Any changes in
the number of customers serviced should be
identified and explained by the franchise hauler.
The application requires the franchise
hauler to report four years of residential and
commercial and light industrial revenues:
(1) calendar year two years ago (2) most recent
calendar year, (3) current year, and (4)
projected “base” year. The County should
reconcile the most
recent year revenues with audited financial
statements. Revenues for the current year are
compared with year-to-date unaudited financial
statements and documentation supplied by the
hauler. Projected revenues for the fifth, or
“base” year, are evaluated by the County for
reasonableness. All assumptions made by the
hauler in preparing these projections are
reviewed.
Revenues reported by the hauler should
not include any rate increases in the base
year (year 5). Rate schedules submitted by
the franchise hauler should be consulted to
determine the most recent rates. Account
information included in the application is
reviewed to determine changes in the
number of accounts served.
Allowances for uncollectible accounts
also are reviewed. These figures should be
deducted from total revenue projections.
These allowances may be based on a fixed
percentage of total revenues or on actual
experience. Assumptions related to
allowances for uncollectible accounts should
be provided by the franchise hauler.
In the case where the County is not using
the flat $5.00 per ton net revenue amount for
curbside recycled materials processing, revenue
from recyclable material sales is provided in
the application. Amounts identified in the
second year of the four years provided should
reconcile with the financial audit. Amounts
identified in the current (third) year, the base
(fourth) year should be documented by the
Chapter II. Base Year Rate Setting Process
Contra Costa County 42 Garaventa Enterprises
franchise hauler. The County will review these
projections to ensure they are consistent with
trends in recycling collection costs, scrap
values, processing costs, as well as estimated
diversion rates and tonnage.
c. Review and Verify Operating Ratio
The operating ratio must be between 88
percent and 92 percent, and is set at 90
percent in the initial base year. County
representatives verify that the operating ratio
used in the application is within this range.
The allowable operating profit also is
recalculated utilizing the operating ratio
stated in the application. If the operating ratio
does not fall within the range stated above, or
if there are any errors in calculating allowable
operating profit, these deficiencies are noted.
d. Determine Components of Requested
Change in Rates
The County evaluates all costs, revenues,
and operating profits provided in the
application to determine the components of
the requested adjustment in rates. This
would include determining the proportion of
the requested adjustment in rates which is
due to changes in each of the following:
q Costs
q Residential revenues
q Commercial and light industrial revenues
q Recyclable revenues
q Operating profit (or loss).
e. Review Performance Data
County representatives review and
analyze performance data, which are
included in the application (number of
accounts and tons collected). Operating
statistics are reviewed to explain past
historical trends and justify future expenses.
Both actual and percentage increases are
examined and any unusual changes in
performance are investigated to determine
their cause and effect on future cost
performance. An unusual change in
operating statistics is any increase or
decrease of more than the San Francisco-
Oakland-San Jose Consumer Price Index
(CPI) published by the Bureau of Labor
Statistics in their Monthly Labor Review.
Changes in accounts served, number of
routes, tons collected, or direct labor hours
generally should correspond to changes in
cost and revenue. In accordance with the
Franchise Agreement, all operating statistics,
which affect the competitive position of the
hauler, should be treated as confidential.
f. Request Additional Data and
Clarification, if Necessary
Throughout the analysis of the
application, County representatives may
request clarification and/or additional data
from the franchise hauler to explain any
unusual changes in costs or operating
performance. This information is requested
in a letter from the County to the franchise
hauler. Upon request from the franchise
hauler, the County will provide a rationale
for each of the items contained in its data
request(s).
g. Document Staff Review and Prepare
Written Response
During this task, County representatives
document any findings noted during the
review process. The franchise hauler can
request that County representatives prepare a
memorandum to highlight notable details
related to the activities completed during the
review process and/or key findings of the
review.
Chapter II. Base Year Rate Setting Process
Contra Costa County 43 Garaventa Enterprises
STEP 4
Base Year
Response to
Additional Information Requests
from County
Responsibility: Franchise Hauler
Timing: Completed within two weeks of receiving a
request for additional information from the
County
Tasks: a. Provide Additional Information, if
Requested
b. Prepare and Submit Response
Description of Tasks
Overview
During this step the franchise hauler
responds to requests for additional
information from the County.
a. Provide Additional Information,
if Requested
During Step 3, County representatives
reviewed the application and may have
identified additional supporting
documentation and information needs, or
changes in the financial or operating data
between the five fiscal years which require
clarification or further explanation. The
franchise hauler should respond to the
County’s request for additional information.
Responses will vary depending on the specific
requirements of the County.
b. Prepare and Submit Response
The franchise hauler prepares written
responses to the County’s request for
additional information. These responses are
prepared and forwarded to the County
during this step.
Chapter II. Base Year Rate Setting Process
Contra Costa County 44 Garaventa Enterprises
STEP 5
Base Year
Survey of Rates
in
Similar Service Areas
Responsibility: County
Timing: Conducted concurrently with the
application review (Steps 3 and 4)
Tasks: a. Survey Residential and Commercial Solid
Waste Rates and Charges in Similar Service
Areas
b. Summarize Survey Results
c. Prepare and Submit Summary to the Franchise
Hauler
Description of Tasks
Overview
The County conducts a survey of
residential and commercial solid waste rates
in communities similar in size and location
to the unincorporated County. The County
also determines comparable charges for
residential truck usage, as well as rental rates
for buildings similar to those rented by the
franchise hauler.1 The purpose of this survey
is to benchmark the rates proposed by the
franchise hauler to determine if the rates are
reasonable. Sample survey forms and
instructions are provided in Section III-B of
this manual.
1 The County would verify the accuracy of any G&A
cap calculations submitted by the franchise
hauler, alternatively the County may elect to
recalculate the G&A cap in the manner described
in Section E.1 of Chapter 1.
a. Survey Residential and Commercial
Solid Waste Rates and Charges in
Similar Service Areas
In this task, the survey of rates in other
areas, which are similar to the unincorporated
County, is conducted. The survey covers the
following topics:
q Introduction
q General Information (e.g., including
solid waste practices and rate setting
approaches)
q Rate Setting Process
q Residential Service
q Commercial and Drop Box Service.
In order to avoid mailing and response
delays, the survey is conducted by telephone.
A minimum of six other jurisdictions should
be surveyed. Jurisdictions selected should be
Chapter II. Base Year Rate Setting Process
Contra Costa County 45 Garaventa Enterprises
located in Northern California and have
operating environments, which are similar
to, unincorporated Contra Costa County.
Additionally, the survey should also include
the other unincorporated areas franchised by
the County.
b. Summarize Survey Results
After the survey has been conducted, the
results are tabulated and compared. The
purpose of surveying rates is to determine if
there is an explanation for why residential
and/or commercial rates might vary
significantly among the surveyed
communities.
Residential rates proposed in the rate
change application should be compared to
residential rates in other jurisdictions. If the
rates proposed in the application are
significantly higher than in other
jurisdictions, County staff should provide the
franchise hauler with the opportunity to
suggest potential reason(s) for differences. If
the potential basis for differences are not
identified, the Board of Supervisors may have
concerns adjusting the rates as proposed in
the application. The franchise hauler should
provide requested input within ten (10)
business days.
c. Prepare and Submit Summary to the
Franchise Hauler
If requested by the hauler, or if the County
deems necessary, the County may prepare a
summary report, which makes conclusions
about how rates and services provided by the
current franchise hauler compare with those in
other jurisdictions. The summary report may
include an overview other jurisdiction’s
general solid waste practices and rate setting
approaches. The report also may document
residential refuse, recycling, greenwaste, and
commercial refuse collection services and
rates. It also may include the following
information:
q Number of agencies surveyed
q Percent of agencies which have granted
franchises
q Average monthly charge for comparable
residential can services
q Average charge for once-a-week
commercial service of a two and three
cubic yard bin
q Average charge for 20 cubic yard debris
box service.
The report may compare the proposed
unincorporated County rates with averages
from the survey. The report may summarize
in a matrix format all results of the survey
listed by agency surveyed.
A copy of the rate comparison tables are
included in the Draft and Final Reports,
however the tables would be provided to the
franchise hauler earlier upon request. If the
proposed rates differ greatly from the survey
averages, County staff should at that time
provide the franchise hauler with the
opportunity to provide feedback about how
the proposed rates compare to rates in the
survey. The franchise hauler should provide
requested feedback within ten (10) business
days .
Chapter II. Base Year Rate Setting Process
Contra Costa County 46 Garaventa Enterprises
STEP 6
Base Year
Preparation of
Draft Report and
Recommendations
Responsibility: County
Timing: Completed approximately two months
after determining the application
package is complete
Tasks: a. Prepare Draft Report and
Recommendations
Description of Tasks
Overview
A draft report with recommendations
from County representatives is prepared and
submitted to the franchise hauler for review.
The report will be reviewed by the franchise
hauler in Step 7.
a. Prepare Draft Report and
Recommendations
In this step, County representatives
prepares a draft report including
recommendations for a rate change. The
draft report includes the following sections:
q Executive Summary
q Introduction and Background
q Rate Change Review
q Analysis and Discussion of Rate Change
Application
q Recommendations
q Appendices.
Results of the public hearing (Step 8) also
eventually should be included in the final
report. Each of these report topics is
discussed below:
q Executive Summary
This is a one or two-page summary of
the review process and may include a chart
showing current and proposed rates, and the
recommended rate change.
q Introduction and Background
This section documents the rate change
requested by the franchise hauler. The section
identifies any proposed changes in services
provided by the hauler. The section also
identifies the review goals, objectives, scope,
and other relevant background information.
q Rate Change Review
This section of the report provides a brief
overview of the rate change process and
discussion of significant historical rate issues.
q Analysis and Discussion of Rate
Change Application
This section of the report will include a
review of the analysis work completed by
County representatives. This section
includes the following sub-sections:
Chapter II. Base Year Rate Setting Process
Contra Costa County 47 Garaventa Enterprises
· Review of Rate Changes, including
a discussion of interim year or
extraordinary rate changes during
each year since the last base year,
the relationship of these changes to
changes in the Bay Area Consumer
Price Index, and an analysis of the
significant components of the change
in rates (e.g., changes in tipping fees
or changes in operating profit).
· Analysis of Projected Costs,
including a discussion of any unusual
changes in costs which were
discovered and unresolved during the
review process, with references to
related line items in the Application.
· Discussion of Service Issues,
including changes in frequency or
type of curbside service. If
significant service issues are not
involved with a rate change, this
section would be omitted.
q Recommendations
County representatives would present its
recommendations regarding specific
changes in residential rates in this
section of the document.
q Appendices
Appendices to the report would include:
· Rate change application
· Audited financial statements of the
franchise hauler
· Other relevant supporting materials
provided by the franchise hauler
· Results of the rate survey.
Chapter II. Base Year Rate Setting Process
Contra Costa County 48 Garaventa Enterprises
STEP 7
Base Year
Review of Draft
Report and
Recommendations
Responsibility: Franchise Hauler
Timing: Completed within two weeks of
receiving the County’s Draft Report and
Recommendations
Tasks: a. Review Draft Report and
Recommendations with County Staff
b. Resolve Any Remaining Issues
c. Prepare Response to Draft Report and
Recommendations
Description of Tasks
Overview
The franchise hauler reviews the Draft
Report and Recommendations. The
franchise hauler also may provide additional
information related to any issues identified
during the County’s survey of other
communities’ rates.
a. Review Draft Report and
Recommendations with County Staff
During this task, the franchise hauler
will review the draft report. Each section of
the report should be reviewed to ensure the
following:
q Correct data are included
q County staff analysis is accurate and fair
q Rate changes are acceptable.
b. Resolve Any Remaining Issues
If any issues are identified during this
step, the franchise hauler works with County
staff to fully explore and resolve these
outstanding issues.
c. Prepare Response to Draft Report
and Recommendations
A written response to the draft report is
prepared. The response may cover one or
more of the following topics:
q If data discrepancies exist in any of the
areas noted in the prior task, the County
should be notified of these discrepancies.
q If the analysis conducted by County
representatives can be clarified or
considered differently, this information
should be provided to the County staff.
q If the report is acceptable and no
clarification or comments can be offered,
this should be relayed to County staff.
If no written response is received by the
County within two weeks of delivering the
county’s Draft Report and Recommendations,
then the County will assume that the hauler
has no issues with the report.
Chapter II. Base Year Rate Setting Process
Contra Costa County 49 Garaventa Enterprises
STEP 8
Base Year
Optional Public
Hearing
(Conducted at County’s Discretion)
Responsibility: County
Timing: Completed approximately 3 months after
determining the application package is
complete (or in conjunction with Step
10)
Tasks: a. Post Notice of Public Hearing
b. Conduct Public Hearing
Description of Tasks
a. Post Notice of Public Hearing
County staff may arrange for a public
hearing on the proposed change in
residential rates. This public hearing could
occur in conjunction with Step 10 as part of
a regularly scheduled Board of Supervisors
meeting at which the Final Report and
recommended rates are considered for
approval. This includes:
q Selecting a date for the hearing
q Preparing a public notice
q Distributing (submitting/posting) public
notice ten days prior to hearing date
q Making copies of the report available for
public review.
Exhibit II-3, on the following page is a
sample public hearing notice for newspaper
publication.
b. Conduct Public Hearing
Copies of the Report and
Recommendations should be made available
at the meeting. Representatives from the
County should be available to assist the
Board of Supervisors with citizen’s
questions about the proposed changes.
Representatives from the franchise hauler
may choose to attend at their option.
Chapter II. Base Year Rate Setting Process
Contra Costa County 50 Garaventa Enterprises
Exhibit II-3
Sample Public Hearing Announcement
Public Notice
Contra Costa County will hold a
public hearing to consider proposed
increases in the rates charged by
Garaventa Enterprises for the
collection of residential solid waste.
A hearing will be held at ____ a.m.
on ______________________ in the
____________________________
____________________________
____________________________.
Copies of the proposed rates and the
rate change application are available
at the Contra Costa County
Department of Conservation and
Development, 651 Pine Street, 4th
Floor, North Wing, Martinez,
California between the hours of 8:00
a.m. and 5 p.m.
Chapter II. Base Year Rate Setting Process
Contra Costa County 51 Garaventa Enterprises
STEP 9
Base Year
Preparation of
Final Report
and Recommendations
Responsibility: County
Timing: Completed within one month of
receiving comments from the franchise
hauler
Tasks: a. Incorporate Franchise Hauler’s Changes in Final
Report
b. Incorporate Comments from Public Hearing
c. Prepare Final Report and Recommendations
Description of Tasks
Overview
The County prepares the Final Report
and Recommendations, incorporating
relevant comments from the franchise hauler
and public hearing during this task.
a. Incorporate Franchise Hauler’s
Changes in Final Report
If applicable, clarification of issues
raised in the public hearing should be
addressed. If necessary, meetings are
conducted with representatives from the
County and the franchise hauler. Final
solutions to outstanding issues are included
in the report.
b. Incorporate Comments from Public
Hearing (if applicable)
If applicable, relevant comments received
during the public hearing are considered
during this task. If appropriate, modifications
to the report should be made. If significant
modifications are to be made, the franchise
hauler is notified and allowed an opportunity
to respond to these changes.
c. Prepare Final Report and
Recommendations
After final comments from the franchise
hauler have been considered, the Final
Report is prepared. A copy of the Final
Report is submitted to the franchise hauler.
Chapter II. Base Year Rate Setting Process
Contra Costa County 52 Garaventa Enterprises
STEP 10
Base Year
Presentation of Final Report
and Recommendations
to the Board of Supervisors
Responsibility: County
Timing: Completed 30 days prior to the expected
implementation of new rates
Tasks: a. Distribute Report to Board of
Supervisors
b. Obtain Board of Supervisors Approval
Description of Tasks
Overview
During this step, the Final Report and
Recommendations is presented to the Board
of Supervisors for review, comment, and
approval.
a. Distribute Report and Summary to
Board of Supervisors
In this task, the Final Report and
Recommendations is provided to members
of the Board of Supervisors. The report is
included as an agenda item for Board of
Supervisors consideration at a regular Board
meeting. The rate change may be placed on
either the regular, or consent calendar.
Copies of the report are provided to the
Clerk of the Board electronically as an
attachment to the staff report (referred to as
a Board Order) and distributed to Board
members in the same manner as all other
agenda materials. The Clerk of the Board
should be notified four weeks prior to the
meeting at which the rate change will be
considered if intended to be a “noticed
public hearing” in conjunction with Step 8.
The Final Report should be provided two
weeks prior to the meeting.
b. Obtain Board of Supervisor Approval
Supervisors review the report and
proposed rate changes. If the Board agrees
with the recommendations of County staff, the
report and rates are approved. If the Board
does not agree with the recommendations, the
report is returned to County staff for additional
analysis. If the report and rates are not
approved, the Board would indicate reasoning
and direct staff accordingly.
Chapter II. Base Year Rate Setting Process
Contra Costa County 53 Garaventa Enterprises
STEP 11
Base Year
Implementation
of
New Rates
Responsibility: Franchise Hauler
Timing: Conducted following Board of
Supervisors approval of the new rates
Tasks: a. Prepare Notification of Rate Change
b. Implement Rate Change
Description of Tasks
Overview
During this final step, the franchise
hauler implements new rates.
a. Prepare Notification of Rate Change
Once the report is approved, a
notification of a rate change is mailed by the
franchise hauler to all customers. This
notification may be included with a regular
billing or may be mailed separately. The
notification must be performed at least 30
days prior to the effective date of the rate
change. The franchise hauler should provide
a copy of the draft notice to County staff for
review/input. A copy of the final notice
should be provided to the County at the time
of customer notification.
b. Implement Rate Change
During this final task, the new rates are
entered into the franchise hauler’s billing
system and included in the billing cycle. If
the franchise hauler prepares billings once
every two or three months, and a rate change
occurs during the middle of a billing cycle,
unbilled amounts in the current billing cycle
due to the rate change are calculated and
included in the next billing cycle.
In accordance with the franchise
agreement, residential rates charged by
Garaventa represent maximum rates. It is
assumed for purposes of this manual that
Garaventa will charge these maximum rates.
If Garaventa charges rates below these
maximum rates and fails to meet its revenue
requirement, the County is not responsible for
making up any future revenue inadequacies
resulting from lower than maximum rates
charged. In no case will Garaventa be entitled
to recover past uncollected revenues through
a balancing account or future increases in
rates.
Chapter II. Base Year Rate Setting Process
Contra Costa County 54 Garaventa Enterprises
[This page intentionally left blank.]
Chapter III
Base Year
Rate Setting Methodology
Contra Costa County 55 Garaventa Enterprises
III. Base Year Rate Setting Methodology
This chapter provides detailed
instructions for completing the Base Year
Rate Change Application and for conducting
the Solid Waste Fee Survey. The application
will be prepared by the franchise hauler and
reviewed by the County. The survey will be
prepared by the County.
Forms provided in this chapter identify all
areas to be completed with double outlined
boxes. If data are to be entered on the forms,
the box has no shading. If a calculation is
required, the box has light shading.
This chapter of the manual includes the
following sections:
A. Preparation of the Base Year Rate
Change Application
B. Survey of Rates in Similar Areas
A. Preparation of the Base Year Rate
Change Application
The franchise hauler is responsible for
preparing the Base Year Rate Change
Application. This form includes detailed
financial and operating information and is
used to determine the projected costs and
revenues of the franchise hauler for the base
year.
Exhibit III-1 provides an overview of the
steps and related tasks which must be
completed to prepare the application form.
Exhibit III-2 is a sample application form as
it might be completed by the franchise hauler.
Following this exhibit are detailed descriptions
of each step and related tasks. Please note that
data included in these exhibits are provided
for illustrative purposes only and are not
intended to reflect actual operating or financial
conditions of the franchise hauler.
Several lines in the application contain
four columns. This includes lines 1-15, 18,
21-23, and 25. These columns are intended to
show the relationship between the two most
recently completed years, the current year,
and projections for the new “base” year.
These columns are organized as follows:
q Columns One and Two include
information for the franchise hauler’s
two prior fiscal years. These are the most
recent years that financial information is
available and that actual costs and
revenues can be verified.
q Column Three is for estimating
performance during the current fiscal year.
The “current year” is the franchise hauler’s
fiscal year prior to the new base year. The
base year rate change application is
prepared during the course of the current
year. Data in this column should include
year-to-date performance plus estimated
performance during the remaining months
of the current fiscal year.
q Column Four is used to report projected
performance during the new base year. This
information is entirely a projection and is
utilized to determine any rate changes.
The relationship between these four
columns for any given line item should be
consistent. Any substantial difference between
each of the four years should be explained by
the franchise hauler and considered by the
County during the review process.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 56 Garaventa Enterprises
Exhibit III-1
Preparation of Base Year Rate Change Application
Steps
1. Entry of
Operating Costs
and Profit
2. Determination of
Residential,
Commercial, and Light
Industry Revenues
Tasksa
3. Calculation of
Allowable Operating
Profit and Revenue
Requirement
4. Calculation of
Percent Change
In Rates
5. Preparation
of
Summary Form
a.Enter Prior Year Information
b.Enter Current Year Estimated Information
c.Enter Base Year Projected Information
d.Enter Operating Data
a.Determine Residential Revenue
b.Determine Commercial and Light
Industry Revenue
c.Determine Allowance for Uncollectible
Accounts
d.Determine Recyclable Revenues
e.Calculate Total Revenue
a.Calculate Allowable Operating Profit
b.Determine Franchise Fee
c.Calculate Revenue Requirement
a.Calculate Net Surplus/Shortfall
b.Calculate Percent Change In Rates
a.Calculate New Rates
b.Sign and Submit the Application
a All tasks performed by the franchise hauler.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 57 Garaventa Enterprises
Exhibit III-2
[Page 1 of 6]
Sample Base Year Rate Change Application
1
S T E P
2
S T E P
3
S T E P
4
S T E P
Contra Costa County
Financial Information
Estimated Projected
Current Year Base Year
Year 1 Year 2 Year 3 Year 4
1.Direct Labor 975,000$ 978,000$ 990,000$ 1,100,000$
2.Tipping Fees (Profit Allowed)750,000 775,000 775,000 780,000
3.Corporate and Local General and Administrative Costs 375,000 395,000 405,000 407,500
4.Depreciation and Other Operating Costs 150,000 175,000 185,000 195,000
5.Services Provided to County 40,000 45,000 46,000 46,000
6.Curbside Recycled Materials Processing Costs (if Option Used by County)- - - -
7.Total Allowable Costs (Lines 1+2+3+4+5+6)2,290,000$ 2,368,000$ 2,401,000$ 2,528,500$
8.Operating Ratio 87%88%90%90%
9.Allowable Operating Profit [(Line 7 / 0.9)-Line 7]343,396$ 311,743$ 254,323$ 280,944$
10.County Administrative Fee 20,000$ 25,000$ 25,000$ 25,000$
11.Household Hazardous Waste Fees 100,000 110,000 135,000 140,000
12.Trucking and Equipment 500,000 510,000 525,000 527,000
13.Tipping Fees (Pass Through)75,000 85,000 85,000 90,000
14.Total Pass Through Costs (without Franchise Fees) (Lines 10+11+12+13)695,000$ 730,000$ 770,000$ 782,000$
15.Total Allowable Costs (Line 7) plus Allowable Operating Profit (Line 9) plus
Total Pass Through Costs (without Franchise Fees) (Line 14)3,328,396$ 3,409,743$ 3,425,323$ 3,591,444$
16.Residential Revenues 1,775,000$
17. Less Allowance for Uncollectible Residential Accounts 17,750
18.Total Residential Revenues (without Rate Change in Base Year)1,689,930$ 1,739,430$ 1,752,300$ 1,757,250$
19.Commercial and Light Industrial Revenues 1,870,500$
20. Less Allowance for uncollectable Commercial and Light Industrial Accounts 13,094
21.Total Commercial/Light Industrial Revenues (without rate change in Base Year)1,802,295$ 1,838,043$ 1,841,519$ 1,857,407$
22.Recyclable Revenues 11,350$ 11,730$ 11,785$ 11,710$
23.Total Revenues (Lines 18+21+22)3,503,575$ 3,589,203$ 3,605,604$ 3,626,367$
24.Net Shortfall (Surplus) without Franchise Fees (Lines 15-Line 23)(34,922)$
25.Residential / Commercial / Light Industrial Franchise Fees (see calculation below)175,179$ 179,460$ 180,280$ 270,371$
26.Net Shortfall (Surplus) with Franchise Fees (Lines 24 + 25)235,449$
27.Total Commercial / Light Industrial Revenues Prior to Rate Change (Lines 18+21)3,614,657$
28.Percent Change in Existing Residential / Commercial / Light Industrial Rates (Line 26 / Line 27)6.51%
Franchise fees are set by the County at a percent of the revenue requirement 29.Total Allowable Costs (Line 7)2,528,500$
Solve for two equations with one unknown, and identify franchise fees as X =>30.Allowable Operating Profits (Line 9)280,944
Equation 1) Revenue Requirement x Franchise Fee % = X 31.Pass Through Costs with Franchise Fees (Line 14+25)1,052,371
Equation 2) Revenue Requirement = Line 15 + X, or $__________+X 32.Revenue Requirement 3,861,815$
Substitute equation 2) into equation 1) and solve for X =>
($________+ X) x Franchise Fee % = X or X = ______
Year:Page 1 of 6
Section III -- Pass Through Costs without Franchise Fees
Section IV -- Revenue Requirement without Franchise Fees
Section V -- Revenues without Rate Change in Base Year
Section VI -- Net Shortfall (Surplus)
Section VII -- Percent Change in Rates
Franchise Fee Calculation Summary Revenue Requirement
Base Year Rate Change Application
Actual
Historical Years
Section I -- Allowable Costs
Section II -- Allowable Operating Profit
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 58 Garaventa Enterprises
Exhibit III-2
[Page 2 of 6]
Sample Base Year Rate Change Application (continued)
1
S T E P
Contra Costa County
Cost Summary for Year ____
Audited
Unincorporated Non-Uninc.Garaventa Allocation
Description of Cost County County Financial Base(s)
Labor - Regular 435,000$ 565,000$ 1,000,000$ Labor hours
Labor - Overtime 83,000 67,000 150,000 Labor hours
Benefits 415,000 435,000 850,000 Labor hours
Payroll Taxes 45,000 55,000 100,000 Labor hours
33.Total Direct Labor 978,000$ 1,122,000$ 2,100,000$
34.Total Tipping Fees (Profit Allowed)775,000$ 725,000$ 1,500,000$ Tons
Accounting 25,000$ 25,000$ 50,000$ Accounts
Accounting Staff 75,000 75,000 150,000 Accounts
Computer Services 60,000 60,000 120,000 Accounts
Dues and Subscriptions 3,500 4,000 7,500 Accounts
Insurance 50,000 50,000 100,000 Accounts
Legal 15,000 20,000 35,000 Accounts
Management Fees 61,700 88,300 150,000 Accounts
Miscellaneous and Other 15,000 20,000 35,000 Accounts
Office Expenses 22,000 28,000 50,000 Accounts
Office Repair and Maintenance 7,800 7,200 15,000 Accounts
Outside Services 5,000 5,000 10,000 Accounts
Public Relations and Promotion 5,000 5,000 10,000 Accounts
Taxes and Licenses 7,500 9,500 17,000 Accounts
Telephone 15,000 20,000 35,000 Accounts
Travel 2,500 2,500 5,000 Accounts
Utilities 35,000 45,000 80,000 Accounts
35.Total Corporate and Local General and Administrative Costs 405,000$ 464,500$ 869,500$
Depreciation-Buildings 100,000$ 150,000$ 250,000$ Square Footage
Depreciation-Vehicles 25,000 50,000 75,000 Direct
Depreciation-Containers 35,000 40,000 75,000 Direct
Other Operating Costs 25,000 35,000 60,000 Accounts
36.Total Depreciation and Other Operating Costs 185,000$ 275,000$ 460,000$ N/A
37.Total Services Provided to County 46,000$ -$ 46,000$ N/A
38.Curbside Recycled Materials Processing Costs -$ N/A
39.Total Allowable Costs (Lines 33+34+35+36+37+38)2,389,000$ 2,586,500$ 4,975,500$
40 Total County Administration Fee 25,000$ -$ 25,000$ N/A
41.Total Household Hazardous Waste Fees 135,000$ -$ 135,000$ N/A
Equipment Rental
Gas and Oil
Insurance
Parts
Repair and Maintenance
Tires
Other
42.Total Trucking and Equipment 525,000$ 675,000$ 1,200,000$ Lease
43.Total Tipping Fees (Pass Through)85,000$ -$ 85,000$ Tons
44.Total Residential/Commercial/Light Industrial Franchise Fees 270,371$ -$ 500,000$
45.Total Pass Through Costs (Lines 40+41+42+43+44)1,040,371$ 675,000$ 1,945,000$
46.Total Costs (Lines 39+45)3,429,371$ 3,261,500$ 6,920,500$
Year:Page 2 of 6
Base Year Rate Change Application
Section VIII -- Base Year Cost Allocation
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 59 Garaventa Enterprises
Exhibit III-2
[Page 3 of 6]
Sample Base Year Rate Change Application (continued)
2
S T E P
Contra Costa County
Revenues Summary
Estimated Projected
Current Year Base Year
Year 1 Year 2 Year 3 Year 4
Single Family Residential Services
47.Single Family Residential Revenues 1,650,000$ 1,700,000$ 1,710,000$ 1,715,000$
Multiunit Residential Services
48.Number of Accounts 50 50 52 52
49.Multiunit Residential Revenues 57,000$ 57,000$ 60,000$ 60,000$
50.Residential Revenues (w/o Allowable for Uncollectible Accounts) (Lines 43+45)1,707,000$ 1,757,000$ 1,770,000$ 1,775,000$
51.Allowance for Uncollectible Residential Accounts 17,070$ 17,570$ 17,700$ 17,750$
52.Total Residential Revenues (Line 46 - Line 47)1,689,930$ 1,739,430$ 1,752,300$ 1,757,250$
Commercial and Light Industrial Can Services
53.Number of Accounts 128 128 130 130
54.Commercial and Light Industrial Can Revenues 75,000$ 77,000$ 78,000$ 78,500$
Commercial and Light Industrial Bin Services
55.Number of Accounts 723 723 735 735
56.Commercial and Light Industrial Bin Revenues 1,675,000$ 1,710,000$ 1,710,500$ 1,725,000$
Commercial and Light Industrial Drop Box Services
57.Number of Accounts 20 21 27 27
58.Commercial and Light Industrial Drop Box Revenues 65,000$ 64,000$ 66,000$ 67,000$
59.Commercial and Light Industrial Revenues (w/o Allowance for
Uncollectible Accounts) (Lines 50+52+54)1,815,000$ 1,851,000$ 1,854,500$ 1,870,500$
60.Allowance for Uncollectible Commercial and Light Industrial Accounts 12,705$ 12,957$ 12,982$ 13,094$
61.Total Commercial and Light Industrial Revenues (Line 55 - Line 56)1,802,295$ 1,838,043$ 1,841,519$ 1,857,407$
62.Recyclable Revenues 35,000$ 40,000$ 40,000$ 42,000$
63.Total Revenues (Lines 48+57+58)3,527,225$ 3,617,473$ 3,633,819$ 3,656,657$
Base Year Rate Change Application
Section IX -- Revenues
Actual
Historical Years
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 60 Garaventa Enterprises
Exhibit III-2
[Page 4 of 6]
Sample Base Year Rate Change Application (continued)
2S T E P2
S T E P
Contra Costa County
Single Family Residential Revenues Summary
For Comparative Purposes, Not Used for Base Year Projection Base Year
Revenues
Single Family Residential Revenues (w/o Rate Change in Base Year)
Current Projected
Rate/Month Accounts Total a/
Oakley area can /toter (County)26.00$ 1,000 312,000
Oakley area extra can with toter (County)7.00$ 2 168
Oakley area mini can (County)23.00$ 5 1,380
Oakley area 40 gallon can (County)26.00$ 400 124,800
Brentwood (out of City) can/toter 26.00$ 450 140,400
Brentwood (out of City) extra can with toter 7.00$ 20 1,680
Brentwood (out of City) mini can 23.00$ 600 165,600
Brentwood (out of City) 32 gallon can 26.00$ 600 187,200
Byron toter 26.00$ 75 23,400
Byron extra can with toter 7.00$ 15 1,260
Byron mini can 23.00$ 10 2,760
Byron 32 gallon can 26.00$ 10 3,120
Discovery Bay can/toter 26.00$ 850 265,200
Discovery Bay mini can 23.00$ 20 5,520
Discovery Bay extra can with toter 7.00$ 10 840
Discovery Bay 32 gallon can 26.00$ 375 117,000
Baypoint (PDS) can/toter 26.00$ 1,000 312,000
Baypoint (PDS) mini can 23.00$ 20 5,520
Baypoint (PDS) extra can with toter 7.00$ 2 168
Baypoint (PDS) 32 gallon can 26.00$ 45 14,040
64.Total Projected Single Family Residential Revenues 5,509 1,684,056$
Base Year Rate Change Application
Section X -- Single Family Residential Revenues and Customer Counts
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 61 Garaventa Enterprises
Exhibit III-2
[Page 5 of 6]
Sample Base Year Rate Change Application (continued)
1
S T E P
Contra Costa County
Operating Information
Historical
Information
Percent
Change
Historical
Information
Percent
Change
Current Year
Estimated
Information
Percent
Change
Base Year
Projected
Information
Year 1 Year 1 to 2 Year 2 Year 2 to 3 Year 3 Year 3 to 4 Year 4
Accounts
65.Residential 6,500 0.23%6,515 0.92%6,575 0.15%6,585
66.Commercial 850 0.00%850 1.76%865 0.00%865
67.Light Industrial 20 5.00%21 28.57%27 0.00%27
68.Total Accounts 7,370 0.22%7,386 1.10%7,467 0.13%7,477
Waste Tonnage
69.Residential 8,500 0.59%8,550 0.29%8,575 0.06%8,580
70.Residential Greenwaste 1,200 3.33%1,240 0.81%1,250 0.00%1,250
71.Commercial 3,500 0.71%3,525 0.71%3,550 0.70%3,575
72.Light Industrial 200 5.00%210 4.76%220 2.27%225
73.Total Tonnage 13,400 0.93%13,525 0.52%13,595 0.26%13,630
Recyclable Tonnage
74.Residential 1,750 3.71%1,815 1.10%1,835 0.00%1,835
75.Commercial 500 2.00%510 -2.94%495 -3.03%480
76.Light Industrial 20 5.00%21 28.57%27 0.00%27
77.Total Tonnage 2,270 3.35%2,346 0.47%2,357 -0.64%2,342
County Services
78.County Bins 15 0.00%15 33.33%20 5.00%21
79.County Drop Boxes 7 28.57%9 -11.11%8 25.00%10
80.3 Yard Bin -- Once per Week 220.00$ 2.27%225.00$ 3.11%232.00$ 0.00%232.00$
81.2 Yard Bin -- Once per Week 175.00$ 2.29%179.00$ 3.13%184.60$ 0.00%184.60$
82.20 Yard Debris Box -- per Pick Up 400.00$ 2.25%409.00$ 3.14%421.85$ 0.00%421.85$
Base Year Rate Change Application
Section XI -- Operating Data
Section XII -- Change in Commercial Rates
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 62 Garaventa Enterprises
Exhibit III-2
[Page 6 of 6]
Sample Base Year Rate Change Application (continued)
5
S T E P
Contra Costa County
Unincorporated Area: All Areas
83.Rate Change Requested 6.5%
New
Current Rate Rate
Oakley area can /toter (County)26.00 27.69
Oakley area extra can with toter (County)7.00 7.46
Oakley area mini can (County)23.00 24.50
Oakley area 40 gallon can (County)26.00 27.69
Brentwood (out of City) can/toter 26.00 27.69
Brentwood (out of City) extra can with toter 7.00 7.46
Brentwood (out of City) mini can 23.00 24.50
Brentwood (out of City) 32 gallon can 26.00 27.69
Byron toter 26.00 27.69
Byron extra can with toter 7.00 7.46
Byron mini can 23.00 24.50
Byron 32 gallon can 26.00 27.69
Discovery Bay can/toter 26.00 27.69
Discovery Bay mini can 23.00 24.50
Discovery Bay 32 gallon can 7.00 7.46
Discovery Bay 32 gallon can 26.00 27.69
Baypoint (PDS) can/toter 26.00 27.69
Baypoint (PDS) mini can 23.00 24.50
Baypoint (PDS) extra can with toter 7.00 7.46
Baypoint (PDS) 32 gallon can 26.00 27.69
84.Multiunit Residential Rate increase of 6.51%will be applied
to all rates in each structure.
To the best of my knowledge, the data and information in this application is complete, accurate, and
consistent with the instructions provided by Contra Costa County.
Name:John Brown Title:CFO
Signature:Date:July 14, 2011
Year: Page 6 of 6
Base Year Rate Change Application
Rate Change
Rate Schedule
Rate schedule
Certificate
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 63 Garaventa Enterprises
STEP 1
Application
Entry of
Operating Costs and
Profit
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Base Year
Rate Change Process (Refer to Section
II-A)
Tasks: a. Enter Prior Year Information
b. Enter Current Year Estimated Information
c. Enter Base Year Projected Information
d. Enter Operating Data
Description of Tasks
a. Enter Prior Year Information
A copy of audited financial statements
for the previous fiscal year should be
obtained. Financial information from the
audit is consolidated into specific categories
identified in the application. All financial
information shall be in accordance with
generally accepted accounting principles.
These categories include:
Line 1 Direct Labor
Line 2 Tipping Fees (Profit Allowed)
Line 3 Corporate and Local General
and Administrative Costs
Line 4 Depreciation and Other
Operating Costs
Line 5 Services Provided to County
Line 6 Curbside Recycled Material
Processing Costs (Optional,
on County request)
Line10 County Administrative Fee
Line 11 Household Hazardous Waste
Fees
Line 12 Trucking and Equipment
Line 13 Tipping Fees (Pass Through)
Line 25 Residential/Commercial/Light
Industrial Franchise Fee
The specific components of these cost
categories are described in Exhibit I-7 in
Chapter I. Supplemental documentation
should be prepared which reconciles the
financial audit for the most recently completed
calendar year to information provided in the
application (e.g., a trial balance report). This
documentation, along with a copy of the audit,
should be included in the application package.
Total cost information for both residential
refuse collection/curbside recycling and
commercial and light industrial refuse
collection should be reported in this initial task,
and in tasks b. and c., below. A breakdown of
costs for residential, commercial, and light
industrial refuse and curbside recycling
services is not required at any point in the rate
setting process.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 64 Garaventa Enterprises
b. Enter Current Year Estimated
Information
Current year costs are determined by
adding actual costs to-date to estimated costs
that will be incurred during the rest of the
fiscal year. Total costs for the current year
should be similar to the prior year, after
taking into account such factors as increases
due to inflation, changes in the number of
residential, commercial, and light industrial
customers served, changes in labor costs,
and increases in uncontrolled costs. Any
significant changes should be explained and
documented. A significant change includes
any increase in cost which is greater than the
CPI, or any decrease in a cost item.
c. Enter Base Year Projected
Information
Base year costs are projected by the
franchise hauler. These projected costs then
are used to calculate the net shortfall/surplus
in revenues and, subsequently, the percent
change in rates. These projected costs should
be developed by estimating anticipated
service levels during the base year, and
determining the expenses which will be
incurred to provide these services. Each cost
element in the application should be
reviewed and any anticipated change in
specific line items should be included in the
base year projection. For example, if
negotiated labor rates are scheduled to
change, or if transfer station and/or landfill
tipping fees are expected to change (as
supported by approved tipping fee changes
reviewed by a regulating agency), these
changes should be included in cost
projections for the base year.
Actual and estimated franchise fees for
the three years prior to the base year (years
one through three of the application) should
be included in the application in tasks a and
b. The franchise fee for the base year (year
five of the application) is not estimated in
this task, but is estimated in Step 3. Because
franchise fees may be based on revenue from
residential, commercial, and light industrial
refuse, and recycling operations, the
projected franchise fee in the base year may
be calculated using the revenue projections
developed in Step 2.
In addition to the cost information
requested in the application, three
supplemental financial measures must be
provided as an attachment to the application:
q the total square feet of office space used
by the franchise hauler and the rental or
lease rate per square foot per month
during the new base year
q the fully-loaded cost per residential truck
during the new base year
q the total square feet of warehouse space,
and the rate per square foot, during the
new base year
The franchise hauler must provide three
comparable rates for each of these financial
measures (i.e., three for trucking charges,
three for office space per square foot, and
three for warehouse space per square foot),
for a total of nine measures. The source of
these comparable rates must be identified.
In the absence of three comparable truck
lease rates, the franchised hauler will provide
the County, or its agents, access to the trucking
company’s accounting records so that the County
can determine the reasonableness of trucking
lease rates charged to County customers.
The franchise hauler should project base
year revenues and costs based on the
projection methodology guidelines provided
in Exhibit III-3. With its Base Year Rate
Application, the franchise hauler should
provide written explanations, and the
supporting rationale for, all cases where the
franchise hauler does not use the projection
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 65 Garaventa Enterprises
methodology guidelines identified in Exhibit
III-3.
d. Enter Operating Data
Operating information requested in the
application, provides an important indicator of
the franchise hauler’s performance. If costs are
changing at an unusual rate, operating data may
provide some explanation of these changes. For
example, cost increases could be attributed to
the increased level of service provided (i.e.,
accounts served). Two operating characteristics
are required in the application for residential,
commercial, and light industrial customers:
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 66 Garaventa Enterprises
Exhibit III-3
[Page 1 of 3]
Contra Costa County
Garaventa Enterprises Rate Setting Methodology
Base Year Projection Methodology Guidelines1
Category Base Year Projection Methodology
Revenue Projection in Base Year
Residential Estimated residential revenues in “Current Year” multiplied by one plus the average annual
compounded rate of change in residential customer revenues over the prior two years.2
Commercial Estimated commercial revenues in “Current Year” multiplied by one plus the average annual
compounded rate of change in commercial revenues over the prior two years.
Debris Boxes Estimated debris box revenue in “Current Year” multiplied by one plus the average annual
compounded rate of change in debris box revenues over the prior two years.
Recyclable Revenues Currently equal to $5 per ton multiplied by the estimated “Current Year” total recycled materials
tonnage. As an alternative to the $5 per ton amount currently used, the County, at its discretion, may
also elect to instead have Garaventa include the revenues (i.e., commodity sales) and costs associated
with processing curbside recycled materials within the Application.
Cost Projection in Base Year
Direct Labor –
Wages
Estimated direct labor wages in “Current Year” multiplied by one plus the average annual
compounded rate of change in direct labor wages over the prior two years; or detailed direct labor
modeling by employee.
Direct Labor –
Payroll Taxes
Estimated direct labor payroll taxes in “Current Year” multiplied by one plus the average annual
compounded rate of change in direct labor payroll taxes over the prior two years; or detailed direct
labor modeling by employee.
Direct Labor –
Health and Welfare
Estimated direct labor health and welfare costs in “Current Year” multiplied by one plus the average
annual compounded rate of change in direct labor health and welfare costs over the prior two years;
or detailed direct labor modeling by employee.
Direct Labor –
Workers Compensation
Estimated direct labor workers compensation costs in “Current Year” multiplied by one plus the
average annual compounded rate of change in direct labor workers compensation costs over the
prior two years; or detailed direct labor modeling by employee
Direct Labor –
Pension
Estimated direct labor pension in “Current Year” multiplied by one plus the average annual
compounded rate of change in direct labor pension over the prior two years; or detailed direct labor
modeling by employee.
Dumping Costs Equal to a verifiable tipping fee rate multiplied by the projected “Base Year” total disposal tonnage.
The projected “Base Year” disposal tonnage is equal to the estimated “Current Year” total disposal
tonnage multiplied by one plus the average annual compounded rate of change in disposal tonnage
over the prior two years.
1 Subject to alternative Base Year projection methods only when provided in writing by the company and approved by the County.
2 Where the average annual compounded rate of change over the prior two years is defined as
[(Current Year Revenues ÷ First Year Actual Revenues (i.e., Prior Base Year Revenues)) raised to the 0.5 power] minus 1].
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 67 Garaventa Enterprises
Exhibit III-3
[Page 2 of 3]
Contra Costa County
Garaventa Enterprises Rate Setting Methodology
Base Year Projection Methodology Guidelines (continued)1
Category Base Year Projection Methodology
Cost Projection in Base Year (continued)
Depreciation and
Other Operating Costs –
Customer Repairs,
Medical Costs (Drug
Testing), Laundry, and
Uniforms
Estimated customer repair costs in “Current Year” multiplied by one plus the average annual
compounded rate of change in customer repair, medical costs (drug testing), laundry, and uniform
costs over the prior two years.
Depreciation and
Other Operating Costs –
Furniture and Fixtures
Estimated furniture and fixture depreciation costs in “Current Year” multiplied by one plus the
average annual compounded rate of change in furniture and fixture depreciation costs over the prior
two years, or as computed per a detailed deprecation schedule.
Curbside Recycled
Materials Processing
Costs (optional – will
need to add a line to the
Application if used)
Direct – the average of actual County processing costs in the prior two years, multiplied by one plus
the average annual compounded rate of change in the April-to-April, San Francisco-Oakland-San
Jose Consumer Price Index (CPI) (Series Id: CUURA422SA0) over the prior three years.3
General and
Administrative (G&A) –
Accounting
Direct – the average of actual G&A accounting cost in the prior two years, multiplied by one plus
the average annual compounded rate of change in the April-to-April, San Francisco-Oakland-San
Jose Consumer Price Index (CPI) (Series Id: CUURA422SA0) over the prior three years.
G&A –
Legal
Direct – the average of actual G&A legal cost in the prior two years4, multiplied by one plus the
average annual compounded rate of change in the April-to-April, San Francisco-Oakland-San Jose
Consumer Price Index (CPI) (Series Id: CUURA422SA0) over the prior three years.
G&A –
Medical Expenses
Direct – the average of actual G&A medical cost in the prior two years, multiplied by one plus the
average annual compounded rate of change in the April-to-April, San Francisco-Oakland-San Jose
Consumer Price Index (CPI) (Series Id: CUURA422SA0) over the prior three years.
3 An example of the average annual compounded rate of change in the CPI over the prior three years, for year 2010, would be
[(Year 2010 April Index ÷ Year 2007 April Index) raised to the 0.33 power] minus 1], or [((227.7 ÷ 215.86) raised to the 0.33
power) - 1] = 1.78%.
4 Where the average annual compounded rate of change over the prior two years is defined as
[(Current Year Costs ÷ First Year Actual Costs (i.e., Prior Base Year Costs)) raised to the 0.5 power] minus 1].
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 68 Garaventa Enterprises
Exhibit III-3
[Page 3 of 3]
Contra Costa County
Garaventa Enterprises Rate Setting Methodology
Base Year Projection Methodology Guidelines (continued)1
Category Base Year Projection Methodology
Cost Projection in Base Year (continued)
G&A –
Other Categories
Estimated G&A costs, excluding the three specified G&A items, in the “Current Year”
multiplied by one plus the average annual compounded rate of change in the April-to-April, San
Francisco-Oakland-San Jose Consumer Price Index (CPI) (Series Id: CUURA422SA0) over the
prior three years.
Total G&A costs, including the three specified G&A items above, are allowed up to a capped limit
of 12.2 percent of the total revenue requirement.5 In any base year, if total G&A costs, as a percent
of the total revenue requirement, exceed the capped limit, total G&A costs will be set to equal
12.2 percent of the total revenue requirement. The capped limit will be re-calculated each base year,
based on publicly traded company data available, over a prior five-year period
County Administrative
Fees
Direct – the average of actual County administrative fees in the prior two years, multiplied by one
plus the average annual compounded rate of change in the April-to-April, San Francisco-Oakland-
San Jose Consumer Price Index (CPI) (Series Id: CUURA422SA0) over the prior three years.
Household Hazardous
Waste Fees
Direct – the average of actual County franchise area HHW fees in the prior two years, multiplied by
one plus the average annual compounded rate of change in the April-to-April, San Francisco-
Oakland-San Jose Consumer Price Index (CPI) (Series Id: CUURA422SA0) over the prior three
years.
Trucking Costs Estimated trucking costs in “Current Year” multiplied by one plus the average annual compounded
rate of change in trucking costs over the prior two years; or the number of equipment pieces/units
multiplied by a verified SEG trucking lease rate, for each truck and equipment item
Franchise Fees Direct – equal to a percentage of the projected revenue requirement in “Base Year”. The County
will set the percentage franchise fee and the amount may change over time (currently the franchise
fee is five (5) percent of total revenues, and upon implementation of the three cart system, the
franchise fee will increase to seven (7) percent of total revenues.
5 The weighted average ratio of G&A to total revenues, for nine (9) publicly traded companies, over a recent five-year period
(2006 to 2010), was 11.07 percent. With an additional 10 percent margin to account for variability in the distribution of G&A
costs by company, the capped limit is 12.2 percent of the total revenue requirement (11.07% * (1 + 10%) = 12.2%).
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 69 Garaventa Enterprises
q Accounts served
q Tons collected
The franchise hauler should report the
quantity of drop boxes and bins provided to
the County including community cleanups.
Additionally, , the franchise hauler always
should provide a frequency distribution of
the number of customers within each
category of the rate structure (both
residential and commercial).
Similar to cost data, four years of
operating data are required in the application.
The first two years are “historical,” the third
year is the “current” year, and the fourth year
is the “base” year. Historical data are based on
actual annual operating statistics during the
last two complete fiscal years and reflect the
same year used in the financial sections of
the application. Current year performance is
based on performance to-date plus estimated
performance for the remaining months of
the current year. Projected base year data
represents the franchise hauler’s best estimate
of service levels during the new base year.
Year-to-year percentage changes then
are determined for accounts served, tons
collected, and drop boxes/bins provided to the
County including community cleanups. Any
significant changes should be documented and
explained by the franchise hauler. A
significant change in an operating
characteristic is an increase or decrease of
more than two percent.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 70 Garaventa Enterprises
STEP 2
Application
Determination of
Residential, Commercial, and
Light Industrial Revenues
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Base Year
Rate Change Process (Refer to Section
II-A)
Tasks: a. Determine Residential Revenues
b. Determine Commercial and Light Industrial
Revenues
c. Determine Allowance for Uncollectible
Accounts
d. Determine Recyclable Revenues
e. Calculate Total Revenues
Description of Tasks
a. Determine Residential Revenues
Residential, commercial, and light
industrial revenues comprise the majority of
revenues to the franchise hauler. To calculate
projected residential revenue for the base
year, the franchise hauler will use the
methodology identified in Exhibit III-3. For
comparison purposes with the projection, the
franchise hauler also will provide a summary
of current rates, projected single family
residential customer accounts, and projected
base year revenues on page 4 of 6 of the
Application. On page 4 of 6, The franchise
hauler will enter the current monthly rates by
service type in the first column of cells on
page 4 of 6. Then, the franchised hauler will
enter the projected number of accounts by
service type in the second column of cells on
page 4 of 6. Total revenues for each service
type are calculated based on the following:
Calculation of
Projected Base Year Revenue
Rate per month
Multiplied by Twelve months
Equals Rate per year
Multiplied by Projected residential
accounts
Equals Revenue by
service type
Revenues by service type then are
entered in the third column of cells on page
4 of 6. These values then are added together
and entered and totaled in line 64.
The number of accounts in each service
category may change throughout the year.
For example, some customers may request
one can service part of the year and an
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 71 Garaventa Enterprises
additional can during the remainder of the
year. The average number of accounts by
service type is to be used in these
calculations. In addition, the number of
accounts identified for these calculations
must agree with operating data provided in
Section XI (page 5) of the application.
Single family and multi-family residential
revenue figures should be provided for all
four years in lines 47 through 52 on page 3
of 6.
b. Determine Commercial and Light
Industrial Revenues
The methodology used to project
commercial and light industrial (debris box)
revenues is provided in Exhibit III-3.
Commercial and light industrial revenue
information is entered in lines 53 through 61
of page 3 of 6 of the application. In the first
three columns of this line, actual revenue
generated by commercial and light industrial
accounts during the prior three years is
reported. The second year amount must
reconcile with the financial audit for that
same year. Commercial and light industrial
revenues for the current year are based on
actual revenue to-date plus an estimate of
the revenues that will be received through
the end of the fiscal year. Commercial and
light industrial revenues in the current year
should be comparable to revenue in the prior
year, after taking into account changes in
rates and service levels.
Projected commercial and light
industrial revenues for the new base year are
entered in the fourth column. This amount,
net of any projected uncollectible accounts,
is based on the estimated annual revenue
received during the current fiscal year plus
any additional revenue generated from
additional accounts. Operating data provided
in Section XI (page 5) of the application
should support any service level changes.
In order to analyze changes in
commercial rates, information must be
provided for the three specific commercial
services. These services are:
q 3 Yard Bin – once per week
q 2 Yard Bin – once per week
q 20 Yard Debris Box – per pickup.
In the columns of lines 80 through 82,
the franchise hauler enters the rate for these
services for the prior three years and the
current year, respectively. Percentage
changes then are entered in columns 2, 4,
and 6. This information provides an
indication of the overall changes in
commercial rates which can be compared to
the requested change in residential rates.
c. Determine Allowance for Uncollectible
Accounts
The franchise hauler likely will not be
paid by all customers served. While this
amount is expected to be relatively small, it
must be accounted for in the calculation of
base year net revenues. These amounts are
reported in two places for each service type:
on lines 17 and 51 for the allowance for
uncollectible residential accounts, and lines
20 and 60 for the allowance for uncollectible
commercial and light industrial accounts.
These amounts can be calculated based
on a formula, such as one percent of
anticipated revenues, or based on actual
experience. All assumptions related to the
projection of uncollectible accounts must be
documented and included as a supplement to
the application.
d. Determine Recyclable Revenues
Currently, the County uses an alternative
approach to determining recycled materials
sales, electing to set a $5.00 per ton net revenue
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 72 Garaventa Enterprises
amount in rates. This $5.00 per ton net revenue
amount represents an estimate of the revenues
less costs associated with processing the
recycled materials collected by Garaventa.
As an alternative to the flat $5.00 per ton
net revenue approach, the County, at its
discretion, can request that Garaventa include
the revenues and costs associated with
processing and selling recycled materials,
collected via the curbside recycling program,
within the Base Year Application. The County
would review the recycled materials sales
revenues and processing costs for
reasonableness.
For this alternative approach, Garaventa
would need to include revenues generated by
selling recyclable materials collected through
the curbside recycling program. The amount of
revenues generated through the sale of these
materials is dependent upon the quantity of
material collected and
the market price for these materials. Both
of these factors are outside direct control of
the franchise hauler. Therefore, revenues
generated by recycled material sales are not
subject to an across-the-board rate change.
In this alternative more detailed approach,
for the base year, revenues from recycled
material sales are determined by projecting
scrap prices for recycled materials and the
anticipated quantity of materials sold. The
projected scrap prices are multiplied by the
projected volume of materials to be sold to
determine projected scrap revenue. These
projected revenues are reported in the fourth
column of the application.
e. Calculate Total Revenues
Total revenues are determined as follows:
Calculation of Total Revenues
Line 18 Total residential revenues
Plus Line 21 Total commercial and
light industrial revenues
Plus Line 22 Flat per ton revenue
amount or alternatively
recycled material sales
Equals Total revenues
Total revenues are entered on lines 23 and 63.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 73 Garaventa Enterprises
STEP 3
Application
Calculation of Allowable
Operating Profit and
Revenue Requirement
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Base Year
Rate Change Process (Refer to Section
II-A)
Tasks: a. Calculate Allowable Operating Profit
b. Determine Franchise Fees
c. Calculate Revenue Requirement
Description of Tasks
a. Calculate Allowable Operating Profit
For the three historical years of actual
data, the hauler will calculate the actual
operating ratio based on the formula below:
Method For Calculating Actual
Operating Ratio on Allowable Costs
(Year 1 to 3)
Step 1
Total revenues (Line 23)
Minus Total operating costs
(Lines 7 + 14 + 25)
Equals Operating profit (Line 9),
input into columns 1, 2, and 3
Actual operating ratios on allowable costs
will reveal how well past base year
projections corresponded to actual results.
We would expect that the hauler would
generally operate in an operating ratio range
of 88 to 92 percent on allowable costs.
Similarly, the formula estimated above is
used to calculate the operating ratio for the
current year (column 3).
In each base year, the operating ratio is
allowed to range from 88 to 92 percent,
which will help stabilize rate changes and
afford the franchise hauler an incentive to
reduce costs. In any base year, if the franchise
hauler will earn an operating ratio outside this
range, then 90 percent is reestablished.
The following operating costs are
included as operating costs in the allowable
operating profit calculation:
q Direct labor
q Tipping fees (profit allowed)
q Corporate and local general and
administrative costs
q Depreciation and other operating costs
q Services provided to County, including
community cleanups
q Curbside recycled materials processing
costs (in the case where the County uses
the alternative to the flat $5.00 per ton
net revenue approach).
The actual operating profit received by the
franchise hauler in the two most recently
completed fiscal years is entered on line 9,
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 74 Garaventa Enterprises
columns 1 and 2. The estimated operating profit
for the current fiscal year is entered on
line 9, column 3. The operating ratio for these
three years then is calculated using the operating
ratio equation shown in Step 1 on the prior page.
To calculate the allowable operating profit
in the base year, the equation below is utilized:
Method For Calculating
Nominal Operating Ratio (Year 4)
Total allowable costs (line 7)
Divided by Operating ratio
Equals Total allowable
operating revenues
Minus Total allowable costs
(Line 7)
Equals Allowable operating profit
(Line 9)
The allowable operating profit is entered
on line 9, column 4 of the application.
b. Determine Franchise Fees
The current franchise fees paid to the
County is set equal to five (5.0) percent of
gross revenues and upon implementation of
the three-cart system will increase to 7.0
percent. The calculation of the franchise fee is
not a straightforward exercise because as
revenue is increased (e.g., via a rate change),
so does the amount of franchise fees increase
because franchise fees are based on a percent
of gross revenues. To calculate the franchise
fee for the base year requires solving for two
simultaneous equations with one unknown
value, the franchise fee, which is identified
as X. The equations are summarized in the
bottom left corner of the Base Year Rate
Change Application and are as follows (the
example below is provided for the case where
franchise fees are seven (7) percent of gross
revenues):
1. Revenue Requirement × 0.07 X
2. Revenue Requirement = Line 15 + X, or
in more detail [Total Allowable Costs
(Line 7) plus Allowable Operating Profit
(Line 9) plus Total Pass Through Costs
(without Franchise Fees) (Line 14)] + X.
By substituting equation 2 into equation 1,
the calculation is simplified to:
(Line 15 + X) × 0.07 = X, or
(Line 15 x 0.07) = 0.93X, or
X = (Line 15 x 0.07) ÷ 0.93
Projected franchise fees, X, should be
entered on line 25 of the application.
Lines 10, 11, 12, and 13 should be added
and the result entered on line 14, total pass
through costs without franchise fees. Any
significant changes in total pass through
costs should be explained and documented.
c. Calculate Revenue Requirement
The revenue requirement establishes the
level of revenue needed to meet all
allowable costs and operating profit. This
includes residential, commercial, and light
industrial waste and recycling costs, and
assumes a reasonable profit margin based on
the operating ratio calculation.
Total revenue requirements are
determined as the sum of:
q Allowable operating costs (Line 7)
q Allowable operating profit (Line 9)
q Pass through costs (Line 14 + 25).
The revenue requirement is entered on line
32 of the application.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 75 Garaventa Enterprises
STEP 4
Application
Calculation of
Percent Change
in Rates
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Base Year
Rate Change Process (Refer to Section
II-A)
Tasks: a. Calculate Net Surplus/Shortfall
b. Calculate Percent Change In Rates
Description of Tasks
a. Calculate Net Surplus/Shortfall
The net surplus/shortfall, prior to the
franchise fee, is first determined based on
the following calculation:
Shortfall/Surplus Prior
to Franchise Fee
Line 15 Revenue requirement
(without franchise fee)
[equal to total allowable
costs (Line 7) plus
allowable operating profit
(Line 9) plus total pass
through costs without
franchise fees (Line 14)
Less Line 23 Total revenues
Equals Line 24 Net residential surplus/
shortfall, without
franchise fee
Next the franchise fee calculated in Line 25
is added to the surplus/shortfall in Line 24 to
get the total net surplus/shortfall (Line 26).
This number is used to calculate the percent
change in existing rates.
b. Calculate Percent Change in Rates
The percent change in rates is the
amount that rates must be either raised to
generate revenues sufficient to eliminate any
net shortfall or lowered so that no net
surplus occurs. The projected amount of
revenue generated during the base year from
the sale of recycled materials was calculated
in Step 3; therefore, any change in revenue
required must come from an increase or
decrease in residential and commercial/light
industrial rates.
The percent change in existing rates is
calculated as follows:
Shortfall/Surplus Prior
to Franchise Fee
Line 26 Net surplus/shortfall
Divided
by Line 27 Total residential and
commercial/light
industrial revenue
without change
Equals Percent change in rates.
The percent change in rates is entered on
line 28 of the application.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 76 Garaventa Enterprises
STEP 5
Application
Preparation
of
Summary Form
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Base Year
Rate Change Process (Refer to Section
II-A)
Tasks: a. Calculate New Rates
b. Sign and Submit the Application
Description of Tasks
a. Calculate New Rates
The rate change identified on page 1,
line 28 should be entered on page 6, line 83
of the Base Year Rate Change Application.
Current rates for residential solid waste
collection should be entered in the first
column of page 6 of 6. The adjusted rates
then are calculated by multiplying the
current rate by one plus the rate increase
identified in line 1. These adjusted rates are
entered in the second column. Separate from
the application forms, the franchise hauler
shall furnish a separate complete schedule of
current and requested commercial rates.
Page 6 of 6 of the application is designed
for use by each of the unincorporated
County areas. The top left of this page has a
space for the hauler to indicate which
geographic area the rate change is to apply
to. In the future, should the County adopt a
uniform rate structure across these
geographic areas, this form may be used for
the entire County.
b. Sign and Submit the Application
An authorized representative from the
franchise hauler should sign and date the
application. This signature provides a
certification of the franchise hauler that the
application is complete, accurate, and
consistent with the instructions provided in
this manual. The hauler should submit to the
County one reproducible hard copy, one bound
hard copy, and one copy on disk of the
completed Base Year Rate Change Application.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 77 Garaventa Enterprises
B. Survey of Rates in Similar Areas
As a check of the reasonableness of
existing and new refuse collection fees, a
survey of rates in similar communities should
be conducted during each base year (once
every four three). This survey covers a variety
of topics including:
q Residential service
q Commercial service
q Rate setting process
q Tipping fees
q Profit methodologies.
The survey is conducted by County
representatives during base year process Step
5. Exhibit III-4 is a sample survey form. The
survey should be conducted by telephone
instead of by mail. A minimum of six cities
should be contacted. These cities should be
located in the East San Francisco Bay Area,
and should be similar in size and
demographic make-up to unincorporated
Contra Costa County.
While all questions in the survey provide
valuable comparative information, there are
several key questions including, but not
limited to:
q Monthly rates for a range of residential
service
q Monthly rate for standard commercial
and light industrial services (e.g., once-a-
week pick-up of a three yard bin)
q Tipping fees for transfer station and
disposal services
q Solid waste practices
q Rate setting approaches
q Operating ratios.
After the survey has been conducted, the
results are summarized for comparison with
the franchise hauler’s rate application. This
summary is included as an attachment to the
Final Report and Recommendations package,
as described in Section II-A, Step 6. This
information also is used in the evaluation of
the franchise hauler’s application.
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 78 Garaventa Enterprises
Exhibit III-4
[Page 1 of 3]
Sample Solid Waste Rate Survey
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 79 Garaventa Enterprises
Exhibit III-4
[Page 2 of 3]
Sample Solid Waste Rate Survey (continued)
Chapter III. Base Year Rate Setting Methodology
Contra Costa County 80 Garaventa Enterprises
Exhibit III-4
[Page 3 of 3]
Sample Solid Waste Rate Survey (continued)
Chapter IV
Interim Year
Rate Setting Process
Contra Costa County 81 Garaventa Enterprises
IV. Interim Year Rate Setting Process
This chapter describes rate adjustment
processes during interim years between base
years. There are three potential rate adjustments
that may occur during the two interim years
between base years: (1) an interim year rate
adjustment, (2) a CPI-based rate adjustment,
or (3) an extraordinary rate adjustment.
This chapter is organized as follows:
A. Interim Year Rate Adjustments
B. CPI-Based Rate Adjustments
C. Extraordinary Rate Adjustments
D. Timing of Interim Year and
CPI-Based Rate Setting.
Even if an interim-year adjustment or
CPI-based rate adjustment would justify an
increase in rates, the franchise hauler is not
required to apply for an increase. This will
help stabilize rate adjustments even when
small increases might be warranted.
A. Interim Year Rate Adjustments
Interim year rate adjustment requests are
accepted in the two years between base
years. The interim year process requires less
information and preparation time, while still
allowing fair and reasonable rate adjustments.
For interim year rate applications, rates
changes are based on a composite index.
The index consists of:
q Historical changes in the Consumer Price
Index (CPI) for the San Francisco-Oakland-
San Jose published by the Bureau of Labor
Statistics in their Monthly Labor Review
q Projected changes in tipping fees (for the
transfer station and landfill)
q Adjustment for the franchise fees which
change if revenues change.
For an interim year rate change, the
franchise hauler is responsible for determining
the actual annual change in the CPI for the
most recent 12-month period. The franchise
hauler also is responsible for estimating and
documenting projected changes in tipping fees
in the interim year for which an interim year
rate adjustment is requested.
B. CPI-Based Rate Adjustments
The current Franchise Agreement allows
the hauler to adjust rates up to the CPI
without Board of Supervisor approval.
Consistent with these terms, the County
allows the hauler in interim years to adjust
rates up to the CPI without Board of
Supervisor approval.
In the case of the CPI-based rate
application, the hauler only needs to provide
the County with the most recent change in
the prior April to April San Francisco-
Oakland-San Jose CPI. The hauler shall
notify the County, on August 1, of its intent
to change rates by the CPI. The hauler then
must submit a letter, by November 1, with
the June to June CPI data, and the percent
rate change proposed to be implemented, so
the County can verify this CPI information is
correct. Finally, following confirmation
from the County that the CPI data has been
calculated correctly, the hauler shall notify
customers by December 1 that rates will be
changed on January 1.
C. Extraordinary Rate Adjustments
Special extraordinary adjustments are
allowed outside of the annual schedules of
the base year and interim year adjustments.
Special extraordinary adjustments also may
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 82 Garaventa Enterprises
be submitted simultaneously with an interim
year application. Both the County and
franchise hauler may initiate the
extraordinary rate adjustment process. For
these adjustments, the franchise hauler will
provide necessary information and
documentation so the County can make a
judgment as to the reasonableness of such a
rate adjustment. With Board of Supervisor
approval, an extraordinary adjustment can be
made by the franchise hauler.
Exhibit IV-1, following this page,
provides an overview of the interim year and
CPI-based rate adjustment processes.
D. Timing of Interim Year and
CPI-Based Rate Setting
Exhibit IV-2 shows the timing of the
interim year and CPI-base rate adjustment
processes. Generally, interim year rate
changes are implemented at the beginning of
the calendar year in which the new rates will
take effect. The rate change process should
begin five months prior to the beginning of
the new calendar year and the rate change
application should be submitted to the
County a minimum of four months prior to
the implementation of the rates. For rate
changes effective January 15, the application
should be submitted to the County by August
1.
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 83 Garaventa Enterprises
EXHIBIT IV-1
[Page 1 of 2]
Document(s)/Deliverable(s)
•Rate Application
•Interim Year Rate
Change Worksheet
•Additional
Documents and
Information
•Draft Report
•Notice to Board
•Approve Resolution
Responsibility
Franchise
Hauler
County
County
Steps
1. Preparation and
Submission of Rate
Change Application
2. Preparation of
Draft Rate Review
Report
Tasks
a.Prepare an Interim Year
Rate Change Application
b.Submit Draft to County
Staff
•Notification to
Customer
•Rate Schedule
Franchise
Hauler
6. Implementation
of
New Rates
a.Notify Customers
b.Implement Rate Change
•Written Response to
Draft Report
Franchise
Hauler
3. Company Review
and Response
to County Report
•Final Report
County4. Preparation of
Final Rate Review
Report
a.Identify Consumer Price Index
b.Complete Interim Year Rate
Change Worksheet and
Determine New Rates
c.Request Additional Data, and
Clarification, if Necessary
d.Prepare Draft Report and
Recommendations
a.Review County Staff
Calculations and Analysis
b.Prepare and Submit
Response
a.Incorporate the Franchise
Hauler’s Comments in
Final Report, as Needed
b.Prepare Final Report and
Recommendations
a.Distribute Report to
Supervisors
b.Obtain Board of
Supervisor Approval
5. Presentation of Final
Rate Review Report
to the Board of
Supervisors
Interim Year Rate Change Process
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 84 Garaventa Enterprises
EXHIBIT IV-1
[Page 2 of 2]
CPI-Based Rate Change Process
Steps Responsibility Tasks Document(s)/Deliverable(s)
1. Notification of CPI
Based Rate Adjustment
Franchise
Hauler
a. Telephone Contact with County Notification of Intent to Adjust
Rates by the CPI
2. CPI Application Due Franchise
Hauler
a. Prepare Letter Application Specifying
CPI Rate Change
b. Receive Confirmation from County that
CPI Calculation Correct
Letter to County with Prior Year
June to June CPI Index Data
and Percent Change in Rates
3a. Prepare and Provide
Customer Notification
Franchise
Hauler
a. Notify Customers of Rate Change Notification to Customer
3b. Implementation of
New Rates
Franchise
Hauler
a. Implement Rate Change Rate Schedule
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 85 Garaventa Enterprises
Exhibit IV-2
Timing of Interim Year and CPI-Based Rate Change Processes
Timing of Interim Year Rate Change Process
Formal Review Process Implement
No. Steps Due Date
Aug. Sep. Oct. Nov. Dec. Jan.
1 Preparation and Submission
of Rate Change Application
August 1
2 Preparation of Draft Rate
Review Report
Third Week
in August
3 Company Review and
Response to County Report
September 14
4a. Preparation of Final Rate
Review Report
Mid October
4b. County Prepares Board Order
for Department Review
November 1
5 Presentation of Final
Rate Review Report to
the Board of Supervisors
Late November
6a. Prepare and Provide
Customer Notification
December 1
6b. Implementation of New Rates January 15
Timing of CPI Rate Change Process
Application Preparation Implement No. Steps Due Date
Aug. Sep. Oct. Nov. Dec. Jan.
1 Notification of CPI
Rate Adjustment
August 1
2 CPI Application Due November 1
3a. Prepare and Provide
Customer Notification
December 1
3b. Implementation of New Rates January 15
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 86 Garaventa Enterprises
STEP 1
Interim Year
Preparation and
Submission of Rate
Change Application
Responsibility: Franchise Hauler
Timing: Completed four months prior to the
implementation of the new rates
Tasks: a. Prepare an Interim Year Rate Change
Application
b. Submit Draft to County Staff
Description of Tasks
Overview
During this first step, the franchise
hauler prepares the Interim Year Rate
Change Application.
a. Prepare an Interim Year
Rate Change Application
The franchise hauler is responsible for
projecting any change in tipping fees. The
projection is made for the interim year for
which new rates are being requested.
Projected changes in tipping fees then
are entered on the Interim Year Rate Change
Application. In addition, any discussion
about these changes is provided with the
application. The application is signed by an
appropriate representative of the franchise
hauler.
b. Submit Draft to County Staff
The completed application is sent to the
County for review and calculation of new
residential rates. The franchise hauler’s
application does not include any new rates;
these are determined by the County during
Step 2. The hauler should note whether the
proposed change would equal or exceed the
CPI, and thus require Board of Supervisor
approval.
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 87 Garaventa Enterprises
STEP 2
Interim Year
Preparation of
Draft Rate Review Report
Responsibility: County
Timing: Completed within three weeks of receiving a
completed Interim Year Rate Change
Application
Tasks: a. Identify Consumer Price Index
b. Complete Interim Year Rate Change
Worksheet and Determine New Rates
c. Request Additional Data, and
Clarification,
if Necessary
d. Prepare Draft Report and
Recommendations
Description of Tasks
Overview
County staff uses the franchise hauler’s
own projections of tipping fee costs,
determines changes in the Consumer Price
Index for non-tipping fee costs, and then
calculates the rate change and new rates for
the next interim year. The Interim Year Rate
Change Worksheet is used to complete this
step.
a. Identify Consumer Price Index
The annual change in the San Francisco-
Oakland-San Jose Metropolitan Area
Consumer Price Index (CPI) provides the
single largest factor for determining new rates
during interim years. The actual change in this
index during the twelve months (April to April)
prior to the date the Interim Year Rate Change
Application is submitted to the County is used
for the actual change in the methodology.
Because a projected change in the CPI is not
produced for the San Francisco-Oakland-San
Jose (Bay Area) by a public agency, the actual
change in CPI for the prior twelve months also
is used as the projected CPI for the interim
year. This information is available from the
United States Department of Labor, Bureau of
Labor Statistics, and is prepared monthly.
b. Complete Interim Year Rate Change
Worksheet and Determine New Rates
County staff prepares the Interim Year
Rate Change Worksheet and calculates new
rates during this task. This worksheet requires
information from the most recent Base Year
Application and the current Interim Year
Application. This worksheet also requires the
Bay Area Consumer Price Index information
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 88 Garaventa Enterprises
collected in task a. The worksheet is used to
calculate the new rates. Detailed instructions
on how to complete this worksheet are
provided in Section V of this manual.
c. Request Additional Data, and
Clarification, if Necessary
If necessary, County staff requests
clarification and/or additional data from the
franchise hauler. The request is to clarify the
franchise hauler’s assumptions for projected
changes in tipping fees and to indicate the
expected change in rates.
d. Prepare Draft Report and
Recommendations
County staff prepares a draft report with
recommendations of new rates for Board of
Supervisor consideration. If the change in
rates does not exceed the CPI, the County
will inform the Board of Supervisors of the
upcoming change in rates. For a change
above the CPI, the County will solicit
feedback and comments from the Board
before obtaining the Board’s approval for the
Interim Year rate change. This report should
be brief and include the following sections:
q Executive Summary
This is a summary of the review process
and includes a chart showing current and
proposed rates, and the recommended
rate change.
q Background
This section of the report provides a
brief overview of the rate change process
and discussion of any significant
historical issues.
q Analysis and Discussion of Issues
This section includes a review of the
analysis work completed by County staff.
This section also includes a discussion of
any significant changes in tipping fee
costs and an identification of the change
in CPI assumed by the County.
q Recommendation
County staff presents its
recommendation regarding any change
in rates in this section.
q Attachments
Attachments to the report would include:
· Rate change application
· Revised rate schedule
· Rate change worksheet.
After the draft report and
recommendations have been prepared, the
document should be submitted to the
franchise hauler for comment and review.
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 89 Garaventa Enterprises
STEP 3
Interim Year
Company Review and Response
to County Report
Responsibility: Franchise Hauler
Timing: Completed within three weeks of receiving
the completed interim year draft report from
the County
Tasks: a. Review County Staff Calculations and
Analysis
b. Prepare and Submit Response
Description of Tasks
Overview
The franchise hauler reviews the draft
report to ensure that any calculations and
analysis completed by County staff are fair,
reasonable, and justified.
a. Review County Staff Calculations
and Analysis
The franchise hauler reviews the draft
report to ensure the following:
q Correct data are included
q County staff analysis is accurate
and fair
q Rate changes are reasonable and acceptable.
b. Prepare and Submit Response
A written response to the draft report is
prepared. The response may cover one or
more of the following topics:
q Data discrepancies in any of the areas
noted in the prior task
q Clarification for the County or
alternative analysis of the application
q Responses to the County’s request for
additional information.
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 90 Garaventa Enterprises
STEP 4
Interim Year
Preparation of
Final Rate Review Report
Responsibility: County
Timing: Conducted within three weeks of
receiving comments from the franchise
hauler
Tasks: a. Incorporate the Franchise Hauler’s
Comments in Final Report, as Needed
b. Prepare Final Report and
Recommendations
Description of Tasks
Overview
The County prepares the Final Report and
Recommendations incorporating comments
from the franchise hauler, as appropriate.
a. Incorporate the Franchise Hauler’s
Comments in Final Report, as Needed
Comments or issues raised during the
franchise hauler’s review of the draft report
are considered during this task. If necessary,
meetings should be conducted with
representatives from the County and the
franchise hauler. Final solutions to outstanding
issues should be included in the report.
b. Prepare Final Report and
Recommendations
After final comments from the franchise
hauler have been considered, the Final Report
and Recommendations is prepared. A copy of
the Final Report should be submitted to the
franchise hauler.
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 91 Garaventa Enterprises
STEP 5
Interim Year
Presentation of
Final Rate Review Report
to the Board of Supervisors
Responsibility: County
Timing: Completed within ninety days of receiving a
completed Interim Year Rate Change
Application
Tasks: a. Distribute Report to Supervisors
b. Obtain Board of Supervisors Approval
Description of Tasks
Overview
In this step, the Final Report and
Recommendations is submitted to the Board
of Supervisors for review, comment, and
approval, during this step.
a. Distribute Report to Supervisors
The Final Report and Recommendations
is included as an agenda item for Board
consideration at a regular Board of
Supervisors meeting. This item may be
placed on either the regular or consent
calendar. Copies of the report are provided
to the Clerk of the Board for distribution
with other agenda materials. The Clerk of
the Board should be notified four weeks
prior to the meeting at which the rate change
will be considered and reports will be
provided two weeks prior to the meeting.
b. Obtain Board of Supervisor Approval
For changes in rates which exceed the
CPI, Supervisors will review the report and
proposed rate changes. If the Board agrees
with the recommendations of County staff,
the report and rates should be approved. If
the Board does not agree with the
recommendations, the report is returned to
County staff for additional analysis. If the
report and rates are not approved, the Board
should be asked to specifically identify
deficiencies.
Chapter IV. Interim Year Rate Setting Process
Contra Costa County 92 Garaventa Enterprises
STEP 6
Interim Year
Implementation
of
New Rates
Responsibility: Franchise Hauler
Timing: Conducted following the approval of the
new rates by the Board of Supervisors
Tasks: a. Notify Customers
b. Implement Rate Change
Description of Tasks
Overview
After new rates have been approved by
Board of Supervisors, the final step in the
process is to implement the new rates.
a. Notify Customers
After the report is approved, a
notification of a rate change should be
mailed to all customers 30 days in advance
of the rate change. Residential and
commercial rates will increase at the same
time, unless otherwise specified at the time
the rate change is approved by the County
Board of Supervisors.
b. Implement Rate Change
During this final task, the franchise hauler
enters the new rates into their billing system
and includes the new rates on the next
appropriate customer invoice. If a rate change
occurs during the middle of a billing cycle,
unbilled amounts are calculated and included
in the next billing cycle.
Chapter V
Interim Year
Rate Setting Methodology
Contra Costa County 93 Garaventa Enterprises
V. Interim Year Rate Setting Methodology
Two forms are required to complete the
Interim Year Rate Setting Process:
q Interim Year Rate Change Application
This is completed by the franchise hauler
and documents changes in tipping fees
and regulatory charges.
q Interim Year Rate Change Worksheet
This form is completed by the County
and is used to calculate the change in
residential changes during an interim year.
This chapter provides detailed
instructions for completing these two
documents, and is organized as follows:
A. Preparation of the Interim Year Rate
Change Application
B. Preparation of the Interim Year Rate
Change Worksheet.
A. Preparation of the Interim Year Rate
Change Application
The Interim Year Rate Change Application
is the first document completed during the
interim year rate change process. This
application is prepared by the franchise hauler,
and identifies changes in tipping fees paid
directly by the franchise hauler. This item is
reported as a cost per ton.
Exhibit V-1, following this page, provides
an overview of the steps and related tasks
which must be completed to prepare the
application form. Exhibit V-2, following
Exhibit V-1, is a sample application as it
might be prepared by the franchise hauler.
This exhibit includes references to the various
steps which must be completed to prepare the
application. Following this exhibit is a detailed
description of these steps and related tasks.
Similar to the base year forms, these
forms identify all areas to be completed with
double outlined boxes. If data are to be
entered in the form, the box has no shading.
If a calculation is required, the box has light
shading. Please note that data included in
these forms are provided for illustrative
purposes only and are not intended to reflect
actual operating or financial conditions.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 94 Garaventa Enterprises
Exhibit V-1
Preparation of Interim Year Rate Change Application
Steps
1. Report Changes in
Tipping Fee Costs
2. Explanation of
Change in
Tipping Fee Costs
Tasks
3. Application
Certification
a.Provide Prior Year Tipping Fee Costs
b.Provide Interim Year Tipping Fee Costs
c.Calculate Change in Tipping Fee Costs
a.Provide Explanation of Changes
b.Provide Supporting Documents
a.Sign Application
b.Submit Application to County
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 95 Garaventa Enterprises
Exhibit V-2
Sample Interim Year Rate Change Application
1
S T E P
2
S T E P
3
S T E P
Contra Costa County
Interim Year Rate Application
Section I -- Changes in Tipping Fee Costs
Change in Tipping Fee Costs
1.Prior Year Tipping Fees Per Ton 65.00$
2.Projected Interim Year Tipping Fees Per Ton 67.00$
3.Projected Change In Tipping Fee Costs 3.08%
Section II -- Explanation of Changes in Tipping Fee Costs
Provide an explanation of any changes in tipping fee costs (i.e., tipping fees paid for
transfer station, transfer, and landfill disposal). Attach supporting documentation to this
application as appropriate.
Section III -- Certification
To the best of my knowledge, the data and information in this application is complete, accurate, and
consistent with the instructions provided by the Contra Costa County.
Name: John Brown Title:CFO
Signature:Date:July 14, 2011
Year: Page 1 of 1
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 96 Garaventa Enterprises
STEP 1
Application
Report of Changes
in
Tipping Fee Costs
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Interim
Year Rate Change Process (Refer to
Section IV)
Tasks: a. Provide Prior Year Tipping Fee Cost Per Ton
b. Project Interim Year Tipping Fee Cost Per
Ton
c. Calculate Change in Tipping Fee Cost
Per Ton
Description of Tasks
a. Provide Prior Year Tipping Fee Cost
Per Ton
The first task in this step is to provide
prior year tipping fees. This item is reported
in terms of cost per ton to eliminate any
changes which are due to increases or
decreases in tons of solid waste removed by
the franchise hauler. Prior year tipping fees
per ton should be entered on line 1.
b. Project Interim Year Tipping Fee Cost
Per Ton
The franchise hauler estimates what
tipping fees will be for the next interim year.
Projected interim year tipping fees per ton
are entered on line 2.
c. Calculate Change in Tipping Fee Cost
Per Ton
The percent change in tipping fee costs
per ton is determined as follows:
line 2 - line 1
line 2
The product of this equation, rounded to the
nearest one decimal place, is entered on line 3.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 97 Garaventa Enterprises
STEP 2
Application
Explanation of
Changes in
Tipping Fee Costs
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Interim
Year Rate Change Process (Refer to
Section IV)
Tasks: a. Provide Explanation of Changes
b. Provide Supporting Documents
Description of Tasks
a. Provide Explanation of Changes
Any changes in tipping fees should be
fully explained in this task. For example, if a
landfill closes and the franchise hauler begins
using a new landfill with higher tipping fees,
this information should be disclosed.
b. Provide Supporting Documents
Documents which support or further
explain any change in costs are provided, as
appropriate. This might include formal
announcements of tipping fee increases
provided by the landfill or transfer station
operator, or descriptions of new regulatory
fees which will be paid directly by the
franchise hauler.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 98 Garaventa Enterprises
STEP 3
Application
Application
Certification
Responsibility: Franchise Hauler
Timing: Prepared during Step 1 of the Interim
Year Rate Change Process (Refer to
Chapter IV)
Tasks: a. Sign Application
b. Submit Application to County
Description of Tasks
a. Sign Application
An authorized representative from the
franchise hauler should sign and date the
application. This signature provides certification
by the franchise hauler that the application is
complete, accurate, and consistent with the
instructions provided in this manual.
b. Submit Application to County
At this point, the application should be
complete. The application is submitted to
the County for review and calculation of the
rate change, as described in the following
subsection.
B. Preparation of the Interim Year
Rate Change Worksheet
The Interim Year Rate Change Worksheet
is used to calculate new interim year residential
rates. This document is prepared by the County
after the franchise hauler has submitted an
Interim Year Rate Change Application.
The worksheet is a two-page form. Page 1
provides summary information about the rate
change requested and the resulting new rates. Page
2 includes detailed calculations required to
determine the rate change. Steps 1 through 4 of
the methodology will be completed using page 2
of the worksheet. Step 5 will be completed using
page 1 of the worksheet.
Exhibit V-3, following this page, provides
an overview of the steps and related tasks
which must be completed to prepare the
worksheet form and calculate new rates.
Exhibit V-4, following Exhibit V-3, is a
sample of the two page worksheet as it might
be prepared by County staff. This exhibit
includes references to various steps which
must be completed to prepare the worksheet.
Following Exhibit V-4 is a detailed description
of each step and related tasks.
Please note that the data included in
these exhibits are provided for illustrative
purposes only and are not intended to reflect
actual operating or financial conditions.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 99 Garaventa Enterprises
Exhibit V-3
Preparation of Interim Year Rate Change Worksheet
Steps
1. Determination of
Base Year Costs
and Weighting
2. Projection of
Change in
Consumer Price Index
Tasks
3. Calculation of
Percent Changes
in Uncontrolled Costs
4. Calculation of
Weighted Change
in Rates
5. Preparation
of
Summary Form
a.Enter Rate Change
b.Calculate New Rates
a.Identify Prior Base Year Non-Tipping Fee
Costs
b.Identify Prior Base Year Tipping Fee Costs
c.Calculate Weightings
a.Determine Projected Change in Consumer
Price Index
a.Enter Tipping Fee Cost Information from
Application
b.Review Mathematical Accuracy
c.Calculate Tipping Fee Adjustment Factor
a.Calculate Weighted Change in Non-Tipping
Fee Costs
b.Calculate Weighted Change in Tipping Fee
Costs Per Ton
c.Calculate Total Change in Costs
d.Calculate Franchise Fee Adjustment
e.Calculate Percent Change in Existing Rates
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 100 Garaventa Enterprises
Exhibit V-4
[Page 1 of 2]
Sample Interim Year Rate Change Worksheet
5S T E P
Interim Year Rate Change Worksheet
Summary
Rate Change
1.Percent Change in Rates Requested 3.43%
Rate Schedule
New
Rate Schedule Current Rate Rate
2.Oakley area can /toter (County)26.00$ 26.89$
3.Oakley area extra can with toter (County)7.00 7.24
4.Oakley area mini can (County)23.00 23.79
5.Oakley area 40 gallon can (County)26.00 26.89
6.Brentwood (out of City) can/toter 26.00 26.89
7.Brentwood (out of City) extra can with toter 7.00 7.24
8.Brentwood (out of City) mini can 23.00 23.79
9.Brentwood (out of City) 32 gallon can 26.00 26.89
10.Byron toter 26.00 26.89
11.Byron extra can with toter 7.00 7.24
12.Byron mini can 23.00 23.79
13.Byron 32 gallon can 26.00 26.89
14.Discovery Bay can/toter 26.00 26.89
15.Discovery Bay mini can 23.00 23.79
16.Discovery Bay extra can with toter 7.00 7.24
17.Discovery Bay 32 gallon can 26.00 26.89
18.Baypoint (PDS) can/toter 26.00 26.89
19.Baypoint (PDS) mini can 23.00 23.79
20.Baypoint (PDS) extra can with toter 7.00 7.24
21.Baypoint (PDS) 32 gallon can 26.00 26.89
Year: 2011 Page 1 of 2
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 101 Garaventa Enterprises
Exhibit V-4
[Page 2 of 2]
Sample Interim Year Rate Change Worksheet (continued)
1
S T E P
2
S T E P
3
S T E P
4
S T E P
Contra Costa County
Financial Information
Base Year Non-Tipping Fee Costs
1 Total Operating Costs 4,000,000$
2 Plus:Allowable Operating Profit 444,444
3 Minus:Tipping Fees (Profit Allowed)1,200,000
4 Equals:Total Non-Tipping Fee Costs 3,244,444$ 69.9%
Base Year Tipping Fee Costs
5 Tipping Fees (Profit Allowed)1,200,000$
6 Plus:Tipping Fees (Pass Through)200,000
7 Equals:Total Tipping Fee Costs 1,400,000$ 30.1%
8 Base Year Revenue Requirement (Less Franchise Fee)4,644,444$ 100.0%
Change in Non-Tipping Fee Costs
9 Projected Change in Consumer Price Index 4.00%
Change in Tipping Fee Costs
10 Prior Year Tipping Fees Per Ton 75.00$
11 Projected Interim Year Tipping Fees Per Ton 76.00$
12 Projected Change in Tipping Fee Costs 1.32%
13 Prior Year Tipping Fee Adjustment Factor 0.00%
14 Adjusted Projected Change in Tipping Fee Costs 1.32%
Weighted Change in Non-Tipping Fee Costs
15 Non-Tipping Fee Costs as % of Base Yr. Revenue Requirement 69.9%
16 Multiplied by:Projected Change in Consumer Price Index 4.00%
17 Equals:Weighted Change in Non-Tipping Fee Costs 2.79%
Weighted Change in Tipping Fee Costs
18 Tipping Fee Costs as % Base Yr. Revenue Requirement 30.1%
19 Multiplied by:Adjusted Projected Change in Tipping Fee Costs 1.32%
20 Equals:Weighted Change in Tipping Fee Costs 0.40%
Total Change
21 Total Percent Change in Costs 3.19%
22 Divided by:Adjustment for Franchise Fee (1-7.0%)93.0%
23 Equals Percent Change in Existing Rates 3.43%
Interim Year Rate Change Worksheet
Section I--Base Year Costs
Section II--Changes in Costs
Section III--Calculation of Percentage Change in Rates
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 102 Garaventa Enterprises
STEP 1
Worksheet
Determination of
Base Year Costs and
Weighting
Responsibility: County
Timing: Prepared during Step 2 of the Interim
Year Rate Change Process (Refer to
Chapter IV)
Tasks: a. Identify Prior Base Year Non-Tipping Fee
Costs
b. Identify Prior Base Year Tipping Fee Costs
c. Calculate Weightings
Description of Tasks
a. Identify Prior Base Year
Non-Tipping Fee Costs
Non-tipping fee costs are those items which
can be reasonably managed by the franchise
hauler in order to minimize future rate
increases. Changes in these costs should
approximate the change in the San Francisco-
Oakland-San Jose Consumer Price Index (CPI).
In order to streamline the base year
process, non-tipping fee costs are adjusted
based on an annual change in the CPI
instead of projected changes in each cost
item. This eliminates the need to conduct a
detailed review of the franchise hauler’s
audited financial statements.
The following table identifies the line
items in the base year application which
must be entered on the controlled cost
portion of the interim year worksheet. The
name of each line item is the same in both
applications.
Base Year
Application
Line Number
Interim Year
Worksheet
Line Number
Name
of
Line Item
6. 1. Total Allowable Costs
8. 2. Allowable Operating
Profit
2. 3. Tipping Fees
(Profit Allowed)
Tipping fees are included in total operating
costs (line 1). Because of this, tipping fees must
be deducted to determine total non-tipping fee
costs in the base year (line 1 plus line 2 minus
line 3). This total then is entered on line 4 of
the worksheet and is used to calculate the
weighted change in non-tipping fee costs.
b. Identify Prior Base Year
Tipping Fee Costs
Tipping fee costs are based on the
franchise hauler’s projections, not projected
changes in the CPI. Total tipping fee costs in
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 103 Garaventa Enterprises
the prior base year must be calculated to
determine the weighting of tipping fee costs
to non-tipping fee costs.
The following table identifies the line
items in the prior base year which must be
entered on the interim year worksheet in the
tipping fee costs sub-section. The name of
each line item is the same in both forms.
Base Year
Application
Line Number
Interim Year
Worksheet
Line Number
Name
of
Line Item
2. 5. Tipping Fees
(Profit Allowed)
11. 6. Tipping Fees
(Pass Through)
The amounts in lines 5 and 6 are added
and the total entered on line 7.
c. Calculate Weightings
Total non-tipping fee costs (line 4) plus
total tipping fee costs (line 7) equals total base
year revenue requirements (excluding
franchise fees). This total is entered on line 8
of the worksheet (base year revenue
requirement less franchise fee).
A weighting for both non-tipping fee costs
and tipping fee costs is calculated as follows:
Non-Tipping Fee Costs:
Line 4 Total non-tipping fee costs
Divided
by Line 8 Base year revenue
requirement
Equals Non-tipping fee costs as a
percentage of base year
revenue requirement.
This percentage figure is entered on line 4,
column 2, and line 19.
Tipping Fee Costs:
Line 7 Total tipping fee costs
Divided
by Line 8 Base year revenue
requirement
Equals Tipping fee costs as a
percentage of base year
revenue requirement.
This percentage figure is entered on line 7,
column 2, and line 22.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 104 Garaventa Enterprises
STEP 2
Worksheet
Projection of Change
in Consumer Price
Index
Responsibility: County
Timing: Prepared during Step 2 of the Interim
Year Rate Change Process (Refer to
Chapter IV)
Tasks: a. Determine Projected Change in Consumer
Price Index
Description of Tasks
a. Determine Projected Change in
Consumer Price Index
In this task, the San Francisco-Oakland-
San Jose Metropolitan Area Consumer Price
Index (CPI) is determined. The actual
change in the index between the prior year
and the current year will be used as the
projected CPI for the upcoming interim year.
This information is available from the
United States Department of Labor, Bureau
of Labor Statistics, San Francisco-Oakland-
San Jose, and is prepared monthly. Enter this
projected percentage increase on line 9.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 105 Garaventa Enterprises
STEP 3
Worksheet
Calculation of Percent
Changes in
Tipping Fee Costs
Responsibility: County
Timing: Prepared during Step 2 of the Interim
Year Rate Change Process (Refer to
Chapter IV)
Tasks: a. Enter Tipping Fee Cost Information from
Application
b. Review Mathematical Accuracy
c. Calculate Tipping Fee Adjustment
Factor
Description of Tasks
a. Enter Tipping Fee Cost Information
from Application
The figures on lines 1 through 3 of the
application (actual and projected tipping fee
costs) are entered on lines 10 though 14,
respectively, of the worksheet Any significant
changes in these costs are documented by the
franchise hauler. A significant change would
be any increase greater than the change in the
CPI, or a decrease of any amount. If a
significant change has not been adequately
explained, additional information is requested
from the franchise hauler.
b. Review Mathematical Accuracy
The mathematical accuracy of the
franchise hauler’s totals for Total Prior Year
Tipping Fee Cost (line 10), and Total
Projected Interim Year Tipping Fee Cost
(line 11) are checked during this task. The
percent change in tipping fee costs should be
calculated as follows:
line 11 - line 10
line 10
After the percentage change in tipping fee
costs has been verified, this figure is entered
on line 12 of the worksheet.
c. Calculate Tipping Fee Adjustment Factor
Because interim year rates are partially
determined based on projected changes in
tipping fees, corrections are required during
the second interim year to reflect the difference
between actual and projected changes in
tipping fees. This adjustment is not required
for the first interim year rate change following
a base year. If this is the first rate change
following a base year, enter zero in line 13
and line 14 should equal line 12.
The adjustment factor is determined
based on the following formula:
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 106 Garaventa Enterprises
Actual change in Tipping Fees during
the previous interim year
Minus Change in Tipping Fees from the prior
Interim Year Rate Change Worksheet
(line 12 of prior application)
Equals Tipping fee adjustment factor.
The adjusted change in the tipping fee is
then calculated by adding the figures in line
12 and 13. The adjusted projection of the
tipping fee then is entered on line 14 and 19
of the worksheet. This information is used
in Step 4.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 107 Garaventa Enterprises
STEP 4
Worksheet
Calculation of
Weighted Change in
Rates
Responsibility: County
Timing: To be prepared during Step 2 of the
Interim Year Rate Change Process
(Refer to Chapter IV)
Tasks: a. Calculate Weighted Change in Non-Tipping Fee
Costs
b. Calculate Weighted Change in Tipping Fee
Costs
c. Calculate Total Change in Cost
d. Calculate Franchise Fee Adjustment
e. Calculate Percent Change in Existing
Rates
Description of Tasks
a. Calculate Weighted Change in Non-
Tipping Fee Costs
Figures should have been entered on line
15, non-tipping fee costs as a percent of base
year revenue requirements, and line 16, the
adjusted projected change in CPI, based on
calculations completed in previous tasks. To
obtain the weighted change in non-tipping
fee costs, line 15 is multiplied by line 16 and
the result entered on line 17.
b. Calculate Weighted Change in
Tipping Fee Costs
Line 18, tipping fee costs as a percent of
base year revenue requirements, and line 19,
projected change in tipping fee costs, should
now have an entry based on calculations
completed in previous tasks. To obtain the
weighted change in tipping fee costs, line 18
is multiplied by line 19 and the result
entered on line 20.
c. Calculate Total Change in Cost
To calculate total percentage change in
costs, line 17, the weighted change in non-
tipping fee costs, is added to line 20, the
weighted change in tipping fee costs, and the
result entered on line 21, total change in
costs.
d. Calculate Franchise Fee Adjustment
In order to account for changes in the
franchise fee resulting from an change in
rates, an adjustment is made to the percentage
change in total costs which was entered on
line 21. The adjustment factor is equal to one
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 108 Garaventa Enterprises
minus the franchise fee (1.00 - 0.07 = 0.93).
This value should be entered on line 22.
e. Calculate Percent Change in
Existing Rates
The final task in this step is to calculate
the percent change in existing rates. To
determine this change, line 21 (total percent
change in costs) is divided by line 22
(franchise fee adjustment), and the result is
entered on line 23. The value on line 23
should be greater than the value on line 21.
The difference accounts for the change in
franchise fees.
Chapter V. Interim Year Rate Setting Methodology
Contra Costa County 109 Garaventa Enterprises
STEP 5
Worksheet
Preparation of
Summary
Form
Responsibility: County
Timing: To be prepared during Step 2 of the Interim
Year Rate Change Process (Refer to Chapter
IV)
Tasks: a. Enter Rate Change
b. Calculate New Rates
Description of Tasks
a. Enter Rate Change
The rate change identified in line 23
should be entered on Page 1, line 1 of the
worksheet.
b. Calculate New Rates
Current rates for residential solid waste
collection are entered in the first column of
lines 2 through 6 on page 1. The new rates
then are calculated by multiplying the
current rate by one plus the rate change
identified on line 1. The new rates are
entered on the second column of lines 2
through 6.
Appendix A
Contra Costa County
Franchise Agreement
with
Garaventa Enterprises
Appendix B
Rate Application
Forms and
Worksheets
Contra Costa County
Financial Information
Estimated Projected
Current Year Base Year
Year 1 Year 2 Year 3 Year 4
1.Direct Labor $$$$
2.Tipping Fees (Profit Allowed)
3.Corporate and Local General and Administrative Costs
4.Depreciation and Other Operating Costs
5.Services Provided to County
6.Curbside Recycled Materials Processing Costs (if Option Used by County)
7.Total Allowable Costs (Lines 1+2+3+4+5+6)$$$$
8.Operating Ratio %%%%
9.Allowable Operating Profit [(Line 7 / 0.9)-Line 7]$$$$
10.County Administrative Fee $$$$
11.Household Hazardous Waste Fees
12.Trucking and Equipment
13.Tipping Fees (Pass Through)
14.Total Pass Through Costs (without Franchise Fees) (Lines 10+11+12+13)$$$$
15.Total Allowable Costs (Line 7) plus Allowable Operating Profit (Line 9) plus
Total Pass Through Costs (without Franchise Fees) (Line 14)$$$$
16.Residential Revenues $
17. Less Allowance for Uncollectible Residential Accounts
18.Total Residential Revenues (without Rate Change in Base Year)$$$$
19.Commercial and Light Industrial Revenues $
20. Less Allowance for uncollectable Commercial and Light Industrial Accounts
21.Total Commercial/Light Industrial Revenues (without rate change in Base Year)$$$$
22.Recyclable Revenues $$$$
23.Total Revenues (Lines 18+21+22)$$$$
24.Net Shortfall (Surplus) without Franchise Fees (Lines 15-Line 23)$
25.Residential / Commercial / Light Industrial Franchise Fees (see calculation below)$$$$
26.Net Shortfall (Surplus) with Franchise Fees (Lines 24 + 25)$
27.Total Commercial / Light Industrial Revenues Prior to Rate Change (Lines 18+21)$
28.Percent Change in Existing Residential / Commercial / Light Industrial Rates (Line 26 / Line 27)%
Franchise fees are set by the County at a percent of the revenue requirement 29.Total Allowable Costs (Line 7)$
Solve for two equations with one unknown, and identify franchise fees as X =>30.Allowable Operating Profits (Line 9)
Equation 1) Revenue Requirement x Franchise Fee % = X 31.Pass Through Costs with Franchise Fees (Line 14+25)
Equation 2) Revenue Requirement = Line 15 + X, or $__________+X 32.Revenue Requirement $
Substitute equation 2) into equation 1) and solve for X =>
($________+ X) x Franchise Fee % = X or X = ______
Year:Page 1 of 6
Franchise Fee Calculation
Section VII -- Percent Change in Rates
Summary Revenue Requirement
Section IV -- Revenue Requirement without Franchise Fees
Section V -- Revenues without Rate Change in Base Year
Section VI -- Net Shortfall (Surplus)
Actual
Historical Years
Base Year Rate Change Application
Section I -- Allowable Costs
Section II -- Allowable Operating Profit
Section III -- Pass Through Costs without Franchise Fees
Contra Costa County
Cost Summary for Year _____
Audited
Unincorporated Non-Uninc.Garaventa Allocation
Description of Cost County County Financial Base(s)
Labor - Regular
Labor - Overtime
Benefits
Payroll Taxes
33.Total Direct Labor
34.Total Tipping Fees (Profit Allowed)
Accounting
Accounting Staff
Computer Services
Dues and Subscriptions
Insurance
Legal
Management Fees
Miscellaneous and Other
Office Expenses
Office Repair and Maintenance
Outside Services
Public Relations and Promotion
Taxes and Licenses
Telephone
Travel
Utilities
35.Total Corporate and Local General and Administrative Costs
Depreciation-Buildings
Depreciation-Vehicles
Depreciation-Containers
Other Operating Costs
36.Total Depreciation and Other Operating Costs
37.Total Services Provided to County
38.Curbside Recycled Materials Processing Costs
39.Total Allowable Costs (Lines 33+34+35+36+37+38)
40 Total County Administration Fee
41.Total Household Hazardous Waste Fees
Equipment Rental
Gas and Oil
Insurance
Parts
Repair and Maintenance
Tires
Other
42.Total Trucking and Equipment
43.Total Tipping Fees (Pass Through)
44.Total Residential/Commercial/Light Industrial Franchise Fees
45.Total Pass Through Costs (Lines 40+41+42+43+44)
46.Total Costs (Lines 39+45)
Year:Page 2 of 6
Base Year Rate Change Application
Section VIII -- Base Year Cost Allocation
Contra Costa County
Revenues Summary
Estimated Projected
Current Year Base Year
Year 1 Year 2 Year 3 Year 4
Single Family Residential Services
47.Single Family Residential Revenues $$$$
Multiunit Residential Services
48.Number of Accounts
49.Multiunit Residential Revenues $$$$
50.Residential Revenues (w/o Allowable for Uncollectible Accounts) (Lines 43+45)$$$$
51.Allowance for Uncollectible Residential Accounts $$$$
52.Total Residential Revenues (Line 46 - Line 47)$$$$
Commercial and Light Industrial Can Services
53.Number of Accounts
54.Commercial and Light Industrial Can Revenues $$$$
Commercial and Light Industrial Bin Services
55.Number of Accounts
56.Commercial and Light Industrial Bin Revenues $$$$
Commercial and Light Industrial Drop Box Services
57.Number of Accounts
58.Commercial and Light Industrial Drop Box Revenues $$$$
59.Commercial and Light Industrial Revenues (w/o Allowance for
Uncollectible Accounts) (Lines 50+52+54)$$$$
60.Allowance for Uncollectible Commercial and Light Industrial Accounts $$$$
61.Total Commercial and Light Industrial Revenues (Line 55 - Line 56)$$$$
62.Recyclable Revenues $$$$
63.Total Revenues (Lines 48+57+58)$$$$
Year:Page 3 of 6
Base Year Rate Change Application
Section IX -- Revenues
Actual
Historical Years
Contra Costa County
Single Family Residential Revenues Summary
For Comparative Purposes, Not Used for Base Year Projection Base Year
Revenues
Single Family Residential Revenues (w/o Rate Change in Base Year)
Current Projected
Rate/Month Accounts Total a/
Oakley area can /toter (County)$$
Oakley area extra can with toter (County)
Oakley area mini can (County)
Oakley area 40 gallon can (County)
Brentwood (out of City) can/toter
Brentwood (out of City) extra can with toter
Brentwood (out of City) mini can
Brentwood (out of City) 32 gallon can
Byron toter
Byron extra can with toter
Byron mini can
Byron 32 gallon can
Discovery Bay can/toter
Discovery Bay mini can
Discovery Bay extra can with toter
Discovery Bay 32 gallon can
Baypoint (PDS) can/toter
Baypoint (PDS) mini can
Baypoint (PDS) extra can with toter
Baypoint (PDS) 32 gallon can
64.Total Projected Single Family Residential Revenues $
a/Equal to the current rate per month multiplied by 12 multiplied by the projected number of accounts.
Year: Page 4 of 6
Base Year Rate Change Application
Section X -- Single Family Residential Revenues and Customer Counts
Contra Costa County
Operating Information
Historical
Information
Percent
Change
Historical
Information
Percent
Change
Current Year
Estimated
Information
Percent
Change
Base Year
Projected
Information
Year 1 Year 1 to 2 Year 2 Year 2 to 3 Year 3 Year 3 to 4 Year 4
Accounts
65.Residential %%%
66.Commercial %%%
67.Light Industrial %%%
68.Total Accounts %%%
Waste Tonnage
69.Residential %%%
70.Residential Greenwaste %%%
71.Commercial %%%
72.Light Industrial %%%
73.Total Tonnage %%%
Recyclable Tonnage
74.Residential %%%
75.Commercial %%%
76.Light Industrial %%%
77.Total Tonnage %%%
County Services
78.County Bins %%%
79.County Drop Boxes %%%
80.3 Yard Bin -- Once per Week $%$%$%$
81.2 Yard Bin -- Once per Week $%$%$%$
82.20 Yard Debris Box -- per Pick Up $%$%$%$
Year:Page 5 of 6
Section XI -- Operating Data
Section XII -- Change in Commercial Rates
Base Year Rate Change Application
Contra Costa County
Unincorporated Area: All Areas
83.Rate Change Requested %
New
Current Rate Rate
Oakley area can /toter (County)$$
Oakley area extra can with toter (County)
Oakley area mini can (County)
Oakley area 40 gallon can (County)
Brentwood (out of City) can/toter
Brentwood (out of City) extra can with toter
Brentwood (out of City) mini can
Brentwood (out of City) 32 gallon can
Byron toter
Byron extra can with toter
Byron mini can
Byron 32 gallon can
Discovery Bay can/toter
Discovery Bay mini can
Discovery Bay 32 gallon can
Discovery Bay 32 gallon can
Baypoint (PDS) can/toter
Baypoint (PDS) mini can
Baypoint (PDS) extra can with toter
Baypoint (PDS) 32 gallon can
84.Multiunit Residential Rate increase of %will be applied
to all rates in each structure.
To the best of my knowledge, the data and information in this application is complete, accurate, and
consistent with the instructions provided by Contra Costa County.
Name:Title:
Signature:Date:
Year: Page 6 of 6
Certificate
Base Year Rate Change Application
Rate Change
Rate Schedule
Rate schedule
Contra Costa County
Interim Year Rate Application
Section I -- Changes in Tipping Fee Costs
Change in Tipping Fee Costs
1.Prior Year Tipping Fees Per Ton $
2.Projected Interim Year Tipping Fees Per Ton $
3.Projected Change In Tipping Fee Costs %
Section II -- Explanation of Changes in Tipping Fee Costs
Provide an explanation of any changes in tipping fee costs (i.e., tipping fees paid for
transfer station, transfer, and landfill disposal). Attach supporting documentation to this
application as appropriate.
Section III -- Certification
To the best of my knowledge, the data and information in this application is complete, accurate, and
consistent with the instructions provided by the Contra Costa County.
Name:Title:
Signature:Date:
Year: Page 1 of 1
Contra Costa County
Interim Year Rate Change Worksheet
Summary
Rate Change
1.Percent Change in Rates Requested %
Rate Schedule
New
Rate Schedule Current Rate Rate
2.Oakley area can /toter (County)$$
3.Oakley area extra can with toter (County)
4.Oakley area mini can (County)
5.Oakley area 40 gallon can (County)
6.Brentwood (out of City) can/toter
7.Brentwood (out of City) extra can with toter
8.Brentwood (out of City) mini can
9.Brentwood (out of City) 32 gallon can
10.Byron toter
11.Byron extra can with toter
12.Byron mini can
13.Byron 32 gallon can
14.Discovery Bay can/toter
15.Discovery Bay mini can
16.Discovery Bay extra can with toter
17.Discovery Bay 32 gallon can
18.Baypoint (PDS) can/toter
19.Baypoint (PDS) mini can
20.Baypoint (PDS) extra can with toter
21.Baypoint (PDS) 32 gallon can
Year: 2011 Page 1 of 2
Contra Costa County
Financial Information
Base Year Non-Tipping Fee Costs
1 Total Operating Costs $
2 Plus:Allowable Operating Profit
3 Minus:Tipping Fees (Profit Allowed)
4 Equals:Total Non-Tipping Fee Costs $%
Base Year Tipping Fee Costs
5 Tipping Fees (Profit Allowed)$
6 Plus:Tipping Fees (Pass Through)
7 Equals:Total Tipping Fee Costs $%
8 Base Year Revenue Requirement (Less Franchise Fee)$%
Change in Non-Tipping Fee Costs
9 Projected Change in Consumer Price Index %
Change in Tipping Fee Costs
10 Prior Year Tipping Fees Per Ton $
11 Projected Interim Year Tipping Fees Per Ton $
12 Projected Change in Tipping Fee Costs %
13 Prior Year Tipping Fee Adjustment Factor
14 Adjusted Projected Change in Tipping Fee Costs %
Weighted Change in Non-Tipping Fee Costs
15 Non-Tipping Fee Costs as % of Base Yr. Revenue Requirement %
16 Multiplied by:Projected Change in Consumer Price Index %
17 Equals:Weighted Change in Non-Tipping Fee Costs %
Weighted Change in Tipping Fee Costs
18 Tipping Fee Costs as % Base Yr. Revenue Requirement %
19 Multiplied by:Adjusted Projected Change in Tipping Fee Costs %
20 Equals:Weighted Change in Tipping Fee Costs %
Total Change
21 Total Percent Change in Costs %
22 Divided by:Adjustment for Franchise Fee (1-7.0%)93.0%
23 Equals Percent Change in Existing Rates %
Year: 2011 Page 2 of 2
Interim Year Rate Change Worksheet
Section I--Base Year Costs
Section II--Changes in Costs
Section III--Calculation of Percentage Change in Rates
EXHIBIT B
3-Cart Collection System
The purpose of this Exhibit A is to define the residential 3-Cart Collection System (“3-Cart System”)
referenced in Recital B of the Third Amendment to County Franchise Agreement with Garaventa
Enterprises.
The 3-Cart System consists of all of the following:
1. GARBAGE COLLECTION
Garaventa Enterprises (“Contractor”) will provide all residential customers in the Franchise Area
described in the Existing Franchise Agreement with Garaventa Enterprises (8758 customers as of
July 15, 2011) with new brown wheeled garbage carts. Contractor will ask customers to select the
size of their garbage carts, which may be any of the following sizes: 20-gallon minimum, 32-gallon
minimum, 64-gallon minimum, or 95-gallon minimum. Customers who do not elect to choose a cart
size will receive the following sized carts by default:
· 20-gallon can and 32-gallon can customers will be provided with wheeled carts roughly
equivalent in capacity to their existing cans.
· 96-gallon wheeled cart customers will be provided with 64-gallon wheeled carts.
Contractor will continue to collect garbage on a weekly schedule.
2. GREENWASTE COLLECTION
Contractor will provide green wheeled greenwaste carts (between 95-100 gallons in capacity) to all
residential customers in the Franchise Area, except for those customers specified below. Contractor
will instruct customers to deposit all greenwaste into these carts for collection, in place of existing
customer-supplied bags or containers. Greenwaste will be collected curbside for recycling on a bi-
weekly schedule.
Residential customers in possession of Contractor-supplied 96-gallon green garbage carts will not
receive new wheeled greenwaste carts. Contractor will instruct these customers to use their existing
garbage carts for greenwaste collection.
Residential customers who reside in the Marsh Creek Road area described and depicted in Exhibit 1
attached hereto (“Marsh Creek Area”) will not be provided with wheeled greenwaste carts, due to
the exceptional cost of servicing this rural area with three separate collection trucks. Contractor will
instead provide these customers with 52 green plastic bags, each with a minimum capacity of 32
gallons and thickness of at least 1.2 millimeters, for greenwaste collection, one bag to be used for
collection each week. Contractor will instruct these customers to place bags containing greenwaste
adjacent to or inside their garbage carts for collection by garbage collection trucks. Contractor will
recycle materials placed in these bags. This method of collection is considered a component of the
3-Cart System, notwithstanding the use of bags in place of carts for greenwaste disposal and
collection.
Contractor will collect greenwaste from the green carts on a bi-weekly schedule.
3. MIXED RECYCLABLES COLLECTION
Contractor will provide blue wheeled recycling carts (between 95-100 gallons in capacity) to all
residential customers in the County franchise area, except as otherwise specified below. Contractor
will instruct these customers to deposit all mixed recyclables (including bottles, cans and paper) in
these carts for curbside collection, in place of the two existing 14 gallon recycling crates previously
supplied by the Contractor.
Residential customers who reside in the Marsh Creek Area will not be provided with wheeled
recycling carts. Contractor will instead provide these customers with 52 blue plastic bags, each with
a minimum capacity of 32 gallons and thickness of at least 1.2 millimeters, for mixed recyclables
collection, one bag to be used for collection each week. Contractor will instruct these customers to
place bags containing mixed recyclables adjacent to or inside their garbage carts for collection by
garbage collection trucks. Contractor will recycle mixed recyclables placed in the bags. This method
of collection is considered a component of the 3-Cart System, notwithstanding the use of bags in
place of carts for mixed recyclables disposal and collection.
Contractor will collect mixed recyclables from the blue carts on a bi-weekly schedule.
County reserves the right to modify the 3-Cart System pursuant to Section 17 of the original
Franchise Agreement.
G:\Conservation\Lorna\Franchised Haulers\Rates\Garaventa Enterprises\Board Order - July 2011\GE 3-Cart Service
Description_FINAL-B.doc
Page 1 of 6
AMENDMENT NO. 3
To County Franchise Agreement with Garaventa Enterprises
This is Amendment No. 3 (“Third Amendment”) to the Franchise Agreement
between Contra Costa County (“County”), a political subdivision of the State of
California, and Garaventa Enterprises, a California corporation (“Contractor”). County
and Contractor may hereafter be collectively referred to as the “Parties.”
RECITALS
A. This Third Amendment amends the existing agreement between the parties,
which consists of the Franchise Agreement With Garaventa Enterprises, effective May 9,
1995 (the “Original Agreement”), and Amendment No. 2 To Franchise Agreement with
Garaventa Enterprises, effective May 17, 2011 (“Amendment No. 2”), collectively
referred to as the “Existing Franchise Agreement.” Amendment No. l to Franchise
Agreement with Garaventa Enterprises, dated January 18, 2000 (“Amendment No. 1”),
was terminated on May 17, 2011.
B. Contractor has proposed to implement a three-cart collection system ( “3-
Cart System”) to serve all of its residential customers in the Franchise Area described in
the Existing Franchise Agreement (“Customers”). The 3-Cart System is described in
Exhibit A, attached hereto and incorporated herein by reference.
C. Implementation of the 3-Cart System (“System Implementation”) requires
completion of all of the following:
(1) Written notice by Contractor to all Customers, advising them of the
planned launch and estimated commencement date of the 3-Cart System, and describing
the 3-Cart System consistent with Exhibit A;
(2) The purchase by Contractor of a sufficient number of wheeled carts and
plastic bags to provide to all Customers, consistent with Exhibit A;
(3) The delivery by Contractor of the carts and bags to the Customers,
consistent with Exhibit A;
(4) Contractor’s commencement of collection utilizing the 3-Cart System;
Page 2 of 6
(5) Written notice by Contractor to all Customers, advising them of the 3-
Cart Residential Rate Structure approved by the County Board of Supervisors on January
25, 2011, and the effective date of rates to be charged to customers under that structure;
(6) Contractor’s incorporation of authorized rates under the 3-Cart
Residential Rate Structure into bills sent to all Customers.
D. Contractor wishes to amortize the cost of carts and bags used in the 3-Cart
System over a period of time that is longer than the remaining years in the term of the
Existing Franchise Agreement. Contractor desires an extension of the term of the
Existing Franchise Agreement to permit this amortization. County desires that the term
extension be conditioned upon System Implementation to the County’s satisfaction.
E. The franchise fee under the Existing Franchise Agreement (“Franchise
Fee”) has not been adjusted since its establishment on June 16, 1998, at the rate of 5
percent of Contractor’s gross annual revenues generated from waste collection services
performed under the Existing Franchise Agreement (“Gross Annual Revenues”). County
desires to collect an additional 2 percent of Contractor’s Gross Annual Revenues to help
offset County’s costs of administering the Existing Franchise Agreement.
F. The purpose of this Third Amendment is to provide for an extension of the
term of the Existing Franchise Agreement, conditioned upon System Implementation to
the County’s satisfaction, and increase the Franchise Fee by requiring Contractor to pay
to County an additional 2 percent of Contractor’s Gross annual revenues.
NOW THEREFORE, in consideration of the above and the promises and other provisions
in this Third Amendment, the Parties agree as follows:
Page 3 of 6
AGREEMENT
1. Section 3 of the Original Agreement is amended to read as follows:
“3. TERM. Subject to Section 33 (Annexation and
Change of Franchise Area Boundaries) and Section 35
(Breach and Termination), the term of this Agreement
and the exclusive franchise granted hereunder (“Term”)
shall be 20 years, and commence on May 9, 1995. The
Term will be extended automatically upon satisfaction
of all of the following conditions:
a. Contractor completes the System
Implementation on or before January 15 , 2012;
b. Contractor sends written notice to County,
advising of Contractor’s completion of the
System Implementation, along with the following
documentation:
(1) Written evidence of Contractor’s
purchase of the carts and bags referenced in
Exhibit A to the Third Amendment;
(2) Contact information (addresses and
phone numbers) for each of Contractor’s
customers in the Franchise Area;
(3) Evidence of Contractor’s notification
of all Customers regarding System
Implementation and the 3-Cart Residential Rate
Structure, including a copy of the notice(s) sent,
list of customers to whom notice was given, and
a declaration under penalty of perjury by an
authorized representative of Contractor stating
that notices were provided pursuant to this Third
Amendment and stating the date of said notice;
Page 4 of 6
(4) Evidence of Contractor’s incorporation
of rates authorized by County under the 3-Cart
Residential Rate Structure into bills sent to all
Customers; and
(5) Any other information or
documentation requested by County regarding
System Implementation; and
c. County sends written notice to Contractor,
verifying the completion of the System
Implementation to County’s satisfaction. The
date of such notice will be referred to hereafter
as the “System Implementation Date.”
The System Implementation Date will be the effective
date of the Term extension. The period of the Term
extension will be either (1) 10 years, through and
including May 8, 2025; or (2) until termination of the
3 -Cart System, whichever is shortest.
The 3-Cart System will be considered to have been
terminated upon occurrence of all of the following: (1)
Contractor ceases collection of garbage, greenwaste or
mixed recyclables according to the schedule set forth in
Exhibit A; (2) County sends written notice to
Contractor, directing Contractor to resume collection
according to such schedule; and (3) Contractor fails to
resume collection within 14 days of the date of the
notice.”
2. Section 23 of the Original Agreement is amended to read as follows:
“23. ADMINISTRATIVE SERVICES AND
FRANCHISE FEES.
a. A dministrative Services Fees. As directed by
County, Contractor shall pay County fees to
cover the costs incurred by County in (1) the
administration of this Agreement and , (2) the
Page 5 of 6
services and programs provided by County
pertaining to solid waste. These fees will be
referred to as “Administrative Services Fees.”
The amount, time and frequency of payment of
such fees may be established by County from
time to time. No Administrative Services Fees
are payable as of the date of the Third
Amendment. Administrative Services Fees that
are established after the date of the Third
Amendment will be payable from Contractor to
County on the earlier of either (1) the effective
date of rates charged by Contractor to customers
that incorporate such Administrative Services
Fees; or (2) the first day of the second calendar
month immediately following County’s
determination of a maximum rate that
incorporates such Administrative Services Fees.
b. Franchise Fee. As directed by County,
Contractor shall pay County a percentage of
Contractor’s Gross Annual Revenues as a
Franchise Fee. The time and frequency of
payment of the Franchise Fee may be established
by County from time to time. As of the date of
the Third Amendment, the Gross Annual
Revenues percentage is 5 percent. Effective on
the System Implementation Date, the Gross
Annual Revenues percentage will be 7 percent.
Following the date of the Third Amendment,
County may adjust the Gross Annual Revenues
percentage subject to applicable legal
requirements. Such adjustment would be
effective on the earlier of (1) the effective date
of rates charged by Contractor to Customers that
incorporate a Franchise Fee based on such
adjusted rate; or (2) the first day of the second
calendar month immediately following County’s
determination of a maximum rate that
incorporates a Franchise Fee based on such
adjusted rate.
Page 6 of 6
c. Pass-Through. Administrative Services Fees
and the Franchise Fee shall be considered
reasonable costs and subject to “pass-through” as
described in Section 8 on Rates.”
3. Entire Agreement. The Existing Franchise Agreement as amended by
this Third Amendment shall be construed together as one and the same
agreement and is the entire agreement between the Parties.
IN WITNESS WHEREOF, the Parties have entered into this Third
Amendment as of the date last set forth in the signatures below.
Contractor County
Garaventa Enterprises, County of Contra Costa
a California corporation
By:_____________________ By: _________________________
Chair, Board of Supervisors
Its: _____________________
Officer
By:_____________________ Attest: David Twa, Clerk of the Board of
Supervisors and County Administrator
Its:_____________________
Officer By: ____________________________
Deputy
Date: ___________________ Date:_______________________
[Note: Two officers must sign on behalf of corporations. The first
must be the chairman of the board, president or any vice
president; the second must be the secretary, assistant secretary,
chief financial officer or any assistant treasurer. (Corp. Code, §
313; Civ. Code, § 1190.)
Garaventa3rdAmendment.7.19.11.doc
EXHIBIT A
3-Cart Collection System
The purpose of this Exhibit A is to define the residential 3-Cart Collection System (“3-Cart System”)
referenced in Recital B of the Third Amendment to County Franchise Agreement with Garaventa
Enterprises.
The 3-Cart System consists of all of the following:
1. GARBAGE COLLECTION
Garaventa Enterprises (“Contractor”) will provide all residential customers in the Franchise Area
described in the Existing Franchise Agreement with Garaventa Enterprises (8758 customers as of
July 15, 2011) with new brown wheeled garbage carts. Contractor will ask customers to select the
size of their garbage carts, which may be any of the following sizes: 20-gallon minimum, 32-gallon
minimum, 64-gallon minimum, or 95-gallon minimum. Customers who do not elect to choose a cart
size will receive the following sized carts by default:
· 20-gallon can and 32-gallon can customers will be provided with wheeled carts roughly
equivalent in capacity to their existing cans.
· 96-gallon wheeled cart customers will be provided with 64-gallon wheeled carts.
Contractor will continue to collect garbage on a weekly schedule.
2. GREENWASTE COLLECTION
Contractor will provide green wheeled greenwaste carts (between 95-100 gallons in capacity) to all
residential customers in the Franchise Area, except for those customers specified below. Contractor
will instruct customers to deposit all greenwaste into these carts for collection, in place of existing
customer-supplied bags or containers. Greenwaste will be collected curbside for recycling on a bi-
weekly schedule.
Residential customers in possession of Contractor-supplied 96-gallon green garbage carts will not
receive new wheeled greenwaste carts. Contractor will instruct these customers to use their existing
garbage carts for greenwaste collection.
Residential customers who reside in the Marsh Creek Road area described and depicted in Exhibit 1
attached hereto (“Marsh Creek Area”) will not be provided with wheeled greenwaste carts, due to
the exceptional cost of servicing this rural area with three separate collection trucks. Contractor will
instead provide these customers with 52 green plastic bags, each with a minimum capacity of 32
gallons and thickness of at least 1.2 millimeters, for greenwaste collection, one bag to be used for
collection each week. Contractor will instruct these customers to place bags containing greenwaste
adjacent to or inside their garbage carts for collection by garbage collection trucks. Contractor will
recycle materials placed in these bags. This method of collection is considered a component of the
3-Cart System, notwithstanding the use of bags in place of carts for greenwaste disposal and
collection.
Contractor will collect greenwaste from the green carts on a bi-weekly schedule.
3. MIXED RECYCLABLES COLLECTION
Contractor will provide blue wheeled recycling carts (between 95-100 gallons in capacity) to all
residential customers in the County franchise area, except as otherwise specified below. Contractor
will instruct these customers to deposit all mixed recyclables (including bottles, cans and paper) in
these carts for curbside collection, in place of the two existing 14 gallon recycling crates previously
supplied by the Contractor.
Residential customers who reside in the Marsh Creek Area will not be provided with wheeled
recycling carts. Contractor will instead provide these customers with 52 blue plastic bags, each with
a minimum capacity of 32 gallons and thickness of at least 1.2 millimeters, for mixed recyclables
collection, one bag to be used for collection each week. Contractor will instruct these customers to
place bags containing mixed recyclables adjacent to or inside their garbage carts for collection by
garbage collection trucks. Contractor will recycle mixed recyclables placed in the bags. This method
of collection is considered a component of the 3-Cart System, notwithstanding the use of bags in
place of carts for mixed recyclables disposal and collection.
Contractor will collect mixed recyclables from the blue carts on a bi-weekly schedule.
County reserves the right to modify the 3-Cart System pursuant to Section 17 of the original
Franchise Agreement.
G:\Conservation\Lorna\Franchised Haulers\Rates\Garaventa Enterprises\Board Order - July 2011\GE 3-Cart Service
Description_FINAL.doc
EXHIBIT A
3-Cart Collection System
The purpose of this Exhibit A is to define the residential 3-Cart Collection System (“3-Cart System”)
referenced in Recital B of the Third Amendment to County Franchise Agreement with Garaventa
Enterprises.
The 3-Cart System consists of all of the following:
1. GARBAGE COLLECTION
Garaventa Enterprises (“Contractor”) will provide all residential customers in the Franchise Area
described in the Existing Franchise Agreement with Garaventa Enterprises (8758 customers as of
July 15, 2011) with new brown wheeled garbage carts. Contractor will ask customers to select the
size of their garbage carts, which may be any of the following sizes: 20-gallon minimum, 32-gallon
minimum, 64-gallon minimum, or 95-gallon minimum. Customers who do not elect to choose a cart
size will receive the following sized carts by default:
· 20-gallon can and 32-gallon can customers will be provided with wheeled carts roughly
equivalent in capacity to their existing cans.
· 96-gallon wheeled cart customers will be provided with 64-gallon wheeled carts.
Contractor will continue to collect garbage on a weekly schedule.
2. GREENWASTE COLLECTION
Contractor will provide green wheeled greenwaste carts (between 95-100 gallons in capacity) to all
residential customers in the Franchise Area, except for those customers specified below. Contractor
will instruct customers to deposit all greenwaste into these carts for collection, in place of existing
customer-supplied bags or containers. Greenwaste will be collected curbside for recycling on a bi-
weekly schedule.
Residential customers in possession of Contractor-supplied 96-gallon green garbage carts will not
receive new wheeled greenwaste carts. Contractor will instruct these customers to use their existing
garbage carts for greenwaste collection.
Residential customers who reside in the Marsh Creek Road area described and depicted in Exhibit 1
attached hereto (“Marsh Creek Area”) will not be provided with wheeled greenwaste carts, due to
the exceptional cost of servicing this rural area with three separate collection trucks. Contractor will
instead provide these customers with 52 green plastic bags, each with a minimum capacity of 32
gallons and thickness of at least 1.2 millimeters, for greenwaste collection, one bag to be used for
collection each week. Contractor will instruct these customers to place bags containing greenwaste
adjacent to or inside their garbage carts for collection by garbage collection trucks. Contractor will
recycle materials placed in these bags. This method of collection is considered a component of the
3-Cart System, notwithstanding the use of bags in place of carts for greenwaste disposal and
collection.
Contractor will continue to collect greenwaste from carts on a bi-weekly schedule.
3. MIXED RECYCLABLES COLLECTION
Contractor will provide blue wheeled recycling carts (between 95-100 gallons in capacity) to all
residential customers in the County franchise area, except as otherwise specified below. Contractor
will instruct these customers to deposit all mixed recyclables (including bottles, cans and paper) in
these carts for curbside collection, in place of the two existing 14 gallon recycling crates previously
supplied by the Contractor.
Residential customers who reside in the Marsh Creek Area will not be provided with wheeled
recycling carts. Contractor will instead provide these customers with 52 blue plastic bags, each with
a minimum capacity of 32 gallons and thickness of at least 1.2 millimeters, for mixed recyclables
collection, one bag to be used for collection each week. Contractor will instruct these customers to
place bags containing mixed recyclables adjacent to or inside their garbage carts for collection by
garbage collection trucks. Contractor will recycle mixed recyclables placed in the bags. This method
of collection is considered a component of the 3-Cart System, notwithstanding the use of bags in
place of carts for mixed recyclables disposal and collection.
Contractor will collect mixed recyclables from carts on a bi-weekly schedule.
County reserves the right to modify the 3-Cart System pursuant to Section 17 of the original
Franchise Agreement.
G:\Conservation\Lorna\Franchised Haulers\Rates\Garaventa Enterprises\Board Order - July 2011\GE 3-Cart Service
Description_FINAL.doc
Deer Valley RdMarsh Creek RdFairview AveC
oncord Ave
Map created 6/23/2011by Contra Costa County Department Conservation and Development Community Development Division--GIS Group651 Pine Street, 4th Floor North Wing, Martinez, CA 94553-009537:59:48.455N 122:06:35.384WThis map contains copyrighted information and may not be altered. It may be reproduced in its current state if the source is cited. Users of this map agree to read and accept the County of Contra Costa disclaimer of liability for geographic information.I 0 0.5 10.25 Miles
Legend
Marsh Creek Area
Parcels
Water Bodies
Brentwood City Limits
Exhibit 1 - Marsh Creek Area
Marsh Creek Rd
Briones Valley Rd
EXHIBIT D
CHANGES TO BE ADDRESSED IN FOURTH AMENDMENT TO THE
COUNTY’S FRANCHISE AGREEMENT WITH GARAVENTA ENTERPRISES
- Page 1 of 4 -
Reflect Current Circumstances and Accurate Section References
· Multiple Sections - Throughout the Franchise Agreement, replace all references to
“Community Development Department” with “Department of Conservation and
Development”, and replace “Director of Community Development” with “Conservation
and Development Director”.
· Section 32 - Replace “Silvio Garaventa, Sr.” with “General Manager”.
· Sections 12 & 34 - Correct section number where referring to the ‘Contractor’s Duty to
Maintain Records; County’s Right to Examine Records’ section, should say Section 7 (not
Section 8).
Acknowledge Rate Manual Applicability and Contractor Provided Containers for
Residential Customers
7. CONTRACTOR’S DUTY TO MAINTAIN RECORDS; COUNTY’S RIGHT TO
EXAMINE RECORDS. Contractor shall maintain a proper set of books and records in
accordance with generally accepted accounting principles, accurately reflecting business
done by it under this Agreement.
Contractor shall further maintain and make available to County, upon its request,
records as to number of Customers, total and by type, route maps, service records and
other materials and operating statistics in such manner and with such detail as County may
require. County shall treat the information required by this paragraph that affects the
competitive position of the company as confidential information to the extent permitted by
law.
County may at any time during the term of this Agreement, have the books and
records of the Contractor examined by a County Agent or Agents appointed for that purpose
by the County. Unless such examination pertains to review of a rate application submitted
by the Contractor, County shall give thirty (30) days’ written notice to the Contractor of
such examination date. County expenses incurred under this section shall be paid by
Contractor upon request, subject to cost their recovery through the rates allowed by the
County hereunder.
The information by this section shall pertain to Contractor’s operations covered and
regulated by this Agreement, and nothing contained herein shall require the Contractor to
provide the County with information pertaining to the Contractor’s operations which are not
regulated by the County, except in conformance with this section and Section 34 (Affiliated
Entities).
County’s Agents may examine Contractor’s books, records and financial statements
pertaining to operations not regulated by the County as may be reasonably required for the
sole purpose of gathering information necessary to allow the Agents to ascertain whether
income, expenses, assets and liabilities are reasonably and consistently allocated among
operations regulated by County and those not regulated by the County. Contractor shall
obtain County’s written approval of its method of segregating its financial records between
County-regulated and non-County regulated operations. County shall not unreasonably
withhold such approval.
EXHIBIT D
CHANGES TO BE ADDRESSED IN FOURTH AMENDMENT TO THE
COUNTY’S FRANCHISE AGREEMENT WITH GARAVENTA ENTERPRISES
- Page 2 of 4 -
To the extent allowed by law, information gained from examination of records
pertaining to operations not regulated by the County shall be treated by County and its
aAgents as confidential information.
For the review of books and other financial records necessary to verify the
Contractor’s income, expenses, assets and liabilities, “County Agent” shall mean County
employees, or an independent Certified Public Accountant or public accountancyindividuals
employed by a professional financial consulting firm hired by the County. For all other
information or records, including the results of financial verification, “County Agent” shall
mean any consultant designated by the County or County employees.
Nothing in this section will prevent County from allowing public access to County
records as provided for under the California Government Code, and in the event any dispute
arises as to public access to information provided by Contractor under the terms of this
Agreement, the County shall in its discretion provide public access to said information
according to law or tender the defense of any claims made against the County concerning
said information to Contractor. Prior to releasing any information pursuant to this
paragraph, County shall make a good faith effort to notify Contractor of the intended
release.
8. RATES. Rates shall be fixed by the County from time to time. In determining
the rates, the County shall consider fairness to both Contractor and the Customers.
Reasonable costs incurred by Contractor pursuant to this Agreement shall be designated as
“pass-through” or “subject to reasonable profit” as determined by the County during the
rate review process.
The County established a rate setting methodology that has been reasonably
adapted to this Agreement. The rate setting methodology utilized shall: (a) provide for
rate reviews accompanied by audited financial statements covering the entire period since
the last audited rate application; (b) provide for annual CPI adjustments between audited
rate applications; (c) specify what costs are to be pass-through (without profit) and what
costs are to be subject to reasonable profit; (d) provide for the recovery of Contractor’s
reasonable costs incurred in providing services under this Agreement; and (e) specify the
operating ratio allowed to the Contractor (currently 88%-92%). The rate setting
methodology is described in the “Rate Setting Process and Methodology Manual for Solid
Waste Charges As Applied to Garaventa Enterprises” (“Rate Manual”) which may be
amended by the County from time to time.
Rates fixed by County shall be maximum rates which Contractor may charge the
Customers. The maximum rates fixed by the County at this timethe time this Agreement
was executed shall bewere the highest commercial rates and the highest residential rates
being charged by Garaventa Enterprises within the Franchise Area immediately before the
effective date of this Agreement, as set forth in the letter and enclosures from Garaventa
Enterprises to Val Alexeeff dated April 14, 1995, attached hereto as Exhibit B and
incorporated herein by this reference. Nothing in this Agreement precludes Contractor from
charging rates less than the maximum rates fixed by the County. Pending an initial rate
review by the County, the maximum rates chargeable shall were to be those rates charged
on the effective date of this Agreement.
EXHIBIT D
CHANGES TO BE ADDRESSED IN FOURTH AMENDMENT TO THE
COUNTY’S FRANCHISE AGREEMENT WITH GARAVENTA ENTERPRISES
- Page 3 of 4 -
Following consultation with the Contractor and examination of industry norms and
trends, the County, in its sole discretion, shall determine the method of determining
Contractor profitability.
All costs associated with County review and processing of rate applications shall be
paid by Contractor upon request 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 Rate application forms
and associated guidelines and instructions are contained in the Rate Manual approved by
the County.shall include one reproducible hard copy, 15 hard copies bound in an appropriate
manner and one copy on disk formatted pursuant to County specifications.
Contractor shall submit its first rate application as directed by the County. All rate
applications shall include information from the previous approved rate change to the
present, or such other period of time as is selected by the County. Every three years, a
detailed 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. In intervening years, Contractor may submit abbreviated rate applications as
provided for and described in the County’s Rate Manual.
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 Contactor under the
conditions allowed in this section. In either case, Contractor shall prepare a rate application
in accordance with the requirements of this section and the County’s Rate Manual.
If the rate change is initiated by County, the Contractor shall submit its rate
application to County within 60 days of County’s notice to Contractor.
If the rate change is initiated by Contractor, it shall be submitted no more than once
a year under normal operating conditions. The date of Contractor initiated applications shall
be standard, year by year; such dates to have been mutually determined upon mutual
agreement of by the parties and incorporated into the rate setting schedules in the County’s
Rate Manual reasonably FArelated to the fiscal year of Contractor.
In the event that the Department of Conservation and Development determines that
a rate change that would be requested by Contractor is no more than the applicable annual
change in the Consumer Price Index for All Urban Consumers for the San Francisco Bay
Area for that fiscal rate year of Contractor, Contractor may increase its rate up to such
amount and not request awithout obtaining rate change approval from the BoardCounty.
EXHIBIT D
CHANGES TO BE ADDRESSED IN FOURTH AMENDMENT TO THE
COUNTY’S FRANCHISE AGREEMENT WITH GARAVENTA ENTERPRISES
- Page 4 of 4 -
Contractor may defer submittal of a detailed rate application pursuant to this paragraph for
a maximum of two consecutive years.
In the event that Contractor must make significant changes in its operations or
experiences significant changes in costs or revenue not under its control, Contractor may
submit a rate application. Contractor shall provide documentation for the need for such rate
application relative to those extraordinary changes as provided for and described in the
County’s Rate Manual. The application will thereafter be reviewed by County staff and
scheduled for considerationed by the Board.
10. OPERATION BY CONTRACTOR. Contractor shall furnish all necessary
equipment (excludingincluding containers for customerssingle-family residential wastes) for
services provided pursuant to this Agreement in the Franchise Area and shall maintain such
equipment in a sanitary condition at all times. Contractor shall furnish all necessary labor in
connection with the operation of a Solid Waste collection system in the Franchise Area.
The Contractor, in performance hereof, shall use trucks with covered, water-tight
truck bodies constructed of sufficient strength to withstand a fire within, without
endangering adjacent property. Trucks, drop boxes, bins, or similar types of equipment
shall be kept clean and in good repair. Contractor shall have its name and telephone
number on the side of each truck and on each drop box, bin or similar type equipment
provided by Contractor.
G:\Conservation\Lorna\Franchised Haulers\Rates\Garaventa Enterprises\Board Order - July 2011\Revised Text_GE-
FA Amendment 4.doc