HomeMy WebLinkAboutMINUTES - 11172015 - D.4RECOMMENDATION(S):
ACCEPT report from Crowe Horwath (consultant) dated October 28, 2015 regarding their review of the Base Year
Rate Application submitted by Richmond Sanitary Service (Exhibit A).
CONCUR with the Director of Conservation and Development’s proposed use of Rate Stabilization funding to offset
the recommended 2016 Base Year Collection Rate increase of 2.19% effective January 1, 2016 for residential
customers in the unincorporated West County area served by Richmond Sanitary Service (RSS) under the
County/RSS Franchise Agreement.
CONCUR with the Director of Conservation and Development’s proposed use of Rate Stabilization funding to offset,
to the maximum extent possible, the annual Consumer Price Index (CPI) rate increases that may be requested for
calendar years 2017 through 2019 for residential customers in the unincorporated West County area served by RSS
under the County/RSS Franchise Agreement
FISCAL IMPACT:
No impact to the County General Fund. The costs for County staff time spent administering the Franchise Agreement
and any related consulting services are covered by solid waste/recycling collection franchise fees.
APPROVE OTHER
RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
Action of Board On: 11/17/2015 APPROVED AS RECOMMENDED OTHER
Clerks Notes:
VOTE OF SUPERVISORS
AYE:John Gioia, District I Supervisor
Candace Andersen, District II
Supervisor
Mary N. Piepho, District III
Supervisor
Karen Mitchoff, District IV
Supervisor
Federal D. Glover, District V
Supervisor
Contact: Demian Hardman (925)
674-7826
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: November 17, 2015
David Twa, County Administrator and Clerk of the Board of Supervisors
By: June McHuen, Deputy
cc:
D. 4
To:Board of Supervisors
From:John Kopchik, Director, Conservation & Development Department
Date:November 17, 2015
Contra
Costa
County
Subject:Solid Waste Collection Rates in the Unincorporated West County Areas Served by Richmond Sanitary Service Under
the County's Franchise Agreement
BACKGROUND:
In October 1993, the County entered into a Franchise Agreement with Richmond Sanitary Service (RSS), which
was amended in 1994. On November 12, 2013, the County approved a Second Amendment to the County/RSS
Franchise Agreement that: (a) increased the franchise fee to seven percent (7%); (b) established new 2014
Collection Rates, which included a Rate Stabilization Adjustment; (c) required RSS to provide new and expanded
services; and (d) acknowledged the term was extended through October 11, 2023.
The Franchise Agreement grants RSS the exclusive privilege and duty to collect solid waste, recyclables and
organics routinely generated by residential and commercial customers within the designated RSS service area
(also known as the “Franchise Area”). The RSS service area covers the following eight (8) unincorporated
communities, which are all located in Supervisorial District I, with the exception of Alhambra Valley located in
District V:
Alhambra Valley (partial)1.
Bayview2.
East Richmond Heights3.
El Sobrante4.
Montalvin Manor5.
North Richmond6.
Rollingwood7.
Tara Hills8.
The County establishes and regulates Collection Rates that RSS is allowed to charge for residential collection
services provided in their Franchise Area. These rates are established in accordance with the adopted rate setting
methodology set forth in the “Rate Setting Process and Methodology Manual for Solid Waste Charges As Applied
to Richmond Sanitary Service a division of Republic Services, Inc.” (Rate Setting Methodology Manual). The
County-adopted methodology details a rate setting process that involves: (a) Base Year rate reviews that occur
every four (4) years based on data submitted in detailed rate applications and accompanying audited financial
statements; (b) Annual Interim Year rate adjustments calculated based on a weighted increase in controlled and
uncontrolled costs and Consumer Price Index (CPI) adjustments, alternatively in the intervening years between
audited rate applications the Franchise allows adjustments which do not exceed the change in CPI without
approval from the County Board of Supervisors; and (c) provides for the recovery of the reasonable costs incurred
by RSS in performing services under the Franchise Agreement as well as allowable profit.
Unlike the other County Franchise Agreements, the total monthly rate charged to ratepayers is comprised of both
a Collection and Post-Collection Rate. The County only approves the Collection Rate charged to residential
customers in the RSS service area. Another public agency regulates the Post-Collection Rate as discussed in more
detail in the Post-Collection Rate section at the end of this report.
History of Solid Waste Collection Rate Adjustments since the prior Base Year
Below is a brief summary of the rate adjustments over the past four (4) years within the County/RSS Franchise
Area:
2012: Base Year Rate Review – A recommended rate decrease of -5.99% was deferred, so rates charged to
customers remained stable. The deferral of the 5.99% reduction provided a credit to help offset subsequent annual
rate increases as well as generated Efficiency Surplus Funding which has been used to have RSS provide
additional services within the Franchise Area at no additional cost to ratepayers.
2013: Interim Year Rate – Annual CPI adjustment of 2.80% was credited to RSS. Instead of increasing rates by
the change in CPI, a portion of the 5.99% rate reduction credit identified in 2012 was used to offset the 2.80% CPI
increase, resulting in the credit being reduced from 5.99% to 3.19%. The rate reduction credit not used to offset
CPI increases each year yielded surplus revenue resulting from service efficiencies (“Efficiency Surplus
Funding”) which is being treated as a credit available to fund allowable costs for fees or services not included in
the Collection Rates pursuant to the terms of Exhibit G to the Second Amendment to the County/RSS Franchise
Agreement approved in November 2013.
2014: Interim Year Rate – Annual CPI adjustment of 2.03% was credited to RSS. The rate reduction credit of
3.19% remaining from 2013 was used to offset the CPI increase, which further reduced the credit from 3.19% to
1.16%. Although there was no net change in rates charged to residential customers in 2014, a change (technically
an 18% increase) to the Collection Rate component of the monthly rate charged to customers was prompted by a
reduction in the Post-Collection Rate regulated by another public agency in addition to the implementation of
enhanced services. In order to maintain stable rates for customers in the RSS service area, the Board of
Supervisors approved a Rate Stabilization Adjustment which in addition to the Enhanced Services Rate
Adjustment resulted in a Collection Rate increase that equaled the Post-Collection Rate reduction so there would
be no net change in customers' monthly bills. The Rate Stabilization Adjustment solely applied to residential rates
effective on January 1, 2014 pursuant to the terms of the Second Amendment to the County/RSS Franchise
Agreement approved in November 2013.
2015: Interim Year Rate – Annual CPI adjustment of 2.96% was credited to RSS. The remaining 1.16% rate
reduction credit available from 2014 was applied to offset a portion of the CPI increase (2.96% - 1.16% = 1.80%).
The Rate Stabilization Adjustment was used to offset the remaining 1.80% to avoid having to pass-through any
CPI increase to residential customers.
2016 Base Year Rate Review – Richmond Sanitary Service (RSS) Rate Application
To determine a Base Year Rate change for calendar year 2016, the County requested technical assistance from
Crowe Horwath (consultant) to review the Base Year Rate Application submitted by RSS. The result of Crowe
Horwath’s review is contained in their report dated October 28, 2015, which is attached as Exhibit A. Crowe
Horwath conducted their review consistent with the County’s Rate Setting Manual for use in the service area and
the recommendations resulting from the detailed review are contained in the attached report.
The Base Year Rate setting process requires that a detailed rate change application be submitted by the RSS along
with an audited financial statement and supplemental financial and operational information. Using the detailed
financial data provided, Crowe Horwath reviews several cost categories to determine the appropriate rate
adjustment. The major cost categories include:
Direct Labor Costs
Corporate and Local General and Administrative Costs
Trucking and Equipment
Allowable Profit
County Franchise Fee
The Base Year Rate Change Application submitted by RSS proposes a rate increase of 7.39%, which corresponds
with a monthly increase of $1.71 in the residential Collection Rate for the 35 gallon cart, the most common
County service level. Crowe Horwath reviewed the Application submitted by RSS for consistency with the
Manual, County policies, and waste management industry practices. Their analysis did a comparison on
year-to-year changes in revenues and costs for reasonableness and solicited explanations from RSS for material
changes. This included the examination of actual data results for 2014, estimated results for 2015, and projected
results for 2016. Exhibit B contains Crowe Horwath's analysis of the financial data associated with the Enhanced
Services provided by RSS which the company is required to keep segregated for rate setting purposes consistent
with Section 3 of Exhibit F to the Second Amendment to the County/RSS Franchise.
Recommended 2016 Base Year Rate Adjustment
Crowe Horwath’s report concludes that a Collection Rate increase of 6.44% is warranted based on an analysis of
the costs analyzed as a part of the 2016 Base Year rate review, which is 0.95% lower than the 7.39% increase
proposed by RSS. Additionally, the consultant's report recommends the remaining Rate Stabilization Adjustment
be eliminated in 2016 in order to offset another 4.25% of the 6.44% Collection Rate increase. When combining
these two factors, the final recommended Collection Rate increase for residential customers is 2.19%, which is
5.20% less than was originally requested by RSS. Details regarding the proposed 2.19% Collection Rate increase
for all residential cart sizes is shown in Table 1 below.
TABLE 1 - 2016 Collection Rate Increase Recommended by Crowe Horwath (2.19%)
Residential Cart Size
Exiting
Collection
Rate (2015)
2.19%
Collection Rate
Increase (2016)
Increased Collection
Rate Recommended
in Exhibit A (2016)
20-Gallon $20.95 $0.46 $21.41
35-Gallon $23.04 $0.50 $23.54
60/65-Gallon $44.59 $0.98 $45.57
95/100 Gallon $66.26 $1.45 $67.71
Since the establishment of the Rate Stabilization Adjustment in 2014, RSS has been collecting Rate Stabilization
funding which the County/RSS Franchise authorizes the County Director of Conservation and Development to use
to help offset rate increases. The opportunity to establish a Rate Stabilization Adjustment without increasing the
amount charged to customers resulted from a reduction in the Post-Collection Rate negotiated by the West Contra
Costa Integrated Waste Management Authority (WCCIWMA) in conjunction with their Post-Collection
Agreement with Republic Services. As of the end of September 2015, RSS had collected $360,258.79 in Rate
Stabilization funds, with approximately $400,000 expected to be available by the end of calendar year 2015. Staff
estimates that approximately $255,363.85 will need to be used to cover the 2.19% increase in residential
Collection Rates for calendar years 2016 through 2019. Staff recommends that $255,363.85 of Rate Stabilization
funding be used to offset the 2.19% Collection Rate increase recommended in Exhibit A. Furthermore, staff
recommends that the remaining funding ($104,894.94) be used to offset future increases in CPI, to the extent
feasible, for the subsequent interim three (3) years.
Post-Collection Rates
Post-collection services are provided in coordination with neighboring jurisdictions through a Joint Powers
Authority, the WCCIWMA. Post-Collection Rate adjustments are generally approved prior to any Collection Rate
adjustments in the RSS service area, but usually become effective at the same time Collection Rate changes are
made (January 1st of each year). The Franchise Agreement requires RSS to cause any adjustment to the
Post-Collection Rates to be passed through to customers simultaneously with any adjustment to Collection Rates.
On October 29, 2015 the WCCIWMA tentatively agreed on a new Post-Collection Rate that will increase the
Post-Collection Rate component of the total monthly residential rate charged to customers by 4.84% to 4.90%
depending on the customer selected cart size. Details regarding the rate increase for all cart sizes is shown in
Table 2 below. The WCCIWMA is expected to formally approve the Post-Collection Rate increase at their
meeting on November 12, 2015, with the new Post-Collection Rate going into effect on January 1, 2016.
TABLE 2 - 2016 Post-Collection Rate Increase not yet Approved by WCCIWMA (4.8 - 4.9%)
Residential Cart
Size
Current
Post-Collection Rate
(2015)
Proposed
Post-Collection
Rate Increase
(4.8 - 4.9%)
Proposed
Post-Collection
Rate
(2016)
20-Gallon $4.55 $0.22 $4.77
35-Gallon $7.97 $0.39 $8.36
60/65-Gallon $14.83 $0.72 $15.55
95/100 Gallon $22.24 $1.09 $23.33
Post Collection Rates and the associated percent increase listed in this table are only preliminary. Final 2016
Post Collection Rates and the associated percent increase listed in this table are only preliminary. Final 2016
Post Collection Rates will not be approved until November 12, 2015.
If the Board concurs in the proposed use of Rate Stabilization funding, the only increase in residential rates
charged to customers served by RSS in 2016 will be the Post-Collection Rate increase ultimately approved by the
WCCIWMA for 2016. The tentative Post-Collection Rate increase equates to a net increase in the total monthly
amount charged to residential customers ranging from 0.86% to 1.26%, depending on the cart size. The monthly
rate charged for the typical 35-Gallon cart service would increase by 1.26%. Details regarding this
recommendation for all cart sizes is shown in Table 3.
TABLE 3 - Net Change in Monthly Rate Charged to Customers for 2016
(Staff Recommended Offset of Collection Rate Increase using Rate Stabilization Funding + Proposed
Post-Collection Rate Increase)
Residential Cart Size
Existing Total
Monthly Rate
(2015)
Proposed
Post-Collection
Rate Increase
Proposed Total
Monthly Rate
(2016)
Net Monthly
Rate Increase
(2016)
20-Gallon $25.50 $0.22 $25.72 0.86%
35-Gallon $31.01 $0.39 $31.40 1.26%
60/65-Gallon $59.42 $0.72 $60.14 1.21%
95/100 Gallon $88.50 $1.09 $89.59 1.23%
Post Collection Rates and the associated percent increase listed in this table are only preliminary. Final 2016 Post Collection Rates will
not be approved until November 12, 2015.
CONSEQUENCE OF NEGATIVE ACTION:
Collection Rates charged to customers would remain unchanged whether the Board approves the
recommendations or not. Technically, the Director of Conservation and Development has the authority to direct
that Rate Stabilization Funding be used to offset rate increases. However, the Board has the authority to instead
approve a rate increase and therefore Board concurrence is requested. In the absence of Board direction to the
contrary, Rate Stabilization funding would be used to offset the Base Year Rate adjustment.
CHILDREN'S IMPACT STATEMENT:
Not applicable.
ATTACHMENTS
Exhibit A: Final Report - Review of 2016 Richmond Sanitary Services Rate Application
Exhibit B: Enhanced Services Cost/Revenue Analysis
Crowe Horwath LLP
Independent Member Crowe Horwath International
575 Market Street, Suite 3300
San Francisco, California 94105-5829
Tel 415.576.1100
Fax 415.576.1110
www.crowehorwath.com
October 28, 2015
Ms. Deidra Dingman
Conservation Programs Manager
Contra Costa County
Department of Conservation and Community Development
30 Muir Road
Martinez, California 94553-4601
Subject: Review of 2016 Richmond Sanitary Services Rate Application
Dear Ms. Dingman:
This letter report represents results of Crowe Horwath LLP’s (Crowe) review of the 2016 rate application
submitted by Richmond Sanitary Service to Contra Costa County (County). The County has a franchise
with Richmond Sanitary Services (RSS, a subsidiary of Republic Services, Inc.) to provide refuse and
recycling collection services in unincorporated areas in western Contra Costa County.
This letter report is organized into eight (8) sections as follows:
A. Summary
B. Project Background
C. Goals and Objectives of Rate Review
D. Scope of Rate Review
E. History of Collection Portion of the Rate
F. 2016 Base Year Rate Application
G. Review of 2016 Base Year Rate Application
H. Comparison of Rates and Services to Other Neighboring Jurisdictions
There are three (3) attachments to this report, as follows:
A. Rate Application and Audited Financial Statements
B. Adjusted Base Year Rate Model
C. Comparative Rate Survey.
A. Summary
In its Application, RSS requested a rate increase, for the collection portion of the rate, of 7.39 percent for 2016.
We recommend a rate increase of 2.19 percent for the collection portion of the rate for 2016. The collection
portion of residential service rates would increase by between $0.46 and $1.45 per customer, per month,
depending on the residential service level as shown in Table 1. For the most common 35 gallon cart
residential service, the recommended collection rate would be $23.54 per customer, per month.
Corresponding commercial collection rates (without the post-collection portion of the rate) are shown in
Table 2. Finally, total residential rates, inclusive of both the collection and projected potential post-
collection rate components are shown, by residential rate category, in Table 3.
Ms. Deidra Dingman, Conservation Programs Manager Page 2
October 28, 2015
Table 1
Unincorporated West Contra Costa County
Potential January 1, 2016 Residential Collection Rates, Per Customer, per Month
Based on 2.19 Percent Rate Increase
Service Level 2015 Collection Rate Rate Change 2016 Collection Rate
20 Gallon $20.95 $0.46 $21.41
35 Gallon $23.04 $0.50 $23.54
65 Gallon $44.59 $0.98 $45.56
95 Gallon $66.26 $1.45 $67.71
Table 2
Unincorporated West Contra Costa County
Potential Selected January 1, 2016 Commercial Collection Rates, Per Customer, Per Month
Based on 2.19 Percent Rate Increase
Service Level
Current Once per Week
Rate Rate Change
Potential New Once per
Week Rate
1-Cubic Yard $143.22 $3.14 $146.36
2-Cubic Yard 253.53 $5.55 $259.08
3-Cubic Yard 316.83 $6.94 $323.77
4-Cubic Yard 380.13 $8.32 $388.45
5-Cubic Yard 443.43 $9.71 $453.14
6-Cubic Yard 506.73 $11.10 $517.83
7-Cubic Yard 633.37 $13.87 $647.24
Table 3
Unincorporated West Contra Costa County
Potential January 1, 2016 Total Residential Rates (Collection Plus Projected Post Collection)
Per Customer, per Month
Service Level
Collection Rate
(2.19% Increase)
Projected Post Collection
Rate (4.18% Increase)1 Total Rate
20 Gallon $21.41 $4.74 $26.15
35 Gallon $23.54 $8.30 $31.84
65 Gallon $45.56 $15.45 $61.01
95 Gallon $67.71 $23.17 $90.88
1 Post Collection Rates and the associated 4.18 percent increase listed in Table 3 is only preliminary. Final 2016 Post Collection
Rates will not be approved until November, 2015.
Ms. Deidra Dingman, Conservation Programs Manager Page 3
October 28, 2015
B. Project Background
RSS has an exclusive franchise with the County to collect, and remove for disposal and recycling,
residential, commercial, and light industrial solid waste and recyclable materials. RSS originally had a
twenty (20) year franchise with the County, beginning October 12, 1993 and ending October 11, 2013. On
November 12, 2013, the County Board of Supervisors determined that RSS’s performance had been
satisfactory and approved a Second Amendment to the County/RSS Franchise Agreement which
extended the franchise term an additional ten (10) years through October 11, 2023. The RSS franchise
includes the following six (6) service areas in unincorporated Western Contra Costa County:
1. East Richmond Heights
2. El Sobrante
3. Montalvin Manor
4. North Richmond
5. Rollingwood
6. Tara Hills.
Exhibit 1 on the following page shows locations of these six service areas. RSS also serves the following
neighboring jurisdictions in Western Contra Costa County:
City of Hercules
City of Pinole
City of Richmond
City of San Pablo.
Table 4 below and Table 5 on the following page show current residential and commercial rates for the
six unincorporated West County service areas.
The County regulates the “collection” portion of rates only. The remaining portion of the rate, representing post
collection activities, is regulated by the West Contra Costa Integrated Waste Management Authority
(WCCIWMA, also referred to as RecycleMore). Post collection activities include transfer, landfilling, materials
processing, and composting.
RSS consolidates refuse collected from unincorporated West County areas at the Golden Bear Transfer
Station and Integrated Resource Recovery Facility (IRRF) and transports refuse to Keller Canyon Landfill
near Pittsburg in unincorporated Contra Costa County for disposal. Formerly, RSS disposed of refuse at
the West Contra Costa Sanitary Landfill (WCCSL) in Richmond.
Table 4
Unincorporated West Contra Costa County
Residential Rates per Customer, per Month (As of September 15, 2015)
Service Level Collection Rate Post Collection Rate Total Rate
20 Gallon $20.95 $4.55 $25.50
35 Gallon $23.04 $7.97 $31.01
65 Gallon $44.59 $14.83 $59.42
95 Gallon $66.26 $22.24 $88.50
Ms. Deidra Dingman, Conservation Programs Manager Page 4
October 28, 2015
Exhibit 1
West Contra Costa County
Area Map
Table 5
Unincorporated West Contra Costa County
Selected Commercial Rates per Customer, per Month (As of September 15, 2015)
Service Level One Pickup per Week Two Pickups Week
1-Cubic Yard $204.28 $358.84
2-Cubic Yard 334.71 612.02
3-Cubic Yard 457.34 850.36
4-Cubic Yard 576.10 1,081.70
5-Cubic Yard 692.62 1,309.55
6-Cubic Yard 808.07 1,535.85
7-Cubic Yard 922.89 1,761.33
Rollingwood
Ms. Deidra Dingman, Conservation Programs Manager Page 5
October 28, 2015
RSS provides curbside recycling service services to unincorporated West County areas. RSS accepts the
following recyclable material types:
Aluminum (cans, foil, and trays)
Aerosol cans
Cardboard
Glass bottles, jars, beverage and food containers
Milk and juice cartons
Mixed paper (chipboard, computer paper, junk mail/envelopes, white/colored paper, magazines,
catalogs, paper bags, cereal and shoe boxes, and telephone books)
All mixed plastics
Mixed rigid plastic packaging and plastic #1 through #7 food containers
Newspaper
Plastic bags and film (properly bagged)
Plastic bottles (types #1 through #7), soda and water bottles, milk and juice jugs and bottles
Scrap metal
Steel and tin food and beverage cans.
Residential customers commingle all of their recyclable materials into one 64-gallon cart. RSS collects
residential curbside recyclables each week. RSS takes recyclable materials to the IRRF where they are
separated on a Materials Recovery Facility (MRF) sort line. Republic Services owns and operates the
IRRF.
RSS collects organics every week in a 64-gallon cart. RSS also collects foodwaste, food-soiled paper,
and green waste within the organics container. Organics are composted at the West Contra Costa
County Sanitary Landfill site. RSS shifted from bi -weekly recycling and organics collection programs to
weekly service on March 1, 2015.
C. Goals and Objectives of Rate Review
The Manual specifies that the primary goal of the rate setting process and methodology is to determine
fair and equitable residential refuse collection charges that provide a reasonable profit level to RSS.
Fairness is demonstrated through a rigorous review of RSS’s actual revenues and expenses. Residential
charges also must be justifiable and supportable.
Rate setting is prospective. The County sets rates in advance of when actual results occur. The County
must therefore base rates on careful projections.
To set rates, the County reviews trends in prior, current, and projected revenues, costs, and profits. The
County sets rates that are intended to cover RSS costs of operations and allow a reasonable profit.
The County uses the operating ratio (OR) method to project the profit level allowed to RSS in a base
year. The actual OR level received by RSS in a base year, and in subsequent interim years, is not
however, guaranteed.
D. Scope of Rate Review
The County based the scope of work for this review on the requirements in the Manual. The base year
process has seven (7) steps, five (5) of which are the County’s responsibility. RSS is responsible for the
other two (2) steps.
Ms. Deidra Dingman, Conservation Programs Manager Page 6
October 28, 2015
Crowe, as the Consultant, provided assistance to the “County” for five steps in the rate review process
(#2 through #5). We carefully reviewed and analyzed the 2016 rate application. We conducted our review
in accordance with procedures described in the Manual. We completed the following activities during our
review:
Verified the application was complete2
Determined data presented in the application were mathematically correct and consistent
Reviewed the reconciliation of calendar year 2014 financial information provided in the application
to the 2014 financial audit
Compared actual 2014 results with estimated 2015 and projected 2016 financial results
Analyzed significant historical fluctuations in major cost categories
Examined the relationships between financial and operating information for reasonableness
Reviewed RSS franchise fees payments to the County
Conducted a survey of rates in other similar neighboring communities.
We submitted a formal data request to RSS on August 28, 2015. We received RSS responses on
September 11, 2015. We met with RSS management on October 8, 2015, to ask remaining follow-up
questions, and provide RSS with an opportunity to provide additional context regarding the rate application.
E. History of Collection Portion of the Rate
As specified in the Agreement, the County directly regulates the collection portion of the residential rate.
Collection rate changes, since the County adopted the Manual in 2003, increased on a compounded
basis by 2.52 percent per year over the thirteen years since 2003 and are shown in Table 6.
In August 2003, following the base year review, the County approved an increase in the service portion of
the 35-gallon cart rate to $17.50 per month. As of October 2015, the service portion of the 35-gallon cart
rate was $23.04 per month. Over this period, the collection portion of the 35-gallon cart rate increased
31.7 percent. The difference between the August 2015 CPI (259.117) and the August 2003 CPI (196.30)
was 32 percent, equal to the actual change in the service portion of the 35-gallon cart rate.3 The effective
collection portion of the rate, not including the program changes resulting from the post-collection
agreement in 2014 (see footnote 6 on the next page), as of 2015 equals $19.49 per month for the 35
gallon service level ($23.04 less $3.55 per month). This $19.49 amount represents an increase of 11.1
percent since 2003, well below the 32 percent increase in the CPI for this period.
F. 2016 Base Year Rate Application
The County received RSS’s Base Year Rate Change Application (Application) on July 2, 2015. A copy
of the Application is provided in Attachment A, at the end of this report. RSS used year-to-date
information (i.e., first quarter) to estimate 2015 financial results. Year 2016 results are projected in the
Application.
RSS requested a 7.39 percent service rate increase effective January 1, 2016. This request corresponds
to a $1.71 per customer, per month, increase in the collection portion of the 35 gallon rate, the most
common County service level.
Our review did not represent a financial audit of RSS. Armanino LLP completed a 2014 financial audit of
all RSS operations, including the County (provided in Attachment A). For purposes of preparing the 2014
cost data for the Application, RSS allocated County costs from total audited RSS costs.
2 We summited a letter of completeness to RSS on August 3, 2015.
3 The applicable comparable consumer price index is the San Francisco-Oakland -San Jose Consumer Price Index, All Items.
Ms. Deidra Dingman, Conservation Programs Manager Page 7
October 28, 2015
Table 6
Unincorporated West Contra Costa County
Historical Residential Refuse Collection Rate Changes (Not Including Post Collection)
(2003 to 2015)
Year
Collection Portion of the Rate
(35G Customer, Per Month)
Percent Change in
Collection Portion of the Rate
2003 $17.50 4.15%4
2004 $17.50 0.00%
2005 $17.85 2.00%
2006 $18.35 2.95%
2007 $19.25 5.04%
2008 $19.25 0.00%5
2009 $19.25 0.00%4
2010 $19.25 0.00%6
2011 $19.61 2.00%
2012 $19.61 0.00%
2013 $19.61 0.00%
2014 $23.16 7 18.00%
2015 $23.04 ~0.00%
G. Review of 2016 Base Year Rate Application
This section details findings from Crowe’s review of RSS’s 2016 Application. We identified the impact of
each finding in terms of a dollar value increase or a decrease in the “revenue requirement” identified in
the Application. The revenue requirement is the amount of revenue that RSS needs to collect, through
rates charged to customers, to cover costs of providing the service plus a reasonable financial return.
Increasing the revenue requirement results in an increase in rates, and decreasing the
revenue requirement results in a decrease in rates.
Crowe reviewed the Application for consistency with the Manual, County policies, and waste
management industry practices. In our review of RSS financial results, we compared year-to-year changes
in revenues and costs for reasonableness and solicited explanations from RSS for material changes. We
4 Rate increase implemented August 1, 2003.
5 In December 2007, the County Board of Supervisors deferred implementation of the recommended 4.39 percent decrease as a
means of stabilizing rates while generating revenue the County could use to aid in the prevention or abatement of illegal dumping
within the County franchise area served by RSS. RSS was authorized to continue charging customers the same service rates
through December 31, 2008 and directed to provide County with the surplus revenue collected from customers in 2008
(approximately $111,378). This surplus amount was no longer collected in 2009.
6 Rates were left unchanged in 2010. A recommended 4.11 percent reduction was treated as a credit to offset the interim year rate
change for 2011.
7 In 2014, RecycleMore negotiated a new post collection agreement with Republic Services. At that time, certain costs formerly
included as part of the post-collection charge were shifted to the collection portion of the rate. Though the collection portion of the
residential rate increased 11 to 18 percent, there was an equally offsetting reduction in the post collection portion of the rate.
Thus, total County residential rates did not change in 2014.
Ms. Deidra Dingman, Conservation Programs Manager Page 8
October 28, 2015
examined actual results from 2014, estimated results for 2015, and projected results for 2016. Our adjusted
rate model is provided in Exhibit B-1, of Attachment B.
1. RSS Financial and Operating Results Since the 2012 Base Year
In Table 7, we compare West County approved service rate changes with changes in residential revenues
and residential accounts. Residential revenues remained relatively flat and increased just 1.1 percent
between 2012 and 2014. This increase is supported by the compound impact of (1) the total rate increases
and (2) the increase in number of residential accounts.
In Table 8, we compare West County approved service rate changes with changes in commercial service
revenues and tons. From the time series, we find that service rates increased 8.0 percent between 2012
and 2014, commercial tonnage increased by 5.8 percent, both contributing to the overall estimated 13.3
increase in commercial revenues.
Table 7
Unincorporated West Contra Costa County
Comparison of Residential Rate Increases with Changes in
Residential Revenues and Accounts (2012 to 2014)
Year Rate Increases Change in Residential
Accounts
Change in RSS Residential
Collection Revenues
2012 to 2014 0.0% 2.0% 1.1%
Table 8
Unincorporated West Contra Costa County
Comparison of Commercial Rate Increases with Changes in
Commercial Revenues and Tonnage (2012 to 2014)
Year Rate Increases Change in Commercial
Tons
Change in RSS Commercial
Collection Revenues
2012 to 2014 ~8.0% 5.9% ~13.3%
For the above comparison, in addition to rate changes, we used the number of accounts as a proxy for
changes to residential revenues while we used tonnage as a proxy for changes to commercial revenues.
Tonnage is more applicable for the commercial sectors as businesses are more inclined, than the
residential sector, to adjust their service level based on tonnage changes.
Between 2012 and 2014, RSS County revenues and costs increased at different rates, as shown in Table 9.
RSS costs increased 6.7 percent, while RSS revenues increased 4.2 percent. During this same 2012 to
2014 period, RSS’s actual operating ratio ranged from 83 to 88 percent.8 This period of relatively higher
profitability resulted from RSS continuing to implement corporate-wide costs savings initiatives. These
measures included combining routes (resulting in labor cost reductions) and focusing on more efficient
equipment maintenance management practices.
8 The County’s target operating ratio during base years is 90 percent. A smaller operating ratio represents a larger return.
Ms. Deidra Dingman, Conservation Programs Manager Page 9
October 28, 2015
Table 9
Unincorporated West Contra Costa County
Change in RSS Revenues and Costs
(2012 to 2014)
Description Percent Change
Revenues 4.2%
Costs 6.7%
2. Method for Allocating RSS Costs to West County Areas
In addition to unincorporated West County, RSS includes the following other service areas in their total
consolidated RSS financial statements, provided in Attachment A:
Hercules
Pinole
Richmond
Rodeo
San Pablo.
In Table 10, we provide the methods used by RSS to allocate total consolidated costs to unincorporated
West County areas. RSS allocated nearly all West County costs from total consolidated RSS costs using
its route allocation method.
Table 10
Richmond Sanitary Service
Methods Used to Allocate Consolidated Costs
To Each Jurisdiction Served
Cost Allocation Method 9
Labor Route Allocation
Corporate and Local General
and Administrative Costs
Route Allocation
Depreciation and Other Operating Costs Route Allocation
Trucking and Equipment Route Allocation
Franchise Fees Direct
RSS’s route allocation method is based on time-and-motion analyses for each residential, commercial,
and industrial route. For each route, RSS requires its drivers to record start and stop times and various
activity times for a sample of actual routes performed during the year.
For the residential sector, RSS measures the number of drive-bys, per hour, on routes with West County
customers (e.g., for calendar year 2014, 98.16 drive-bys per hour).10 RSS divides the total number of
County drive-bys over a given period by the number of drive-bys per hour to determine the total number
9 Note that the company incorrectly identified its use of other allocation methods on page 2 of 6 of the Application (e.g.,
accounts, direct) to allocate the County’s share of total costs. The company used the route allocation methodology to
allocate all of its costs other than franchise fees. We do not think that this alternative allocation methodology had a
negative impact on unincorporated West Contra Costa County.
10 In 2011, residential drive-bys, per hour, were 99.81. In 2006, residential drive-bys, per hour, were 82.14.
Ms. Deidra Dingman, Conservation Programs Manager Page 10
October 28, 2015
of hours over that period spent on West County customers. RSS divides the number of hours spent on
West County customers by the total number of hours spent on all of its customers to determine the
percentage of total residential costs associated with West County operations (for 2014, 17.22 percent).
RSS performs a similar analysis for the commercial sector, but instead of drive bys per hour, RSS uses
lifts per hour. For the industrial sector, RSS uses the total number of hours spent on drop box activities. In
2014, the West County’s allocation for the commercial sector was 6.47 percent of total RSS business and
the industrial sector was 4.22 percent of total RSS business.
In Table 11, we compare County route allocation percentages in 2014, with those from 2011 and 2006. As
shown, for the residential sector the allocation has remained relatively similar over time. However, for the
commercial and industrial sectors, the route allocation percentages have declined over time, suggesting that
RSS has become more efficient at serving the West County commercial and industrial sectors, relative to
how RSS serves its overall commercial and industrial business. For the industrial sector, some of this shift is
caused by RSS obtaining more non-unincorporated County business that happens to be farther away from,
and requires longer travel distances, to the disposal facility.
Table 11
Richmond Sanitary Service
County Route Allocation Percentages
(Calendar Years 2006, 2011, 2014)
Sector
County 2006
Route
Allocation (%)
County 2011
Route
Allocation (%)
County 2014
Route
Allocation (%)
Residential (refuse)11 17.6% 17.5% 17.2%
Commercial 8.3% 7.2% 6.5%
Industrial 8.8% 6.3% 4.2%
Total 14.5% 14.2% 13.7%
RSS maintains operating costs by sector. For 2011, RSS’s operating costs for each sector were as
follows:
Residential – 70.67% (2011 - 69%, 2006 - 66%)
Commercial – 14.71% (2011 - 14%, 2006 - 15%)
Industrial – 14.62% (2011 - 17.03%, 2006 - 19.88%).
To calculate the County’s share of total RSS costs (for 2014, 13.74 percent), RSS multiplied the operating
cost percentages above by the County’s route allocations in Table 11 for each sector, and summed the
three results as follows:
Residential – 70.67% x 17.22% = 12.17%
Commercial – 14.71% x 6.47% = 0.95%
Industrial – 14.62% x 4.22% = 0.62%
Total = 13.74 percent.
For 2014, RSS allocated 13.74 percent of consolidated RSS costs to unincorporated West County (for
those cost categories requiring the route allocation method).
11 Does not include curbside recycling or organics.
Ms. Deidra Dingman, Conservation Programs Manager Page 11
October 28, 2015
The route allocation method is acceptable to use to allocate RSS costs to West County areas. This
method is consistent with waste management industry practice. The pooled costs that RSS allocates to
each jurisdiction, using the route allocation method, also generally do not vary between jurisdictions.
RSS has several transactions with related parties. These transactions required careful scrutiny and are
identified in Table 12.
Table 12
Richmond Sanitary Service
Related Party Transactions
(Calendar Year 2014)
Cost Related Party
Trucks, equipment, and facilities Bay Leasing Company
Certain general and administrative costs Republic Services Inc.
3. Review of RSS Revenues, Costs, and Profits
This section describes our review of each revenue, cost, and profit category. We identify adjustments to
the Application. We express adjustments based on their impact to RSS’s revenue requirement. The
revenue requirement is equal to the sum of the following:
Total allowable costs
Allowable operating profits
Total pass through costs.
RSS’s requested County revenue requirement, as submitted in the Application, is $4,115,819. This figure
is shown on line 32 of the Application in Attachment A.
We summarize the impact of our review findings in Exhibit B-1. We show findings as adjustments to the 2016
revenue requirement. Adjustments reduce the RSS 2016 revenue requirements by $192,540.
i. Revenues
Residential Revenues
RSS projected no change in residential revenues between 2015 and 2016. RSS indicated in its
Application that residential accounts grew a modest 0.88 percent in 2015. RSS expects residential
accounts to remain at 2015 levels in 2016. Residential revenues have been relatively stable dating back
to 2008.
Due to the limited changes in the housing market in the area and the uncertain overall economic climate,
we do not project much growth in the residential sector near term. We accepted RSS’s revenue projection
for 2016.
Net Impact:
[No change to the revenue requirement]
Commercial and Light Industrial Revenues
RSS projected no change in commercial and light industrial revenues between 2015 and 2016.
Commercial and light industrial revenues dipped in 2012 and 2013, but in general have been relatively
stable since 2008.
Ms. Deidra Dingman, Conservation Programs Manager Page 12
October 28, 2015
Similar to the residential sector, due to the current uncertain overall economic climate, we do not project
growth in the commercial and industrial sectors near term. We accepted RSS’s commercial and light
industry revenues projection for 2016.
Net Impact:
[No change to the revenue requirement]
ii. Costs
Direct Labor
RSS projected labor costs to increase 5.0 percent for both 2015 and 2016. We reviewed labor
agreements between RSS and the Teamsters Local 315 (drivers). The projected 5.0 percent increase in
labor costs for 2016 is consistent with required combined changes in wages, health and welfare, and
pension costs specifi ed in RSS labor agreements. However, for 2015, the union agreement Local 315
had the following projected increases:
Drivers wages, +2.8 percent
Health and welfare benefits, +2.8 percent
Pension contribution, +0.8 percent
The combined 5.0 percent change projected by direct labor (wages and benefits) for 2015 is
approximately 2.2 percent above that called for by the union agreement. We recommend the County
allow a 2.8 percent increase for 2015.
We validated that RSS’s large projected 2015 increase in labor costs associated with shifting from bi-
weekly to weekly recycling and greenwaste service, estimated at 16 percent was supported by the actual
costs incurred to date. Further, that these costs are credited within the credit for enhanced services
negotiated as part of the post-collection agreement (discussed on page 14 of this report).
Net Impact:
[Decrease in revenue requirement of $26,265]
Corporate and Local General and Administrative Costs
The Manual (page 1-14) specifies a cap on corporate and local general and administrative costs equal to 12.2
percent of the total revenue requirement. However, at the time the Manual was written, the model included
post collection (or IRRF) costs in the revenue requirement. If we include estimated post collection costs in the
adjusted revenue requirement, corporate and local general and administrative costs are 11.7 and 12.1 percent
of the revenue requirement for 2015 and 2016 respectively, and within the cap guideline.
Net Impact:
[No change to the revenue requirement]
Trucking and Equipment (Allowable)
In this category, we reviewed RSS’s recent monthly fuel purchases. We show average 2014 and year-to-date
2015 diesel fuel prices paid by RSS, in Table 13. These prices compare with wholesale diesel prices paid by
other local area refuse collection companies, during the same 2014 and 2015 timeframes. We accepted
RSS’s fuel projection for 2016.
Net Impact:
[No change to the revenue requirement]
Ms. Deidra Dingman, Conservation Programs Manager Page 13
October 28, 2015
Table 13
Richmond Sanitary Service
Diesel Fuel Price per Gallon
(2014 and 2015)
Month Price per Gallon
Average 2014 $3.22
Average January through Sept. 2015 $2.44
Depreciation and Other Operating Costs
We made no change to this cost category.
Net Impact:
[No change to the revenue requirement]
Services Provided to County
RSS included the following costs in this category:
County can service (12, 35-gallon cans)
County fire station green waste bin service
County maintenance truck disposal (direct haul to Golden Bear Transfer Station).
We estimated Services Provided to County costs of $27,067, based on the recent two-year average of these
costs. We projected Services Provided to County costs of $27,067 for 2016, a decrease of $2,887 from the
RSS projected amount ($29,954).
[Decrease in 2016 revenue requirement of $2,887]
Trucking and Equipment (Pass Through)
We obtained and reviewed leases charged by Bay Leasing Company to RSS for trucks and containers. Lease
rates vary depending on the truck/equipment purchase price, financing rate, and age. We examined Bay
Leasing truck and equipment purchase prices. We found truck and equipment purchase prices consistent with
purchases of other similar waste management companies.12
Since the last base year review, the company has shifted the leased portion of its trucking and equipment
costs to a pass-through expense. We agree with this pass-through treatment of this related-party transaction
as it removes the uncertainty whether there is profit paid to both the RSS collection and Bay Leasing
businesses. We reviewed the lease transactions for both truck and carts/containers and determined they were
reasonable.
An important consideration, related to equipment rental costs for the RSS operation, is that there are very few
new planned truck and equipment purchases planned for this base year. Consequently there is not a
significant increase expected in this cost category.
Net Impact:
[No change to the revenue requirement]
12 Comparable lease rates are difficult to find in the waste management industry as most service providers either purchase trucks or lease
them from a related party.
Ms. Deidra Dingman, Conservation Programs Manager Page 14
October 28, 2015
Franchise Fees
The County franchise agreement with RSS specifies that the County can establish an amount equal to “a
percentage of its [RSS’s] gross annual revenues generated from the performance of such waste
collection services under this Agreement,” with the “percentage, time, and frequency of payment to be
established by the County.”
A summary of franchise fee payments made by RSS to the County is provided in Table 14. Amounts included
in RSS’s Application, RSS detailed records, and in County records are very similar and the differences are
considered immaterial and likely due to accounting versus payment timing differences.
Based on the other adjustments noted in this section, we decreased franchise fees by $2,438. The
franchise fee is calculated as seven (7) percent of the revenue requirement. With decreases in the
revenue requirement noted above, the franchise fee also decreases.
Net Impact:
[Decrease in 2016 revenue requirement of $2,438]
Table 14
Richmond Sanitary Service
Comparison of Franchise Fees
(Calendar Years 2013, 2014 and 2015)
Calendar Year Application RSS Detailed Monthly
Payment Records County Reports
2013 $179,991 $179,991 $185,98713
2014 $266,54414 $272,565 $272,565
2015 (Jan to July) N/A $162,838 $162,838
Rate Stabilization Fund
In the application, RSS included an amount of $157,711 to contribute to the County’s rate stabilization
fund (line 25 of the Application). At the direction of the County, we have removed this $157,711
contribution as the County in order to mitigate the impact of the 2016 rate change.
Net Impact:
[Decrease in 2016 revenue requirement of $157,711]
iii. Profits
With the adjustments identified in this section, total allowable costs for the projection year 2016 are
$2,882,891. The Manual (Item E.3 page 1-16) specifies that should the operating ratio for the base year fall
between 88 percent and 92 percent, rates would remain unchanged in the base year.
13 The $5,996 difference between the County and RSS information represents an amount recorded by the County which was paid
for by the County’s efficiency surplus funding. This difference occurred for the month of November 2013 when the County had
recently increased its franchise fee from 5% to 7% of gross revenues.
14 The $6,021 difference between the RSS Application and other sources represents an amount recorded by the County which was
paid for by the County’s efficiency surplus funding. This difference occurred for the month of December 2013 when the County had
recently increased its franchise fee from 5% to 7% of gross revenues.
Ms. Deidra Dingman, Conservation Programs Manager Page 15
October 28, 2015
Table 15 shows the operating ratio calculation for 2016. Without any changes to rates, the company would
receive an operating ratio of 92.3 percent. In accordance with the Manual, because this operating ratio falls
outside the 88 to 92 percent range, rates are reset for a 90 percent operating ratio.15
The operating ratio calculation is as follows:
Operating Ratio (OR) =
Total Allowable Costs
Total Allowable Costs + Allowable Operating Profit
The OR calculation is shown in Table 16, following Table 15. We calcul ate allowable profit of $320,321,
at the allowable 90 percent operating ratio. This allowable profit represents a reduction of $3,239 from the
$323,560 in profit requested in the Application for 2016.
Net Impact:
[Decrease in 2016 revenue requirement of $3,239]
Table 15
Richmond Sanitary Service
Calculation of Actual Operating Ratio
(Projection Year 2016)
Description Amount
Total Revenues (line 21) $ 3,704,305
Plus Credit for Enhanced Services (Line 12)16 295,598
Less Total Allowable Costs (line 7) (2,882,891)
Less Franchise Fees (line 23) (285,669)
Less Pass-Through Costs (592,109)
Equals Profits (with adjustments and no rebasing) $ 239,234
Operating Ratio (with adjustments and no rebasing) $2,882,891 / ($2,882,891 +
$239,234) = 92.34%
Table 16
Allowable Profit Calculation
(Projection Year 2016)
Description Amount
(Total Allowable Costs / Operating Ratio)
– Total Allowable Costs
= Allowable Operating Profit
($2,882,891/90 percent) - $2,882,891
= $320,321
15 Source: Rate Setting Manual, page I-14.
16 Based on terms specified in Exhibit F of the Second Amendment to the County/RSS Franchise.
Ms. Deidra Dingman, Conservation Programs Manager Page 16
October 28, 2015
4. Components of Residential Rates
There are a number of cost components which are included in residential rates. Using the 35-gallon residential
cart rate as an example, the pie chart in Figure 1, on the following page, shows the major components of the
projected 2016 rates, and the relative costs of each component. Line item references are made to the
Application. Cost categories are described below:
Direct Labor Costs includes compensation of the waste removal staff, including regular time,
overtime, payroll taxes, and associated benefits. This category corresponds to Direct Labor (Line
1) of the Application.
Post Collection Costs include all charges for the disposal of solid waste at a landfill or transfer
station and processing of recyclables. Although post collection costs are not included in the
Application, we include them in this single can rate analysis.
General and Administrative Costs and Svc to County include such costs as accounting, corporate
overhead/management fees, insurance, legal services, office supplies, postage, telephone, and
utilities. These costs include Corporate and Local General and Administrative Costs (Line 2), and
Services Provided to County (Line 4).
Trucking and Equipment Costs includes leases of trucks and equipment, fuel and oil expense,
licenses, parts, tires, and associated repair and maintenance expenses. These costs are
identified as Trucking and Equipment with Profit (Line 5), Depreciation and Other Operating Costs
(Line 3), and Trucking and Equipment Pass Through (Line 9) of the Application.
Profit is any revenue which exceeds expenses (total allowable costs plus total pass-through
costs). The operating ratio method is used to determine allowable profit, as discussed in the profit
analysis section of this report. Profit is shown in Line 7 of the Application. Profit does not include
that portion of profit included in the post collection costs.
The County’s Franchise Fee is currently seven (7) percent of total residential/ curbside recycling,
commercial, and light industrial revenues. Franchise fees are shown in Line 23 of the Application.
Figure 1
Components of Rate
(Projection Year 2016)
Direct Labor
35%
Trucking and
Equipment Costs
16%
General and
Administrative
Costs and Svc to
County
13%
Post Collection
Costs
25%
Profit
6%
County Franchise
Fees
5%
Ms. Deidra Dingman, Conservation Programs Manager Page 17
October 28, 2015
H. Comparison of Rates and Services to Other Neighboring Jurisdictions
Current 2015 unincorporated County rates were compared with survey data from ten (10) other
jurisdictions. Results of the survey are summarized in Attachment C. Tables C-1 through C-3 show how
current 2015 West County residential rates compare to the average of the ten areas surveyed. For
reference, rate comparisons for commercial and industrial sectors also are shown.
In Table C-1, we compare Unincorporated West County residential rates with averages of ten other
comparable neighboring jurisdictions. For the ten jurisdiction comparison, West County residential rates
compared favorably for 20-gallon and 32-gallon services at 8.74 and 11.93 percent below average. West
County residential rates for 65 gallon service approximated the average, while rates for the 96-gallon
service were 9.9 percent above the average.
For information purposes only, for the commercial (bin) sector, as shown in Table C-2, West County rates
were generally relatively close to the average of the ten jurisdictions. Rates ranged from 6.01 percent below
average to 3.67 percent above average. Rates for four of the six categories surveyed fell below average.
For information purposes only, for the industrial (debris box) sector, as shown in Table C-3 on the following
page, West County rates were between 6.4 and 18.1 percent below the ten jurisdiction average. This
comparison is based on a representative two (2) ton load. Note that most of the comparable jurisdictions in
the West Contra Costa County area, which are also served by Republic Services, are offered the same
price for debris box services as unincorporated West Contra Costa County customers.
Ms. Deidra Dingman, Conservation Programs Manager Page 18
October 28, 2015
Attachment A: Rate Application and Audited Financial Statements
Ms. Deidra Dingman, Conservation Programs Manager Page 19
October 28, 2015
Attachment A includes the 2016 Base Year Rate Change Application (Application) submitted by RSS to
the County July 2, 2015. In the Application, RSS proposed to increase the service portion of West
unincorporated County collection rates by 7.39 percent on January 1, 2016. The Application included the
following forms:
Financial information
Cost summary for year 2014
Revenue summary
Single family residential revenues summary (including current rates and accounts)
Operating information
Rate change requested (including current and proposed rates).
Information provided in the Application was for the following five (5) years:
Actual prior years, 2012 to 2014 (including audited 2014 results)
Current year estimated, 2015
Base year projected, 2016.
Attachment A also includes the 2016 audited financial statements submitted by RSS with its Application
to the County. Armanino LLP, a certified public accountant, prepared the audited financial statements.
The audit opinion is unqualified. In Table A-1, below, we reconcile the difference in total RSS costs in the
2014 audit, with total RSS costs shown on page 2 of 6 of the Application.
Table A-1
Richmond Sanitary Service
Calculation of Actual Operating Ratio
(Projection Year 2016)
Description Amount
Audited financial statement $38,755,824
Less landfill disposal costs (15,312,862)
Less contributions (92,574)
Less bad debt (83,464)
Less other income (37)
Equals total RSS costs in Application (row 42, page 2 of 6) $23,266,687
Ms. Deidra Dingman, Conservation Programs Manager Page 20
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 21
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 22
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 23
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 24
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 25
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 26
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 27
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 28
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 29
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 30
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 31
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 32
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 33
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 34
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 35
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 36
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 37
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 38
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 39
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 40
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 41
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 42
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 43
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 44
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 45
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 46
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 47
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 48
October 28, 2015
Ms. Deidra Dingman, Conservation Programs Manager Page 49
October 28, 2015
Attachment B: Adjusted Rate Model
Ms. Deidra Dingman, Conservation Programs Manager Page 50
October 28, 2015
Exhibit B-1, on the next page, of this appendix provides the adjusted base year rate model based on
Crowe adjustments. The model reflects the following general adjustments:
Revenues
No adjustment to revenues
Allowable Costs/Profits
Minor adjustment to direct labor
No adjustment to general and administrative costs
No adjustment to trucking and equipment costs (w/profit)
No adjustment to depreciation and other operating costs
Minor decrease to services provided to the County
Minor reduction to operating profit
Pass Through Costs
No adjustment to trucking and equipment costs (pass through)
Elimination of contribution to rate stabilization fund
Minor reduction in franchise fees.
Ms. Deidra Dingman, Conservation Programs Manager Page 51
October 28, 2015
Exhibit B-1
Schedule of Rate Review Findings
(Projection Year 2016)
Line in
Application Category Revenue or
Cost Profit Total
Revenues
14 Residential Revenues $0 $0 $0
17 Commercial Revenues 0 0 0
Subtotal $0 $0 $0
Allowable Costs
1 Direct Labor ($26,265) ($2,918) ($29,183)
2 Tipping Fees (Profit Allowed) 0 0 0
3 Corporate and Local General
and Administrative
0 0 0
4 Trucking and Equipment 0 0 0
5 Depreciation and Other
Operating
0 0 0
6 Services Provided to County (2,887) (321) (3,208)
Subtotal ($29,152) ($3,239) ($32,391)
Allowable Operating Profits
9 Allowable Profits $0 $0 $0
Subtotal $0 $0 $0
Pass Through Costs without Franchise Fees
10 Administrative Fees $0 $0 $0
11 Trucking and Equipment
(Pass Through)
0 0 0
Subtotal $0 $0 $0
Franchise Fees
23 Residential/Commercial/Light
Industrial Franchise Fees
($2,438) $0 ($2,438)
Contribution to Rate Stabilization Fund
Contribution to Rate Stabilization
Fund
($157,711) $0 ($157,711)
Subtotal ($157,711) $0 ($157,711)
Total Adjustments ($189,301) ($3,239) ($192,540)
Ms. Deidra Dingman, Conservation Programs Manager Page 52
October 28, 2015
Attachment C: Comparative Rate Survey
Ms. Deidra Dingman, Conservation Programs Manager Page 53
October 28, 2015
Tables C-1 through C-3 below include results of a survey of comparative residential, commercial, and
industrial rates. We provide comparisons between West County rates and the following ten (10)
neighboring jurisdictions:
Albany
Crockett
El Cerrito
Hercules
Kensington
Oakland
Pinole
Richmond
Rodeo
San Pablo.
Table C-1
Comparison of 2015 West Unincorporated Contra Costa County
Residential Rates with 10 Neighboring Jurisdictions (Per Customer, Per Month)
Residential Rates
Jurisdiction 20 Gallon 35 Gallon 65 Gallon 95 Gallon
1. Albany $36.72 $41.13 $71.08 $101.02
2. Crockett 22.44 26.61 46.66 56.69
3. El Cerrito 31.50 42.08 84.43 -
4. Hercules 28.67 33.61 59.25 85.64
5. Kensington 37.60 41.71 - -
6. Oakland 32.10 36.82 67.19 102.43
7. Pinole 27.17 32.12 57.14 82.91
8. Richmond 26.44 32.11 61.28 91.26
9. Rodeo 23.91 25.65 31.29 43.02
10. San Pablo 23.00 27.94 54.22 81.26
Average $28.96 $33.98 $59.17 $80.53
2015 West County rates $25.50 $31.01 $59.42 $88.50
Difference -11.93% -8.74% 0.42% 9.90%
Ms. Deidra Dingman, Conservation Programs Manager Page 54
October 28, 2015
Table C-2
Comparison of 2015 West Unincorporated Contra Costa County
Commercial Rates with 10 Neighboring Jurisdictions (Per Customer, Per Month)
Commercial Rates
1 pickup per week 2 pickups per week
Jurisdiction 1 cu. yd. 2 cu. yd. 3 cu. yd. 1 cu. yd. 2 cu. yd. 3 cu. yd.
1. Albany $163.87 $327.74 $491.61 $327.74 $655.48 $983.22
2. Crockett 121.15 162.74 - 193.30 245.88 -
3. El Cerrito 280.37 545.06 - 560.74 1,090.12 -
4. Hercules 242.45 401.44 550.71 424.68 733.77 1,024.25
5. Kensington 192.65 384.50 - 384.50 768.00 -
6. Oakland 194.10 322.37 462.27 388.20 644.74 924.54
7. Pinole 240.58 402.54 555.19 424.38 739.56 1,037.12
8. Richmond 214.35 354.12 485.99 378.14 649.89 906.93
9. Rodeo 107.60 166.30 224.99 215.19 332.58 449.96
10. San Pablo 213.32 255.38 489.18 375.31 651.67 912.19
Average $197.04 $332.22 $465.71 $367.22 $651.17 $891.17
2015 West County rates $204.28 $334.71 $457.34 $358.84 $612.02 $850.36
Difference 3.67% 0.75% -1.80% -2.28% -6.01% -4.58%
Table C-3
Comparison of 2015 West Unincorporated Contra Costa County
Industrial Rates with 10 Neighboring Jurisdictions (Per Pull, 2 Tons of Material)
Industrial Rates
Jurisdiction 20 yard 30 yard 40 yard
1. Albany $689.40 $1,034.10 $1,378.80
2. Crockett 641.08 675.08 806.08
3. El Cerrito 685.50 785.50
4. Hercules 641.08 675.08 806.08
5. Kensington 610.00 - -
6. Oakland 1,019.75 1,345.16 1,658.94
7. Pinole 641.08 675.08 806.08
8. Richmond 641.08 675.08 806.08
9. Rodeo 641.08 675.08 806.08
10. San Pablo 641.08 675.08 806.08
Average $685.11 $801.69 $984.28
2015 West County rates 641.08 675.08 806.08
Difference -6.43% -15.79% -18.10%
Memorandum
Date: October 28, 2015
To: Deidra Dingman,
Contra Costa County
Department of Conservation and Community Development
From: Erik Nylund,
Crowe Horwath LLP
Subject: 2016 Richmond Sanitary Services Base Year Rate Review -
Enhanced Services per Second Amendment to the
Franchise Agreement and Exhibit F
Background:
RSS’s Application included costs (primarily labor and additional vehicles and vehicle maintenance)
associated with providing the required new enhanced services in accordance with the Post-Collection
Agreement negotiated between RecycleMore and Republic Services in 2014. Enhanced services
included shifting from bi-weekly to weekly residential recycling and organics collection; providing
commercial organics collection, and providing commercial dry routing services.
RSS made an adjustment in its 2016 Application to reduce RSS’s total operating costs by $295,598
(shown on line 12 of the Application). This $295,598 reflects the actual cost of providing enhanced
services tied to the Post Collection Agreement with RecycleMore and Republic Services. The company
agreed that over the course of the County’s franchise term, the costs of providing these enhanced
services would be segregated. Costs that RSS incurs for providing these services as well as the revenue
derived from the Enhanced Services Rate Adjustment are not to be factored into rate setting.
Crowe Tests:
1) We verified that the $295,598 credit for the cost of enhanced services shown on Line 12 tied to
($1 difference due to rounding) the costs detailed in the WCC County column in the schedule on
page 2 of this memorandum.
2) We verified that RSS projected 2016 costs of providing enhanced collection services is consistent
with the 2015 costs ($295,598).
3) We verified that RSS did not include the portion of its residential revenues associated with
enhanced collection services within page 1 of the Application (i.e., line 16). This enhanced
services revenue amount equaled $200,079.60 for the residential sector (see attached schedule
on the page 3 of this memorandum).
Conclusion
Net Impact:
[No change to the 2016 revenue requirement]
Page 1
Ms. Deidra Dingman Page 2
October 28, 2015
Ms. Deidra Dingman Page 3
October 28, 2015