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Home My WebLink AboutMINUTES - 12172002 - SD.10 Contra TO: BOARD OF SUPERVISORS ; ` - Costa FROM: DENNIS M. BARRY, AICP County COMMUNITY DEVELOPMENT DIRECTOR, DATE: December 17, 2002 SUBJECT: CHANGES IN SOLID WASTE RATES FOR THE UNINCORPORATED AREA OF CONTRA COSTA UNDER THE COUNTY'S SOLID WASTE COLLECTION FRANCHISE WITH GARAVENTA ENTERPRISES SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS 1) ADOPT an overall rate increase of 7.66% for solid waste collection rates in the County franchise area served by Garaventa Enterprises. 2) ADOPT standardized rates for Bay Point, Discovery Bay and Brentwood unincorporated areas (including Kinghtsen and other far east county) to become effective as of February 1, 2003. FISCAL IMPACT No Impact to the County General Fund. BACKGROUND/REASONS FOR RECOMMENDATIONS The County has a solid waste collection franchise agreement with Garaventa Enterprises for service to the following communities: part of Bay Point; Discovery Bay; and the Brentwood unincorporated area. These communities are in Supervisorial Districts III and V. In June of 2002, the Board of Supervisors approved a contract with NewPoint Group, Inc. for a rate review of the unincorporated Contra Costa areas served by Garaventa t CONTINUED ON ATTACHMENT. YES SIGNATURE f RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMI EE APPROVE OTHER SIGNATURE (S): ACTION OF BOARD ON MMM 12, APPROVED AS RECOMMENDED y_ OTHER x SIM AMME ATIA=. VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE x UNANIMOUS {ABSENT Nm AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE ABSENT: ABSTAIN: BOARD OF SUPERVISORS ON THE DATE, SHOWN. Contact: Linda Moulton (925) 335-1238 ATTESTED MEMM 1.7,,_,2M2 cc: Garaventa Enterprises .JOHN SWEETEN, CLERK OF Ironhouse Sanitary District THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR C BY �`�. , DEPUTY Linda's Disk3:12J17i02.bo Changes in Solid Waste Rates December 17,2002 Page 2 Enterprises. NewPoint Group had previously compiled a rate setting manual and methodology specifically for rate reviews for Garaventa Enterprises. NewPoint Group's Report entitled "Review of Garaventa Enterprises Solid Rate Application For 2003" is Attachment 1. The County entered into the franchise with Garaventa Enterprises in May of 1995. During the last eight years, rates have increased twice. The first rate increase was in June 1998 when the County instituted the franchise fee of 5% and a charge for household hazardous waste services. The second increase was in July of 2000 when the County approved a rate increase for a new greenwaste collection program. There have been no CPI rate adjustments or other increases within this period. Exhibit 111-5 from the Report shows a comparison between the actual rate increases, which were County mandated, and the hypothetical rate which would have resulted if the rate had been CPI adjusted annually since 1995. This graph is also shown as Attachment 2. The average rate in the areas increased from $18.89 to $21.48. If CPI increases had been requested by the hauler, the rate could have risen to an average of$24.32 plus the County's increases totaling $2.59. The average rate could have been approximately$27.00 instead of the current average of $21.48. Ironhouse Sanitary District participated in and contributed to this joint rate review underthe terms of the County-Ironhouse MOU. Ironhouse Sanitary District's Board will approve the rate change for its own service area. Staff will work with Byron Sanitary District regarding solid waste services and rates in their area. PROPOSED RATE CHANCES The table below shows the current rates, the proposed rates, and the increase in rates for the various service areas: Service Area Current Proposed Increase j Rate Rate In Rate Bay Point art22.03 23.80 1.77 Brentwood Area 22.58 23.80 1.22 1 Discovery Bay 21.981 23.801 1.82 The rates are for a 32 g. can. Currently the rates for Bay Point, the Brentwood area and Discovery Bay range from $21.98 to $22.58. Staff is proposing that these rates be standardized at $23.80. This would mean an increase of$1.22 for the Brentwood area, $1.77 for Bay Point, and $1.82 for Discovery Bay. Staff feels this is an ideal opportunity to establish more equitable rates forthe Garaventa franchise area and therefore recommends approving the rate structure shown above. A 20 g. can rate will be introduced in the Brentwood service area. Customers in the other service areas are already offered this service. A small portion of the rate increase is a result of increased household hazardous waste service costs. TIMING OF RATE CHANGE The new rates will start as of February 1, 2003 which will give Garaventa Enterprises time to give customers 30 days notice of change in rates. FUTURE RATE CHANCES The County's Rate Setting Methodology calls for a rate review every four years with rate increases allowed for interim years. Such rate increase cannot exceed the increases in the CPI for all Urban Consumers for the San Francisco Bay Area as described in the Rate Setting Methodology. ADDENDUM SD.10 DECEMBER. 17, 2002 On this day the Board CONSIDERED adopting an overall rate increase of 7.66% for solid waste collection rates in the County franchise area served by Garaventa Enterprises, presented by Linda Moulton, Community Development Department. After further discussions, the Board took the following action: ADOPTED an overall rate increase of 7.66% for solid waste collection rates in the County franchise area served by Garaventa Enterprises; and adopted standardized rates for Bay Point, Discovery Bay and Brentwood unincorporated areas (including Knightsen and other far east county communities) to become effective February 1, 2003, as recommended by the Community Development Director; and REQUESTED notice to be sent to appropriate Municipal Advisory Councils. ATTACHMENT I of » 77 i C'S t ,�r�e 4 Costa y F Ol0 araventa Enterprises VMS=s 0 �� A4 Review Solid Waste Rate Application For 200 Prepared for: Dr. Linda Moulton Community Development Department - Contra Costa County 651 Pine Street Administration Building 4`'Floor, NorthVding Martinez, California 94553 Prepared by: NewPoint Group, Inc. 2555 3Ta Street, Suite 215 Sacramento, California 95818 (916) 442-0508 www.newpointgroup.com Table of Contents Table of Contents ExecutiveSummary.............................................................................................. BS-1. 1. Introduction and Background A. Background of Review.........................................................................................I-1 B. Goals and Objectives of Review..........................................................................I-4 C. Scope of Review...................................................................................................I-4 If. Rahe Setting Process A. Base Year Process............................................................................................... II-1 B. 2003 Base Year Rate Application....................................................................... II-2 C. Interim Year Process.......................................................................................... II-2 111. Review of Rate Change. Application for 2003 A. Review of Revenues, Costs, and Profits ...........................................................III-i B. Components of Single Can Rate....................................................................III-12 IV. Recommended Rate Change A. Recommended Rate Change ............................................................................. IV 1 B. Why Rates are Increasing?................................................................................ IV-1 C. Implementation of Rate Change...................................................................... IV-3 D. Comparison of Rates and Services to Other Jurisdictions .............................. IV-5 Appendix A- 2003 Gaeraventa Enterprises Rate Application..................................A-1 Appendix B - 2001 Audited Financial Statements..................................................B-1 Appendix C -- Reconciliation of 2001 Audit to Rate Application............................C-T Appendix.D -Adjusted Base.Year Rate Model........................................................Y3-1 Appendix B - Survey of Other Jurisdictions .......................................................... B-1 Review of Solid Waste Rate Application TOC-2 ......................................... Executivre Summary k Executive Summary Executive Summary In its 2003 Base Year Rate Change Garaventa provides service to the Application (Application), Garaventa following six(G) geographic areas located Enterprises (Garaventa) requested an within East County: increase in solid waste collection rates of 11.65 percent. Garaventa submitted this I. Bal-Point Application in 2002, for rates to go into 2. Brentwood effect in the rate dear 2003, 3. Byron Sanitary District areas Contra Costa County (County) engaged 4. Discovery Bay NewPoint Group, Inc. (Consultant) to review 5. Ironhouse Sanitaajr District areas the Application. This report presents results C. North Concord - unicorporated areas. of the review. The review was performed consistent with the Counter's 11098 dare Each of these areas currently has different Setting Process and.Metlxvdolok� Manual for rate structures and rates. 'The small number Residentr`ral Solid lV aste Changes as Applied to of ,ortla Concord customers'rates are set Garaventa Enterprises (Manual). equal to rates for the City of Concord- Thos the costs and rEvenues for this area are not The review focused on calendar year 2001 included in the rate review. actual information, 20032 estimated information (based on 5 months of actual Based on adjustments made to the data), and 2003 projected information. The Application, NewPoint Group recommends a review also relied on audited financial 7.66 percent rate increase, This rate statements provided by Garaventa for calendar increase reflects NewPoint Group reductions to year 2001. the aanount of revenue required to cover allowable costs, allowable profit levels, and pass The request for an 11.65 percent rate through costs (called the revenue requirement) increase was larger,,driven by the lack of totaling$211,385. Prinmary categories adjusted prior adjustments to Garaventa rates to included: direct labor, tapping fees, trucldng account for inflationary increases in costs, and equipment., services provided to the Since 11�J5, the only changes to Garaventa County, and time allowable profit level, rates have been for new programs and services, including: Two options for applying the 7.66 percent is Counter franchise fees rate increase are presented below, Option A is the rate increase applied to a new • Greenwaste program regionalized residential rate stn icture and the • Household hazardous waste program existing commercial rate structure. Option B • Mixed paper recycling program, is the rate increase applied to the existing residential and cotmmnmercial rate structures. Review of Solid Waste Rate Application Option A -- Rate Increase The 7.66 percent rate increase applied to the Applied to Regionalized Residential regionalized residential rate structure for the Rate Structure and Commercial five unincorporated County areas (without Rate Structure North Concord) is shown in Table ES-1, on The County expressed an interest in the following page. Overall, the 32-gallon regionalizing the residential rate structure for rates for the four areas other than Byron all County areas served by Garaventa other Sanitary District(which does not have curbside than Ironhouse Sanitary District and Byron recycling service) would vary by only$0.20 per Sanitary District areas. In other words, the customer, per.month. County may like for each area to have the Residential rates have changed since the same rate for each service type (e.g., a 32- franchise agreement was signed in 1995. At gallon rate in Bay Point would equal a 32- that time, maximum residential rates were gallon rate in Discovery Bay). In this option, identified in the franchise agreement in we provide the County with a regionalized Exhibit B. Rates shown in Table ES-1 residential rate structure option. represent maximum residential rates at the Existing residential rate structures for time of this rate review and should replace each of the three unincorporated County the maxin-ium rates presented in .Exhibit B of areas are not significantly different. To the franchise agreement. regionalize a residential rate structure The 7.66 percent rate increase applied to therefore would require only minor the commercial rate structure is shown in adjustments in addition to the proposed 'fable ES-2, following Table ES-1. This rates, with the 7.66 percent increase. commercial rate structure includes From a rate-making perspective there are commercial can, toter, and bin service rates. several compelling reasons to regionalize Commercial rates have changed since the residential rates, including: franchise agreement was signed in 1995. At that time, maximum commercial rates were • Garaventa allocates costs to each service identified in the franchise agreement in area from one total pool of costs Exhibit B. Rates shown in Table ES-2 • Services do not vary significantly represent maximum commercial rates at the between geographic areas time of this rate review and should replace • Unit costs do not vary significantlythe maximum rates presented in Exhibit B of between geographic areas (i.e., similar the franchise agreement. methods and equipment types are used) e Rates evolved from historical precedence and not necessarily from a nexus between services and cost. ES-2 Executive Summary Table ES-1 Unincorporated County Option A- Proposed Regionalized Residential Rate Structure (with 7.66 Percent Rate Increase) Y 1. Bay Point $17.88 $19.25 $1.37 2. Brentwood N/A $19.25 New Service 3, Byron Sanitary District N/A N/A N/A 4. Discovery flay $17.83 $19.25 $1.42 5. Ironh.ouse Sanitary District N/A N/A N.,/A $I7 SG $391 X411 �, ..+..o-.. ,,,,,u" � i. 1. Ray Point $22.43 $23.80 $3.77 2. Brentwoodc $22.58 $23.80 $1.22 3. Byron Sanitary District $18.30 $19.70 $1.40 4. Discovery Bald $21.98 $23.80 $1.82 5. Ironhouse Sanitary District $22.51 $23.60 $?•0>1' t'�verage $21 48 $22 94 $146- **yy'' t 7�♦c qy J a ' 7 � Y� w S X l� � �y 1. Ray Point $25.03 $26.80 $1.77 2. Brentwood $25.58 $26.80 $1.22 3. Byron Sanitary District $21.30 $22.70 $1'40 4. Discovery Bay $24.98 $26.80 $1.82 5. Ironhouse Sanitary District $25.51 $26.60 $1.09 $.yALLLLL a Rounded to dearest$0.05 increine�t. b Reduced by W.65;ler customer,per month,to reflect August,2002 rate'Increase for 1 swaste Program. C Additional 32 gallon can rate is$5.30 per can,per month,an increase or so,io per ca {ler.month from the existingrate of$7,7t1 , leer can,per fnonth. 0niy four customers currently have an extra can. d Additional 32-gallon can rate is$5.90 per can,Per month,an increase of$0,40 per can,per month,frim:the existing rate etf$5.50 per can,Per month. Only four customers currently have an extra can. US-.3 Review, of Solid Waste Rate Application Table ES-2 Unincorporated County Option.A/B Proposed Commercial Rate Structure (with 7.66 Percent Irate Increase) } f "kt44 ✓ s�y�,�," $ w v`pyS X`'"' ! w ' Rk �' �.r r,tAa. r4=a",r 'ka stotx lYbsfia^,w' I 3 �rzr'x,.e sx"i , htrSiuc c`r `5. 4tti.r°r 4'+sS ?rc x' , ' r x � s 1 xwk $166.10. $169.00 $169.00 $169.60 $169.00 $168.54 2 x wk 279.35 305.00 305A0 285.35 305.00 295.94 3 x wk 392.70 442.00 442.00 401.00 442.00 423.94 4xwk 505.95 578.00 578.00 516.70 578.00 551.33 1 xwk $219.45 N/A N/A` N/A N/A $219.45 2 x wk 389,10 N/A N/A N/A N/A 389.10 3 xwk 558.70 N/A N/A N/A N/A 558.70 4 xwk 728.40 N/A N/A N/A N/A 728A0 i ctzcsee $ $20 2a0 to 24,50', $231 W�rt�� 4 �F"Y�+" ,+�1c �q, 2 yard din 1 xwk $178.82 $181.95 $1.81.95 $1.82.59 $181.95 $181.45 2 x wk 300.75 328.36 328.36 307,21 328.36 318.61 3 x wk 422.78 475.86 475.86 431.72 475.86 456.41 4 x wk 544.71 622.27 622.27 556 28 622.27 593.56 1 x w1: $236,26 _ N1 N/A" N/A N/A $236.26 2 x wk 418.91 N/A N/A N/A NIA 418.91 3 x wk 601.50 N/A N/A N/A N/A 601.50 4 x wk 784.20 N/A N/A N/A N/A 784.20 1#er can`a,W, $24,, $26 B t $2 3 $ 4.a 6 26 381 $2.5.63 1'�r,tt�rrrzr $ 544-14, $44 14 $37 $44 34 $4 D ra S.Cn k a�✓ # '4 n �1 a�� ror 4'� '4z 4 , a >?ppy,t ." } rt 'ak Y�: p , '' t : I xwk $178.80 $181.95 $1.81.95 $182.60 $181.95 $181.45 2 x wk 300.75 328.35 328.35 307.20 328.35 318.60 3 x wk 422.80 475.85 475.85 431.70 475.85 456.41 4 x wk 544.70 622.25 622.25 556.30 622.25 593.55 3}7ctrti Tait NS $236.25 A N i 1 x wk A /A N.y jA N/A $236.25 2 x wk 418.90 N/A N/A N/A N/A 418.90 3 x wk 601.50 N/A N/A N/A N/A 601.50 4 x wk 784.20 N/A N/A N/A N/A 784,20, 4,1V A .f 44 P4 ' ES-4 Executive Summary Option B-- Rate Increase Applied A.comparison of the 32-gallon residential to Existing Residential and rates for each of the two options is provided in Commercial Rate Structure 'Fable ES-4, on the following page. As shown, Option B is a 7.66 percent rate increase the difference between the two 32-gallon rate applied to the existing rate structure. The 7.66 options does not vary by more than 2.1 percent rate increase applied to residential percent. Based on this limited impact to rates for the five unincorporated County areas ratepayers, the evidence for regionalizing Bay is shown in Table ES-3, below. Point, Brentwood, and Discovery Bay area residential rates is compelling. The County did not intend to regionalize commercial rates. As a result, the commercial rate structure in Table ES-2 is applicable for either Option A or Option B. Table ES-3 Unincorporated County Option B -- Proposed Existing Residential Rate Structure (witli 7.66 Percent Rate increase) .. `. 1. Bay Point $17.88 $19.25 $1.37 2. Brentwood N/A $19.25 New Service 3. Byron Sanitary District N/A N/A N/A 4. Discovery Bay $17.83 $19.20 $1.37 5. Ironhouse Sanitary District N/A N/A N/ Avera i $a 1 �k 33 01 4 ,. Bay Point $22.03 $23,70 $1.67 6. Brentwood` $22.58 $24.30 1.72 7. Byron Sanitary District $18.30 $19.70 1.40 S. Discovery Bayd $21.98 $23.65 1.67 2. tronhouse Sanitary District $22.51 $23.60 1.09 Average 12148 $22 99 P 4 1. Bay Point $25.03 $26.70 $1.67 2. Brentwood $25.58 $27.30 $1.72 3. Byron Sanitary District $21.30 $22.70 $1.40 4. Discovery Bay $24.98 $26.65 5. lronhouse Sanitary District $25.51 Al 0e a hounded to nearest$0.05 incren7ent. 17 Reduced b b0.65 per Customer,'per month,.to ref ect August,2002 rate increase for l:ousehold Itazardnuti waste pretLnnarr. y P c Additional 32-gallon ran rate is`F8.30 Per cnn,per month,an increase tic$ll.b0 ner can,per month,from the exr.stin rate of$ .70 per car.,per mvnli. +?n!y f;-)ur ctr5tamers currently have one can. d.Additional 32-gallon can rate is$i.9Q per car.,per month,an increase of 50.40 her can,per much, from the existing rate of$5.50 per can,per month. Only four customers rurrentiy have rine can. Review of Solid Waste Rate Application Table ES-4 Unincorporated County Comparison of 7.66 Percent Rate increase Applied to Regionalized 32-gallon Rate versus Existing 32-gallon Rate IM 1. Bay Point $23.80 $23.70 -0.4% 2. Brentwood $23.80 $24.30 2.1% Byron Sanitary District $19.70 $19.70 0.0%a 4. Discovery Bay $23.80 $.23.63 -0.6% 5. Ironhouse Sanitary District $23.60 $23.60 0.0%a a No differerce because these areas'rates were not regionalized. ES-ti t`,, t} -nd 1. Introduction and Background Introduction and Background Contra Costa County(County) contracted Garaventa provides service to the with NewPoint Group, Inc., to help conduct following six (G) geographic areas located this 2003 rate review of one of its municipal within unincorporated Contra Costa County: solid waste collection haulers, Garaventa Enterprises, Inc. (Garaventa). Garaventa is a 1. Bay Point.(part of Bay Point) privately-owned company located in Concord, 2. Brentwood California. This report represents results of the 3. Byron Sanitary District areas first base year rate review of Garaventa. 4. Discovery Bay 5. Ironhouse Sanitary District areas The review was perforined consistent with G. North Concord -unincorporated areas. guidelines provided in the County's 1998 Rate Garaventa Enterprises has four subsidiary Setting Process and Methodology Manual for companies that perforin the actual collection Residential Solid Waste Charges as Applied to activities for the first five service areas, noted Garaventa Enterprises (Manual). The Manual above. These companies are: principally establishes a process for submitting applications for rate changes and for reviewing n Pittsburg Disposal (Bay Point area) rate change applications. The remainder of this a Brentwood Disposal (Brent*raood, Byron, introductory section is organized as follows: Knightsen, other rural County areas) A. Background ofReview a Discovery Bay Disposal (Discovery Bay area) B. Goals and Objectives of Review IN Oakley.Disposal (Ironhouse Sanitary C. Scope of Review. District area). A. Background of Review Concord Disposal Service (CDS) perforins Garaventa has an exclusive franchise with the the refuse collection for the small North County to collect, and remove for disposal and Concord area. A total of approximately 30 recycling, all residential and commercial, and County customers are serviced by CDS in light industrial solid waste, including recyclable this area. CDS rates are subject to rate review materials. Garaventa has a twenty-year by the City-of Concord and, as a result,the franchise with the County, beginning with an revenues and costs for this small area have effective date of May 9, 1995, and ending May not been included in this County rate review. 8, 2015. The County has jurisdiction to North Concord area rates are set equal to regulate collection, removal, and disposal of all City of Concord rates. solid waste, and the recycling of all material. Exhibit I-1, on the following page, The County engaged NewPoint Group, provides a map of these six service areas. All Inc. (Consultant) in 2002, to conduct this rate review using the County's Manual. of these geographical areas currently have different rate structures and rates. t-� Review of Solid Waste Rate Application Exhibit 1-1 Garaventa Enterprises Unincorporated East Contra Costa County Refuse Collection Service!areas rN� I 4r c�<rsar. F 1 � } x' k r _.F ae � 1. Baty Paint 2. Brentwood 3. Byron Sanitary District ° 4. Discovery Say 3, lronhouse Sanitary District G. North Concord -2 I. Introduction and Background Tables I-1 and I-2 summarize the basic Table I-2 service rates for these geographic areas as of 2002 Unincorporated County 1998 and 2002, respectively. Table I-2 Basic 32-gallon Monthly Service Ratesa shows how rates have changed since the Garaventa Enterprises Manual was developed in 19980 Table I-1 1. Bay Point $22.03 $1.73 1998 Unincorporated County 2. Brentwood $22.55 $1.73 Basic 32-gallon Monthly Service Ratesa 3. Byron Sanitary $,18.30 $0 Garaventa Enterprises District 4. Discovery Bay $21.95 $1.73 5. Ironhouse $2.56 Sanitary District h $22.5.1 1. Bay Point $20.30 2. Brentwood $20.55 a Service for one container with up to 32-gallons of reiuie. For 3. Byron Sanitary District $15.30 an additional$3.00,the customer can rent a i w gallon toter. 4. Discovery Bay $20.25 h Includes a$0.65 per. customer,per month,increase in 5. Ironhouse Sanitary District $20.30 August,2002. a Service for one aOntair er with up to 32-gallons of refuse. Curbside recycling services are provided Foran additional$3.00,the customer can rent a rix' to all areas but the Byron Sanitary District gallon toter. area. Materials collected through the On July 18, 2000, the Board approved curbside program include: new greenwaste collection services for m Aluminum unincorporated County. At that time, rates as Glass were increased $1.73 per customer, per month, for all service areas. Customers a #1 and#2 Plastic place greenwaste at the curb in either plastic ar Cardboard bags (up to five) or in 32-gallon customer- a :"newspaper provided.containers (up to two). ar Tilt. In August 2002, the Ironhouse Sanitary District raised its rate by $0.65 per Customers place cardboard and customer, per month, to account for newspaper in one milk cart and all other increases in the Household Hazardous materials in a second milk cart. Milk carts Waste (HHW) operating costs. are provided by Garaventa. 1-.3 Review of Solidi Waste Rafe Application The County Environmental Health B. Goals and Objectives of Review Department,used to provide mobile Battery, The Rate Setting Manual specifies that the Oil, Paint, and Antifreeze (BOPA) and prima,goal of the rate setting process and Household Hazardous Waste (HI-fW) events a methodologyis to determine fair and couple of times per year to unincorporated equitable refuse collection charges which County. Then an interim permanent HHW provide a reasonable profit level to facility was developed. During 1999 and Garaventa. Fairness is demonstrated 2000, this facility provided BOLA services through a rigorous review of Garaventa's approximately once per weep and scheduled actual revenues and expenses. Rate charges HHW events. Because the interim permanent also must be justifiable and reasonnable. facility didn't have a permit, the HHW had to be taken offsite in-mediately. With a permit There is no contractual obligation by the obtained.in 2001, the HHW facility became a County to provide the hauler with a permanent facility with the full range of HHW constitutional fair return through this review accepted.. The current operator of the HHW process. Rather, the County reviews facility is Delta Diablo Sanitary District(Delta revenues, costs, and profits as a basis for Diablo, a public entity), recommended changes to refuse collection charges. Charges should be sufficient to All.refuse collected from unincorporated cover costs of operations and allow a County ureas is disposed of at the Pittsburgcover profit to the hauler.Transfer Station, a materials recovery facility (MRF) owned by Garaventa. The Pittsburg Transfer Station is a dirty MRF. Material is Scope of Review directly sorted on the tipping floor for The scope of work for this project is based materials that can be diverted. The residual on requirements of the rate setting process waste is then transferred. by Long-haul which is documented in the Rate Setting trailers approximately 2.5 miles to Potrero Manual. The base year process describes Hills Landfill in Solana County, owned by eleven (11) steps, seven (7) of which are the Republic Waste Services, Inc. responsibility of the County. Garaventa is responsible for the other four(4) steps, NewPoint Group, as the Consultant, assumed the role of the 'County' in the rate review process (with the exception of Step S which is conducting,the Public Hearing). 1-4 T. Introduction and Background We completed the following activities Our review does not represent a financial during the course of our review: audit of Garaventa. Armanino McKenna • Verified the application was complete LLP, performed calendar year 2001 financial audits for Brentwood Disposal, Discovery • Determined data presented in the Bay Disposal, and Oakley Disposal. In each application were mathematically correct case, the audits were qualified only by the and consistent fact that statements of cash flows were not a Reconciled calendar year 2001 financial provided for each entity. All income information to the financial audit statement information used for this rate • Compared actual 2001 results with review was unqualified by this auditor. estimated year 2002, and projected year The remainder of this report addresses 2003, financial results the findings and recommendations of our Analyzed significant historical 2003 base year review of refuse collection fluctuations in major cost categories rates in the County. There are three report Examined the relationships between sections that follow: financial and operating information w Section II - Rate Setting Process for reasonableness w Section III = Review of Rate Change ■ Analyzed trucking and equipment costs Application for 2003 charged by a related party, SEG Trucking m Section IV- Recommended Rate Change. • Reviewed and assessed impacts of changes to the household hazardous Also, there are five (5) appendices to this report, Appendix A to E. waste program m Assessed the impact of regionalizing County residential rates • Benchmarked Garaventa against recently published publicly-held and privately-held financial results • Conducted a survey of rates in other similar nearby communities_ t-� Review of Solid Waste Rate Application 1-6 ...................................... .............................. ................................................ .... ..........................................................- ............................I '' . Rate -Sieffing Process 11. Rate Setting Process IL Rate SeWng Process On September 28, 1998, the County with actual revenues and costs. Finally, adopted the Rate Setting Manual. The there are no retroactive rate adjustments Manual was subsequently updated on.June except under conditions of a party's defauIt 26, 1999. The Manual was completed with in the process. assistance from. hiewPoint Group, with input frorn the Ironhouse Sanitary District Two rate change processes exist: the base and Garaventa. Prier to adopting this year process and interim.year process. Each of Manual, no formal rate setting process or these processes is described below. This section methodology ex-fisted in the County. also summarizes haw the first base year rate application was assembled. The remainder of Included in the Manual is a formal this section is organized as fellows: structure for establishing refuse collection A. Base Year.Process charges_ The County elected to focus on B. 2003 Base Year Rate implication residential garbage and curbside collection C. Interim Year Process. of recyclable materials, and not focus its rate regulation on commercial charges. A. Base Year Process Residential charges represent recovery of - allowable costs and a reasonable profit to Ease year rates are established every four the hauler for providing refuse and curbside years. This 2003 review represents the first recycling collection services. base year review of Garaventa. At the time the Manual was completed in 1998, the The Manual establishes rate change County did not conduct a base year rate policies, provides application fortes, specifies review as rates had recently been adjusted reporting formats, and identifies required for program clianges. The base year process supporting docu€mentation. Procedures for requires that the hauler submit a detailed. requesting, reviewing; and adopting rate change application with the most residential rate changes also are specified. current financial audit and father supporting financial and operating data. The process is set up to (1) encourage long-term rate stability and mitigation of This rate application is carefully reviewed. rate impacts to ratepayers and (2) provide and analyzed in accordance with formal an incentive to the hauler to improve step-by-step procedures specified in the operations performance so as to increase Manual. In the base year-- residential, profitability. Thus, annual CPI-based rate commercial, light industrial, and curbside increases while allowed, are not encouraged recycling costs are cotr€bined. However, using,this process. Also, there is no formal, residential and commercial, and light or conceptual, balancing account whereby industrial, revenues are reported separately. projected revenues and costs are "balanced" Review of Solis) Waste Rate Application B. 2003 Base Year Rate Application franchise hauler (such as wages, The County received Garaventars Base Year salaries, payroll taxes, rent, and general Rate Change Application on August G, 2002 and administrative costs) (Application). A copy of this Application is a Change in tipping fees and regulatory provided in Appendix A. Garaventa provided costs estimated to occur in the next calendar year ended 2001 audited financial interim year results with the Application. Year-to-date a An adjustment for the franchise fee,which information (i.e., January 1 through May 3 i, is based on a percentage of total revenues 2002) was used as a basis for the estimated generated from residential and 2002 financial results. Finally, year 2003 results commercial service. are projected in the Application. An unincorporated County rate setting The Manual requires that applications timeline since 1998 is shown in Exhibit 11- received after 1999 include audited financial t. On lune 16, 1998, County rates were statements for the most recently completed increaser)by between $1.00 and $1.55 per year. With its Application, Garaventa included customer, per month, or an increase on a 20101 financial audits for three subsidiary percentage basis of between 5.2 percent and companies, Brentwood Disposal, Discovery Say 8.0 percent, depending,upon the geographic Disposal, and Oakley Disposal. Copies of these area. This increase was for new household audits prepared by Annanino McKenna LLP are hazardous waste program costs as well as a provided in Appendix B. Garaventa operates new County franchise fee. on a calendar year ending December 31. On July 18, 2000, the County approved a The 2003 Application was carefully rate increase for a new greenwaste program. reviewed and analyzed by the Consultant. Rates increased by between $1.56 and $1.73 The review was conducted in accordance with per customer, per month, or an increase on formal procedures specified in the Manual. a percentage.basis of between 7.7 percent and 8.5 percent, depending upon the C. Interim Year Process geographic area. In each of the interim three years between Since the Manual's development in 1998, base years, rate changes follow a streamlined no interim rite increases have occurred. process. Interim year rate changes are based Based on the above information, the only on the annual percentage change in a increases in rates during the 1998 to 2002 composite index of the following three items: period were a result of prograin additions Change in the most recent actual, not and/or changes. No rate increases during forecasted, San Francisco-Oakland-San this time were to account for inflationary Jose Metropolitan Consumer Price increases in Garaventa casts. Index., applied to specific costs of the tt-� 11. Rate Setting Process Exhibit 1I-1. Unincorporated East Contra Costa County Rate Setting Timeline June 1998 Rate Increase July 2000 Rate Increase ($1.00 to$1.55/mo., or 5.2 to 8.0%) ($1.56 to 1.73/mo.,or 7.7 to 8.5%) its 1 3 4 1 Manual 1st Base Developed Year Rate Review ll-3 Review of Bolin Taste Rate Application 1I-4 ap a I g 2003 ..................... ...................................... ............................................................................................................ 111. Review of Rate Change: Application for 2003 III. Review of Rate Change Application for 2003 This section provides a summary of A. Review of Revenues, Costs, NewPoint Group's review of Garaventa's base and Profits year rate change application for 2003. We This section describes NewPoint Group identify our findings and the impact of these adjustments to the Application. Adjustments findings on County ratepayers. This section are expressed based on their net impact(i.e., also details major categories of revenues and including both cost impact and profit costs. Findings from this section are impact) to Garaventa's revenue requirement. translated into our recommendations for a rate change in flection IV. For example, if an allowable cost of $1,000 was reduced by $100 to $900, the A copy of the Application is provided in net impact to the revenue requirement Appendix A. NewPoint Group reviewed the would be a reduction of$111 ($10010.90) Application for consistency with the to account for the 90 percent operating Manual, County policies, and with waste ratio. The revenue requirement is equal to management industry practices. the sung of the following: In the Application, Garaventa Enterprises ■ Allowable costs requested a rate increase of 11.65 percent a Towable operating profits for residential and commercial rates. In our review of Garaventa financial results, we ■ Total pass through costs. compared year-to-year changes in revenues A summary of the revenue requirement is and costs for reasonableness and solicited provided in lines 27 through 30 of the first explanations from Garaventa for material page (page 1 of 6) of the Application in changes. We examined actual results from Appendix A. 2001, estimated results for 2002, and projected results for 2003. Appendix C A summary of the impact of NewPoint provides detailed line item income Group's findings is provided in Exhibit statements for each year that served as key 1I1-1, on the following page. Findings are documents for our review. shown as adjustments to the revenue requirement in 2003. As shown in Exhibit This chapter is organized into two sections: III-1 the 2003 revenue requirement is A. Review of Revenues, Costs, and Profits $211,385 lower as a result of NewPoint B. Components of Single Can Rate. Group adjustments to Garaventa revenues, costs, and profits. The remainder of this section describes our adjustments to revenues and costs and details each of our seven (7) findings. [6Y-t Review of Solis) Waste Rate Application Exhibit III-1 Impact of NewPoint Group Findings on Revenue Requirement Allowable Costs 1 Direct Labor $('28,821) $(3,202) $(32,023) 2 Tipping Fees (Profit Allowed) (1.63,807) (1.8,2011 (182,008) 3 Corporate and Local General and Administrative Costs (14,640) (1,627} (16,267) 4 Depreciation and Other Operating Costs (197) (22) (219) 5 Services Provided to County (y (64,{1 X65) p�{y (7,129) (71,[2194) r PP.y� .��nG r tiia� $1�yt 1r"'It'Yi$`a f.r4$i 1 --av,ii t i a- ii T xt rY:' A v ,lv��r,i;a✓ �,. ..T\ Vi�V� ,r F .L ��6?.,n�,,�'�`.',: Pass Through Casts without Franchise Fees 6 Trucking and Equipment $(164,453) 0 $(164,453; 2 Tipping Fees (Pass Through) 163,807 0 163,807 5 Household I1afardous Waste Program Costs 1.01,641 0 101,641 yy�q WW .�� 'a'�A��...°... %�� ..a� ;"'uv �u8 'r., `r.r?,u�. ... :"��. _ r q �� G +l?•ti?sr"�'�, .�. , r�1i3 t7,�� :,' Franchise Fees 7 Franchise Tees $i105t,9, $(10,569) 1 0 *q— f#k;'. ,; 's�"i,Ga �`,,. �' ", �++r-'r::,'.r.. uu�.'u"�.✓ hxr } #,-�"�ti' '� _k i � ilk,' %. .. ca h# �"? x x, 0 Revenues Consistent with how interim year rate adjustments (i.e., those between base years) No changes were made to revenues are treated in the Manual, we recommend projected in the Application. that the County use this 1.3 percent escalationfactor to project changes to Costs certain inflationary expenses for 2003. Escalation Factor Finding#1 Because 2003 is a projection year, we Direct Labor assume that certain Garaventa costs will Labor costs are estimated to increase in the increase at levels consistent with the most Application by 8.5 percent between 2001 and recent change in the Consumer Price Index 2002, and by another 2.3 percent between (CPI) for the San Francisco-Oakland-San 2002 and 2003. A large driver for the increase Jose area (all items, all urban consumers). in labor costs during this period is worker's We are using the most recent available compensation costs. Between 2001 and change in the CPI for the period of August 2003,worker's compensation costs are 2001 to August 2002, as the projected expected to increase $32,599, from $59,749 change in the CPI for 2003. This change in to $92,648, or approximately 55 percent. CPI is equal to 1.3 percent[(193.5 - This increase in worker's coirzpensation is 197 .0)1191.0)]. supported by recent significant increases observed in.the industry. 1111-2 Ili. Review of Rate Change Application for. 2003 The State Compensation Insurance Fund, Table 1i1_1 Garaventa's worker's compensation insurer, Comparison of Garaventa Worker's recently=increased Garaventa's rate by 13 Compensation Rates with Pure Premium Rates percent on July 1, 2002. This increase was in addition to a 12 percent rate increase effective Garaventa (2003) $15.36January 1, 2002. Additionally, on October 21, Pure Premium Rate (7/1/02 on $18.53 2002, the.California Insurance Commissioner Policies with Anniversary Ratin Dates on or after 7/1/02 and before 1, 1/03)' approved a 10.5 percent increase in pure Pure Premium Rate (1/1/03 on $17,64 premium rates (applicable to policies with Policies with Anniversary Rahn mates on or after 1/1/02 and before 71./02 anniversary rating dates in 2003). Together, that are outstanding as of 1/1103):, between January 1, 2002 and January 1, 2003, Pure Premium hate (711/02 on New $16.73 the effective worker's compensation increase to and Renewal laolicies with Anniversary on or 1/1/03) Garaventa from the sources we reviewed was Comparison Range $16.73 to$18.53 estimated at approximately 35.5 percent (13 + 1 111 1111' 1 11 11111 12 + 10.5 percent). a For Garbage,Ashes,or Refuse Collection(California Workers Compensation Code Number 9403). A recent article in the San Jose Mercury In order to estimate 2002 direct labor costs, News titled, "Soaring insurance costs hitting we prepared an analytical model that included California business owners," dated October 19, the number of direct laborers, rate of pay, and 2002, specified that "countless California regular time, overtime, and vacation time business owners large and small are reeling assumptions. This model also incorporated from increases that routinely top 100 percent health and welfare, pension,worker's in worker's compensation costs. Insurers... compensation, and payroll tax assumptions. As must increase prices after a multi-year strategy a check, estimated health and welfare and of underpricing to win market share blew up pension benefit costs were tied to actual paid in their faces. The stock market, which they'd receipts. Payroll taxes were estimated at 9.5 been hoping to tap to help offset their percent of payroll. In the model we substituted insurance losses, tanked, and medical costs actual March 1, 2002 laborer hourly wage rates soared thanks to inflation and fraud." specified in the "Agreement.Between. Teamsters As a check, in Table 111-1 we compare Local 315 and Concord Disposal ServiceIncluding Garaventa's worker's compensation rate against Pittsburg Disposal Seri1ice, Oakley Disposal Service, worker's compensation pure premium rates Discovery Bay Disposal Sendice, Rio Vista approved by the California Insurance Sanitation, Delta Debris Box Service, and SEG Commissioner for 2002 and 2003. Garaventa's Trucking,for the period of 3/1/98 to 2/.28/03," rates of$15.3 6 per$100 of payroll, even with The model's 2002 results were then the projected increases noted above, are projected for 2003 by applying the projected between 8 and 21 percent below the recently change in the CPI of 1.3 percent. published pure premium rates for refuse collection businesses of between $16.73 and Net Ypa [Reduction iii 2043 t eveaae $18.53 per $100 of payroll. regn.iretr�el t of.$32,OZ3� III-3 Review of Solid Waste Rate Application Finding#2 Finding#3 Tipping Fees Corporate and Local, General and Tipping fees are shown in the Application Adininistraive Costs to increase between 2001 and 2003 by a For 2003, total Corporate and Local total of 7.4 percent from $1,399,916 to G&A costs are below the cap specified in $1,504,047. The increase in tipping fees is a the Manual. The Manual specifies that result of an increase in the tipping fee rate at Corporate and Local G&A cannot exceed the Pittsburg Transfer Station. During this 13,2 percent of total costs in ffie initial period the tipping fee increased from $45.00 base year. For 2003 Corporate and Local per ton to $50.50 per ton. G&A costs are approximately 11 percent of total allowable costs plus profit plus This $50.50 per ton tipping fee rate is over franchise fees (i.e., line 13). 23 percent less than three other transfer station tipping fee rates in, or near, Contra Costa Nonetheless, in a detailed review of line County. Tipping fee rates at three other similar item Corporate and Local G&A costs,we transfer stations are identified below: disallowed sponsorship costs as these costs ransfer are not considered associated with the refuse STAR.Transfer Station (operated bar Allied Waste Industries, Inc.) in collection business. For 2003 sponsorships are projected to be $14,640. Martinez- $612.25 per ton Davis Transfer Station (operated by PA haste Management, Inc.) in Oakland - $74.50 per ton Berkeley Transfer Station (operated by Finding #4 the City of Berkeley) in Berkeley- Depreciation and Other Operating Costs $70 per ton (above 260 pounds). 1�I- araventa projected an increase in Based on the Manual requirement that Depreciation and Other Operating Costs of 2.1 percent between 2002 and 2003. We tipping fees in excess of$45.00 per ton are allowed an increase of 1.3 percent, Consistent treated as a pass-through cost, we capped the with the projected change in the CPP. arnount allowed with profit.for 2003 at $1,340,240 (($1,504,047 = $50.50) X het lMp4ct.-' Rdsatir' $45.00). Thus, the amount of tipping fees $ 19 above this amount, or $163,807 ($1,504,047- $1,340,240), has been reclassified as a pass- through cost without profit. k not'4ef, pa ini 0'4 i�is�Iiiie 111-4 .................... Ill. Review of Rate Change Application for 2003 Finding#5 Prior to fiscal year 2001/02 the Household Hazardous Waste transactions were slightly more involved with Prograin Costs the County being billed by Delta Diablo, then For 2003, Garaventa projected a total of billing both Ironhouse Sanitary District and $64,165 for "Services provided to the Garaventa. Ironhouse Sanitary District had County" (line 5). This expense is largely for agreed for Garaventa to pay it a fixed amount the County's household hazardous waste per quarter to cover program operations costs. program. We have re-categorized this In turn, the Ironhouse Sanitary District paid household hazardous waste cost from an the County. Garaventa remitted back to the allowable cost (with profit) to a pass- County also. The County then passed these through'cost (without profit). two remittances on to Delta Diablo. The latitude for categorizing household The permanent HHW facility is still under hazardous waste program costs as a pass construction, with an expected completion through cost is provided on page 1-15 of the date of January 2003. Capital costs of the Manual which specifies that "pass through permanent facility are estimated at $1,075,000. costs are costs which are included in rates Of this amount, $150,796 was paid for charged to customers, however these costs do through a grant from the California Integrated not have an associated profit component. Waste Management Board. Of the remaining Pass through costs are generally transactional approximately $9.25,000, the County's in nature and often are thought of as costs estimated share is $79,500 (not including Bay not associated with any significant effort Point areas) and the Ironhouse Sanitary perforn-ied by the hauler." District's estimated share is $112,850. Based The current operator of the HH'�41 facility on the terms of the facility loan amount, these is Delta Diablo Sanitary District(Delta costs will be paid back over a 15-year period Diablo, a public entity). Delta Diablo with a 6 percent interest rate. The County has currently bills the County and the indicated that it will fund its portion of the Ironhouse Sanitary District for the operating capital costs outside of the rate base (e.g., costs of the HHW facility. The County through franchise fees). Ironhouse Sanitary subsequently bills its unincorporated East District also expects to fund its share of the County haulers, including berth Garaventa HHW facility capital costs outside of the rate and Pleasant Hill hayshore Disposal and base (likely through franchise fees). remits these payments directly to Delta Prior to fiscal year 2001/02, the allocation Diablo. Likewise, the Ironhouse Sanitary of HHW facility operating costs to an East District cZrrrently bills Garaventa for the County Area was based on that area's share of HHW charges and remits payments from the total area households. In fiscal year Garaventa back to Delta Diablo. 2001/02, the allocation was changed to actual usage. Facility operators now check the zip codes on driver's licenses of customers to deterinine the area they are from. Review of Solid Waste Rahe Application East County residential rates (not The increase in HHW facility operating costs including Ironhouse Sanitary District areas) between 2001 and 2002 is based in part on the were 'increased to account for HHW fiscal HHW facility actively marketing its services. year 1997/98 and 1938/99 costs. On June For example, marketing alone likely was 16, 1998, the Board approved a residential responsible for increasing Bay Point area usage rate increase (not including Ironhouse from 61 customers, in the first half of fiscal Sanitary District areas) of$0.49 per year 2001/02, to 148 customers, in the second customer, per month, for HHW. half of fiscal year 2001/02. During the past two fiscal years (2000-01 Additionally, the HHW facility held and 2001-02), the Ironhouse Sanitary District specific event days in East County areas. has received a fixed amount from Garaventa Delta Diablo personnel publicized the event for BOPA and HHW costs. During this time, and then traveled to an area to collect the the quarterly amount paid by Garaventa to HHW. A special event in the spring of 2002 Ironhouse Sanitary District equaled explained an increase in Knightsen usage $5,248.95, or $875.00 for the BOPA and from 5 customers in the first half of fiscal $4,373.95 for the HHW facility. year 21301/02, to 141 custorners in the second half of fiscal year 20111/02. Likewise As shown in Fable III-2 below,based a special event day in Byron increased usage on cost and usage information available as from 25 to 109 customers,between the first of the time this report was written, the year and second halves of fiscal year 2001/02. 2002 HHW facility operating costs for Fast Delta Diablo expects to continue to hold a County and Ironhouse Sanitary District are similar number of these special event days estimated to be $100,33 7. HMW facility in East County areas to encourage higher operating costs are projected to increase in participation levels_ 2003 by the estimated rate of inflation of 1.3 percent. The 2003 projection is shown Based on reclassifying the $64,165 (or in Table III-2. $71,294 with profit) "Services provided to County" cost as a,pass through cost and Table III-2 adding the additional revenue required to Actual, Estimated, and Projected Household meet the 2003 projection of$101,641,we Hazardous Waste Program Operating Costs increased the overall revenue regrxirement by $30,347 ($101,641-$71,294) for 2001 Actual $56,295 household hazardous waste program costs. 2002 Estimateda $100,337 2003 Projected $101,641 Prior to the time of this writing, Delta Diablo had made a high-level planning Sources: Discussion with Delta Dia,.-)Io accounting ptnonnel and estimate of the projected costs for the Delta Nablo fiscal year 2001/02 report to County. a Rased or cost information available as of]x/21/02. permanent facility (Source- HHW Collection Services Agreement with the County). Delta Diablo had estimated County and I1t-� Ili. Review of Mate Charge Application. for 2003 Ironhouse Sanitary District costs to be We also compared the monthly lease $149,756 in fiscal year 2002/03 (including a rates charged by SEG Trucking with other small cost for Bay Point areas served by national comparable refuse collection truck Pleasant Hill Bayshore Disposal) and lease rates. Comparable monthly lease rates $221,559 in fiscal year 2005/06, a nearly 48 from three other sources, with and without percent expected growth level over this maintenance costs included, are provided in three-year period.. 'The year 2002 $100,337 Table 111-3 below. estimate is approximately$49,419 lower than the figure projected by Delta Diablo for Table 111-3 fiscal year 2002/03. Comparable Refuse Collection Truck Lease Rates As a result of this variation, we hesitate to M1111��Iff W.4 rely on the high-level Delta Diablo planning projections for rate setting at this time. The 1 -Florida $4,500 Late .Model Mack 25 yd. Rear Loader County and Ironhouse Sanitary District (without maintenance) should continue to monitor household 2 -Florida $5,5001 LateModel.Mack 40 yd: Front loader hazardous waste program costs in the future (without maintenance) to determine whether they change from the 2 - Florida $5,5o0 Late Model International 25 yd, amount projected for 2003. In the case hear Loader where household hazardous waste program (without maintenance) costs change materially (i.e., by greater or 2 --Florida $6,000 Late Model Mack 40 yd. front Loader less than 5 percent), the County and (with maintenance) Ironhouse Sanitary District should work with 2 -Florida $6,000 Late Model International 25 yd. Garaventa to determine an appropriate rate Rear Loader change (either up or down), and tuning, to (with maintenance), account for these cost changes. 3 -Arizona $5,070 Tate Model Front properly $ to 6,000 Loader or Rear Loader twitbut maintenance) ' iiatct jarix 200 ettu . ren iretnent a $ 3;34 Rear.loader lease rates provided in the Garaventa model compared with the lease Finding #6 rates observed in the industry(at Trucking and Equipment approxirnately $6,000 per month, with Garaventa provided a May 1, 2001 maintenance, as shown in Table 1II-3), schedule of monthly trucking and however we reduced Garaventa front loader equipment lease costs charged to the lease rates by approximately$1,500 per County by a related party to Garaventa, SEG month to more closely approximate these Trucking. We reviewed the individual truck industry averages and to align more closely lease rates, and line itern expenses within: with Garaventa's own rear loader lease rates, the lease rates, for reasonableness. as the costs to maintain these two truck types are not considerably different. tit-7 Review of Solid Waste Rate application In contrast to the front loader and rear Finding#7 loader trucks, recycling trucks are generally* Franchise Fees less expensive to purchase and maintain., The franchise fee that Garaventa pays the However,we Relieve that Garaventa may have County is equal to five (5) percent of gross slightly underestimated recycling truck revenues. Gross revenues include all residential, expenses. For purposes of the projection we commercial, and light industrial refuse and have adjusted Garaventa recycling truck lease recycling revenue: Franchise fees are a pass rates upward by approximately $340 per through expense, which do not earn profit. month to more closely approximate the lower end of lease rate range obsezTed in the A total of three (3) percent of the hive industry. This adjustment percent franchise fee is remitted to the will provide Garaventa with sufficient Ironhouse Sanitary District by the County, resources and an added incentive to maintain. Ironhouse Sanitary District uses this portion its recycling trucks at the highest level. of the franchise fee to administer its own solid waste programs and.services. Other adjustments embodied in the trucking and equipment projection include used on the adjustments to the overall allowing a 90 percent operating ratio on revenue requirement made in this chapter, SEG Trucking lease costs to be consistent franchise fees also were adjusted slightly with the Manual's allowable profit level. to $285,482 from the $296,051 figure in SEG Trucking lease rates had reflected an 85 the Application. percent operating ratio (for profit and I + t"tm ac :T e z�ztiza"ni. .200J tie management fees). reit��re erit"ril$10,69 " Additionally, we disallowed one of two management cars included in the trucking Profles projection. We assume that Garaventa can We recommend the County continue to use adequately service County areas with one an operating ratio ranging from 88 to 92 management car, percent, with a target of 90 percent for all base With these adjustments, we revised year rate setting. In dais first Rase year, we have 2001 trucking and equipment costs and used an operating ratio of 90 percent before then projected these costs to increase by interest and tax (EBIT) consistent with the. 1.3 percent for 2002 and in the projection Manual requirements. This 90 percent year 2003. operating ratio is equivalent to an 11.1 percent return on operating expenses. The operating ib3et"I pact: l e uc trczz art 2[03 r ev6 iiiratio is the most commonly used method for z ecl tae tent cif 55 refuse rate regulation. The Manual's operating ratio is supported by recently-available information for publicly-held companies, and privately-held companies, presented below. 111-8 III. Review of plate Change Application for 2003 We compared recent financial data Table III-4, below, shows that the available for publicly-held and privately-held weighted average operating ratio on an EBIT waste management companies. Because (earnings before interest and tax) basis available financial data is for combined between 1993 and 2000 was 89.7 percent, collection, transportation, and disposal while the average operating ratio during the operations, the corresponding operating sane period was 90.1 percent. ratios are lower than businesses providing exclusively waste collection services (i.e., Table III-4 without disposal). Operating ratios for Publicly-Held Waste Management collection operations alone are generally Companies Average Operating Patios a higher than for disposal operations alone (1993 to 2000) because disposal companies require greater returns due to the significant environmental and regulatory risks of operating landfills. 1993 to 2010 18 89.7 90.1 We reviewed financial information for eighteen publicly-held companies a bn an earnings before interest and tax basis(EBB). between 1993 and 2000. The eighteen companies included: Due to the significant acquisition and • Allied Waste Industries merger activity in the waste management • American Waste Services industry over the past several years, some of these companies are now part of other • Browning Ferris Industries companies. As an example, LISA Waste • Casella Waste.Systems acquired Philip and Sanifill. Likewise,Allied • Laidlaw Waste Industries (Allied) acquired Laidlaw. • Mid-American Waste Systems Additionally, LISA Waste Services merged with • Philip Environmental Waste Management inc., and retained the name of Waste Management. Allied acquired • Republic Services, Inc. Browning Ferris Industries. Historic data for • Sanifill all of these companies represents the Best • Superior available information for publicly-held • United Waste Systems companies for the period of 1393 to 2000. • LISA Waste Services Robert Morris &Associates (RMA) • Waste Connections publishes its "Annual Statement Studies" for • Waste Management, Inc. an array of industries, including privately-held • Waste Industries waste management companies. RMA data is for companies doing business as refuse systems ■ Waste Management.International (SIC Code 4953). These are systems "primarily • Western Waste (SIC in the collection and disposal of • Waste Management Technologies. refuse by processing or destruction or in the 3bl_� Review of Solid Waste Rate Application operation of incinerators, waste treatment Exhibit 111-2, on the following page, plants, landfills, or other sites for disposal of shouts six key rate setting policies included such materials." These data "do not include in the rate regulation of Garaventa by the companies primarily engaged in collecting and County. The second column of this exhibit transporting refuse without disposal." As identifies the policy, and the third column shown in Table 111-5,the operating ratio, on identifies how the policy was treated for rate an EBIT basis, of over 244 companies surveyed setting purposes in the rate review, All of in each of the eight years from 1993 to 2000, these key policies have been followed for ranged from 90.2 to 93.1 percent, this 2003 rate review. Consistent with the Manual, because Results of NewPoint Group findings are Garaventa would fall outside the range of 88 to summarized in Exhibit I11-3, following 92 percent without a rate increase, we have Exhibit III-2. The total projected revenue reset the operating ratio to 90 percent in the requirement(with adjustn-tents and new base year 2003. The operating ratio without a programs) for base year 2003 is $5,709,633, rate change would be 101 percent. To as sutnmarized in Exhibit III-3. With the determine this 101 percent operating ratio, rate setting adjustments, a rate adjustment using Exhibit D-1 we divided projected 2003 equal to an increase of 7.66 percent is costs with adjustments, but without allowable recommended. Exhibit D-1 in Appendix profit, of$5,364,470 05,424,151 (Line 13) - D is a copy of the first page of the $345,163 (Line 7) + $285,482 {mine 23)), by Application reflecting all of the adjustments. projected.revenues of$5,303,368 (Line 21), and converted this number to a percentage. This 7.66 percent rate increase is approximately four (4) percent below 4et p,aet.! fta pap t6 4,everi:� ie tate ret t the 11.65 percent rate increase originally rn, ctci in"Fttrs1 t . J requested in the Application. Implementation of this rate increase is Table I11-5 discussed in more detail in thePrivately-Held Waste Management chapter. Companies Operating Ratios a. g p ` . (1993 to 21100) n 1993 313 92.7 1994 300 90.7 1995 325 90.2 1996 304 90.7 1997 271 91.1 1998 278 92,9 1999 244 92.6 2000 247 93.1 source:Robert Morris&Associates a For SIC Code 49.53, Refuse Systmis,on an eamirigs before interest and tax psis(EBB). III-10 111. Review of Rate Change Application for 2003 Exhibit III-2 Key Rate Setting Policies and Their Treatment in 2003 1.Corporate and Local,General Allowed with profit up to a cap of Allowed with profit and represents 11.1 percent of and Administrative Costs 13.2 percent of total allowable costs. total costs. 2.Franchise Fee ]'qua] to the 5.0 percent of gross Estimated at$285,482 in the projection year, residential,commercial,and light equal to 5 percent of gross residential, industrial revenues, commercial,and light industrial revenues. 3.Profit Allowed to fluctuate between an Reset to a 90 percent OR in this base year, operating;ratio (OR)of 88 and 92 percent. Adjusted to a 90 percent OR in base}rears if outside bracket. 4.flipping Fees Allowed with profit up to$45.00 per Allowed with profit up to$45.00 per ton. ton. Amounts above$45,00 per ton 'tipping fees are equal to$50.50 per ton consistent are treated as a pass-through expense. with the gate rate at the Pittsburg"Transfer Station. A total of$163,807 of the tipping fees are reclassified as a pass-through expense. 5.Interest Expense Not an allowable expense. Not included in application. 6.Amortization Not an allowable expense. Not included in application. Exhibit III-3 Summary of Adjustments to Garaventa Revenues and Expenses (2003) Revenues Residential $4,081,215 $0 $4,081,215 Commercial and Light Industrial 1,221,426 0 1,221,426 Ret}clin 5� gyC 7 0 7727 Allowable Expenses Direct Labor $1,169,519 $1(28,821) $1,140,698 `ripping lees(Profit Allowed up to$45.00) 1,504,047 (163,807) 1,340,240 Corporate and Local G&A Costs 613,992 (14,640) 599,352 Depreciation and Other Operating Costs 26,376 (197) 26,179 Services Provided to Count), 64,165 (64,165) 0 Pass Through Expenses County Administrative Fee 0 0 0 Truddrig and Equipment 1,871,524 (164,453) 1,707,071. 'Pipping Fee(Pass Through) 0 1.63,807 163,807 Household Hazardous'Naste Program Costs 0 101,641 101,641 Franchise fees 296,051 (10,569) 285,482 Profit 375,344 (30,181) 345,163 Shortfall (Surplus) $617,650 $(21.1,385) $406,265 Rate Change 11.65% 7.66% lil-11 Review of Solid Waste Rate Application B. Components of Single Can Rate Household Hazardous Waste There are a number of cost components program Costs includes operating which are included in rates for residential and costs of the permanent Household commercial service. Using the single can.rate Hazardous Waste facility. These costs as an example, the pie chart in Exhibit 111-4, are identified as Household Hazardous on the following page, shows the major Waste Program Costs (Line 11) in the components of the projected 2003 rates, and revised application. the relative costs of each component. Trucking and Equipment includes Categories of costs are described below: depreciation and leases of trucks, fuel Direct Labor includes compensation of the expense, licenses, parts, tires, and waste removal staff, including regular time, associated repair and maintenance overtime, payroll taxes, and associated expenses. These costs are identified as benefits. This category corresponds to Direct `fucking and Equipment (Line 9) and Labor(Line I) of the revised application. Depreciation and Other Operating Costs (Line 4) in the revised application. Tipping lees include all charges for the disposal of solid waste at a landfill of pr+ait is any revenue which exceeds transfer station., which are currently set at expenses (total allowable costs plus total $50.50 per ton. A cap on the allowable cost pass-through costs). The operating ratio portion of tipping fees is set at $45.00 per method is used to determine allowable ton. The regaining fees between $45.00 and profit,as discussed in the profit analysis $50.50 per ton are a pass through cost. section of this report. Profit is shown in These tipping fees also include Line 6 of the revised application. transportation costs€rom the transfer station Though Trucking and Equipment is a. to the landfill. This category corresponds to pass through.cost, SEG Trucking profits Tipping Fees (Profit Allowed) (Line 2) and (set at a 90 percent operating ratio) were Tipping Fees (Pass 711hrough) (Lige 10) in the subtracted from Trucldng and Equipment revised application, above and added to this Profit category. Corporate and Local, General and County's ]franchise Fee is 5.0 percent Administrative Costs include . of total residential/curbside recycling, accounting, office space rental, utilities, cotnniercial, and light industrial office supplies,legal services, insurance, revenues. Use of these €ands includes postage, etc. for Garavent:a. These casts development of programs and are identified as Corporate and Local, compliance with State waste reduction General and Administrative Costs requirements, Franchise fees are shown (Line 3), and County Administrative Fee in Line 23 of the revised application.. (Line 8) of the revised application. The relationships shown in Exhibit 111-4 ,generally are relatively consistent with industry averages. 111-12 111. Review of bate Change Application for 2003 Exhibit III-5, below, shows a Exhibit III-4 comparison between the average basic Components of the Single Can Rate service, or 32-gallon single can rate, and the CPI-adjusted rate for the period of Household Hazardous Waste Franchise Pees 5% 1995 to the present. Based on the rate Prograrn Costs 2% adjustments approved during this period, average County rates are actually$2.84 per yy customer, per month,lower than the $24.32 per customer, per month, CPI- RYM adjusted average rate for August, 2002. The County's average residential collection rate yp c +r has remained below the CPI-adjusted rate p �y fviha since the beginning of 1995 when the Y y� 'Szkx� 'M 150 current franchise agreement with � z u ,� s Garaventa was signed. R" ;,2 SM r� ' ` 1 4M Exhibit III-5 Comparison of Average 32-gallon Single Can Rate with CPI-Adjusted Average 32-gallon Single Can Ratea (1995-2002) 2 .€ $24.32 14.f. D d t $23. 5 2.5,01._,..��.,._,. .,.�.. $23.1 s €.+30 $21.04; (,tcn) hr'Jh 5. 20.00 20,00 � f $19.1 6 MOO 111-13 Review of Solid Waste Rate Application ..................................... ......................................... .............................................. .. .............................. ...........................................................- ....... .............................................. ........................... . ....................................... . Recommended s ............. IV. Recommended Rate Change IV. Recommended Rate Change In the previous chapter we detailed A. Recommended Rate Change NewPoint Group's findings from our review As summarized in the previous chapter, and of Garaventa's 2003.Application. We in the adjusted application (Exhibit D-1), the presented these findings based on the impact total projected revenue requirement for 2003 is to the 2003 revenue requirement. In this chapter we provide our recommendations for $5,709,63' (Line 30 of the application). This includes all rate setting adjustments described a rate increase. The revenue requirement in the previous chapter. However, total from the previous chapter is now translated into the real impact on County rates. projected 2003 residential, corm-nercial, light industrial, and recycling revenues are We identify the tirning of previous rate $5,303,368 (Line 21). changes by unincorporated County areas Based on the projected revenue requirement and explain why rates are increasing. We. and revenues, and assurning no changes in describe our recommended approach for rates, Garaventa will operate with a total implementing this rate increase. shortfall in 2003 of$406,265 (Line 24). From The current overall residential rate a revenue requirement perspective, all structure has minor variations in rates across residential, commercial, and light industrial geographic areas. We propose a common rates would need to be increased by T66 residential rate structure for East County percent [$406,265 $5,302,641 (Line 25)I to areas other than the Ironhouse Sanitary make Garaventa whole in calendar year 2003. District and Byron Sanita7� , District areas, B. Why Rates are Increasing? I I We also compare proposed new The most recent residential rate changes for unincorporated County rates with those each County area are summarized in Exblbft charged in other similar jurisdictions. M-1, on the following page, for customer 0 1 This section is organized as follows: provided 32-gallon can service. This exhibit A. Reconiniended Rate Change. shows rate increases for program changes that B. Why Rates are Increashig? occurred for all areas but-Byron Sanitary District areas on June 16, 1998 and July 18, 2000. Over C. Intpley-nentation of Rate Change the 1995 through 2002 period, rates increased D. Conipaii-son of Rates and Seivices to solely for new programs and services, includin ., g Other Jurisdictions. • Franchise fees (in par',to fund County administration and programs) • Greenwaste program • Household hazardous waste program • Mixed paper recycling. IV-t. ................ ......................................... Review of Solid Waste Rate Application Exhibit IV-1 Recent 32-gallon Rate Changes in Unincorporated Contra Cresta County Areas 1.Ba Point $22.03 N/A $22.03 Program,. $20.30 Program $18.80 Y Additions Additions 2.Brentwood $22.58 N/A $22.58 Program $20.83 Program $19.30 Additions Additions` 3.Byron Sanitary $1830 N/A $18.30 Program b $18 30 Program $18.30 District Additions Additions' 4.Discovery Bay $2.1.98 N/A $21.98 Program h $20.25 A rogtio s` $18.75 Additio5.ironhouse X2.51 grogram Program,, $20.30 Program $19.30 a $21.86 Sanitary District, Additions Additions Additions` a A$(I.65 ger customer,per month,incruse for the howsehold hazardous waste program operating casts. b A$1,13 f er customer,per month,increase for expansion of p jper recycling to include white and mixed paper and magazines,and a new biweeld),greenwaste program. c A$1.0ii per customer,per mornth,increase for household hazardous waste costs in 199 1198 and 1998/{)9,and a franchise fee collected by file county. Between 1998, when the rate setting Other reasons why rates are increasing Manual was developed, and 2002, the include (1) workers'compensation costs have annual percentage change in the Consumer increased significantly, (2) controllable Price Index, San Francisco-Oakland-San Jose operating casts were escalated in the base year, region (CPI), increased an average (3) household hazardous waste program costs compound rate of 3.94 percent per year, as have increased, and (4) a prescribed allowable shown in Table IV-1 below, On a profit level of 90 percent was implemented. compounded basis the CPI increased 15.6 percent over this nearly four-year period. ,able IV-1 An argument could be made that the Consumer Price Index County could allow Garaventa a rate change San Francisco-Oakland-San Jose All-Urban Consumers of as high as 1 i.6 percent based solely on (December 31 Year End, unless otheru,#se noted) this historical change in CPI. However, without reviewing historical time series financial data, and because Garaventa has not previously been.rate regulated, we 1998 167.4 cannot determine that (1) existing rates are 1999 174,5 aligned with the costs of service, and (2) 2000 184.1 whether historical Garaventa costs have 2001 190.6 Aug 2002 1915 actually changed consistent with.the CPI. We believe that a 7.66 percent rate increase is reasonable,and represents the result of shifting Garaventa to a more accountable, rigorous, and formal rate setting process and methodology. IV-2 IV. Recommended Rate Change C. Implementation of Rate Change geographic areas. Rates vary between different After rate setting adjustments, we areas for the same service. With the exception recommend that the County increase of the two sanitary districts that approve their unincorporated County rates by 7.66 percent. rates separately from the County, the County Based on the County's desire to regionalize the would like to regionalize residential rates for residential rate structure, we have provided two the Bay Point, Brentwood, and Discovery Bay options for implementing the 7.66 percent rate areas. Table IV-2, below, provides an analysis increase. This section describes one option of the regionalization of these three area's 32¢ that applies the rate increase to a proposed gallon residential rates. For the 7,005 new regionalized residential rate structure, and customers in these areas, the proposed new 321- one option that applies the rate increase to the gallon residential rate would equal $23.80 per existing rate structure. The remainder of this customer, per month. The impact to the three section is organized as follows: areas beyond the 7.66 percent proposed rate change would be a $0.10 per customer, per I. Option A -Apply Rate Increase to Regionalized Residential Rate Structure month, increase to Bay Point customers, a and Commercial Rate Structure $0.50 per custorner, per month, decrease to 2. Option B -Apply Rate Increase to Existing Brentwood areas, and a $0.15 per customer, Residential and Connnercial Rate Stnicture, per month, increase to Discovery Bay areas, The County and Garaventa would benefit in 1. Option A - Apply Rate Increase the future from this more siniplified and to Regionalized Residential consistent rate structure. Rate Structure and Commercial Proposed rates for 20-gallon customers Rate Structure in Bay Point and Discovery Bay are At this time, the County has expressed an presented in Table IV-3, on the following interest in a regionalized residential rate page. For each of these areas, the new 20- structure. The current residential rate structure gallon rate would equal $1.9.25 per has multiple service types across the customer, per month. Table W-1 Proposed Regionalized 32-Gallon Monthly Rates for Bay Point, Brentwood, and Discovery Bay Areas 1.Bay Point $22M $2170 2,604 $740,509 2.Brentwood $22.58 $24,30 1,307 3 8 1,1,211 3.Byron Sanitary District $18.30 $79,70, 4.Discovery Ila-, $21.98 $23,65 3,094 878,226 5.Ironhouse Sanitary District $22.51 $23.60: ---------- IV-3 ------------ ...... Reviews of Solid Waste Rate Application Table IV-3 Proposed Regionalized 20-Callon Mini-Can Monthly Rates for Bay Point and Discovery Bay Areas 1.Bay Point $17.88 $19.25 77 $17,787 f 4.Discovery Bay $17.83 $19.20 i 27 6,220 IN With regionalized rates, the absolute the Byron Sanitary District area,which does changes to residential rates are summarized not have a curbside recycling program., rates in Table IV-4, below. The absolute change of the other four areas are within $0.20 per in rates ranges from $1.09 per customer, per customer, per month. Rates for all five areas month, for the Ironhouse Sanitary District would increase by an average of$1.46 per to $1.82 per customer, per month, for the customer, per month. Discovery Bay area. With the exception of Table IV-4 Unincorporated County Option A-w Proposed Regionalized Residential Rate Structure (with 7.66 Percent Rate Increase) 1. Bay Point W 4$1.7.88 $19.25 $1.37 2. Brentwood N/A $1.9.25 New Service 3, Byron Sanitary District N/A N/A N/A 4. Discovery Bay $17.83 $19.25 $1.42 5. Ironhouse Sanitary District N/A N/A N/A Averse1 86 $t�3 2$ 1 40 . „0 'k^9'' 1. Bay Point $.22.03 $23.80 $1.77 2. Brentwood' $22.58 -$23.80 $1.22 3. Byron Sanitary District $18.30 $19.70 $1.40 4. Discovery flay, $21..98 $23.80 $1.82 5. Ironhouse Sanitary District $22.51 $23.60 $1.09h g vetage X21452 94 $3:46 1. Bay Point $25.03 $26.80 $1.77 2. Brentwood $25.58 $26.80 $1.22 3. Myron Sanitary District $21.30 $22.70 $1..40 4. Discovery Bay $24.98 $26.50 $1,82 5. Ironhouse Sanitary District $25.51 $26.60 $1..09 A `, X24.48. ":$ 5 9 $.1; 6 a Rounded to nearest so.(?5 increment. b Reduced Icy$(x.65 per custom r,per month,to reflect August,21)(12 rate increase for household,hazardous waste program. c Additional 32-gallon mn rate is$8.30 per can,per month,an increase of$0.60her can,per month,from the existing rate of$7.70 per can,per month. Only fox customers currently have an extra can. d Additional 32-If2Irn can rate is$5.90 per can,per month,an increase of$000 per can,per month,ftorn the existing rate of$530, per cats,per month. only four customers currently have an extra can. IV-4 ............... IV. Recommended Rate Chan-0e Residential rates have changed since the The County did not intend to regionalize franchise agreement was signed in 1995. At commercial rates. As a result, the that time,maximum residential rates were commercial rate structure in Table IV-5 is identified in the franchise agreement in applicable for either Option A or Option B. Exhibit B. Rates shown in Table IV-4 represent maximum residential rates at the D. Comparison of Rates and time of this rate review and are intended to Services to Other Jurisdictions replace the maximum rates presented in Unincorporated County rates were Exhibit B of the franchise agreement, compared with survey data from eleven other The 7.66 percent rate increase applied to jurisdictions. Results of the survey are the commercial rate structure,is shown in summarized in Appendix E. Exhibit E-1 Table IV-5, on the following page. This shows residential rates for each of the areas commercial rate structure includes surveyed. This exhibit compares proposed commercial can, toter, and bin service rates. rates of each unincorporated County area Commercial rates have changed since the with average residential rates of those franchise agreement was signed in 1995. At jurisdictions surveyed. In summary, that time, maximum commercial rates were proposed County rates are generally higher identified in the franchise agreement in than average for lower service levels, and are Exhibit B. Rates shown in Table IV-5 lower than average, for higher service levels. represent maximum commercial rates at the For example, rates for one 32-gallon time of this rate review and should replace container are approximately 24 percent the maximum rates presented in Exhibit B greater than average rates, while rates for one I 00-gallon toter are 36 percent less than of the franchise agreement, average. This is explained largely because the 2. Option B — Apply Rate Increase to six CCCSWA iurisdictions., which are part of Existing Structure and Commercial the eleven sui veyed, have adopted unit Rate Structure pricing rate structures 'i.e., the rate for a 100- The recommended.rate change of 7.66 gallon toter is three times the rate for a 32- percent would result in an absolute rate gallon container). Most County customers elect to have 100-gallon toter service, increase in individual residential 32-gallon rates ranging from as low as $1.09 per Existing commercial rates, prior to a rate customer per month to $1.72 per customer change, also are shown in Exhibit E-1. Existing per month, depending upon the sen-ice commercial rates are well below average for all area. Absolute rate changes for each service bin sizes and frequency of collection,with the area are shown in Table IV-6, below. exception of the 2 cubic yard bin picked up Table IV-7, following Table TV-6, provides once per week which is about, average (I the entire County residential rate structure percent above). The 2 yard and 3 yard bins, with the 7.66 percent rate increase. picked up twice per week, are 10 and 19 percent below the average, respectively. IV ............ .... ..... .... Review of Solid Waste Rate Application Table IV-5 Unincorporated County Option A f B - Proposed Commercial Rate Structure (with 7.66 Percent Rate Increase) ` �, `"'7e [� k xql 4 ;. GY ,� '§f *J�`hdF aesll t�? � e a ' •� `*r'�N" r r x�4°.�$l 1xwk $166.10 $169.00 $169.00 $169.60 $169.00 $168.54 2 x wk 279.35 305.00 305.00 285.35 305.00 295.94 3 x wk 392.70 442.04 442.00 401.00 442.00 423.94 4 x wk 505.95 578.00 578.00 516.70 578.00 551,33 ! k y 1# r�'��,�', i d:s �rcgl1 f i 1# ,q-UtJ tF 1 x wk $219.45 V N/A N/A N/A ITA $219.45 2 x wk 389.1.0 NIA N/A N/A N/A 389.10 3 xwk 558.70 N/A NJA N/A N/A 558.70 4 x wk 728.40 N/A N/A N/A N/A 728.40 � �te X24 $ , 1 irlt �.fly', H ��.'' � �,�� 1 1 ��'L r�+�R� ,f.��4n�• / J iit:�i�� t�y� ��1��[A� ��;Sa'��k 1 xwl $17e.82 $181.95 $181.95 $182.59 $181.95 $181.45 2 x wk 300.75 328.36 328.36 307.21 328.36 318.61. 3 x wk 422.78 475.86 475.86 431.72 475.86 456.41 4 x wk 544.71 622.27 622.27 556.28 622.27 593.56 J44 1 x wk $236.26 / N/A N/A N� $236'.26 2 x wk 413.91 N/A NI/A N/A NIA 418.91 3 x wk 601.50 NIA N/A N/A N/A 601.50 4 x wk 784.20 N/A N/A NIA N/A 784.20 I'& ttt X248 ' $26 38 $,26 3 24G $ 3$ $ 5 ti3 P3 874 $44 14 31 137 14 $42 p3 .95 $ "$ $ $ 3 $ .. 45 2 x wk 300.75 328.35 388.35 307.20 328.i5 318.60 3 x wk 422.80 475.85 475.85 431.70 475.85 456.41 4 x wk 544.70 622.25 622.25 556.30 622.25 59355 3: rxrd 7sitt I xwl. 236.25 N/A N/A N/A` N/A $236.25 2 x wk 418.90 N/A N/A N/A N/A 418.30 3 x wk 601.50 N/A N/A N/A N/A 601.50 4 x wk 784.:20 N fA N/A N/A N/A 784.20 Ir cart�czte $2.4 30 X26 40 $25 $ 4.752 40 $25'Oa5 Iv-6 IV. Recommended Rate Change Table IV-6 Proposed Absolute Changes in 32-Callon Monthly Rates for Each Service Area,, 1. Bay Point $22.03 $23.72 ($0.02) ' $23.70 , $1.67 $0.00 $23.70 2. Brentwood $22.58 $24.31 ($0.01) $24.30 $1.72 $0.00 ` $24.30 3. Byron Sanitary District $18.30 $19.70 $0.00 $19.70 ` $1.40 $0.00 $19.70 4. Discovery Bay $21.98 $23.66 ($0.01) s $23.65 ` $1.67 $0.00 $23.65 5. Ironhouse Sanitary District $22.51 $24.23 $0.02 $24.23 i $1.74c ($0.65)- ; $23.60 a Does not include tater rental of$3.0.0 per rush mer,per a�oni!3. b 7'o round rates to nearest$0.05 increme;rt. c. Rate increase already approved for household hazardous waste operating costs. 1lie net increase to Ironhouse areas would! Review of Solid Waste Rate Application !V-8 ppen-d"TiAC.R's ...................................... ............... .............................. ........... ................ ....................... Appendix A 2003 Garaventa Enterprises hate Application A Appendix 2003 Garaventa Enterprises Rate Application Appendix A includes the 2003 Base Year The rate application includes the Rate Setting Application submitted by following forms: Garaventa Enterprises on August 5, 2002. In a Financial information its application, Garaventa proposed to increase residential and commercial a Cost summary for Year 2001 collection rates by 11.65 percent. a Revenue summary While the rate application was identified Single family residential summary, as a "draft" application, following including the rate structure (rate discussions with the County and Garaventa, and accounts) it was determined that the rate application ® Operating information was a final application. The enclosed rate ■ Current rates by unincorporated application was therefore not modified and was used for this 2003 Base Year rate review. County service area. This is the first Base Year for this refuse hauler. Information provided in this application is for the following three (3) years: • Prior Year - 2001 • Current Year- Estimated- 2002 • Base Year Projected- 2003. A-1 Review of Solid Waste Rate Application A-2 ..... ........................ ............................ .......................................... ......................... ....................... Garaventa Enterprises 4080 MALLARD DRIVE * Pt7.BOX 5397 CONCORD, CALIFORNIA 94520 (925) 689-8390 Ms. Linda Moulton Contra Costa County Community Development Department 651Pine St. 4`'Floor, North Wing Martinez, CA 94553-0095 August 5, 2002 RE: Rate Application Dear Ms. Moulton, Enclosed is a draft Base Year Rate Application for Garaventa Enterprises franchised areas for unincorporated Contra Costa County and Ironhouse Sanitary District. The Base Year.Rate Application is supported by Audited Financial Statements of those operations for the calendar year 2001, current estimated results of calendar year 2002 based on 5 months of operation, and projected 2003 results. Our resulting calculation shows a change in the current Residential and Commercial rates of 11.65%. The result assumes no change in the HFiW fees. We would like to discuss this matter with you, along with the allocation of the increase between Residential, Commercial, and geographical area. A meeting with you, your staff, consultants, Board Committee and Ironhouse Sanitary District representatives should be scheduled at your earliest convenience. If you have any questions, please call us at(925) 689-8390. Sincerely, Clark Colvis CFO Cc. Eric Nylund(w/enclosures) Cc: Denise Nunn, Ironhouse Sanitary District (w/enclosures) Contra Costa County Base Year Rate Change Application Financial information Actual EstimatedP'W,C, Hlsbaricat Years Current Year :::Aiiai:Yiir:::: Year s Year2 Year 3 Year 4 Enter Actual Year in this Row i 999 2000 2001 2002 t. Direct Labor ; - $ $ 1,053,944 $ 1,143,50$ ;:::•:-1;189 #3 2. Tipping Teas(Prollt Allowed) - - 1,399,916 1,473,1#55 •:-:•:•:•1•,5134;047. 3. Corporate and Local Gen"and Administrative Coats $89,341 599,788 ::;•:813`�!1� 4. Depreciation and Other Operating Costs - 18,382 25,643 5. Services Provided to County $1,5981 62,869 :Ar.4;166 6. Tommi Allowable Costs(Lines 1+2+3+4+5) $ - $ - $ 3,103,191 is 3,305,783 $::'•3;379 10Q 7. Operating Ratio 07 To! SDIV/011 80.095 8. Allowable Operating Profit((Line 6*0.9) Line 8)I is $0 f$ 344,799 1 $367,307 1$-:-:.:.:.37-S,.344- 9. - °:°3739:344•9. County Administrative Fee 10, Trucking and Equipment - 1,759,767 1,833,706 :::•:1,t;'ti;&24 11. j1pkmg Feespass,Through) 12. Total Pada Through Costs(without Franchise Fees)(Lines 9+10+11) _ - 1,759,767 1,533,706 i;&75,524: 13. Total Allowable Costs(Line 6)plus Allowable Operating Prot(Line 6)plus Total Pass Through Costs(without Franchise Fera)(Line 12) $ S $5.207.767 $5,50t1,7T6 11, 45. 14. Residential Revenue $.::488�i2d4 15. Less Allmwm for Uncollectible,ibe Resided Accounts tY3 r 16. Total Residential Revenue(without Rate Change in Sass Year) L$ $ 4,013,604 J,$ 4,047,4009 :40 .: ) 17. Commercial and Light industrial Revenue 78. Lass Allowance fru Uncollectible Commercial and Light industrial Accounts 19-, Total CommerciaULight industrial Revenue(without Rata Change in Hasa Year) $ $ $ 1,173,996 $ 1,197,478 20. Recycled Mate Sales $ 727 727 7 21. Tom Revenue(Lines 16+19+20) $ is IS 5,188,327 t$ 5,245,612S: 5.3D3;'36i- 22. Net Shortfall(Surplus)without French"Fees(Line 13-Line 21) 23. Residential/CommsrcisOUght Industrial Franchiss Fens(sea oblation below) $ - '$E=- $ 263,060 t$ 285,830 24- Net Shortfall(Surplus)with Franchise Foes(Lines 22+23) 25. Total RasidentiallCommercial/Light industrial Revenue Prior to Rate Change(Lines 16+19) 26. Percent Change in Existing Rasidential/Commercialfiipht Industrial Rates(Cans 24-Line 25) :.: °:•>.��,..Y Franchise teas aro set by the County at 5 percent of the revenue requirement 27. Total Allowable Coats(Line 6) $::•:3,.,S;•1 Ot? Solve for two equations with one unknown,and identify franchise fees as X => 28. Allowable Operating Profits(Line 6) ::375 344; Equation 1) Revenue Requirement x 0.05=X 29. Total Pass Through Costs(with Franchise Fees)(Lines 12+23) 2 587,575' Equation 2) Revenue Requirement=Line 13+X.or$4,427,391+X 30. 2003 Revenue Requirement(Lines 27+26+29) Substitute equation 2)into equation 1)and solve for X => ($4,427,391+X)x 0.05=X,or X a$233,021 Year; 2002 Page i of a Contra Costa County( Base Year Rate Change Application Cost Summary for Year 2001 Audited Unincorporated Non-Uninc. Garaventa Allocation Description of Cost Cou Cou Financial B s Labor-Regular $ 736,080 $ $ NIA NIA Labor-Overtime - 255,104 NIA Benefits Payroll Taxes 62,760 NIA 31. Total Direct Labor $ 1,053, $ 32. Total Tipping Fees(Profit Allowed) Ac=nbng $ 46863: $ S NIA Collection Fees 2,335 NIA NIA Computer Services NIA Dues and Subscriptions 2,622 Insurance 510 - NIA Janitorial 3,775 NIA . _ �NIA Laundry NIA Legal 94 Management Fees 178,067 - NIA Miscellaneous and Other - N/A NIA Office Expense 47,104 _ N!A Operating Supplies Outside Services - NIA Postage 33,737 - NIA Public Relations and Promotion 15,176 NIA Rent-Office 61,515 NIA Salaries-Office 133,907 NIA Payson Taxes and Benefits 23,767 NIA Taxes and Licenses 150 NIA Telephone 13,496 NIA Travel 533 NIA Utilities 6c2420.837 1,538 33. Total Corporate and Local General and Administrative Costs 56 .341 $ Depreciation-Buildings EZ $ $ NIA Deprecation-Vehicles NIA Depreciation-Containers NIA Other Operating Costs NIA34. Total Depreciation and Other Operating Costs A - 35, household hazardous Waste $ 61, 9$ $ $ a 36. Total Allowable Costs(Lines 31+32+33+34+35) $ 3, II3.1 1 NIA 37. Total County Administration Fee A Equipment Rental $ 1,759.767 $ $ NIA NIA Gas and 011 NIA Insuranoe - --- - Parts NIA _ NLA Repair and Maintenance _ NIA Tires NIA Other 38, Total Trucking and Equipment $ 1,759,767 $ 34. Totes Tipping Fees(Pass Through) - 4d. Tottal ResidentiallComrnercial/Light Industrial Franchise Fees 263,0 0 N 41. Total Paas Through Costs(Lines 37+38+39+40) 2,02 82 $ $ NI 42. Total Costs(Lines 36+41) $ 5,126,018 Year: 2002 Page 7 ttf 6 Contra Costa County Base Year Rate Change Application Revenue Sumr»ary Actual 9tlm at>1d Historical Yeah Current Year :::Bales 1'®iti Year 1 Year 2Year 3 Yaw 4 :; ter -. ••- Enter Actual Year in this Row 1989 2000 2001 2002 Single Family Residential Service 43, Single Family Residential Revenue(Base Year From Page 4 of 6) $ $ IS 4,018.558 $ 4,052,403 ;$:•:-::A,Q ,250A Multiunit Residential Service 44. Number of Accounts 0 0 0 0 45. Multiunit Residential Revenues 5 $ Is IS 46. Residential Revenue(w/o Allowance for Uncollectible Accounts)(Lines 43+'45} $ $ Is 4,tt18,558 $ 4,052,403 47. Allowance for uncollectible Residential Accounts $ $ $ 4,862 $ 4,994 48. Total Residential Revenue(Line 48•Una,47) $ i$ $ 4,013.804 $ 4.047,409}•$::::#:fi t:215 Commercial and Light Industrial Can Service 49. Number of Accounts 133 136 ?::�:�:M1 50. Cor sale cial and Light Industrial Can Revenues ; $ $ 188.071 , $ t s 9: Commercial and Light Industrial Bin Service 51. Number of Accounts 258 283 52. Commercial and Light Industrial Bin Revenues $ $ $ 987,373 $ 1,007,120 Commercial and Light Industrial drop Boz Service 53. Number of Accounts - 54. Commercial and Light Indus$lal Onip BOX Revenues $ $ !$ $ 53. Commercial and Light Industrial Revenue(w/o Allowance for Uncoilectibie Accounts)(Lines 50+52+54) $ $ 1$ 1,175,444 i$ 1,198,953 56. Allowance for Unaotiectible,Commercial and Light Industrial Accounts $ $ is 1,448 $ 1,417 57. Total Commercial and Light Industrial Revenue(Line 65•Llne 56) $ $ $ 1,173,996 $ 1,197,478 58. Recycled Material Sales $ $ $ 727 S 727 59. iotas Revenue(Lines 48+57+58) $ ?$ $ 6,188,327 $ 5,246,812 Year: 2002 Page 3 of 8 COMM Costs county Base Year Fate Change Application StagTle Famtty R"idendal Summary :Baiso:Yer3r:•:•:° ShVfe Farntty Res f revenue(without Rate Change to Saxe Ysar) Current Prc'ected _ Ratelmonth Accounts Owey CantToter $ 21.86 6,210 Brentwood(in 04)Canfroter 18.30 129 Brentwood(out of City)Can/Toter 22.58 1,307 :35!F FSd2; Brentwood(out of City)Extra Can 7.70 4 Discovery Bay Can/Toter 21.98 3,094 Discovery Say Mini Can 17.83 27 Discovery Bay Edrs Can 5.50 Saypoitlt(PITS)Cart/Toter 22.03 2,804 fiH$409 Baypoint(PDB)Mini Can 17.88 77 1#344#; Byron Canfroter 22.58 8ti 23, 18 60. Total Base Year Single Family Residential tD,, $ :•;:d,QB6,2#.• ai Equal to the current rate per month multiplied by 12 multiplied by the projected number of accounts. Year: 2002 Page 4 of 6 Contra Costa County Base Year Rete Grange Application Operating Information mstorical Current Year r;:. :.: Base Yeas Historical Histcxnc ei :fi t Audited ?fit Estimated .!? ettt Projected information ::,•Gft�at a.•: lnfbnnodon .:Chan informahon .. Inicsrmat#on r. Infornudon Year 1 t:Yr..1:toy:: Year 2 :Yr :::; Yaw 3 ::Yr_4 16 4::: Yew 4 ;:Yf.41o'A::: Yaw 5 Enter Actual Year 1099 ?::::::::::: 2000 2001 2002 2005 Accounts 61. Residential 0 :..#Gi?titJOf 0 . 1131: 15,235 15,235 ::`:`:•217f#°1r: 15,540 62. Commercial 0 Joit l{)I. 391 :2 flb'e 399 i::::: tit3 407 63. Light Industrial 0 1 :NUk:.:.;: NIA 64. Total Accounts Waste Tonnage 11 65. Residential #0"1: 28,980 28,980 :;:;:;:;:f}.laE3°r5 2$,980 fib. Commercial 01::..; }#Vtp? 0 >:: .#t?tVti3?: 2,795 #3 0`Ya 2,795 1iT0°�S 2,795 67. Light Industrial 0 ::>t1/A: 0 :::::::NIA-:::;: 0 ::::tilt% ;:::! 0 68. Total Tons ,.'.'.'.#pIV10j ....,..... :':•:• FIX7?'.'.'.'.'3#.775`'..'.'.`.tl #09Q�.'. .'3I'775. '.'`'.'OtSlOya'.'.'.'.'.'31i775• Recyclable Tonnage ......... . 69. Residential ::;1f[3I for - `' ::!fl_3tillQ?: 5,796 040°fv 5,79€ :::D',QO 'a 5,796 70. Commercial :`:#t3lVIIh 0 ?: 0 ::::# ?1/Jt)1 0 0 :... 71. Light Industrial `::Plt}k:;:':`. 0 f:;:::p9+ti;:.:;:.: 0 >' ; ; 0 ::::Esltf>:?: 0 72. Total Tons County Services 73, County Bins <#i7U/01 AiC3fVldl :. #t]iVtt7+: 74. County Drop Boxes 75. 3 Yd.Bin-1X pet week $ $ - :: 2IV30? $, - 76. 2 Yd.Bin-1X{ser week $ $ _ ::.':i ? $ - :- iti7l $ - I1IIt3t $ 77. 20 Yd.Box-per pick up NIA NIA::: NIA i:':: MA:::( NIA ?NtA:;: NIA NIA Year: 2002 Page 5 of 6 contra Costa county Ease Year late Change Application UnIncorporstad Area., All Areas Nor- 7s. Rate changes Requested Increased New Abbreviated iw S�hedufs Cunexrt Rate Rate Adjustments ..Rate Rate 21.86 $ 24.42 $ (0.01) 5 Oakley Can/toter 24.40 Brentwood(in City)Can/Toter 28.30 20.43 0.02 20.45 1 -Brentwood tout of City)CanfrOter 22:58 25.21 {O.Oi 25.20 Brentwood(out of City)Extra Can 7.70 8.80 8.60 Discovery Bay CardToter 21.98� 24.54 0.01 14.55 17.63 i 19.x1 (0.01 19.90 Discovery Bay Mini Can 0.01 6.25 Discovery Bay Extra Can 5.50 6.24 asypoint(PDS)Can/Toter 22.03 17.88 1199.60 24:60 .66 (0.02) 19.95 Baypoint(PCS)Mini Can 0.01) 25-20 Byron Can(Toter 22.58 25.22 (a)Calcul eted rates are rounded up to the nearest$0.05. 79. Multiunit Residential Rate increases of 1 75% will be applied to'aii rates in each structure with each rata rounded up or down to the nearest$0.05. Noma 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: Clark Cotvis Title:CPO Signature:� f _ pate: August 5,2002 Page b of 6 Year: 2002 Appendix B 2001 Audited Financial Statements AppendixB 2001 Audited. Financial Statements Appendix B provides audited financial These audits were performed according statements prepared for Garaventa to auditing standards generally accepted in Enterprises by their independent auditor, the United States. For all three companies, Armanino McKenna LLP. Audited the opinions provided by the auditor are statements were included in the rate unqualified with the exception of the fact application for three companies related to that these statements do not include unincorporated County refuse collection: statement of cash flows, which are required by generally accepted accounting principals. * Brentwood Disposal The omission of the audited statement of * Discovery Bay Disposal cash flows does not, limit our ability to ® Oakley Disposal. complete this rate review. Audited statements were for the year The 2001 revenues and expenses ended December 31, 2001. presented in the 2003 Base Year Rate Application were reconciled to the 2001 audited financial statements. Further, actual results presented in the financial statements were used as the priniary basis to determine reasonableness of the projections used to set collection rates in 2003. Review of Solid Waste Rate Application B-2 ................................................. ......... .......................... .................................... .......................................................................................-............................ ...........1111,111,111,11-11.................. BRENTWOOD DISPOSAL FINANCIAL STATEMENTS DECEMBER 31, 2001 ............ ....... TABLE OF CONTENTS Page No. Independent Auditors' Report Balance Sheet 2 Statement of Operations and Proprietors' Capital 3 Notes to Financial Statements 4- 8 Supplementary Information Schedule of Operating Expenses Schedule-of Selling, General, and Administrative Expenses 10 ----------- ARMANINQ McKE:NNA LLQ Certified Public Accountants&Consultants 220 Juana Avenue San Leandro.CA 94577-4884 ph 5I0.483.7600 f x 510.483.3300 INDEPENDENT AUDITORS" REPORT To the Proprietors Brentwood Disposal Concord, California Vire have audited the accompanying balance sheet of Brentwood Disposal (a proprietorship) as of December 31, 2001,and the related statement of operations.and proprietors' capital for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United Mates of America. These standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis,evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The Company declined to present a statement of cash flows for the year ended December 31, 2001. Presentation of such a statement summarizing the Company's operating, investing and financing activities is required by accounting principles generally accepted in the United Mates of America. In our opinion. except that the omission of a statement of cash flogs results in an incomplete presentation as explained in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Brentwood Disposal as of December 31, 2001, and the. results of its operations for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of operating expenses and selling, general and administrative expenses for the year ended December 31, 2001, are presented for the purpose of additional analysis and are not required parts of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ARMANINO MCKENNA LLP March 11, 2002 BRENTWOOD DISPOSAL Balance Sheet December 31, 2001 ASSEIS Current assets Cash $ 253 Accounts receivable Tracie, net of allowance,for doubtful accounts of$900 40,041 Legal settlement 229,200 Current assets 269,494 Property and equipment Office furniture and equipment 22,637 Less: accumulated depreciation (22,637) Cather assets Intangible assets, net of accumulated amortization of$1,025,000 57,500 Deposits 900 58,400 $ 327,894 Current liabilities Bank overdraft $ 20,677 Accounts payable and accrued liabilities 26,690 Deferred revenue 6,878 Current liabilities 54,245 Other liabilities Advance account 19,618 Intercompany payable 32,244 131,862 Proprietors' capital 141,787 $ 327,894 The accompanying notes are an integral part of these financial statements. - 2 - BRENTWOOD DISPOSAL Statement of Operations and Proprietors' Capital For the Year Ended December 31, 2001 Revenue S 662,393 Cost of operations Operating expenses 741,983 General and administrative expenses 113,161 Total cost of operations 855,144 Loss from operations (142,751) Other income/(expense) Interest expense (1,051) Interest income 14,790 13,739 Net loss (179,012) Proprietors' capital, begim-iing of year 320,799 Proprietors' capital, end of year S 141,787 The accompanying notes are an integral part of these financial statements. _ 3 _ BRENTWOOD DISPOSAL Notes to Financial statements December 31, 2001 1. Summary of Significant Accounting Policies Business Brentwood Disposal(the "Company") is engaged in the solid waste collection and recycling business. The Company provides services under exclusive agreements to unincorporated areas of Eastern Contra Costa County including the towns of Byron and Knightsen, all located in California. The Company was acquired by the proprietors in December 1984 and is part of a group of entities with common ownership. As a member of this group of related entities, the Company is allocated certain expenses and receives certain services from the related entities, The Company's financial position and results of operations might be different if it was operated as a stand'-alone entity. Property and equipment Property and equipment are carried at historical cost. Expenditures for maintenance, repairs, renewals, and improvements, which do not significantly extend the useful lives of assets, are charged to operations as incurred. Property and equipment is depreciated over the estimated useful lives of the related assets using the straights-line method. There was no depreciation charged to operations for the year ended December 31, 2001 since all assets.have been fully depreciated. Useful lives are as follows: Office furniture and equipment 3 - 7 years Advance account/Intercompany payable The advance account represents intercompany charges and credits involving cash transfers and other transactions between the Company, Garaventa Enterprises Inc. ("GEI"), and affiliates. The intercompany payable account represents amounts payable to Discovery Bay Disposal, an affiliate, for franchise fees, AB939 fees, and household hazardous waste fees paid by Discovery Bay Disposal on behalf of the Company. Revenue Revenue consists primarily of billings to customers for the collection. recycling and disposal of municipal solid waste from a diversified base of customers including residential, commercial and industrial customers in Eastern Contra Costa County. Residential customers make payments in advance for collection services. Revenue from those receipts is deferred and is recognized as the services are performed. - 4 - BRENTWOOD DISPOSAL Notes to Financial Statements December 31, 2001 1. Summary of Significant Accounting Policies (continued) Income taxes Income from the proprietorship is combined with the income and expenses of the proprietors from other sources and reported in the proprietors' individual federal and state income tax returns. The proprietorship is not a taxpaying entity for purposes of federal and state income taxes, and thus,no income taxes have been recorded in the accompanying financial statements. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Estimates are used when accounting for the allowance for doubtful accounts and employee benefit plans among others. it is reasonably possible that actual results could differ significantly from those estimates and significant changes to estimates could occur in the near term. 2. Franchise Agreements The Company provides services under exclusive agreements to the Byron Sanitary District., annexed areas of Brentwood and certain areas of Contra Costa County, all located in California. The agreements provide for payments to the district and county of a percentage of gross revenues from collection services. Rate schedules are adjusted based on cost of living adjustments. The agreements expire May 2015. 3 Legal Settlement Receivable During 1995, the Company entered into a legal settlement agreement with the City of Brentwood resolving a previous dispute. The agreement calls for quarterly principal and interest payments to be made by the City of Brentwood to the Company. The receivable outstanding was 5229,200 at December 31:2001. Interest payments are included in interest income and were $1.4,554 for the current year. 5 BRENTWOOD DISPOSAL Notes to Financial Statements December 31, 2001 4. Intangible Assets The proprietors purchased 100%of the assets effective December 31, 1984. The transaction resulted in the recognition of several intangible assets. The Company evaluates the realizability of goodwill by estimating the expected future cash flaws of the Company. At December 31, 2001, no reserve for impairment of goodwill was deemed necessary. Intangible assets consist of the following: Remaining Period of Amortization Franchise fees $1,025,000 0 years Goodwill 50,000 23 years Going concern 50,000 23 years 1,125,000 Less: accumulated amortization (1,067,500) Total intangible assets, net57,5fl0 Amortization expense charged to operations was $2,500 for the year ended December 3 1, 2001. The acquisition was consummated prior to the effective date of Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). This statement no longer allows the systematic write down of goodwill over its estimated useful life. It requires an entity with recorded goodwill to perform an annual impairment test for goodwill by applying a fair value based assessment. The previsions of the statement are required to be implemented starting with fiscal years beginning after December 15, 2001 and were adopted by the Company subsequent to year-end. 5. Profit'Sharing Flan The Company contributes to a qualified defined benefit pension plan as required by its bargaining agreement with the labor union. The Company contributes a percentage of each eligible employee's annual compensation to the plan. The Company contribution for the year ended December 31, 2001 was $11,423. - 6 - BRENTWOOD DISPOSAL Notes to Financial Statements December 31, 2001 6. Related Party Transactions Garaventa Company provides certain accounting and administrative services to the Company. Charges for these services amounted to $13,860 for the year ended December 31,2001. The Company disposes of municipal solid waste at a transfer station owned by Contra Costa Waste, a related entity. For the year ended December 31, 2001, disposal fees of$187,173 were incurred with the transfer station. The Company leases disposal trucks from a related party, SEG Trucking, under an operating lease expiring on December 31, 2003. The agreement calls for annual rent adjustments based on prevailing market rates. The Company also rents office space and office equipment under month- to-month agreements with Garaventa Property, another related party. Minimum lease commitments in excess of one year are as follows: 2002 $396,737 200; $396,737 Rent expense charged to operations under operating leases was $354,789 for the year ended December 31, 2001. 7. Concentration of Credit Risk The Company operates exclusively in the solid waste industry in Contra Costa County, California and; therefore, its revenues and receivables are subject to geographical concentrations. Due to the nature of the Company's services, its accounts receivable are comprised of many customers. This diversity reduces the risk of any one customer significantly impacting the Company's realization of its receivables. 8. Commitments and Contingencies Contingent liabilities In the ordinary course of conducting its business, the Company becomes involved in lawsuits and administrative proceedings. Some of these proceedings may result in fines, penalties, or judgments being assessed against the Company that, from time to time, may have an impact on earnings. It is the opinion of management that the aforementioned proceedings, individually or in the aggregate, will not have a materially adverse effect on the Company's financial position. - 7 - BRENTWOOD DISPOSAL Notes to Financial Statements December 31, 2001 8. Commitments and Contingencies (continued) Collective bargaining agreement A. significant portion of the Company's employees are subject to a collective bargaining agreement, which expires March 2003. Environmental risk The refuse and recycling industries in which the Company operates are subject to a certain level of environmental risk. Such environmental liabilities could have a material effect on the financial position of the Company and its affiliates. The Company has not accred any liability for environmental contingencies. 9. Subsequent Events Subsequent to December 31, 2001, the Company converted from a proprietorship to an S corporation. - 8 - SUPPLEMENTARY INFORMATION BRENTWOOD DISPOSAL Schedule of Operating Expenses For the Year Ended December 31, 2001 Wages $ 134,948 Payroll taxes 11,426 Workers compensation insurance 11,225 Group health insurance 13,281 Profit-sharing plan 11,423 Dumping fees 187,173 Equipment rent 330,091 Franchise fees 32,802 Household hazardous waste fees 8,362 Uninsured losses 1,252 Total operating expenses $ 741,983 The accompanying notes are an integral part of these financial statements. - 9 - BRENTWOOD DISPOSAL Schedule of Selling, General, and Administrative Expenses For the Year Ended December 31, 2001 Officers` salaries $ 38,375 Office salaries and wages 12,905 Payroll taxes 2,351 Profit-sharing plan 529 Accounting 13,860 Advertising and promotion 3,433 Amortization 2,500 Bad debts 2,700 Miscellaneous expense 3.088 Office equipment rent 8,844 Office rent 15,854 Office supplies 4,358 Postage 3,418 Telephone 946 Total selling, general, and administrative expenses $ 113,161 The accompanying notes are an integral part of these financial statements. a10 - DISCOVERY B►A'Y DISPOSAL FINANCIAL STATEMENTS DECEMBER 31, 2001 ............. TABLE OF CONTENTS Page No, Independent Auditors' Report i Balance Sheet 2 Statement of Operations and Proprietors' Capital Notes to Financial Statements 4 - 7 Supplementary Information Schedule of Operating Expenses 8 Schedule of Selling, General, and Administrative Expenses 9 .......................... ........................................ ...................................................................................................... ...... ARMRNINO MGKENNA LLP Certified Public Accountants& Consultants 20 Juana Avenue San Leandro,CA 94577-4884 oh 510.483.7600 f x 510.483.3300 INDEPENDENT AUDITORS' REPORT To the Proprietors Discovery Bay Disposal Concord, We have audited the accompanying balance sheet of Discovery Bay Disposal (a proprietorship) as of December 31, 2401,and the related statement of operations and proprietors` capital for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the,financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. The Company declined to present a statement of cash flaws for the year ended December 31, 2041. Presentation of such a statement summarizing the Company's operating, investing and financing activities is required by accounting principles generally accepted in the United States of America. In our opinion, except that the omission of a statement of cash flaws results in an incomplete presentation as explained in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Discovery Bay Disposal as of December 31, 2001, and the results of its operations for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of farming an opinion on the basic financial statements taken as a whole. The supplemental schedules of operating expenses and selling, general and administrative expenses for the year ended December 31, 2001, are presented for the purpose of additional analysis and are not required parts of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. ARMANINO MCKENNA LLP February 28, 2002 DISCOVERY BAY DISPOSAL Balance Sheet December 31, 2001 ASSEIS Current'assets Accounts receivable, net of allowance for doubtful accounts of$1,900 $ 24,694 Other assets Intercompany receivable 228,515 $ 253,209 [.IABILTTIES AND PROpR ETORS' CAPITAL Currentliabilities Bank overdraft $ 25,979 Accounts payable and accrued liabilities 60,040 Deferred revenue 13,696 Current liabilities 99,715 Other liabilities Advance account 100,374 Proprietors' capital 53.120 $ 253,209 The accompanying notes are an integral part of these financial statements. - 2 - DISCOVERY BAY DISPOSAL Statement of Operations and Proprietors' Capital For the Year Ended December 31, 2001 Revenue 853,2157 Cost of operations Operating expenses 840,659 General and administrative expenses 95,149 Total cost of operations 935,808 Loss from operations (82,551) Other income/(expense) Interest expense (3 17) Interest income 1,582 Net loss (81,286 j Proprietors' capital, beginning of year 134.406 Proprietors' capital, end of year 53,120 The accompanying notes are an integral part of these financial statements. - 3 - ....................... ..................................... ..................................................................... .......................................... ...... ....... DISCOVERY BAY DISPOSAL Dotes to Financial Statements December 31, 2001 1. Summary of Significant Accounting Policies Business Discovery Bay Disposal (the "Company") is engaged in the solid waste collection and recycling business. The Company provides services under an exclusive agreement to the area of Discovery Bay in Eastern Contra Costa County, California. The Company was acquired by the proprietors in December 1984 and is part of a group of entities with common ownership. As a member of this group,the Company is allocated certain expenses and receives certain services from the related entities. The Company's financial position and results of operations might be different if it was operated as a stand.-alone entity. Revenue Revenue includes billings to customers and sales of recyclable material for the collection, recycling and disposal of municipal solid waste from a diversified base of customers including residential, commercial and industrial customers in Contra Costa County. Residential customers make payments in advance for collection services. Revenue from those receipts is deferred and is recognized as the services are performed. Income taxes Income from the proprietorship is combined with the income and expenses of the proprietors from other sources and reported in the proprietors' individual federal and state income tax returns. The proprietorship is not a taxpaying entity for purposes of federal and state income taxes, and thus, no income taxes have been recorded in the accompanying financial statements. Intercompany receivable The intercompany receivable represents amounts due from affiliates for franchise fees, AB939 fees, and household hazardous waste fees paid by the Company on behalf of these affiliates. Advance account The advance account represents intercompany charges and credits involving cash transfers and other transactions between the Company, Garaventa Enterprises Inc. ("GEF') and other affiliates. -4 - DISCOVERY BAY DISPOSAL Notes to Financial Statements December 31, 2001 1. Summary of Significant Accounting Policies (continued) Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Estimates are used when accounting for the allowance for doubtful accounts and employee benefit plans among others. It is reasonably possible that actual results could differ significantly from those estimates and significant changes to estimates could occur in the near term. 2. Franchise Agreements The Company provides services under an exclusive agreement to the County. The agreement provides for payment to the county of a percentage of gross billings from collection services. Rate schedules are adjusted based on cost of living adjustments. The agreement expires May 2015. 3. Profit-Sharing Plan The Company contributes to a qualified defined benefit pension plan as required by its bargaining agreement with the labor union. The Company contributes a percentage of each eligible employee's annual compensation to the plan. The Company contribution for the year ended December 31, 2001 was $18,120. 4. Related Partv Transactions Garaventa Company provides certain accounting and administrative services to the Company. Charges for these services amounted to $9,102 for the year ended December 31, 2001, The Company disposes of municipal solid waste at a transfer station also owned by Contra Costa Waste. For the year ended December 31, 2001, disposal fees of$214,927 were incurred with the transfer station. - 5 - DISCOVERY BAS''DISPOSAL Dotes to Financial Statements December 31, 2001 4. Related Party Transactions(continued) The Company leases disposal trucks from a related party, SECS Trucking, under an operating lease expiring on December 31, 20033. The agreement calls for annual rent adjustments-based on prevailing market rates. The Company also rents office space and office equipment under month- to-month agreements with.Caaraventa Property, another related party. Minimum lease commitments in excess of one year are as follows: 2001 $381,7128 2002 $381,728 Rent expense charged to operations under operating leases was $401,828 for the year ended December 31, 2001. 5. Concentration of Credit Risk The Company operates exclusively in the solid waste industry in Contra Costa County, California and. therefore, its revenues and receivables are subject to geographical concentrations. Due to the nature of the Company's services, its accounts receivable are comprised of many customers. This diversity reduces the risk of any one customer significantly impacting the Company's realization of its receivables. b. Commitments and Continizencies Contingent liabilities In the ordinary course of conducting its business,the Company becomes involved in lawsuits and administrative proceedings. Some of these proceedings may result in fines, penalties, or judgments being assessed against the Company that, from time to time, may have an impact on earnings. It is the opinion of management that the aforementioned proceedings, individually or in the aggregate, will not have a materially adverse effect on the Company's financial position. Collective bargaining agreement A significant portion of the Company's employees are subject to a collective bargaining agreement, which expires March 2003. - 6 - DISCOVERY BAY DISPOSAL Notes to Financial Statements December 31, 2001 6. Commitments and Contingencies (continued) Environmental risk The refuse and recycling industries in which the Company operates are subject to a certain level of environmental risk. Such environmental liabilities could have a material effect on the financial position of the Company and its affiliates. The Company has not accrued any liability for environmental contingencies. 7. Subsequent Events Subsequent to December 31, 2001, the Company converted from a proprietorship to an S corporation. - 7 - SUPPLEMENTARY INFORMATION DISCOVERY BAY DISPOSAL Schedule of Operating Expenses For the Year Ended December 31, 2001 Wages $ 114,228 Payroll taxes 9,494 Workerscompensation insurance 9,192 Group health insurance 26,042 Profit-sharing plan 18,120 Dumping fees 214,92.7 Equipment rent 389,202 Franchise fees 42,943 Household hazardous waste fees 13,382 Uninsured losses 3,129 Total operating expenses $ 840,659 The accompanying notes are an integral part of these financial statements. _ g _ ........... ................. DISCOVERY BAY DISPOSAL Schedule of Selling, General, and Administrative Expenses For the Year Ended December 31, 2001 Officers' salaries $ 31,041 Office salaries and wages 16,624 Payroll taxes 1,653 Accounting 9,102 Advertising and promotion 2,364 Bad debts 5,600 Miscellaneous expense 2,960 Office equipment rent 1,296 Office rent 11,330 Office supplies 6,720 Postage 6,459 Total selling, general, and administrative expenses $ 95,149 The accompanying notes are an integral part of these financial statements. - 9 - ........................................ ........................................... .......................... ........ ............................. ............ ....................... - - .............. ............................- OAKLEY DISPOSAL FINANCIAL STATEMENTS DECEMBER 31, 2001 TABLE OF CONTENTS Page No., Independent Auditors' Report Balance Sheet 2 Statement of Income and Proprietors' Capital Notes to Financial Statements 4 - 7 Supplementary Information Schedule of Operating Expenses 8 Schedule of Selling, General, and Administrative Expenses 9 ..................................... ....................................... ...................... ........... ............................................................... ............... ............. ARMAN1NO McKENNA LLP Certified Public Accountants &Consultants 270 Juana Avenue San.Leandro,C=A 94577-4884 oh 5M483.71604 fx 510,483.3300 INDEPENDENT AUDITOR. ' REPORT To the Proprietors Oakley Disposal Concord, We have audited the accompanying balance sheet of Oakley Disposal (a proprietorship) as of December 31, 2001, and the related statement of income and proprietors` capital for the year then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonablebasis for our opinion. The Company declined to present a statement of cash flows for the year ended December 31, 2001. Presentation of such a statement summarizing the Company's operating, investing and financing activities is required by accounting principles generally accepted in the united States of America. In our opinion, except that the omission of a statement of cash flows results in an incomplete presentation as explained in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial positron of Oakley Disposal as of December 31, 2001, and the results of its operations for the year then ended in conformity with accounting principles generally accepted in the United States of America. Our audit was made for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of operating expenses and selling, general and administrative expenses for the year ended December 31, 2001, are presented for the purpose of additional analysis and are not required parts of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. AR.MANTINO MCI ENNA LLP March 11, 2002 ................ ............. .............. .............. ....... m.;-X OAKLEY DISPOSAL Balance Sheet December 31, 2001 Current assets Cash $ 200 Accounts receivable, net of allowance: for doubtful accounts of$4,100 177,948 Current assets 178,148 Property and equipment Office furniture and equipment 8,025 Less: accumulated depreciation (5,348) 2,677 Other assets Advance account 414,364 $ 595,189 Current'liabilities Bann.overdraft $ 88,724 Intercompany payable 17,379 Accounts payable and accrued liabilities 120,531 Deferred revenue 264,126 Current liabilities 490,760 Proprietors' capital 104,429 $ 395,189 The accompanying notes are an integral part of these financial statements, 2 OAKLEY DISPOSAL Statement of Income and Proprietors' Capital For the Year Ended December 31, 2001 Revenue S 2,827,1.2:8 Cost of operations Operating expenses 2,302,26 i General and administrative expenses 273#963 Total cost of operations 2.576,230 Income from.operations 250,898 Other income Interest 5,216 Net income 256.114 Proprietors' deficit, beginning of year (151,585) Proprietors' capital, end of year $ 104.429 The accompanying nates are an integral part of these financial statements. OAKLEY DISPOSAL Notes to Financial Statements December 31, 2001 l. Summary of Significant Accounting Policies Business Oakley Disposal (the "Company") is engaged in the solid waste collection and recycling business. The Company provides services under exclusive agreements to the Iron House Sanitary District that includes the City of Oakley and certain areas of Contra Costa County, all located in California. The Company was acquired by the proprietors in 1976 and is part of a group of entities with common ownership. As a member of this group of related entities, the Company is allocated certain expenses and receives certain services from the related entities. The Company's financial position and results of operations might be different if it was operated as a stand-alone entity. Property and equipme Property and equipment are carried at historical cost. Expenditures for maintenance, repairs, renewals, and improvements, which do not significantly extend the useful lives of assets, are charged to operations as incurred. Property and equipment is depreciated over the estimated useful lives of the related assets using the straight-line method. Depreciation charged to operations was $278 for the year ended December 31, 2001. useful lives are as follows: Office furniture and equipment 5 - 7 years Advance account/Intercompany payable The advance account represents intercompany charges and credits involving cash transfers and other transactions between the Company,Garaventa Enterprises Inc. (GEI) and other affiliates. The intercompany payable account represents amounts owed to an affiliate, Discovery Bay Disposal, for franchise fees and AB939 fees paid by Discovery Bay Disposal on behalf of the Company. Revenue Revenue includes billings to customers and sales of recyclable material for the collection, recycling and disposal of municipal solid waste from a diversified base of customers including residential, commercial and industrial customers in Contra Costa County. Residential customers are billed in advance for collection services. Revenue from those billings is deferred and is recognized as the services are performed. - 4 - OAKLEY DISPOSAL Notes to Financial Statements December 31, 2001 1. Summary of Significant Accounting Policies (continued) Income taxes Income from the proprietorship is combined with the income and expenses of the proprietors from other sources and reported in the proprietors`individual federal and state income tax returns. The proprietorship is not a taxpaying entity for purposes of federal and state income taxes, and thus, no income taxes have been recorded in the accompanying financial statements. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Estimates are used when accounting for the allowance for doubtful accounts and employee benefit plans among others. It is reasonably possible that actual results could differ significantly from those estimates and significant changes to estimates could occur in the near term. 2. Franchise Agreements The Company provides services under an exclusive agreement to the Iron House Sanitary District and certain unincorporated areas of Contra Costa County, all located in California. The agreements provide for payment to the District and County of a percentage of gross billings from collection services. Rate schedules are adjusted based on cost of living adjustments. The agreement expires January 1, 2004 and there is an option to extend for an additional 10 years, 3. Profit-Sharing Plan The Company contributes to a qualified defined benefit pension plan as required by its bargaining agreement with the labor union. The Company contributes a percentage of each eligible employee's annual compensation to the plan. The Company's contribution for the year ended December 31, 2001 was $40,179. - 5 - OAKLEY DISPOSAL Dotes to Financial Statements December 31, 2001 4, Related Party Transactions Garaventa Company provides certain accounting and administrative services to the Company. Charges for these services amounted to $19,476 for the year ended December 31, 2001. The Company disposes of municipal solid waste at a transfer station also owned by Contra Costa Waste,, a related entity. For the year ended December 31, 2001, disposal fees of$769,536 were incurred with the transfer station, The Company leases disposal trucks from a related party, SEG Trucking, under an operating lease expiring on December 31, 2003. The agreement calls for annual rent adjustments based on prevailing market rates. The Company also rents office space and office equipment under month- to-month agreements with Garaventa Property, another related party. Minimum lease commitments in excess of one year are as follows: 2001 $829,841 2002 $829,841 Rent expense charged to operations under operating leases was $854,496 for the year ended December 31, 2001. 5. Concentration of Credit Risk The Company operates exclusively in the solid waste industry in Contra Costa County, California and; therefore, its revenues and receivables are subject to geographical concentrations. Due to the nature of the Company's services, its accounts receivable are comprised of many customers. This diversity reduces the risk of any one customer significantly impacting the Company's realization of its receivables. An allowance for doubtful accounts is also maintained. 6. Commitments and Contingencies Contingent liabilities In the ordinary course of conducting its business, the Company becomes involved in lawsuits and administrative proceedings. Some of these proceedings may result in fines, penalties, or judgments being assessed against the Company that, from time to time, may have an impact on earnings. It is the opinion of management that the aforementioned proceedings, individually or in the aggregate, will not have a materially adverse effect on the Company's financial position. - 6 - .............. ...... .............. OAKLEY DISPOSAL Notes to Financial Statements December 315 2001 6. Commitments and Contingencies continued} Collective bargaining agreement A significant portion of the Company's employees are subject to a collective bargaining agreement, which expires March 2003. Environmental risk The refuse and recycling industries in which the Company operates are subject to a certain level of environmental risk. Such environmental liabilities could have a material effect on the financial position of the Company and its affiliates. The Company has not accrued any liability for environmental contingencies, 7. Subsequent Events Subsequent to December 31, 2001, the Company converted from a proprietorship to an S corporation. 7- ................... SUPPLEMENTARY INFORMATION .......... .......... ......................... ............. :�XXIIX, X, OAKLEY DISPOSAL Schedule of Operating Expenses For the Year Ended: December 31, 2001 Wages $ 378,201 Payroll taxes 31,513 Workers compensation insurance 30,487 Group health insurance 55,346 Profit-sharing plan 40,179 Dumping fees 769,.536 Equipment rent 823,831 Franchise fees 144,405 Household hazardous waste fees 20,996 Uninsured losses 7,773 Total operating expenses $ 2,302,267 The accompanying notes are an integral part of these financial statements, - 8 - OAKLEY DISPOSAL Schedule of Selling, General, and Administrative Expenses For the Year ended December 31, 2001 Officers" salaries $ 90,000 Office salaries and wages 55,079 Payroll taxes 9,989 Profit-sharing plan 2,420 Accounting 19,476 Advertising and promotion 10,175 Bad debt recovery (1,900) Collection agency fees 1,795 Contributions 5,250 Depreciation 278 Janitorial 2,873 Medical 1,084 Miscellaneous expense 2,103 Office equipment rent 2,5$0 Office rent 28,085 Office supplies 12,895 Postage 19.498 Telephone and utilities 12.283 Total selling, general, and administrative expenses $ 273,963 The accompanying notes are an integral part of these financial statements. - 9 - Appendix C - Reconciliation of 2001Audit to Rate Application ` en d Reconciliation of 2001 Audit to Rate Application Garaventa included its reconciliation Additionally for the year 2002 estimate, from the audited financial statements to the and year 2003 projection, detailed line item 2001 information in the rate application. expenses are provided in this appendix. This reconciliation is titled, "Income Statements/Audit tie-out." C;-fl .................. ...... ........... ............ Review of Solid Waste Rate Application C-2 .......... C,rttavemn Enterprises Rate Application Income Statement/Audit tie-oul 12/31/2001 From Audited Financial Statements Uiscuvery Pittsbuylla lJ . Brentwood Bap (Bay E2tut) Total Revenue 2,827,128 662,393 853,257 851,949 5,194,727 Cost of operations Operating expenses Labor-wages 378,201 134,948 114„228 108,703 736,080 IR payroll taxes 31,513 11,426 9,494 10,327 62,760 IP Labor-,health and welfare 55,346 13,281 26,042 18,457 113,126 IB Labor-workmensscomp 30,487 11,22.5 9,192 8,845 59,749 IB Labor-pension 40,179 11,423 18,120 12,508 82,230 IB Total Direct Labor 535,726 182,303 177,076 158,839 1,053,944 Dumping costs 769,536 187,173 214,927 228,280 1,399,916 2 Ftandrise fees 144,405 32,802 42,943 42,910 263,060 23 H14W fees 20,996 8,362 13,382 18,838 61,598 5 Real-equipment 1233,931 330,091 389,202 216,643 1,759,767 10 General and admin expenses Salaries-Directors' 90,000 38,375 31,041 18,671 178,087 3 Salaries-office 55,079 12,905 16,624 49,299 133,907 3 Payroll taxes 9,989 2,351 1,653 3,445 17,438 3 Accounting 19,476 13,860 9,102 4,255 46,693 3 Advertising 6,725 2,977 2,364 1,569 13,635 3 Sales Promotion 200 456 - - 656 3 Sponsorships 3,250 440 1,196 4,886 3 Amortization - 2,500 - 2,500 Nan-allow Bad debt (1,900) 2,700 5,600 6,400 Rev Collection fees 1,795 59 85 396 2,335 3 Contributions 5,250 - 412 5,662 Non-allow Ibw-rental 2,580 81844 1,296 1,346 14,066 3 Insurance - - 610 610 3 Janitorial 2,873 - - 902 3,775 3 Lease-outside equipment - 1,980 1,980 1,611 5,571 3 Legal - - 94 94 3 Medical expenses 1,084 310 336 343 2,073 3 Office supplies and expenses 12,895 4,358 6,720 3,493 27,466 3 Pension plan expense 2,420 529 19 ',288 4.256 3 Postage 19,498 3,418 6,459 4,362 33,737 3 Rent-office 28,085 15,854 11,330 6,246 . 61,515 4 Telephone 11,236 946 375 939 13,496 3 Utilities 1,047 - 491 1.538 3 Dues and subscriptions 370 2,452 2,822 3 interest-deposits 678 678 Non-allow Licenses-permits 45 45 45 is 150 3 Travel and entertainment 48 485 533 3 Total G&A 272,723 112,907 95,029 103,922 584,581 Repairs mrd maim. 933 - 120 438 1,491 4 Taxes-personal property 29 254 109 392 4 Repairs-customer 7,773 1,252 3,129 3,875 16,029 4 Depreciation 278 202 480 4 9,013 1,506 .3,249 4,624 18,392 Total cost of operations 2.576 30 855,144 935,808 774,076 5,141,258 Income(Loss)from operations 250,898 (192,751) (82,551) 77,873 53,469 Other income/(expense) Inter-est income 5,216 14,790 1,582 21,588 Nan-allow interest expesne (1,0517 (317) (1,368} Non-allow 5,216 13,739 1.265 20,220 Net Income 256,114 (179,012) (81,286) 77,873 73,689 Expense mllforward Allomed Expenses 5,126,018 Expense per A-2 5,126,018 Difference - Garaventa Enterprises Rate Application 2002 protections Discovery Pittsburgh 5 months 12 uwnth OaW!Z Brentwood Bay Iff Point). Total Pref Total Revenue 1.025,808-74 278,589.09 420,538.32 250,654.45 1,973.5@8,80 4,738,584.84 Cost ofopetadons Operating expenses Labor-wages 170,101.57 56.447,42 48,140.91 46,29294 321,982,84 772,758.82 PPayroll taxes 15,312.25 5,424-18 4,288.65 4.302.83 29,375.89 70,502,14 Labor-he"end welfwe 26,320.14 5,848.92 11,697-84 7,89029 $1.557.19 123,737.28 Labor-wotlmenscoup 21,582.43 7,381.92 5,973.78 305.30 38,603.41 92,846.18 Labor-pension 17,17257 4,857.36 7,741,97 _V11,85 34.583.95 83,98148 ToWDirxttahor 250,469.18 82,029,78 77,821,13 88,183,21 478;503.28 1,143,607.87 Dunving costs 332,588.51 84,688.52 90,138.04 106,829.74 614,02281 1,473,654.74 Franchise fees 89.750.94 1,383.15 69,364.03 140,49812 289,830.31 HW fees 10,497.90 2,169.78 12.887.88 82,888.59 Rent-equipment 345,607 EIS 165.438.30 168,781.10 84,219.83 764,043.98 1,8333,705.55 Gcmal and admin expenses Salaries-Directors' 50,893.29 15,030.08 15.030.08 9.431.08 90,364.47 215,922.73 Salaries-office 24,334.08 - - 17.977.56 42,331.62 101,595.89 payroll tortes 4,480.05 599.46 999.46 1.878.68 7,557,83 18,138.31 Accounting 14,148.80 11,280.00 9.272,60 2,024.98 36,726.18 68,14283 Advertising 2,596,48 1,191.40 1,120-00 289.47 5,197.35 12,473.84 Sales Prumnon 845,00 1,000.00 - - 1,848.00 3,948.00 Sponsorships 5,700,00 276.83 5,978.83 14.344.39 Antnttimuon Sad debt Collection fees 123425 155,26 124.80 21927 1 733,40 4.180.16 Contributions - - _ WAS 843.19 1,543.88 Pxn-rental 1,075A0 3.685.00 540.00 580.73 5.880.73 14,085.75 htsurance 810.00 .Janitorial 1,244.50 - 286.32 1,533.82 3,881.17 Lane-oumide equipmcni 720.00 720.00 79455 2,224.56 5,338.92 Legal 330.00 - 15.90 349,90 830.16 Medical mqoeases 276.00 115.50 - 11820 507.70 1,219.48 Office supplies and expenses 3.380.48 1,OS4.76 1.579.89 1,226.54 7.22145 22,331.98 Pension plats expense 681.82 253,12 35029 833.88 2098.91 5,037.38 Postage 5.060.56 1,489.96 2.77995 1,58021 10.930.38 31,232.91 Rent-ogee 11.702.05 6.606.05 4.720.95 2,302.44 25,631.49 81,515.56 Telephone 2.891.36 405.88 .30.50 734.79 4,162.31 9,984.54 hilitis 374.90 - 176.48 551,36 1,323.3'1 Dues and subscriptions 200.00 137.50 64.20 401.70 9134.08 Interest-deposits Licenses-perinks Travel and crurfu tnn ern - 36.75 5;1.63 156,38 380.11 131,448.18 43.760.50 35,968.00 41,847.88 253,824.57 599,788.97 Rets and plaint. 120.00 16.55 138.55 327.72 Taxes-personal property Repairs-customer 5,673.12 889.24 2,423.16 1,414.21 10,399.75 24,959.40 Dopsca20on 176.87 54.77 231.64 555.94 5,649.99 88924 2,543.18 1,485.53 10,757.94 25,843.06 Total cost ofoperarians 1,146,212.63 376,159.49 447,803.28 300,163.00 2,272,348.38 5,429,299.09 Income(Loss)from operations 1120,405.691 (.01.60080) {27,284.94) (49,508.55) (298.779.78) {892,734.45? Odor income)(expense) lnterust income 730.96 17.88 38727 - 1,136.09 2,728.62 Interest expesne 730.96 17-W 38727 - 1,135.09 2,726.82 Net Incotne (119.874.93) {i01,5112.54) (28.877,87) f49,508.55) 1297543.89) (590,007.837 •--TNs mote,calctoted by addirq on ale HHW Cees earresoonding tr to second half of 2002 as stated in ale Housework!Hazardous Waste Business plan as orepared by t*Dena Diablo Sartaaon District oaraveuta Enterprises Rate Application 2003 Projections A1lecstion 2001 Method 2002 2003 Revenue 5,194,727 4,736,564.64 Cost of operations Operating expenses Labor-wages 736,080 Specific 772,756.82 791,924.10 IR Paytolitaxes 62,760 Specific 70.502.14 72,250.67 1P Labor-health and welfare 113,126 SWft 123,737.26 123:737.26 1B Labor-workmans comp 59,749 Specific, 92,648.18 92,646.16 1$ Labor-pension 82 230.00 Specific 83,961.48 86,959.19 113 Total Direct LaW 1,0$3,944 1,143,606 1,189,519 Dumping costs 1,399,916 Motion 1,473,854.74 1,504,047.41 s" Franchise fees 263,050 Mellon 289,830.31 295,607.77 23 qHw fees** 61.698 Specific 62.868.59 64,165.19 5 Rent-equipment 1,759,767 Inflation 1,833,705.55 1,871,523.91 10 General and admin expenses Salaries-Directors' 178,087 Specific 216,922.73 222,302.86 3 Salaries-office 133,907 Sps me 101,595.89 104,115.58 3 Payrdutalecs 17,438 Specific 18,138.31 18,588.16 3 Accounting 46,693 Specific 68.142.83 71,549.97 3 Advermirtg 13,635 inflation 12.473.64 12,730.90 3 Sales Promotion 656 inflation 3,948.00 4.029.42 3 Sponsorships 4,886 InBation 14,344.39 14,640.23 3 Amortization 2,500 Non-Allow - Mott-allow Bad debt 6,400 Motion - - Rev Collwbon fees 2,335 "sum 4,160.16 4,245.96 3 Contributions 5,662 Non-Ahow 1,543.86 1,543.66 Not-allow ibm-rental 14,066 Inflation 14,065.75 14,355.84 3 Insurance 610 Inflation 610,00 622.58 3 Janitorial 3,775 Intlation 3,681.17 3,757.09 3 Lease-outside equipment 5,571 inflation 5,338.92 5,449.03 3 Legal 94 Mation 830.16 647.28 3 Medical expenses 2.073 Motion 1,218.46 1,243.81 3 Office supplies and expenses 27,466 inflation 22,331.96 22,792.53 3 Pension plan expense 4,256 inflation 5,037.38 5,141.26 3 Postage 33,737 Inflation 31,232.91 31,877.06 3 Rent-office 61,515 inflation 61,515.58 82,784.27 3 Telephone 13,496 Inflation 8,989.54 10,195.57 3 Utilities 1,538 Inflation•, 1.323.31 1,350.60 3 Duas and subscriptions 2,822 Inflation 964.78 983.98 3 Imermt-deposes 678 Non-Allow Non-allow Licenses-permits 150 Inflation 3 Travel and entertainment 533.03 Inflation 380.11 367.95 3 Total General 6 Admin(Allow) 569,341 596.245 613,992 Repairs and mains 1,491 Inflation 327.72 334.48 4 Taxes-personal properly 392 inflation - 4 Repairs-customer 16,029 Motion 24,959.40 25,474.16 4 Depreciation 480.12 inflation 555.94 587.40 4 18,392 25,843 26,376 Total cost of operations 5.126,018 5,427,755 5,545,431 income(Loss)from operations 53,469 Other incomeF(expense) Interest income 21,588 2.726.62 2,726.62 kion-allow Interestexpe.me (1,368} - 0 Non-allow 20,220 Net Income 73,689 "-Amounts based on Household Hazardous Waste Program Business Plan prepared by fie Def Diablo Sanitation District for the FY 2002 and 8eyon4- ................... .................................. ................. Appendix D Adjusted Base Year Rate Model A Appendix D Adjusted Base Year Rate Model Exhibit. D-I of this appendix provides a Services provided to County reclassified as a pass through expense 'called Household the adjusted base year rate model. The model is the first sheet of the base year Hazardous Waste Program Costs). application and shows the 2001, 2002, and Pass Through Costs 2003 financial information. Year 2003 incorporates all of the adjustments noted in a Trucking and equipment reduced to Section Ill of this report including: reflect market-based monthly lease rates and 1.3 percent inflation rate- Revenue s Franchise fee adjusted for findings from a No adjustments. rate review. Allowable Costs Profit • Adjustment to direct labor for worker's Operating ratio adjusted to 90 percent compensation cost increases The resulting residential rate increase I is • Tipping fees in excess of$45.00 per ton 7.66 percent, based on a net shortfall of are a pass through cost $406,265. This figure is determined by • Corporate and local general and dividing $406,265 by the projected 2003 administrative costs reduced for revenue (before a rate adjustment) of sponsorship costs $5,304,147 (54,081,215 $1,222,932' • Depreciation and other operating costs all-owed at 1.3 percent inflation rate ....................................................................................................... ......... ............................................................... Review of Solid Waste Nate Application Exhibit D-1 Financial Information Contra Casts County Estimated Projected Actual Current Year Ease Yes, Yearl-Audit Year 2 Year 3 2004 %Chane 2002 56 Chane 2003 %Change in the SF-Bay Area CPI 1.3% 4. Direct Labor $ 1 053 944 6.8% $ 1.126,0W 1.3% $ 1,140,698 2. Tipping Fees(Profit Allowed) 1,399,916 1.3% 1381 552 3.0 1340 240 3. Corporate and Local General and Administrative Casts 564,455 3.7% 585,545 2.0% 595,352 4. Depreciation and Other Operating Costs 18,392 40.5% 25,843 1.3% 26,179 S. Total Allows ble Costs(Lines 1+2+3+4+5+6) $ 3,036,707 2.7% $ 3,118,899 -0.4% $ 3,106,469 Ke S. Operating Ratio r90,6% 8%1 98,1 7. Allowable Operating Profit i(Llne 71.9)-Line 7) t$ 315,023 1 -81%15 59,817 479%1$ 345,453 8. County Administrative Fee axD#V!0! *D1V70i 9. Tacking and Equipment 4,663.537 1.3% 1,685,163 1 1.3% 4,7©7,071 10. Tipping Fees(Pass Through) ODIV101 92,103 77.9% 153,807 11. Household Hazardous Waste Program Costs #DIV/Ol #DIV/01 101,641 12. Total Pass Through Costs(without Franchise Fees)(Lines 10+11) $ 1,663,537 6.8%1$ 1,777,2661 $ 1,972,519 13. Total Allowable Costs(Line 7)plus Allowable Operating Profs(Line 9)plus Total Pass Through Costs(without Franchise Fees)(Line 12) 5,015,267 1 -1.2%1$ 4,955,782 13.5% $ 5.424:151 14. Residential Revenue $ 4,086,250 15. Less Allowance for Uncollectible Residential Accounts _ 5,035 16, Total Residential Revenue(without Rate Change In Bose Year) $ 4,103,604 -1.4%j$ 4,047,409_ 0.8% S 4,081.215 17. Commercial and Light Industrial Revenue $ 1,222,932 18. Less Allowance for Uncollectible Commercial and Light industrial Accounts 1,506 19. Total CammerciaULEght 3trdustrial Revenue(without Rate Change in Base Year) $ 1.173,996 I 2.0% $ 197,4761 2.0% $ 1221 426 20, Recycled Materlai Sales rs 727 7,0%1 7271 0.0%1$ 727 21. Total Revenue(Lines 16+19+20) 5,278,3 1, _-0.6%1$ 5,245,612 14.1% $ 6.303,368 22. Net Shortfall(Surplus)without Franchise Fees(Line 13-Line 21) $ 120 783 23. Residential/Commercial/Light industrial Franchise Fees(see calculation below) $ 263,060 10.2% $ 289,830 1.5°h $ 285,482 24. Net Shortfall(Surplus)with Franchise Fees(Line 22+23) $ 406,265 25. Total Res#dentialiCommerciai/Light Industrial Revenue Prior to Rate Change(Lines 16+19) $ 9,302,67411 26. Percent Change In Existing Residential/Commercial/Light Industrial Rates(Line 241 Line 25) Equation 1) Line 13 X.05$X 27.Total Allowable Costs(Line 5) $ 3,106,489 Equation 2) Line 13+X 28.Allowable Operating Profits(Line 7) 345,163 (Line 13+X)X.05 a X 285,462 29.Total Pass Through Costs(with Franchise Fees)(Line 12+23) 2,258,001 30.2003 Revenue Requirement(Lines 27+29+29) $ 5,709,633 D-7 .......... ............ ......I............. ................ ........... Appendix E Survey of Other Jurisdictions A appendix E Survey of Other jurisdictions Appendix E includes a survey of other Other in-County Jurisdictions jurisdictions. A total of eleven (1 1) other a Antioch jurisdictions were surveyed including-, a Clayton Central Contra Costa Joint Powers Authority a Martinez • Danville is Pittsburg • Lafayette a Pleasant Hill. • Moraga Exhibit E-I provides a comparison of • Orinda average County residential and commercial collection rates provided by • Unincorporated County Garaventa with averages from these eleven im Walnut Creek. comparable jurisdictions. va Review of Solid "Waste Rate Application Exhibit E-1 Residential Refuse, Recycling, and Green Waste Collection Rates of Comparable Jurisdictions to Unincorporated Contra Costa.County Garaventa Enterprises (October 2002) '*0 ; t, n 1 20 gallon .-y N/A $18-76 $36.30 N/A $21.85 1-32 gallon r ' ,Fs` q`+s 5 5�wk� � <' 23.00 19.33 '2 3.30 19.36 23.7 }f f0 i-64 gall on x 1 3t7 9rri 3 7 ?l 2 i 25.74 28.09 26.00 N/A 24.17 y ir4 f i l e l s 1-96 gallon �� a a�ys'F 27.96 30.62 54.62 22.36 24.64 Commercial Collection Rates of Comparable Jurisdictions to Unincorporated Contra Costa County Garaventa Enterprises (October 2002) -'SIN W INN � q Mckup per week 41 "q $ 0;'1$107.87 $110.00 $110.63 N/A $125.88 RI` s 2 �A' .€ r� 2cubic)ards 2!4. ` 10{ 2 ` 3 r0 232,90 24�2s82 � 1t)8,t3C5 166.1() 370.81 795.82 164.{7(i 7S2 4 cubic}randsflr' 3(111`#i 28i 5 3 ` 49 3014 23 1Cs {72. 249.88 N/A 335.8<4 227.00 228.22 .274 4 2-362 c;cubic yards 614�1 6(1i'3S ; a .3 W.60i3 4 ,,3 4110' 474.6{i N/A 391.33 N/A 459.00 2 pickups per week 1 cubic yard 2)4 6{ 0 2 $ 1 04 $, 2 )9 $"its 82 1,08 0,0$215.76 $222.00 N/A N/A $191 84 1 6 14 r 1fA hJfA 2 cubic yards { £ r r 37r, r 332.21 341.7(; 333.86 300.{)0 3!14 2ts 353t3i! 14t10 9 cuh:c rands 484.78 N,.A 30139 432.00 436.566 $1' %a 6 cublcyards f z til&�1J2t t f�J 1,1 1,x:97 9 t,'215,90 =648,110 0417.20 N/A 73.3.84 N/A 998.536 � 1,Li4j.q4 Iki/A Per gull-loose 15 bred $i48 834t3:80 $34€3`x(} $3t7 '$348 8t334ll,fiil,: N A N/A N A N 1� NIA S"348$tl ;{ *1/A: (v JA debris#��+x I 1 /� I 20 and g 4 i 4C5(l6 :464;06114t3 fl6 t36 40(X)6 362.82 343.28 3:36.85 34(1.0t1 3(19.16 4(17,54 366; )5 to°la deE>ris box ' 30and r s; deris box 6e)7 9 697 1) .:6J7 5362.82 343.28 336.35 N/A 309.7 b 553.77 hJIA ,` I47�t11 40 yyard deL�ris box �3U 1� ��311' �33t312 , �3af 12 93;112 �3Ds12 362_t12 343.2<S 33G.S_5 N/A 3(;9.1( NrA N/A Nates: Commercial drop box rates for Antioch,Clayton,and Pleasant Hill are for boxes not to exceed I ton. The commercial circ p box rate for M.trtistcz and'N'tsburg is for a box not to exceed 3 tans. E-2 . ........ .... .............. .......... ............. Appendix E Survey of Other Jurisdictions Exhibit E-I (continued) Average Existing and Proposed Regionalized Residential and Commercial Collection Rates of Garaventa Enterprises (October 2002) $17.88 $25.03 Brentwood N/A 22,758 25.58 N/A 2130 18.30 yrun Swiitary District 17,83 2i,98 24.98 Discovery Bay N/A 2231 25.51 jronbcrise Swiftary District $23.80 $26.80 Bay P0111t 0 Breiitwoo23.80 26.8 d 19�70 22.711wiftary District 19.25 5 23.80 215.80 av V ry B 23 60 26.60 Iranhozase swiftary District ... . ............ $166.10 $2.7 3-5 $219,45 $389,10 $3CI00 ic,9M ;03.00 N/A NA 340I B,eiitwood 340.00 305.00 N/A N/A Sar�iUry District '10 YTQII NIA 34G.-, N/A ar 169.60 28535 Disavery I3ay I NIA N/A 340.00 Aver ;'ag j_ 45 NaS oiat $178.80 $300-75 $236.25 $418.90 $3 6. 5 Brel:twond181.9532835 N/A N/A 366.05 81.93 32835 N/A N/A 366.05 Byroi,,Sai iftaii District 18 1.(30 31)121) .N N/A 3 6 b.01 1.)iScover"T Bay N/A N JA 3 6 6,0 5 Ironhouse sirlitary District 181,95 328,33 .41 Noma Mwmwn� FMI I,& I E-3 .......... ............................. .......... ........ ....... .................... ................... Review of Solid Waste Rate Application E-4 ATTAC H M E H T 2 Comparison of Average 32-gallon Single Can Rate with Cpl-Adjusted Average 32-gallon Single Can Rated (1995-2002) S24.32 24-00 95 X23,14 2 3,,:0 2 Jt 0 0 A A $21.04 ,20,44 a