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HomeMy WebLinkAboutMINUTES - 12022003 - D3 Contra TO: BOARD OF SUPERVISORSR. Costa FROM: Dennis M. Barry, AICP County Community'Development Director GATE: December 2, 2003 SUBJECT: RATE INCREASE FOR SOLID WASTE COLLECTION IN THE UNINCORPORATED AREAS SERVED BY PLEASANT HILL BAYSHORE DISPOSAL, INC. UNDER THE COUNTY FRANCHISE AGREEMENT SPECIFIC REQUEST(S)OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS 1. ACCEPT report from NewPoint Group dated November 5, 2003 regarding their review of the Interim Rate Application submitted by Pleasant Hill Bayshore Disposal, Inc. (EXHIBIT A). 2. APPROVE a solid waste collection rate increase of 2.6% for customers in the unincorporated areas served by Pleasant Hill Bayshore Disposal, Inc. under the County's Franchise Agreement. FISCAL IMPACT No impact to the County General Fund. BACKGROUND/REASONS FOR RECOMMENDATIONS The County has a solid waste collection franchise agreement with Pleasant Hill Bayshore Disposal, Inc. (PHBD) for service to the following unincorporated areas: Alhambra Valley Concord, unincoporated Bay Point(portion) Morgan Territory Canyon Pacheco Clyde Pleasant Hill, unincorporated The County's PHBD Service Area includes portions of Supervisorial Districts ll, 111, IV and V. CONTINUED ON ATTACHMENT: X YES SIGNATURE _,,, ECO'MMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMI EE _.,L�APPROVE OTHER SIGNATURES : , ACTION OF BO ON December 2, 2003 APPROVED AS RECOMMENDED x OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE ,g,UNANIMOUS (ABSENT nme AND CORRECT COPY OF AN ACTION TAKEN AYES: NOES: AND ENTERED ON THE MINUTES OF THE BOARD ABSENT: ABSTAIN: OF SUPERVISORS ON THE DATE SHOWN. Contact: Deidra Dingman (925/335-1224) ATTESTED necewber 2, 2003 cc: Community Development Department(CDD) JOHN SWEETEN, CLERK OF THE County Counsel— L. Fujii BOARD OF SUPERVISORS AND Pleasant Hill Bayshore Disposal, Inc. COUNTY ADMINISTRATOR BY - , DEPUTY DAFranchise n Rates\PHBD RateM2004 Rate Setting\BO-PHBD Interim Year Rate tneraase.dae Changes in Solid waste Collection Rates Charged by PHBD December 2, 2003 Page 2 RACKGROUNDiREASONS FOR RECOMMENDATIONS (continued) NewPoint Group Review The County entered into an agreement with NewPoint Group to review the Interim Year Rate Change Application submitted by PHBD. NewPoint Group conducted their review consistent with the applicable provisions of the rate setting manual approved by the County for use in the PHBD Service Area. The result of NewPoint Group's review is contained in their letter dated November 5, 2003, which is attached as EXHIBIT A. Proposed Solid Waste Collection Rate Increase Interim year rate changes are calculated based on a weighted increase in controlled and uncontrolled costs. The recommended 2.6% increase of the solid waste collection rate was calculated based on the 5% projected increase in uncontrolled costs and 1.4% increase in controlled costs. Uncontrolled Costs Uncontrolled costs refer to tipping fees and associated regulatory charges. PHBD submitted an Interim Year bate Change Application showing a projected 5% increase of the tipping fee (also referred to as the gate rate) at the Contra Costa Transfer and Recovery Station from $ 51.24 per ton to $ 53.80 per ton. Controlled Costs Controlled costs include all costs other than tipping fees and associated regulatory charges. Controlled costs are adjusted based on the change in the CPI, which increased by 1.4%. The below table summarizes the existing and recommended residential solid waste collection rates. Can Size MONTHLY SOLIDCOLLECTION " Existii7g CR 2.6% Increase of CR Recommended CR 20 gallon $ 15.95 $ 0.40 $ 15.35 35 gallon $ 17.05 $ 0.45 $ 17.50 65 gallon $ 20.85 $ 0.55 $ 21.40 95 ganon $ 23.45 $ 0.60 -124.05 The recommended 2;6% increase would also apply to commercial and light-industrial customers served by PHBD under the County's Franchise Agreement. ATTACHMENTS Exhibit A—Letter from NewPoint Group dated November 5,2003 # AFranchise n RatestPHBD Rates\2004 Rate Settingl80-PHBD interim Year Rate increase.doe EXHIBIT A err P6*nt Gn_g Management Consultants November 5, 2003 Ms. Deidra Dingman Community Development Department Contra Costa County 6151 Pine Street 4t'Floor,North Wing Martinez,California 94553-0495 Subject: 2004 Interim Rate Review of Unincorporated Contra Costa County Areas Served by Pleasant Mill Bayshore Disposal, Inc. Dear Ms. Dingman: This letter report represents results of NewPoint Group's evaluation of Pleasant Hill Bayshore Disposal, Inc.'s (PHBD)2004 Interim Year Rate Change Application(Application). In accordance with the County's 1998 Rate Setting Process and Methodology Manual.for Residential Solid Waste Charges, as applied to Browning-Ferris Industries, Inc. -Pleasant Hill Bayshore Disposal, Inc. (Manual), PHBD recently submitted its Application to initiate the interim year review process. To complete our review, we principally followed Step 2 in Section IV of the Manual. This letter report is organized into four sections as follows: A. Summary B. Background C. Analysis of Interim Year Application D. Recommendations. There also are three attachments to this letter. A. Summary Based on our analysis of the Application, we recommend a rate increase of 2.6 percent to take effect on January 1, 2004. Changes to the most common residential rates in the County rate structure are shown on page 1 of the Interim Year Rate Change Worksheet(Worksheet) included as Attachment 1.1 This recommended rate increase also is applicable to the'commercial and light industrial customer rates. ' There are eight separate unincorporated County service areas. Rates shown in Attachment I are regional rates which were implemented on January 1,2003. 0 2555 Thircl Street.$Jte 215, crvmento.CofftorNo qss 18 9 Rione.:(916)442-05M.. * Fax:(910)442-0714 NewPc nt Gn& Management Consultants Ms. Deidra Dingman Page 2 November 5, 2003 B. Background In 1998,the County adopted the Manual The Manual reflects the County's desire to use the operating ratio method for establishing allowable profit levels in base years. The Manual identifies guidelines for allowable, pass-through, and non-allowable costs.', Every four years, during base years,the hauler submits financial statements and a Base Year Rate Application. These documents are reviewed to determine whether a rate change is necessary. Interim years follow a more streamlined process. Interim years occur wring each of the three years between base years when the hauler submits an Interim Year Rate Application. The interim year process distinguishes between controlled costs and uncontrolled costs. Controlled costs include all costs other than tipping fees (both tipping fees with profit allowed and tipping fees treated as a pass through cost). In interim years, controlled costs are adjusted based on the change in the San Francisco-Oakland-San Jose Consumer Price Index(CPI),All Items, for All Urban.Consumers. The CPI is published by the U.S. Department of Labor,Bureau of Labor Statistics. In contrast,the hauler projects expected changes to its uncontrolled costs in the Interim Year Rate Change Application. Since that Manual's adoption, the County has conducted two base year rate reviews in 1338 and 2002 and one interim year rate review in 2001. Rate changes since 1998 were as follows: ■ 1338 : +$1.51 per month, or 2.5 to 14.5 percent ■ 2001 : + 3.3 percent ■ 2003 : - 5.2 percent (resulting from the 2002 review). The County received PHBD's Application on September 2, 2003. A copy of the Application is included as Attachment 2. C. Analysis of Interim Year Application As part of the interim year process, the County is required to complete the Worksheet (Attachment 1). The rate increase based on completion of the Worksheet, is 2.6 percent, as shown on page 1 of the Worksheet. This rate increase corresponds to a$0.40 per customer,per month, increase for the 20-gallon can service, a$0.45 per customer,per mouth increase for the 32-gallon can service, a$0.55 per customer,per month, increase for the 64-gallon cart service, and a $0.60 per customer, per month, increase for the 96-gallon cart service. In the Application, PHBD projects tipping fees to increase from$51.24 per ton to$53.80 per ton on January 1, 2004. This corresponds to a 5.0 percent increase in uncontrolled costs. This new $53.80 per ton tipping fee rate will represent the rate charged by Allied to weighed self-haul customers at the Contra Costa Transfer and Recovery Station in Martinez.2 Allied competes for weighed self-haul customers at that transfer station so essentially the$53.80 per ton rate will represent a market-based tipping fee. Z The County regulates the per cubic yard self-haul rate charged at the Contra Costa Transfer and Recovery Station. 25:5;5 Third 5twet,Wte 215.$actomento,Cwtalk mk3 95$1$ 0 Vie:(916)442-05M 0 Fox:016)442.0714 NewP67int Gpup` Management Consultants Ms. Deidra Dingman Page 3 November 5,2003 The Application was submitted on September 2, 2003. We used the most recent available CPI at the time of this writing, or the August 2003 CPI. Between August 2002 and August 2003, the CPI increased from 193.5 to 196.3, or by 1.4 percent(see Attachment 3). Thus,we used a 1.4 Percent increase in controlled costs. Historical trends for the change in August CPI are shown in Table 1. The last fourteen years has been a period of relatively low inflation. Since 1990, the average change in the August CPI was 3.1 percent. For the six-year period, since the Manual's implementation(i.e., 1998 to 2003), the change in the August CPI ranged from 1.3 to 5.1 percent, and averaged.3.3 percent. Table 1 Change in Consumer Price Index San Francisca-Oakiand-San Jose (All Items, CPI-U) 1990 to 2003' (August-to-August Period) Percent Change in Year Index 1990 3.9 1991 4.5 1992 2.6 1993 2.5 1994 2.2 1995 1.4 1996 2.7 1997 3.6 1998 3.3 1999 4.1 2000 4.7 2001 5.1 2002 1.3 2003 1.4 Average— 14 years 3.1 3 CPI source data is provided in Attachment 3. 2555 Thlyd Street.Sudte 215.Scrc:rarnento,Coffornio 9581 * Phi,(9 16)A42-05M * Fox:(914)442-0714 NewPo nt rpup Management ConsUtants Ms. Deidra Dingman Page 4 November 5, 2003 Rate setting is prospective. Rates are set in advance of the year they are ultimately charged. In this interim year, the actual prior year change in the CPI (in this case 1.4 percent) is used as a estimate for the CPI projected to occur in 2004. In the next interim year,were the hauler to submit an interim year application,an adjustment would be made based on the resulting actual CPI that occurred in 2004. For example, if the projected 1.4 percent change actually was 2.0 percent,that portion of the rate would be adjusted upward by 0.6 percent in the next interim year to make up this difference. Following three interim years (2003 to 2005), for 2006 the County will conduct a base year rate review to examine the hauler's actual costs from the previous interim years. In this 2006 base year rate review, the County will, among other analyses, assess whether the hauler's costs have escalated at a rate faster or slower than the CPI,which may provide a rationale for why rates would be increased or decreased at that time. Thus, if in interim years,use of the CPI has materially overstated or understated the hauler's actual change in costs, rates could in turn be adjusted during that base year(based on a measurement of the operating ratio level). A Recommendations Based on our evaluation of the Application, we recommend a rate increase of 2.6 percent to take effect on January 1, 2044. New residential rates, for typical County services, under our recommendation would be as follows: ■ 20-gallon can - $16.35 per customer,per month ■ 32-gallon can- $17.50 per customer, per month ■ 64-gallon cart- $21.44 per customer, per month ■ 96-gallon cart- $24.05 per customer,per month. Rates are rounded to the nearest$0.05 increment in accordance with the Manual requirement. Should you have any questions regarding the interim year rate review process, or any of the contents of this letter,please do not hesitate to contact me at(510) 338-0104. Sincerely yours, Erik.Nylund Principal + 2,5Thind Street,Sr,Ate 215,sac;.ror?ento,C41fornlo 95818 • Phon16)AQ4 O Fax:(914)42.0714 Attachment Y Interim Year Rate Change Worksheet' + 2555 fNrc!Street,SjAtq 215.$00tomento.Colltomla 95018 + phone:(9(916)442.0 i Fax:(x`)63 442-071A NewMint Group Management Consultants Contra Costa County Interim Year Mate Change Worksheet Summary 1. percent Change in residential nates �% New Rate Schedule a) Current Rate Rate Adjustment Rate 2, 1-20 Galton Can Service $ 15.95 $ 16.37 $ AO2 3. 1-32 Gallon Can Service $ 17.05 $ 17.50 $ 4. 1-64 Gallon Cart Service $ 20.85 $ 21,40 $ 5. 1-96 Gallon Cart Service $ 23.45 $ 24.07 $ Year 2307 Page 1 of 2 a) Does not include all of the rates in the rate structure. 2555 TNrd ytreet;SkAe 215.Socromento,Colifornio Q 18 0 Phone.(916)442-051 a Fox:(g1 ) -071A NewRclnt Gaup& Management Consultants Contra Costa County Interim Year Rate Change Worksheet Financial Inform a tion Base Year Controlled Costa b) 1. Total Allowable Costs 2. Plus: Allowable Operating Profit 3. Minus: Tipping Fees(Profit Allowed) 4. Equals: Total Controlled Costs Base Year Uncontrolled Costs b) 5. Tipping Fees(Profit Allowed) 6. Pius: Tipping Fees({Pass Through) 7. Equal: Total Uncontrolled Costs 8. Base Year Revenue Requirement(Less Franchise Fee) Change In Controlled Costs 9. Projected Change in Consumer Price Index 1.4% 10. Ad ustment Factor from Prior Interim Year 9,0°10 11, Adjusted Projected Change in Consumer Price Index IMMI Change In Uncontrolled Costs 12. Prior Year Tipping Fees Per Ton Is 54.24 13, Plus: Prior Year Regulatory Fees Per Ton 14. Equals: Total Prior Year Uncontrolled Costs Per Ton 15, Projected Interim Year Tipping Fees Per Ton $ 53.80 16, Plus: Projected Interim Year Regulatory Fees Per Ton Is 17. Equals: Total Projected Interim Year Uncontrolled Costs Per Ton 18. Projected Change In Uncontrolled Costs Sectiofs III-Calculation of Percent Change in Rates I swm� Weighted Change In Controlled Costs 19. Controlled Costs as%of Base Yr.Revenue Requirement 59.2% 20. Muhl lied k : Adjusted Projected Change In Consumer Price Index 4.4% 21. Equals: Weighted Change in Controlled Costs Weighted Change In Uncontrolled Costs 22. Uncontrolled Costs as%of Base Yr.Revenue Requirement 39.9°l0 01 23. Mufti tied by: Projected Chan a in Uncontrolled Costs 5.9°!0 24, Equals: Weighted Change in Uncontrolled Costs Total Change 25, Total Percent Change in Casts 26. Divided by: Adjustment for Franchise Fee(4-5.0%) 95.0% 27. Equals: percent Change in Existing Rates Year: 2001 page a of 2 b) Actual numbers are not shown to protect the hauler's confidentiality. * 25551hitO Street, Site 216,SocramentaXoIltornio 9.5818 * PhQno::(9 tb) 2- 0 Fox:(916)d4"2-0714 Attachment 2 Interum Year Rate Change Application' " 2555 Third 5treqot,Wts 215,Sacrornento,COlffbe-+iO 958E * ph (91b)442 O ! Fax:(9 16)442.07 14 Camra Costa County Interim Year Rate Change Application Section I-Changes in Uncontrolled Costs Change In Uncontrolled Casts 1. Prior Year Tipping Fees per Ton 51.24 2. Plus: Prior Year Regulatory Fees per Ton 3. Equals: Total Prior Year Uncontrolled Costs per Ton 1 51.2411 4. Projected Interim Year Tipping Fees per Ton 53.8Ci 6. Plus: Projected Interim Year Regulatory Fees per Ton 6. Equals: Total Interim Year Uncontrolled Costs per Ton 1 53.8011 7. Projected Change in Uncontrolled Costs 5°Jo Section If-Explanation of Changes in Uncontrolled Costs Increase In tipping fens at the Contra Costa Transfer Station. Section III-Certification To the best ofmy knowledge,the data and information in this application is complete, accurate, and consistent with the instructions provided by Contra Costs County. Name: Timm Ar, ;t' Title: General Manager ✓ r ` Signature: Gate: 8/29/03 Year: bate Year 2004 Page 1 of 1 * 2555 Third Street,Softe 215, amento,Col fornio 95818 • tae.(916)442-05M Fox:1+9163 442-0714 Attachment 3 U.S. Bureau of Labor Statistics Consumer Price Index, All Items (CPI-U) San Francisco-Oakland-San Jose Area • 25551 1€d$x00?,omits 215, romento,+Cdj(arn#o 9M 18 + :(916)442-0508 . rix.(,g16),442-0714 NewRint Group" Management Consultants Consumer Price Index - All Urban Consumers Series Td: CUURA422SAO Not Seasonally Adjusted Area: San Francisco-Oakland-San Jose, CA Item: All items Bane Period: 1.982-84=100 Year Jan Feb Mar Apr May Jun Jul Aug Sep Chet Nov Dec Annua! HALF RA. 1 2 1990 128.5 129.2 130.0 130.7 130.8 '131.6 132.3 133.1 134.0 134.6 134.7 135.1 132.1 130.1 134. 1991 136.7 136.1 136.3 135.8 136.2 137.6 138.2 139.1 139.7 139.61 139.8 139.8 137.9 136.5 139. 1992 140.3 141.0 141.9 1141.6 141.9 141.9 142.2 142.7 143.7 144.3 144.2 144.3 142.5 141.4 143. 1993 145.1 145.5 145.7 146.8 146.9 146.1 146.1 146.2 146.5 147.0 147..2 147.0 146.3 146.0 146. 1994 147.5 1.47.4 148.2 148.0 148.3 148.1 148.9 149.4 .149.4 149.4 149.8 143.4 148.7 147.9 149. 1995 150.3 150.5 151.1 151.5 151.3 151.7 1151.5 151.5 152.3 152.6 152.4 152.1 151.6 151.1 152, 1996 152.9 153.2 152.9 153.9 155.1 155.2 155.9 155.6 156.3 156.9 156.9' 156.0 155.1 j 153.9 156. 1997 157.0 157.9 159.2 '159.6 159.8 160.0 160.6 161.2 161.6 162.5 162.6>. 162.6 160.4 158.9' 161. 1998 163.2 164.6 165.5 156.6 167.2 167.4 165.5 164.2 166. 1999 169.4 172.2 171.8 173.5 175.2 174.5 '172.5 170.8 174. 2000 176.5 178.7 179.1 181.7 183.4 184.1 180.2 177.7' 182. 2001 187.9 189.1 130.9 191.0 191.7 190.6 ;189.9 188.7 191. 2002 191.3 193.0 193.2 193.5 194.3 193.2 193.0 192.3 193. 2003197.7 197.3 196.3 136.3 196.8 • 25!55 Third street.SkAte 215,$ tgrctenta.cafifornio 1958 18 0 Phono.(916)442.0 * Fax:(V IO) -0714