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HomeMy WebLinkAboutMINUTES - 12052006 - SD.3 TO: BOARD OF SUPERVISORSContra A. FROM: Dennis M. Barry, AICP a / j Costa Community Development Director `.,w County DATE: December 5, 2006 SUBJECT: RATE INCREASE FOR SOLID WASTE COLLECTION IN THE UNINCORPORATED AREAS SERVED BY RICHMOND SANITARY SERVICE UNDER THE COUNTY FRANCHISE AGREEMENT SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION RECOMMENDATIONS 1. ACCEPT report from NewPoint Group dated November 16, 2006 regarding their review of the Interim Rate Application submitted by Richmond Sanitary Service. (EXHIBIT A). 2. APPROVE a solid waste collection service rate increase of 5.04%, effective January 1, 2007, for customers in the unincorporated areas served by Richmond Sanitary Service 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 Richmond Sanitary Service (RSS) for service to the following unincorporated areas: Bayview North Richmond East Richmond Heights Rollingwood EI Sobrante Tara Hills Montalvin Manor The County's RSS Service Area includes portions of Supervisorial Districts I and II. CONTINUED ON ATTACHMENT: X YES SIGNATURE RECOMMENDATION OF COUNTY ADMINISTRATOR _ RECOMMENDATION OF BOARD COMM EE APPROVE OTHER r SIGNATURES ACTION OF B 17 ON J> . ZdOAPPROVED AS RECOMMENDED OT ER VOTE OF SUPERVISORS / I HEREBY CERTIFY THAT THIS IS A TRUE s/ UNANIMOUS (ABSENT7W/Q) 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. vacad-; 0[57xllcr Contact: Deidra Dingman (925/335-1224) ATTESTED Dee. � 50 2 cc: Community Development Department (CDD) JOHN CULLEN, CLERK OF THE County Counsel BOARD OF SUPERVISORS AND Richmond Sanitary Service (via CDD) COUNTY ADMINISTRATOR i BY , DEPUTY G:\Conservation\Bryn\Franchise\Franchise-BS\RSS\2007 Rates\BO-RSS Interim Year Rate Increase 2007.doc Changes in Solid Waste Collection Rates Charged by RSS December 5, 2006 Page 2 of 3 BACKGROUND/REASONS 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 RSS. NewPoint Group conducted their review consistent with the applicable provisions of the rate setting manual approved by the County for use in the RSS Service Area. The result of NewPoint Group's review is contained in their letter dated November 16, 2006 which is attached as EXHIBIT A. Existing Residential Collection Rates There are two components which together comprise the actual monthly rate charged to customers in the County's RSS Service Area. The first component is the service rate, which is set by the County and subject to our rate review process. The service rate component has not increased for the County's RSS Service Area since January 1, 2006. The second component is the Integrated Resource Recovery Facility (IRRF) rate (hereinafter referred to as IRRF Rate), which is set by the West Contra Costa Integrated Waste Management Authority (WCCIWMA) and not subject to the approval of the County. The IRRF Rate includes the transfer and disposal costs and this rate is set each year by the WCCIWMA. The IRRF Rate component is passed onto all customers served by RSS. On November 9, 2006 the WCCIWMA Board approved the IRRF Rate for 2007 which is equal to the existing 2006 IRRF Rate. Currently the following rates are being charged to residential customers in the County's RSS Service Area: EXISTING RATES Cart Size IRRF Rate Service Rate Total Monthly Rate Charged to Customers 20 gallon $ 5.19 $ 17.75 $ 22.94 35 gallon $ 9.09 $ 18.35 $ 27.44 65 gallon $ 16.91 $ 35.70 $ 52.61 95 gallon $ 25.37 $ 53.00 $ 78.37 Recommended Service Rate Increase The recommended 5.04% increase of the Service Rate can be applied to controlled costs (all costs other than the IRRF rate), in accordance with the County's Rate Manual. Controlled costs are adjusted based on the change in the Consumer Price Index (CPI), which increased by 3.79%. An adjustment factor of 1% has been added to account for the disparity in the projected CPI calculation applied to the 2006 Interim Year Rate Analysis versus the actual CPI for that specified time period. Republic Services, under the terms of the Franchise Agreement, is obligated to pay a 5 % franchise fee to the County. This fee has also been factored into this Interim Year Rate Review and thus, increases the controlled costs from 4.79% to 5.04%. The below table summarizes the per cart costs of the recommended increase of the Service Rate. MONTHLY SOLID WASTE SERVICE RATE Cart Size 2006 Service Rate Recommended Recommended Service Rate Increase 2007 Service Rate 20 gallon $ 17.75 $ .90 $ 18.65 35 gallon $ 18.35 $ .90 $ 19.25 65 gallon $ 35.70 $ 1.80 $ 37.50 95 gallon $ 53.00 $ 2.65 $ 55.65 Changes in Solid Waste Collection Rates Charged by RSS December 5, 2006 Page 3 of 3 BACKGROUND/REASONS FOR RECOMMENDATIONS (continued) If the Board of Supervisors approves the recommended increase to the Service Rate, the new total monthly rate to be charged to residential customers effective January 1, 2007 would be as follows: Cart Size Service Rate IRRF Rate Total Monthly Rate set by Count set by WCCIMWA 20 gallon $ 18.65 $ 5.19 $ 23.84 35 gallon $ 19.25 $ 9.09 $ 28.34 65 gallon $ 37.50 $ 16.91 $ 54.41 95 gallon $ 55.65 $ 25.37 $ 81.02 ATTACHMENTS Exhibit A—Letter from NewPoint Group dated November 16, 2006 G:\Conservation\Bryn\Franchise\Franchise-BS\RSS\2007 Rates\BO-RSS Interim Year Rate Increase 2007.doc EXHIBIT A NewP©int Groupe Management Consultants November 16, 2006 Ms. Deidra Dingman Community Development Department Contra Costa County 651 Pine Street 4`"Floor, North Wing Martinez, California 94553-0095 Subject: Final Report-2007 Interim Rate Review of Unincorporated Contra Costa County Areas Served by Richmond Sanitary Service, Inc. Dear Ms. Dingman: This letter report represents results of NewPoint Group's evaluation of an Interim Rate Application submitted by Richmond Sanitary Service Inc. (RSS) for unincorporated Contra Costa County(County). County rate setting is guided by the County's 2003 Rate Setting Process and Methodology Manual for Solid Waste Charges as applied to Richmond Sanitary Service, Inc. —a division of Republic Services Inc. (Manual). The County Manual allows RSS to submit an interim year rate application during the three years between base years. The County regulates the following six(6)unincorporated areas: 1. East Richmond Heights 2. EI Sobrante 3. Montalvin Manor 4. North Richmond 5. Rollingwood 6. Tara Hills. Our review was conducted consistent with Steps 2, 4, and 5 in Chapter 3 of the County 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 (3) attachments to this letter. NewPeint Group Management-.0©nsulta nis Ms. Deidra Dingman Page 2 November 16, 2006 A. Summary Based on our analysis of the Application, we recommend a service rate increase of 5.04 percent take effect on January 1, 2007, Changes to the most common residential rates in the County service rate structure (without IRRF charges) are shown on page 1, lines 2-5, of the Interim Year Rate Change Worksheet(Worksheet) included as Attachment 1. B. Background In 2003,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 audited 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 during 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 (service costs) and uncontrolled costs (IRRF charges). In interim years, controlled costs (service 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, IRRF charges are reviewed and approved by the West Contra Costa Integrated Waste Management Authority (WCCIWMA). Since that Manual's adoption, the County has conducted one base year rate review in 2003 and rates were adjusted during interim years 2005 and 2006. Year 2007 will be the third interim year review. Service rate changes since 2003 were as follows: ■ August 1, 2003 : +4.15 percent ■ January 1, 2005: + 2.00 percent ■ January 1,2006: +2.95 percent The County received RSS's Application on October 4, 2006. 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 service rate increase based on completion of the Worksheet is 5.04 percent, as shown on page 1 of the Worksheet. This rate increase corresponds to a$0.90 per customer, per month, increase for the 20-gallon can service, a$0.90 per customer,per month, increase for the 35-gallon can service, a $1.80 per customer, per month, increase for the 65-gallon cart service, and a $2.65 per customer, per month, increase for the 95-gallon cart service. Final Report NewP6int Group`'' Management C3nsultants Ms. Deidra Dingman Page 3 November 16, 2006 In its Application, the Company indicated a significant change in projected tipping fees, or IRRF fees, of 45.4 percent. The WCCIWMA is considering changes to the IRRF charge (the charges for all other services than collection), at their November 9, 2006 meeting,that will become effective on January 1, 2007. At this time, the WCCIWMA is considering three options, one of which would leave IRRF rates unchanged. For purposes of this report we have assumed that IRRF rates will remain unchanged for 2007. IRRF charges for 2006 and 2007 are shown in the table on page 1 of the Worksheet, below the service rate schedule. As an example, the IRRF charge for 20-gallon service is $5.19 per customer,per month. For the service rate adjustment,we used the August-to-August CPI for this interim year review. Between August 2005 and August 2006, the CPI increased from 203.0 to 210.7 or by 3.79 percent(see Attachment 3).' Rate setting is prospective. Rates are set in advance of the year they are ultimately charged. The projected increase in the CPI for 2006 (in the prior interim year review) was 2.80 percent, compared with an actual increase in the CPI of 3.79 percent. The projected rate increase for this year has been increased by 1.00 percent to account for this difference.2 Thus, we used a 4.79 percent increase in controlled costs(3.79 percent plus a 1.00 percent adjustment factor). To account for the fact that the hauler must pay a five percent franchise fee to the County,we adjusted the 4.79 percent increase upward to a 5.04 percent increase in the service portion of the rate. Historical trends for the change in August CPI are shown in Table 1 on the next page. The last four years has been a period of relatively low, but increasing,inflation. For the four-year period, since the Manual's implementation (i.e., 2003 to 2006),the change in the August CPI ranged from 1.2 to 3.8 percent, and averaged 2.2 percent. Following three interim years, in 2007 for rates to be set for January 1, 2008,the County will conduct a base year rate review in accordance with the Manual requirements. The Application is required to be submitted to the County by June 30, 2007. In a 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). For rates set January 1,2006,as part of the previous interim year rate review,the October to October CPI was used as the Application was submitted later than the process called for in the Manual. The Manual calls for an August 31 submission. In the future,the County should use the August-to-August change in the CPI for consistency. The actual difference was 0.997 percent. We have rounded this figure to 1.00 percent. Final Report NewP6int Group` Management.Consultonts Ms. Deidra Dingman Page 4 November 16, 2006 Table 1 Change in Consumer Price Index San Francisco-Oakland-San Jose (All Items, CPI-U) 2003 to 20063 (August-to-August Period) Percent Change in Year Index 2003 1.4 2004 1.2 2005 2.2 2006 3.8 Average—4 years 2.2 D. Recommendations Based on our evaluation of the Application,we recommend a service rate increase of 5.04 percent to take effect on January 1, 2007. New residential service rates, for typical County services,under our recommendation would be as follows: ® 20-gallon can- $18.65 per customer, per month a 35-gallon can- $19.25 per customer,per month s 65-gallon cart- $37.50 per customer, per month 0 95-gallon cart- $55.65 per customer, per month. Service rates are rounded to the nearest $0.05 increment in accordance with the Manual requirement. Based on year IRRF approved charges (without any change in 2007), new total residential rates, for typical County services, would be as follows: a 20-gallon can- $23.84 per customer, pr month ® 35-gallon can- $28.34 per customer, per month ® 65-gallon cart- $54.41 per customer, per month a 95-gallon cart- $81.02 per customer, per month. Total rates would increase by between 3.3 and 3.9 percent under the assumption that IRRF rates remain unchanged to County customers for 2007. CPI source data is provided in Attachment 3. Final Report NewR nt Group Management Consultants Ms. Deidra Dingman Page 5 November 16, 2006 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 (916) 442-2456. Sincerely yours, NewMint Group' Inc. Erik Nylund Principal Final Report Attachment I Interim Year Rate Change Worksheet NewP6int Group` ManagementConsultants Ms. Deidra Dingman Page 7 November 16, 2006 Contra Costa County Interim Year Rate Change Worksheet Summary Rate Change V. Percent Change in Residential Rates s.oa^ro Rate Schedule(Service Rate w/o IRRIF Charge) Current New Service Rate Schedule a) Service Rate Rate Adjustment Rate 2. 1-20 Gallon Can Service $ 17.75 $ 18.64 $ 0.01 i 3. 1-35 Gallon Can Service $ 18.35 $ 19.27 $ (0.02) r 4. 1-65 Gallon Cart Service $ 35.70 $ 37.50 $ 5. 1-95 Gallon Cart Service $ 53.00 $ 55.67 $ (0.02) Rate Schedule(Total Rate Including IRRF Charge) i^crs-<s,aa Year 2006 Year 2007 Year 2006 New 2007 %Increase in Rate Schedule a) IRRF Rate IRRF Rate` Total Rate Total Rate Total Rate 1-20 Gallon Can Service $ 5.19 $ 5.19 $ 22.94 3.9% 1-35 Gallon Can Service $ 9.09 $ 9.09 $ 27.44 3.3% 1-65 Gallon Cart Service $ 16.91 $ 16.91 $ 52.61 a 3.4% 1-95 Gallon Cart Service $ 25.37 $ 25.37 $ 78.37 3.4% 'Pending review by the West Contra Costa Integrated Waste Management Authority during November 9,2006 meeting. Year: 2007 Page 1 of 2 a) Does not include all of the rates in the rate structure. Final Report NewFlent Group" Management Consultants Ms. Deidra Dingman Page 8 November 16, 2006 Contra Costa County Interim Year Rate Change Worksheet Financial Information Section 1--Base Year Costs Base Year Controlled Costs 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. Plus: Tipping Fees((Pass Through) 7. Equal: Total Uncontrolled Costs 8. Base Year Revenue Requirement(Less Franchise Fee) Section 11--Changes in Costs Change in Controlled Costs 9. Projected Change in Consumer Price Index 3.79% 10. Adjustment Factor from Prior Interim Year 1.00% 11. Adjusted Projected Change in Consumer Price Index Change in Uncontrolled Costs 12. Prior Year Tipping Fees Per Ton 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 16. Plus: Projected Interim Year Regulatory Fees Per Ton $ 17. Equals: Total Projected Interim Year Uncontrolled Costs Per Ton w �` 18. Projected Change In Uncontrolled Costs Section III-.Calculation of Percent Change in Rates Weighted Change in Controlled Costs r 19. Controlled Costs as%of Base Yr.Revenue Requirement 100.0% r 20. Multiplied by: Adjusted Projected Change in Consumer Price Index 1 4.79% 21. Equals: Weighted Change in Controlled Costs Weighted Change in Uncontrolled Costs r 22. - Uncontrolled Costs as%of Base Yr.Revenue Requirement 0.0% r 23. Multiplied by: Projected Change in Uncontrolled Costs 11 0.0% 24, Equals: Weighted Change in Uncontrolled Costs �J' a Total Change rg rt'" 147,,9;,go' 25. Total Percent Change in Costs r 26. Divided by: Adjustment for Franchise Fee(1 -5.0%) 95.0% 27. Equals: Percent Change in Existing RatesP Year: 2007 Page 2 of 2 Final Report b) Actual numbers are not shown to protect the hauler's confidentiality. Attachment 2 Interim Year Rate Change Application NewPoint Groutot Management Consultants Ms. Deidra Dingman Page 10 November 16, 2006 tU--0A-00 08:49 Fram-Rlchaand Smltary Sa vice 510-Ztt-1032 T-433 PAIII/5113 F-�030 RICHIM0111W my URVICE I T8k 1510126244 �t WO (we) 25-1591 M Date: 10/4/06 To: CCC Community Developm=t Art:, Deidra Dingman FAX: (925)335-1249 From: Janna M.Coverstan ComraM AAdmini=aWi/ Management Counsel .w.r..r.............•a••....usy. :w'.................._.....................,. .....a�� Good morning,Deicira_ Here is the application for interim year CPZ Rate t11;13uttment effective 1/1/47. Please let me know If you need anything else, Jars�rd i 'rhe'laforaytlott.contakwd in fhls fixsiroilc mr-O'bgt is'rntended nnly for the personal and confidentw use of ti i ieciyicatts) mooed above. mft ncssrwge may be anattarne-41ent communication ancl/orwork product and as mach is privily.ed acid` cenfidentiol.Itthe antler of this message W not the Ortenited reco!"t.:oran agent responsibie for dahveriu tto*W, Intended recipient;you are hereby natified,that you hoe received this-massage in error and thot any review,c.4ernitwtion, distribution or copying of this message is strictly prchibiied. If yaU'llave:received this communication in a•ar;Visa= notify Us immediately at MO)262-1644. rural xeport NewR nt Group" tvtonoyement C©nsultonts Ms. Deidra Dingman Page 11 November 16, 2006 10-34-78 38:83 Fra Richizwd,Saittary Service SIC-222-1032 Y434 P.D021803 f-030 RICHMCIND SANITARY SERVICE ? e •+'e� us to meo'HWME ORNE • RfC iMONC CALIFORNIA 948W September 29,2006 Ms.DeidmDingmm Solid Waste Manager Contra costa:comity Deparuneat of Community Development 651 Pine Sheet,0 Floor,Borth Wing Martine=t,CA.94553 Dear Ms Dingman: Re: APPLICATION FOR INTERIM YEAR CPI RATE ADJUSTMENT As provided for in the Franchise Agreement between Contra Costa County and Richmond Sanitary Service dated October 12,1993,and in accordance with the-Raft Setting Proeass and Methodology Manual for Solid Waste Charges.dated June.30,2003;enclosed herewith is an Application for Interim Year CPI Rate Adjustment for the unincorporated meas of West County. The requested adjustment is far an increase in rates of S.79%, effective Januaryl,2007. Early review ofthe requested adjustment will beappreciated so that timely notice canbe provided to our customers. If you.have any questions or need additional information,please call Janna Coverston at(510)262-1644. Very truly. _urs. .y 1 Shawn Moberg General Manager i i I Eaakrsurc Cc: J.Coverston W.Lai) E,Skelly Final Report NewPOlnt Group Management Consultants Ms. Deidra Dingman Page 12 November 16, 2006 Cortina Costa Courity Unincorporated Interim Year Rate Change Application Change.in Uncontrolled.Coal 1 Phar Year Tipping Fees per Ton 5100.19 .2- PWS PnOr Year RegufataY.Peas Per Tpn (InChJdeC In Tipping Feel 3 E,gpetG:' 'Tdat a^YeeriAicantrd[ed Costs Per Tim >.100.19 4 Prgected IntamnYew TwOng Fees Per Ton 5 5.e7 _ 5 PWS Protected lreean YearReguiatory Fees Per Ten 6 EqueW Total Projectedlntenm Year Uncontrolled Costs Per Tai 5 145.67 7Prolaaled Change in Uncanhdied Cos%, 11 of Chingos it)Uncontrolled Costs The1RRF per ton ripping Teesarenot:ad by ASS norregulated by the County.The IRRF:per tan teas-areeetbytne West Contra CDstalnlegraled WastitManagemant Pu11rcntY(WCC1WMA),The-WCCIWMA hasholyotset: the3RRFI"lathe 2007 mlendaryear, Cahsurne"r Price InddiAsdtAug 2005 303'.0 iefleetue base or last role adphatnent) Cwtsvma Pfiis Inda as,Ofnug 2006 '210:7 change n Opt 7. 46 change hilthe GPI 3:79 To the held of nb,knaModge the data and infamatibn in this application is canplete,accurate,and consistent vitth the instructions prWded try the Gontm aaste County. Name. Shawn Moberg Titlo' General Manager Sgnature: 'twee. 8r29fzfxx Year, 2006 Page,i ei2 Final Report Attachment 3 U.S. Bureau of Labor Statistics Consumer Price Index, All Items (CPI-U) San Francisco-Oakland-San Jose Area N NewPoint Group" Management Consultan?s Ms. Deidra Dingman Page 14 November 16, 2006 Series Id: CUURA422SAO Not Seasonally Adjusted Area: San Francisco-Oakland-San Jose, CA Item: All items Base Period: 1982-84=100 • ' , 2.9 153 2152 9 153.9 155.1 155 2 155.9 55.6 56.3 156.9 156 91560155 1 153.9 156.3 • ��.1S�C1' 1,5 ,9`159�2,�`59 fi� �-,9`��{3�'x {7�Q 1�640�6�1d6+1�;�`�6ii �5�1�2�6'^f"626 164 4y ��9��9�` • • 163.2 164.6 165.5 166.6 167.2 11 7.4 165.5 164.2 166.9 .169 s11702t` IVQx I7as1z sf 4z# # tr1176.51 178.7179.1 181.7 183.4 184.1180.2 177.7 182.6 `1 k de t rvt , s ai gay es Y-e& '�o§M ``" i yt 5 a�ew" x s t m-+: P, w✓ � ° g fps 87«9 E €3,9a 1 „ A,, 140 6 189 J _88 7 X791 x ► r 191.3 193.0 193.2 193.5 194.3 1932193.0 192.3 193.7 g ;"• > .0 � � r.P r±��se s � c '"' i J i "ag '� x a � p.; �r az i un . - e 197 7 r 4 ,b s 9G,`3i t ,u9j a t 198 1198.3 199.03 198.7 200.3 X199.5 198.8 198.2 199.5 1 1 MINOR ax'�� a o �` 4a °' '�' znx zi 2©z 5 r. n e zo3 0, zas 43202 + i . 207.11 208.9 3209.1 210.7 1 1 207,9 Final Report u