HomeMy WebLinkAboutMINUTES - 12162008 - SD.9 SE ` Contra
TO: BOARD OF SUPERVISORS
'I< Costa
FROM: Catherine Kutsuris, Director
Department of Conservation and Development County
DATE: December 16, 2008
SUBJECT: RATE CHANGES FOR SOLID WASTE COLLECTION IN THE UNINCORPORATED AREAS
SERVED BY ALLIED WASTE SERVICES UNDER THE COUNTY FRANCHISE
AGREEMENT
SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION
RECOMMENDATIONS
1. APPROVE a solid waste collection rate increase of 4.44% for customers in the
unincorporated areas served by Allied Waste Services under the County's
Franchise Agreement, pursuant to recommendations from NewPoint Group based
upon their review of Allied's Interim Year Rate Application (summarized in their
Final Report dated October 9, 2008 which is attached as EXHIBIT A).
2. DEFER pass-through of 4.44% increase for residential customers through 2009 to
be offset using a portion of current year revenue resulting from deferred
implementation of automation and variable can rates.
3. DIRECT Allied Waste Services to track and report actual residential customer
service levels (cart sizes) and revenue on a monthly basis, including breakdown of
customers by community, for use in calculating net revenue impact from deferring
pass-through of 4.44% increase and downsizing resulting from variable can rates.
4. ADOPT a Variable Can Rate option for the residential customers in the
unincorporated areas served by Allied Waste Services under the County's
Franchise Agreement (except Canyon) which would become effective upon
implementation of automated collection services.
FISCAL IMPACT
No impact to the County General Fund.
CONTINUED ON ATTACHMENT: ® YES ❑ NO SIGNATURE -
ECOMMENDATION OF COUNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE (S):
ACTION OF BOARD ON er' Ito, -)-U6 SAPPRO AS RECOMMEND _V' OTOER
VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND
I ��, n CORRECT COPY OF AN ACTION TAKEN AND
V UNANIMOUS (ABSENT r� ENTERED ON THE MINUTES OF THE BOARD
AYES: NOES: OF SUPERVISORS ON THE DATE SHOWN.
ABSENT: ABSTAIN: ppP,,
ATTESTE4� r I'e.;
Contact: Deidra Dingman (925-335-1224) DAVID TWA, CLERK OF THE
cc: Department of Conservation and Development(DCD) BOARD OF SUPERVISORS AND
L. Wilcox, County Counsel COUNTY ADMI ISTRATOR
Allied Waste Services (via DCD)
B , DEPUTY
G:\Conservation\Lorna\Franchised Haulers\Rates\Allied Waste Inc\Board Order Files\BO-Allied Interim Year Rate Increase 2009.doc
Rate Increase for Solid Waste& Recycling Collection —Franchise Agreement with Allied Waste Services
December 16, 2008
Page 2
BACKGROUND/REASONS FOR RECOMMENDATIONS
The County has a solid waste collection franchise agreement with Pleasant Hill
Bayshore Disposal, Inc. (now known as Allied Waste Services) for service to the
following unincorporated areas:
Alhambra Valley (portion) Concord, unincorporated
Bay Point (portion) Morgan Territory
Canyon Pacheco
Clyde Pleasant Hill, unincorporated
Allied's Service Area under the County Franchise includes portions of Supervisorial
Districts II, III, IV and V.
Interim Year Rate Application for 2009
The NewPoint Group conducted a review of the Interim Year Rate Change Application
submitted by Allied consistent with the applicable provisions of the rate setting manual
approved by the County for use in the Allied Service Area. The result of NewPoint
Group's review is contained in their letter dated October 9, 2008 which is attached as
EXHIBIT A.
Interim year rate changes are calculated based on a weighted increase in controlled
and uncontrolled costs. The recommended 4.44% increase of the solid waste
collection rate was calculated based on the 4.24% increase in controlled and 4.2%
increase in uncontrolled costs.
TABLE 1 — MONTHLY RESIDENTIAL COLLECTION RATES
4.44% Increase* Average Rates
Cart Size Existing Rate New Rate
(Deferred through 2009) in County
20-gallon $ 18.15 $ 0.81 $ 18.96 $ 20.15
32-gallon $ 19.40 $ 0.86 $ 20.26 $ 23.76
64-gallon $ 23.70 $ 1.05 $ 24.75 $ 37.94
96-gallon $ 26.65 1 $ 1.18 1 $ 27.83 1 $ 50.80
' Staff recommends the County defer pass-through of this 4.44% increase for residential customers
through 2009.
The recommended 4.44% increase would not be deferred for commercial and light-
industrial customers served by Allied under the County's Franchise Agreement.
Special extraordinary costs, including fuel cost increases are also considered in the rate
analysis; however an adjustment is allowed only where the change in a cost line item is
demonstrated to exceed double the CPI change. No extraordinary adjustment is
recommended because the estimated increase in fuel costs contained in the
Application would not result in an increase in the applicable Trucking and Equipment
cost line of more double the CPI.
Defer Pass-Through of 4.44% Increase for Residential Customers through 2009
Staff recommends the County defer pass-through of this 4.44% increase for residential
customers through 2009. Deferring pass-through of this increase for a year is expected
to result in a net decrease Allied's revenue of approximately $38,500. However, this
revenue loss would be offset using a portion of the current year revenue not used to
implement automation. The 4.44% increase would be passed through to customers at
the beginning of 2010, in addition to any other rate change warranted based upon
results of the next Interim Year Rate analysis, unless otherwise offset by other revenue.
Tracking & Reporting of Residential Customer Accounts and Revenue
Staff will work with Allied Waste Services to ensure that actual residential customer
revenue is tracked (including monthly breakdown of customers by cart size and
community) so that the data can be used to calculate the true value of deferred 4.44%
residential rate increase.
Rate Increase for Solid Waste & Recycling Collection—Franchise Agreement with Allied Waste Services
December 16, 2008
Page 3
Automated Collection, Single-Stream Recycling & Variable Can Rates
• Automated Collection is a method of collecting waste or recyclables using wheeled carts
placed at the curb which are serviced by trucks with automated arms to lift carts.
• Single-Stream Recycling does not require customers to sort their recyclables and instead
allows them to place their bottles, cans and paper in a wheeled recycling cart.
• Variable Can Rates are rates set based on the amount of waste collected such that the cost
per gallon for each cart size does not differ significantly and more likely to encourage
customers to select smaller garbage can/cart.
In December 2007, the Board of Supervisors approved automated curbside collection
and single-stream recycling for the residential customers in the communities served
under the County's franchise (all those listed above except Canyon). Each residential
customer will be provided with a wheeled cart for single-stream recycling, providing at
least double the capacity for recyclables per household. As a result, some residents
are expected to elect to downsize' their service level because of less waste being
placed in the garbage cart.
Automated & single-stream recycling collection has not yet been implemented so that
the County can take advantage of this one-time opportunity to maximize potential
benefits of instituting it simultaneously with a variable can rate structure. As a result,
revenue intended to fund automation in 2008 can be used to help stabilize rates and
offset potential revenue loss from customer downsizing' as a result of automation
and/or variable rates. Staff worked with Allied this year to develop several
enhancements in the way these collection service changes will be implemented.
Following the Board of Supervisors decision regarding the recommended variable rate
structure options, Allied will initiate customer outreach and purchase any necessary
equipment to provide automated and single-stream collection service. These service and
variable rate changes would take effect between March-May 2009 (corresponds to each
communities billing cycle listed below).
• March - Bay Point (portion), Clyde, Pacheco, Pleasant Hill-Unincorporated
• April - Alhambra Valley (portion)
• May - Concord-Unincorporated, Morgan Territory
Enhancements to customer outreach and single-stream recycling
Allied's initial outreach effort to inform residential customers about pending service and
rate changes, will involve direct mailing to customers detailing the new expanded
service offerings and corresponding monthly rates. A postcard will be included that
customers will be asked to return indicating what size garbage cart (ranging from 20 to
96 gallons) and recycling cart (either 64 or 96 gallons) they want. Allied generally
receives postcards with selection of cart sizes from about 10-15% of their customers in
areas where they have switched to automated and single-stream recycling.
To increase response from customers, outreach will be conducted in English &
Spanish. Additionally, customers will receive one of two versions of outreach
materials targeting customers based on their existing size of garbage cart. The
version sent to the 96-gallon customers would contain extensive detail regarding the
increased recycling capacity for a wide range of materials that they should no longer
place in their garbage cart. This version would encourage them to increase what
they recycle and select smaller garbage cart size in order to avoid pending rate
increase. Customers that downsize from 96-gallon cart to 64-gallon cart would actually
pay a monthly rate that is about $2.00 less than they are currently paying. Additional
follow-up outreach targeting 96-gallon customers that do not select cart size in
response to the initial mailing will also be conducted (printed materials and phone
calls). Customers that do not select their own cart sizes in response to outreach:
• will retain their existing garbage cart size
• 64-gallon & 96-gallon customers will be provided with 96-gallon recycling carts
• 32-gallon & 20-gallon customers will be provided with 64-gallon recycling carts
Downsize or downsizing refers to customers selecting smaller garbage carts,which commonly occurs in response
to increased price/cost.
Rate Increase for Solid Waste& Recycling Collection—Franchise Agreement with Allied Waste Services
December 16, 2008
Page 4
Simultaneous implementation of service changes and variable can rate structure
Implementation of automated and single-stream recycling collection simultaneously with
the variable can rate structure has multiple benefits. To the contrary, instituting variable
can rates independent of any service enhancements, would result in rate increases for
larger carts without any added value to offset impact to those ratepayers. By
implementing these two changes concurrently, ratepayers can realize savings by
downsizing their service without losing overall cart capacity for waste and recyclables.
Additional potential benefits of implementing variable can rates:
• provides direct economic incentive to encourage people to seek alternatives to
putting waste in the garbage can by reducing, reusing, recycling and composting
wastes,
• provides more balanced and equitable rate structure that reduces subsidy built
into rates for the largest cart size,
• encourages households to realize full value of the standard collection services
they are already paying for by maximizing use of their curbside recycling and
yard waste carts,
• helps County demonstrate "good faith effort" to comply with the Integrated Waste
Management Act (AB 939.
The existing residential rates charged by Allied under the County's Franchise
Agreement are regressive, whereby the cost per gallon for the largest cart (96-gallon) is
three times lower than the cost per gallon for the smallest cart (20-gallon). This rate
structure essentially penalizes customers that select smaller cart sizes and likely the
reason that the largest cart size (96-gallon) is the most popular service level, chosen by
45% of households in these communities.
TABLE 2 - EXISTING COST PER GALLON & SERVICE LEVELS
Cart Size Residential Service Levels in 2008 Cost per Gallon
20-gallon 2.48% $0.95
32-gallon 28.89% $0.63
.64-gallon 23.95% $0.39
96-gallon 44.67% $0.29
In December 2007, the Board of Supervisors directed staff to develop multiple variable
can rate scenarios in consultation with Allied Waste Services which if approved were to
become effective upon the commencement of automated collection. Staff has
developed four variable can rate scenarios which were designed to:
1. Ensure customers are empowered and encouraged to select the size of
garbage and recycling cart that meets their needs
2. Be mindful of communities served, some of which have above average
household size or speak only Spanish
3. Ensure rates for all cart sizes remain at least 20% below average rates
charged throughout Contra Costa County especially important in this economy
4. Incorporate past direction from the Board
5. Downsizing and diversion assumptions based on data from other
jurisdictions that have implemented similar rate structures
Actively engage customers in selection of their garbage and recycling cart sizes
Staff has worked with Allied this year to develop enhancements to the automated
curbside collection and single-stream recycling to be implemented. These
enhancements include expanding and targeting outreach to maximize customer
participation and empowering customers to select their recycling cart size as discussed
on page 3.
Mindful of communities served
As of June 30, 2008, Allied was serving a total of 3,060 residential customers in the
unincorporated communities to receive automated collection & single-stream recycling.
Rate Increase for Solid Waste & Recycling Collection-Franchise Agreement with Allied Waste Services
December 16, 2008
Page 5
Below is a breakdown of these customers' service levels by cart size and community.
TABLE 3-ALLIED'S RESIDENTIAL CUSTOMERS IN COUNTY'S FRANCHISE AREA
Total Average
Community 20-gallon 32-gallon 64-gallon 96-gallon Customers Household
Size
Alhambra Valle onion 7.89% 14.59% 8.46% 11.27% 11.47% 1.66
Bay Point(portion) 48.68% 45.93% 34.52% 59.47% 49.31% 3.27
Clyde 14.47% 6.11% 5.59% 8.34% 7.19% Unknown
Concord-Unincor . 1.32% 0.79% 1.09% 1.83% 1.34% 2.28
Morgan Territory 3.95% 4.41% 3.96% 9.44% 6.54% 2.60
Pacheco 22.37% 25.57% 44.34% 8.56% 22.39% unknown
Pleasant Hill - Unincorp. 1.32% 2.60% 1 2.05% 1.10% 1.76% unknown
TOTAL % PER SIZE 2.48%' 28.89% 23.95% 44.67% 100% 2.45
To ensure that customers receive an adequate level of service that will meet the needs
of a household their size, they will be provided with a choice of garbage cart size
(ranging from 20 to 96 gallons) and recycling cart size (either 64 or 96 gallons).
Staff considered the existing rates charged by the other franchise haulers that serve the
remaining portions of the communities of Alhambra Valley and Bay Point. Comparing
the proposed 96-gallon rates with the increases proposed under these four scenarios,
two of the four (A & B) are still less than rates charged by Garaventa Enterprises in the
remainder of Bay Point and all four are higher than rates charged by Republic Services
in the remainder of Alhambra Valley. See Exhibit B for exact rates by community in
comparison to the four variable can rate scenarios proposed for consideration.
All rates would remain below average
All of the rates proposed under these four scenarios fall far below average rates
charged to residential customers throughout the County (shown in Table 1 on page 2).
Additionally, three of the four scenarios (A-C) include more balanced rate structures
whereby the monthly rates for each cart size are between 22% - 38% below average
(variations of 16% or less between cart sizes) as compared to existing rate structure
which is less equitable with rates that are between 5% - 47% below average. See
Exhibit B for listing of rates charged in various communities throughout the County
(ranked in order of the rates charged) in comparison to the four rate scenarios and the
County average.
Prior direction from the Board of Supervisors
The Integrated Waste Management Act (AB 939) requires cities and counties to
implement programs included in their state-approved Source Reduction & Recycling
Elements (SRRE). The County's state-approved SRRE calls for implementation of a
Variable Can Rate Program defined as a rate structure where the cost per gallon for 64-
gallon and 96-gallon garbage carts are at least 80% of the cost per gallon for the 32-
gallon cart (e.g. if cost per gallon for 32-gallon carts is $0.40, the cost per gallon for
larger carts should be at least $0.32).
In 1998, staff attempted to develop a variable can rate structure for customers served
under the Allied Waste Franchise consistent with the County's state-approved SRRE.
However, the rate structure_changes proposed at that time involved more dramatic rate
increases and were ultimately not approved due to concerns about financial hardship
potentially imposed upon households in these unincorporated communities. The new
variable rate structure scenarios being recommended for consideration today are
intended to be less drastic than those presented 1998, while still helping the County
show progress towards fully implementing our state-approved SRRE.
Other jurisdictions with variable can rate structures
Variable can rates already exist in many parts of the County. As shown in Exhibit B, the
rates charged by Republic Services in Alhambra Valley and the majority of West County
are true variable rates with equivalent cost per gallon for all cart sizes (where the 96-
gallon rate is triple the 32-gallon rate). This is also true of the rates charged in the
Rate Increase for Solid Waste & Recycling Collection—Franchise Agreement with Allied Waste Services
December 16, 2008
Page 6
communities served under the franchise agreement administered by the Central Contra
Costa Solid Waste Authority.
In the last few years, the cities of Pleasant Hill and Antioch adopted variable can rate
structures and implemented them concurrently with new automated services provided
by Allied in the last few years. The success they achieved was an increased diversion
of 40% and 73% respectively. As expected, customers downsized their garbage cart
sizes and the amount of the rate increases impacted the degree of downsizing.
PLEASANT HILL Total tons diverted increased 39.6% due to rate/service changes.)
Service Monthly Monthly Service
Cart Size Customers Level Rate Charge Customers Level
(Before) (Before) Change (After) (After) (After)
20-gallon 560 5.95% ($ 4.46) $ 19.00 1088 11.52%
32-gallon 663 7.04% ($ 3.46) $ 22.00 2829 29.96%
64-gallon 998 10.60% $ 4.04 $ 30.00 3115 32.98%
96-gallon 7192 76.40% 1 $ 18.54 1 $ 45.00 2412 25.54%
ANTIOCH Total tons diverted increased 73% due to rate/service changes.)
Service Monthly Monthly Service
Cart Size Customers Level Rate Charge Customers Level
(Before) (Before) Change (After) (After) (After)
20-gallon n/a n/a n/a $ 21.59 720 2.94%
32-gallon 2440 9.52% $ 1.51 $ 22.61 4009 16.35%
64-gallon 2633 10.28% $ 1.94 $ 28.34 4489 18.31%
96-gallon 20552 80.20% $ 4.38 $ 33.0 7 15300 62.40%
Variable Can Rate Structure Scenarios
Four rate structure options are provided for consideration, however staff's primary
recommendation is Scenario A. The three alternate scenarios are expected to result in
similar potential benefits with varying degree of rate changes, with Scenario D
containing true variable can rates resulting in the most drastic changes (largely provided
for demonstration purposes). Each scenario includes the following information for each
garbage cart size: proposed monthly increase or decrease in rates, new monthly rates,
cost per gallon and amount of money customers could save each month by switching to
the next smaller size. These four scenarios include the following range of possible rate
changes per solid waste cart size:
• 96-gallon = increases of $3.00 - $8.65 / month
• 64-gallon = no rate change - decrease of$0.43 / month
• 32-gallon = decreases of$2.00 - $8.10 / month
• 20-gallon = decreases of$3.00 - $11.36 / month
Allied voiced concerns about the impact downsizing may have on their net revenue.
Staff took this into consideration and attempted to address in the following manners:
1. reviewed the downsizing that occurred in Pleasant Hill and Antioch and used this
data to estimate rate of downsizing that may occur in the County areas serviced
by Allied, and
2. calculated projected revenue impact and adjusted proposed monthly increases/
decreases as needed to minimize net revenue change, and
3. propose to use the actual residential customer counts and revenue to be tracked
and reported by Allied Waste on a monthly basis, including breakdown of
customers by cart size and community, to calculate the impact of actual service
level downsizing.
The total revenue collected will be calculated during the next Interim Year Review to
ascertain if downsizing resulted in net revenue loss or gain. Net revenue loss
experienced in 2009, would be offset by actual current year revenue. Net revenue gain
could be offset through rate setting or by providing customers with additional services.
Rate Increase for Solid Waste & Recycling Collection-Franchise Agreement with Allied Waste Services
December 16, 2008
Page 7
Scenario A
Monthly Monthly Monthly Monthly
Cart.Size Increase/ Rate Rate Cost per Savings For
(Decrease) (With 4.44% (without 4.44% Gallon Smaller Cart
increase) increase) Size
20-gallon ($ 6.00) $ 12.96 $ 12.15 $ 0.65
32-gallon . ($ 3.50) $ 16.76 $ 15.90 $ 0.52 . $ 3.80
64-gallon $ 24.75 $ 23.70 $ 0.39 $ 7.99
96-gallon $ 4.10 $ 31.93 $ 30.75 $ 0.33 $ 7.18
Scenario B -
Monthly Monthly Monthly Monthly
Cart Size Increase/ Rate Rate Cost per Savings For
(with 4.44% (without 4.44% Gallon Smaller Cart
(Decrease) increase) increase)
Size
20-gallon ($ 3.00) $ 15.96 $ 15.15 $ 0.80
32-gallon ($ 2.00) $ 18.26 $ 17.40 $ 0.57 $ 2.30
64-gallon $ 24.75 $ 23.70 $ 0.39 $ 6.49
96-gallon $ 3.00 $ 30.83 $ 29.65 $ 0.32 $ 6.08
Scenario C
Monthly Monthly Monthly Monthly
Cart Size Increase/ Rate Rate Cost per Savings For
(with 4.44% (without 4.44% Gallon Smaller Cart
(Decrease) increase) increase)
Size
20-gallon ($ 5.00) $ 13.96 $ 13.15 $ 0.70
32-gallon ($ 4.00) $ 16.26 $ 15.40 $ 0.51 $ 2.30
64-gallon $ 24.75 $ 23.70 $ 0.39 . $ 8.49
96-gallon $.5.00 $ 32.83 $ 31.65 $ 0.34 $ 8.08
Scenario D True Variable
MonthlyMonthly Monthly Monthly
Cart Size Increase Rate Rate Cost per Savings For
/
(Decrease) (with 4.44% (without 4.44 Gallon Smaller Cart
increase) increase) Size
20-gallon ($ 11.36) $ 7.60 $ 6.79 $ 0.38
32-gallon ($ 8.10) $ 12.16 $ 11.30 $ 0.38 $ 4.56
64-gallon ($ 0.43) $ 24.32 $ 23.27 $ 0.38 $ 12.16
96-gallon $ 8.65 $ 36.48 $ 35.30 $ 0.38 $ 12.16
ATTACHMENTS
Exhibit A- Letter from NewPoint Group dated October 9, 2008
Exhibit B-Comparison of Residential Rates throughout Contra Costa County
G:\ronservation\Lorna\Franchised Haulers\RatesWIled Waste Inc\Board Order Files\BO-Allied Interim Year Rate Increase 2009.doc
EXHIBIT A
NewPoint Group"'
Management Consultants
October 9,2008 -
Ms. Deidra Dingman
Conservation Programs Manager
Department of Conservation & Development
Contra Costa County
651 Pine Street
4th Floor,North Wing
Martinez, California 94553-0095
Subject: Final Report-2009 Interim Year Rate Review of Unincorporated Contra
Costa County Areas Served by Allied Waste Services .
Dear Ms Dingman:
This letter report represents results of NewPoint Group's evaluation of Allied Waste
Services' (Allied).2009 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;Inca—Pleasant Hill Bayshore
Disposal, Inc. (Manual), Allied submitted its Application to initiate the interim year review
process on August 27, 2008. To complete our.review, we principally followed Step 2 in Section .
IV of the Manual.
The County Manual allows Allied to submit an interim year rate application during the three
years between base years. The County regulates the following eight (8)unincorporated areas:
1. Alhambra Valley(portion) 5.' Concord, Unincorporated
2. Bay Point(portion) 6. Morgan Territory
3. Canyon . 7. Pacheco
4. Clyde 8. Pleasant Hill, Unincorporated.
This letter is organized into four(4) sections as follows:
A. Summary
B. Background
C. Analysis of the Interim Year Application
D. Recommendations.
There are also three (3) attachments to this letter.
A. Summary
2555 Third Street,Suite 215,Sacramento,California 95818 Phone:(916)442-0508 Fax:(916)442-0714
http://www.newpointgroup.com
NewR nt Group"'
Management Cansultdnts
Ms. Deidra Dingman Page 2
October 9, 2008
Based on our analysis of the Application, we recommend a rate increase of 4.44 percent to
take effect onJanuary1, 2009. '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. The recommended rate increase of 4.44 percent is also applicable to the
commercial and light industrial customer rates.
B. Background
i
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 during each of the
three years between base years, and are triggered if 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. Changes in uncontrolled costs in an interim year are projected
by the hauler in the Interim Year Rate Change Application.
Since that Manual's adoption in 1998, the County has conducted three base year rate reviews
(in 1998, 2003, and 2008), and rates were adjusted during interim years 2001, 2004, 2005, 2006,
and 2007. Rate changes since 1998 were as follows:
■ 1998: + $1.51 per month, or 2.5 to 14.5 percent (base year)
■ 2001: + 3.3 percent (interim year)
■ 2003: —5.0 percent (base year)
■ -2004: +2.6 percent(interim year)
■ 2005: + 1.7 percent(interim year)
■. 2006: + 3.3 percent(interim year)
■ 2007: +5.5 percent (interim year)
■ 2008: + 0.0 percent(base year).
The County received Allied's Application on August 27, 2008. A copy of the Application is
included as Attachment 2. In the Application, in addition to the CPI-based rate increase, Allied
also requested that the County consider an extraordinary rate adjustment to account for increases
in fuel costs.
Final Report
NewPoint Group`"
Management Consultants
Ms. Deidra Dingman Page 13
October 9, 2008
Series Id: CUURA422SA0
Not Seasonally Adjusted
Area: San Francisco-Oakland-San Jose.CA
Item: All items
Base Period: 1982-84=100
{ Year Jan
Feb Mar, j Apr MaYR w Jun Jut Aug Sep Oct Nov Dec ,Annual. HALFS HALF2
( lggg 163 2 1 4.6 165 5 166 6 167 2 167 4 165.5 164 2� 166.9(
iggg j ,169 4 172.2 , 171.8 n 173.5 175.21 ti; i:174 5 .172 5 170 SF 174:2(
( 2000 176 5 178.7 179 1� 181 7� j 183 4 184 1j 180 2 177 1 182.6(
( 2001 191 3 'e 193A mu 4 lg 191 0 ' X , 191 7 1 ;190'611-48r9 188 7 191x1
2002 2 193 5 194 3 193 2 193 0 192 3 293.7(
( 2003 197 7 197:3 196 35 196 3 a , X196 3 195 3 196 4 196 8 1961(
2004 198 i� 198 3�, 199 `198 7 200 3) 199 51 198.8 198P199.5(
(_2005 201 2 201 St k ,: 2U1 2 203.0 0 , 205 9 ,ZU3 4 2U2 7 201 577
2U_33y(
( 2006 t 107 1 108`9 ; 209.11 L1U.7j 211.W 21U 41 W9.2_Z0'9' 110.61 Y
(2007 113:688 115 841 116 113 a ,117 949 118 4851 116 048 214.756 21 361(
�.
2008 219:612 2ZZ.074 "�"'"` 225.18 221J30�
Final Report
NewPoint Group'''
Management Consultants
Ms. Deidra Dingman Page 3
October 9, 2008
C. Analysis of the 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 4.44 percent, as
shown on page 1 of the Worksheet. This rate increase corresponds to:
■ 20-gallon: $0.81 per customer, per month
■ 32-gallon: $0.86 per customer, per month
■ 64-gallon: $1.05 per customer, per month
■ 96-gallon: $1.18 per customer, per month.
The Application was submitted on August 27, 2008. We used the most recent available CPI
at the time of this writing, or the August 2007 to August 2008 change in the CPI. Between
August 2007 and August 2008, the CPI increased from 216.240 to 225.411, or by 4.24 percent .
(see'Attachment 3).
Historical trends for the annual change in CPI are shown in Table 1. The change in the CPI
for the last eleven years has been relatively modest, but recently has been increasing. For the
eleven-year period, since the Manual's implementation(i.e., 1998 to 2008),the change in the
August CPI ranged from 1.2 to 5.1 percent, and increased by an average annual compound rate
of 3.1 percent. During this same eleven-year period, actual implemented County rates increased .
by an average annual compound rate of between 1.2 percent and 2.3 percent, depending on the
rate.
In the Application, Allied projected tipping fees to increase by an inflation-based 4.20
percent from $70.24 to $73.19 per tori. This escalation is reasonable.
2008 Base Year New Automation Services
In the 2008 base year, the County allowed an incremental cost increase of$171,236 for
automation of residential refuse and recycling services. This allowed cost increase included
amortization of planned capital outlays of nearly $700,000 for 1.5 new automated trucks and
approximately 5,300 new carts. The base year rate review also anticipated that Allied would
implement automated services by May.31, 2008, or earlier.
As of this writing, Allied and the County are still developing the variable can rate structure,
associated with the automation services. Allied has not yet incurred capital outlays of the
approximately$700,000 for automated trucks and carts. Based on the current schedule, the
County and Allied plan to implement automation of refuse and recycling services in 2009.
Therefore,the $171,236 provisioned for automation for the rate year 2008 was not incurred, and
represents funding available to offset the costs of providing services to the County ratepayers,
potentially in subsequent Interim Year(s). We recommend that the County and Allied-work
together to determine a mutually agreeable way for the County ratepayers to receive an
equivalent direct benefit from this $171,236 prior to the next base year in 2012 (e.g., offset a
one-time cost(s) that would otherwise result in rate increase).
Final Report
NewPc int Group
Management Consultants
Ms. Deidra Dingman Page 4
October 9, 2008
Table 1
Change in Consumer Price Index
San Francisco-Oakland-San Jose (All Items, CPI-U)
1998 to 2008'
(August-to-August Period)
Year Percent Change in
Index
1998 3.3
1999 4.1
2000 4.7
2001 5.1
2002 1.3
2003 . 1.5
2004 . 1.2
2005 2.2
2006 3.8
2007 2.6
2008 4.2
Average annual compound 3.1
rate of change— 11 years
Request for Extraordinary Adjustment for Fuel Costs
The Manual has a provision that allows special extraordinary adjustments to be considered
outside of the annual schedules of the base and interim year adjustments (page III-1 of the
Manual). Based on our analysis of Allied's request for an extraordinary adjustment(described in
its Application cover letter, see Attachment 2) we recommend.that the County not grant a special
extraordinary adjustment for fuel cost increases, at this time, based on the following factors:
■ The extraordinary adjustment is allowed in the case where the hauler can demonstrate that
a change in one of the cost line items specified in the Application will exceed two (2)
times the most recent change in the applicable CPI. For this 2009 interim year
application, the estimated increase in fuel costs from year 2007 to 2008 does not result in
an increase in the applicable cost line item (i.e., Trucking and Equipment) of more than
two (2) times the CPI.z
■ A certain portion of fuel cost increases are covered in the CPI already provided for in the
recommended 4.44 percent increase.
CPI source data is provided in Attachment 3.
'-Based on fuel cost data provided by Allied for year 2007 and partial year to date 2008.
Final Report
NeWR int Group'
Management Consultants
Ms. Deidra Dingman Page 5 .
October 9, 2008
■ Fuel costs have stabilized and have.been declining in recent months.
Following the three interim years:(2009, 2010, and 2011)_; the County will conduct a base
year rate review in mid-2011 for rates to be set for January 1, 2012, in accordance with the
Manual requirements. Allied is required to submit the Base Year Application to the County by
June 30, 2011. In a"base year"rate review, the County will, among other analyses, assess
whether the hauler's cost have escalated at a rate faster or slower than the CPI,which may
provide a rationale for why rates would be decrease or increased 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 decreased or increased during that-base year(based on a measurement of
the operating ratio level).
D. Recommendations
Based on our evaluation of the Application, we recommend a rate increase of 4.44 percent to
take effect on January 1, 2009. New residential rates, for typical County services,under our
recommendation would be as follows:
■ 20-gallon: $18.96 per customer, per month
■ 32-gallon: $20.26 per customer, per month
■ 64-gallon: $24.75.per customer, per month
■ 96-gallon: $27.83 per customer, per month.
Should you have any questions regarding this 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,
NewPoint Group Inc,
Erik Nylund
Principal
Final Report
Attachment I
Interim Year Rate Change Worksheet
}
NewPc nt Group"'
Management.Consultants
Ms. Deidra Dingman Page 7
October 9, 2008
Contra Costa County
Interim. Year Rate Change Worksheet
Summary '
Rate Change
1. Percent Change in Rates 4.44%
Rate Schedule
Increased New
Rate Schedule a) Current Rate Rate Adjustment b) Rate
2. 1-20 Gallon Can Service $ 18.15 $ 18.96. $'
3. 1-20 Gallon Cart Service $ 18.15 $ 18.96 $
4. 1-32 Gallon Can Service $ 19.40 $ 20.26 $
5. 1-32 Gallon Cart Service $ 19.40 $ 20.26 $ J$� "20:26''
_ 6. 1-64 Gallon Cart Service $ 23.70 $ 24.75_ $ $: 24:75;
7. 1-96 Gallon Cart Service $ 26.65 $ 27.83 $ 27:83;
Year. 2009 Page 1 of 2
a)Does not include all of the rates in the rate structure.
b)Not applicable. The County has elected not to round rates to the nearest$0.05 interval.
i
I
Final Report
NewPoint Group
Monac3ement Consultants .
Ms. Deidra Dingman Page 8
October 9, 2008
Contra Costa County
Interim Year Rate Change Worksheet
Financial Information
Section 1--Base Year Costs
Base Year Controlled Costs c)
1. Total Allowable Costs
2. Plus: Allowable Operating Profit
3. Minus: Tipping Fees(Profit Allowed)
4. Equals: Total Controlled Costs 68,04%
Base Year Uncontrolled Costs c)
5. Tipping Fees(Profit Allowed)
6. Plus: Tipping Fees(Pass Through)
7. Equal: Total Uncontrolled Costs 311:96%
8.. Base Year Revenue Requirement(Less Franchise Fee)
Section 11--Changes in Costs
Change in Controlled Costs
9. Projected Change in Consumer Price Index
10. Adjustment Factor from Prior Interim Year
11. Adjusted Projected Change in Consumer Price Index 4.24%
Change in Uncontrolled Costs
12. Prior Year Tipping Fees Per Ton $ 70.24
13. Plus: Prior Year Regulatory Fees Per Ton $ -
14. Equals: Total Prior Year Uncontrolled Costs Per Ton $ 70.24
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
18. Projected Change In Uncontrolled Costs - 4.20%
Section III—Calculation of Percent Change in Rates
Weighted Change in Controlled Costs
19. Controlled Costs as%of Base Yr.Revenue Requirement 68.04%
20. Multiplied by.- Adjusted Projected Change in Consumer Price Index
21. Equals: Weighted Change in Controlled Costs _•`,2.88%
Weighted Change in Uncontrolled Costs
22. Uncontrolled Costs as%of Base Yr.Revenue Requirement 31.96%
23. Multiplied by: Projected Change in Uncontrolled Costs 4.20%
24. Equals: Weighted Change in Uncontrolled Costs 1.34%
Total Change
25. Total Percent Change in Costs 4.422%
26. Divided by: Adjustment for Franchise Fee(1-5.00%) 95.00%
27. Equals: Percent Change in Existing Rates
Year: 2009 Page 2 of 2
c) Actual numbers are not shown to protect the hauler's confidentiality.
Final Report
- Attachment 2
Interim Year Rate Change Application
NewPc int Group'
Management Consultants
Ms. Deidra Dingman Page 10
October 9,2008
- --'ply ii�4';,i:'�•� ALLIED WASTE SERVICES -
August 21,2008 12
'08 RLI'27 I'ii 1:
-!r J• i' {�i lr.Vly: lili'1!It/7j
Ms.Diedra Dingman '"'
Solid Waste Program Director
Community Development Department
Contra Costa County
651 Pine St.
4t1i Floor,North Wing
Martinez,Ca 94553-0095
RE: Interim Year Rate Application for Solid Waste and Recycling Services
Notice of Intent to Request an Extraordinary Adjustment
Dear Ms.Dingman,
Allied Waste Services of Contra Costa County is pleased to provide the Interim Rate
Change Application for 2009.
In addition,the rate setting process allows for special,extraordinary adjustments outside
the annual schedules if certain conditions are met. Extraordinary adjustments are allowed
in the case where the hauler(Allied Waste)can demonstrate that a change in one of the
cost line items specified in the Base Year Rate Change Application will exceed two (2)
times the most recent annual change in the Consumer Price Index for San Francisco-
Oakland-San Jose published by the Department of Labor Statistics,which is 4.2%.
In the Base Year Rate Change application,we projected that 2008 costs in the Trucking
and Equipment Category would increase 18%from the prior year.One of the components
that drives this increase is fuel.Fuel is forecasted to be$55,000 higher than the same time
last year. i believe we will be able to demonstrate to the City that Trucking and
Equipment has increased at least twice the CPI.
We look forward to meeting with you to discuss our application and request for an
extraordinary increase.Please feel free to contact me if you have any questions.
Sincerely, 1
Timothy M.Argent>
General Manager
441 N.Buchanan Circle
Pacheco,CA 94553
925.685.4711 /FAX 925.685.4735
www.dispo"sal.com
Final Report
NewPc nt Group`'
Management Consultants
Ms. Deidra Dingman Page 11
October 9, 2.008
Contra Costa County
INTERIM YEAR RATE CHANGE APPLICATION
$EC ION 1 GFiARC 5[N L1t„ICQV7N7Ls
Change in Uncontrolled Costs
1 Prior Year Tipping Fee per ton 70.24
2 Plus Prior Year Regulatory Fees per ton
3 Equals: Total Prior Year Uncontrolled Costs per ton 70.24
4 Projected Interim Year Tipping fees per ton 73.19
Plus: Projected interim year regulatory fees per ton
73.19
Projected Change in Uncontrolled Costs 4.20
e�l fi`l1�Fk PIRANA.T FBF I1 G N U.:a��P O L 8.SST
Consumer Price Index for the most recent period is 4.2%
To the best of my knowledge the data information in this application is complete,accurate,and consistent with the
instructions provided by Contra Costa County.
Name: Timothy M.Are Title: General Manager
Signature: r Date: 8/22/2008
Year: Rate Year 2008 Page 1 of 1
v
Final Report
Attachment 3
U.S. Bureau of Labor Statistics
Consumer Price Index, All Items (CPI-U)
San Francisco-Oakland-San Jose Area
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