HomeMy WebLinkAbout1/16/2013 - STAFF REPORTS - 5B CC 1/16/2013 Announcements/Presentations
What2
• Residential trash collection
—From Twice-Weekly to Once-Weekly
PROGRAM HIGHLIGHTS -carts tortrasn provided by Fsos
ONCE-WEEKLY � ":
Residential Trash Service �{ � +t�
i. Im Springs Disposal Services 6
4
January 16,2013 --
Why.:
• Success of the Single Stream
Recycling program • Environmental Benefits
• Carts are convenient
• Quality of Life Benefits
• Twice-weekly collection unnecessary
• Practical Benefits
• A Sustainability Plan program
Quality of Lite
• 40%fewer truck trips • Uniformity;neater a ce
• Clean CNG power �-3i'ws• �•
i
• Less litter from wind
• Increased recycling from: animals
-Increased awareness
• Less litter from collection
-Walk-in recycling to subscribers at no
additionalcost • Same daycolledions
CC 1/16/2013 Announcements/Presentations
Practical � 'What People Say..
Approw
2013
2014
• 14%lower rates
• Customer requests
• Carts replace cans&lids • April 12,2012—PS Neighborhood
Involvement Committee
• Less Wear&teat on Streets —Presentation on program&rates with
0&A
—Overwhelming support
• Current best practice (of 32 neighborhoods only 1 No&1
Abrtention)
Inte resin Rai_ es: jirrie
• Rates won't reduce by h
• Comparisons with other cities NEXT STEP:
need to account for distinguishing • Finalize new Agreement:
characteristic': —Staff&PSDS (Feb.—May 2013)
—Amount of waste generated
—Frequenty of trash wlleaion —City Council consideration
—Method of billing (June S,2013)
—Amount of city fees included —Execute agreement(July 1,2013)*
—Amount of subsidies,if any 'AnY delay could delaystart-up by 6
months.
Timeline Summal}'
• PSDS orders vehicles& carts
(July 1,2013) __
• PSDS distributes carts&
public information(March 2014)
• Program start-up
(March 31,2014)*
"Contingent upon executing new agreement by
July 1,1013
CC 1/16/2013 Announcements/Presentations
Thank you
—City Council Subcommittee
Questions&discussion welcomed
Palm Springs Disposal Semites
Conclusion
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1FOO, City Council Staff Report
Date: January 16, 2013 UNFINISHED BUSINESS
Subject: DISCUSS EXCLUSIVE SOLID WASTE AGREEMENT WITH PALM
SPRINGS DISPOSAL SERVICES (PSDS) AND ALTERNATIVES.
From: David H. Ready, City Manager
Initiated by: Public Works and Engineering Department
SUMMARY
The City Council will discuss and direct staff related to modifying solid waste collection
in the City of Palm Springs from the current twice per week to once per week. This
proposed change in service will result in a reduction of residential rates and a "carbon
footprint" reduction in the City through less frequent solid waste collection truck runs.
Additionally, Palm Springs Disposal Service (PSDS) has indicated they will require a
new 15 year exclusive contract to effectuate the modification of collection services. If so
directed, staff will finalize negotiations for a new contract accordingly and return to the
City Council for approval.
RECOMMENDATION:
Direct Staff as appropriate.
STAFF ANALYSIS:
The City entered into a contract with PSDS on July 3, 2003, for twice weekly pick up of
solid waste. The term of the agreement is 13 years and expires on June 30, 2016. The
agreement provides for a 2 year extension to June 30, 2018, based on the results of a
performance review and at the City's discretion.
On June 1, 2011, the City Council authorized staff to enter into negotiations with PSDS
to explore a new agreement which changed collection to once weekly and modify some
terms of the existing agreement such as reducing the collection fee to reflect collection
changes. (See attached staff report dated June 1, 2011.)
ITEM NO.��
City Council Staff Report
January 16, 2013- Page 2
Solid Waste Agreement
Working with the City's solid waste consultant, MSW Consultants, a detailed analysis
was prepared on the proposed change. Attached you will find their report, "Review of
Proposal to Change to Once-Weekly Residential Refuse Collection." One of the
specific areas the report reviewed was comparison of PSDS converting to automated
trucks vs. use of current manual trucks, and found their projected cost savings
"appeared reasonable" (see report "Finding 4.2," p. 8), which is a basis for the reduction
in proposed residential rates. Also, the report noted that the 11 year contract term
originally proposed is "reasonable" (see "Finding 4.4," p. 10). However, since the time
of this report, PSDS has modified their request to include a 15 year contract term.
Further meetings and discussions with MSW Consultants, PSDS and the City Council
ad hoc subcommittee (Mayor Pro Tern Mills and Councilmember Hutcheson) resulted in
the current PSDS proposal on once weekly collection rates presented to Council here.
Below is a comparison Table of current rates and proposed "1x week service" for the
most used category of residential service (a full residential rate category comparison is
attached):
"Residential" Solid Waste Monthly Rates*
Current Rate 7/1/13 7/1/14 7/1/14
Estimated Estimated 1x week
COLA Rate COLA Rate PSDS Proposed Rate
$18.02 $18.31 $18.83 $16.20
14% Reduction
(*Includes green waste collection—via a"no charge'subscription service)
As a comparison of these proposed rates with other Coachella Valley Cities, attached is
a Table showing current 1x weekly service rates in Cathedral City, Coachella, Desert
Hot Springs, Indian Wells, Indio, La Quinta and Palm Desert. It should be noted, the
proposed reduction is for residential only, and business rates will remain the same with
no service change frequency for that category of customer.
If the City Council directs staff to proceed with the change in residential service, staff will
finalize contract negotiations with PSDS based on the information above and return at a
future meeting for final approval of a new 15 year exclusive solid waste contract.
ALTERNATIVES:
In the alternative, the City Council may direct staff to leave the current PSDS contract in
place maintaining twice per week residential service at the current rate structure, until
the contract expiration date of June 30, 2016. At that time, the City Council may direct
staff to proceed with a "request for proposals" for once weekly solid waste collection
service.
02
City Council Staff Report
January 16, 2013- Page 3
Solid Waste Agreement
FISCAL IMPACT:
If a new agreement for once weekly service is approved, the franchise fees for the City
(including recycling and sustainability) will remain at the same percentages. Actual
revenues related to those fees are based on collection "tonnage" and may fluctuate
accordingly. Additionally, residential customers will realize a 14% rate reduction subject
to future annual cost of living increases (COLA's) and disposal "tipping fee" pass-thru's
as in the current agreement.
David J. Barakian David H. Ready,
City Engineer & City Manager
Director of Public Works
Attachments:
1. City Council Staff Report June 1, 2011
2. Residential Solid Waste Rate Comparison Table
3. MSW Consultants, "Review of Proposal to Change to Once-Weekly Residential Refuse
Collection"
4. Once-Weekly Service Comparative Analysis of Monthly Rates
03
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cqI/FOKN,P City Council Staff Report
Date: June 1, 2011 NEW BUSINESS
Subject: AUTHORIZATION TO NEGOTIATE NEW AGREEMENT WITH PALM
SPRINGS DISPOSAL SERVICES (PSDS) PROVIDING FOR ONCE
WEEKLY SERVICE.
From: David H. Ready, City Manager
Initiated by: Public Works and Engineering Department
SUMMARY
The City entered into an agreement with PSDS on July 1, 2003 to provide solid waste
collection services. That agreement provides twice weekly pick up and expires June 30,
2016. Approval of this item will authorize staff to enter negotiations with PSDS on a new
agreement which will modify the existing terms to, among other things, change
collection to once weekly.
RECOMMENDATION:
1) Authorize staff to enter into negotiations with PSDS on a new Agreement which
will modify some existing terms of the current Agreement to, among other things,
change collection to once weekly.
STAFF ANALYSIS:
The current term of Agreement No. 4727 with PSDS expires June 30, 2016 after a term
of 13 years. The City Charter limits the term of any franchise agreement to 15 years
which means the Agreement could be extended to no later than June 30, 2018. PSDS
has prepared and submitted a proposal for once weekly service. City Staff, utilizing our
solid waste consultant MSW Consultants, reviewed the proposal and presented findings
to City Staff as well as PSDS. PSDS has concurred in the general conclusions included
in the findings. The main conclusions were a) a new 11 year contract term b) change to
once weekly residential service resulting in an average 11.4% decrease in customer
rates c) fully automated collection using new CNG vehicles d) Green Waste services on
a subscription basis.
04
City Council Staff Report
June 1, 2011 -Page 2
Authorization to negotiate new agreement with PSDS providing once weekly service
As part of the performance review of PSDS services by the City's Consultant, staff
conducted a customer satisfaction survey. One thousand residential customers and
50% of the commercial customers were surveyed, yielding a margin of error of 3-6%.
The overwhelming majority of customers rated PSDS's overall perforrance as either
Good or Excellent. The survey results did show a few minor areas where improvement
is needed and those areas are proposed to be addressed in the new agreement.
Staff proposes to negotiate all terms of a new agreement and bring it back to Council for
their consideration this coming Fall. Authorization as recommended above would need
to also include approval of the MSW amendment also on this agenda.
FISCAL IMPACT:
Authorizing staff to negotiate a new agreement, in itself, has no fiscal impact.
SUBMITTED:
Recommended by: Approved by:
&— C—O "a 6/L�
David J. Barakian Thomas J. Wilso
City Engineer& Assistant City nager
Director of Public Works
Approved by:
David H. Ready
City Manager
Attachment: PSDS proposed program rate comparison
05
6)), CURRENT PROGRAM PROPOSED PROGRAM
Collection Once-Weekly
Estimated FY'12 Estimated FY'12
Subscription Services(1 x2) Monthly Rate Subscription Services(4)(5) Monthly Rate(3)
Curbside Economy Curbside Economy
(Trash: 1,32g.can),Recycle:1,15". $ 17.92 (Trash: 1,68-g.cart),Rec:1,68g.
cart) cart)
Family Value Curbside PLUS
(Trash:4,32g.cans), Recycle:1,68- $ 21.21 (Trash:1,96-gal cans),Recycle: 1,68- $ 19.64
g.cart) gal Cart)
Standard Walk-ln(7)
Walk-In (Trash:1,6a-gal cart,1X),Recycle: 1, $ 20.93
$ 23.40 68-gal cart)
(Trash:2,32g.cans),Recycle:1,68- Manual Walk-In(7)(8)
g.cart @ curb) (Trash:4,32gal.cans,Recycle:2,32- $ 20.93
gal.cans)
Estate Estate
$ 59.66 $ 53.70
(Unlimited trash&recycle,walk-in) (Unlimited trash&recycle,walk-in)
9 NO
Curbside Economy Curbside Economy
(Trash: 1,32gal can,2X),Recycle: 1, $ 17.74 (Trash:1,68-gal cart).Recycle:1,68-
68-gal cart) gal cart)
Family Value Curbside PLUS
(Trash:4,32gal cans,2X),Recycle:1, $ 21.03 (Trash: 1,96gaI cans),Recycle:1,W
68-gal cart) gal Cart)
Walk-In (6) Standard Walk-ln(7)
(Trash:2,32gal cans,2)),Recycle: 1, $ 23.21 (Trash: 1,68VI cart),Recycle: 1,68- $ 20.77
al cart curb) I cart
PSDS Once-Weekly Revenue Analysis Update 1/20/2011(bk) 06
F:
OEM
Each additional refuse can $ 5.29 Each additional refuse cart $ 5.85
+ 1st additional recycling cart $ 4.97 1st additional recycling cart Free
2nd additional recycling cart $ 4.97 2nd additional recycling cart $ 2.19
Green waste collection InCI. Green waste collection $ 3.16
Each additional refuse Can $ 11.71 Each additional refuse cart $ 8.44
Walk-in recycling collection $ 4.99 Walk-in recycling collection Free
list additional recycling cart $ 4.97 lst additional reading cart Free
WA2nd additional reading cart $ 4.97 2nd additional recycling cart $ 4.78
MEGreen waste collection Incl. Green waste collection $ 5.19
Notes:
(1)Trash services are twice-weekly, recycling services are once-weekly;walk-in recycling is an
added cost.
(2)All trash cans provided by customer;all recycle carts provided by PSDS.
(3)
(4)All services are once-weekly.
(5)All trash&recycle carts provided by PSDS.
(6)$28.18 with optional walk-in recycling added.
(7)All Walk-In customers will receive walk-in recycling collection at no added cost.
(8)Customer to provide 32-gal. max cans for trash&recycle collection.
PSDS Once-Weekly Revenue Analysis Update 1/20/2011(bk) 07
Residential Solid Waste Rate Comparison 1/6/2013
64 Gallon Any Size Rate Weekly Date of Year of
Cart Direct Billing Adjustment Service Agreement Agreement
Cathedral City $ 16.59 Yes 1 1-Jul-11 3 of 17
Coachella $ 18.06 Yes 1 1 Jun-06 7 of 10
Desert Hot Springs $ 22.12 Yes 1 1-Aug-1 0 3 of 15
Indian Wells $ 20.34 No 1 1-Jul-05 8 of 10
Indio $ 17.73 Yes 1 1-Jul-10 3 of 9
La Quinta $ 13.71 Yes 1 1-Jul-07 6 of 10
Palm Desert $ 8.46 Yes 1 15-Ma -O 3 of 10
Palm Springs $ 18.02 Yes 2 18-Jul-03 10 of 15
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REVIEW OF PROPOSAL TO CHANGE TO
ONCE-WEEKLY RESIDENTIAL REFUSE COLLECTION
PREPARED BY
ONl�t7fiT`�1�T
SOLID WASTE CONSULTANTS
TO IACAL GOVERNMENT
FEBRUARY S,2011
09
REVIEW OF PROPOSAL TO CHANGE TO
ONCE-WEEKLYRESIDENTIAL REFUSE COLLECTION
TABLE OF CONTENTS
1. BACKGROUND.........................................................................................................................1
2. SUMMARY OF THE COMPANY'S PROPOSAL.........................................................................2
3. WORK PERFORMED.................................................................................................................5
4. FINDINGS .................................................................................................................................6
4.1 A LARGE PORTION OF THE COMPANY'S COSTS DO NOT CHANGE WITH THE FREQUENCY OF
COLLECTION..............................................................................................._....................................................6
4.2 TFm COMPANY'SPROJECrm 2012 NErCosrSAVBVGS APPEARED REASONABLE......................8
4.3 NET Cosr REDuCITON LSLEsSFORMANUALSERVICE...................................................................9
4.4 TT-IE PROPOSED II-YEAR CONTRACT TERM LSREASONABLE........................................................10
4.5 NOT ALL PROPOSED CONTRACT PROVISIONS ARE RELATED TO ONCE-WEEKLY SERVICE.......11
4.6 AUTOMATED CART COLLECTION SERVICE IS A HIGHER QUALITY SERVICE...............................11
10
1. BACKGROUND
The City of Palm Springs (City) provides solid waste collection service to its residents
through an exclusive franchise agreement(Agreement) with Palms Springs Disposal
Services, Co. (the Company). Under the terms of the Agreement, the Company is
required to collect refuse from residential customers twice per week, and collect co-
mingled recyclables and greenwaste once per week. Table 1 below shows the days of
the week and from what areas in the City the Company collects each of these material
types
Table 1— Current Frequency and Days of Collection
Material Type Frequency of Service Area Days of Collection
Collection
Refuse Twice per North of Ramon Rd. Monday aild Thursday
Week South of Ramon Rd. Tuesday and Friday
Co-mingled Once per North of Ramon Rd. Monday or Thursday
Recyclables Week South of Ramon Rd. Tuesday or.Friday
West of Palm Cyn.Dr. Wednesday
Greenwaste Once per Citywide Wednesday
Week
In the vast majority of other cities throughout Southern California, residential refuse is
collected once per week. Moreover, of the other cities in the Coachella Valley, only
one other city(Rancho Mirage)has twice per week refuse collection.
At the City's request, the Company submitted a proposal to transition to once per
week residential refuse collection service. The Company's proposal included a cost
analysis that quantified the net cost savings of converting to once-weekly collection,
and a term sheet that proposed several other changes to the Agreement.
The Agreement provides that either the City or the Company may initiate a change in
the scope of services. Any such change, and any corresponding adjustment to
customer rates, is subject to the mutual agreement of the City and the Company. The
City retained MSW Consultants to assist the City in evaluating the reasonableness of
the Company's proposal for once-weekly collection. This report summarizes the
Company's proposal, outlines the work we performed,and describes our findings.
1 February 8,2011
11
2. SUMMARY OF THE COMPANY'S PROPOSAL
The Company's proposal for once-weekly collection centered around a changeover to
automated cart service. The Company's proposal also included several changes in the
Company's residential collection service, and resulted in an 11.4% decrease in
customer rates. The Company also proposed that the City enter into a new franchise
agreement with certain modifications to the current contract provisions.
Table 2 below summarizes each of the Company's proposed changes in residential
collection service. The Company's proposed changes to the contract provisions and
proposed lower service fees are shown in the table on the next page. The Company
also offered several qualitative reasons why it believed that a transition to once-
weekly service was best accomplished in conjunction with a changeover to automated
cart service. These reasons are summarized at the end of this section.
Table 2—Proposed Changes in Residential Service
Service Change Under the new agreement,the Company would.
Weekly Service Collect refuse once per week;residents would receive service
for all three material types on the same day of the week
New Refuse Carts Furnish all customers with new high capacity wheeled refuse
carts with attached lids. Economy and Walk-in customers
would receive 65-gallon carts, Family Value and Estate
customers would receive 95 gallon carts.
New Clean-fuel Vehicles Use clean-fuel, CNGpowered vehicles to provide automated
(Le.,mechanized)residential collection service.
Recyclables Collection for No longer charge an additional fee for collection of recyclables
Walk-in Customers from Walk-in customers.
'Scout'Vehicles for Walk-in Employ smaller 'scout' vehicles to retrieve and pre-position
Service carts for residential customers with Walk-in service.
Subscription-basis Begin offering greenwaste collection service on a subscription
Greenwaste Service basis. The Company would charge a fee only to those
customers who elect to use the service,rather than the current
system in which the Company provides greenwaste collection
on a universal basis at no additional charge.
2 February 8,2011
2
In addition to its proposed changes in service frequency and service fees, the
Company proposed that the City and the Company enter into a new 11-year franchise
agreement, and that the new agreement include several changes to the provisions of
the current Agreement. These proposed changes are listed below in Table 3.
Table 3—Proposed Changes in Contract Provisions
Contract Current Proposed
Provision
Length of Agreement expires on June 30,2016. New agreement would have a term of 11
Term years.
Minimum Dwelling units that are regularly Dwelling units regularly occupied on a
Service occupied on a part time basis are part-time basis would be required to
Requirements required to subscribe to service,but subscribe to Walk-in service to ensure that
for Part-time the type of service is determined by automated carts are not left on the street
Residents the property owner or manager. when seasonal residents leave the City.
Vacation The City Code requires vacation The Company proposes to add a provision
Rentals rentals to subscribe to the highest to the Agreement regarding vacation
level of service,which is Estate rentals to make the Agreement consistent
Service. However,the Agreement with the City Code.
does not address this issue.
Event Houses The City Code requires event Event Houses would be required to receive
houses to use reasonable business commercial bin service on an event-by-
practices in arranging for refuse event basis.
collection.
Collection of Construction and demolition debris The Company would have the right to
Construction removed by a contractor or other collect all construction and demolition
and person using their own equipment debris generated in the City,even that
Demolition as an incidental part of a total which is now removed by contractors as an
Debris service offered by that contractor is incidental part of a total service offered by
exempt from the agreement. that contractor.
Community None in current contract. Company would pay$78,000 per year for
Funding sustainable community programs.
Successor None in current contract. Company would set aside$100,000
Agreement annually and transfer$1,000,000 to City
Incentive upon entering into a successor 10-year
contract.
3 February 8,2011
13
The Company projected that by the time the new service was rolled out in 2012, the
net saving it would realize would enable it to decrease residential customer rates by
approximately 11.4%. In addition to lower rates, the Company offered primarily
three reasons why it felt that a transition to once-weekly service was best
accomplished in conjunction with a changeover to automated cart service.
First, with the wide acceptance of automated cart service in other communities
throughout Southern California and in the Coachella Valley, automated cart service
would be viewed favorably as an enhancement to the current manual service.
Second, transitioning to once-weekly service would increase the amount of waste
collected in a single pickup. If the Company continued using manual collection to
provide once-per-week service, many residents would need to purchase additional
cans to contain the increased amount of waste collected in a single pickup. Residents
would not need to incur this additional expense if they were provided high capacity
refuse carts with automated collection service.
Finally, if residents were to purchase additional cans to accommodate once-weekly
manual collection service, the additional cans would require additional storage space
in either the resident's yard or garage. Because the high capacity carts used in an
automated collection system are taller, they are able to contain a greater amount of
waste with a smaller 'footprint' As a result, the use of high capacity automated carts
would make it less likely that residents garage, side-yard or patio space would be
infringed upon by additional refuse cans.
4 Februawy8,2011
14
3. WORK PERFORMED
To evaluate the Company's proposal for once-weekly service, we performed the
following tasks:
• Met with Company representatives to review and discuss the proposal for
once-weekly refuse collection.
• Obtained and reviewed the Company's financial statements, detail general
ledger and other financial and operational information.
• Analyzed the Company's expenses, and allocated its costs among its
residential, commercial,industrial and non-franchised lines of business.
• Evaluated the Company's productivity assumptions by comparing them to the
Company's actual productivity for providing automated once per week service
in Desert Hot Springs, and by comparing them to other residential solid waste
collection operations with which we are familiar.
• Compared the Company's projected cost savings with its current actual
expenses.
• Evaluated the reasonableness of the Company's projected capital costs by
comparing them to actual costs incurred by the Company and by other
jurisdictions for similar equipment
• Reviewed the Company's revenue and expense projections for calendar year
2012, the year in which automated, once-weekly collection service is proposed
to be implemented.
• Confirmed the mathematical accuracy of the supporting schedules and the
resulting reduction in customer rates.
5 Febniary8,2011
15
4. FINDINGS
Based on our review and analysis of the Company's proposal for once-weekly
collection,we found that:
4.1 A Large Portion of the Company's Costs Do Not Change with the
Frequency of Collection
We found that a large portion of the Company's cost to provide residential service did
not vary with the frequency of collection. Solid waste collection operations are similar
to public utilities in that they typically include a high portion of fixed costs. These
fixed costs typically include items such as office buildings and maintenance facilities.
In addition to fixed costs, the Company's cost of providing residential service includes
other costs that are not considered fixed costs, but nevertheless do not vary with the
frequency of service. For example, disposal tipping fee costs are typically considered
'variable' costs because the cost of disposal varies with the volume of tons. However,
disposal tipping fee costs do not vary with the frequency of collection. The volume of
waste that residential customers generate does not change with the number of weekly
pickups.
Additionally, the labor and equipment cost of the Company's drivers travelling from
the collection area to the disposal facility does not change with the frequency of
collection. Because there is no change in the amount of tons of waste collected, the
Company's drivers must continue to make the same number of trips to the Edom Hill
transfer station. Drivers typically make two trips per day to the disposal site. As a
result, this disposal site travel time typically consumes about one quarter of a drivel's
work day.
Other items in the Company's cost structure that do not change with a reduction in
the number of weekly pickups include the cost of recyclables collection (which will
continue to be collected once per week)and the cost of fees paid to the City.'
'The City Administrative Fee and Franchise Fee are based on a percent of the Company's gross receipts. As a
result,if the Company's revenue is decreased,percentage rate of these fees must be increased slightly to maintain
city fee revenues at the same level.
6 February S,2011
16
Table 4 below shows that for the 12 months ended September 30, 2009, the
Company's total cost of providing residential solid waste collection service was
approximately $4,362,000. Of that amount, approximately $2,755,000, or
approximately 63% were costs that do not change with the frequency of refuse
collection service. Conversely, Table 4 shows that approximately 37%, or a little more
than one-third, of the Company's total residential collection costs change with the
number of weekly refuse pickups.
Table 4—Costs that Change with the Number of Weekly Refuse Pickups
Percent of Total
Cost Category Annual Cost Cost
Costs that Change with the Number of Weekly Pickups
Labor and labor-related Cost $794,000 18%
Vehicle Operating Cost $661,000 15%
Vehicle Depreciation $152,000 3%
Subtotal:Costs that Vary with the Number of Weekly Pickups $1,607,000 37%
Costs that Do Not Change with the Number of Weekly Pickups
Reyclables Collection Costs 357,000 8%
Disposal Tipping Fees 550,000 13%
City Fees 295,000 7°/u
Other Fixed Operating Cost 785,000 18%
General&Administrative 768,000 18%
Subtotal:Costs that Do Not Vary $2,755,000 63%
Total Cost to Provide Residential Service $4,362,000 100%
7 February 8,2011
17
4.2 The Company's Projected 2012 Net Cost Savings Appeared Reasonable
We found that the Company's projected net reduction in cost to provide automated
service appeared reasonable. The transition to once-weekly service would enable the
Company to significantly reduce its labor costs. However, to provide automated
service, the Company is proposing to spend approximately $3 million to purchase
new trucks and carts. Therefore, the labor cost savings would be partially offset by the
additional cost of this new equipment.
In its proposal, the Company projected that it would be able to realize an annual net
costs savings of approximately$487,000. Based on our review and analysis, we found
this to be a reasonable estimate. Table 5 below shows the Company's projection of the
changes in its residential collection costs that would result from transitioning to once-
weekly automated collection service.
Table 5—Projected 2012 Cost Savings Due to
Once-weekly Refuse Collection—Automated Service
Projected 2012 Projected 2012
Cost Category Cost of Twice Cost of Once Cost Increase or
per Week per Week (Savings)
Service Service
Collection Labor and Labor-related Costs $858,000 $375,000 ($483,000)
Truck Operating Cost 560,000 352,000 (208,000)
Truck Depreciation 231,000 185,000 (46,000)
Truck Interest 0 80,000 80,000
Subtotal:Trucks $791,000 $617,000 ($174,000)
Cart Depreciation 0 91,000 91,000
Cart Interest 0 36,000 36,000
Cart Maintenance 0 43,000 43,000
Subtotal:Carts $0 $170,000 $170,000
Total $1,649,000 $1,162,000 ($487,000)
8 February 8,2011
�. 8
4.3 Net Cost Reduction is Less for Manual Service
We found that if the Company were to convert to once-weekly service and continue to
provide manual service, the net cost savings would be less than that of providing
automated service.
In evaluating the Company's proposal, we considered the issue of whether the
Company should convert to once per week service and continue to collect refuse
using its existing fleet of rear-loading vehicles and two-man crews. To perform this
analysis, we used the Company's existing costs and operational factors to model the
savings it might realize if it simply began collecting refuse once per week instead of
twice per week Based on our analysis, we found that the Company would be able to
reduce its annual costs by approximately$458,000.
Our estimate of the reduction in cost resulting from reducing the number of pickups
and continuing to provide manual service is shown below in Table 6.
Table 6—Projected Cost Savings Due to
Once-weekly Refuse Collection— Manual Service
Projected 2012
Cost of Twice Projected 2012 Cost Increase or
Cost Category per Week Once-weekly (Savings)
Service
Service
Collection Labor and Labor-related Costs $858,000 $620,000 ($238,000)
Truck Operating Cost 560,000 $404,000 (156,000)
Truck Depreciation 231,000 $167,000 (64,000)
Truck Interest 0 0
Subtotal:Trucks $791,000 $571,000 ($220,000)
Cart Depreciation 0 0
Cart Interest 0 0
Subtotal:Carts $0 $0 $0
Total $1,649,000 $1,191,000 ($458,000)
9 February 8,2011
19
4.4 The Proposed 11-year Contract Term is Reasonable
The new 11-year contract term proposed by the Company is reasonable. Municipal
refuse collection agreements typically have a term of from 7 to 10 years to allow the
contractor time to amortize its capital investment. Moreover, the existence of a multi-
year contract is often a key factor for private refuse companies to obtain financing for
their capital expenditures. In its cost estimates, the Company calculated its
depreciation expense over a 10 year useful life for the new trucks and carts. We found
this to be reasonable.
According to the Company, the purpose for including an additional year over the
useful life of the assets is to allow the Company time to arrange for financing and
order the equipment prior to placing it in service. We also found this to be reasonable.
Therefore, we believe that an 11-year contract term is reasonable.
10 February 8,2011
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4.5 Not All Proposed Contract Provisions are Related to Once-weekly
Service.
In addition to the contract term, we found that the Company's proposed contract
provisions for the minimum service requirement for part time residents and vacation
houses were related to the implementation of once-weekly automated service. The
Company has represented that these provisions are an integral part of rolling out
automated cart service.
The purpose for requiring seasonal residents and vacation house to subscribe to Walk-
in service is to ensure that the new automated carts will be taken off the curb after
part-time and holiday residents leave town. We believe it is reasonable to link these
proposed contract provisions to the implementation of once-weekly service.
However, the remaining proposed contract terms described in Table 3 above are not
related to once-weekly service. The Company could feasibly implement once-weekly
refuse collection without addressing the issue of requiring event houses to have
'commercial-type waste services on an as needed basis.' Additionally, the expansion
of the Company s franchise right to collect all C&D debris is not linked to the
implementation of once-weekly service. Any changes in the scope of service in the
current Agreement are subject to the mutual agreement of the City and the Company.
Therefore, while the Company may require these changes as a condition of
implementing once-weekly service, it should be understood that these other contract
issues are not operationally linked to collecting refuse once per week vs. twice per
week.
4.6 Automated Cart Collection Service is a Higher Quality Service
Automated cart service represents a higher quality of solid waste collection service.
We found the Company's justifications for linking a transition to once-weekly service
to a changeover to automated cart service to be reasonable. In addition to the
Company's reasons for changing over to automated service, there are other reasons
for the City to change to automated cart collection.
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For example, the use of automated carts in the collection of residential solid waste
significantly reduces the frequency and severity of drivers' back-related injuries. The
hinged lids help to better contain odor and prevent spillage. Automated carts are
equipped with wheels and are of a balanced design, which enables them to be easily
maneuvered. They are manufactured from durable materials and have a long useful
life. The use of standard automated carts also results in neighborhoods having a
neater, more uniform appearance on collection day. Accordingly, automated solid
waste collection service is of a higher quality than manual collection.
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Once-Weekly Service
Comparative Analysis of Mo thly Rates
Current Program Proposed Program
Twice-Weekly Collection Once-Weekly Collection
Current
Rate Subscription Estimated FY Subscription Estimated FY
Services (1)(2) 14/15 Monthly Services (4)(5) 14/15 Monthly
Rate Rate(3)
Individually-Billed Dwellings
$18.02 Curbside $18.83 Curbside $16.20
Economy Economy
$21.31 Family Value $22.54 Curbside PLUS $19.38
$23.53 Standard Walk- $20.93
In (6)
Walk-In $24.36 Manual Walk-In $24.36
(6)(7)
$60.00 Estate $62.35 Estate $53.62
Centrally-Billed Dwellings
$17.84 Curbside $18.63 Curbside $16.02
Economy Economy
$21.13 Family $22.34 Curbside $19.21
Value PLUS
$23.36 Walk-In $24.17 Standard $24.17
Walk-In
Green Waste free on subscription basis.
No rate changes to Commercial, Industrial or manual collection.
Notes:
(1) Trash services are twice-weekly, recycling services are once-wee kly; walk-in recycling is an
added cost.
(2) All trash cans provided by customer; all recycling carts provided by PSDS.
(3)
(4) All services are once-weekly.
(5) All Trash& recycling carts provided by PSDS.
(6) All Walk-In customers will receive walk-on recycling collection at not added cost.
(7) Customers to provide 32-gal max cans for trash &recycling collection.
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