HomeMy WebLinkAbout6/18/2003 - STAFF REPORTS (37) STAFF REPORT
DATE: June 18, 2003
TO: Mayor and City Council Members
FROM: Troy L. Butzlaff, Assistant to the City Manager
RE: Approval of Franchise Agreement with Palm Springs Disposal Services for Solid
Waste Management Services
RECOMMENDATION:
It is recommended that the City Council approve, in a form acceptable to the City Attorney,
an exclusive franchise agreement with Palm Springs Disposal Services (PSDS) for solid
waste management services.
SUMMARY:
The City's franchise agreement with Palm Springs Disposal Services (PSDS)for the collection
and disposal of solid waste expires on June 30, 2003. At the direction of the City Council, staff
has been working with PSDS to prepare a new franchise agreement that establishes the
contractual framework and performance expectations between the City and PSDS. The
proposed agreement incorporates a number of significant changes including a new approach to
setting rates that results in an overall decrease in hauler revenue. In addition to realigning
rates, PSDS will offer a number of service enhancements to residential, commercial and
industrial customers including the creation of a new subscription based service program for
residential customers. Under this program, residential customers will receive a modest rate
reduction ranging from 18% to 40% per month depending on which service level they subscribe
to. Overall, staff believes that the proposed franchise agreement is in.the public's interest in
that it provides a superior level of services at a reasonable price.
BACKGROUND:
The State Legislature has given local government broad authority to establish a system for
solid waste collection and disposal. Collection services may be provided by the City, by
another local entity, or by a solid waste enterprise (Public Resources Code Section 40058). In
addition, Public Resources Code Section 40059 (a[2]) states that local government has the
authority to award collection services, with or without a competitive bid process, by means of a
partially exclusive or wholly exclusive franchise, non-exclusive franchise, contract, license, or
permit, if in the opinion of the governing body the public health, safety, and well-being so
require.
On March 18, 1992, the City entered into an exclusive franchise agreement with Palm
Springs Disposal Services for solid waste collection, disposal, and recycling services. This
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agreement was for a ten (10) year term expiring on September 30, 2002.
The City Council has extended term of the agreement on several occasions to facilitate the
completion of an audit of the contractor's rates and charges, as well as to enable staff to
negotiate a new franchise agreement. The most recent extension expires on June 30, 2003.
As you know, staff has been negotiating a new franchise agreement with PSDS over the past
ten (10) months. Generally, these negotiations have been meaningful and productive. On
April 9, 2003, staff provided a status report on our negotiations with PSDS and asked the
City Council for further direction on whether to proceed with the preparation of an agreement.
Based on the information that was provided, the City Council directed staff to finalize an
exclusive franchise agreement with PSDS to reflect the results of a comprehensive financial
and service audit that was conducted by an outside consultant.
The proposed franchise agreement with PSDS represents the culmination of several months
of hard work between the parties. As with any negotiated agreement there will be some give
and take by both parties. Although staff has endeavored to draft an agreement that
represents the direction provided by Council, PSDS has requested that the City Council
reconsider the term option. Originally, PSDS had requested a 15-year term, During the
Study Session on April 9th, the City Council approved an initial term of 11 years with four (4)
one (1) year options at the City's discretion. PSDS has indicated that an 11-year term with
four one-year options does not enable them to sufficiently amortize their capital equipment
costs. Staff acknowledges that this may be an issue and is recommending that the City
Council consider a modification that would allow the City Council to grant, at its discretion, a
single four year extension in the eighth year of the agreement. To receive this extension,
PSDS must successfully pass an audit to be paid by PSDS. The audit shall include, but not
be limited to: (1) a satisfaction survey, (2) a survey of rates being paid in surrounding cities,
and (3) a review of Contractor's financials, billing, reported Collections, rate structure, overall
effectiveness, recordkeeping, customer needs, profitability and cost effectiveness (as
measured by the mean average of the combined General and Administrative Expense and
Pretax Profit, expressed as a percentage of Total Revenue, for the three largest, publicly
traded solid waste firms as reported in their year-end financial statements published in their
most recent annual reports). If, based on the results of the audit it is determined that the
Contractor's pre-tax profit for year seven exceeds 8% of the total revenue, rates must be
reduced in order for the City to consider extending the term. This mechanism will insure that
rates remain at a reasonable and justifiable level throughout the term of the agreement.
PSDS is proposing a significant change in residential services. Instead of providing a single
service plan (e.g, Twice Weekly, Walk-in Service), PSDS will offer residents a subscription
based service plan consisting of four different service tiers. Each tier offers different service
options and has been designed to meet varying disposal and cost concerns.
Under the new subscription based service plan, residential customers will experience a 18%
to 40% reduction in their rates depending on the service level they choose. Table 1.1 shows
the current monthly rate and the final negotiated rate for each service category.
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Table 1.1 Subscription Based Service Plan
Service Service Current Negotiated
Level Description Monthly Monthly Rate
Rate
Economy Twice Weekly N/A $14.79
Curbside - 1 can
Family Value Twice Weekly N/A $17.29
Curbside —4 cans
Standard Tvyi'ce,Weekly: $283 $19.4�;,
Walk=in -.2 cans
Estate Twice Weekly N/A $49.50
Walk-in —
Unlimited
It will take several months to effectuate the new subscription based service plan. In order to
provide residents an immediate rate reduction, PSDS is proposing to lower all residential
rates to $19.49 on July 1st. Over the next several months, PSDS will send out information on
the different service tiers and encourage residents to select a service plan. Residents will
have until the end of September to sign-up for a service plan. The new subscription rates will
become effective October 1'�. PSDS will allow residents to change service plans once per
year at no charge. A nominal fee will be assessed for additional service plan changes
beyond the one that is provided.
As a condition of the franchise, PSDS has agreed to hold residential collection rates at their
current level for the next two (2) years. Thereafter, rates will be adjusted annually based
upon the percentage change in the Consumer Price Index (CPI) for All Urban Consumers
(CPI-U) for the Los Angeles-Riverside-Orange County area as published by the United
States Department of Labor, Bureau of Labor Statistics. Any change in CPI is subject to a
2.5% maximum cap. Should the formula adjustment in CPI result in a change of more than
two and a half percent (2.5%), PSDS may petition the City Council for the additional amount.
The City Council may approve the request or undertake a review and determination of
appropriate rates.
Commercial rates will remain unchanged and will also be fixed at their current level for the
next two (2) years. Table 1.2 shows the proposed rate for a 3 cubic yard bin as compared to
the rates charged in other Valley cities.
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Table 1.2 Commercial Services
Palm Palm' Desert
Cathedral Indian Palm Rancho
Springs, Springs, City Coachella Hot Wells Indio La Quinta Desert Mirage
Current 'Proposal Springs
3CY $115.59 .$115.59 $127.06 $111.90 $104.81 $119.78 $77.22 $93.47 $76.00 $84.30
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PSDS is also planning to add several new services for commercial customers. Specifically,
commercial customers for a nominal fee can request same day priority pick-up of their trash,
as well as dispose of their unwanted electronic wastes.
Debris box customers may experience slightly higher rates due to an adjustment in the
method of allocating disposal costs. Although the actual increase will vary from customer to
customer, PSDS will offer reduced rates for clean loads of construction and demolition
debris, green waste, food waste, concrete, asphalt and drywall to help encourage recycling.
Customers that use stationary compactors will experience a 13% reduction in their rates.
Table 1.3 reflects the current and proposed rates for industrial services and how they
compare to other Valley cities.
Table 1.3 Industrial Services
Palm Palm
Springs, ,§prings Coachella Cathedral Desert Hot Indian Indio La Palm Rancho
Current .Pro osal City Springs Wells Quinta Desert Mirage
10 CY Box,
8.5 ton load $412.89 $544,.65.: $478.54 $557.83 $460.53 $459.11 $520.81 $471.83 $445.80 $415.66
20CY Box,
3.0 ton load $220.82 $29&081. $234.67 $320.90 $211.38 $246.97 $263.60 $238.92 $273.29 $203.52
30CY
Comp. 7.5
ton load $825.10 :,$718.% $717.53 N/A N/A $639.95 $683.81 $471.72 $468.25 $643.26
PSDS will continue to offer the same services that they currently provide. These services
include: bulky goods collection; curbside pick-up of used oil and used oil filters; holiday tree
recycling; telephone book recycling; and semi-annual cleanup events at designated
locations. In addition, under the proposed franchise agreement, PSDS will provide the
following services at no additional charge:
• PSDS will provide a total of thirteen (13) CNG powered collection vehicles over the
next fourteen (14) months;
• Collection of refuse, yard waste and recyclables from all 22 City facilities and parks;
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• Collection of solid waste and recyclables from City-sponsored special events;
• New, more aggressive waste diversion programs for City facilities;
Used auto/light truck tire collection service;
• Collection of electronic wastes such as computers, printers, televisions, VCR's, cell
phones, fax machines, stereos, and electronic games; and
• Compost at City cleanup events.
While an agreement on the material terms and conditions has been reached staff is still
working with PSDS on the final franchise agreement. It is .anticipated that the final
agreement will be completed within the next two weeks. PSDS is prepared to implement the
new franchise effective July Vt.
Staff believes that the proposed franchise agreement offers a unique and comprehensive
range of services to the community. In approving this agreement, the City Council will
provide lower rates for residential and certain industrial customers while maintaining the
current rates for commercial customers. Furthermore, the agreement protects customers by
providing a mechanism to review future rates increases, as well as an audit provision to
insure that the hauler's profitability does not exceed a certain threshold. Finally, staff
believes that PSDS, which has a proven track record of providing quality service,
understands the needs of our community and is best suited to perform the services that are
required.
Attachment:
1. Minute Order
2. Franchise Agreement Between the City and Palm Springs Disposal Services for Solid
Waste Management Services 9 n07 proo
City Manager
33
MINUTE ORDER NO.
APPROVING AN EXCLUSIVE FRANCHISE
AGREEMENT, IN A FORM ACCEPTABLE TO THE CITY
ATTORNEY, WITH PALM SPRINGS DISPOSAL
SERVICES FOR SOLID WASTE MANAGEMENT
SERVICES
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I HEREBY CERTIFY that this Minute Order, approving an exclusive franchise
agreement, in a form acceptable to the City Attorney, with Palm Springs Disposal
Services for solid waste management services was adopted by the City Council of the
City of Palm Springs, California, in a meeting thereof held on the 181h day of June, 2003.
PATRICIA A. SANDERS
City Clerk
3315
SLovAK BARON &EMPEY tip
A T T O R N E Y S A T L A W
DIOMASS SLOVAK
DAVID L.BARON 1111 E.TAHOUITZ CANYON WAY,SUITE 110, PALM SPRINGS, CA 92262
MARCE BmEEv PHONE(760)322-2275 FAX(760)322-2107
JASON D.DABAREINER "
PETER M BOCIINEWICH
MARY E.GILSTRAP
CHARLESL GALLAOIIER �9P.9�Ai 1 86°4)�� '
BRIANE WIIITLEY - - -
MARK W EDEI.STEIN
a p/
VINCENT R.WHI9TAKER
JOEL D.PETERSON4
RICIIARDA DMEENLIAUER w
01 (-OUNSEL
LUCIENA VAN I-IULLE
MYRON NIEVERS,P.C.
june 18, 2003
VIA HAND DELIVERY
City of Palm Springs
City Clerk
3200 E. Tahquitz Canyon Way
Palm Springs, CA 92262
Attn: City Council Members
Re: June 18, 2003 Regular Meeting Agenda
Dear Council Members:
This letter will serve as formal objection to proposed action on Matter No. 33 "Palm
Springs Disposal Services" on the Palm Springs City Council Agenda for this evening's regular
meeting. This agenda item does not specify the proposed tern for the contract, nor does it
specify the dollar amounts at issue in the contract. In fact, the notice even fails to state that the
contract is for waste disposal services, although we have presumed that to be the case.
Moreover, the Staff Report and Agenda Packet were still not available as of noon today thereby
precluding any opportunity for informed public comment with respect to this item.
We believe such notice fails to meet either the letter or the spirit of the Brown Act.
Therefore, demand is hereby made that this item be withdrawn from the Agenda and postponed
to the City Council's next regular meeting.
Very truly yours,
SLOVAK BARON & EMPEY LLP
MARC E. EMPEY 1
cc: David Aleshire, City Attorney I
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