HomeMy WebLinkAbout6.5 GarbageCollectionRates
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CITY OF DUBLIN
AGENDA STATEMENT
CITY COUNCIL MEETING DATE: January 13, 1992
SUBJECT: Establishment of 1992 Garbage Collection Rates
~prepared by: Paul S. Rankin, Assistant City Manager)
EXHIBITS ATTACHED: 1. ~proposed Resolution.
2. / Letter dated November 21, 1991 from D. David
MacDonald, Oakland Scavenger Company to JRRRC,
regarding response to 1992 Draft Report.
3. / Letter dated December 5, 1991 from Paul Causey,
JRRRC Chair to Mr. MacDonald, OSC regarding JRRRC
recommendation.
4. ~Letter dated December 17, 1991 from Mr. MacDonald,
OSC to JRRRC regarding the recommended Return on
~qui ty .
5. / Joint ~sedJ.~~_t~~~~~~w Committee_ Report date_d
December 16, 1991 (was previously distributed with
A\S!< . the Agenda for Dec~mbe~:.b'-, 1991 )f:3:,?,~2- 0'1
RECOMMENDATION:(~' Open Public Hearing; Receive Staff Report and Public
comments; Close Public Hearing; Adopt Resolution.
FINANCIAL STATEMENT:
The impact on garbage customers will vary
depending on the level and type of service. All
residential rate categories are proposed to be
reduced. The rate reduction will result in a
decrease in the Franchise Fees collected by the
City. The estimated annual decrease in Franchise
Fees is $3,490.
DESCRIPTION: At the City Council meeting on December 23, 1991, the
City Council received a report from the Joint Refuse Rate Review Committee
(JRRRC) regarding the Review of Oakland Scavenger Company's 1992 Rate
Application. As required by State law, a public hearing must be conducted
prior to the establishment of revised garbage collection rates.
Extent of Proposed Rate Ad;ustment
The JRRRC Report found that the Company projected that Dublin ratepayers
will generate revenues in excess of the cost of service. The recommended
adjustments were developed in a manner which attempts to avoid substantial
fluctuations in future years. The current analysis is based upon
projections and, therefore, external factors may impact the Company's
revenue. Overall, the proposed rates are intended to reduce the total
revenue from Dublin ratepayers to the Company by a total of 4.7 percent.
Because the Company provides a variety of services with different costs and
charges, the actual change to an individual rate will vary. For example,
the proposed rates reduce a 1 can residential customer's bill by 8% and a 2
can customer will receive a 4% decrease. In future rate applications, the
Company will account for costs and revenues on a jurisdictional basis.
Therefore, the City Council will be able to consider any future adjustment
required as a result of a deviation from the projections used in the 1992
Rate Application.
Chanqes Reflected in the Proposed Rate Schedule
The proposed rate schedule reflects several changes from services offered
in previous years. Some of the changes are in direct response to the City
of Dublin's programs contained in the Preliminary Draft Source Reduction
and Recycling Element, required by State law. The following outline
ITEM NO. b.;
COPIES TO:
D. David MacDonald, OSC
Dan Borges, Livermore Dublin Disposal
Paul Causey, JRRRC Chair
tJJ
FILE
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summar1zes the proposed substant1al changes reflected 1n the proposed
resolut1on:
a Super Recycler - A new class of serV1ce 1S proposed to be 1mplemented,
prov1d1ng weekly collect1on of a 20 gallon conta1ner w1th curbs1de
recyc11ng The cost of th1s serV1ce 1S $6 65 per month
b Un1form Can Rates - Prev1ously, the C1ty'S rate structure prov1ded for
collect1on of add1t1onal cans at a d1scounted rate Th1s rate
structure d1d not prov1de an 1ncent1ve for res1dents to reduce the
amount of waste d1sposed of 1n the landf1ll The proposed rate
structure makes the standard 32 gallon conta1ner a un1form rate of
$6 30 per month (Note The f1rst can rate of $7 90 1S h1gher due to
the 1nclus1on of the curbs1de recyc11ng cost and the 30 cents per
month est1mated for 2 spec1al clean-ups )
c Increase for CurbSlde Recyc11nQ CurbS1de recycl1ng serV1ces are
prov1ded under a separate agreement w1th L1vermore Dub11n D1sposal
The serVlce 1S 1ncluded as part of the 1n1t1al level of serV1ce for
all res1dent1al customers The Company 1S allowed to 1ncrease the fee
based upon changes 1n the Consumer Pr1ce Index The current charge 1S
$1 25 per month Based upon the change 1n the CPI, the proposed rates
1nclude an 1ncrease 1n th1s surcharge to $1.30 per month
d Spec1al Clean-ups - The proposed rate structure prov1des for 4 spec1al
clean-ups for res1dent1al customers Th1s 1S not a change 1n the
level of serV1ce, however, 1n prev10us years only 2 clean-ups were
funded through the rates and 2 were funded through spec1al funds WhlCh
are no longer ava11able The est1mated cost of the two add1t1onal
clean-ups 1S 30 cents and has been added to the f1rst can of serV1ce
e Commerc1al/Mult1fam1lv Bln Serv1ce The proposed rate structure
accounts for the cost of serv1C1ng a conta1ner mult1ple t1mes per week
and 1mplements a un1form per yard rate Th1S change should encourage
customers to ut1l1ze the most eff1c1ent level of serv1ce (For
example, the proposed rates prov1de a d1scount to the customer hav1ng
one 4 yard conta1ner empt1ed once per week vs hav1ng a 2 yard
conta1ner empt1ed tW1ce per week) The proposed rate structure
reduces some rates and 1ncreases other commerC1al rates Based upon
the current customer prof1le, 84% of the b1ns currently 1n use would
recogn1ze a decrease 1n costs
f Handy Hauler - The proposed resolut1on lncorporates S1m1lar changes
for th1s serV1ce as were d1scussed 1n the coromerc1al sector The
proposed rate reflects a 2 5% decrease from current rates
g Drop Box - All levels of Drop Box serV1ce are proposed to lncrease
The serV1C1ng of a drop box 1S less efflc1ent and more expens1ve than
regular commerc1al serV1ce Each conta1ner must be removed and hauled
to the landf1ll 1ndlv1dually The proposed rates address these
factors The amount of the 1ncrease ranges from 3 2% to 8 8%
depend1ng on the S1ze of the contalner
C1tV of Dubl1n Act10n on Recommendat1ons by the JRRRC
In add1t1on to the local serV1ce 1ssues dlscussed above, there are also
several s1gn1f1cant recommendat1ons made by the JRRRC The proposed rate
structure 1S based upon the C1ty Counc11's concurrence w1th the 1992 JRRRC
Report Rev1ew1ng Oakland Scavenger Company's Rate App11cat1on The
follow1ng out11ne h1gh11ghts the s1gn1f1cant 1ssues
a Allocat1on of Balanc1nQ Account In prev10us years, the Company has
not recovered the full operat1ng cost of serV1ce In add1t10n, th1S
balanc1ng account has 1ncreased due 1n part to reduced revenues
(econom1c factors) and the Company expend1ng more than 1t proJected 1n
1tS or1g1nal rate app11cat1on Th1s 1S the f1rst year that the rate
app11cat1on has been rev1ewed on a Jur1sd1ct1onal bas1s, rather than
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companyw~de. Therefore, the current deflclt 1n the balanclng account
had to be dlstrlbuted among the agencles The Company does not have
the hlstorlcal data avallable to dlstr1bute th1S def1c1t on the same
baS1S as 1t was generated The JRRRC has recommended a methodology
for dlstrlbut1ng the def1clt The recommended rates are proJected to
allow the Company to fully recover the C1ty of Dubl1n's share 1n 1992
b Closure/Post Closure Costs The JRRRC has recommended exclud1ng
closure and post closure landf1ll costs for further study In the
event that these are detenn1ned to be rate allowable, the C1ty of
Dubl1n w1ll owe 1tS proport1onate share of these excluded costs, as
part of a future rate appllcatlon
c. Return on EqUltV (ROE): The Company's rate appllcatlon had requested
a ROE of 1 7 % The JRRRC has recommended an ROE of 1 0 % , wh1ch
translates lnto a 5 7% pre-tax prof1t The C1ty 1S requ1red under 1tS
franchlse agreement to allow the Company to recover 1ts expenses plus
a reasonable return on 1nvestment The JRRRC prov1ded the bas1s for
th1S recommendatlon J..n Append1x B of the December 16, 1991 Report
The factors 1mpactlng the recommendatlon by the JRRRC 1nclude the
follm,nng
o Econom1C trends and recess10nary factors have affected all
bus1nesses result1ng 1n reduced proflts
o The franchlse agreement unlquely guarantees the Company a return
on the1r 1nvestment
o Compar1son of earn1ngs for other compan1es 1n the same 1ndustry
o The Company's past performance, 1nclud1ng 1nadequate control of
costs dur1ng a perlod of decl1n1ng revenues
In the event that performance and other factors 1mprove 1n future
years, an adJustment to the ROE may be recommended by the JRRRC
d Fund1nQ for JRRRC Operat1ons Currently all stud1es conducted by the
JRRRC are funded through General Fund contrlbut~ons from member
agenCles The scope of thlS work has 1ncreased substantlally
Also, the JRRRC 1S 1n need of staff ass1stance wh1ch can be
obta1ned contractually from the Alameda County Waste management
Author1ty. The JRRRC has 1ncluded est1mated fund1ng 1n the 1992
Rate Appl1cat1on to undertake the fallow1ng work 1993 Rate
Rev1ewi Contractual SerV1ces from the Waste Management Author1ty,
and a ReV1ew af Landf1ll Closure/Post Closure Costs These costs
w1ll be allocated and shared by all Jurlsd1ct10ns part1c1pat1ng
1n the stud1es The total amount 1ncluded 1n the 1992 Rate
Appl1cat1on lS $250,000
Conclus10n
Staff would recommend that the C1ty Councl1 conduct a publ1C hear1ng,
rece1ve publ1c 1nput, and adopt the proposed resolutlon lmplement1ng the
new rate schedule
a:113garb agenda#7
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RESOLUTION NO
- 92
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF DUBLIN
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AMENDING SCHEDULE OF SERVICE RATES FOR SOLID WASTE COLLECTION/
ESTABLISHING A MINIMUM SERVICE LEVEL FOR RESIDENTIAL CUSTOMERS
AND
DESIGNATING THE POINT OF COLLECTION FOR SINGLE FAMILY COLLECTION
WHEREAS, the C1ty of Dub11n adopted on January 14, 1991 Resolut1on No
5-91 wh1ch estab11shed garbage serV1ce rates, and
WHEREAS, a not1ce announc1ng a pub11c hear1ng on the proposed 1992 rate
adJustment has been pub11shed on January 3, 1992 and January 10, 1992, as
requ1red by the Government Code, and
WHEREAS, Oakland Scavenger Company (OSC) has subm1tted a 1992 rate
app11cat1on to the J01nt Refuse Rate Rev1ew Comm1ttee (JRRRC) 1n accordance
w1th the franch1se agreement between the C1ty and asci and
WHEREAS, the JRRRC has recommended rate adJustments based upon
Jur1sd1ct1onal cost of serV1ce 1n a report dated December 16, 1991, and
WHEREAS, the Rate App11cat1on subm1tted by asc 1ncluded a request for
certa1n expenses to be pa1d by the ratepayers, and
WHEREAS, the JRRRC recommended that certa1n expenses be excluded from
the 1992 rate app11cat1on, and
WHEREAS,
Closure, and
the exclus10ns 1ncluded costs for
Landf1ll Closure/Post
WHEREAS, the JRRRC agreed to reV1ew these exclus10ns 1n the future rate
appl1cat1on, prov1ded that adequate background data can be obta1ned to
support 1nclus1on of these expenses 1n the rates, and
WHEREAS, the JRRRC has reserved the r1ght to perform further analys1s
on the Company expense for 83 franch1sed employees h1red 1n 1990, and
WHEREAS, 1n the 1991 rate app11cat1on the C1ty of Dub11n excluded costs
for the Measure D surcharge, the lega11ty of wh1ch was the subJect of a
lawsu1t pend1ng at the t1me, and
WHEREAS, Measure D surcharges (1mposed 1n the November 1990 Alameda
County elect1on) were lev1ed from March 20, 1991 through November 7, 1991 and
as such the Company 1ncurred expenses, and
WHEREAS, the JRRRC 1992 report proJects that Dub11n ratepayers have
contr1buted adequate revenue to re1mburse the Company for 1tS Measure D
expenses, and
WHEREAS, the C1ty of Dubl1n des1res to establ1sh a new rate category
for res1dences wh1ch produce small volumes of SOl1d waste, and
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EXHIBll1-
WHEREAS, the new I.vlce level shall also
serVlce level at such tlme as mandatory garbage
resldentlal customers, and
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be deslgnated as a mlnumum
serv~ce lS lmplemented for
WHEREAS, the JRRRC has recommended that the return on equlty be
establlshed at 10% for 1992, and
WHEREAS, the JRRRC has submltted a detalled analysls In the 1992 report
substantlatlng the Return of EqUlty Recommendatlon, and
WHEREAS, the JRRRC report ldentlfles a methodology for dlstrlbutlng the
balanclng account among all affected Jurlsdlctlons, and
WHEREAS, the adJustments proposed are proJected to allow asc to fully
recover In 1992 the Clty of Dublln's share of the balanclng account, and
WHEREAS, the Clty has also undertaken an analysls of commerclal and
drop box rates, and
WHEREAS, certaln adJustments are recommended for commerclal and drop
box serVlces, and
WHEREAS, ln accordance wlth Sectlon VI of an agreement dated Apr~l 24,
1990 between the Clty, asc, and Llvermore Dublln Dlsposal, certaln charges
for curbslde recycllng are allowed, and
WHEREAS, In accordance Wl th
Company lS authorlzed to collect
serVlce, and
the
$1 30
Curbs1de Recycllng Agreement,
per month per household for
the
th1s
WHEREAS, the Clty Councll has conducted a publlC hearlng on the matter
on January 13, 1992, and
WHEREAS, the SOlld Waste Ordlnance and Agreement regardlng Waste
Collectlon and Dlsposal requlre the Clty Councll to deslgnate a rate schedule
and pOlnt of collectlon for slngle famlly resldences
NOW, THEREFORE, BE IT RESOLVED that the Clty Councll of the Clty of
Dublln does hereby resolve as follows
1 Beglnnlng January 1, 1992, the Rate Schedule attached
marked "Exhl.bl t A" and by reference, made a part hereof, shall
offlclal rate schedule untl1 further resclnded or amended
hereto,
be the
2 The Super Recycler serVl.ce level ldentl.fl.ed ln Sectlon II (A) of
Exhlbl. t A shall be the mlnl.mum serVlce level at such tl.me as mandatory
serVlce for reSl.dentlal customers lS lmplemented
3 Begl.nnl.ng January 1, 1992, the cost for curbsl.de recycllng
collectlon shall be $1 30 per month per resl.dence ThlS charge shall be
l.ncluded ~n the base level of serVl.ce for res~dences as shown In Exhlblt A
4 As descrlbed above, thlS rate reV1Sl.On 1S based upon the
recommendatl.on of the J01nt Refuse Rate Revlew Comm1ttee flndlngs In the
reVlew of Oakland Scavenger Company's 1992 Rate Appll.catlon (dated December
16, 1991)
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5 The C1ty COU~l of the C1ty of Dub11n c~urs w1th the methodology
proposed by the JRRRC to d1str1bute the current operat1ng def1c1t among the
Jur1sd1ct10ns and the proposed rates are proJected to fully pay the C1ty of
Dubl1n's proJected share of the def1c1t along w1th any Measure D expenses,
and
6 The C1 ty Counc1l f1nds that the JRRRC recommendat10n for a 10%
Return on EqU1ty 1S supported by 1nformat10n 10 the 1992 ReV1ew of the Rate
Appl1cat10n Report (December 16, 1991) represent~ng a reasonable return on
1nvestment and, as such, 15 1ocorporated 1nto the proposed rate structure
7 The C1 ty Counc~l of the C1 ty of Dubl1n supports the 1nclus1on of
necessary funds 1n the OSC's rate appl1cat1on to fund the operat1ons of the
JRRRC 10 1992
8 Sa1d rates are 1n accordance w1th the C1ty of Dubl10 Sol1d waste
Management Ord1nance and the Agreement between the C1ty of Dub11n and Oakland
Scavenger Company, a subs1d1ary of Waste Management lnc 1 regard1ng Waste
Collect1on and D1sposal
9 The content of th1s Resolut1on shall supersede Resolut1on No 5-91
adopted the 14th day of January, 1991
PASSED 1 APPROVED AND ADOPTED THIS 13TH DAY OF JANUARY, 1 992, BY THE
FOLLOWING VOTE
AYES
NOES
ABSENT
Peter W Snyder, Mayor
ATTEST
Kay Keck, Clty Clerk
PSR/slh a ResGarb agenda
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EXHIBIT A
CITY OF DUBLIN
RATES FOR GARBAGE COLLECTION & DISPOSAL SERVICES
CONDUCTED PURSUANT TO A FRANCHISE AGREEMENT
BETWEEN THE CITY OF DUBLIN AND
OAKLAND SCAVENGER COMPANY
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I EFFECTIVE DATE
The rates shown for the collect1on of refuse w1th1n the C1ty of
Dubl1n are effect1ve as of January 1, 1992
II RESIDENTIAL SERVICE
A SUDer Recycler Collect1on Th1s 1S a ffi1n1ffium serV1ce level
prov1d1ng for once a week collect1on of a 20 gallon capac1ty
conta1ner Th1s serV1ce level cannot be comblned w~th
serV1ces 1dent~f1ed 1n sect10ns (B) or (C) below Th1s rate
lncludes a $1 30 (one dollar and th1rty cents) charge for
curbslde recycl1ng
Monthly Charge
$6 65
B Flrst Conta1ner Collectlon Cost for Customers not SubsCrlblnq
to SUDer Recycler Rate For customers not subscrlblng to the
Super Recycler serVlce level (as descrlbed 1n subsect10n A
above), the rates shown below shall apply to the lnlt1al can
of serV1ce Once per week collect1on of the follow1ng s1zed
conta1ners shall 1nclude a $1 30 (one dollar and th1rty cents)
charge for recycl1ng
32 gallon contalner (Standard Contalner)
40 gallon contalner (Overs1zed Conta1ner)
45 gallon conta1ner (Overs1zed Conta1ner)
48 gallon conta1ner (Overslzed Conta1ner)
Monthly Cost
$ 7 90
$ 9 50
$10 45
$11 05
C Add~t1onal Contalner Collectlon Costs
Once per week collect1on of each addlt~onal contalner beyond
serVlce provl.ded under "(B)" above
32 gallon conta1ner (Standard Conta1ner) $ 6 30
40 gallon contal.ner (Overslzed Conta1ner) $ 7 90
45 gallon contalner (Overslzed Contalner) $ 8 85
48 gallon contalner (Overs1zed Contalner) $ 9 45
D Spec1al Servlces
Large accuffiulatlons $6 30 per CUblC yard
Speclal Plck-ups $12 00 m1nlmum per p1ck-up
III DESIGNATION OF POINT OF COLLECTION
For Slngle Fam1ly Resldent1al Serv1ce, the above rates shall be for
"back yard serv1ce" for regular garbage serVlce The term "back
yard serv1ce" shall mean the contal.ner(s) shall be on the outs1de
of and ~n close prOX1ffi1ty to the structure be~ng served, and at a
locatlon WhlCh ~s the customer's opt1on Padlocks or other dev~ces
wh~ch deny the Collector reasonable access w111 rel~eve sa1d
collector from responslb1l~ty of such collect1on The Curbs1de
Res1dent1al Recycl1ng Program requ1res that conta1ners be placed 1n
locat1on wh~ch can be eas1ly seen and read1ly access1ble, W1th1n
f~ve feet from the curb
IV ADDITIONAL SERVICES PROVIDED IN RATES
The above rates shall 1nclude four (4) annual res~dentlal cleanups
Dates of sald cleanups shall be at the d1scret1on of the C1ty upon
reasonable not1ce to the Company The rules regulat1ng the spec1al
cleanup shall be approved by the Contractor and the D1rector The
Contractor shall separately account for costs assoclated w1th th1S
serV1ce and report 1nformat~on as requested by the C1ty
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~~[f={J~[8S~lr A
COMMERCIAL AND M~IFAMILY BIN SERVICE "
V
The follow~ng rates ~nclude collect~on, d~sposal, and b~n rental at
commerc~al establ~shments and mult~fam~ly proJects serv~ced by
central~zed b~ns The rates shown are for a monthly per~od All
charges are based upon b~ns be~ng f~lled no h~gher than water
level Excess rate for waste wh~ch exceeds water level ~s $6 40
per yard
Volume of SerVlce Frequency Monthly Rate
1 Yard 1/week $ 27 70
1 Yard 2/week $ 60 95
1 Yard 3/week $ 94 20
1 Yard 4/week $127 45
1 Yard 5/week $160 70
2 Yard 1/week $ 55 40
2 Yard 2/week $116 35
2 Yard 3/week $177 30
2 Yard 4/week $238 25
2 Yard 5/week $299 20
3 Yard 1/week $ 83 10
3 Yard 2/week $171 75
3 Yard 3/week $260 40
3 Yard 4/week $349 05
3 Yard 5/week $437 70
4 Yard 1/week $110 80
4 Yard 2/week $227 15
4 Yard 3/week $343 50
4 Yard 4/week $459 85
4 Yard 5/week $576 20
6 Yard 1/week $166 20
6 Yard 2/week $337 95
6 Yard 3/week $509 70
6 Yard 4/week $681 45
6 Yard 5/week $853 20
7 Yard 1/week $193 90
7 Yard 2/week $393 35
7 Yard 3/week $592 80
7 Yard 4/week $792 25
7 Yard 5/week $991 70
VI HANDY HAULER
The followlng rates apply to the collect~on of a 4 CUblC yard Handy
Hauler Collectlon Bln
Total Cost for Placement, One Week
B~n Rental & D~sposal of Contalner
fllled no hlgher than water level
$44 05
Rental Cost beyond flrst week
$9 00 per week
Cost for Addlt~onal Dump
$31 15
Excess Charge for Bln Fllled hlgher
than water level
$6 40 per yard
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VII DROP BOX
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The follow1ng rates shall be charged for drop box serV1ces
rendered The cost shall be on a per p1ck-up bas1s and costs are
based upon the load not exceed1ng the water level Certa10
m1scellaneous charges as noted 10 subsect10n (H) may also apply
A
6 CUb1C Yard Conta1ner (D1rt/Rock/Debr1s)
Rate per P1ck-ut'
The p1ck-up cost of th1s conta1ner shall be
the same as the 14 yard conta1ner due to the
we1ght accommodated
$ 95 15
D
14 CUb1C Yard Conta1ner
$6 40/cub1C yard plus $5 55
20 CUb1C Yard Conta1ner
$6 40/cub1c yard plus $5 55
30 CUb1C Yard Conta1ner
$6 40/cub1C yard plus $5 55
40 CUb1C Yard Conta1ner
$6 40/cub1C yard plus $5 55
Excess Rate Per Yard
If conta1ner loaded above water level
$95 15
B
C
$133 55
$197 55
E
$261 55
F
$6 40 per
CUb1C yard
G Compacted Rate Per Yard
For serV1ce and collect1on of compacted
mater1als, the total rate shall 1nclude
both a CUb1C yard rate and a charge for
each plck-up
$ 12 80 per
yard plus
$5 55 per
plck-up
H M1scellaneous Charqes
The follow1ng charges are 1n add1t1on to the conta1ner charges
descr1bed above
1 Flasher Charge $10 55 per pull
2 In1t1al Placement Charge $23 00
3 Weekly Conta1ner Rental Fee
Beyond 1st Week $11 90*
4 Da1ly Conta1ner Rental Fee
After F1rst We~k $1 70/day*
5 Stand-by T1me $77 00 per hour
6 Relocat1on Fee $31 50 per request
7 Cancellat10n of Automat1c Collect1on
,
at End of Rental Per10d $41 90
*Note Th1s charge 1S walved 1f the follow1ng serV1ce
frequency 15 ma1ntalned
Serv1ce Level
6 yard/14 yard/20 yard
30 yard
40 yard
Frequency
4 pulls/month
3 pulls/month
2 pulls/month
a garb-a agenda#7
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NO\)-:~-1991 l~ ~() FPon
~JHSTE rtGr11 T 05':
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P 0: 14
Oakumd Scavenger Company
AdmlnlstftltlvQ' Offices
2000 ErnQBfoaoorol Suite SOO
Ooklpnd CA 94606
41 SfS32 1400 'Fax 415/532 1465
I)
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A Wa!:lc MaflSQelTlonl Como:lny
November 21, 1991
30int nQfuse Rate ~evlew Comm~ttea
Paul Causey, Cha~rman
Ora Loma sanitary Distr~c~
2600 Grant Avenue
San Loren2o, CA 94580
Dear Mr. Causey
on Monday, NovamDQr 18, 1991 Oakland scavenqer Company verbally
responded to various ~ssues addressed 1ft both your letter dated
Novemb9r l~, 1991 and Hllton, Parnkopf, & Hobson1s Nov~er 13,
1991 draft of the nR9v~ew of Oakland Scavenger companyts 1992 Rate
Applicat.ion'" Following- 19 a reiteratl.on of our position re<a-ardinq
'l:.hoae i$$ue~.
Clo6u~a/Po~t-el9aur~ Costs
It continues t.o be our posltl.On that:. our est.1Jnates are
reasonable and t,hQse costs are. rate-alloWable. We will assist
thla CommJ. ttee and 1 ts: I consultants wheneJ.va.r and 'Wherever
posaibl& durlng your 1992 r~vie~
~~q~l W~$~ fo~ ~a$ BQnill~ ~awsui~
In answer to your inqul.ry, the. folloWlng lnfomatl.On 19
prasented for your conslderatlon
o
HF&H has indicated that In 1989, $551,890 and In 1990l
$SO,OS2 wa~ paid In legal costs regarding the Bonilla
laWsult. None of these expenditures included amounts
pa~d to plalntl.ffs lawyers
The follOwing amounts were pal.d. to our attorneys to
research, ll.tlg~to, and nesotiate the obllqatio" of ase
to pay plaintl.ff'S attornAY'S fess
1989 - $ 46,460
1990 - 27,769_
Total $ 74___249
Monthly b1l1lngs were as follows, based on the
information supplled to HF&H in October, 1990
llll 199Q
$101,554 $18,071
90/922
42,964
4,9,194
41,641
38,897
126,394
24,72S
24/188
11,408
.January
February
March
Aprll
May
June.
July
AUguSt.
S e.pt e:ro):l e r
october
November
December
Total
41,372
Gl
<1;).
2,614
18,025
S 60.082
EXHiBIT ;;L
~5S1, a_~Q
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~eset ~lloeation at Altamont L~ndfil1
We reserve the r~ght to provide addit~onal substant~ve
documentatJ.on to further demonstrate cur posl.t~on ~n thlS
matter 0 We maintain our earl~er pos~t~on as presented ln my
earlier memo to the Comm1ttee on thls matter
caD1tal Im~~ovement program
We appreclate lnput from the Commlttee However, most of
these proJects are compl:1.ance and regulatory related We wl11
need to proceed wlth these projects In 1992, and therefore
recommend lmmedlate lnvolvement by the COIDmlttee
Measure D Collections
We w:1.11 provlde the Committee wlth an account1ng by
Jurlsdl.ct:1.on of Measure D collections and payments, on or
before December 1, 1991
PaYment of comm~ttee operat1ons
We have agreed to lnclude $400,000 In the 1992 Rate
Applicatlon to fund COIDmlttee operatlons, and w~ll follow the
payment and accountlng procedures outl~ned In Ltem 9 of your
letter
( Exeluslon of Reevel~na coorcbnator and commyn:L tv Rol'3t~ons
Representative from 1992 ~llowable ~xeenses
We believe these two positions are necessary to effectlvely
respond to ongolng J urlsdlctlonal requ 1. rements Wl th In our
franchJ.sed operatlons. To the extent these lndlvlduals
perform work wlthln our non-franchlsed busl.nesses, an
approprlate allocat:1.on of costs w111 be made Attached as
Exhiblts A and B are Job descrlptlons for these pOSltlonsr
after your reVlew, we would appreclate your cons1deratlon for
a re-determlnatlon as to the rate-allowablllty of these
POSltlons (Precedence for the rate-allowab~llty of pub11C
relatlons/publlC educatl.on posltl.OnS has been set In other
hlghly regulated bUSlnesses )
state and Local Mandated Fees
A listing of current state and local mandated fees was
distrlbuted at the November 18th JRRRC meeting. ThlS fee
schedule was correct, the $ 75 AB939 fee was not lncreased to
$1 00 on July I, 1991
RECOMMENDATION FOR ]\ CHANGE IN THE ALLOWED RETURN ON EQUITY (ROE)
certalnlY the maJor flscal lssue addressed ln your draft letter was
the recommendatlon to adJust the after-tax return on egulty from
17% to 10%.
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page 3
Thank you for allow~ng us add~t~onal time to respond to th~s very
important matter A dJ.sCuss1on of our pOS1t~on J.S presented below
Addit1onally, we have lncluded comments on the concept and
comparab~l~ty of operat1nq ratloS, and f~nally, for your revlew,
we have lncluded an alternate method of measUring future
prof1tab~1J.ty levels
Return on Equity standard
Be~J.nnJ.na vs End~nq Return on EOUJ.tv
The comm~tteels analysJ.s presented comparatJ.ve returns on equJ.ty
for Refuse Systems companJ.es For the years presented the report
ind1cates that the return on endinq equlty for 226 compan~es 1S as
follows
1988 ... 17 3%
1989 - 18.1%
1990 - 14 2%
1991 cO 13 0%
Please note that the RMA survey presents end~ng returns an equ~ty,
ose's allowed returns are calculated on beainn1.ng equJ.ty. By
ut J.l lZ J.ng two d1f f erent measurements, 1 t lS l.mposs1ble to draw
effect~ve comparisons As demonstrated below when utllizing the
end1ng equJ.ty methodOlogy, ase's actual return on equJ.ty would be
14 5% for 1991 rather than the 17% that results when uSlng the
begJ.nn lng equJ. ty methodology. The numbers presented have been
excerpted from page 20, Table 3-7, Sect~on A of the draft "ReV1.6W
of oakland scavenger Company1s 1992 Rate Appll.catJ.on"
BeglnnJ.ng Equity. 1/1/91
Altamont AdJustment
Beg~nning Equity for ROE
Allowed EarnJ.ngs post-tax
Ending Equ1.ty, 12/31/91
$33,622,246
(353.457)
$33,268,789
S,655169!t
S38.924.483
~OE uSlnq BegJ.nn1na EOUltV
Earn1ngs
D1VJ.ded by Beg1nn1.ng EquJ.ty
Results In ROE of
5,655,694
33,268,789
17 0%
ROE USlnq End1ng EauJ.tv
Earnlngs
D1.Vlded by End1.ng Equlty
Results J.n ROE of
5,655,694
38,924,483
14.5%
In ose's case, the dlfference between us~ng the end1ng vs
beg~nn1ng equlty results 1n a 2 5% dlfference 1n allowed returns;
a sJ.gnlflcant d1.fference. As a matter of fact, from 1988 thru
1991, that same difference for Qse ranged from 1 6% to 3 3%
NOV-22-1991
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Development of comparable statistlcs
The RMA survey d1ssects the informatlon presented by company S1ze
The 226 companl.es from WhlCh the above statl.stlcs are compl.led
l.ncludes companles of all Sl.zes We propose that only the
companies In the survey wlth sales of $25,000,000 and over be used,
as these companies would be more comparable to ose And although
the RMA survey does not present comparable statlstlcs for return
on beginn1ng equ1.ty, by mak1ng a few assumptlons, and by utll1z1ng
the data presented In the report, we have calculated the beglnn1ng
equ1ty for the 25 f1rms appearlng in th1s part of the RMA survey
1n Table 1 below Please note that 1988 and 1989 data was not
avallable to us at th1s tlme
The Comm~ttee has also l.ndIcated that the ROE for the three largest
sol~d waste compan1es 1S also utll1zed l.n the evaluatIon of an
approprIate return for OSC Table 1 presents the calculated
beglnn1ng ROE' s for 1988-1991 for Waste Management, Browning-Ferr1s
Industrles, and La~dlaw
The CommIttee has also lntroduced the concept of comparlng ose's
operatlng ratlo w~th those of other regulated refuse haulers WhlCh
are prl.marlly located w1th1n Northern Callfornla Operatlng ratlos
range from 90% to 96%, averaging 91 7% ThlS compares to an
lndlcated 1991 operatlng rat1.o for OSC of 91 7% Agaln, we cautlon
that these haulers are not 100% comparable to asc, the ma)Orlty of
the haulers In the survey provlde collectlon serVIces only. QSC
on the other hand provIdes a full range of solld waste servlces,
l.ncludl.ng collectlon, transfer, and landflll As eVIdenced by our
capItal proJect submlsslon for the past several years, both the
landflll and transfer operat~ons require slgn1flcant amounts of
capital 1nvestment, Wh1Ch ~n turn demand hlgher prof1tabllity
levels Although these lnconsl.stencies In comparab:tl1ty to OSC
eXlst, we have nonetheless calculated an estlmated ROE for these
companles (Table 1)
Table 1
EQU1ty (OOO's omItted)
Beq mn l.!!,g
llRA Survey - C~l es 1:11 th sales $.25,000,000 or greater
1991 19 7X
1990 21 0
Ya$te ~t, Br~lng-ferrJs, laldl~
1990 22 2X
1989 25 5
19e.3 23 1
~
16 4%
17 I,
17 9'''
19 3
2Q 3
Oakland SClIVengGf to
1991 17 O'X 14 5%
1990 17 0 14 7
1989 17 0 13 7
Regu( ate<! Cc::pllfll os 1 n ~ortttem ta 11 f (estlOlte.Q 8$w;Jlng 91 n l!Iwrage eperatm'll rat:1 0)
1991 17 0% 14 5%
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proposed Methodologt
Table 2 illustrates our proposed methodology to calculate ese's
return on ~nvestment.
Table. 2
RMA Survey-25 large companles
WKI. aft, LaIdlaw
other regulated ccmpanles, USlng the
average 91 7t operatlng ratlo
Average
1991 EQUltv cOOO's om\tt~)
Seqlnnl~ End1ng
19 7X 16 4%
22 2 17 9
1lJL 14 5
19 6% 16 3l(
Th~s methodology ~ncorporates an average based on the beginn~ng
ROEls illustrated above As was po~nted out In the comm~ttee's
letter, an adjustment wlll be made to th1S return, based on several
factors, ~nclud~ng the relatlve rlsk OSc enJoys versus the surveyed
companl.es Also, an obJectlve standard should be developed to
account for the perfarmance\of the company when compared to pre-
establlshed goals
Service Perform~nce
The Committee correctly pOlnts out that ase ~ncreased stafflng
levels during 1990 I a tlIneframe In WhlCh the overall buslness
cl~lIlate was cons~derably d~fferent than the recess~onary
env~ronment we are currentlY exper1enc1ng Whlle we dld ~n fact
add 105 employees durlng 1990, 18 of those were In our non-
franchlsed operat~ons Of the 87 franchlsed employees added, 57
of those were l.n the landfl.ll and transfer areas. We have
prev~ously supp11ed detalled lnformatlon to your consultants
regardl.ng these addit1ons, In general, however, these positions
were added to react to regulatory requlrements , ~ncreased S1. te
malntenance requ~rements and internal1.zatlon of work prevlously
contracted to outs~de vendors
ses EnglneerS, commentlng ln the1.r recently completed report lS5ued
wlth the Draft Management Audlt, lndlcated the folloWl.ng
IIEquipment and manpower utlllzed for transfer and dl.sposal
operatlons are conventl.onal and comparable to facl.lities of
sl..m1.lar size and scope "
"In all other areas (except the pOSS~b111ty of expandlng the
self-haul tlpplng area and the paving of the household
hazardous waste area) SCS feels the Company 15 prov~dlng
transfer and recovery serv1ces In a sound manner, in
accordance wlth lndustry standards".
"In comparlson wlth other landfllls, operatlons at Altamont
are w~thln, and ln some cases more efflc~ent than tYPlcal
~ndustry practJ..ces II
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IINo recommendat1ons for operat1onal 1mprovement are presented
hereln. scs feels the Altamant landfill lS being operated In
a convent~onal and sound manner. II
Regard1ng Durham Road Landfillv
II Overall , there is no eVldence of unproductive or unneeded
act~vJ.ty, staff, or equ~pment. The faClllty 1n general 1S
effectively operated and mal.ntalned in accordance with slte
constraints "
"No recommendatl.ons for operat~onal lmprovement are lncluded
hereln. SCS feels the Durham Road Landfill 15 being operated
1n a sound manner."
Based on the above, we subm1t that the headcount addltlons at both
the landfills and transfer statlon be cons1dered reasonable and
necessary.
nf the 30 additional employees added during th~c t~mo, ~ c~9n~f-
1cant number were added to 1nternallze funct10ns prev~ouslY
performed by outs1de vendors Cost savlngs reallzed from thls
dec~Slon have been demonstrated
Wh1le the COIDmlttee has out11ned some areas that undenlably requlre
lmprovement, the Commlttee has 1ndlcated only one area that It
cltes as be~ng a poslt1ve 1nd1cation of the company's performance
(worker's compensat1on claims) Certalnly, the ses report on the
landfl.lls and transfer statlon contalned many POS1.tlves. Also, the
low number of complalonts the Jurl.sd1.ctions recelve from the1.r
const1.tuents 15 an l.nd1catlon of the relative level and quallty of
service. Remember that l.n any given month OSC employees servlce
over 260,000 res1dentloal households and make over 1,100,000
res1.dentlal plckups
Addltlonally, we would like to relterate several points regard long
the performance of OSC for the past several years'
Landfill space has been provl.ded to our customers as eV1denced
by the extens1.ve landfill capacloty located at the Altamont,
we are currently evaluatlng an expans1.on at Durham Road
Landf11l
The Davis street Transfer Statlon 18 a very successful pro] ect
that handles approxlmately 3,100 tons of SOlld waste per day
Surroundlng countles have experl.enced or are experlenclng
slgn1f1cant shortfalls in landflll capac~ty.
osc contl.nues to provide addltlonal services
communities -we serve - curbs~de trash cleanups,
hazardous waste collectlon days, mandatory serv1.ce
cornmun~ty educat10n programs, hazardous waste
lnformatlon, etc
to the
household
programs,
advlsory
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November 21, 1991
Page 7
Waste Management ma~nta~ns h~gh environmental standards - OSC
as a wholly-owned subsid~ary compl~es with those standards
Prior to 1990, OSC1s last rate ~ncrease was ~n January, 1983,
In fact, ~n July of 1985, commerc~al rates decreased by 11%
OSC'S res~dent~al and commerc~al rates compare favorably to
those of surrounding communities See the attached telephone
survey of rates (Exhlblt C).
The folloWing is a comparlson of transfer statlon rates
(telephone survey November 21, 1991)
Ton Rate CU Yd Rate M~n Charqe
Davls street $35 00 $ 5.25 $ 5 25
Berkeley 52 00 13 00 7.00
san~tary F~ll 52 52 N/A 10 00
Vasco Road N/A 8 50 N/A
Acme Fl.II 68 30 16.40 19 65
In 1990, asc paid the follow~ng fees to our jur~sd~ct~ons
Franchise Fees $7,500,000
M1tlgat1on Fees/San Franc~sco
and contra costa 1,900,QOO
$9,400,000
R9S00nS1vanass ~o Jurisdictions
We apprec~a te the Comm:1- ttee 1 s pos i ti ve cOIn11\ents about the 1992 Rate
Appll.cat~on process However, you express concern W~ th OSC IS
responsJ.veness In the prlor three :::;ubmH:lsions The 1991 subm~sslon
was submitted on-tlme and wlthln the September 30, 1990 deadlJ.ne
AS lndlcated to the Conuuttee at that t~me, the 5ubmlsslon was
complete w~th the exceptJ.on of the Southern Dlv~s~on At that tlme
J.t was unclear what d~rect~on the Tri-Cities would take w~th regard
to extendlng the franchlse, puttl.ng the franch~~e to bld, ete
Once that lssue was resolved, a completed submlss~on was made. The
prlor two years' submlttals were incomplete only w~th regard to
Waste Management Management Fees and corporate Serv1ce &
Development costs. Those lssues were resolved to the COmIDlttee's
sat~sfact~on, and a substantial adJustment was made ~n the
Committee's favor
w~th regard to AB939 proposals, OSC has worked wlth the
Jur~sd~ctlons to develop numerous curbslde recycllng programs
Although most of these programs are out of the franchlse, they have
been extremely successful and have largely met the goals
establ~shed Jointly by the Company and the Jur~sdlctlons We are
currently 'Working Wl th Fremont and Newark ln establ~sh~ng an
effect~ve multl.-family recycl~ng program, and have proposed a
greenwaste collectlon program to the Tr~-Cltle5, l.n conjunctJ.on
wlth a compost~ng program at Durham Road Landf~ll We wlll
contl.nue to make efforts to work wlth all ]url.sdl.ctions In
aSslstlng wlth develop1ng mutually beneficlal recycllng programs
Addltlonally, we will cont~nue to attempt to supply all
)Urlsdlct~ons wlth t~mely responses to all inqulr~es
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November 21, 1991
Page B
CO..NCLU9ION
In the November 13th letter, the COlllItll..ttee has introduced the
concept of establl..shing certa~n goals and ob)ectl..ves for OSC We
would l~ke to work wl..th the committee to establl..sh goals for 1992
Once these goals have been establl..shed, we propose we schedule
quarterlY update meetl..ngs to advl..se the committee of our progress
1n attal..nl..ng these goalS
Based on the lnformatl..On presented above, we do not feel that the
eXl..stl..ng beg~nn1.ng return on egul..ty level of 17% 1.5 unreasonable
for 1992. We propose that this 17 % level be estab 1 ~shed as a
basell..ne from wh~ch adJustments (perhaps ~n 0 5% to 1.0%
l.ncrements) e~ther pOSl..tl..ve or negative, be made based on the
prev10usly set crl..terla as outlined above. Once the ground rules
and an effect~ve d1alogue have been establ~shed, we most certalnly
w~ll be in a wl..n, Wln, Wl.n sl..tuatlon for the Ratepayers, the JRRRC,
and osc.
Please feel free to call me wlth any questlons and comments
41
~p
D Dav~d MacDonald
OAKLAND SCAVENGER COMPANY
Executlve Vlce President
attachments
cc. JRRRC Members
scott Hobson
mg91071 m
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Exh1b1t A
JOB DESCRIM!ON
pOBITION/TITLE9
REPORTS TO~
Cemmun1ty Relations R$presentative
Exegutivs Vice prGe~dent
POSIT~ON DESCRIPTION9
The commun~ty Relat~ons Representative w~ll be a pr~mary contact
between the Oakland Scavenger Company and local commun~ty
leaders. Th~s w~ll include ~nteract~on with elected offic~als,
corporate pub11c affalrs managers and ather C~V1C leaders who
act1vely partlc~pate ~n local leadersh1p capacities
Representat~ve must ut11ize a var~ety of 1nter~personal and
buslnass Skllls to be able to execute his/her dutles Key
responslbllitles ~nclude access1ng, establlshlng and/or
developlng a company presence in communltles throughout Alameda
County. The Representat~ve w~ll mon~tor and promote the
company's lmage w~th~n these commun~t~es
Th~s representative may also prov~de polit~cal gu~dance and
support to managers and department heads as needed
Direct~on w~ll be provided by the Execut1ve Vlce presldent as the
representat~ve's actlons relate to the company's pol~cles and
strateg~es ThlS representat~ve w211 have dlscretlonary latltude
In the field and wlll be expected to use hls/her own judgement
when asses51ng publ~c affalrs issues In a dlrect or support role
MAJOR AREAS OF RESPONSIBILITY
1. Prov~de communlty contact for the company by actlvely
ldentlfYlngt sOllcitlng and responding to customer needs.
Represent the company w1th respect to commun1ty and
governmental organlzatlOns as asslgned Actlvely
partlc~pate in communlty actlvltles as a representat1ve of
the company.
2. provide publ~c affalrs support as necessary to managers and
other publlC contact employees.
o Conduct In-house support or strategy meet1ngs
o provlde deta~led background lnforrnat~on on
~ndlv~duals or 1ssues
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tj.),;,t:lO-'J.
l ... ..I. ~ ...--
JOB DESCRIPTION
.
"
Exh~blt B
~ ~ .admn Io D&vis
TiTLEg Rscyc1inq Coor~in~torf O~kland SQ~Venqe~ COo
position Descr+ot1on
Track leg~slat~ve developments affecting AB939 activltiest
emphas~s on d~vers~on of wood and yard waste to compost~ng and
co-generatlon Provlde on-g01n9 guldance and support to
lnd~v~dual recycling coordinators wlthin asc, maximlze revenues
from recovered materlal,
Malor~reas of Respons~blllty.
Develop, plannlng and prepar~ng proposals for separate yard waste
collectlon systems Develop plans for compostlng at company
facilltJ..eso
Attend waste Management Authorlty Resource Recovery commlttee
meetings, as well as Clty council meetings for Alameda County
c~tles as requlred
Develop, planning and proposals for "speClal proJects", such as
phone book recycl~n9, Chr~stmas tree recycllng and recycl1ng at
BART stat~on5 throughout the county
coordlnate between Legislative office and approprlate publ~c
entities regarding legislative developments relat~nq to AB939,
etc
provide information to juriSdlctions to ald their SRRE
development. Coordlnate wlth consultants hlred by Jur~sd~ctions
Assist in implementatlon of speclflC proJects related to
segregatlon of wood and yard waste
provide assistance in preparatlon of RFP1s and RFQ's for
recycllng operatlons
coordlnate wlth sludge treatment faCll1tles to assess upcoming
sludge dlsposal needs and opportun~t1es for alternatlves to
landfilling such as d~rect injectlon, pelletlzlatlon, or co-
compostlng wlth wood and yard waste.
Represent Oakland Scavenger Company through publlC speaklng and
engagements.
AD91087 s
NUV-':::':::-l '::''::'1 10 1:::11:::1 rr<:ul'l WH~ I c:. I'IUI-II T u~\"
,c.;
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Page 2
3 Coord~nate local press
o Prepare and ~ssue press releases as needed
o Prepare and coord~nate company response to med~a
~nqulr~es
4. Coordinate special events or proJects as needed
MH90001 5
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EXhJ.bJ.t C
REFUSE COLLECTION RATES FOR SURROUNDING COMMUNITIES
l\1JU4ED:i\ COUNTY
Berkeley
(curb)
san Leandro
CONT~ COST& COON~~
Pittsburg (curb)
concord
Or1nda
Moraga
Walnut Creek
Lafayette, Alamor
Danville
Pleasant H111
San Ramon (curb)
Pleasanton
Rlchmond
Plnole, El
Sobrante
MAJU~ COUNTY
San Rafael (flat)
(hl.ll )
Novato
(curb)
M111 Valley (flat)
S~ FRANCISCO COUNTY
(curb)
~ 90 g&llon conta2nQ~
ddm91104 S
lCM
11 50
8 85
19 80*
18 00
19 35
17.40
13 40
18 45
17 OC
12 45*
15 90*
12 37
12.37
10 40
12.00
8 85
13 75
9 32
2Ci\N
25 30
17 70
24 05
35 95
32 30
22 75
34 20
22.80*
22 84
22.84
20.80
24 00
14 12
22 35
13.56
1Yl\RP
68 00
35.97
55 10
n/a
n/a
94 50
94.50
60.85
52.15
93.45
n/a
77.52
60.11
77 15
77 15
21.95
2 XMP
118 40
719.l (food)
104 6S (bus )
140 00
140 00
165 55
165.55
109 45 (comm)
93 80 (apt)
159.75
118 25
132.44
120.14
126 90
126 90
n/a
3 yard - 106 46
56.70
86 00
113.35
172~OO
TOTHL P 13
~~
~
dlo lOMA sANnf\v mSTRKl
December 5, 1991
2600 GRANT AVENUE
SAN LORENZO CALIFORNIA 94580
TELEPHONE. (4\5\ 276 4700
FAX {4151 276.\528
RECEIVED
DEe D 1991
r:ITY r);:: DUDLlN
0_
H~iII'(I W I'C """ p n-a-tI'11
iYI L 5.in'D:l'd VIC. p"~ 1"11
"-+lItYrtV NcIIt\1"111g1 SK1!1ll.a,."
~.....'" Q a-.vo 0. octo
~e Fan 01" ~-tOQr
a-u",",,","
PIUIi H c..ua.ay
Mr DaVId MacDonald
Oakland Scavenger Company
2000 Embarcadero, SUlte 300
Oakland, CA 94606
SUBJECT 1992 RATE APPLICATION
Dear Dave
On behalf of the CommIttee, I want to thank you for your November 21, 1991 letter provIdmg
more detaIled mfonnanon related to the CommIttee's recommendanons earlIer In the month and
my letter of November 11, outluung thelt proposals The Comrrnttee met on November 25,
1991 to consIder your letter and to provIde final dIrecnon to H1lton, Famkopf & Hobson for the
complenon of the 1992 Rate ReVIew Report The CommIttee has asked that I convey to you
theIr philosophy and responses to your November 21st letter pnor to Issuance of the final rate
repon Fmally, I want to thank you for your December 3, 1991 letter proVIdmg the summary
of Measure D payments per Junsdlcuon ThIS mfonnanon will be helpful dunng each agency's
consideranon of actual rates for the 1992 year
FIrst let me deal With the relanvely mInor Issues m your letter and before movmg Into a
dISCUSSIon of return on eqUIty The followmg are the CommIttee's dlI'ecnons WIth regard to
those Items
o Legal Fees for the Bomlla LawsuIt. The CommIttee fInds that the $74,249 payment to
research, IIngate and negotiate the oblIganons of the OSC to pay the plaInnffs attorneys
are not rate allowable and as such WIll be excluded from the rate base The rema.mlOg
legal fees for 1989 and 1990 WIll be allowed In the rate base, however, the CommIttee
only allows these because It feels that It IS not cost effecuve to connnue to pursue WIth
the Company the matter of the acceptabIltty of these costs
o Asset Allocatum of the Altamont Landfill. The Committee contInues to mamtaJ.n that
the HIlton, Farnkopf & Hobson method of allocanng landfill assets IS acceptable ThIS
allocauon methodology WIll conunue to be used In the 1992 rate appllcauon and any
future rate apphcauons
E~ ;t"'l ~ , - i
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Mr DaVId MacDonald
1992 RATE APPLICATION
December 5, 1991
Page 2
o Capual Improvement Program - The Comnuttee understands the Company's need to
pursue many of these projects and will be duectmg theu subcommlttee to work WIth you
to become mvolved m consIderal:1ons of how the rate apphcanon will determme the
acceptability of projects to be mcluded 10 the CIP
o Excluswn of Recycang Coordmlltor, Commumty ReIatwns Represenranve, and
Program Development Manager - Based on the cIassIfical:1on specIfical:1ons submItted for
the RecyclIng Coordmator and Commumty Relaoons Represental:1ves, the Comnuttee has
chosen to dIsallow all costs assocIated WIth these posIoons ill 1992 The cIassIfical:1on
descnpoons confinn the CommIttee's bel1ef that these posInons should be pald for from
from non-franchIse recyclIng operatIons Further, we have learned from H.1lton,
Farnkopf & Hobson that you had preVIously excluded the Program Development
Manager from the rate base The Commlttee expects that In future appl1canons the
Company will JUStIfy addItlonal staff related to franchIse operanons In the rate
appl1canon Wlule the Comnuttee may be able to support posItlOnS such as Program
Development Manager and Commurnty Relatlons Representatlves, they WIsh to know the
speclfic tasks and asSIgnments for these posIoons 10 advanced to determme the rate
allowability of these poslnons
o Addlhon of Fmnchzsed Employees - Because mformanon related to the addIt10n of these
employees was subffiltted so late In the rate process and detaIled support was not
proVIded, the Commlttee reserves the nght to further evaluate thIs matter dunng the 1993
rate appl1canon process JustIficatIon S provIded 10 your November 21, 1991 letter IS not
suffiCIent to allow the Commlttee to fully evaluate the need for 87 new employees As
a consequence, the CommIttee would lIke detaIled mformatIon regardIng all 87
employees no later than February 1, 1992 so that the Committee wIll have tIme to
adequately evaluate the reasonableness of these addItIOnS If mformanon is not submItted
by the February 1st deadlme, the CommIttee may consIder these poSltlOnS to be
unwarranted and poSSIbly dIsallow thelt cost In the 1993 rate applIcanon
o Return On EquIty - ObvIously, the major concern to both the Comnuttee and the
Company are phIlosoph1C conSIderatIons surroundmg the establIshment of the appropnate
return on equay for the 1992 rate appllcauon As I 1Od1cated to you at the November
18th meenng, the CommIttee 1S senously concerned about setung an appropnate and
JustIfiable rate for Company profit In addItIon, we are glad to see that the Company
belIeves that ROE should be ued to some firmly established performance goals The
phIlosophy paper prepared by the CommIttee, and preVIOusly submItted to you, was an
attempt to provIde the structure upon WhiCh eqUlty could be detenmned on a regular and
.
Mr DaVId MacDonald
1992 RATE APPLICATION
December 5, 1991
Page 3
.
lOgIcal basIS
The CommIttee applauds your suggestIon regardmg the development of perfonnance
standards for 1992 and looks fonvard to your suggestIons With regard to these standards
In adchoon, the Comnuttee also accepts your offer to have quarterly update meetIngs on
the rate applIcatlon so that we can be mfonned of the Company's progress towards
meetIng performance goals and seMce standards as we go along dunng the year
The Comrmttee has spent consIderable orne dunng thIs and the pnor year rate
appl1catlons consIdenng the concepts of return on eqUIty They have become
mcreasmgly concerned about the publ1c perceptlon of slgrnficant profits when the
economy IS expenencmg a slgrnficant downturn In addltlOn, the Comnuttee recogmzes
that long tenn agreements With the vanous agencies guarantee the Company profits on
whatever expendltures are mcluded ill the rate applIcatIon The CommIttee gave very
senouS consIderatIon to the pomts ldenhfied m your letter regardmg return on eqUIty,
partIcularly spendmg much ame dIscussmg your concern regardmg the dIfference
between begmmng and endmg eqUIty Therr spe(:lfic comments regardmg the Robert
Moms study mclude the follOWIng
o To the Comnuttees knowledge, none of the compames mcluded In the Robert
Moms study receIve guaranteed return on long tenn soild waste collectIOn and
dIsposal contracts Therefore, the Comrruttee feels that the Company return
should be lower, reflecang the lower nsk
o These compansons have been used conSIstently m the past by the CommIttee to
evaluate the appropnateness of the Company's return on eqUIty
o It IS practlcally lmpoSSIble to evaluate other comparues as completely comparable
to the Oakland Scavenger Company's operatlOns However, the Robert Moms
survey and the largest publ1c Waste Management Companys do provIde some
mdIcatlon of a reasonable rerum for unregulated busmesses over tIme, and shows
trends rn the mdustry related to return on eqUIty
WInle the CommIttee recogmzes many of the pomts made 10 your letter regardmg
performance, complaInts, rates and dISposal fees, the CommIttee contJ.nues to feel that
the Company has not been progreSSIve and farsIghted In therr approach to operauonal
conslderauons Whtle the Company contmues to mdlcate that they recogmze that
recyclmg and the economy have slgmficant effects on theIr operatIons, the CommIttee
.
Mr DavId MacDonald
1992 RATE APPLICATION
December 5, 1991
Page 4
.
has not seen adequate recogmtlon m the rate appl1caoon that recyclmg efforts will have
any effect on costs
The Company also states that It has proVIded long term landfill capacIty for Alameda
County While tJus 15 true and the County and Oakland Scavenger should be proud of
the steps they have taken to date, It IS ObVlOUS that Oakland Scavenger's current poSItlOn
IS to use tJus capaCIty at the earlIest possIble opportumty by allowmg Imports from other
countles ThIs reduces the long term availability of dIsposal capaCIty for Alameda
County resIdents
Concerrung your companson of dtsposal fees, whtle It IS true fees m the area have been
SIgnIficantly below other loca1landf1lls, there have been and will probably contInue to
be sIgmfican t mcreases m these dIsposal fees due to the Company's addItlon of personnel
and the Company's posrure that they should be at the front edge of technology WIth
regard to the protecnon of landfills Wlule the Comnnttee can understand the need for
an envlronmentally sound approach, It IS dtfficult to determme the most reasonable
response to regulatory requrrements 'flus will be evaluated by the Comnuttee dunng It'S
reVlew of capItal projects
Fmally, the Comrmttee contmues to be concerned about the Company's response to AB
939 and proVlslOn of mformatIon necessary for the agenCIes to respond to AB 939
W1ule your paragraphs dealmg WIth "responSIveness to jUnsdIctr.ons" suggest that you
have been proactIve 10 tlus area, members of the CommIttee and those worlang With your
staff, connnue to have trouble obtammg 1OformatIon and tonnages by JunsdICtIOn
F1Oally, proJecnons made by the Company do not recognue both hlstoncal and future
trends In the mdustry RecogmtlOo of these trends and adequate response both finanCIally
and operatIonally are Imperauve for the rate payers to develop renewed confidence that
the Oakland Scavenger Company IS operatIng 10 a reasonable and economIC fashlOn
All of thIS leads to the COffinuttee's final recommendatIon WIth regard to return on eqUIty
for 1992 The CommIttee has dISCUSsed all of the pomts outltned 10 your November 21,
1991 letter and finds no new substantlve 1Oformatlon The CommIttee's poSItIon remams
that rerurn on eqUIty for 1992 should be set at 10% based upon the phl.losophy outl1Oed
In the paper preVIously prOVIded to you Further, the concepts of guaranteed rate of
return for the Company due to the long term dISposal contracts WIth the agenCIes, and
operatIng raoos 10 both San Mateo and Walnut Creek that translate IOta ROE's SImIlar
to that granted to Oakland Scavenger, conv1Oce the Committee that 10% IS appropnate
for the 1992 rate year HIlton, Famkopf & Hobson have been dIrected to mc1ude thIS
8
.Mr DaVId MacDonald
1992 RATE APPLICATION
December 5, 1991
Page 5
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return on eqUlty m the final rate recommendanons
o AlIocatuJn of Accumulated Deficzt - As part of the JunsdIcnonal based rate appl1canon,
the Comnuttee has consIdered the methods to be used to allocate all expenses, mc1udmg
the accumulated deficIt At the November 25th meetmg, the CommIttee finally
determmed that dus defiCIt would be allocated to each agency based on a percentage
developed. by allocatmg one half of the deficIt usmg the 1992 contnbunon to the deficIt
and one half usmg adjusted 1992 expenses TIns compronuse hopefully recognIZes the
long term relanonslup among all agenCIes and was a compromtse solunon to complete
the Junsd1ctIonal based allocatlon HIlton, Famkopf & Hobson can further descnbe
exactly how t1us methodology was used and answer any questIons you may have Wlth
regard to Its appl1catlOn
Fmally, the Comnuttee appreciates the Company's responSIveness ill the current year With regard
to substanllve phIlosophIC ISSUes related to the rate appl1canon Further, we commIt to you our
will.J.ngness to contInue to work to make thIS process successful for both the rate payers and the
Company The Comrruttee IS prepared to work diligently WIth the Company to prepare for the
1993 rate appl1catIon and It IS therr hope that performance standards and obJectl.'ves can be
defined wluch proVlde recogmtIon of the value of the Oakland Scavenger Company to the
commumt:l.es they serve If you should have questIons regardmg any of the declSlons made by
the Comnuttee, please contact me at your converuence
Smcerely,
~tfG&--
Paul H Causey, Chamnan
Jomt Refuse Rate ReVlew CommIttee
PHC/Jk
(1X.2A 125910SC LTR)
I
CC JRRRC Members
HIlton, Farnkopf & Hobson
Oakland Scavenger Company
Administrative Offices
2000 Embarcadero SUite 300
Oakland CA 94606
510/5321400 FAX 510/5321465
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A Waste Management ComoarlY
r; ECEVVED
DEe J 0 1991
December 17, 1991
- ~ f""111n11N
Mr Paul Causey
Jo~nt Refuse Rate
ReVIew commIttee (JRRRC)
Ora Lama SanItary DIstrIct
POBox 95
San Lorenzo, CA 94580
Dear Mr Causey
ConfIrmIng our recent conversatIon, we fInd unacceptable the
JRRRC's deCISIon that a 10% return on eqUIty (ROE) 1S approprIate
for our Company for 1992
We feel we have already set forth very compellIng wr1tten
arguments for a hIgher ROE It would be our preference and
request to convene open negotIatIons In the near future on thIS
very Important matter WIth the JRRRC's Subcomm1ttee As I
IndIcated, we have always been able to resolve ROE matters WIth
the JRRRC and we would lIke to thInk we can contInue thIS
practIce
ProceedIng WIth settIng new rates for 1992 IS approprIate WIth
the understandIng that our company 15 protestIng the JRRRC's ROE
deCISIon
I look forward to your response to our request
Slncyre 7; ~-; ,/. /
~<. d ,/ d:,/~~ 't? /</?
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~D DaVId MacDonald
ExecutIve VIce PreSIdent
DDMjsd
DDM91198 s
cc Rate Rev1ew commIttee Members
EXHIBIT ~