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HomeMy WebLinkAbout7.1 Garbage Collection Franchise 10—so CITY OF DUBLIN AGENDA STATEMENT CITY COUNCIL MEETING DATE: September 23 , 1985 SUBJECT Garbage Collection Franchise EXHIBITS ATTACHED Memorandum from City Attorney dated September 6, 1985 ; Report from Hughes , Heiss & Associates dated September, 1985 (will be delivered Friday) RECOMMENDATION 1 ) Notify the Dublin San Ramon Services District and Oakland Scavenger that the City of Dublin intends to become the Garbage Collection Franchisor effective April 1 , 1986 2 ) Petition the Alameda County Joint Rate Review Committee for inclusion in Joint Powers Agreement pending the selection of Oakland Scavenger as the City ' s Garbage Franchisee 3 ) Determine whether or not the City should solicit bids or directly negotiate with Oakland Scavenger for garbage collection service FINANCIAL STATEMENT: The Dublin San Ramon Services District Garbage Franchise fee is approximately $115 , 000 for the combined areas of Dublin and southern San Ramon. It is unknown at this time how much of the franchise revenue would be directly collected by the City of Dublin. Receipt of the San Franisco import surcharge which is presently being collected by DSRSD would not accrue to the City under the Franchise Agreement but would have to be negotiated with the District . The District collects approximately $75 , 000 per year for the combined areas of Dublin and southern San Ramon from the surcharge . DESCRIPTION In accordance with earlier City Council direction, the firm of Hughes , Heiss & Associates has proceeded with the study of those services provided by the Dublin San Ramon Services District . Hughes , Heiss & Associates has completed their review of the Garbage Franchise which is presently held by the Dublin San Ramon Services District for both the City of Dublin and southern portion of the City of San Ramon. As you may recall , the Dublin San Ramon Services District had indicated that it would like a response from the Cities no later than October 20, 1985 with respect to the position of the Cities of Dublin and San Ramon with respect to the Garbage Collection Franchise . The Dublin San Ramon Services District Franchise Agreement with Oakland Scavenger expires on April 1 , 1986. The Agreement provides that the Dublin San Ramon Services District must notify Oakland Scavenger by January 1 , 1986, as to whether it intends to renew the Garbage Franchise . In a memorandum dated September 6 , 1985 from the City Attorney , the City Attorney indicates that the City does have the right to exercise the Franchise to provide collection of garbage for Dublin residents . This interpretation has been supported by the legal services utilized by Hughes , Heiss & Associates . Given the fact that the City does have the right to offer its own franchise for garbage collection services , it is necessary that the City notify the Dublin San Ramon Services District no later than January 1 , 1986, if it wishes to exercise that right . Concurrently, the City would also need to open negotiations with Oakland Scavenger and other potential franchisees to establish a replacement contract . This contract would need to include the term of the agreement , the franchise fees , and the fees for service . ---------------------------------------------------------------------------- r� COPIES TO : Paul Ryan, DSRSD ITEM NO . /. / AGENDA STATEMENT: Garbage Collection Franchise Page 2 The City would also need to petition the County ' s Joint Refuse Rate Review Committee for inclusion in the Joint Powers Agreement contingent upon the City selecting Oakland Scavenger as the franchisee . In addition to the Garbage Franchise Agreement , Dublin San Ramon Services District presently has , under a separate contract with Oakland Scavenger, an agreement to receive approximately $75 ,000 in annual revenue received for the import of San Francisco garbage to the Altamont Landfill . Dublin San Ramon Services District uses approximately $36,000-$40 , 000 of the amount to provide residents of the District with two additional special pick-ups per year. The remainder of the import surcharge is used by the District for General Fund purposes . The District ' s current contract with Oakland Scavenger which provides these additional revenues expires at the end of October, 1988. This is the expiration date for the import of San Francisco garbage to the Altamont Landfill . The Alameda County Solid Waste Management Authority is presently considering whether San Francisco will be permitted to import garbage to the Altamont beyond 1988. Based on conversations with other representatives from various cities throughout Alameda County , it appears at this time that San Francisco will be permitted to import garbage to the Altamont beyond 1988 . However, it does not appear that the garbage franchisors throughout the County will receive any revenues directly as they have in the past . It is anticipated that any revenue collected from San Francisco will be used primarily for enhancing or prolonging the life of the Altamont Landfill for Alameda County residents . Since the San Francisco Import Fee Surcharge , which is collected by DSRSD , is presently under a separate agreement with Oakland Scavenger, the City would need to negotiate a transfer of these revenues from the District to the City in order to maintain the two additional special pick-ups per year that are presently provided . If this was not accomplished , the City would have to modify the franchise fee structure negotiated between Dublin and the franchisee to fund additional pick-ups , or the service would have to be reduced in this area. It should also be pointed out that the Dublin San Ramon Services District also provides garbage collection services to the Camp Parks area. Since this area is presently not within the City , some transition provision would need to be made for Camp Parks unless the City was successful in annexing Camp Parks prior to April 1 , 1986. Mr. John Heiss of Hughes , Heiss & Associates will be present at the City Council meeting to discuss his report in more detail . ECEIVE D MICHAEL R. NAVE SEP 91985 ATTORNEY AT LAW 1220 HOWARD AVENUE, SUITE 250 BURLINGAME, CALIFORNIA MAILING ADDRESS 94010-4211 P. O. BOX 208 (415) 348-7130 BURLINGAME, CA 94011-0208 MEMORANDUM TO: RICHARD AMBROSE FROM: MICHAEL R. NAVE DATE: September 61 1985 RE: Solid Waste Collection Franchise The Dublin-San Ramon Services District (DSRSD) , a community services district, currently provides solid waste disposal to the residents of Dublin through a franchise agreement with Oakland Scavenger Co. The franchise agreement expires April 1, 1986 . DSRSD is studying the possibility of ceasing to provide solid waste collection within the city limits of Dublin when the franchise with Oakland Scavenger expires. The question is whether Dublin may grant a franchise to provide solid waste collection for the residents of the City if DSRSD ceases to provide that service. The Community Services District Act (Government Code Section 61000 , et seq.) provides that when part of the district is also included within a city, and where the services provided are duplicated by services provided by the city, the district may adopt a resolution refraining from providing such services. Government Code Section 61626.7 . Thus, DSRSD can terminate its collection of solid waste by following the procedures of Section 61626.7 . There is no additional requirement of LAFCO approval. The word "franchise" has several meanings. When a public utility conducts its operations through the grant of a franchise, the franchise is defined as a " . . . special privilege conferred upon a corporation or individual by a government duly empowered legally to grant it. " Oakland v. Hogan, (1940) , 41 CA2d 333 , 342, 106 P2d 987 , 994 . A franchise is not the same as a license. The distinction between a franchise and .a license is discussed in Copt-Air, Inc. v. City of San Diego, (1971) , 15 CAM 984 , 93 CR 649, 652: "A right or privilege which is essential to the performance of the general function or purpose of the grantee, and which is and can be granted by the sovereignty alone, such as MEMORANDUM Re: Solid Waste Collection Franchise September 6 , 1985 Page Two the right or privilege of a corporation to operate an ordinary or commercial railroad, a street railroad, city waterworks or gasworks, and to collect tolls therefor, is a franchise. (Citations. ) "A right or privilege not essential to the general function or purpose of the grantee, and of such a nature that a private party might grant a like right or privilege upon his property, such as a temporary or revocable permission to occupy or use a portion of some public ground, highway, or street, is a license and not a franchise. " (McPhee & McGinnity Co. v. Union Pac. R. Co. ,. supra, 158 F 5,10 .) A city or other public agency generally exacts a franchise fee in consideration of the granting of the franchise. The franchise fee, usually a percentage of gross receipts or revenues, has been described as " . . . in the nature of a toll or rental for the use of the streets covered by the franchises. " San Francisco-Oakland Terminal Rys. v. Alameda County, (1924) , 66 CA 77 , 225 P 394 , 306 . As stated in Tulare County v. City of Dinuba, (1922) , 188 C 664, 670 , 206 P 983 , 985: "The gross receipt charge under the Broughton Act is neither a tax nor a license, but is obviously a toll or charge, which the holder of the franchise undertakes to pay as part of the consideration, for the privilege of using the avenues and highways occupied by the public utility. " Franchises, being sovereign prerogatives, belong to the political power of the legislature of the state. 34 CJ3d, Franchises from Government, 510 . The power to grant franchises may be delegated by the legislature to subordinant tribunals. Fall v. Sutter County, 21 C 37; 34 CJ3d, §11. Any delegation of the power to grant a franchise to subordinant entities must be construed in favor of the sovereign. Salinas v. Pacific Telephone and Telegraph Co. , 72 CA2d 494, 164 P2d 905; 34 CJ3d, §12 . As stated in Petaluma v. Pacific Telephone and Telegraph Co. , 44 C2d 284 , 282 P2d 43 , 45: "Although the power of the state to grant franchises may be delegated to cities, the MEMORANDUM Re: Solid Waste Collection Franchise September 6 , 1985 Page Three intention to do so must be clearly expressed, and any doubt as to whether there has been such a delegation must be resolved in favor of retention of the power by the state. " We thus must look to see whether general law cities have been given the power to grant a franchise for solid waste disposal. Health and Safety Code, Section 4250 states that: "The legislative body of any incorporated city may contract for the collection or disposal, or both, of garbage, waste, refuse, rubbish, offal, trimmings or other refuse matter under such terms and conditions as may be prescribed by the legislative body of any such city by resolution or ordinance. " In addition, the Broughton Act (Public Utilities Code, Sections 6001, et seq. ) gives cities the power to grant franchises "to exercise any other privilege whatever proposed to be granted by the governing . . . body" in accordance with the procedures set forth in the Act. The Broughton Act does not specifically refer to solid waste collection. In Gurtz v. City of San Bruno, (1935) , 48 P2d 142 , 8 CA2d 399, the court held that the city had the power to grant an exclusive franchise for garbage removal. The court held in that case that the city erred, however, in not following the procedures set forth in the Broughton Act for granting franchises. In conclusion, it is clear from the Gurtz case that the City may grant a franchise for collection of solid waste. The procedures under the Broughton Act must be followed. Alternatively, the City could enact an ordinance under Health and Safety Code Section 4250 setting forth procedures for contracting for solid waste collection. Such an ordinance could provide for the granting of an exclusive contract or license to collect solid waste with or without competitive bidding. Universal By-Products, Inc. v. City of Modesto, (1974) , 43 CAM 145 , 117 CR 525. MRN1 j m ANALYSIS OF SOLID WASTE COLLECTION OPTIONS OPEN TO DUBLIN AND SAN RAMON CITY OF DUBLIN CITY OF SAN RAMON September 20, 19'85 Hughes, Heiss & Associates, Inc . San Mateo, California ANALYSIS OF SOLID WASTE COLLECTION OPTIONIS OPEN TO DUBLIN AND SAN RAPIOid The paper which follows explores options and issues open to Dublin and San Ramon related to the delivery of solid waste collection services. The paper evaluates alternative approaches for assuming service franchisor authority and responsibility. The key focus of the analysis includes the following : identification of issues related to assumption of the franchisor responsibility by Dublin and San Ramon frog; the Dublin-San Ramon Services District (DSRSD) . Evaluation of the advantages and disadvantages of alternative courses of action open to each of the cities. Key decision points faced by each of the cities. The paper opens with a brief review of the existing service system in both Dublin and San Ramon. 1. CURRENTLY, T'*ib SEPAkhTE FkAiiChISE AukEE!,,iENTS PROVIDE THE 6ASIS FOR "inE DELIVERY OF SOLID WASTE COLLECTION SERVICES TO UUBLliv Aiw SN14 r<HMOk. Under the current service system, two collection companies and two distinct franchises are related to the delivery of solid waste collection services to the Dublin and San Ramon areas. Key character- istics of the existing system include the following : DSkSD provides solid waste collection services to tine City of Dublin and the southern one third of the City of Sari Ramon under a franchise agreement with the Oakland Scavenger Company. This ten year agreement expires April i, 1986. The northern portion of the City of San Ramon receives solid waste collection services under a franchise agreement between the Central Sanitary District of Contra Costa County and Valley Disposal Service. The franchise agreement between the Central Sanitary District and Valley Disposal expires November 1, 1986. Negotiations related to contract renewal are currently underway. -1- uiven the existence of two different franchise agreements and two different service deliverers, service levels and costs vary across the Dublin and San Ramon service areas. because of involvement of two different service delivery companies in the City of San Ramon, differ- ent rate structures and different service levels are provided within the city boundaries depending upon the service delivery company involved. Exhibit 1 , which follows this page, summarizes basic charac- teristics of both costs and service levels related to the two service deliverers and current franchise agreements. Analysis of the inform- ation presented in Exhibit I indicates that residential service cost differentials which appear to be apparent when viewed on a per can basis tend to blur when service levels are considered. While the per can cost of service provided by the Oakland Scavenager Company is significantly below the comparable per can cost charged by Valley Disposal Service, these cost differentials blur when certain services are considered : - Under the Valley Disposal Service contract, customers are provided pick-up of two cans of lawn or garden clippings with each can of solid waste. - In the Jakland Scavenger service area, these additional cans of lawn and yarden clippings would result in an additional per can cost of 53. 50 each. - Thus, for, a suburban customer who uses both the solid waste and lawn and garden clipping service, the 'valley Disposal Service could actually be less expensive. In addition, under the existing Valley Disposal Service contract with the Central Sanitary District, three free clean-ups are provided each year. In the DSRSD service area covered by Oakland Scavenger, there are two free annual clean-ups included in the basic service rate. The DSRSD funds two additional free clean-ups by applying a portion of revenue received through the District ' s share of the $3.00 per ton importation fee levied on Sari Francisco. As noted in the Exhibit, these additional services are not funded by the basic rate structure. -2- EXHIBIT I Cities of Dublin and San Ramon COMPARATIVE SOLID WASTE COLLECTION COSTS AND SERVICE LEVELS Oakland Scavenger Valley Disposal Residential • Monthly cost of $5.05 per . Monthly cost of $8.95 per can (32 gallon) -- 1 can. can (32 gallon) -- 1 can. • Backyard pick-up. . Backyard pick-up. • Each additional can at . Each additional can at $3.50. $4.00 No comparable arrangement. . With one can of garbage ser- Blurs per can cost differ- vice, get 2, 32 gallon cans entials between the two of clippings per week. In- service providers. cluded in the service price. 2 free annual clean ups in- . 3 free clean-ups each year. cluded in basic service rate. Additional clean-ups in ser- vice area reflect DSRSD use of revenue received through $3/ton surcharge on SF waste transported to Altamont land fill . These additional services not funded by basic rate structure. Commercial . Monthly cost per 32 gallon . Monthly cost per 32 gallon can (one can) of $5.05. can (one can) of $9.40. Each additional can at . Each additional can at $5.05. $3.70. Loose material @ $4.75/ . Loose material @ $6.30/ yard. yard. -3- By most measures, commercial pick-up costs in the Oakland Scavenger Service area are significantly lower than they are in the Valley Disposal Service area. Cost differentials between the two service areas also need to be considered in conjunction with revenue generation related to solid waste collection franchise agreements. The DSRSD--dakland Scavenger agreement includes a 7.06% franchise fee which generates from $10U,000 to X115,000 a year revenue for DSkSu. It should be noted that this franchise fee has been reduced over the course of the contract by decision of the Board of Directors of DSkSu. Franchise fee reductions were agreed upon to moderate cost increases during the high inflation periods of several years ago. Conversely, the Central Sanitary District--Valley Disposal Service agreement provides negligible franchise fee revenue for the Central Sanitary District . Essentially, the Ventral Sanitary District views administration of the franchise agreement as a service for residents and agencies covered by the District ' s jurisdiction and has levied a franchise fee sufficient to cover contract administration and management costs. For the entire Central Sanitary District Service area, this franchise fee is currently approximately $15,U0O per year. It also needs to be understood that observed price differentials between the two service deliverers could possibly reflect the results of two distinctly different negotiation processes. In Alameda County, agencies contracting with the Oakland Scavenger Company have formed a Joint Powers Agreement kefuse Rate keview Committee which jointly supports pro- fessional evaluation of the Oakland Scavenger Company' s operating cost structure -to provide participating agencies with information useful in individual negotiaion of rates with the service company. In addition, the Refuse Rate Review Committee attempts to develop consensus policies regarding reasonable rates of return for the Oakland Scavenger Company related to service delivery and a uniform posture related to proportional rate increases that participating agencies should negotiate on an individual basis with the Oakland Scavenger Company. it is clear that the joint action' of multiple agencies possible through the refuse Rate Review Committee increases the leverage of individual agencies in negotiating with the solid waste collection ' company. -4- in the Central Sanitary District service area, the District negotiates with Valley Disposal Service. The Central Sanitary District also employes a professional accounting firm to evaluate service company operating costs and margins, but because of the centrally delivered service, jurisdictions in areas covered by the Central Sanitary District--Valley Disposal Service contract have no input in determining either rate structures, franchise fee levels, or other cost related items related to service delivery. These factors further blur service cost and service level compar- isons between the two service delivery companies under both existing arrangements and potential future arrangements assuming that the two cities assume direct franchisor responsibility. 2. PAkTICIPATION 1N THE ALAIEDA COUNTY SOLID WANE SYSTEi,I bErvEkATES ADDITIONAL k-VENUE FOk USkSD AbOVE AND Ar'mkl FkOI,'i FnAHICHISE FEE kELATED kEVENUE. Currently, the City and County of San Francisco, imports solid waste into Alameda County for disposal at the Altamont landfill owned and operated by the Oakland Scavenger Company. This importation by the City and County of San Francisco includes a $3.00 per ton fee levied to mitioate or offset the impact of importing solid waste into and through the various jurisdictions in Alameda County. kevenue related to this fee or surcharge is currently distributed among the various jurisdictions in Alameda County through individual contracts between those jurisdictions and the Oakland Scavenger Company. DSkSU currently receives approximately 175,000 per year as its portion of this mitigation fee or surcharge related revenue. This is covered by a separate contract between DSkSD and the Oakland Scavenger Company--a contract which expires on October 31, 1988. This contract is distinct from the franchise agreement contract between DSkSD and Oakland -5- Scavenger which expires in spring of 1586. Analysis indicates that neither Dublin nor San Ramon would have access to this revenue unless the DSkSD board of Directors chose to assign the contract to the two cities or established a separate agreement between the District and the two cities for allocation of the revenue. It needs to be clearly understood that this contract and the revenue related to it are completely distinct from the franchise agreement. Replacement of DSRS[i by the cities as service franchisers for solid waste collection services would have no impact on the separate agreement between USkSD and Oakland Scavenger nor would it provide the cities with immediate access to that revenue stream. 3. wh1LE LOivvEk kA16E TRENDS IN REFUSE COLLECTION kNTES AkE DIFFICULT O PkO EC , SEV kAL KEY FACOkS NEED TO bE 61ibEkSTOOD b- Y 60TH bUBL k miib SAii kAiviolN. A major issue related to the assumption of franchisor responsi- bility by the two cities and subsequent contracting with solid waste collection companies involves the dual issues of moderating costs for service area customers as well as potentially generating franchise fee revenue for the cities. As noted earlier, service level differentials make "apples to apples" comparisons of residential services and costs relatively difficult between the two service companies. Conversely, it appears relatively clear that there is a fairly significant co1mer- cial cost differential between the two companies given existing franchise agree,Tients and rate structures. In considering the longer range, the following needs to be noted: Specific rate structures could change no matter which service delivery company is selected by either Dublin or San -6- Ramon. Individual cite success in negotiating a rate structure and franchise fee with competing service deliverers are all imponderables at this time. "Breaking apart" the current DSRSD service area could result in different rate structures for the two cities given resulting shifts in commercial--residential customer nix in the two individual areas compared to the total DSRSU service area covered by the current rate structure. Tne northern portion of San Ramon, as noted earlier, is covered by an "umbrella" agreement between the Central Sanitary District and Valley Disposal Service. Under this agreement, rates are esentially comparable for the entire service area. if San Ramon is severed from this service arrangement and contracts with a Contra Costa County based service deliverer which employs a Contra Costa County based landfill , there is some potential for San Ramon to experience a higher rate structure than is currently the case. Given its location in the southernmost portion of Contra Costa County, transportation costs related to service delivery to San Ramon by a company employing a Contra Costa County based landfill could be expected to be higher than costs related tc serving jurisdictions in the central and northern ;portions of the Countv. To the extent that San Ramon negotiated an individual contract with a Contra Costa County based service deliverer, the loss of the "averaging effect" of being a part of the larqer Central Sanitary District contract could exert upward pressures on rates and costs for San Ramon operating alone. Conversely, as discussed in greater length in a subsequent portion of this paper, costs could be moderated by opening tie service to competitive bid in the two areas. In addition, available data related to expected future cost trends differs sharply when the two service delivery companies involved in the Lublin and San Ramon areas are considered : The most recent analysis conducted by the accounting firm of Price, 'Waterhouse for the Refuse Rate Review Committee indicated that profits and return on equity have exceeded targets due to revenue exceeding projections with the costs increasing at a lower rate proportionally for Oakland Scavenger Company operations in Alameda County. Current projections indicate that, given targeted recommended reductions in return on equity, rate increases should not be necessary until approximately the 1989-1990 time frame for those jurisdictions dealing with the Oakland Scavenger Company. In addition, the refuse Rate Review Committee has taken the policy position that residential rates be held constant and any cost reductions be applied to the commercial -7- rate area to ultimately eliminate the "commercial subsidy" of residential rates by commercial custoiriers. For the current year, this was translated into an 11'10 reduction in commercial rates and constant residential rates. Conversely, the Central Sanitary District--Valley Disposal Service contract and franchise agreement is currently under negotiation. Until these negotiations are completed, it is virtually impossible to accurately predict future trends in rate structures in the Central Sanitary District service area. However, it should be noted the Valley Disposal Service rates were increased as of July 1, 1585 as a result of the periodic readjustment of rates negotiated between the Valley Disposal Service and the Central Sanitary District. in addition, there is significant uncertainty related to longer range landfill issues in Contra Costa County. Until these issues are resolved, future cost projections related to refuse collection services are probably impossible. 4. ANALYSIS AND LEGAL OPINIONS INDICATE BOTH DUBLIN ANO SAN RAi,io;N CAIN t JS W) It FRANLHIJL k 6h J WHEI,i LXIJ I IN6_ C-ONTRACTS t R . Analysis of statutes and resulting case law indicate the following regarding exercise of franchisor rights related to solid waste collection services: As general law cities, both Dublin and San Ramon can elect to offer the franchise rights for solid waste collection services within their jurisdictions. They have no rights to existing contracts until those contracts expire or are assigned or renegotiated uy existing parties. Transition or transfer of the franchisor authority or responsibility between existing special service districts and the two cities does not require Local Agency Formation Commission action or approval . Given the above, should Dublin and San Ramon decide to assume authority over the granting of solid waste collection franchises, the following steps should be taken: The City of Dublin, through city council resolution, should decide through majority vote to pursue absorbtion of respon- sibility for granting a franchise for solid waste collection -8- services. The board of Directors of the Dublin-San Kamon Services District should be notified of this intent once the resolution is passed. To facilitate negotiations with potential service deliverers and to provide an orderely transition of franchise responsibility and agreement, this notice should be given as soon as possible given the expir- ation of the existing USRSD franchise agreement with Oakland Scavenger in April , 1986 and the 90 day renewal provision associated witn that agreement. San Ramon, through comparable action, will need to notice both the Dublin-San Ramon Services District and the Central Sanitary District of the City' s intent to assume franchisor responsbility. Again, these notices should be given as soon as possible considering the following : - The expiration and renewal notice deadlines associated with the USRSU--Oakland Scavenger Company agreement. - The existence of ongoing negotiations related to contract renewal between the Central Sanitary District and Valley Disposal 6ervice. Analysis indicates that the issues related to assuming franchisor responsibility and service delivery options are significantly different when Dublin is compared to San Ramon. As a result, the options open to each city and the advantages and disadvantages of each are explored separately in the paragraphs which follow. 5. DUBLINIS APPROACH TO ASSUMING THE FRANCHISOR ROLE IS RELATIVELY STRAIGHIFOkWAnD. Practically, the City of Dublin faces two options in regard to the delivery of solid waste collection services: Maintain the status quo which would involve DSRSD re- contracting with the Oakland Scavenger Company for the delivery of solid waste collection services to the Dublin area. The City of Dublin assuming the franchisor role and selecting a service deliverer once the USRSU--Oakland Scavenger Company contract expires. -9- The paragraphs which follow explore each option. (1) Maintenance of the Status quo Offers Few Advantages to Dublin . As noted above, the franchise agreement between DSRSD and the Oakland Scavenger Company is expiring and, in the absence of Dublin assuming the franchisor ' s role would need to be negotiated by DSRSD prior to its expiration date of April 1, 1986. As a result, there is no certainty that such a re-negotiated contract would provide the same rate structure or comparable fee levels as are currently in place under the expiring t.en year agreement. While analysis conducted through the Refuse Rate Review Committee has indicated that there should not be significant change in residential or commercial rates over the period through the end of the 1980 ' s, the actual rate struc- ture, potential franchise fee, and other service delivery provisions are dependent on the type of contract which would be agreed upon between DSRSD and the Oakland Scavenger Company. As a result, from the prospective of potential changes in rates and franchise fees, Dublin ' s assumption of franchisor respons- ibility and subsequent negotiation with a service deliverer appears to offer no greater risk than renegotiation of service between DSRSD and the Oakland Scavenger Company. Given this conclusion, there appears to be little advantage to Dublin to maintain the status quo. (2) A Variety of Steps Need to be Undertaken for Dublin to Assume the Franchisor o e. The key elements in the process related to Dublin 's assump- tion of franchisor responsibility involve those key dates related to -10- the expiration of the existing contract between DSRSD and Oakland Scavenger. As noted earlier in this paper, the ten year franchise agreement expires April 1, 1986 and also includes a 9O day renewal notice by either party which makes the practical decision date January 1, 1986. It should be noted that the Oakland Scavenger Company has already notified DSRSD of their interest in renewing the contract . Given these key dates, the City of Dublin needs to undertake the following steps: As noted above, notify the DSRSD Board of Directors of the City's intent and interest in assuming solid waste collection system franchisor responsibilities. That notice should be made as soon as possible. The City needs to determine how it wishes to proceed in terms of the selection of a collection company. This could involve preparation of a request for proposal and solicitation of competitive bids for negotiation with a specified service provider. Assuming that the City selects to open the process to competitive bid, prepar- ation of a request for proposal and solicitation of bids should occur concurrent with the notice to the DSRSD. If it appears likely that the City will select the Oakland Scavenyer Company as the service deliverer, it is clearly in the City' s interest to request membership in the Refuse Rate Review Committee through inclusion in the Committee' s Joint Powers Agreement. Key advantages related to Lommittee membership include: - Increased leverage in the rate negotiation process. - Lower costs involved in contract administration to include the sharing of costs of professional audits of Stavanger Company- financial performance which is key to the rate negotiation process. - Steps should be taken to gain committee membership as soon as and if it clear that the Oakland Scavenger Company is likely to be selected . -11- The final step in the process involves selection of a service companv, negotiation of rates, and establiShMent of a franchise agreement . ;Major advantages and disadvantages associated with Dublin ' s assuming the franchisor role include the following : Advantages: - Enables the city to control the franchise fee determination. - Provides the opportunity for the City to receive franchise fee revenue. - Through direct participation in the negotiation process, allows the City to exercise local control over rate structures, franchise fees, and service levels. Disadvantages: - Given the composition of Dublin (residential versus commercial mix) and the existence of no significant difference in risk between the City neqotiating a new contract and DSRSD negotiating a new contract, there appear to be no significant disadvantages associated with the City's assuming the franchisor role. 6. SAH kAlviuk FACES A VAkIETY OF �fORE COi-,IPLEX ISSUES IN ANY AUuUST�IE �T TO ThE CUkkENT SOLID WASTE COLLECTIUN SYSTEki. Given the existence of two different service delivery contracts covering the City area and different expiration dates associated with each of those contracts and conditions, San Ramon faces a more complex situation involving alternatives to the delivery of solid waste collection services. Basic options open to the City include the following : maintain the status quo which would involve allowing the Central Sanitary District to renew the franchise for the Sari Ramon area and maintenance of two distinct service deliverers within the City boundaries. -12- Move to assume the franchisor responsibility under a variety of scenarios including : - Attempting to contract with one service delivery company for the entire City area. - Maintaining two distinct service delivery agencies within City boundaries but establish local control over service contracts and conditions. Each of these options are explored in the sub-paragraphs which follow. (1) i,laintainance of the Status Quo Would be Unlikely to Fulfill San kamon City Council Objectives. The first option open to the City of San Ramon is maintainance of the status quo involving split delivery of solid waste collection services. This could be accomplished whether or not the City of Dublin assumes franchiser responsibility from the Dublin-San Ramon Services District for its area. There are two alternative courses of action for maintaining the status quo: Under the first alternative, the City of San Ramon could notify DSRSD of the City' s intent to withdraw from the District ' s service delivery franchise once the existing contract with Oakland Scavenger Company expires. This would probably occur concurrent with notice by the City of Dublin of the same intent. Under this scenario, San kamon could then sign a contract or joint powers agreement with Dublin for the franchise of solid waste collection services in the southern portion of San kamon which is currently covered by the Dublin- San Ramon Services District. The contract or.joint powers agreement could provide the following : - Could stipulate distribution of franchise revenue related to the southern portion of San namon. - Could include a proportional contribution to Dublin ' s costs related to membership in the Refuse Rate Review Committee should Dublin select Oakland Scavenger Company as a service deliverer. -13- Under this scenario, no change would be made regarding service delivery in the northern area of San Ramon and it is assumed under the status quo option that the City would simply allow the Central Sanitary District to renegotiate a franchise for the northern area and split service delivery would continue. The other option is for the City of San Kamon to assure franchisor riqhts for both northern and southern areas but negotiate agreements with separate service delivery companies. Notice requirements to both DSKSD and the Central Sanitary District would be the same as the previous option, but San Ramon would need to go through the process of selecting service deliverers for the two areas. Under this scenario, San Ramon would need to: - Issue a request for proposal . - Select a service delivery company or companies. - Petition for membership in the Kefuse mate Keview Committee to reduce costs and potentially increase leverage for negotiating refuse collection rates in the southern portion of the City if bakland Scavenger Company is the Company selected to provide service. - Negotiate franchise fees for the service situations in each area of the Citv. 11ajor considerations related to the maintenance of the status quo in regard to multiple service deliverers within the city boundaries of San Ramon include the following : Neither of these options would meet the City' s objectives of providing a uniform service delivery system and cost structure within the city boundaries. while rate structures are dependent on the results of negotiations with service deliverers, it is highly likely that a rate differential would exist because of differing travel requirements for northern and southern portion service deliverers. Additionally, it is unlikely that the franchise fee revenue generated from the southern portion of the City could be expected to be sufficient to offset the cost rifferential between the two areas if the City Council selected to apply that franchise fee to equalize rates. -14- Even if San Ramon elects to withdraw from the Dublin-Jan Ramon Services District for solid waste collection service purposes, the City is unlikely to loose access to the option of selecting a collection company with access to closer, Alameda County landfill sites. Principal reasons include the following : - Solid waste generated in the southern portion of the City is already included in the Alameda County Solid 4vaste Plan. A shift of service deliverers has no impact on the waste stream which the Plan has been developed to deal with. - There are no specific approvals or plan amendments required to effect a change in service deliverers or placement of franchisor authority, regardless of whether San kamon elects a contract or joint powers agreement through the City of Dublin or contracts directly for service for the southern portion of the City. joining with Dublin through a contract or a joint powers agreement for the franchise for southern portions of San Raiiion could nave a positive impact on rate levels. oy providing a larger area covered by the franchise, preferential rates might be able to be negotiated. It should be noted that these variations on the status quo have been presented because of the potential for San Ramon to be unsuccessful in gaining access to the Alarneda County Waste Disposal system for waste generated in the northern portion of the City. As such, the two scenarios presented under this option represent "worst case" alternatives. W Consolidation of all of San kamon Under a Single Solid waste Collection Franchise Represents a ilore Lonip ex Set of Decisions and Processes. The other major option open to the City of San Ramon is to niove to consolidate the solid waste collection franchise under a single service deliverer covering tie entire city area. This involves transitioning franchisor authority from two separate agencies--DS{Su -15- and the Central Sanitary District--as well as selecting and negotiating with a single solid waste collection company. Nevertheless, this option is more consistent with the City Council ' s objectives in terns of the following : Establishing a uniform collection system across the entire city area. Potentially gaining access to the Alameda County disposal system with attendant reduced travel costs and potentially lower rate structure. The potential to generate a higher level of franchise fees than are available under the split service delivery; option discussed in the preceeding section. To pursue the consolidated service option, Sari kamon would need to accomplish the activities outlined in the sun-paragraphs which follow: (1.1) Formal Notice of tine Intent to Assume Franchisor Authority Would Need to be uiven to both USRSU and the Central Sanitary District. To effect any change in the existing service delivery system, San kamon would need to give formal notice to both DSRSD and the Central Sanitary District of the City's interest and intent in assurninq solid waste collection franchisor authority for all areas within the city boundaries. While there are differing expiration dates related to both the USRSD and the Central Sanitary District contracts, it would be in San Rarnon ' s interest to make the decision and give notice as quickly as possible. hey dates include the following : As noted above, the DSRSD--Oakland Scavanger Company contract expires April 1, 19803 and includes a 990 day notice requirement related to franchise contract renewal by one or both parties. As a result, the practical date related to contract renewal is January i, i986. when one considers the elapsed time necessary to select a replacement service company, negotiate agreement, and the like, it is in the City' s interest to make notice as soon as possible. -16- While the contract between the Central Sanitary District and the Valley Disposal Service expires igoveiber 1, 1536, interviews indicate that both parties are currently under negotiation related to contract renewal . As a result, it is again in San Ramon ' s interest to make notice of the intent to assume franchisor authority for the northern portion of the City as soon as possible so that the City' s intent can be taken into account by both parties negotiating renewal of the contract for the remainder of central Contra Costa County. In addition to notifying the Central Sanitary District of the City's intent to assume franchisor responsibility, San kam on should also explore one additional issue with the Central Sanitary District before proceeding with the selection of a service delivery company. This would involve the potential to include the City' s sphere of influence--areas included within the sphere of influence but external to existing city boundaries--under the provisions of a new solid waste collection franchise. This could involve either establish- ing a contract or a joint powers agreement between San Ramon and the Central Sanitary District which would allow the City of San Karon to deliver solid waste collection services and provide the franchise for the exercise of those services to areas falling external to the city boundary, but which fall within the sphere of influence. While approval of such a proposal is at the discretion of the Central Sanitary District, the following factors need to be considered : If such an agreement is not negotiated, it would be extremely difficult to include newly annexed areas as part of the City' s solid waste collection system until the franchise agreement between the Central Sanitary District and Valley Disposal Service or other selected service deliverers expired. While the length of the franchise agreement which is being currently being renegotiated is unknown at this time, it could be expected to be a minimum of five to seven years. -17- In the absence of such agreement, as annexation occurred, the City Council ' s goal of providing a uniform delivery system throughout the city boundaries would be frustrated. Over the lonoer range, the absence of peripheral areas could impact the rate structure achieved by San Ramon. To the extent that the unincorporated periphery which falls within the sphere of influ- ence includes significant commercial development, inclusion of those areas in the solid waste collection service area could have positive impact on overall rate structures for both residential and co-mmercial customers in Jan Ramon. (2.2) H Service Deliverer w ill Need to be Selected by the City of San Ranon. Achievement and implementation of a consolidated solid waste collection system within the city boundaries of San kamon would necessitate selection of a service deliverer. To the extent that the City pursues competitive bids from interested solid waste collection companies, the process of request for proposal , selection of a bidder, negotiation of a contract, and the like would need to be followed. As such, it is basically the same process as outlined for Dublin earlier in this paper. It would appear to be in the City' s interest to pursue competitive bids in the interest of minimizing rate levels and maximizing Potential franchise fee revenue. The selection of a single service deliverer is complicated by the staggered contract expiration dates related to current service deliverers and agreements. As a result, it would be necessary for the City to select a service deliverer but provide for actual implementation of services on a staggered basis as follows: fo provide service under a San Ramon granted franchise to the southern portion of San Ramon effective Npril 1, 1986. -1 b- Implement service to the northern portion of San Ramon upon expiration of the Central Sanitary bistrict- -Valley Disposal Service contract on November 1, 1986. The issue is further. complicated if the service deliverer selected involves use of an Alameda County based landfill for disposal purposes. if this is the case, the issue of importation of incremental solid waste involves the waste generated in the northern portion of San kamon. Any contract covering the collection and disposal of waste generated in that area could not be finalized until required approvals were obtained from the Alameda County Solid Waste Mi�anagement Authority. As a result, San Ramon and the selected services deliverer could finalize that portion of the service contract related to the southern portion of the City which is already included in the Alameda County solid waste system. Achievement of full consolidation would be dependent on the approval process which is described in the section which follows. (2.3) To the Extent the Selected Franchise ''Would Involve Use of Landfill Sites in AlafWeda County and Impact Currently Projected Waste Streams, Formal Approval of importation Will be required. While there are a variety of options open to San kamon in the selection of a service delivery company to achieve consolidated service, should that service delivery company include, as part of its service, disposal of San kamon generated waste at an Alameda County landfill site, a third party approval will be necessary before the system could actually be implemented. The approval mechanism, related to waste generated in the northern portion of San Ramon and imported -1 for disposal to Alameda County, would involve the following basic steps: San kamon would select a disposal company to provide consolidated solid waste collection services. The company selected would make application for importation of incremental solid waste (generated by the northern portion of San Ramon) to the Alameda County Solid Waste Authority. The request would be for an amendment to tree Alameda County Solid Waste Plan to incorporate the incremental increase in the waste stream resulting from the importation of solid waste generated by the northern portion of San kamon. The Alameda County Solid Waste Authority would then analyze and act upon the request for a plan amendiiient. Assuming approval by the Alameda County Solid Waste Authority, final approval of the plan amendment would also need to be granted by State level solid waste management agencies. While analysis indicates that the process for gaining importation approval is relatively straightforward in terms of process mechanics, there are a variety of other factors which can be expected to influence the time frame required to reach a decision on any importation request as well as the type of decision ultimately rendered . These include the following : Tile City and County of Sari Francisco, as noted earlier in this paper, currently is a major importer of solid waste to Alameda Count v. Under the terms of the existing importation agreement, the City and County of San Francisco pays a mitigation fee or surcharge of 13.00 per ton to offset the impact of solid waste importation on affected Alameda agencies. That agree- ment expires in 1988 and includes a series of contracts between Oakland Scavenger and Alameda County agencies covering disposition of the �3.00 per ton mitigation fee. The City and County of San Francisco and the Oakland Stavanger Company are currently negotiating with the Alameda County Solid ''Waste Authority to both extend and expand the existing importation agreement which runs through 1958. Ultimate resolution of this request will set a number of precedents which can have significant influence on any San Ramon related request for solid waste importation. Key issues include the following : - Part of the current analysis and negotiation process involves determination of a revised mitigation fee related to solid waste import- ation. This includes refining how such a fee is calculated based on the actual impact of incremental solid waste importation on both individual jurisdictions and the overall Alameda County solid waste system. - Until this issue is resolved and appropriate precedents established, it is highly unlikely that the Alameda County Solid Waste klanagem ent Authority would or could act on an additional request for importation. - Interviews indicate that this issue should be decided by the end of this calendar year or early in 186. - As a result, little action could be expected on a San kamon related request for importation until early in i986. interviews indicate that the amount of time required to process the request for a plan amendment and reach decision. would be about six months. Assuming completion of the San Francisco case by the end of the year and a six month decision making time frame, San Ramon could expect a decision on a request for importation of solid waste related to the northern portion of the City little earlier than June, 1986. while this date falls well before the expiration of the current franchise agreement related to the northern portion of the City, it is significantly later than the expiration of the DSRSu--Oakland Scavenger contract for the southern portion of the City and underlines the need for a two step contract approach of if a consolidated service delivery agency employing Alameda County landfill sites is selected. Overall , the major disadvantages associated with pursuing a consolidated solid waste collection system to include a single service delivery company include the following : There is some uncertainty in regard to how a request for importation of solid waste would be resolved at the -21- Alameda County Solid Waste Management Authority level . Current conflicts involving the City of Berkeley and Contra Costa County related to solid waste importation and related fees could have some potential to stimulate political resistance to importation by San Ramon. the extent to which this is a real possibility is unknown at this time. Similarly, there could be some potential resistance by Contra Costa agencies depending on the impact on San Ramon' s withdrawl fro-ii the solid waste collection system. bisputes could arise if San Ramon' s witndrawl would impact the overall cost structure of solid waste selection services for remaining Contra Costa County agencies. However, since San Ramon falls in the southern end of the County and has relatively extended travel distances related to the disposal of waste at existing and likely future landfills, it is riot clear that withdrawl of San Ramon from the Contra Costa County system would have adverse cost impact on remaining agencies. Nevertheless, there is an unknown potential for Contra Costa County based resistance to withdrawl of San Ramon from the Contra Costa County system--potential resistance which could complicate state level approval of an amendment to the Alameda County Solid Waste Management Plan which involves a San Ramon related importation request. There is virtually no way to quantify this risk at the current time. Additionally, it is highly likely that importation of solid wate generated in the northern portion of San Ramon will result in some level of mitigation fee consistent with the ultimate resolution of the San Francisco request to expand importation and extend the importation agreement related to Alameda County. As a result, basic rates related to northern and southern San Ramon could differ because of the existance of such a mitigation fee. An alternative to equalize costs could involve the City Council deciding to employ any franchise fee to offset the impact of a mitigation fee on northern section rates, or to equalize rates across the entire City by bringing southern section rates up to those charged for the northern area including the mitigation fee. Which course of action open to the City is dependent on the level and type of franchise fee negotiated with the service delivery company. The final , "worst case" scenario associated with attempting to install a single service delivery agency would involve implementation of San Ramon franchise service for the southern portion of the City in -22- the early spring of 1986 and then, subsequently, disapproval of an importation request by the Alameda County Solid Waste Authority in the summer of 1986. Even if this "worst case" scenario occurred, San kamon would still have approximately three months to identify and implement alternative service delivery approaches for continuing solid waste collection services in the northern portion of the City. If an importation request was denied, the City would need to select either an alternative service deliverer or the selected service delivery company would need to identify an alternative landfill site located in Contra Costa County. ;;s noted above, the City would have three months to resolve this issue before the current Valley Disposal Service- -Central Sanitary District franchise contract covering San Ramon expires. resolution of such an issue would probably involve reverting to one of the two options presented in earlier portions of this section which involved maintenance of a split service delivery system. (3) under any Scenario, There Appear to be Few Significant Disadvantages to pan Ramon ' s Assuming the Franchisor Role for the Entire area Within its Jurisdiction. Major disadvantages and advantages associated with San kanon ' s assuminq the franchisor role for all solid waste collection services provided within its boundaries are summarized below: Di sadvaiitages: The major disadvantages associated with San Kwon' s assumption of franchisor authority for solid waste collection services within its bound- aries involves the potential uncertainty involved in any request for importation of solid waste to Alameda County. As noted above, to the extent that such a request was denied, it could complicate the selection of service delivery companies and subsequent negotiations of contracts. -23- San Ramon would have to assume responsibility for contract negotiations with service delivery companies under each option. If the City were required to operate under a system with two service delivery companies, negotiation could pose an incremental expense and administrative load as follows: . . From the perspective of improving leverage and moderating costs of negotiated rate structures, it would be in the City' s interest to obtain access to the Refuse Rate Review Committee in Alameda. County for the purposes of obtaining professional auditing information on service delivery agency costs. This is, of course, predicated on the selection of Oakland Scavaeger Company as a service deliverer in the southern portion of the City. . . if San Ramon was unsuccessful in obtaining admission to the Refuse Rate Review Committee, its negotiating posture could be complicated. While it would probably have access to the results of the periodic audit of Oakland Scavanger Company operations, it might lose some negotiating leverage if it were not part of the Coiimittee. . . If the City is required to negotiate service delivery for the northern portion of San kamon on an individual basis, it could lose some of the "leverage" which is currently provided through the Central Sanitary District negotiation for an area wide service franchise. However, it should be noted that this potential loss of leverage could be offset by increased local control over negotiations and related rates and franchise fees negotiated. if an importation request were denied, there is the potential that the City could find itself in a situation where it would be required to negotiate service delivery contracts wit[; two different companies and attendant continuation of a divided service system and non-uniform rate structure across the City. Advantages: - By assuming the franchisor authority for the entire City, San Ramon would be able to establish local control with potentially greater impact on -24- both refuse rate collection costs for residents, a uniform rate schedule across the City, and poten- tial franchise fees. Depending on how successful the City is in nego- tiating agreements with competitive bidders, costs could be reduced for all or a portion of San kamon residents. Given the above, there appear to be no coiiipelling reasons for ' San kamon to maintain the status quo. 7. NO MATTER WHICH; COURSE OF ACTION IS SELECTED BY THE TWO CITIES, ACCESS 10 FEE KEVENUE KELATED TO THE SAN FRANCISCO !HPOP_IATIOi\! OF SU I U WAJiE iS IMPJ5J 16LE WIIHUUT THE C0i,iCUPREkCL Uf it UJKJU 3UNRD. As noted earlier in this paper, DSRSD currently receives a portion of the importation fee levied on the City and County of San rrancisco through the Oakland Stavanger Company. That revenue is received as a result of an agreement between the Oakland Stavanger Company and the DSRSD. The expiration of that contract is October 31, 1988. Even if the cities elect to exercise authority over the grant- ing of solid waste collection franchises within their respective jurisdiction, that decision has no impact on gaining access to the approximately $75,000 per year revenue related to the mitigation fee. City access to that revenue could be gained only through negotiations with the Board of Directors of DSRSD. -[5-