HomeMy WebLinkAbout8.1 Garbage Rate Adjustment CITY OF DUBLIN
AGENDA STATEMENT
CITY COUNCIL MEETING DATE: December 23, 1991
SUBJECT: Review of Proposed Garbage Rate Adjustment and Service
Options
(Prepared by: Paul S. Rankin, Assistant City Manager)
EXHIBITS ATTACHED: 1. Executive Summary
7 2 . Joint Refuse Rate Review Committee - Review of
Oakland Scavenger Co. 1992 Rate Application
3. Letter of Agreement for Use of Special Garbage
Rate Surcharge
4. Proposed Residential Rate Structure
5. City of Dublin Rate Model Assumptions
6. Letter from Livermore Dublin Disposal indicating
Increase in Curbside Recycling Fee
7. Proposed Commercial and Multi-Family Rate
Structure
S. Proposed Drop Box Rates
RECOMMENDATION: Receive Staff Report, provide input, authorize Staff to
�JUT/�prepare the necessary documents for consideration at
��bb'' the January 13, 1992 meeting.
FINANCIAL STATEMENT: The Company's original request projected a
Companywide increase of 13%. The findings of the
detailed rate review suggest that Dublin can
institute a rate reduction affecting most
customers. This decrease is contingent upon City
Council concurrence of a recommendation by the
Joint Refuse Rate Review Committee to reduce the
amount of profit from what is being requested by
the Company. The amount will vary depending on
the level and type of service.
If a rate decrease is implemented, the City will
experience a decrease in Franchise Fee Revenue.
The estimated impact on an annual basis is $3,490.
DESCRIPTION:
JRRRC Background for Proposed Adjustment
The City of Dublin participates as a member of the Joint Refuse Rate Review
Committee (JRRRC) . The Committee was formed through a Joint Powers
Agreement to provide rate review assistance to agencies serviced by Oakland
Scavenger Co. The joint effort allows the work to be completed in a cost
effective manner and avoids a duplication of effort.
During the past year, several changes have occurred which impacted the
scope of the review. In order to review Company operations, a Management
Audit was undertaken. The focus of the work was aimed at identifying
potential areas for greater efficiency and cost reductions. The second
major change was in the methodology used to apply recommended rate
adjustments. In previous years, companywide revenues were considered and
all agencies made equal adjustments to rates on this basis. For example,
if the Company projected a need for 10% more in revenue, each agency would
increase rates by an amount projected to be sufficient to generate 10% more
revenue. There was not any attempt to link rates in an individual
jurisdiction with the cost of service in the jurisdiction. The current
rate application addresses this issue on a cost of service basis by
jurisdiction.
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COPIES TO:
D. David MacDonald, OSC
Dan Borges, LDD - - - =-
Scott Hobson, HFH CITY CLERK
ITEM NO. 0 ,t*
FILE 1811101- 13MO
ti
Staff has prepared an Executive Summary (Exhibit 1) which focuses on issues
related to the City of Dublin. This Summary addresses issues identified in
the JRRRC Management and Operations Review as well as the 1992 Rate
Application. In addition, Exhibit 1 contains detailed recommendations for
specific adjustments to rates and services in the City of Dublin.
Issues to be Considered by the City Council
The focus of the Staff report will be to identify policy issues and request
direction from the City Council. Staff will use this information to
prepare documents for consideration by the City Council at a Public Hearing
on January 13, 1991. State law requires that a publicly noticed hearing
occur prior to implementation of fees by the City.
A. MANAGEMENT AUDIT ISSUES
Many of the issues identified in the Operations and Management Review have
been held over for further review by the JRRRC. Two specific issues
directly relate to the City of Dublin.
A.1. Collection Crew Size
The Audit identified that the City of Dublin is currently serviced by one
2-person crew and one 3-person crew. The Consultants have encouraged 2-
person crews due to their higher productivity. Staff would propose that we
conduct further discussions with the Company on this issue. It would be
important to identify whether feasible alternatives exist and the cost
implications of those alternatives. For example, changing to two 2-person
crews could result in substantial overtime costs. This type of factor
needs to be discussed with the Company. Staff would anticipate having
additional information by the time of next year's rate review.
A.2 . Semi-Automated Service
The second relevant issue discussed in the Management Audit is a
recommendation to pursue semi-automated service. As stated in Exhibit 1,
this has been discussed by the City Council in previous years and Staff was
directed to continue with the current level of service. Given the
intensive capital costs with this service, it may be appropriate to
consider this option when the current franchise expires in 1996.
B. RATE REVIEW
The Rate Review contains several policy issues as discussed in Exhibit 1.
Staff would request, in addition to any general comments that the City
Council identify, any concerns or proposed modifications to the
recommendations on the following issues:
B. 1. Proposed Methodology of Distributing the Balancing Account
As discussed in Exhibit 1, the methodology used to distribute the current
Oakland Scavenger Company operating deficit represents a compromise
between two opposing positions. Staff would recommend that the City
Council concur with the JRRRC recommendation as an equitable resolution to
the issue. In the future, adequate data will be available to have each
agency responsible for generating the revenue necessary to fully pay for
expenses associated with services in that jurisdiction.
B.2 . Proposed Reduction to the Company's Return on Equity
The JRRRC has recommended that the level of profit for 1992 be reduced from
what the Company has requested. The basis for this recommendation is
outlined in detail in Appendix B to Exhibit 2 . This recommendation is
based upon the JRRRC review of industry statistics, economic factors, and
the Company's performance. The JRRRC has recommended that the Company be
allowed a 10% Return on Equity, which translates into a 5.7% pre-tax
profit.
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B.3. Consideration of the Number of Special Cleanups to be Included in the
Rates
The Consultants have calculated the impact to residential garbage rates of
including two clean-ups which are not' currently funded by the rates. If
the City Council elected to only conduct 2 clean-ups per year, the proposed
monthly residential rates could be reduced by an additional 30 cents.
B.4. Proposed Residential Service and Rate Adjustments
Exhibit 1 discusses in detail the proposed implementation of several
changes to residential rates and services. The following summarizes the
recommended changes:
(a) Proposed establishment of a uniform can rate which eliminates any
discount for multiple cans.
(b) Proposed establishment of a Super Recycler service level,
providing regular collection of a 20 gallon container.
(c) Proposed requirement for all .residences to subscribe to a minimum
level of service.
(d) Proposed rate reductions for all classes of residential
customers.
B. S. Proposed Adjustments to Commercial and Large Container Rates
The Consultants have worked with Staff to develop a revised rate structure
for customers using bin services. The proposal results in a decrease for
the majority of commercial bins now in service. The drop box collection
rates are proposed to increase. These changes are recommended to implement
a rate structure which more closely relates to the cost of service.
Utilizing factors consistent with the Commercial and Drop Box proposals, a
rate decrease is recommended for the Handy Hauler rate.
Conclusion
Staff would recommend that the City Council receive the report and provide
additional direction where appropriate. Staff will proceed in the
following manner unless directed otherwise by the City Council:
1. The Management Audit will be received and filed. Staff will continue
to participate on the JRRRC to review the issues designated for
further study. Staff will request that Livermore Dublin Disposal
provide additional information on the use of all two man crews in our
community.
2 . Staff will prepare the necessary rate resolutions for consideration at
the January 13, 1992 City Council meeting, based upon the proposed
schedules presented. Also, appropriate notices regarding the hearing
will be published as required by State law.
3. Staff will prepare amendments to the Solid Waste Ordinance and
Franchise Agreement necessary to implement mandatory garbage service.
4. Staff will, work with the Company to institute the Super Recycler rate
following formal action to establish a rate at January 13, 1992 City
Council Hearing.
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CITY OF DUBLI t
MEMORANDUM
TO: Mayor and City Council
FROM: V-1 Paul S. Rankin, Assistant City Manager
SUBJECT: Executive Summary: 1992 Oakland Scavenger Company (OSC)
Management and Operations Rate Application Review
DATE: December 19, 1991
Staff has prepared a City of Dublin Executive Summary of the 1992
Garbage Rate Application and Management Audit with Recommendations for
Adjustments. This document focuses on findings in the 1992 Rate
Review report which are of specific relevance to the City of Dublin.
As you are aware, the City of Dublin participates with other agencies
serviced by OSC in the joint review of rate applications. The Joint
Refuse Rate Review Committee (JRRRC) makes recommendations based upon
findings of an independent review of the Company's Rate Application;
therefore, the Consultant's report presents issues and information in
a format consistent with the overall review of the Company's total
operation.
The City of Dublin Executive Summary also contains specific
recommendations on proposed adjustments to the current rates and
services provided. Some of these issues (i.e. , Mandatory Garbage
Service and a Super Recycler Rate) are specific to the City of Dublin
and were not evaluated by the JRRRC. This document is intended to be
a supplement to the City Council agenda item which will focus on
issues for consideration by the City Council.
If you have any questions, please feel free to contact me.
PSR/lss
a: 1219JRRC.doc.psr#8
CI. JF DUBLIN EXECUTIVE SUMMX )F
OAKLAND SCAVENGER COMPANY MANAGEMENT AND OPERATIONS REVIEW AND
1992 RATE APPLICATION INCLUDING RECOMMENDED RATES
Management Audit
The Management Audit was completed by a Consultant Team which included
Hilton Farnkopf & Hobson (HFH) and SCS Engineers. HFH coordinated the
project and focused on financial and management issues. SCS Engineers
have a background in solid waste operations and reviewed the collection,
transfer and disposal operations. The Executive Summary from the audit
is attached as Appendix A.
Scope of Findings
The report findings are not all applicable to the City of Dublin. In
some cases, the issues were unique to divisions of Oakland Scavenger
Company other than Livermore Dublin Disposal. It is also important to
note that on some of the findings, the JRRRC has proposed to consider
further analysis in the future. The report also recommends that local
agencies consider changing the method of collection to achieve cost
reductions. The members of the JRRRC recognize that this type of
consideration is solely a local policy issue and is submitted for
informational purposes. It is also important to note that the report
identifies areas which are positive and that overall the operations are
generally consistent with other comparable solid waste companies
reviewed by the Consultants.
Major Relevant Finding of the Management Audit
organizational Structure
In 1986, Oakland Scavenger Co. became a part of the Waste Management
Inc. (WMI) companies. WMI is an international firm providing a variety
of waste related services throughout the world. Since this change in
corporate ownership, OSC has decentralized its management structure.
General Managers at the division level are now responsible for
residential, commercial, and drop box activities. In the old
organization the General Manager was only responsible for residential
activities. Commercial and drop box services were managed centrally for
all divisions. With this change in responsibilities, the Consultants
have noted a change in the management personnel. Although these
personnel have a shorter tenure with OSC, they continue to have
significant tenure in the industry. The Consultants have recommended
that the JRRRC. give further consideration to analysis of whether certain
savings could be achieved through consolidation of Oakland Scavenger
Company accounting and maintenance activities. Since the WMI purchase,
the Company has decentralized these services and provides them at the
division level.
Capital Planning
The Consultants obtained information on the process used by the Company
for Capital Projects. This is an area which the JRRRC intends to
address in 1992. Particularly, the committee will attempt to develop a
mechanism for input by the agencies on capital costs which are paid by
the rate payers. This issue is also associated with the issue of
closure and post cl re costs at the landfill id the potential for
inclusion of these costs in the rate base.
Personnel Recruitment/Training
The Consultants scope of work included a review of the companies hiring
practices. In general there have been improvements in the Company's
efforts to have a workforce which is diverse and meets goals in its
affirmative action plan.
The Company representatives were very proud of their efforts to improve
employee training. One measure of their success is the reduction in
work related injuries. This also reduces the expenses of the Company.
The Company has shown these types of decreases at the same time as the
State mandated benefits were increasing.
Route Audits
The current Company policy is to audit residential routes every three
years and commercial routes every two years. This process involves
verifying that the service level being collected is the same as what is
being billed. For example, assuring that the customer is not being
billed for one can and having two cans collected. The Company has
indicated that it is currently implementing operational controls which
will more closely monitor this issue. The Committee will consider at a
future date whether an independent audit is warranted.
Complaint System
Due to the limited availability of records, the Consultant was unable to
review complaints over an extended period of time. Those reviewed
showed a very low frequency and most were for missed pick-ups. The
Consultant has recommended that the Committee consider the cost/benefit
of maintaining historical customer service data and its potential use in
recommended rate adjustments. .
Collection
The Consultants found that despite the fact that subscription is based
on a backyard service, many customers place the cans in a sideyard or at
the curb. It was also noted that the average crew size was 2.5. In a
previous study, it was recommended that the Company attempt to use two-
person crews wherever possible. This would result in the average crew
size number being closer to two. The Consultants have found that the
unit productivity of the two-person crew is higher than a three-person
crew (i.e. 3.8 tons/day/person on two-person crews and 3.5
tons/day/person on a three- person crew) . Dublin currently has one
two-person crew and one three- person crew. The Consultants have
suggested that the Company evaluate how the service could be handled by
two-person crews. The Company has certain obligations in its union
agreement to notify the union of the changes. Further discussions with
OSC representatives will need to be considered to determine the
potential for a crew reduction in Dublin.
Semi-Automated Collection
The Consultants have recommended that the agencies consider curbside
semi-automated collection. There are obvious capital costs required to
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implement this type ;ervice including tipping hanisms on the truck
and a standardized co..tainer for the customer. .i the past, the City
Council has directed Staff to continue with the current service level.
Given the potential cost savings in terms of ongoing personnel expenses,
it may be an issue to consider in the future.
Disposal
The Consultants found that the Company operations at the Altamont
Landfill appeared efficient and within industry standards. As mentioned
in the section on Capital Projects, additional review may be appropriate
on closure and post closure expenses and projects.
RATE REVIEW
Previous Rate Adjustment
In order to fully understand the starting point for the 1992 rate
analysis, it is important to review the actions taken by the City for
1991.
On January 14, 1991, the City Council adopted a rate increase which was
projected to generate 29% more revenues for the Company. The City of
Dublin based this adjustment on projections of the JRRRC indicating that
the Company required a 28% increase to absorb all outstanding operating
costs, plus a 1% increase to address an anticipated increase in the
tipping fee levied by the Alameda County Waste Management Authority.
The increase did not address Measure D, which was estimated at an
additional 13%. The approved increase was projected to cover the
deficit in the balancing account which is used to track deviations in
actual expenses and revenues as compared to the projections. When the
revenues exceed expenses, the account has a positive balance and can be
used to offset future rate increases. In 1991, the opposite was
projected and the ratepayers owed the Company monies due to a negative
balance in the account. The City of Dublin attempted to set rates at a
level which would fully repay the balancing account by January of 1992.
What Actually Happened During 1991
As noted, each year the rate setting process is based in a large part on
projections, which can vary dramatically from what actually occurs. The
economy is only one of several factors which impacts the operations of
the Company. It is projected that the 1991 rate structure will generate
a 25% increase in revenue over the previous year. As noted, the City
was attempting to make adjustments which would generate 29% more revenue
(Exhibit 2, Table 2-2, page 12) . The purpose of identifying this impact
is to demonstrate the fluctuation possible due to the use of
projections. The economy can impact the commercial and drop box
revenues. Also, if substantial numbers of residences adjust their
service level downward, the overall revenue for the Company is
decreased.
The second factor affecting the Company's 1991 expenses was the fact
that the Company incurred Measure D expenses between March 20 and
November 7. Due to the City's lawsuit challenging this measure, the
City Council had not considered Measure D in making the rate adjustment.
The Company estimates that it paid a total of $108, 084 in Measure D fees
attributable to garbage collected in the City of Dublin. The lawsuit
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has been appealed ai :he parties have agreed to collect the fee
during the appeal. one fees paid by the Comi. _y were a legitimate
expense and the Company is entitled to recover these costs.
As previously mentioned, the 1990 Rate Report projected a deficit in the
balancing account of approximately $8 million as of December 31, 1991.
The Company is now projecting a deficit of $22 .5 million. A significant
portion of this increase is due to economic factors which resulted in
revenues being less than projected. As shown on page 16 of the report,
nearly 59% of the increase is due to this factor. The other major
components of the increase are: Disputed Costs - 24% of the increase
and Expense Exceeding Projections - 17% of the increase.
Jurisdictional Review
As previously noted, the report being considered represents rate
recommendations based upon each jurisdiction (i.e. the rate structure
for the jurisdiction must generate adequate funds to cover expenses) .
In some cases, the Consultants had to rely on an allocation of costs
based upon operational factors. The process used for the Livermore-
Dublin Division was less complicated than other divisions due to the
fact that many costs were already reported by the Company on this basis.
The Consultants project that in 1992 the cost of operations, including
profit within the City of Dublin, will be $2 .066 million. The revenue
anticipated to be generated based on the current rate structure is
$2.434 million. As shown in Table 5-6 (Page 43) the City of Dublin has
been allocated $131, 000 of the estimated balancing account. This
account currently represents monies owed to the Company due to
insufficient revenues being collected in previous years. Additional
information is provided in the following section. This figure does not
represent the City's potential contribution to costs which were deleted
from the balancing account for further review. Additional review is
necessary before the JRRRC can apportion these costs. A significant
portion ($1,843, 000) of the adjustments to the balancing account
represent closure and post closure expenses. Of this amount, 80% of the
costs are associated with the Durham Road landfill. The City of Dublin
would not be contributing to those costs since the City's waste is
disposed of at the Altamont Landfill.
Allocation of Balancing Account
Over the years, Oakland Scavenger Company has recorded deviations from
their projected revenues in a "Balancing Account." For example, from
April of 1986 through January of 1990, the City Council did not adopt
any rate increases. This was possible due to surplus funds in the
balancing account, which were sufficient to cover inflationary costs.
The 1990 Rate Application Review projected that the Balancing Account
would have a negative balance. This means that current rates were not
recovering the full cost of Company operations. The Balancing Account
also requires the payment of interest. If the Account has a positive
balance, the ratepayers receive the benefit of interest earnings;
however, with a negative balance, the ratepayers must pay the Company
interest on the amount owed.
With the proposed change to rates based purely on the cost of service in
each jurisdiction, it became necessary to consider how the Balancing
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Account would be c ded among the agencie The JRRRC spent
considerable time evaluating various alternat. .s. The following
summarizes the two opposing positions represented by members:
■ Those members which were not currently contributing towards the
deficit (i.e. revenues generated by the jurisdiction were covering
projected costs) did not feel a significant responsibility to
contribute towards the deficit. This was the position expressed by
the City of Dublin representative.
■ Members who were currently contributing towards the deficit
believed that this only reflects the current relationship between
costs and revenues. They raised the question as to whether their
agencies may have been contributing to the surplus enjoyed by all
agencies in earlier years.
Unfortunately, the Company does not have detailed records by
jurisdiction for previous years. The 1992 year will be the first time
that the Company rates are recommended to be established on a
jurisdictional basis. The Committee recognized that the cost and effort
to allocate the Balancing Account to the agencies which generated the
deficit was not possible. Therefore, the Committee selected a formula
which was a compromise addressing both of the philosophies discussed
above.
The proposed methodology allocates 50% of the adjusted balance on a
proportionate share of projected 1992 Companywide expenses. Dublin
represents 2. 14% of the projected expenses. The remaining 50% is
proposed to be allocated based upon whether the City is projected to
contribute towards the deficit in 1992. The Consultants have identified
that the City of Dublin will have enough revenues to cover all projected
expenses; therefore, we do not assume any contribution towards this
second half of the Balancing Account. These calculations are shown in
Exhibit 2 [page 45 (Table 5-7) ] .
It should be noted that the City of Dublin will be contributing 1.07% of
the projected $18.1 million Balancing Account. This account balance has
been adjusted as shown in Exhibit 2, Table 4-2 (Page 22) of the
Consultant Report. As part of the 1992 Study, the Consultants will
calculate the actual account balance. In the event of any deviation
from the amount identified, the City of Dublin would share 1. 07% of the
amount of deviation. As stated, the methodology is based upon a
compromise formula and it would be appropriate for the City Council to
provide Staff with additional direction if there is any concern with
this approach.
The Committee has utilized a "Return on Equity" (ROE) formula for
several years in determining the amount of profit allowed. It is
important to understand that this is determined by applying a percentage
figure to the equity as of a certain date. The Company requested a 17%
ROE, which was consistent with the amount granted in the previous year.
Historically, OSC has been granted an ROE ranging from 12% to 17%. The
17% ROE requested would be comparable to a 9% pre-tax profit.
Appendix B to the Rate Report (Exhibit 2) provides a detailed discussion
of the basis for the JRRRC recommending a reduction in the ROE. The
Committee took into consideration available data on similar companies,
the economy, the guaranteed return provided by franchise agreements and
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OSC performance. Ba upon all of these fact , the Committee has
recommended a ROE profit calculated at 10%. This _�anslates into a 5.7%
pre-tax profit. As noted in the report, this is at the low end of
profits allowed by other regulatory agencies. However, the Committee
believes that the information presented in the report justifies this
action. In the event that performance and other factors improve in the
future, a different level may be recommended.
Implication of uniform Rate Structure
As a part of the 1991 rate increase, the City Council began implementing
a rate structure which would eventually result in a uniform can rate.
In previous years, substantial discounts were given for additional cans.
In 1991 the discount given was reduced from 42% to 14%. The suggested
policy involved phasing the move to a uniform can rate. This program is
also identified in the City's Draft Source Reduction and Recycling
Element (SRRE) .
It should be noted that the changes in garbage service may have resulted
in residents changing their service level. It is difficult to know
whether this was a result of the availability of the curbside recycling
program or the added cost of the additional can. The following
breakdown shows the change in customer classification:
Percentage of Residential Customers by Service Level
1 can 2 cans 3 cans 4-6 cans
1990 41. 0% 52 .0% 6. 0% 1. 0%
1991 47. 0% 49.0% 4.0% 0.48%
Therefore, the final move to a truly uniform rate may continue to move
customers towards a lower service level. This can impact the overall
revenue requirements since there are certain fixed costs which must be
covered regardless of the level of service provided. As shown later in
this report, the City has excess revenues, which would allow the rate
structure be revised in 1992 to be a uniform can rate. This is
discussed further in the Section titled "Recommendation For 1992 Rates."
Super Recycler Rate
In July, the City Council requested that Staff investigate the potential
for a special "senior citizen" rate. The concern expressed was that
given the increases in disposal costs, garbage bills were becoming a
major burden for small generators. Staff discussed this concept with
Company representatives and others in the field of waste management. A
major cost factor in providing a separate rate category is the cost to
administer the qualification of those using the service. It was
suggested that the City consider establishing a reduced rate for small
generators. This was also an option identified in the 1990 Hilton
Farnkopf Hobson report on Alternative Rate Structures. Some people
refer to this option, which provides for collection of a 20 gallon can
as a "mini-can." Staff would recommend that the reduced service level
be called a "Super Recycler Rate." This complements the City's efforts
to meet State mandated goals for reductions in waste placed in
landfills.
Staff would propose that the Super Recycler Rate would be based on a 20
gallon container. The standard container is currently 32 gallons. The
proposed cost of this service is $6. 65/month. The additional service
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tier would not resu n burdensome qualifying ce eligibility would
be. based on the volt....a of waste generated. Th proposed cost to the
customer is approximately 19% less than the proposed 32 gallon single
can. A complete discussion occurs in the section entitled
"Recommendation for 1992 Rates."
Mandatory Service
The City Council has previously recommended that Staff prepare for City
Council consideration documents necessary to implement mandatory garbage
service. The Company has indicated that there are approximately 435
residences which do not currently subscribe to a garbage service. City
Codes require residents to dispose of their garbage on a weekly basis.
The closest waste disposal facility is the Transfer Station located in
Pleasanton. The current minimum change for a Dublin resident using this
facility is $8. 00. Therefore, for most residences, it would be less
costly for them to subscribe to the regular garbage service. Although
Staff does not have any data on this issue, it appears that those
without service may be using commercial dumpsters or otherwise illegally
disposing of their garbage. The imposition of mandatory service would
discourage this practice.
Mandatory Garbage Service would require a change to City Ordinances, as
well as the Franchise Agreement with the Company. Typically, a
mandatory ordinance would require residences to subscribe to a minimum
service level. The Company would be required to collect garbage from
each household regardless of the status of the customer's account. In
the event that the Company is unable to collect for the service billed,
the delinquent amount is requested from the City. After conducting a
public hearing, the City Council can place a lien on the property to
recover the delinquent amount plus administrative costs incurred by the
City. The following circumstances warrant consideration of this change:
a. AB 939 requires that the City exert greater control and
document the flow of garbage by sector.
b. The curbside recycling collection needs to be offered to all
homeowners in order to divert more waste from the landfill as
required by State law.
C. The requirement for each residential unit to have a minimum
level of service is an effective way to assure that residents
are properly disposing of their garbage. This should reduce
incidents of illegal dumping such as residences without
service using commercial or public dumpsters without the
permission of the owner.
d. The development of an alternative minimum service level (Super
Recycler) should address, the concern that not enough waste is
generated to warrant regular service.
e. A mandatory service requirement typically includes provisions
to recover delinquent accounts on the property tax bill. This
eliminates the Company expense for bad debts which would
otherwise be absorbed by the rate payers.
Staff would propose to present the necessary documents to implement
mandatory service at a public hearing on January 13, 1992 . It is
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anticipated that th ocuments would require s cription by April 1,
1992 .
Special Clean-Up Costs
The City of Dublin has provided 4 special Saturday clean-ups since
assuming responsibility for the garbage franchise in 1986. Two of these
clean-ups were paid for entirely through the rate structure. The
remaining two were paid for through special funds set aside by the
Company for the benefit of Dublin ratepayers. The funds were generated
when the Dublin San Ramon Services District failed to reduce rates as
recommended by the JRRRC. DSRSD was uncertain as to whether they would
continue to be. the franchising Authority. The City immediately reduced
rates upon assuming this responsibility. The Company accounted for the
$78, 040 and provided interest over the life of these funds. The current
balance in this account is now approximately $1,176 plus fourth quarter
interest earnings.
Effective July 1, 1990, the City Council enacted a surcharge on
residential garbage rates to recover the cost of a Household Hazardous
Waste (HHW) Collection conducted May 5, 1990. Dublin's share of the HHW
event was $22,659. It was estimated that 75 Dublin households
participated in the event. The amount of the surcharge was 20 cents per
month for single family households and 15 cents per yard on multi-family
commercial bins. As part of the 1991 rate application, the City Council
executed a Letter of Agreement (Exhibit 3) regarding the use of funds
generated by this surcharge. The Agreement allows the funds to be used
for the special clean-ups outside the residential rate structure. The
fund is projected to have a $4,645 surplus at the end of 1991. This is
due in part to the fact that the City was successful in obtaining a
$2,300 grant from the State.
Therefore, it is projected that the City will have approximately $5,821
available to off-set special clean-ups in 1992. These funds were
generated as follows:
Special Clean-Up Fund $1, 176
Excess HHW Fees 4, 645
Total Available $5,821
Based on recent figures, the Company projects that the cost per clean-up
will exceed $9, 000; therefore, Staff has requested that the rate
consultant calculate the cost per household of providing 2 additional
clean-ups at $9,000 each. The current surplus funds would be applied to
the January clean-up. The Consultants have calculated the cost at 30
cents per household. This is shown in column (F) on Exhibit 4 for
discussion purposes. In the event that the City Council wish to
continue to provide this level of service, the clean-up costs would be
folded into the base uniform rate. Staff would recommend that the City
Council require that the Company maintain separate cost accounting and
measurements for these clean-ups. This information will be important in
the future in the event that the City Council wishes to consider an
adjustment to the level of service in order to reduce the impact of a
fee increase.
It should also be noted that the $9,000 estimate by LDD for clean-ups is
a projection only. In 1991, the company's expenses exceeded this
amount. They have assumed that the increased volume was due to
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substantial landscap ebris killed during the zter freeze. Staff
believes that the overall conservative recommenc, moons in the proposed
rate structure will protect against large deviations in this
calculation. In addition, careful monitoring of future costs will allow
for an appropriate adjustment.
Recommendation For 1992 Rates
The JRRRC report indicates that after fully funding its estimated share
of the balancing account, that Dublin could reduce total revenue to the
Company by 9 .4% Exhibit 2 [Table 1-2 (page 6) ] . Staff has obtained the
services of Hilton Farnkopf and Hobson (HF&H) to prepare additional
analysis on the impact of reducing revenues within each of the service
sectors.
Given the fluctuating nature of the Garbage Rate Setting Process, Staff
is recommending that the City Council proceed in a conservative manner
to avoid substantial fluctuations in rates from year to year. As noted
with the data from 1991, due to the use of projections, the actual
adjustment of the Company's revenue by a certain percentage may deviate
due to external factors. Given this concern, Staff has worked with the
Consultants to develop rate scenarios which would reduce Company revenue
by 4.7%. The balance between Company costs and revenues will be
accounted for on a jurisdictional basis. Therefore, the City will have
an opportunity to consider with the 1993 rate application any adjustment
required due to the deviations from the projected numbers.
Exhibit 4 identifies the recommended residential rate structure. This
scenario accomplishes a variety of the proposed service adjustments
discussed in detail elsewhere in the report. For example, the
adjustment would provide uniform can rates, include estimated funding
for four clean-ups per year, account for the increase in the recycling
fee, and institute a super recycler (20 gallon can) service level. The
Consultants have also clearly outlined the assumptions used in making
this projection (Exhibit 5) . For example, HF&H have assumed that all
customers not currently receiving service will subscribe to the minimum
Super Recycler service. In addition, they have assumed that 5% of the
current one can customer will reduce their service. These projections
are made on the best information which is currently available.
As shown in Exhibit 4, the recommended rate adjustment would present
reductions for all residential customers. The summary below includes
the cost of clean-ups and recycling in the base rate.
Proposed vs. Current Residential Rates
Current Rate Proposed Rate % Change
1 can customer $8.55 $7.90 (8%)
2 can customer $14.75 $14.20 (4%)
3 can customer $20.95 $20.50 (1%)
The decrease shown is provided after accounting for increased recycling
and clean-up costs. The City's curbside recycling program is not a part
of the Company's franchised operation. The Company has assumed all risk
and they are allowed annual increases tied to the change in CPI. As
stated in Exhibit 6, the Company has requested an increase from $1.25 to
$1.30 per month per subscriber. Staff has identified that this change
is consistent with the Company's agreement. The proposed rate structure
-9-
also eliminates any t ;ount for additional cans urther, the proposal
provides an opportunity for the Super Recyclei .<ate. If a current
single can customer were able to change to this service, they could
reduce their cost of service by 29% (current 32 gallon @ $8.55 vs. $6.65
for 20 gallon super Recycler) .
Proposed Rate Structure for Commercial Service
In the past, the City Council Resolution establishing rates only
identified a cubic yard rate for commercial service. The Company also
applied a container charge in addition to the cubic yard rate. Over the
years, the Company applied any increases to the container charge, as
well as the cubic yard rate. Consistent with the Residential Service,
the Consultants have prepared a rate structure which would provide for
uniform rates for weekly service. Staff is also proposing that a single
rate be established including the container rental and disposal costs.
The current differential in commercial rates does not have a clear
relationship to the cost associated with providing service on a higher
frequency. The following example is typical of the type of
discrepancies which have resulted from neglecting to address the cost of
disposal and bin rental as a single unit:
Current Commercial Monthly Rate Structure
2 yard container/twice per week $ 121.25
4 yard container/once per week $ 125.20
As shown above, the more frequent service is currently less costly for
the same volume of garbage disposed. Through the implementation of a
uniform rate, this discrepancy is eliminated. As shown in Exhibit 7,
the proposed rate per yard for once per week service would be a uniform
amount: $27.70 (i.e. 1 yd = $27.70, 2 yd = ($27.70 x 2) _ $55.40) .
An additional frequency factor was added to the proposed collection
rates beyond once per week service. This change is being recommended to
assure that the rate structure encourages the most efficient service
frequency. In the future, the City Council may wish to consider whether
a larger frequency factor should be included.
The proposed frequency factor is based upon 20% of the one yard once per
week rate of $27.70. This equals approximately $5.55, which is added
for each pick-up beyond one per week to the base disposal cost. The
following example shows the method used:
Effect of Imposing Frequency Factor
Assume base cost of $27.70 per yard
Proposed cost of 1 yard collected 3 times per week
$27.70 x 3 = $83.10
Frequency Charge $5.55 x 2 = $11. 10
Total Monthly Fee = $94.20
As stated, there is an obvious cost to have personnel and a vehicle
servicing a location more than once per week. Therefore, the proposed
cost for 3 yards collected 1 time per week is $83.10, which is less than
-10-
the example shown abc The proposed rate stru re begins to address
thi's issue.
Overall, the proposed rate structure will provide a decrease in costs
for a majority of the current customers. Based on the current profile,
the cost of 84% of the bins currently in use will be reduced. The
amount of reductions is as shown in Column D on Exhibit 7. The
Residential Multi Family Bin service will observe slightly larger
decreases due to the elimination of the HHW surcharge. The Consultant
has prepared this recommendation based upon an attempt to reduce overall
revenue in the commercial service area by 4.7%. As previously noted,
this is a conservative approach intended to level out year-to-year
fluctuations.
Drop Box Container Service
As with the commercial sector, previous rate adjustments have only
addressed a cubic yard rate. The drop box service is typically used on
a limited time basis for construction and demolition debris. Regular
users of this service may also have bulky wastes which cannot be easily
accommodated in a commercial collection truck. The costs associated
with this service are substantially different than regular commercial
service. Commercial establishments are serviced with a 01Front End
Loader" (FEL) which collects garbage from more than one location and
then proceeds to the landfill. The collection of drop boxes involves
transporting the individual box to the landfill; therefore, the "drop
box" service should not be less costly than regular commercial service.
The current rate structure does not provide for this type of
relationship. The following example displays the imbalance in the
current rates:
Current Rate Structure Comparison
Drop Box vs. Commercial Service
Drop Box Service
20 yard drop box = $124 per pick-up
$124 x 4.33 weeks = $536.92/month
Commercial service
4 yards once/week = $125.20/month
If 5 bins were obtained to = 20 yards, cost per month =
$125.20 x 5 = $626. 00
It should be noted that drop box service customers do pay a $23. 00
placement charge; however, this is only levied on the first delivery.
for the purpose of the comparison above, the delivery fee was not
included; however, this would not change the fact that drop box service
currently is priced less than the more efficient commercial bin
service.
In order to begin addressing this issue, the Consultant has suggested
that at a minimum, the cubic yard rate should be at least equivalent to
the rate charged in the commercial sector. This would result in a $6.40
cubic yard rate for bin service customers. This is a $0.20 per yard
increase over the current rate of $6.20. In addition, these customers
would pay placement and container rental charges as shown in Exhibit 8.
The proposed cost shown in Exhibit 8 also factors in the same frequency
-11-
factor as shown on commercial rates. As viously noted, this
factor reflects the added costs of individual del—ary and removal. The
proposed Drop Box rate structure results in increases to all levels of
service. The Company and the Consultants have indicated that this is
consistent with the relationship between cost and revenues found in
providing this type of service.
Handy Hauler Rates
The Handy Hauler is used primarily by residents doing one-time clean-
ups. This is a 4 cubic yard bin which is placed in the street. The
previous rate resolutions have never addressed this' service level. The
current rates charged for this service are $45.15 for a one-week
placement. The Handy Hauler has similar cost factors to drop box
service. One difference is that the delivery is more efficient, since
the bins stack and can be delivered more than one at a time. The
following chart identifies the current fees for this service.
Current Handy Hauler Fees
Placement for one week period and dump $45. 15
If bin is dumped after placement $32 .25 per dump
Difference between initial and subsequent dumps $12 .90
Rental costs beyond one week $ 9. 00 per week
The Consultant concurred that there was some rationale to adjust the
rate using similar factors to those in the commercial and drop box rate
structures.
Basis for Proposed Handy Hauler Rate
The proposed rate uses the same cubic yard rate as is shown in the
commercial structure, plus frequency and placement charges. The rental
cost beyond the first week is maintained at the 1991 level.
4 cubic yards @ $6.40 ea $25. 60
Frequency charge 5.55
Placement/bin charge 12 .90
Proposed Total per 1 week (1 dump) $44. 05
Cost for additional dump $31.15
Rental cost beyond first week $ 9. 00
This results in a 2.5% decrease from the current Handy Hauler rate
($44.05 vs. $45.15) . The advantage to maintaining reasonable rates on
this service is that it may encourage residents to dispose of large
accumulations in a timely manner, rather than waiting for special clean-
ups.
a: 1223garb.agenda#7
-12-
Y,c
FINAL REPORT
1991 MANAGEMENT AND OPERATIONS
REVIEW
OF OAKLAND SCAVENGER.COMPANY
November 25, 1991
HILTO N FARNKOPF &HOBSON
��J7' •, Rte'
HILTON FARNKOPF&HOBSON
Advisory Services to
Municipal Management
39350 Civic Center Drive,Suite 100
Fremont,California 94538-2331
Telephone:510/713-3270
Fax:510/713.3294
November 25, 1991
Joint Refuse Rate Review Committee
c/o Mr. Paul H. Causey, Chairman
2600 Grant Avenue
San Lorenzo, CA 94580
1991 MANAGEMENT AND OPERATIONS REVIEW
OF OAKLAND SCAVENGER COMPANY
Dear Members:
This letter summarizes our review of the management and operations of the
Oakland Scavenger Company (Company) on behalf of the Joint Refuse Rate
Review Committee (JRRRC). Our review was performed based on specific
procedures agreed upon between Hilton Farnkopf& Hobson (HF&H), SCS
Engineers (SCS) and the JRRRC. This report is intended for the exclusive use
of the member agencies of the JRRRC and should be considered in the context
of the overall scope and limitations of the project, which are described in the
Executive Summary.
The Executive Summary begins with a description of the project background,
objectives, scope of work, and limitations. We then present our major find-
ings and resulting recommendations for your consideration. Appendix A is
HF&H's review of the Company's management and Appendix B is SCS's
review of the Company's, operations.
In general, SCS and we found that the Company's management, collection,
transfer, and disposal operations are generally consistent with other compa-
rable solid waste companies with which we are familiar.
However, based on the results of our review, we recommend that:
• The Company implement separate FEL routes for collection of bins now
serviced by REL crews in the Northern Division. We estimate that $1.0
to $1.4 million could be saved annually.
• The Company balance the routes in the Central and Southern Divisions
so that the average workday is consistent with the rest of the Company's
routes. This could result in an estimated savings of$580,000 per year.
recycled L,Paper
Adak
HILTON FARNKOPF
&HOBSON
November 25, 1991
Joint Refuse Rate Review Committee
Page 2
• The Company reduce three-person crews to two-person crews on all
Central Division, Southern Division and Dublin routes and on 13
Northern Division routes and add additional two-person routes to bal-
ance the workload to that typical on other two-person routes. This could
result in a net estimated savings of$245,000 per year.
• The JRRRC member agencies change to semi-automated or automated
curbside service. This could result in cost savings of 30-35% for semi-
automated service and 60-65% for automated service.
• The JRRRC perform an independent audit of the Company's routes and
billing system to ensure that all revenues for service rendered are being
collected properly. This could result in an increase in revenues to the
Company, reducing the need for future rate increases.
• The JRRRC perform an analysis of the Company's accounting and
administrative functions to determine whether, and to what extent, cost
savings may be generated through consolidation of these functions.
• The Company implement certain other improvements in management
systems and practices to improve its ability to monitor and control its
operations (e.g., complaint handling system, capital project manage-
ment system, etc.).
These recommendations are made based on our limited review of the man-
agement and operations of this $100 million company. Many of the recom-
mendations made have been discussed with the Company previously, and the
Company has made some progress in implementing some of these recom-
mendations, as discussed in our report. The Company reports that they are
currently evaluating other of the recommendations. Other recommendations
require action on the part of the JRRRC member agencies, such as the move
to semi-automated curbside collection.
HILTON FARNKOP
F&HOBSON
November 25, 1991
Joint Refuse Rate Review Committee
Page 3
We appreciate the cooperation provided us by the Company and the direction
given by the JRRRC during the course of our review. Please call me if you
have any questions about the results of our review.
Sincerely,
L. Scott Hobson
Partner
1991 1 MAMA GI!NIEDU AND OPERATIONS +
OF OAIUAND SCAVENGER CONPPANv
EXECUTIVE StrnrMAnY
BACKGROUND
In 1985, the Joint Refuse Rate Review Committee (JRRRC) employed Price
Waterhouse and SCS Engineers (Consultants) to perform a review of the
Oakland Scavenger Company's (Company's) operations. Based on their
review, the Consultants recommended that the communities reduce their col-
lection crew sizes from three to two persons and that the JRRRC consider
moving to curbside collection service in order to provide more cost-effective
and efficient service.
The following year, on December 1, 1986, the Company merged with Waste
Management, Inc. (WMI) through an exchange of stock. Since that time, the
Company has undergone a major organizational change, implemented sig-
nificant new policies and procedures, and initiated a significant capital pro-
gram.
In addition, over the last few years, there have been significant changes in the
State and local solid waste legislation and solid waste regulatory fees that
have had a significant impact on the Company's operations. Many local
jurisdictions have added residential curbside recycling and household haz-
ardous waste programs that are beginning to have an impact on the waste
stream.
As a result of these and other factors, the balancing account balance (the dif-
ference between cumulative revenues and expenses) changed in 1989 from a
balance due to the ratepayers to a projected 1992 balance due the Company of
over $22 million. This dramatic rise in the amount due the Company is due to
expenses greater than, and revenues less than, those budgeted in each of the
last three years. (For a more detailed analysis of the Company's revenues and
expenses, see HF&H's report on the Company's 1992 rate application,
available in December, 1991.)
Finally, during the discussion regarding the 1991 rate increase, the Oakland
City Council Finance Committee expressed serious concern regarding the
Company's financial performance and its hiring practices. As a result of
those discussions, the Finance Committee required that a management and
operations review of the Company be performed prior to the approval of any
future rate increases.
As a result of these-events, the JRRRC engaged Hilton Farnkopf& Hobson
(HF&H) and SCS Engineers (SCS) to perform a management and operations
review of the Company.
1
OBJECTIVES
The objectives of this review are to identify opportunities for:
• improved management controls;
• greater operational efficiency; and,
• improved delivery of collection and disposal services.
SCOPE OF WORK
Our review included consideration of all of the Company's franchised opera-
tions (collection, transfer, disposal, and administration). Specifically, our
review was to answer the following major questions:
1. Does the Company have an effective long-range capital planning and
management system?
2. Does the Company have an effective organizational structure?
3. Does the Company have an effective personnel recruitment, training, and
retention program?
4. Does,the Company have effective management systems to monitor its per-
formance?
6. Does the Company have effective management systems to revise projects or
operations when they are not being performed in accordance with expecta-
tions?
Our evaluation of the Company's operations was based on interviews with key
management personnel, observations of the Company's operations, and com-
parisons to industry data obtained from other similar operations or from our
files.
LIMITATIONS
Our review was limited to that information provided to us by the Company and
the JRRRC and limited observations of selected Company operations. In some
cases, the Company was unable to provide all of the data requested:
• We requested workers' compensation records as far back as possible,
preferably at least to 1986. The Company could only provide records for
1989, 1990, and 1991 because they had changed insurance brokers and
did not have records prior to the change.
2
• We requested the results of route audits performed by the Company in
1991. The Company provided the results for the Northern and Southern
Divisions but said that the results for the Central and Livermore/Dublin
Divisions were not available.
• We requested a copy of the 1990 and 1991 complaint management
reports. The Company reported that annual summaries are not pre-
pared, but did provide an example of the Northern Division daily com-
plaint log for August 8, 1991.
In addition, the Company would not provide certain data because of their con-
cerns about data confidentiality:
• We requested the Company's preventative maintenance policy and pro-
cedure statement that they claimed was proprietary. They did, how-
ever, provide a summary of the preventative maintenance program
procedures.
• We requested a copy of the Company's route audit policy and procedure
statement that they claimed was also proprietary. They did, however,
provide a summary of the procedures followed by the Northern Division
in 1991.
• We requested a copy of the Company's performance standards that they
claimed was proprietary.
Further, we were directed by the JRRRC to exclude certain testing from our
review, including an evaluation of the Company's landfill closure and post-
closure cost estimates and an evaluation of the reasonableness of the
Company's five-year capital plan.
Finally, the nature or amount of the data available to us for comparison to the
Company's operations limits the conclusions that can reasonably be drawn.
For example:
• We compared the Company's organizational structure and span of con-
trol to other large solid waste collection activities, both public and pri-
vate. However, the available data was limited and none of the other col-
lection activities was directly comparable in size or organizational
structure.
• Due to the limitations of the scope of work to be performed, we did not
perform detailed field investigations, including environmental monitor-
ing and time and motion studies.
Had additional information been available to us or had we been able to per-
form more extensive observations of the Company's operations that were out-
side the scope of the contract, we might have come to different conclusions or
made different recommendations.
3
MAJOR FINDINGS
Organizational structure
Pr - MI
• Prior to its merger with WMI in 1986, the Company was a closely held
corporation with a centralized management structure. The average
tenure of key management personnel was 31 years with the Company
and 32 years in the solid waste industry (see Table 1-1).
• Division managers were responsible for the residential collection activi-
ties within their areas. Commercial collection, drop box collection, and
truck and container maintenance were each managed in separate divi-
sions. Accounting and billing activities were performed centrally for
each collection division.
P s� t—W I
• The Company has evolved into a more decentralized organization, with
largely autonomous divisions headed by general managers responsible
for all collection activities and accounting and office functions within
their areas. The average tenure of key management personnel is 11
years with the Company and 21 years with the solid waste industry (see
Table 1-1).
• General managers are responsible for residential, commercial, and
roll-off collection within their areas. In addition, each division has its
own controller, accounting staff and office personnel.
Other Companies
• The number of management layers within the Company between the
top executives and the drivers is typical of most comparable solid waste
companies.
• Based on HF&H's experience, other companies that service multiple
jurisdictions generally have centralized accounting and maintenance
functions.
Capital Planning
• Capital expenditures for projects and change orders of over 5% are sub-
ject to written approval based on the dollar value of the project (see Table
2-1).
• Capital expenditures in 1990 exceeded what had been projected by over
.$2,400,000. This was primarily due to the unbudgeted purchase of the
98th Avenue maintenance and administrative building for $3,400,000
4
(due to the Loma Prieta earthquake), offset by a delay in the Durham
Road leachate extraction treatment project, amounting to $929,000.
• 1991 capital expenditures are currently projected to be $242,000 lower
than anticipated last year, which is equivalent to 1.2% of the total 1991
capital budget.
Personal Recruitment,Training,and Retention
Recruitin-
• Generally, the percent minority (including women) has increased in
most job categories from 1985 to 1990;
• The percent minority (including women) is above the Company's
Affirmative Action Plan Availability Factor for drivers, Local 6 opera-
tors, Local 6 non-operators, other machinists, and clerical in 1990.
• The percent minority (including women) is below the Company's
Affirmative Action Plan Availability Factor for operations managers
and supervisors, helpers, mechanics, and administrative managers.
• Generally, the percent women has increased in most job categories
from 1985 to 1990.
• The percent women is above the Company's Affirmative Action Plan
Availability Factor for mechanics, other machinists, clerical workers,
and administrative managers.
• The percent women is below the Company's Affirmative Action Plan
Availability Factor for all other categories.
Training
One measure of the safety training programs' effectiveness is the number of
workers' compensation claims filed by the Company's employees (collection
and all other employees). HF&H's analysis (see Table 3-2) reveals that:
• Injury claims have fallen by 57, or 11%, in 1990 and by 78, or 17%, in
1991, despite an increase of 128 employees over the two years, bringing
the total employee count to 1,097.
• The total wort Fors' compensation benefits paid decreased by $169,000 in
1990.
• Despite a 49% increase in the maximum weekly benefit, the adjusted
average cost per employee has declined from $1,543 in 1989 to $1,262 in
1991.
5
Retention
• Hr&H's review of the Company's placement survey for 1990 showed an
overall turnover rate of 8%. The turnover rate for drivers and helpers
was 4%.
Monitoring and Controlling Operations
Route Audits
• The Company has scheduled route audits for most routes in 1991, with
some not scheduled until 1992. The Company policy requires residen-
tial route audits once every three years and commercial and roll-off
route audits once every two years.
• The Company is implementing a route sequencing program that they
report will result in virtual daily route audits by the collection crews.
• Northern Division route audits resulted in additional average monthly
residential billings of$1,992 per route audited. If projected to all
Northern residential routes, the total additional revenues would be
approximately $1,600,000 per year. However, the Company has reported
that a significant portion of this additional revenue was subsequently
reversed by changes in customer subscription levels.
• Revenue in the Southern Division remained virtually unchanged.
Complaint Handling Svstem
• The complaint handling system does not accumulate statistics for his-
torical comparison purposes. On August 8, 1991, the day for which the
Company provided the Northern Division complaint log, 0.3% of the
total customer base called to complain about their service. The largest
number of those complaints were for missed pickups.
Bad Debt Collection
• In June, 1991, the Overdue Accounts Analysis showed a total receivable
balance over $1,000 and 90 days of$63,800 or 0.004% of the total accounts
receivable balance of$15,000,000. The total receivable balance over 90
days in June was approximately $165,000 or 1.1%. The Company
reports that the over 90 day balance is typically around 3% of total
receivables.
• The Company wrote off$323,000 in bad debts in 1990, or 0.4% of fran-
chised revenues. Through September 30, 1991, the Company has writ-
ten off$457,000, or 0.5% of revenue.
6
Davis Street Transfer Station Bond Requirements
• Compliance with the bond requirements is reviewed annually in con-
nection with the Company's financial audit and a note to the financial
statements is prepared. The auditor reports that the Company has
been, and is, in compliance with these covenants.
RefusaMecyclables Materials Collection
Scope of Services
Overall --
• Table 3-1 summarizes the scope of services provided by the Company
within each jurisdiction.
Residential --
• The base level of service is once-per-week backyard collection of cans
and prepaid bags from single family residential dwellings and collec-
tion of 1, 11/2 or 2 cubic yard roll-out bins from multi-family and small
commercial accounts.
• In many parts of the Company's service area, despite the fact that resi-
dents subscribe to backyard service, cans are placed at the curb or in the
side yard for collection.
• The average residential crew size is 2.5 persons. Table 3-3 shows the
collection crew size for each jurisdiction.
Commercial/Industrial --
• There are a total of 41 commercial FEL routes serviced by one-person
crews.
• Commercial accounts are provided refuse bins up to 7 cubic yards that
are serviced up to six times per week.
• Industrial accounts are provided containers up to 50 cubic yards that
are collected on either a regular basis or as needed.
Recyclables Collection --
• The Company provides exclusive residential recycling services to seven
of the thirteen JRRRC jurisdictions (see Table 3-1). All programs,
except Emeryville and Albany, are considered non-franchised.
• All recycling services involve weekly curbside collection of source-sepa-
rated or commingled recyclables.
7
Union Cwitmda
• Collection employees are members of Teamsters Union Local 70. The
current contract extends through June 1993.
• Collection employees work under a task system, wherein they are
guaranteed a minimum 8 hours pay regardless of the length of the
workday. Within the 8-hour workday, the employees are allowed to take
a one-half hour lunch and two fifteen-minute breaks.
• The average workday, as reported by the route supervisors, is as fol-
lows:
-- Northern Division: 7.0 hours.
-- Central Division: 6.0 to 6.5 hours for most routes. However, three
routes consistently require 8.5 to 9.0 hours.
-- Southern Division: 5.0 to 5.5 hours.
-- Livermore/Dublin Division: 6.0 to 7.0 hours.
These assignments (except for the Southern Division) are consistent
with other solid waste collection companies with which SCS is familiar.
• The contract contains requirements to notify the Union in advance of
crew size reductions, changes in route structure and introduction of
new equipment.
• Work assignments are subject to bid and awarded on the basis of senior-
ity.
Collection Productivity
• Table 3-6 summarizes various productivity measures by Company divi-
sion and route type.
• The unit productivity of the two-person crews is greater than that of
three-person crews. This is typical of other collection companies, in
SCS's experience.
• The Company's productivity for two-person crews of between 134 and
217 accounts per day per person compares to productivity of between 125
and 250 accounts per day for other jurisdictions surveyed by SCS having
two-person backyard backyard collection service (see. Table 3-7).
8
Transfer Operations
Operations
• Approximately 3,100 tons of MSW are presently delivered to the Davis
Street Transfer Station on a daily basis (see Table 4-1.). However, the sta-
tion has been designed to receive and process up to 600 tons per hour, or
9,600 tons per day during two 8-hour shifts. At present, there is no max-
imum daily capacity applied by the regulatory agencies. Application
will be made next year to the County Solid Waste Management
Authority to modify the County Solid Waste Management Plan to allow
the Davis Street transfer station to receive and transfer up to 5,000 tons
per day.
Regulations
• Table 4-5 presents the general regulatory requirements and permit
conditions governing land use, waste handling, water and air quality,
and health and safety issues at the Davis Street Transfer Station.
• Regulatory agencies reported no outstanding violations of applicable
regulatory requirements. Representatives of regulatory agencies indi-
cated that the Company assigns high priority to environmental mat-
ters, and the Company is generally responsive to agency requirements,
suggestions, and recommendations.
Transfer Productivity
• In comparison with other large volume facilities with which SCS is
familiar, operations at the Davis Street Transfer Station are reasonable,
as shown below.
Other Transfer
Facilities Davis t.
TPD/Transfer Vehicle 70-130 . 129
TPD/Heavy Equipment Operator 20-25 22
Disposal Operations
Operations
• Table 5-1 summarizes the key site, waste, and facility characteristics
and environmental controls at the Company's landfills.
9
Reet lations
• Table 5-4 presents the general and specific regulatory requirements for
landfill operations of the Altamont landfill. Table 5-5 presents the regu-
latory requirements for the Durham Road landfill.
• Regulatory agencies reported no outstanding violations of applicable
regulatory requirements.
Landfill Productivity
Altamont --
• The Altamont landfill is disposing of refuse in a very, efficient and
orderly manner. flue to the large size of the transfer vehicles, the num-
ber of vehicles unloading at the working face is relatively low for the
volume of refuse. Unloading and queuing of the transfer vehicles
appeared to be well orchestrated, with a cycle time of less than 5 min-
utes for two tippers.
• The Company has a litter containment problem at the Altamont landfill
due to the tippers unloading from the lift platform where refuse free-
falls several yards before reaching the ground. High winds then have
an opportunity to take pieces of paper and plastic bags to flight across
the facility. The Company has tried several methods of litter control
with minimal success.
Durham Road --
• Based on observations and a review of available data, operations at the
Durham Road landfill appear to be conducted in a manner consistent
with standard industry practices. SCS saw no evidence of unproductive
or unneeded activity, staff, or equipment. The facility in general is well
orchestrated and managed in'accordance with operational constraints.
10
RECOIVIlVIENDATIONS
Organization Structure
1. We recommend that the JRRRC perform an analysis of the Company's
accounting and maintenance functions to determine whether, and to
what extent, cost savings may be generated through consolidation of
these functions.
2. In addition, we recommend that the JRRRC evaluate the reasonable-
ness and necessity of the community relations representative, program
development manager, and recycling coordinator positions in its cur-
rent rate review. These positions may be more properly charged to non-
franchised operations due to the nature of their work, resulting in
lower charges to the ratepayers.
Capital Planning
3. Manual input and administrative cost could be avoided by automating
the interface between the Company's accounts payable system and the
Project Management System.
Personnel Recruitment,Training,and Retention
4. Continued emphasis should be placed on improving opportunities for
women in the work force.
Monitoring and Controlling Operations
5. We recommend that the JRRRC perform an independent audit of the
Company's routes and billing system to ensure that all revenues for
service rendered are being collected properly. This could result in a
significant increase in revenues to the Company. In addition, we rec-
ommend that the Company perform an annual audit of each route and
provide the results of those audits with the rate application each year.
6. We recommend that the JRRRC evaluate the cost and benefit to the
ratepayers of requiring the Company to maintain historical complaint
data for review. This could serve as one basis on which the JRRRC
evaluates the level of service provided by the Company and determines
the allowed return on equity.
Refuse and Recyclable Materials Collection
7. Existing Central Division routes should be re-balanced so that the aver-
age workday throughout the entire division is comparable to that
worked by the Northern and Livermore/Dublin Divisions. Re-balancing
of these routes could result in savings of approximately $115,000 annu-
ally.
. 11
8. We recommend that the Company adjust task assignments (and bal-
ance routes) in the Southern Division to create a workday comparable to
the Northern and Livermore/Dublin Divisions. This would eliminate
up to three daily routes. Based on Company labor and equipment costs,
this translates to potential savings of approximately $465,000 annually.
9. We recommend that the Company implement separate FEL routes for
collection of bins now serviced by REL crews, particularly on existing
REL routes where the following conditions are present:
• There are a high number of bin accounts in close geographic prox-
imity.
• Roll-out bin service could reasonably and safely be performed by a
one-person crew.
We estimate that $1.0 to $1.4 million could be saved annually via com-
plete conversion of all accounts to FEL service.
10. We recommend that:
• All three-person routes in Hayward and Oro Loma (Central
Division), Fremont and Newark (Southern Division), and Dublin be
converted to two-person routes. This represents a total of 16 daily
routes.
• In the Northern Division, changes to two-person routes should be
made on routes where roll-out bin collection could be reasonably and
safely performed by two-person crews, or where traffic and other
conditions permit. This could encompass up to 13 daily routes.
Combined, this would result in a projected annual net savings of
$244,500.
11. We recommend a changeover to semi-automated service. Conversion to
semi-automated service (or automated service, if desired) should be
implemented on a pilot scale or phased approach. Preferable target
areas would include Fremont, Union City, Hayward, Livermore, and
Dublin, This could result in cost savings of as much as 30-35% for
semi-automated service and 60-65% for automated service.
General
12. We recommend that the JRRRC continue to require productivity data by
route on an annual basis as part of the rate application in order to eval-
uate productivity trends and the bases of allocation of costs to the indi-
vidual jurisdictions.
12
LETTER OF AGREEMENT
FOR USE OF SPECIAL GARBAGE RATE SURCHARGE
This Agreement is by and between City of Dublin (CITY) and Oakland
Scavenger Company (COMPANY) , and is dated January 14 , 1991.
WHEREAS, effective July 1, 1990 the City of Dublin revised Garbage
Service Rates to include a surcharge; and
WHEREAS, the surcharge consisted of 20 cents per month for single
family customers and 15 cents per yard for multi-family customers with
bin service; and
WHEREAS, the surcharge was necessary to recover costs associated with a
Household Hazardous Waste (HHW) Collection Day conducted May 5, 1990;
and
WHEREAS, current estimates project that if levied for the entire
calendar year, excess funds will be generated; and
WHEREAS, both CITY and COMPANY agree that flexibility in the use of
excess funds is important:
NOW, THEREFORE the CITY and COMPANY do agree as follows:
I . The garbage rates to be established for 1991 will continue to
include the surcharge first levied July 1, 1990. Funds collected
by COMPANY shall be applied to the balance owed for the cost' of the
May 5, 1990 Household Hazardous Waste Collection Day, until such
time as the COMPANY has fully recovered the expense for the event.
II. COMPANY shall provide CITY with quarterly reports identifying the
total surcharge amount collected and the amount owing for the HHW
collection event.
III. In the event that CITY receives a Grant Reimbursement for the HHW
collection, CITY shall directly apply these proceeds to the cost of
the HHW collection. COMPANY quarterly reports shall identify any
funds transferred in this manner.
IV. Any excess funds collected shall be used only for the purpose of
providing services to the ratepayers. CITY shall have sole
discretion in determining services to be provided with these funds.
COMPANY shall only expend funds upon written instruction from CITY,
except as provided in Section V.
V. In the event that in 1991, the COMPANY has a deficit in the fund
utilized to pay for the two special residential pick-ups which are
not included in the rate structure, the difference may be paid for
excess surcharge funds.
VI . Nothing shall prevent the two parties from determining other uses
for the excess funds, provided that the use is approved in writing
by the City Council .
1
For Oa �-q.nd__Sc venger Company:
D. David McDonald, Date
Executive Vice President
For City f Dublin:
Peter W. Snyd r, M r
-- �at i
EXHIBIT
a: SURCI-iARG.Doc.PSR
PROPOSED
Residential Rate Structure
f `
(B) (C) (D) (E) (F) (G) (H) (I)
Projected Current
Current Customer Rates Without Adt'l
Number Counts With Current Recycling& Uniform Clean up Recycling Total
Description Of Customers Minican Option Rates H.H.W. Rates Cost Rate Rate %Change
132 gal 1/week 2,036 1,934 $8.55 $7.10 $6.30 $0.30 $1.30 $7.90 (8%)
2 32 gal 1/week 2,417 2,417 $14.75 $13.30 $12.60 $0.30 $1.30 $14.20 (4%)
3 32 gal 11week 204 204 $20.95 $19.50 $18.90 $0.30 $1.30 $20.50 (2%)
4 32 gal 11week 23 23 $27.15 $25.70 $25.20 $0.30 $1.30 $26.80 (1%)
5 32 gal 1/week 1 1 $33.35 $31.90 $31.50 $0.30 $1.30 $33.10 (1%)
6 32 gal 1/week 0 0 $39.55 $38.10 $37.80 $0.30 $1.30 $39.40 0%
140 gal 1/week 32 32 $10.35 $8.90 $7.90 $0.30 $1.30 $9.50 (8%)
2 40 gal 1/week 0 0 $18.10 $16.65 $15.75 $0.30 $1.30 $17.35 (4%)
3 40 gal 1/week 0 0 $25.85 $24.40 $23.65 $0.30 $1.30 $25.25 (2%)
4 40 gal 1/week 0 0 $33.60 $32.15 $31.50 $0.30 $1.30 $33.10 (1%)
145 gal 1/week 239 239 $11.45 $10.00 $8.85 $0.30 $1.30 $10.45 (9%)
2 45 gal I/week 0 0 $20.15 $18.70 $17.70 $0.30 $1.30 $19.30 (4%)
3 45 gal I/week 0 0 $28.85 $27.40 $26.60 $0.30 $1.30 $28.20 (2%)
4 45 gal 1/week 0 0 $37.55 $36.10 $35.45 $0.30 $1.30 $37.05 (1%)
148 gal 1/week 3 3 $12.10 $10.65 $9.45 $0.30 $1.30 $11.05 (9%)
2 48 gal I/week 0 0 $21.40 $19.95 $18.90 $0.30 $1.30 $20.50 (4%)
3 48 gal 11week 0 0 $30.70 $29.25 $28.35 $0.30 $1.30 $29.95 (2%)
4 48 gal 1/week 0 0 $40.00 $38.55 $37.80 $0.30 $1.30 $39.40 (2%)
1 Minican 1/week 0 537 N/A N/A $5.05 $0.30 $1.30 $6.65
Projected Monthly Revenues $53,909 $51,664 $1,584 $6,866 $60,114
Monthly Revenue Requirement $51,376 $1,500 $6,866 $59,741
Surplus/(Deficit) $288 $84 $0 $373
Minican Discount 20%
Minican Service Change 5%
Mandatory Service 435
Revenue Req.Change (4.7%)
Clean-up Costs $18,000
City of Dublin.
Rate Model Assumptions
The following assumptions and/or calculations were made in developing the
1992 solid waste rate structures.
• 5% of current customers (or 102 customers) who subscribe to 32 gallon
can service will change their subscription to the 20 gallon mini-can.
This assumption was based on results in nearby cities (Walnut Creek).
No other service changes have been included.
• The 435 residents that do not currently subscribe to any service will
subscribe to the minimum level of service (mini-can) due to the
proposed mandatory service requirement. We have assumed an April
1, 1992 start date for these customers.
• The mini-can rate is based on a 20% discount off the 32 gallon can rate
(or 80% of the 32 gallon can rate).
• All customers with cans larger than 32 gallons are assumed to
subscribe to one can service. The Company was unable to determine
otherwise. We believe this to be a conservative estimate.
• Uniform residential rates are based strictly on can capacity.
• Residential cleanup cost and the recycling rate is based on a per
household charge.
• All residential and bin rates are calculated based on current revenue
levels less 4.7%.
• Commercial and multi-family rate structures have been combined.
• Commercial and multi-family rates are based on two components:
volume and frequency of pick-up. The volume component (or bin
capacity) is an equal charge per yard. The frequency component is
determined as follows: for each extra pick-up (i.e. more than once per
week), a 20% premium of the one yard once per week rate
(appro)imately $5.55) is added.
IBIT 6
LiVermore Dublin Disposal
6175 South Front Road A Waste Management Company
Livermore,California 94550 �415/447-1300
EIVED
DEC 16 1991
1`1Tv r r +JN
October 31 , 1991
Paul. Rankin
City of Dublin
100 Civic Plaza
Dublin, Ca . 94568
Dear Paul ,
It has been a year since the curbside recycling program started.
I think the program has been successful and will continue to be so .
Per our agreement with the City of Dublin, we may request and
adjustment to the fee charged for the program on an annual basis .
As you can see by the attached consumer price index, it rose 4 . 3%
during the last twelve months . This would equate to a five cent
increase in the fee .
Please review the table and call me so we can set a date to discuss
this .
Sincerely,
Dan Borges
General Manager
cc/Dave MacDonald
a division of Oakland Scavenyor Cornpany EXHIBIT
Commercial and Multi- ami y Rate Structure
Current
Number Commercial Uniform
Description Of Bins Rates Rates %Change
1 Yard 1/week 65 $37.90 $27.70 (27%)
1 Yard 2/week 4 $75.85 $60.95 (20%)
1 Yard 3/week 2 $102.70 $94.20 (8%)
1 Yard 4/week 0 $129.55 $127.40 (2%)
1 Yard 5/week 0 $156.40 $160.65 3%
2 Yard 1/week 68 $67.55 $55.40 (18%)
2 Yard 2/week 15 $121.25 $116.35 (4%)
2 Yard 3/week 9 $175.00 $177.30 1%
2 Yard 4/week 1 $228.70 $238.20 4%
2 Yard 5/week 0 $282.45 $299.15 6%
3 Yard 1/week 98 $95.15 $83.10 (13%)
3 Yard 2/week 114 $175.75 $171.75 (2%)
3 Yard 3/week 8 $256.35 $260.40 2%
3 Yard 4/week 6 $336.95 $349.00 4%
3 Yard 5/week 2 $417.50 $437.65 5%
4 Yard 1/week 82 $125.20 $110.80 (12%)
4 Yard 2/week 32 $232.65 $227.15 (2%)
4 Yard 3/week 39 $340.15 $343.50 1%
4 Yard 4/week 1 $447.60 $459.80 3%
4 Yard 5/week 9 $555.05 $576.15 4%
6 Yard 1/week 28 $182.05 $166.20 (9%)
6 Yard 2/week 7 $343.25 $337.95 (2%)
6 Yard 3/week 10 $504.40 $509.70 1%
6 Yard 4/week 0 $665.60 $681.40 2%
6 Yard 5/week 2 $826.80 $853.15 3%
7 Yard 1/week 5 $213.15 $193.90 (9%)
7 Yard 2/week 2 $401.20 $393.35 (2%)
7 Yard 3/week 10 $589.25 $592.80 1%
7 Yard 4/week 1 $777.30 $792.20 2%
7 Yard 5/week 2 $965.35 $991.65 3%
Projected Monthly Revenues $106,929 $102,033
Revenue Requirement $101,903
Surplus/(Deficit) $130
Revenue Req. Change (4.7%)
Extra Pick-Up Premium 20.0%
EXHIBIT
Prej �d December 18, 1991
CITY OF DUBLIN
Proposed Drop Box Rates
Current %
Rate Change
6 Cubic Yard Container (Dirt/Rock/Debris)
The pick-up cost of this container
shall be the same as the 14 yard
container due to the weight
accommodated.
14 Cubic Yard Container
$6. 40/cubic yard plus $5. 55 $ 86.80 + 8 .8%
TOTAL = $95 . 15 per pick-up (water level)
20 Cubic Yard Container
$6 . 40/cubic yard plus $5 . 55 $124 . 00 + 7 . 6%
TOTAL = $133 . 55 per pick-up (water level)
30 Cubic Yard Container
$6. 40/cubic yard plus $5 . 55 $186 . 00 + 6. 2%
TOTAL = $197 . 55 per pick-up (water level)
40 Cubic Yard Container
$6. 40/cubic yard plus $5 . 55 $248 .00 + 5 . 5%
TOTAL = $261. 55 per pick-up (water level)
Excess Rate Per Yard
$6. 40 per yard if container loaded $ 6. 20 +3 . 1%
above wather level
Compacted Rate Per Yard
The compacted Rate per yard shall be $12 .80 $ 12 . 40 +3 . 2%
Miscellaneous Charges Maintained at 1991 Rates
Flasher Charge $10 . 55 per pull
Initial Placement Charge 2$ 3 . 00
Weekly Container Rental Fee Beyond 1st Wk $11 .90
Container Rental Fee After First Week $1 .70/day*
*Note: This charge is waived if the following service frequency is
maintained:
Service Level Frequency
6 yard/14 yard/20 yard 4 pulls/month
30 yard 3 pulls/month
40 yard 2 pulls/month
PSR/lss a: 1223GARC.doc.agenda #6
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