Rancho Palos Verdes City Council
   

TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL

FROM: DIRECTOR OF PUBLIC WORKS

DATE: MAY 20, 2002

SUBJECT: RESIDENTIAL SOLID WASTE AND RECYCLING RATE ADJUSTMENTS FOR

IVY RUBBISH DISPOSAL FOR FY 03-04

Staff Coordinator: Lauren Ramezani, Sr. Administrative Analyst

RECOMMENDATION

  1. Approve a rate increase of 2.7% for Ivy Rubbish Disposal customers for FY 03-04.
  2. Increase the amount of Collector Fee paid by Ivy Rubbish Disposal to the City by $324 to reflect the rate increases.
  3. Approve a change in the distribution of the amount of City's Collector Fee among several City Funds.

BACKGROUND

Ivy Rubbish Disposal (Ivy Rubbish) and Waste Management of Los Angeles are currently in the third year of their seven-year exclusive residential agreements that have been in effect since July 2000. Per the terms of the agreements, rates are fixed for a period of two-years (July 1, 2000 to June 30, 2002) with possible annual adjustments, each July 1, thereafter.

In FY 02-03, Ivy Rubbish was entitled to a rate increase. However, since the rate increase was nominal, Ivy Rubbish did not increase its rates.

A Notice of this Public Hearing was published in the Palos Verdes Peninsula News on May 10 and May 15, 2003.

DISCUSSION

RATE INCREASE: Ivy Rubbish services approximately 600 customers in the Portuguese Bend Community and the area southerly of PVDS. Per their agreement with the City, Ivy Rubbish is eligible for a rate increase of 2.7% for FY 03-04. The amount of the increase is spelled out in the agreement and is a function of the percentage change in the disposal tipping fee per ton, the percentage change in the Producer Price Index (PPI) and Ivy's actual service revenue and disposal expense. Staff finds the calculations accurate and per the agreement's formula.

This requested rate adjustment is the first rate increase since July 2000. This rate increase is approximately $1.17 a month, or an annual increase of $14.04 for the majority of customers (backyard twice a week).

The list of some of Ivy Rubbish's current and proposed monthly rates are as follows:

Service Level

Current Max. Monthly Rate

Proposed Max. Monthly Rate for FY 03-04

Max. Monthly Rate Increase

Curbside 2x/wk
(approx 210 accounts)

$21.55

$22.13

$0.58

Backyard 2x/wk
(approx 315 accounts)

$43.28

$44.45

$1.17

Backyard 1x/wk (approx 30 accounts)

$26.58

$27.30

$0.72

Multi-family 2x/wk
(approx 35 accounts)

$20.87

$21.43

$0.56

COLLECTOR FEE: Ivy Rubbish currently pays the City a total Collector Fee of $12,000 a year (paid in quarterly basis). Currently approximately 56% of the collector fee is deposited in the General Fund ($6,720), 18% deposited in the Waste Reduction (Solid Waste) Fund ($2,160) and 26% in the Beautification (Recycling) Fund ($3,120). This Collector Fee distribution, which was recommended in FY 00-01 by staff and approved by Council, is similar to Waste Management 's current fee distribution. The agreement also allows the Collector Fee to increase by the same percentage as rate increases. If staff's recommendations are approved, the City's Collector Fee will increase by $324 in FY 03-04. The proposed total Collector Fee received from Ivy for FY 03-04 will be $12,324.

Ivy's agreement only states the total amount of the Collector Fee due to the City. It does not identify the distribution of the Collector Fee among City funds. The distribution of the fee is at the discretion of the City council. The City's funding needs have recently changed due to the State budget cuts and the reduction in the City's General Fund revenue. Therefore, staff recommends changing the future distribution of the Collector Fee to the following:

City Fund

Current Distribution Amount
FY 02-03

Current Distribution
%
FY 02-03

Proposed Distribution Amount
FY 03-04

Proposed Distribution %
FY 03-04

General Fund- Various programs

$ 6,720

56%

$ 6,900

56%

General Fund- Stormwater Quality Program

-0-

0%

$ 3,924

32%

Waste Reduction (Solid Waste) Fund

$ 2,160

18%

-0-

0%

Beautification (Recycling) Fund

$ 3,120

26%

$ 1,500

12%

Collector Fee Total

$12,000

100%

$12,324

100%

This recommended distribution:

  • Keeps the percentage allocation for General Fund- Various Programs unchanged (56%).
  • Saves General Fund-Stormwater Quality Program expenditures. It funds the City's increased stormwater/NPDES program implementation costs in the amount of $3,924 (32%).
  • Eliminates the Waste Reduction (Solid Waste) Portion of the collector fee (0%). The Waste Reduction Fund's projected FY 02-03 year-end balance is approximately $692,000.
  • Decreases the Beautification Fund allocation (12%). The Beautification Fund's projected FY 02-03 year-end balance is approximately $483,000. The Beautification program will be funded by approximately $130,000 in California Redemption Value (CRV) revenue received annually from haulers for the beverage containers collected from the City's residential curbside recycling program and $36,500 from the Collector Fee ($35,000 WM and $1,500 Ivy). If needed, for the next several years, the Beautification Fund balance can offset any additional Beautification program expenditures.
  • Is similar to a proposed change in Waste Management's Collector Fee distribution among City funds. (Waste Management's May 20, 2003 rate adjustment staff report)

ALTERNATIVES

  1. Approve the rate increases, but do not pass this charge along to customers. Instead the City will pay for the total annual increase among all customers in the amount of $5,924 from the Waste Reduction (Solid Waste) Funds.
  2. Keep the Collector Fee unchanged.
  3. Change the current Collector Fee distribution. A new distribution among funds to be determined by City Council (a distribution different than the staff recommendation).

CONCLUSION

Approving the staff recommendation will increase Ivy Rubbish Customers monthly rates by 2.7%. This will be the first rate increase for Ivy customers since July 2000. The increase will be effective July 1, 2003. The City Collector Fee distribution will also change and will be distributed among several City funds similar to Waste Management of Los Angeles' FY 03-04.

FISCAL IMPACT

Approving the staff recommendation will increase Ivy Rubbish customers monthly rates by 2.7%, will increase the City Collector Fee for FY 03-04 by $324, and will change the distribution of the Collector Fee.

Respectfully Submitted:
Dean E. Allison, Director of Public Works

Reviewed by:
Les Evans, City Manager

Attachments: Rate Adjustment Formula Explanation

Ivy's FY 03-04 Proposed Rates

RATE ADJUSTMENT FORMULA EXPLANATION

The adjustment is based on a formula involving these factors:

  • Actual service revenue and disposal expense
    • The total disposal expense and total rate revenue of the hauler is for the twelve-month period ending on the most recent December 31st. i.e. January 1, 2002 through December 31, 2002.
  • Producer Price Index (PPI) for Finished Goods
    • The percentage change in the PPI is for the twelve-month period ending on the most recent December 31. i.e. December 2002 vs. December 2001
    • The PPI was selected as the indicator in the contract, instead of the Consumer Price Index (CPI), because the PPI more closely tracks changes and places greater emphasis on items like cost of labor and durable manufacturing equipment rather than consumer goods like food or housing. Additionally, in recent history the PPI changes have increased at a lower rate than the CPI.
    • In calculating percentage change in PPI, preliminary numbers are consistently used.
  • Disposal tipping fee per ton
    • The percentage change in the solid waste disposal tipping fee is based on the change between the most recent tipping fee on which rates were based in FY 99-00 and the new tipping fee in FY 02-03. There has been no rate change since July 2000.
    • If, however, the haulers are the owner/operator of the disposal site/s, then the maximum annual increase in the tipping fee is equal to the annual percentage change in the PPI. This affects Waste Management, not Ivy Rubbish.
    • Ivy Rubbish took all their disposed waste to SERRF (a waste to energy transformation facility in Long Beach, owned and operated by the City of Long Beach), which had a tipping fee increase. Therefore, Ivy's calculated rate adjustment shows an increase.