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TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: DIRECTOR OF PUBLIC WORKS
DATE: APRIL 20, 2004
SUBJECT: RESIDENTIAL SOLID WASTE AND RECYCLING RATE ADJUSTMENTS FOR
WASTE MANAGEMENT OF LOS ANGELES FOR FY 04-05
Staff Coordinator: Lauren Ramezani, Sr. Administrative Analyst
to the City by $8,880 to reflect the rate increases.
$3.42 per household) from the City's Waste Reduction fund. This is to offset 50%
of the rate increase as a "thank you" to customers for the City meeting the State's 50% diversion mandate.
Waste Management of Los Angeles (WM) is in the fourth year of its seven-year exclusive residential agreement that has been in effect since July 2000. Per the terms of the agreement, the City must be notified of annual adjustments by April 1st for possible rate changes to be effective each July 1st. A Notice of this Public Hearing was published in the Palos Verdes Peninsula News on April 8, and April 15, 2004.
Per their agreement with the City, WM is eligible for a maximum FY 04-05 rate increase of 2.95% for single-family and 2.97% for multi-family accounts. The maximum 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 WM's actual service revenue and disposal expense. Staff finds the calculations accurate and per the agreement's formula. There are approximately 10,800 single-family and 40 multi-family accounts serviced by WM.
This maximum rate increase is approximately $0.57 a month, or an annual increase of $6.85 for the majority of single-family customers (twice a week curbside). For the multi-family accounts, the amount varies depending on the service level. For example, for a twice a week 3 cubic yard bin customer, the maximum monthly increase is $2.85 a month, or an annual increase of $34.20. The exact maximum rate increase for all service levels is listed on the attached spreadsheets.
Rate calculations for WM’s most popular services are as follows:
COLLECTOR FEE: WM currently pays the City an annual Collector Fee of $300,600. 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 from $300,600 to $309,480 (or by $8,880) in FY 04-05 and will be distributed among three funds. Approximately 56% of the Collector Fee will be deposited in the General Fund- Various Programs ($173,309), 32% of the collector fee is deposited in the General Fund- Stormwater Quality Program ($99,034), and 12% in the Beautification Fund ($37,137). This City Council approved this Collector Fee distribution in May 2003.
CREDIT TO CUSTOMERS: In February 2004, the City submitted its 2002 annual
AB 939 report with a reported diversion rate of 51%. This is the first year the City met and exceeded the State's 50% diversion mandate. The City's projected FY 03-04 Waste Reduction ending balance is $591,500. The Waste Reduction fund (or AB 939 fund) is an accumulation of AB 939 fees paid to the City by residential and commercial customers. This fund is restricted and its use is limited to activities and expenses related to implementing various waste reduction, recycling and reuse programs, and public education. Staff recommends the issuance of a one-time credit as the City's "thank you" to residents for recycling and helping the City reach this milestone. The one-time credit will total approximately $41,965 (or about $3.42 per household) from
the City's Waste Reduction fund and will offset 50% of the rate increase. This recycling credit is an eligible AB 939 expense.
The maximum monthly rates will not be affected by this credit. i.e. WM customers will receive an invoice with the adopted maximum FY 04-05 monthly rates. The invoice will then have an additional line item showing a "One-time Recycling Credit". That credit will reduce the total due and customers will save money. The City will then issue a check and reimburse Waste Management for the credit given customers.
Approving the staff recommendations will increase the maximum residential rate for Waste Management of Los Angeles customers. The maximum monthly single-family rates will increase by 2.95% and the maximum monthly multi-family rates will increase by 2.97%. This will be the second rate increase for Waste Management customers since July 2000. The increase is effective July 1, 2004. The City Collector Fee will increase by $8,880 and will be distributed among several City funds. Customers will receive a one-time credit equaling 50% of their rate increase as a "Thank you" for their recycling efforts and helping the City meet and exceed its 50% diversion mandate. The City's Waste Reduction fund will fund the credit totaling approximately $41,965.
Approving the staff recommendations will:
Dean E. Allison, Director of Public Works
Les Evans, City Manager
RATE ADJUSTMENT FORMULA EXPLANATION
The adjustment is based on a formula involving these factors: