HomeMy WebLinkAboutCC 2025-01-14_10a Solid Waste Rate Adjustment_Prop 218 (F PRROYO
NCORPOR
ATED Y�
* JULY 10, 1911
C141F04t�P. MEMORANDUM
TO: City Council
FROM: Nicole Valentine, Director of Administrative Services
SUBJECT: Establishment of a Solid Waste Rate Adjustment Consistent with
Proposition 218
DATE: January 14, 2025
RECOMMENDATION:
1) Conduct a public hearing and consider any protests regarding the proposed solid waste
rate adjustment set forth in the attached Resolution and the Notice of Public Hearing
provided to solid waste rate customers (Attachment 3) based on the Solid Waste Rate
Review (Attachment 2); and
2) If there is no majority protest, adopt a Resolution establishing integrated solid waste
collection service rates for January 15, 2024, and each January 1 from 2026 through
2029; and
3) Make findings as included in the attached Resolution that establishing solid waste rates
are not a project subject to the California Environmental Quality Act ("CEQA") because
the action has no potential to result in either a direct, or reasonably foreseeable indirect,
physical change in the environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3),
15378.).
IMPACT ON FINANCIAL AND PERSONNEL RESOURCES:
There is no impact on staff resources related to the proposed action. There will be a minor
increase in franchise fee revenue from the adjustment and a minor increase to the City's
cost for solid waste collection. If the proposed new four-year minimum indexed rate
adjustment methodology is approved, future personnel resources will be required to
prepare the appropriate 30-day notice of rate increase in-lieu of the effort required for
interim year reviews, thus providing operational efficiency compared to the current two-
year maximum schedule. Pursuant to the City's existing Franchise Agreement with South
County Sanitary Service ("SCSS"), the costs of consultant services to review SCSS's rate
adjustment request are paid by SCSS.
BACKGROUND:
The City has had a Franchise Agreement with SCSS, a subsidiary of Waste Connections,
for the collection, diversion, and disposal of solid waste in the City since 1997. On June
10, 2008, a new Solid Waste Collection Franchise Agreement with SCSS was approved
and the Franchise Agreement was subsequently amended twice in 2016. Through the
Item 10.a.
Page 129 of 190
City Council
Establishment of a Solid Waste Rate Adjustment Consistent with Proposition 218
January 14, 2025
Page 2
terms of the Franchise Agreement, SCSS is entitled to compensation for its "labor,
equipment, materials and supplies, taxes, insurance, bonds, overhead, transfer and
transport, processing, division, disposal, provide and all other things necessary to perform
all of the services required by [the] Agreement." This compensation is received through
the rates and charges paid by the City's customers, which are presented to the City
through cost-based rate adjustment applications and approved by the City Council
following a noticed public hearing pursuant to article XIII D, section 6 of the California
Constitution (commonly known as "Proposition 218").
Per the Franchise Agreement, rates are reviewed in accordance with the "City of San Luis
Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste
Management Rates," which was originally established in 1994 (1994 Rate Manual). The
1994 Rate Manual allows for a cost-based rate adjustment every three years and interim
rate adjustments in the other two years. In interim rate periods, the operator is limited to
adjustments based on inflation, tipping fee adjustments, and franchise or regulatory fee
changes. During cost-based rate adjustment years, SCSS is able to request adjustments
due to changes in other operational costs as set forth in the 1994 Rate Manual. The
following table summarizes the SCSS rate review history beginning in 2005.
Table 1: SCSS Rate Review History
Review Adjustment
Year Type
2005 Cost-based 5.60%
2006 Index-based 3.09%
2007 _ Index-based 3.76%
_ 2008 Cost-based 3%
2009 _ N/A 0.00%
2010 N/A 0.00%
2011 _ N/A 0.00%
_ 2012 Index-based 5.15%
2013 Cost-based 3.20%
2014 Index-based 2.05%
2015 N/A 0.00%
2016 Cost-based 3.25%
2017 Index-based 1.00%
2018 Index-based 1.60%
2019 Cost-based 10.06%
_ 2020 Index-based 1.70%
_ 2021 Index-based 0.70%
_ 2022 _ Cost-based 22.19%
_ 2023 Index-based 9.10%
_ 2024 Index-based 3.00%
2025 Cost-based 4.92%
Item 10.a.
Page 130 of 190
City Council
Establishment of a Solid Waste Rate Adjustment Consistent with Proposition 218
January 14, 2025
Page 3
The City of San Luis Obispo has been working with Waste Connections, SCSS's parent
company, to develop and implement a new rate adjustment methodology to replace the
30-year-old Rate Manual. The key objectives for a new rate adjustment methodology are
to enhance rate stability, predictability, fairness, transparency, ease of administration, and
cost-effectiveness. The City of San Luis Obispo contracted with R3 Consulting Group,
Inc. (R3) to support development and negotiation of a new rate adjustment methodology
and the new rate adjustment methodology is available for consideration by other public
agencies in San Luis Obispo County. The City of Arroyo Grande has been following the
development of the new rate adjustment methodology, which is being presented to the
City Council as an amendment to the agreement with SCSS in association with this public
hearing regarding the 2025 rate adjustment.
The City of San Luis Obispo also contracted with R3 to conduct a detailed review of the
2025 cost-based rate applications submitted by Waste Connections to ten agencies in
San Luis Obispo County, including the City of Arroyo Grande. The City of Arroyo Grande
received an initial rate adjustment request from SCSS on July 3, 2024, for an adjustment
to the City's solid waste rates of 3.97% effective in January 2025 following a noticed public
hearing pursuant to Proposition 218. After R3's review, and adjustments necessary for
effectuation of the new rate methodology and new regional service enhancements, the
recommended 2025 rate adjustment is 4.92%.
On November 12, 20241 the City Council reviewed the Solid Waste Rate Review report
completed by R3 (Attachment 2) and received a presentation. R3 completed a thorough
review of SCSS' 2025 cost-based rate adjustment application and adjustments necessary
for the new recommended rate adjustment methodology. R3's report includes the new
rate adjustment methodology and the corresponding rate adjustment of 4.92%, which will
provide key benefits to the City in terms of rate predictability and stability and new
enhanced services.
The City Council set the Public Hearing for January 14, 2025, to consider adjusting the
Solid Waste rates for January 15, 2024, and each January 1 from 2026 through 2029.
ANALYSIS OF ISSUES:
The New Rate Adjustment Methodology replaces the 1994 Rate Manual and regulates
annual rate adjustments for the City's solid waste rates starting in 2026. The new
methodology fulfills key objectives including rate stability, predictability, fairness,
transparency, ease of administration, and cost-effectiveness. The key features of the new
methodology include:
• Capped CPI Adjustment
• Revenue Balancing Mechanism
1 https://pub-arroyogrande.escribemeetings.com/filestream.ashx?Documentld=12957
Item 10.a.
Page 131 of 190
City Council
Establishment of a Solid Waste Rate Adjustment Consistent with Proposition 218
January 14, 2025
Page 4
• Less Frequent Cost-Based Adjustments
• Updated Depreciation Lifespan for Trucks
• Updated Profit Allowance
• Removed Limitation on Corporate Overhead
• Extraordinary Adjustments
• Regional Service Enhancements
o Customer Assistance Program
o Free Bulky Waste Collections
o Annual Cart Exchange
The City will allow customers participating in the PG&E California Alternate Rates for
Energy (CARE) Program to be eligible for the Customer Assistance Program. The CARE
Program requires a review of a household's income and if they are participating in a public
assistance program. The City is undertaking a Water and Wastewater Rate study and will
be reviewing the possibility of creating a specific eligibility requirement for Arroyo Grande
residents. If this is created, the City will work with SCSS to review customer eligibility.
Per R3's report, the key factors affecting the 2025 rate adjustment are summarized as
follows:
• A doubling of post-collection costs for organics processing since 2022 due to
updated costs for processing infrastructure to meet the requirements of Senate Bill
(SB) 1383.
• Market rate adjustment of post-collection costs for landfill disposal, which have
remained flat since 2016. Landfill disposal costs have been below market at $41
per ton since 2016 and will increase to a fair market cost of $70 per ton in 2025.
• Cost-of-living changes in collection costs, which include labor, capital, operating
expenses, insurance and overhead costs, for 2025 increases over 2024 amounting
to 4.21%.
• Additional costs for regional service enhancements, described above, which add
0.45% to the 2025 rate adjustment.
Taken altogether, and including appropriate adjustments to SCSS' original request to
achieve the objectives of the new rate methodology, the 2025 rate adjustment that would
be effective January 15, 2025, following a successful Proposition 218 proceeding, is
4.92% as shown in the table below:
Table 2: 2025 Rate Adjustment Breakdown
Original Adjustment per 1994 Rate Manual 3.97%
_Revised Depreciation Schedule -1.33%
Remove Limitation on Corporate Overhead 1.51%
Regional Service Enhancements _ 0.45%
Updated Profit Allowance 0.23%
Item 10.a.
Page 132 of 190
City Council
Establishment of a Solid Waste Rate Adjustment Consistent with Proposition 218
January 14, 2025
Page 5
Recalculated Franchise Fee 0.09%
Revised Adjustment for New Methodology 4.92%
A summary of changes in residential rates at the 4.92% rate adjustment are shown in the
table below.
Table 3: Summary of Residential Rate Changes
Current Proposed
Proposed
Service Description Monthly Rate Rate Monthly Rate
Effective Adjustment Effective
1/1/2024 1/15/2025
32 Gallon Waste Wheeler $27.33 $1.34 $28.67
64 Gallon Waste Wheeler $35.52 $1.75 $37.27
96 Gallon Waste Wheeler $43.73 $2.15 $45.88
Proposition 218 Process
The City's practice is to apply the provisions of Proposition 218 to solid waste rates and
to require that all property owners and tenant customers receiving solid waste collection
services receive written notice by mail at least 45 days prior to the City Council
consideration of approving solid waste rate adjustments. The notice must include the
amount of the fee, the basis on which the fee was calculated and the date, time and place
of the public hearing and must clearly advise of the right to protest the fee increase.
Proposition 218 notices for the contemplated rate adjustments were mailed by November
30, 2024. A copy of the mailed notice is provided in Attachment 3.
If written protests to the proposed rate increase are received from a majority of affected
parcels, the City Council may not adopt the proposed rates. There are currently 8,807
parcels in Arroyo Grande receiving solid waste collection services. Therefore, 4,404
protests would represent a majority. According to State law, one written protest per parcel
will be counted toward reaching a majority. The protest must be submitted in writing,
signed by the property owner or the authorized representative of the property owner, or
the tenant customer. At the time this report was prepared, 2 protest letters have been
received. Protests have been accepted in person as well as by mail, and will be accepted
up to the close of the public hearing. At that time, the total protests received will be
counted and, if no majority protest has occurred, the City Council may adopt the proposed
Resolution setting forth the solid waste rates that will go into effect on January 15, 2025.
ALTERNATIVES:
The following alternatives are provided for the Council's consideration:
1. Conduct a public hearing and consider any protests regarding the proposed solid
waste rate adjustment set forth in the notice of public hearing provided to solid
Item 10.a.
Page 133 of 190
City Council
Establishment of a Solid Waste Rate Adjustment Consistent with Proposition 218
January 14, 2025
Page 6
waste rate customers and within the attached Resolution; if there is no majority
protest, adopt the Resolution establishing integrated solid waste collection service
rates for January 15, 2024, and each January 1 from 2026 through 2029; and make
findings in the attached Resolution that establishing solid waste rates are not a
project subject to the California Environmental Quality Act ("CEQA") because the
action has no potential to result in either a direct, or reasonably foreseeable
indirect, physical change in the environment. (State CEQA Guidelines, §§ 15060,
subd. (c)(2)-(3), 15378.);
2. Do not approve an increase if a majority of protests are received; or
3. Provide other direction to staff.
ADVANTAGES:
The recommended action will enable continuation of uninterrupted solid waste collection
and recycling services at a reasonable cost.
DISADVANTAGES:
Customers will experience higher solid waste collection and recycling costs.
ENVIRONMENTAL REVIEW:
Adopting the Resolution establishing solid waste rates are not a project subject to the
California Environmental Quality Act ("CEQA") because the action has no potential to
result in either a direct, or reasonably foreseeable indirect, physical change in the
environment. (State CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.)..
PUBLIC NOTIFICATION AND COMMENTS:
The Agenda was posted at City Hall and on the City's website in accordance with
Government Code Section 54954.2, and the proposed solid waste rate adjustment was
set forth in the notice of public hearing, provided to customers consistent with State law.
ATTACHMENTS:
1. Proposed Resolution
2. R3 Report 2025 Rate Adjustment and New Rate Methodology
3. Proposition 218 Public Notice
Item 10.a.
Page 134 of 190
ATTACHMENT 1
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
ARROYO GRANDE ESTABLISHING INTEGRATED SOLID
WASTE COLLECTION SERVICE RATES FOR JANUARY
15, 2024, AND EACH JANUARY 1 FROM 2026 THROUGH
2029 AND FINDING THE ACTION EXEMPT FROM CEQA
WHEREAS, the City of Arroyo Grande ("City") establishes rates and charges for solid
waste, recycling and green waste collection services, pursuant to Public Resources Code
Section 40059 (a) and Arroyo Grande Municipal Code §§ 8.32.100 and 8.32.210; and
WHEREAS, the City and South County Sanitary Service, Inc. ("SCSS") entered into a
Franchise Agreement for collection, diversion and disposal of solid waste, dated
November 12, 1997 ("Prior Solid Waste Agreement"); and
WHEREAS, the City and SCSS entered into a subsequent amendment, modifying certain
provisions of the Prior Solid Waste Agreement, dated March 23, 1999, requiring
collection, diversion and disposal of green waste; and
WHEREAS, the City and SCSS also entered into a Recycling Services Franchise
Agreement, dated August 24, 1999; and
WHEREAS, the City and SCSS further entered into an Amended and Restated Solid
Waste Collection Franchise Agreement, dated June 10, 2008, which amended and
restated the Prior Solid Waste Agreement and incorporated, amended and restated the
Prior Recycling Agreement; and
WHEREAS, the City and SCSS also entered into a First Amendment to the Amended
and Restated Solid Waste Collection Agreement, dated March 22, 2016, which excluded
tipping fee increases for landfill improvements, when calculating whether the SCSS rates
charged to customers are greater than the cumulative cost of living increase; and
WHEREAS, the City and SCSS also entered into a Second Amendment to the Amended
and Restated Solid Waste Collection Agreement, dated July 26, 2016, which amended
the franchise agreement to extend the contract by 20 years, beginning with the first day
of the operation of a new Kompogas organic processing facility; and
WHEREAS, SCSS has submitted a rate increase application (the "application") in
accordance with the Amended and Restated Solid Waste Collection Franchise
Agreement; and
WHEREAS, the application has been comprehensively reviewed in accordance with the
City's rate-setting policies; and
Page 135 of 190
RESOLUTION NO.
PAGE 2
WHEREAS, the rate increase request compared with the rate in effect at the date of the
agreement exceeds the cumulative cost of living increase from that same date, giving the
City the option of terminating the SCSS Franchise Agreement at any time within nine
months following approval of the requested rate increase ("the trigger option"); and
WHEREAS, based on a detailed review of costs, which concludes costs are reasonable
and that rates have been calculated in accordance with the Rate Manual, combined with
the fact that rates for Arroyo Grande are among the lowest in the Central Coast area for
single family residential services, during this fee increase period only, and in this unique
circumstance, the City will not pursue the "trigger" option per Section 8. 3 of the City' s
Franchise Agreement with South County Sanitary Services.
WHEREAS, notices of the proposed rate increase were sent to property owners and
tenants in accordance with the requirements of Proposition 218 and a public hearing was
held on January 15, 2025 to consider protests against the proposed rate increase; and
WHEREAS, it was determined at the conclusion of the public hearing that a majority
protest to the proposed rate increase did not exist; and
WHEREAS, the City Council finds establishing rates and charges for solid waste,
recycling and green waste collection services are not a project subject to the California
Environmental Quality Act ("CEQA") because the action has no potential to result in either
a direct, or reasonably foreseeable indirect, physical change in the environment. (State
CEQA Guidelines, §§ 15060, subd. (c)(2)-(3), 15378.).
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande
as follows:
1. The above recitals are true and correct and incorporated herein by their
reference.
2. The application for a rate increase is hereby approved and the integrated solid
waste, recycling and green waste collection service rates set forth in Exhibit "A"
attached hereto and incorporated herein shall become effective on January 1 ,
2024, and each January 1 from 2026 through 2029.
3. In addition to the rate adjustments set forth in Exhibit "A", commencing each
January 1 of 2026, 2027, 2028 and 2029 solid waste rates will be adjusted
based on the following:
a. Annual change in the Bureau of Labor Statistics' Consumer Price Index
(CPI) for Garbage and Trash Collection in the U.S. all city average, with
a minimum 2% adjustment and a maximum 5% adjustment. Amounts
below the minimum or above the maximum will carry forward to the
following year.
b. Calculation of negotiated profit allowance starting in 2026.
Page 136 of 190
RESOLUTION NO.
PAGE 3
c. Addition of a revenue balancing mechanism starting in 2027, wherein
actual revenues from solid waste rates over or under projections carry
forward as additions to, or offsets against, the annual CPI adjustment.
On motion of Council Member , seconded by Council Member
and on the following roll call vote, to wit:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 14th day of January, 2025.
Page 137 of 190
RESOLUTION NO.
PAGE 4
CAREN RAY RUSSOM, MAYOR
ATTEST:
JESSICA MATSON, CITY CLERK
APPROVED AS TO CONTENT:
MATTHEW DOWNING, CITY MANAGER
APPROVED AS TO FORM:
ISAAC ROSEN, CITY ATTORNEY
Page 138 of 190
RESOLUTION NO.
PAGE 5
EXHIBIT "A"
Page 139 of 190
IEXHIBIT A
RESIDENTIAL SERVICE:
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 14, 2025
CITY OF ARROYO GRANDE
Current Proposed
Proposed
Pickups Per Monthly Rate Monthly Rate
Service Description Week Effective Rate Effective
111/2024 Adjustment 111412025
RESIDENTIAL SINGLE FAMILY DWELLING AND MULTI-UNIT (4 UNITS OR LESS):
32 Gallon Waste Wheeler 1 $26.72 1.31 $28.03
64 Gallon Waste Wheeler 1 $34.72 1.71 $36.43
96 Gallon Waste Wheeler 1 $42.75 2.10 $44.85
TWO-64 Gallon Waste Wheelers 1 $50.78 2.50 $53.28
ONE 64 &ONE 96 Gallon 1 $58.83 2.89 $61.72
TWO-96 Gallon Waste Wheelers 1 $66.83 3.29 $70.12
Residential customers must use the waste wheelers provided by the garbage company. This solid service fee
for residential trash collections(container with black or gray lid)includes once a week pick-up of one
greenwasteforganics container (green lid). and one recycling container (blue lid).
MISCELLANEOUS CHARGES-ALL CUSTOMERS:
Overstacked Garbage&extra bags
Minimum/unit each $7.57 0.37 $7.94
Overstacked Greenwaste &extra
bags Minimum/unit each S3.81 0.19 S4.00
Overstacked Blue Bin & extra bags
Minimum/unit each 54.25 0.21 $4.46
In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE RATES per month $37.78 1.86 $39.64
Monthly charge for additional 96-
gallon green waste service per month $10.44 0.51 $10.95
Extended Vacation Service per month $43.33 2.13 $45.46
Vacant Rate per month $43.33 2.13 $45.46
Waste wheeler cleaning each time $28.18 1.39 $29.57
Trip charge each time $45.40 2.23 $47.63
Non-payment downsize service each time $45.40 2.23 $47.63
Non-payment redeliver waste
wheeler each time $45.40 2.23 $47.63
Non-payment reconnect service each time $45.40 2.23 $47.63
Small item pickup (TV, toilet) each $44.30 2.18 $46.48
Appliance pickup-residential each $62.49 3.07 $65.56
Garbage extras on your scheduled
pickup day per yard $15.97 0.79 $16.76
Garbage extras-NOT ON YOUR
SCHEDULED PICKUP DAY per yard $42.91 2.11 $45.02
Page 140 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 14, 2025
CITY OF ARROYO GRANDE
Current Proposed
Proposed
Pickups Per Monthly Rate Monthly Rate
Service Description Week Effective Rate Effective
111/2024 Adjustment 1/1412025
Re-deliver bin on stopped acct each time $54.15 2.66 $56.81
Stand by time per hour $68.60 3.38 $71.98
Tax Lien Cert. Mail Fee $4.17 0.21 $4.38
City Clean Up $15.50 0.76 $16.26
Extra bin cleaning $84.52 4.16 $88.68
Damage/Destruction of bins or waste
wheelers by quote only
Larger than residential appliance or
glass, glass doors, or plate glass by quote only
Short Term Dumpsters:
Delivery & Pickup-Bin $54.19 2.67 $56.86
Delivery & Pickup-Waste Wheeler $18.90 0.93 $19.83
Rental Per Day $4.02 0.20 $4.22
Empties Per Yard $42.91 2.11 $45.02
Mattress:
Twin Each $24.59 1.21 $25.80
Double Each S24.59 1.21 $25.80
Queen Each $24.59 1.21 $25.80
King Each S24.59 1.21 $25.80
ADDITIONAL INFORMATION ALL CUSTOMERS:
1. Customers requesting Temporary Bins or Roll-off Box Service can call the office for current rates
2. Polystyrene(Styrofoam, Plastic#6) is not collected for recycling and should be thrown away as trash. Please bag
Styrofoam packing peanuts before placing in trash container.
3. It is encouraged to bag your trash in the garbage container but do not bag your recyclables or green waste in their
respective containers and keep it loose.
4. Recycling,Greenwaste/Organics and Garbage containers should spaced 3 feet apart away from any obstacles(i.e
mailboxes,cars, etc) before 6:00am on collection service day.
5. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees,which are
separately noted on the billings.
6. Late Fees are imposed for residential customers over 30 days delinquent.The fee is 1.5%per month of the
outstanding charge,with a minimum fee of$5.00. No prior notice is required,as this late fee policy is stated at the
bottom of every bill.
7. Customers can be responsible for fines for contamination.
Any additional recycling, including greenwaste/organic services are charged out at 50% of the garbage rate.
Page 141 of 190
NON-RESIDENTIAL SERVICE:
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
111/2024 1/112025
Mult Family
MULTI-FAMILY (5 or MORE)
Rates are the same as commercial dumpsters and Waste Wheelers rates (below).
COMMERCIAL DUMPSTERS-ALL AREAS:
1 yd dumpster 1 $131.99 6.49 $138.48
1 yd dumpster 2 $192.57 9.47 $202.04
1 yd dumpster 3 $253.20 12.46 $265.66
1 yd dumpster 4 $324.49 15.96 $340.45
1 yd dumpster 5 $381.50 18.77 $400.27
1 yd dumpster 6 $452.86 22.28 $475.14
1 yd dumpster 7 $550.43 27.08 $577.51
1.5 yd dumpster 1 $149.80 7.37 $157.17
1.5 yd dumpster 2 $231.79 11.40 $243.19
1.5 yd dumpster 3 $328.12 16.14 $344.26
1.5 yd dumpster 4 $427.90 21.05 $448.95
1.5 yd dumpster 5 $520.67 25.62 $546.29
1.5 yd dumpster 6 $588.41 28.95 $617.36
1.5 yd dumpster 7 $688.99 33.90 $722.89
2 yd dumpster 1 $167.65 8.25 $175.90
2 yd dumpster 2 $281.72 13.86 $295.58
2 yd dumpster 3 $399.42 19.65 $419.07
2 yd dumpster 4 $527.75 25.97 $553.72
2 yd dumpster 5 $652.58 32.11 $684.69
2 yd dumpster 6 $731.05 35.97 $767.02
2 yd dumpster 7 $849.99 41.82 $891.81
3 yd dumpster 1 $199.67 9.82 $209.49
3 yd dumpster 2 $377.99 18.60 $396.59
3 yd dumpster 3 $527.75 25.97 $553.72
3 yd dumpster 4 $688.18 33.86 $722.04
3 yd dumpster 5 $816.59 40.18 $856.77
3 yd dumpster 6 $973.50 47.90 $1,021.40
3 yd dumpster 7 $1,243.39 61.17 $1,304.56
4 yd dumpster 1 $249.64 12.28 $261.92
Page 142 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
11112024 1/112025
4 yd dumpster 2 $442.17 21.75 $463.92
4 yd dumpster 3 $634.73 31.23 $665.96
4 yd dumpster 4 $816.59 40.18 $856.77
4 yd dumpster 5 $1,009.17 49.65 $1,058.82
4 yd dumpster 6 $1,198.19 58.95 $1,257.14
4 yd dumpster 7 $1,525.91 75.07 $1,600.98
6 yd dumpster 1 $374.48 18.42 $392.90
6 yd dumpster 2 $663.29 32.63 $695.92
6 yd dumpster 3 $952.07 46.84 $998.91
6 yd dumpster 4 $1,224.93 60.27 $1,285.20
6 yd dumpster 5 $1,513.74 74.48 $1,588.22
6 yd dumpster 6 $1,797.30 88.43 $1,885.73
6 yd dumpster 7 $2,288.88 112.61 $2,401.49
8 yd dumpster 1 $499.27 24.56 $523.83
8 yd dumpster 2 $663.37 32.64 $696.01
8 yd dumpster 3 $1,269.43 62.46 $1,331.89
8 yd dumpster 4 $1,633.22 80.35 $1,713.57
8 yd dumpster 5 $2,018.36 99.30 $2,117.66
8 yd dumpster 6 $1,797.58 88.44 $1,886.02
8 yd dumpster 7 $2,289.25 112.63 $2,401.88
The rates shown above include the monthly container rental fee and a semi-annual dumpster cleaning.
COMMERCIAL GARBAGE CANS - ALL AREAS:
32 Gallon Waste Wheeler 1 $32.08 1.58 $33.66
32 Gallon Waste Wheeler 2 $67.75 3.33 $71.08
32 Gallon Waste Wheeler 3 $58.86 2.90 $61.76
32 Gallon Waste Wheeler 4 $74.87 3.68 $78.55
64 Gallon Waste Wheeler 1 $67.75 3.33 $71.08
64 Gallon Waste Wheeler 2 $90.03 4.43 $94.46
64 Gallon Waste Wheeler 7 $269.03 13.24 $282.27
96 Gallon Waste Wheeler 1 $78.48 3.86 $82.34
96 Gallon Waste Wheeler 2 $131.99 6.49 $138.48
96 Gallon Waste Wheeler 3 $166.18 8.18 $174.36
96 Gallon Waste Wheeler 4 $200.77 9.88 $210.65
96 Gallon Waste Wheeler 5 $226.05 11.12 $237.17
96 Gallon Waste Wheeler 7 $308.41 15.17 $323.58
Page 143 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
11112024 1/112025
COMMERCIAL- OTHER CHARGES:
Rates for all commercial customers include recycling or greenwastelorganics pickup once per week, included with the
garbage service rate. Customers can choose from a 64 or 96 gallon blue commingled recycle waste wheeler or a 32
or 64 gallon organics waste wheeler included with the garbage service rate(96 gallon waste wheelers can only be
used with green waste due to weight). If you need a bin for recycling there is a charge (see below).
If you need more frequent recycling, including organicslgreenwaste service, it can be provided at a 50%
discount from the garbage service rates for the specified level of service required.
MISCELLANEOUS CHARGES-ALL CUSTOMERS:
Overstacked Garbage&extra
bags Minimum/unit each $7.57 0.37 $7.94
Overstacked Greenwaste &
extra bags Minimum/unit each $3.81 0.19 $4.00
Overstacked Blue Bin & extra
bags Minimum/unit each $3.99 0.20 $4.19
Xtra Recycle 32, 64, or 96
waste wheelers per month $1.60 0.08 $1.68
In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE
RATES per month $18.90 0.93 $19.83
Monthly charge for additional
96-gallon green waste service per month $3.91 0.19 $4.10
Waste wheeler cleaning each time $28.18 1.39 $29.57
Trip charge each time $18.90 0.93 $19.83
Non-payment downsize
service each time $18.90 0.93 $19.83
Non-payment redeliver waste
wheeler each time $18.90 0.93 $19.83
Non-payment reconnect
service each time $45.40 2.23 $47.63
Small item pickup (TV, toilet) each $44.30 2.18 $46.48
Appliance pickup-residential each $62.49 3.07 $65.56
Lock Charge $10.52 0.52 $11.04
Garbage extras on your
scheduled pickup day per yard $15.97 0.79 $16,76
Garbage extras-NOT ON
YOUR SCHEDULED PICKUP
DAY per yard $42.91 2.11 $45.02
Commercial Waste Wheeler
rent per month $4.39 0.22 $4.61
Page 144 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
111/2024 1/112025
Re-deliver bin on stopped acct each time $54.15 2.66 $56.81
Large Compactor (> 4 yards) per yard $17.41 0.86 $18.27
Small Compactors(4 yards & assume 3 to 1 3 times the garbage
below) compaction rate
Sunday Service (in additional
to garbage service level) per month $94.56 4.65 $99.21
Recycle bin rental per month $7.89 0.39 $8.28
Stand by time per hour $68.27 3.36 $71.63
Extra bin cleaning Each $84.52 4.16 $88.68
Larger than residential
appliance by quote only
Damage/Destruction of bins or
waste wheelers by quote only
Short Term Dumpsters:
Delivery & Pickup-Bin $54.19 2.67 $56.86
Delivery & Pickup-Waste
Wheeler $18.90 0.93 $19.83
Rental Per Day $4.02 0.20 $4.22
Empties Per Yard $42.91 2.11 $45.02
Mattress:
Twin Each $24.59 1.21 $25.80
Double Each $24.59 1.21 $25.80
Queen Each $24.59 1.21 $25.80
King Each $24.59 1.21 $25.80
ADDITIONAL INFORMATION ALL CUSTOMERS:
1. Customers requesting Temporary Bins or Roll-off Box Service can call the office for current rates
2. Polystyrene(Styrofoam, Plastic#6) is not collected for recycling and should be thrown away as trash. Please bag
Styrofoam packing peanuts before placing in trash container.
3. It is encouraged to bag your trash in the garbage container but do not bag your recyclables or green waste in their
respective containers and keep it loose.
4. Recycling,Greenwaste/Organics and Garbage containers should spaced 3 feet apart away from any obstacles(i.e
mailboxes,cars, etc) before 6:00am on collection service day.
5. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees,which are separately
noted on the billings.
6. Late Fees are imposed for residential customers over 30 days delinquent.The fee is 1.5%per month of the outstanding
charge, with a minimum fee of$5.00. No prior notice is required, as this late fee policy is stated at the bottom of every bill.
7. Customers can be responsible for fines for contamination.
Any additional recycling, including greenwaste/organic services are charged out at 50% of the garbage rate.
Page 145 of 190
ATTACHMENT 2
REPORT
City of San Luis Obispo and Participating Agencies
New Solid Waste Rate Adjustment
Methodology and 2025 Rates
Submitted electronically:November 1, 2024
FC
-41 a,
ice;
i
1:Z.3 N ULTJN GROUP, IN .
RESOURCES - RESPECT RESPONSIBILITY
Page 146 of 190
[2.3CONSULTING GROUP, INC.
RESOURCES• RESPECT•RESPONSIBILITY
November 1, 2024
Ms. Meg Buckingham
Solid Waste and Recycling Coordinator
Public Utilities
879 Morro, San Luis Obispo, CA 93401
submitted via email: mbuckin@slocity.org
SUBJECT: New Solid Waste Rate Adjustment Methodology and 2025 Rates
Dear Ms. Buckingham and Participating Agencies,
R3 Consulting Group, Inc. (R3)was engaged by the City of San Luis Obispo (City)to provide solid
waste consulting services via two engagements supporting the City's negotiations of a new solid
waste services agreement with Waste Connections, the solid waste hauler. R3 was originally
engaged by the City to work in collaboration with Los Osos Community Services District and Waste
Connections to update the methodology for annual adjustments to the solid waste rates charged by
Waste Connections. The key objectives for updating the rate adjustment methodology were to
enhance rate stability, predictability, fairness, transparency, ease of administration, and cost-
effectiveness.
As that engagement proceeded, eight other agencies in San Luis Obispo County (the City of Arroyo
Grande, the City of Grover Beach, the City of Pismo Beach, Avila Beach Community Services
District, Cambria Community Services District, Cayucos Sanitary District, Nipomo Community
Services District, and Oceano Community Services District—altogether"Participating Agencies" or
"Agencies")were included as stakeholder participants in the development of new rate adjustment
methodology. With the inclusion of these additional Agencies, objectives for the engagement were
updated to include regional scale applicability of the new rate adjustment methodology. R3 was then
engaged by the City to review Waste Connections' rate adjustment requests for the 2025 rate year
on behalf of all ten Agencies with the objective of determining 2025 solid waste rates that would an
appropriate starting point for a new rate adjustment methodology starting in 2026.
The City of San Luis Obispo served as the lead contracting agency for both engagements, providing
primary oversight and direction of R3's work. Input and feedback were also sought from the other
nine Agencies, and the results reflect their stakeholder input. Ultimately, the outcomes of both
engagements are the conclusion of good faith contract negotiations between the City and Waste
Connections. In summary, the City and Waste Connections have tentatively agreed to updated
terms and conditions for annual rate adjustment which fulfill key objectives while also securing
enhanced services that will protect low income households, prevent illegal dumping, and clean solid
waste collection containers. The new rate adjustment methodology and enhanced services also
resulted in updated adjustments to solid waste rates for 2025.
The City intends to recommend a new agreement with Waste Connections to the City Council that
will include the new rate adjustment methodology and enhanced services along with the 2025
adjustments to solid waste rates. In keeping with the objective for the results to be applicable on a
regional scale, Waste Connections is willing to offer the new rate adjustment methodology and
1512 Eureka Road,Suite 220, Roseville,CA 95661 I p 916.782.7821 I f 916.782.7824 I www.r3cgi.com
Page 147 of 190
select enhanced services to the other nine Agencies at the updated 2025 adjustments to solid waste
rates.
R3 would like to recognize that this has been a significant undertaking, and we'd like to thank the City of
San Luis Obispo, Waste Connections, Los Osos Community Services District, and Participating Agencies
for your involvement in providing feedback during this process. In closing, R3 recommends City and
stakeholder consideration of the revised 2025 rates and the new rate adjustment methodology as a
means of achieving shared rate fairness, stability, and predictability objectives. Here's what Waste
Connections has shared regarding the outcomes:
"San Luis Garbage (SLG) had the opportunity to negotiate with the City of San Luis Obispo on the
re-write of the 1994 rate-making manual. The goal of this endeavor was to simplify and
streamline the rate-making process for all parties and provide an improved model going forward
for potential refuse collection rate changes. The process included a considerable amount of
discussion and analysis and although arduous at times, SLG feels the negotiations were
performed in good faith, were collaborative in nature and carried out with mutual respect. In
addition to updating the rate-making methodology, both parties took the opportunity to establish
some new service enhancements that will discourage illegal dumping, provide cart cleaning
exchanges, and offer rate relief for low-income customers. SLG believes the outcome of the
negotiation has provided a much-improved rate-review process for the City of San Luis Obispo
and other cities currently under the old rate-making methodology which will ultimately allow for an
easier path to fair and reasonable rates for all customers."
We appreciate the opportunity to be of service to the City and would like to thank the City and the
Participating Agencies for their involvement and feedback. We would also like to recognize Waste
Connections staff for being communicative and responsive to requests for information during the
process.
Sincerely,
Garth Schultz I Principal
R3 Consulting Group, Inc.
510.292.0853 I gschultz@r3cgi.com
1512 Eureka Road,Suite 220, Roseville,CA 95661 I p 916.782.7821 I f 916.782.7824 I www.r3cgi.com
Page 148 of 190
TABLE OF CONTENTS
1 . Executive Summary
page 1
2. Background
page 4
3. New Solid Waste Rate Adjustment
Methodology and 2025 Rates
page 10
Attachments
1 Summary of Original 2025 Base Year Rate Adjustments
2 Revised 2025 Rate Adjustments
3 CPI-U for Garbage and Trash
4 Example Rate Calculations for 2026 through 2029
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates TOC
Page 149 of 190
1 . EXECUTIVE SUMMARY
New Rate Adjustment Methodology
The City of San Luis Obispo, in its capacity as the lead agency on the solid waste rate adjustment
methodology update process, and in partnership with Los Osos Community Services District and Waste
Connections, completed negotiations and arrived at tentative agreement with Waste Connections
regarding the terms and conditions of a new methodology. The outcome was the result of extensive good
faith negotiations between the City and Waste Connections, with due consideration to input provided by
other public agency stakeholders.
Pending City Council approvals, the new methodology will replace the 1994 Rate Setting Process
and Methodology Manual for Integrated Solid Waste Management Rates (1994 Rate Manual) and
will regulate annual rate adjustments for the City's solid waste rates starting in 2026.
The new methodology fulfills key objectives established by the City and Waste Connections, including
rate stability, predictability, fairness, transparency, ease of administration, and cost-effectiveness.
Additionally, in response to requests by other Agencies that contract with Waste Connections in San Luis
Obispo County, the new methodology can be applied on a regional-scale and is available as
recommended alternative to the 1994 Rate Adjustment Manual for those Agencies.
The key features of the new methodology include:
)) CPI Adjustments: Starting in 2026, rate adjustments will be based on the Garbage and Trash
CPI, with a floor of 2% and a cap of 5%. Amounts under 2% or over 5% will carry forward. The
CPI adjustment will apply to Waste Connections' collection and post-collection cost centers.
)) Revenue Balancing Mechanism: Starting in 2027, adjustments to rates will account for
shortfalls or surpluses in Waste Connections' actual revenues compared to projected revenues
from prior years. For example, if Waste Connections' 2025 revenues exceed projections, the
amount of surplus revenues will be credited to the rates in 2027 (and vice versa), achieving
fairness in compensation and rates for the company and for ratepayers. Such adjustments would
take place annually and will be independent of the CPI cap and floor noted above (there is no cap
on these amounts).
)) Less Frequent Cost-Based Adjustments: Currently, solid waste rates are adjusted based on
the 1994 Rate Adjustment Manual every three years on Waste Connections' costs. Via the new
methodology, cost-based adjustments would occur a maximum of every five years, and only if
requested by Waste Connections or the City. The first opportunity for a cost-based adjustment
will be for the 2030 rate year. If neither Waste Connections nor the City request a cost-based
adjustment, then the CPI adjustment approach will be applied. Cost-based adjustments will be
based on Waste Connections' consolidated audited financial statements for the region.
Timeframes for cost-based adjustment application and review process will be ample, such that
the City will have sufficient time for review and approval processes and such that the potential for
delay in implementation is minimized. These timeframes will be delineated in the forthcoming
amendment to the agreement with Waste Connections.
)) Updated Depreciation Lifespan for Trucks: The 1994 Rate Manual set a 7-year depreciation
schedule for solid waste collection trucks. Modern solid waste collection trucks have a 10-year
lifespan, and the depreciation schedule was adjusted accordingly.
)) Updated Profit Allowance: The 2025 rate adjustment will include a 9% profit allowance of
projected collection costs and in 2026 and thereafter the profit allowance will be 10%. The
updated profit allowance is in-keeping with industry standard ranges for solid waste services. For
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 1 of 19
Page 150 of 190
Executive Summary
context, the 2025 profit allowance is approximately 5% of revenues and we estimate that the
2026 profit allowance will be approximately 5.5% of revenues. Profit will not be allowed on post-
collection costs.
)) Removed Limitation on Corporate Overhead: The 1994 Rate Manual placed a limitation on
corporate overhead costs. Today, corporate overhead costs fund legal, tax, payroll, human
resources, engineering, compliance, IT, training and recruiting programs. The City and Waste
Connections agreed to remove the prior limitation in order to fund these services. In the near-
term, compensation to Waste Connections for corporate overhead will be limited by the CPI
adjustment noted above. Cost-based adjustments to corporate overhead are possible in 2030,
and will be subject to review,justification, and potential limitation at that time.
)) Extraordinary Adjustments: The California Air Resources Board (CARB)Advanced Clean
Fleets (ACF) regulation is requiring all solid waste collection trucks to have zero emissions by
2042. This includes a phased in plan to get the percentage of the fleet to be zero emission
vehicle (ZEV)with 10% by 2030, 25% by 2033, 50% by 2036,75% by 2039 and 100% by 2042.
During CPI Adjustment years, Waste Connections may request extraordinary rate adjustments
due to changes in law affecting collection operations, including for compliance with CARB's ACF
zero emission mandate (which may necessitate change to depreciation schedules). The City
may, but is not obligated to, consider requests for extraordinary rate adjustments due to changes
in law affecting post-collection operations. Requests for extraordinary change are subject to good
faith negotiations between City and Waste Connections.
New Service Enhancements
During negotiations, the City and Waste Connections also took the opportunity to establish new service
enhancements that will discourage illegal dumping, provide cart cleaning exchanges, and offer rate relief
for low-income customers. The below service enhancements are available to the other Agencies that
approve the new rate adjustment methodology in association with adjusted 2025 solid waste rates:
)) Customer Assistance Program: 20% low-income discount provided to residential customers
using 32-gallon cart service, using existing jurisdictional practices on low-income relief for their
offered utility type services with evidence of qualifying financial hardship.
)) Free Bulky Waste Collections: Collection of a bulky waste item twice annually from residential
accounts at no separate cost, via clean-up week or voucher program depending on existing
program.
)) Annual Cart Exchange: Once annual exchange of a residential solid waste, recycling, or
organics cart per customer account.
2025 Rate Adjustments
As a result of the above, Waste Connections' 2025 rate adjustment request was revised from a 9.29%
increase to a 9.89% increase in solid waste rates, effective January 1, 2025 (and prior to other rate
structure adjustments that the City and Waste Connections may enact). When the new rate methodology
changes and service enhancements are equally applied to the other regional Agencies, the results are as
shown in Table 1 on the following page. Additional details are included in Section 3 of this report.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 2 of 19
Page 151 of 190
Executive Summary
Table 1: 2025 Rate Adjustments
Agency Original Revised
City of San Luis Obispo 9.29% 9.89%
City of Arroyo Grande 3.97% 4.92%
Los Osos CSD 12.47% 13.18%
City of Pismo Beach 3.97% 4.82%
Cambria CSD 12.78% 12.59%
City of Grover Beach 3.97% 5.02%
Nipomo CSD 3.23% 5.04%
Oceano CSD 3.76% 4.98%
Cayucos SD 12.47% 14.32%
Avila Beach CSD 3.97% 4.60%
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 3 of 19
Page 152 of 190
2. BACKGROUND
1994 Rate Manual
The 1994 Rate Manual is a 120-page document that provides step-by-step directives regarding annual
adjustments to solid waste rates in the City. Though the 1994 Rate Manual specifically references the
City of San Luis Obispo, other agencies in San Luis Obispo County(including the nine Agencies
referenced in this report) also follow the 1994 Rate Manual for annual adjustments to solid waste rates.
The 1994 Rate Manual established a three-year cycle for adjustments to solid waste rates. The first year
of each three-year cycle (called a "base year") adjusted rates based on the documented costs of
providing solid waste services. In the second and third years, solid waste rates were adjusted in
accordance with external indicators, such as the Consumer Price Index (CPI).
While the 1994 Rate Manual was an appropriate approach to annually adjusting solid waste rates at the
time, changing regulatory conditions and modern best practices in solid waste rate setting indicate that
the prior approach has outlived its usefulness. In particular, cost-based adjustments on a fixed three-year
cycle are no longer the industry norm. Most solid waste rate adjustment methodologies in California today
either do not include regular cost-based adjustments or do so less frequently. When allowed, cost-based
adjustments are typically the result of extraordinary changes in cost due to factors like changes in law or
other uncontrollable factors (such as China's National Sword Policy in 2017 and the COVID pandemic in
2020). Additionally, step-by-step instructions and timelines in the 1994 Rate Manual are outdated and do
not contemplate current approaches to public noticing, public hearings, and review timelines for
authorizing rate adjustments.
RFQ for New Rate Adjustment Methodology
Recognizing the limitations of the 1994 Rate Manual, the City and Los Osos Community Services District
issued a request for quotes (RFQ) in early 2024 seeking a consultant to develop a new rate adjustment
methodology. Pursuant to the RFQ process, R3 was awarded an agreement to provide support in
developing a new rate adjustment methodology.
Rate Adjustment History
Rate adjustments experienced by the City and participating Agencies have varied significantly in the prior
ten years from 2015 through 2024, as shown in Table 2, on the following page. As shown in the table, rate
adjustments by agency have varied from 0% (most Agencies in 2015)to over 20% (most Agencies in
2022).
There are important reasons for these variances, primarily related to the unfunded State mandates of SB
1383 (Short-lived Climate Pollutants Act)which required all agencies in California to implement programs
to recover and recycle organic waste to reduce methane emissions from landfills. While rate adjustments
were necessary to fund the required SB 1383 programs, the combination of new costs with the three-year
cost-based adjustment approach in the 1994 Rate Manual resulted in rate adjustment spikes in 2016,
2019, and 2022. Overall, across the Agencies, the average annual rate adjustment from 2015 through
2024 has been 6.76%.
One important objective of the new rate adjustment methodology is to minimize the recurrence of such
spikes by reducing the frequency of cost-based rate adjustments. From R3's experience implanting new
rate methodologies with other clients, the result has been stable and predictable annual rate adjustments.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 4 of 19
Page 153 of 190
Background
Table 2: 2015-2024 Rate Adjustments by Agency
'016 2017 2018 2019 2020 2021 2022 2023 2024
City of San Luis
0.00% 5.25% 1.00% 1.60% 13.70% 1.70% 0.70% 17.75% 9.10% 3.00%
Obispo
City of Arroyo
Grande 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00%
Los OSOS CSD 2.00% 10.37% 1.00% 1.60% 25.74% 1.70% 0.70% 41.87% 7.70% 2.70%
City of Pismo Beach 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00%
Cambria CSD 1.92% 9.93% 1.00% 1.60% 25.32% 1.70% 0.70% 41.50% 9.10% 3.00%
City of Grover
Beach 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00%
Nipomo CSD 0.00% 0.00% 1.00% 1.60% 15.08% 1.70% 0.70% 21.27% 9.10% 3.00%
Ocean CSD 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 21.03% 9.10% 3.00%
CayucosSD 2.00% 27.39% 1.00% 1.60% 26.43% 1.70% 0.70% 43.30% 9.10% 3.00%
Avila Beach CSD 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00%
Financial Statement History
There are three Waste Connections business units serving the ten participating Agencies (San Luis
Garbage, Mission Country Disposal, and South County Sanitary Service). Each business unit prepares
annual audited financial statements which are used as the basis for base year rate applications to the
Agencies. R3 analyzed Waste Connections' audited financial statements for the six years from 2018
through 2023 to evaluate profit achievement, with the results summarized in Table 3, below. Table 3 also
includes estimated profit achievement in 2024 (still underway) and for 2025 (prior to 2025 rate
adjustments).
Table 3: 2018-2023 Profit Achievement
siness Unit I : I ' 2021.
San Luis Garbage -13.84% -16.84% -9.66% -3.41% 12.47% 6.30% -0.64% -6.62%
Mission Country Disposal -19.26% -30.77% -9.28% -19.84% -10.21% 2.47% -4.09% -8.95%
South County Sanitary Service 5.38% 1.40% 0.25% -5.56% 5.93% 15.85% 8.43% 2.38%
Overall -7.22% -12.45% -5.22% -7.88% 4.66% 9.67% 2.61% -3.16%
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 5 of 19
Page 154 of 190
Background
As shown in Table 3, in total across all three business units, Waste Connections operated without any net
income between 2018 and 2021, with net positive profitability being achieved in 2022 and 2023. Profit
achievement varied by business unit, with South County Sanitary Service consistently experiencing
greater profit achievement and Mission Country Disposal consistently experiencing lesser or no profit
achievement. This is one of the key reasons that rate adjustments for the Agencies served by Mission
Country Disposal (Cambria Community Services District, Cayucos Sanitary District, and Los Osos
Community Services District)were higher than the other Agencies in 2019 and 2022.
Table 3 also shows that projected profit achievement in 2024 will be lower than 2023, which is primarily
the result of Waste Connections incurring increased landfill disposal costs (provided by a related party)
and increased organics processing costs (provided by a non-affiliated third party processor). Projected
profit achievement for 2025-which, importantly, is prior to 2025 adjustments to solid waste rates-
demonstrates no net profit for San Luis Garbage and Mission County Disposal and low net income for
South County Sanitary Service. Overall, without adjustments to rates, Waste Connections service to the
Agencies in 2025 will not yield net income.
It should be noted that Waste Connections allocates costs between business units based on allocation
metrics that include vehicle operating hours, number of solid waste containers, and number of customer
accounts. While such metrics are useful means of allocating costs, they do not necessarily represent the
exact cost of providing service within a given business unit.
Rate Comparison
R3 compared current 2024 solid waste rates for the Agencies to rates in other jurisdictions in San Luis
Obispo County, Santa Barbara County, and Monterey County. The results are shown in Table 4, below
and on the following page, and are organized in ascending order by 32-gallon monthly rate (common
residential subscription level).
Table 4: Regional Comparison of Monthly Rates
4 Gallon 96 Gallon 2 Cubic
Yards
Oceano CSD N/A $20.37 $29.31 $57.39 $128.75
San Luis Obispo $14.74 $23.53 $47.06 $70.59 $185.21
Pismo Beach N/A $23.76 $47.56 $71.33 $166.02
Grover Beach N/A $24.23 $32.74 $41.23 $147.95
Arroyo Grande N/A $27.33 $35.52 $43.73 $167.65
Nipomo CSD N/A $27.57 $39.52 $51.81 $136.62
Avila Beach CSD N/A $28.31 $46.78 $65.24 $177.68
Santa Barbara County Zone 4 Lompoc N/A $31.41 $36.13 $40.70 $179.98
Cayucos SD N/A $32.60 $38.52 $44.48 $184.32
Santa Barbara County Zone 5 N/A $33.03 $37.84 $42.46 $192.87
City of Atascadero N/A $33.67 $52.80 $66.35 $172.24
San Miguel N/A $34.13 $53.80 $72.88 $124.12
Santa Barbara County Zone 4 Santa Ynez N/A $34.33 $42.62 $50.77 $254.11
City of Morro Bay $22.21 $35.54 $71.07 $106.63 $265.30
Solvang N/A $36.28 $45.20 $54.69 $256.55
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 6 of 19
Page 155 of 190
Background
•
Agency 20 Gallon 32 Gallon 64 Gallon 96 Gallon bi
Goleta N/A $37.39 $41.88 $48.35 $240.10
Templeton N/A $38.73 $54.63 $60.41 $149.58
Los Osos CSD $27.74 $39.45 $60.57 $64.96 $228.72
Buellton N/A $40.51 $48.40 $56.38 $281.13
Cambria CSD N/A $41.52 $83.03 $124.55 $201.94
King City $32.43 $42.83 $53.68 $63.52 $288.00
Santa Barbara County Zone 2 N/A $43.25 $54.66 $65.92 $259.61
City of Paso Robles $38.15 $43.32 $57.42 $63.59 $188.36
Santa Barbara County Zone 3 N/A $45.22 $51.52 $57.75 $215.72
MRWMD $38.28 $46.54 $72.92 $91.20 $277.20
City of Santa Barbara N/A $48.26 $59.82 $71.38 $277.66
WM Area (Formerly Mid-State) N/A $48.72 $71.31 $93.84 $214.46
Santa Barbara County Zone 1 N/A $56.60 $62.86 $69.25 $256.74
Santa Maria N/A N/A $38.74 $47.87 $166.72
Table 4 demonstrates that solid waste rates for the City and other Participating Agencies compare
favorably to others in the region. Charts 1 through 4, below and on the following pages, show the
information from Table 4 in graphical format.
Chart 1: Regional Comparison of Monthly 32-gallon Cart Rates
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32-gallon monthly service (the most subscribed residential service level)for all Participating Agencies
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 7 of 19
Page 156 of 190
Background
other than Cambria Community Services District, Cayucos Sanitary District, and Los Osos Community
Services District are the lowest in the region. Chart 2 shows how 64-gallon monthly rates compare.
Chart 2: Regional Comparison of Monthly 64-gallon Cart Rates
$90 - —
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City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 8 of 19
Page 157 of 190
Background
Charts 3 and 4 keep the same ordering as Charts 1 and 2 and show how large residential 96-gallon
service and commercial two (2) cubic yard bin service compare with the region. Overall, while exceptions
exist, rates for solid waste service for the City and the Participating Agencies are among the lowest in the
region, including San Luis Obispo County, Santa Barbara County, and Monterey County.
Chart 4: Regional Comparison of Monthly 2 Cubic Yard Rates
$350 –
$300
$250 —
$200 i
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City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 9 of 19
Page 158 of 190
3. NEW RATE ADJUSTMENT METHODOLOGY
AND 2025 RATES
?025 Base Year Rate Adjustments
Waste Connections submitted base year rate applications to the Agencies for rates effective January 1,
2025.1 Those rate applications were prepared in accordance with the 1994 Rate Manual, with
modification for an effectiveness date of January 1, 2025, instead of the October 1, 2024 date that
otherwise would have been the effective date given strict adherence to the 1994 Rate Manual. In simple
terms, the applications project future 2025 costs for providing solid waste services based on the actual
costs of providing services as follows:
)) Actual results for the most recently completed year(2023), which are based on the audited
financial statements.
)) Projected results for the current year(2024), which are to be based on year-to-date information
available at the time the application is submitted.
)) Projected results for the next year(2025).
Adjustments to solid waste rates are then calculated based on the projected 2025 revenue requirement,
which is the sum of:
)) Allowed costs.
)) Allowable operating profit.
)) Pass through costs.
In reviewing the 2025 base year rate applications for the Agencies, R3:
)) Checked calculations for mathematical accuracy and consistency.
)) Tied projected costs back to the 2023 audited financial statements.
)) Evaluated the root causes of extraordinary changes in cost for landfilling and organics
processing.
)) Reviewed 2024 revenues year to date to determine accuracy of projected revenues at current
rates for 2025.
)) Proposed adjustments to solid waste collection vehicle depreciation lifetimes.
A summary of Waste Connections' original 2025 base year rate adjustments per the applications
submitted to the Agencies is included as Attachment 1.
It should be noted that Waste Connections' base year rate applications are made at the business unit
level (San Luis Garbage, Mission Country Disposal, and South County Sanitary Service)with no
allocation of projected costs to individual Agencies served by those business units. Rather, the base year
rate adjustment applications use total costs and revenues for those business units to calculate rate
adjustments for the individual Agencies. For the purposes of our analysis, and as documented in
Attachment 1, R3 allocated projected expenses by agency in accordance with proportion of revenues—
this allocation approach is what the base year rate application achieve in practice, and the result is an
exact match to the rate adjustment calculations included in the base year rate applications for each
agency.
' Authorization of the January 1, 2025 rate adjustments are expected to occur after that date. Waste
Connections will prorate adjustment amounts on customer bills to account for the timing difference.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 10 of 19
Page 159 of 190
New Rate Adjustment Methodology and 2025 Rates
R3 thoroughly reviewed the figures included in the 2025 rate adjustment calculations, as well as
supporting documentation requested of Waste Connections during the review process and found that
Waste Connections' rate applications were accurate and in accordance with the 1994 Rate Manual. The
rate adjustments shown in Table 5 on the following page are the correct rate adjustments per the 1994
Rate Manual and are the default rate adjustments effective January 1, 2025, if the City and the
Participating Agencies do not move forward with revisions to the 2025 rates in accordance with the new
rate adjustment methodology.
Table 5: 2025 Rate Adjustments Per 1994 Rate Manual
gency January 1, 2025, Default
Rate Adjustment
City of San Luis Obispo 9.29%
City of Arroyo Grande 3.97%
Los Osos CSD 12.47%
City of Pismo Beach 3.97%
Cambria CSD 12.78%
City of Grover Beach 3.97%
Nipomo CSD 3.23%
Oceano CSD 3.97%
Cayucos SD 12.47%
Avila Beach CSD 3.97%
Revisions for New Rate Adjustment Methodology
In negotiating the terms and conditions of a new rate adjustment methodology starting in 2026, the City
and Waste Connections made the following revisions to the 2025 base year rate adjustments:
Updated Depreciation Lifespan for Trucks
The 1994 Rate Manual set a 7-year depreciation schedule for solid waste collection trucks. Modern solid
waste collection trucks have a 10-year lifespan, and the depreciation schedule was adjusted by Waste
Connections accordingly. Table 6, on the following page, shows the dollar magnitude of this change and
the effect on the 2025 rate adjustment, with the effect being a reduction in the rate adjustment calculation
ranging from 1.33% to 1.62%, depending on agency. Differences in effect by agency are the result of
business unit allocations described earlier in this report.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 11 of 19
Page 160 of 190
New Rate Adjustment Methodology and 2025 Rates
Table 6: Change in Depreciation Lifespan
y o oIV � w C
0 lir a) -c
2 Si au,N(13
N U U ZOO V V tik." Jill. "
J
Original
Depreciation $1,338,367 $376,989 $295,515 $131,502 $398,063 $316,350 $236,919 $225,376 $114,616 $26,441
Revised
Depreciation 1,125,720 317,545 248,918 110,766 336,460 267,393 200,254 190,498 96,879 22,349
Change in
Calculations (212,647) (59,444) (46,597) (20,735) (61,603) (48,957) (36,665) (34,878) (17,737) (4,092)
Effect on 1
Rate -1.47% -1.62% -1.62% -1.62% -1.33% -1.33% -1.33% -1.33% -1.33% -1.33%
Adjustment
Removed Limitation on Corporate Overhead
The 1994 Rate Manual placed a limitation on corporate overhead costs. Today, corporate overhead costs
fund legal, tax, payroll, human resources, engineering, compliance, IT, training and recruiting programs.
The City and Waste Connections agreed to remove the prior limitation in order to fund these services.
Table 7, below, shows the effect of removing the prior limitation on corporate overhead. Differences in
effect by agency are the result of different original proportionate amounts of corporate overhead between
Agencies. In the near-term, compensation to Waste Connections for corporate overhead will be limited by
the CPI adjustment noted above. Cost-based adjustments to corporate overhead are possible in 2030,
and will be subject to review,justification, and potential limitation at that time.
Table 7: Change in Corporate Overhead
o 0
y N l = Cl) Na)J O0cn >
UvL
V L U • QVj - Z •n0oVt
J
Original
Corporate $246,296 $46,213 $36,226 $16,120 $93,625 $74,406 $55,724 $53,009 $26,958 $6,219
Overhead
Revised
Corporate 430,378 80,753 63,301 28,168 163,600 130,017 97,371 92,627 47,106 10,867
Overhead
Change in 184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648
Calculations
Effect on Rate 1.28% 0.94% 0.94% 0.94% 1.51% 1.51% 1.51% 1.51% 1.51% 1.51%
Adjustment
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 12 of 19
Page 161 of 190
New Rate Adjustment Methodology and 2025 Rates
50% Cost Share for Regional Service Enhancements
Waste Connections is offering new service enhancement to the benefit of the City and the Agencies
including:
)) Collection of a bulky waste item twice annually from residential accounts at no cost, via clean-up
week or voucher program depending on existing program.
)) Once annual exchange of a residential solid waste, recycling, or organics cart per customer
account.
Waste Connections has estimated the annual cost of offering these service regionally and is proposing
recovery of 50% of the projected costs via the 2025 rate adjustment. The City and Waste Connections
have tentatively agreed to this cost sharing as part of the new agreement and for inclusion in the 2025
rates. Waste Connections is proposing the low income discount customer assistance program without a
change in rate adjustment.
Table 8, below, shows the effect of including the 50% cost sharing for these two service enhancements
into the 2025 rate adjustment. Cost allocations are by percentage of accounts by agency, which is the
reason for differences in the effect of rate adjustment by agency.
Table 8: 50% Cost Share for Service Enhancements
0 0
Vl �
0 C/) E R
o
CO m
New Annual $26,376 $9,889 $7,223 $3,623 $11,445 $7,566 $8,179 $7,987 $3,681 $320
Cart Exchange
Bulky Clean-up 21,091 7,908 5,776 2,897 9,152 6,050 6,540 6,386 2,944 256
Enhancements
Change in 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576
Calculations
Effect on Rate 0.33% 0.48% 0.45% 0.51% 0.45% 0.37% 0.54% 0.55% 0.50% 0.19%
Adjustment
Corrections to AB 939 Fees
Agency fees, which include AB 939 Fees and Franchise Fees, are included as estimates in rate
adjustment applications. Because the rate applications are at the company business unit level, and not at
the individual agency level, AB 939 fees in the application are allocated to the Agencies in proportion to
revenues. However, only the City of San Luis Obispo and Cayucos Sanitary District receive AB 939 Fees
—therefore this was corrected in the revised 2025 rate adjustments as shown in Table 9, on the following
page. Note that the values for the City of San Luis Obispo also include a correction to Franchise Fee
revenues.2
2 Specifically, to remove the 1994 Rate Manual's approach to"grossing up"the calculated rate adjustment to account
for the Franchise Fee by including the projected Franchise Fee payment amounts in the rate adjustment calculation
itself. This approach is also recommended for the other Agencies starting with the 2026 rate adjustment.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 13 of 19
Page 162 of 190
New Rate Adjustment Methodology and 2025 Rates
Table 9: Corrections to AB 939 Fees
J co N St t0) >>_ CinCU
� �
Cl) s CU V U m 0 i O N N Q V
•J
Original $362,140 $5,226 $4,097 $1,823 $- $- $- $- $- $-
Agency Fees
Revised 439,411 - - 12,754 - - - - - -
Agency Fees
Change in
77,2713
Calculations (5,226) (4,097) 10,931
Effect on Rate 0.54% -0.14% -0.14% 0.85% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
Adjustment
Updated Profit Allowance
The 1994 Rate Manual, along with the Agencies agreements with Waste Connections, limits allowable
profit based on an "operating ratio" of 92% or 93% of allowable collection expenses (not including post-
collection disposal, processing or recycling expenses nor agency fees) depending on the agency. A 93%
operating ratio is the equivalent of a 7.53% profit margin, and a 92% operating ratio is the equivalent of
an 8.7% profit margin.
A key negotiation point between the City and Waste Connections was a change to the profit allowance.
Ultimately, after much discussion and negotiation, the City and Waste Connections agreed that the 2025
rate adjustment will include a 9% profit allowance of projected allowable collection costs and in 2026 and
thereafter the profit allowance will be 10%. The updated profit allowance is in-keeping with industry
standards for solid waste services.
For context, the 2025 profit allowance is approximately 5% of revenues and we estimate that the 2026
profit allowance will be approximately 5.5% of revenues. Table 10, on the following page, shows the
effect of changing the profit allowance to 9% of collection costs for all Agencies for the 2025 rate
adjustments. Differences in the effect on rate adjustment are due to differences in existing profit
allowances by agency, as well as differences in the depreciation, corporate overhead and new service
enhancements shown in earlier tables.
3 Includes adjustment to Franchise Fee to remove "grossing up" method from City's 2025 rate adjustment
calculations.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 14 of 19
Page 163 of 190
New Rate Adjustment Methodology and 2025 Rates
Table 10: 9% Profit Allowance on Allowable Collection Costs
cn co
0uN .a � �J t >>_ > in
CU
m 2 i O QfU co VsC U N •
V n
J
Original Profit $641,302 $188,392 $170,609 $65,715 $227,094 $180,477 $135,161 $111,295 $65,388 $15,085
Allowance
Revised Profit 768,515 224,623 175,993 78,382 237,649 188,618 141,665 134,797 68,490 15,714
Allowance
Change in 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629
Calculations
Effect on Rate 0.88% 0.99% 0.19% 0.99% 0.23% 0.22% 0.24% 0.90% 0.23% 0.20%
Adjustment
Total Revisions for New Rate Adjustment Methodology
Taken altogether, the revisions to the 2025 rate adjustment result in small increases to the original 2025
rate adjustment calculations. These are shown in Table 11, on the following page, and are also shown in
Attachment 2.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 15 of 19
Page 164 of 190
New Rate Adjustment Methodology and 2025 Rates
Table 11: Overall Revisions to 2025 Rate Adjustments
- O O d O
J O yE ` g E u'
uco) ` oU Q Lo.. O OU
J
Original 2025
Revenue $15,640,734 $4,089,595 $3,228,699 $1,426,540 $4,786,646 $3,804,059 $2,848,911 $2,692,832 $1,378,241 $317,951
Calculation
Change in
Depreciation (212,647) (59,444) (46,597) (20,735) (61,603) (48,957) (36,665) (34,878) (17,737) (4,092)
Change in
Corporate 184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648
Overhead
Enhanced 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576
Services
Updated Profit 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629
Allowance
Corrections to
77,271 - - - - -
AB 939 Fees (5,226) (4,097) 10,931
Revised 2025
Revenue 15,864,119 4,113,493 3,223,463 1,447,971 4,826,170 3,832,470 2,875,118 2,735,447 1,390,379 319,712
Calculation
Revenues at 14,435,726 3,677,194 2,882,493 1,282,686 4,621,616 3,672,906 2,750,690 2,616,676 1,330,724 306,989
Current Rates
Shortfall (1,428,393) (436,299) (340,970) (165,285) (204,554) (159,564) (124,428) (118,771) (59,655) (12,724)
Revised 202
Rate !.89' 13.18% 12.59% 14.32% 4.92% 4.82% 5.04% 4.98%
Adjustment.'
Proportionality in Cost of Service
R3 analyzed the 2025 rate adjustments for adequacy with respect to the cost-of-service requirements of
Proposition 218. Because the base year rate adjustment methodology is based on the documented cost
of provided solid waste services as expressed in Waste Connections' audited financial statements, we
find that the current and proposed solid waste service rates will generate revenues sufficient to cover the
cost-of-providing service plus a reasonable profit allowance commensurate with normal expectations in
the solid waste industry.
R3 also analyzed the proposed solid waste service rates for adequacy with respect to proportionate
allocation of costs among solid waste service customers. R3 found that the current (and thus also
4 Rate adjustments shown include grossing up for franchise fees per 1994 Rate Manual methodology, except for San
Luis Obispo.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 16 of 19
Page 165 of 190
New Rate Adjustment Methodology and 2025 Rates
proposed) solid waste rate structure proportionately allocates costs to service types and container sizes
based on the relative differences in cost associated with the types of services provided to customers.
For example, for customers subscribing to 60-or 90-gallon cart solid waste service, the per-gallon cost-of-
service for those subscribed to the larger container size (90-gallons) is proportionately less than those
subscribed to the smaller container size (60-gallons). This is because solid waste service is comprised of
both fixed and variable costs, with the fixed cost portion being for the cost of collection (labor, fuel, capital
equipment, and other shared costs) as well as the costs related to post-collection disposal, processing,
recycling and composting. Thus, the cost-of-service for the larger container size (90-gallons) has a lesser
proportion of fixed costs to variable costs compared to the smaller(60-gallon) container size.
Factors Affecting 2025 Rate Adjustments
Overall, for the Agencies and the three Waste Connections business units, the 2025 rate adjustments
reflect an 8.12% increase in revenues to meet increased costs and revised profit allowances. The largest
contributors to the overall increase are:
)) Increases in organics processing costs —Third-party costs for the organic waste post-
collection processing facility operated by the company formerly named Hitachi Zosen (NOVA, and
which are not within Waste Connections' control, have doubled since 2022. The change in cost is
the result of changes in facility capital and operating costs.
)) Increases in landfill disposal costs— Related party costs for landfill waste disposal at Cold
Canyon have remained flat since 2016. The 2025 rate adjustment reflects a market adjustment to
these costs, from a per ton tipping fee of$41 per ton (in place since 2016)to a per ton tipping fee
of$70. Waste Connections provided market comparison demonstrating the applicability of the
$70 per ton market tipping fee.
Other factors play minor roles in the 2025 rate adjustment:
)) Collection costs including labor, vehicles, operating expenses and overhead—These costs
are increasing in proportion to the Consumer Price Index and are projected to increase by 3.20%
in 2024 and 4.21%for 2025.
)) Agency fees—These costs are mostly proportionate to changes in rates and are projected to
increase by 2.22% in 2024 and 3.30% in 2025.
Overall, collection services comprise the single largest component overall rate funded expenses, at 56%
of total rate revenues. Post-collection services are the next largest component of rate funding, at 29% of
total rate revenues. Agency fees comprise 10% of rate revenues and profit allowance comprises 5% of
rate revenues. This is demonstrated in Chart 5, on the following page.
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 17 of 19
Page 166 of 190
New Rate Adjustment Methodology and 2025 Rates
Chart 5: Summary Components of 2025 Rate Revenues
Profit
Allowance
Agency Fees 5%
10% 1
Collection
Post- Services
Collection;111*4 56%
Services
29%
New Rate Adjustment Methodology
The City and Waste Connections negotiated a new methodology for adjusting rates starting in 2026,
which are summarized below. R3 is preparing an exhibit to the City's new agreement with Waste
Connections that will further detail the terms and conditions of the new methodology in accordance with
the following points, which have been tentatively agreed to by the parties. The exhibit will be finalized and
ready for distribution to the Agencies on or around November 18, 2024. It is recommended that the
Agencies bring forward the exhibit as an amendment to their agreements with Waste Connections when
considering the 2025 rate adjustments, which is anticipated to occur in January 2025.
The features of the new methodology include:
)) CPI Adjustments: Starting in 2026, rate adjustments will be based on the Garbage and Trash
CPI, with a floor of 2% and a cap of 5%. Amounts under 2% or over 5% will carry forward. The
CPI adjustment will apply to Waste Connections' collection and post-collection cost centers. The
proposed CPI is the Consumer Price Index for all Urban Consumers for Garbage and Trash in the
United States, all City average. Details and prior results for this CPI are included in Attachment 3.
This is the same CPI used by Waste Connections in preparing its 2025 base year application.
)) Updated Profit Allowance: As stated previously, the 2025 rate adjustment includes a 9% profit
allowance of projected collection costs. The City and Waste Connections have tentatively agreed
that, in 2026 and thereafter, the profit allowance will be 10% of collection costs.
)) Revenue Balancing Mechanism: Starting in 2027, adjustments to rates will account for
shortfalls or surpluses in Waste Connections' actual revenues compared to projected revenues
from prior years. For example, if Waste Connections' 2025 revenues exceed projections, the
amount of surplus revenues will be credited to the rates in 2027 (and vice versa), achieving
fairness in compensation and rates for the company and for ratepayers. Such adjustments would
take place annually and will be independent of the CPI cap and floor noted above.
)) Less Frequent Cost-Based Adjustments: Currently, solid waste rates are adjusted based on
the 1994 Rate Manual every three years on Waste Connections' costs. Via the new methodology,
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 18 of 19
Page 167 of 190
New Rate Adjustment Methodology and 2025 Rates
cost-based adjustments would occur a maximum of every five years, and only if requested by
Waste Connections or the City. The first opportunity for a cost-based adjustment will be for the
2030 rate year. If neither Waste Connections nor the City request a cost-based adjustment, then
the CPI adjustment approach will be applied. Cost-based adjustments will be based on Waste
Connections' consolidated audited financial statements for the region. Timeframes for cost-based
adjustment application and review process will be ample, such that the City will have sufficient
time for review and approval processes and such that the potential for delay in implementation is
minimized.
)) Extraordinary Adjustments: The California Air Resources Board (CARB)Advanced Clean
Fleets (ACF) regulation is requiring all solid waste collection trucks to be zero emissions in 2042.
This includes a phased in plan to get the percentage of the fleet to be zero emission vehicle
(ZEV)with 10% by 2030, 25% by 2033, 50% by 2036,75% by 2039 and100% by 2042. During
CPI Adjustment years, Waste Connections may request extraordinary rate adjustments due to
changes in law affecting collection operations, including for compliance with CARB's ACF zero
emission mandate (which may necessitate change to depreciation schedules). The City may, but
is not obligated to, consider requests for extraordinary rate adjustments due to changes in law
affective post-collection operations. Requests for extraordinary change are subject to good faith
meet and confer negotiations between City and Waste Connections.
Example Calculations for 2026 through 2029
R3 has prepared example calculations of projected rate adjustments for 2026 through 2029 based on the
tentatively agreed to terms and conditions outlined above (including adjustment to 10% profit allowance
on collection services starting in 2026). Table 12, below, demonstrates this example for the City of San
Luis Obispo, and Attachment 4 provides examples for all Agencies. Note that the example in Table 12
and Attachment 4 includes the following assumptions:
)) CPI at the 5% cap (note that CPI below the 5% cap will result in lower rate adjustments)
)) Revenue reconciliation at 1% below annual rate revenue projections (note that amounts above
rate revenue projections will offset rate adjustments, not add to them).
)) Discontinuance of the prior Franchise Fee grossing method on rate adjustment for all Agencies
starting in 2026.
Table 12: Example Calculation of New Rate Methodology for the City of San Luis Obispo
2027 2028 2029
Collection Services $8,539,055 $8,966,008 $9,414,308 $9,885,024 $10,379,275
Profit Allowance 768,515 896,601 941,431 988,502 1,037,927
Post-Collection Services 4,602,096 4,832,201 5,073,811 5,327,501 5,593,876
Franchise Fee 1,586,412 1,675,695 1,777,106 1,866,072 1,959,572
AB 939 Fee 368,041 386,443 405,765 426,053 447,356
Revenue Reconciliation Example N/A N/A 158,641 167,569 177,711
Total Revenues 15,864,119 16,756,947 17,771,062 18,660,722 19,595,717
Indexed Rate Adjustment 5.63% 6.05% 5.01% 5.01%
City of San Luis Obispo I New Solid Waste Rate Adjustment Methodology and 2025 Rates 19 of 19
Page 168 of 190
Attachment 1: Summary of Waste Connections' Original 2025 Rate Application Calculations
San Luis Garbage
Mission Country Disposal(MCD) South County Sanitary Service(SCSS)
Company(SLG)
Category
San Luis Obispo Los Osos Cambria Cayucos Arroyo Grande Pismo Beach Grover Beach Nipomo Oceano Avila
Single Family Residential 5 5,282,964 $ 2,795,167 $ 2,201,010 $ 987,376 $ 2,379,516 $ 1,598,158 $ 1,580,148 $ 1,570,029 $ 684,117 $ 91,446
Mutt-Family Dumpsters 2,556,077 - - - - - - - - -
Current Revenues Non-Residential Carts 729,282 100,710 77,805 33,710 256,857 237,767 134,053 119,843 74,076 24,711
Non-Residential Dumpsters 5,846,777 776,244 599,701 259,830 1,979,781 1,832,640 1,033,238 923,712 570,958 190,469
Total Rate Revenue 14,415,100 3,672,121 2,878,516 1,280,916 4,616,154 3,668,565 2,747,439 2,613,584 1,329,151 306,626
Other Income(Allocafed) 20,626 5,073 3,977 1,770 5,462 4,341 3,251 3,092 1,573 363
Total Current Revenues 14,435,726 3,677,194 2,882,493 1,282,686 4,621,616 3,672,906 2,750,690 2,616,676 1,330,724 306,989
Labor 3,658,710 1,042,706 817,360 363,719 1,113,222 884,704 662,567 630,287 320,535 73,945
Depreciation 1,338,367 376,989 295,515 131,502 398,063 316,350 236,919 225,376 114,616 26,441
Insurance 1,124,499 316,418 248,035 110,374 329,978 262,241 196,396 186,828 95,012 21,919
Collection Services Other G&A 976,729 282,701 221,605 98,612 304,307 241,840 181,117 172,293 87,621 20,213
Fuel 754,387 321,408 251,946 112,114 254,951 202,616 151,742 144,349 73,409 16,935
Maintenance 421,166 116,487 91,312 40,633 117,432 93,326 69,893 66,488 33,813 7,800
Corporate Overhead 246,296 46,213 36,226 16,120 93,625 74,406 55,724 53,009 26,958 6,219
Total Collection Services 8,520,154 2,502,921 1,961,999 873,074 2,611,578 2,075,482 1,554,357 1,478,629 751,964 173,473
-
Garbage Landfilling 2,408,278 349,264 273,782 121,831 508,314 403,969 302,538 287,798 146,361 33,765
Post-Couection&Afffiliated Organics Processing 1,108,784 477,019 373,927 166,395 660,852 525,194 393,325 374,162 190,282 43,897
Party Services Recycle hies Processing 916,880 173,112 135,700 60,385 270,385 214,881 160,927 153,087 77,853 17,960
Affiliated Party Costs 168,154 57,121 44,776 19,925 46,128 36,659 27,455 26,117 13,282 3,064
Total Post-Collection&Affiliated Party Services 4,602,096 1,056,516 828,185 368,536 1,485,678 1,180,703 884,245 841,165 427,778 98,686
Franchise Fee 1,515,042 336,540 263,809 117,393 462,296 367,397 275,149 261,744 133,111 30,708
Pass-Through Services AB 939 Fee 362,140 5,226 4,097 1,823 - - - - - -
_ Total Pass-Through Services 1,877,182 341,766 267,905 119,216 462,296 367,397 275,149 261,744 133,111 30,708
Total Compensation for Services) 14,999,4321 3,901,203 3,058,090 1,360,8251 4,559,552 3,623,582 2,713,750 2,581,537 1,312,853 302,866
Allowed Operating Margin 641,302 188,392 170,609 65,715 227,094 180,477 135,161 111,295 65,388 15,085
Total Revenue Requirement 15,640,734 4,089,595 3,228,699 1,426,540 4,786,646 3,804,059 2,848,911 2,692,832 1,378,241 317,951
Surplus(Shortfall)! i (1,205,008)1 I (412,401) (346,206) (143,854)1 I (165,030) (131,153) (98,222) (76,155) (47,518) _ (10,962)
Calculated Adjustment to Rate Revenues 8.36% 11.22% 12.01^/, 11.22% 3.57% 3.57% 3.57% 2.91% 3.57% 3.57%
Grossing up for Franchise Fees 9.29% 12.47% 12.78% 12.47% 3.97% 3.97% 3.97% 3.23% 3.76% 3.97%
Page 169 of 190
Attachment 2: Summary of Revised 2025 Rate Application Calculations
San Luis Garbage Mission Country Disposal(MCD) South County Sanitary Service(SCSS)
Company(SLG)
Category
San Luis Obispo Los Osos Cambria Cayucos Arroyo Grande Pismo Beach Grover Beach Nipomo Oceano Avila
Single Family Residential S 5,282,964 $ 2,795,167 $ 2,201,010 $ 987,376 $ 2,379,516 $ 1,598,158 $ 1,580,148 $ 1,570,029 $ 684,117 $ 91,446
Multi-Family Dumpsters 2,556,077 - - - - - - - - -
Current Revenues Non-Residential Carts 729,282 100,710 77,805 33,710 256,857 237,767 134,053 119,843 74,076 24,711
Non-Residential Dumpsters 5,846,777 776,244 599,701 259,830 1,979,781 1,832,640 1,033,238 923,712 570,958 190,469
Total Rate Revenue 4 616 153 3 668 565 2747439 2 613 584 1 329 152 306626
Other Income(Allocated) �120626� 5,073 3,977 1,770 5,462 4,341 3,251 3,092 1,573 363
Total Current Revenues l:lL:TEI IrEgirlf= 7=1 4 621615 3 672,905 2 750,689 2 616,676 1 330,724 306,989
Labor 3,658,710 1,042,706 817,360 363,719 1,113,222 884,704 662,567 630,287 320,536 73,945
Depreciation 1,125,720 317,545 248,918 110,766 336,460 267,393 200,254 190,498 96,879 22,349
Insurance 1,124,499 316,418 248,035 110,374 329,978 262,241 196,396 186,828 95,012 21,919
Collection Services Other G&A 1,024,196 300,498 234,604 105,132 324,904 255,456 195,836 186,666 94,246 20,789
Fuel 754,387 321,408 251,946 112,114 254,951 202,616 151,742 144,349 73,409 16,935
Maintenance 421,167 116,487 91,312 40,633 117,431 93,326 69,893 66,488 33,813 7,800
Corporate Overhead 430,378 80,753 63,301 28,168 163,600 130,017 97,371 92,627 47,106 10,867
Total Collection Services !ETIMI 2,640,547 2,095,751 1,574,059 1,497,742 761,000 174,605
Garbage Landfilling 2,408,278 349,264 273,782 121,831 508,314 403,969 302,538 287,798 146,361 33,765
Organics Processing 1,108,784 477,019 373,927 166,395 660,852 525,194 393,325 374,162 190,282 43,897
Post-CollectionBA/llllated Recyclables Processing 916,880 173,112 135,700 60,385 270,385 214,881 160,927 153,087 77,853 17,960
Party Services
Affiliated Party Costs 168,154 57,121 44,776 19,925 46,128 36,659 27,455 26,117 13,282 3,064
Total Post-Collection&Affiliated Part Services !IMIltEgniln 1,485,678 1,180,703 884,245 841,164 427,779 98,686
Franchise Fee 1,586,412 336,540 263,809 117,393 462,296 367,397 275,149 261,744 133,111 30,708
Pass-Through Services AB 939 Fee 368,041 - - 12,754 - - - - - -
TotalPass-Throu:h Services 336,540 263,809 130,147 462,296 367,397 275,149 261,744 133,111 30,708
Total Compensation for Services 15,095,604 3,888,870 3,047,470 1,369,589 4,588,521 3,643,852 2,733,452 2,600,650 1,321,890 303,998
Allowed Operating Margin iZIMI
Total Revenue Requirement 15,864,119 4,113,493 3,223,463 1,447,971 4,826,170 3,832,470 2,875,117 2,735,447 1,390,380 319,712
Surplus(Shortfall) _ MEEEMIEM (204,5551 (159,564) (124,428) (118,771) IMIIIIM
Calculated Adjustment to Rate Revenues 9.89% 11.86% 11.83% 12.89^/, 4.43% 4.34% 4.52% 4.54% 4.48% 4.14%
Grossing up for Franchise Fees 13.18% 12.59% 14.32% 4.92% 4.82/ 5.02/ 5.04% 4.98% 4.60%
Profit Margin on Collection Services(2025) .21.12 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0%
Change to Original Rate Application 0.60% 0.71% -0.19% 1.85% 0.95% 0.85% 1.05% 1.81% 1.22% 0.63%
Page 170 of 190
Bureau of Labor Statistics
ATTACHMENT3
Consumer Price Index for All Urban Consumers(CPI-U)
Original Data Value
Series Id: CUUR0000SEHG02
Not Seasonally Adjusted
Series Title: Garbage and trash collection in U.S.city average,all
Area: U.S.city average
Item: Garbage and trash collection
Base Period: DECEMBER 1983=100
Years: 2014 to 2024
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HALF1 HALF2 Annual Change
2014 422.440 422.483 423.413 425.393 425.242 425.930 426.562 426.771 427.327 427.995 427.808 428.187
2015 427.734 429.248 429.235 429.807 431.234 430.813 431.229 432.967 433.843 434.829 436.428 436.996 1.46%
2016 437.205 438.296 437.699 437.676 438.317 437.858 438.607 439.358 439.707 440.311 443.343 444.745 1.71%
2017 446.266 447.699 446.987 447.129 447.272 448.046 448.328 448.717 449.008 452.196 453.820 453.596 2.20%
2018 453.354 454.915 455.230 458.722 462.887 465.041 465.579 470.457 471.026 472.535 486.650 485.935 458.358 475.364 3.96%
2019 475.687 477.474 478.569 479.449 480.865 480.984 482.138 483.987 484.346 486.133 486.485 486.708 478.838 484.966 3.22%
2020 491.003 494.429 495.288 494.432 494.946 496.679 498.564 500.882 501.756 503.315 504.970 508.190 494.463 502.946 3.49%
2021 512.722 517.270 518.505 518.579 516.440 517.202 521.185 524.408 529.934 530.114 529.053 532.538 516.786 527.872 4.74%
2022 533.078 538.313 540.719 542.564 544.546 547.554 548.187 548.706 558.254 561.090 563.816 565.185 541.129 557.540 5.17%
2023 570.412 575.697 576.773 580.124 587.431 589.812 596.167 597.347 596.997 597.569 601.631 602.164 580.042 598.646 7.28%
2024 606.773 610.551 610.015 611.073 609.538 611.946 614.089 615.880 609.983 3.71%
10-Year Average
3.69%
Source:Bureau of Labor Statistics Page 171 of 190 Generated on:October 8,2024(04:11:38 FM)
Attachment 4- Indexed Rate Adjustment Methodology Example Calculations
Example CPI5%
San Luis Obispo
2025 2025 2026 2027 2028 2029
Collection Services $ 8,539,055 $ 8,539,055 $ 8,966,008 $ 9,414,308 $ 9,885,024 $ 10,379,275
Profit Allowance 768,515 768,515 896,601 941,431 988,502 1,037,927
Post-Collection Services 4,602,096 4,602,096 4,832,201 5,073,811 5,327,501 5,593,876
Franchise Fee 1,586,412 1,586,412 1,675,695 1,777,106 1,866,072 1,959,572
AB 939 Fee 368,041 368,041 386,443 405,765 426,053 447,356
Revenue Reconciliation Example N/A N/A N/A 158,641 167,569 177,711
Total Revenues 15,864,119 15,864,119 16,756,947 17,771,062 18,660,722 19,595,717
Indexed Rate Adjustment 5.63% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (158,641) (167,569) (177,711) (186,607) (195,957)
Arroyo Grande
2025 2025 2026 2027 2028 2029
Collection Services $ 2,640,547 $ 2,640,547 $ 2,772,575 $ 2,911,203 $ 3,056,763 $ 3,209,602
Profit Allowance 237,649 237,649 277,257 291,120 305,676 320,960
Post-Collection Services 1,485,678 1,485,678 1,559,962 1,637,960 1,719,858 1,805,851
Franchise Fee 462,296 484,875 512,199 543,197 570,391 598,970
AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N' 48,487 51,220 54,320
Total Revenues 4,826,170 4,848,749 5,121,993 5,431,968 5,703,909 5,989,703
Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (48,487) (51,220) (54,320) (57,039) (59,897)
Los Osos CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 2,495,814 $ 2,495,814 $ 2,620,605 $ 2,751,635 $ 2,889,217 $ 3,033,677
Profit Allowance 224,623 224,623 262,060 275,163 288,922 303,368
Post-Collection Services 1,056,516 1,056,516 1,109,341 1,164,808 1,223,049 1,284,201
Franchise Fee 336,540 419,661 443,556 470,397 493,949 518,698
AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A 41,966 44,356 47,040
Total Revenues 4,113,493 4,196,613 4,435,563 4,703,970 4,939,492 5,186,984
Indexed Rate Adjustment 5.69% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (41,966) (44,356) (47,040) (49,395) (51,870)
Pismo Beach
2025 2025 2026 2027 2028 2029
Collection Services $ 2,095,751 $ 2,095,751 $ 2,200,539 $ 2,310,566 $ 2,426,094 $ 2,547,399
Profit Allowance 188,618 188,618 220,054 231,057 242,609 254,740
Post-Collection Services 1,180,703 1,180,703 1,239,738 1,301,725 1,366,811 1,435,152
Franchise Fee 367,397 385,008 406,703 431,316 452,909 475,602
AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 38,501 40,670 43,132
Total Revenues 3,832,470 3,850,080 4,067,035 4,313,165 4,529,095 4,756,025
Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (38,501) (40,670) (43,132) (45,291) (47,560)
Page 172 of 190
Cambria CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 1,955,476 $ 1,955,476 $ 2,053,250 $ 2,155,912 $ 2,263,708 $ 2,376,894
Profit Allowance 175,993 175,993 205,325 215,591 226,371 237,689
Post-Collection Services 828,185 828,185 869,595 913,074 958,728 1,006,664
Franchise Fee 263,809 188,914 199,670 211,664 222,261 233,395
AB 939 Fee - - - - - -
Revenue Reconciliation Example 1,486 33,278 35,277
Total Revenues 3,223,463 3,148,569 3,327,840 3,527,727 3,704,346 3,889,920
Indexed Rate Adjustment 5.69% 6.01% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (31,486) (33,278) (35,277) (37,043) (38,899)
Grover Beach
2025 2025 2026 2027 2028 2029
Collection Services $ 1,574,059 $ 1,574,059 $ 1,652,762 $ 1,735,400 $ 1,822,170 $ 1,913,278
Profit Allowance 141,665 141,665 165,276 173,540 182,217 191,328
Post-Collection Services 884,245 884,245 928,457 974,880 1,023,624 1,074,805
Franchise Fee 275,149 288,885 305,166 323,634 339,836 356,864
AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 28,889 30,517 32,363
Total Revenues 2,875,117 2,888,854 3,051,661 3,236,343 3,398,364 3,568,639
Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (28,889) (30,517) (32,363) (33,984) (35,686)
Nipomo CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 1,497,742 $ 1,497,742 $ 1,572,629 $ 1,651,261 $ 1,733,824 $ 1,820,515
Profit Allowance 134,797 134,797 157,263 165,126 173,382 182,051
Post-Collection Services 841,164 841,164 883,223 927,384 973,753 1,022,441
Franchise Fee 261,744 274,856 290,346 307,917 323,333 339,533
AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A 27,486 29,035 30,792
Total Revenues 2,735,447 2,748,559 2,903,461 3,079,173 3,233,326 3,395,332
Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (27,486) (29,035) (30,792) (32,333) (33,953)
Oceano CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 761,000 $ 761,000 $ 799,050 $ 839,002 $ 880,953 $ 925,000
Profit Allowance 68,490 68,490 79,905 83,900 88,095 92,500
Post-Collection Services 427,779 427,779 449,168 471,626 495,207 519,968
Franchise Fee 133,111 139,697 147,569 156,500 164,335 172,569
AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 13,970 14,757 15,650
Total Revenues 1,390,380 1,396,966 1,475,692 1,564,998 1,643,347 1,725,686
Indexed Rate Adjustment 5.64% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1° (13,970) (14,757) (15,650) (16,433) (17,257)
Page 173 of 190
Cayucos SD
2025 2025 2026 2027 2028 2029
Collection Services $ 870,906 $ 870,906 $ 914,452 $ 960,174 $ 1,008,183 $ 1,058,592
Profit Allowance 78,382 78,382 91,445 96,017 100,818 105,859
Post-Collection Services 368,536 368,536 386,962 406,311 426,626 447,957
Franchise Fee 117,393 147,842 156,250 165,705 174,002 182,720
AB 939 Fee 12,754 12,754 13,392 14,061 14,764 15,503
Revenue Reconciliation Example N/A N/A N/A 14,784 15,625 16,571
Total Revenues 1,447,971 1,478,420 1,562,501 1,657,053 1,740,019 1,827,202
Indexed Rate Adjustment 5.69% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (14,784) (15,625) (16,571) (17,400) (18,272)
Avila Beach CSD
2025 2025 2026 2027 2028 2029
Collection Services $ 174,605 $ 174,605 $ 183,335 $ 192,502 $ 202,127 $ 212,234
Profit Allowance 15,714 15,714 18,334 19,250 20,213 21,223
Post-Collection Services 98,686 98,686 103,620 108,801 114,241 119,953
Franchise Fee 30,708 32,112 33,921 35,974 37,775 39,667
AB 939 Fee - - - - - -
Revenue Reconciliation Example N/A N/A N/A 3,211 3,392 3,597
Total Revenues 319,712 321,117 339,210 359,738 377,748 396,675
Indexed Rate Adjustment 5.63% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1% (3,211) (3,392) (3,597) (3,777) (3,967)
Total
2025 2025 2026 2027 2028 2029
Collection Services $ 22,604,956 $ 22,604,956 $ 23,735,204 $ 24,921,964 $ 26,168,062 $ 27,476,465
Profit Allowance 2,034,446 2,034,446 2,373,520 2,492,196 2,616,806 2,747,647
Post-Collection Services 11,773,587 11,773,587 12,362,266 12,980,380 13,629,399 14,310,869
Franchise Fee 3,834,558 3,948,262 4,171,077 4,423,411 4,644,863 4,877,591
AB 939 Fee 380,795 380,795 399,835 419,826 440,818 462,859
Revenue Reconciliation Example N/A N/A N/A 407,420 430,419 456,452
Total Revenues 40,628,342 40,742,046 43,041,902 45,645,198 47,930,367 50,331,883
Indexed Rate Adjustment 5.65% 6.05% 5.01% 5.01%
Revenue Surplus(Shortfall)Example -1° (407,420) (430,419) (456,452) (479,304) (503,319)
Page 174 of 190
ATTACHMENT 3
Notice of Public Hearing Regarding
Proposed Solid Waste Rate Adjustment
Property Owners and Tenants - Customers:
This notice is intended to inform you that the City of Arroyo Grande (the "City") will hold a public hearing
regarding rate adjustments (the "Proposed Rate Adjustments") proposed by South County Sanitary Service
(the "Garbage Company") for properties and customers receiving solid waste, recycling, and green waste
services within the City. The Proposed Rate Adjustments will be considered by the Council at the date, time,
and location specified below. Consistent with the requirements of Proposition 218, this notice also provides
you with the following information:
• The Date, Time, and Place of the Public Hearing;
• The Reason for the Proposed Rate Adjustments;
• The Basis for the Proposed Rate Adjustments; and
• The Majority Protest Procedures.
NOTICE OF PUBLIC HEARING
The Public Hearing for the Proposed Rate Adjustment within the City limits will be held on:
Date: January 14, 2025 Time: 6:00 pm
Place: Arroyo Grande City Council Chambers, 215 East Branch St. Arroyo Grande, CA
At the Public Hearing, the City Council will consider all public comment in support of and in opposition to
the Proposed Rate Adjustments and whether or not a Majority Protest exists pursuant to the California
Constitution (as described below). If approved, the Proposed Rate Adjustment for 2025 would become
effective on January 14, 2025 with annual adjustments effective each January 1 of 2026, 2027, 2028 and
2029.
Reason For and Basis of the Proposed Rate Adjustments
Solid waste rates are calculated based on the type of customer, the size of the container serving the parcel,
the frequency of service, and the type(s) of service(s) provided to the parcel, all as provided in more detail on
the attached rate tables.
The Proposed Rate Adjustment for 2025 is based on the Garbage Company's documented cost of providing
solid waste services and is a 4.92% increase above current solid waste rates. This cost-based adjustment is
necessary for the Garbage Company to continue to provide safe, environmentally sound and reliable solid
waste removal, transportation and disposal services to the residents and businesses of the City. The Proposed
Rate Adjustments are required due to:
• Increases in organics processing costs — Third-party costs for the organic waste post-collection
processing facility operated by the company formerly named Hitachi Zosen (NOVA, and which
are not within the Garbage Company's control, have doubled since 2022. The change in cost is
the result of changes in facility capital and operating costs.
Page 175 of 190
• Increases in landfill disposal costs — Related third-party costs for landfill waste disposal at Cold
Canyon have remained flat since 2016. The Proposed Rate Adjustment reflects a market
adjustment to these costs, from a per ton tipping fee of $41 per ton (in place since 2016) to a
per ton tipping fee of $70. The Garbage Company provided market comparison demonstrating
the applicability of the $70 per ton market tipping fee.
• Collection costs including labor, vehicles, operating expenses and overhead — These costs are
increasing approximately 4.21% in 2025.
• Adjustments are also necessary for moving to a new billing methodology for annual rate
adjustments that provides for increased rate stability, predictability, fairness, transparency,
ease of administration, and cost-effectiveness. These include updated depreciation lifespans for
solid waste collection vehicles, Garbage Company corporate overhead costs, and updated
negotiated Garbage Company profit allowance based upon current industry standards.
• For residential service only - Addition of new services, including exchange of residential solid
waste collection carts once annually, and one bulky item collection during clean-up weeks.
The residential solid waste service Proposed Rate Adjustments for 2025 are shown in the table below.
Residential solid waste service is billed on a bi-monthly basis and the Proposed Rate Adjustments will be
effective January 14, 2025. Please see Exhibit A at the end of this notice for a full schedule of the Proposed
Rate Adjustments for 2025.
Garbage 2024 2025 Change in
Container Size Monthly Rate _
32-gallon $27.33 $28.67 $1.34 _
64-gallon $35.52 $37.27 $1.75 _
96-gallon $43.73 $45.88 $2.15
The non-residential solid waste service is billed on a monthly basis and the Proposed Rate Adjustments for
2025 are attached to this notice as Exhibit A.
In addition to the Proposed Rate Adjustments, the City will pass-through certain costs increases imposed by
the Garbage Company to the current effective rates annually. Commencing each January 1 of 2026, 2027,
2028 and 2029 solid waste rates will be adjusted based on the following:
• Annual change in the Bureau of Labor Statistics' Consumer Price Index (CPI) for Garbage and
Trash Collection in the U.S all city average, with a minimum 2% adjustment and a maximum 5%
adjustment. Amounts below the minimum or above the maximum will carry forward to the
following year.
• Calculation of negotiated profit allowance starting in 2026.
• Addition of a revenue balancing mechanism starting in 2027, wherein actual revenues from
solid waste rates over or under projections carry forward as additions to, or offsets against, the
annual CPI adjustment.
The Proposed Rate Adjustments have been independently reviewed for consistency with the City of San Luis
Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management dated June
1994 and in accordance with the provisions of the City's Franchise Agreement with the Garbage Company, as
amended, governing solid waste service within the boundaries of the City. The Proposed Rate Adjustments
implement a new methodology for annual rate adjustments which is described in the New Solid Waste Rate
Adjustment Methodology and 2025 Rates report authored by an independent rate consultant, R3 Consulting
Page 176 of 190
Group, Inc. The consultant's report and the complete set of proposed 2025 solid waste rates is available at the
City Clerk's office located at 300 East Branch St., Arroyo Grande, California, 93420.
How Do I Protest the Proposed Rate Adjustments?
Pursuant to Section 6 of Article XIII D of the California Constitution, the following persons may submit a
written protest against the Proposed Rate Adjustments to the City Clerk before the close of the Public Hearing
referenced above.
■ An owner(s) of property (parcel(s)) receiving solid waste, recycling, and green waste services within
the City limits. If the person(s) signing the protest, as an owner, is not shown on the last equalized
assessment roll as the owner of the parcel(s) then the protest must contain or be accompanied by
written evidence that such person signing the protest is the owner of the parcel(s) receiving
services;
or
■ A tenant(s) whose name appears on the Garbage Company's records as the customer of record for
the corresponding parcel receiving solid waste, recycling, and green waste services within the City
limits (tenant-customer).
A valid written protest must contain a statement that you protest the Proposed Rate Adjustments, the address
or Assessor's Parcel Number (APN) of the parcel or parcels which receive solid waste, recycling, and green
waste services, and include the printed name and signature by either the owner or the tenant-customer of the
parcel or parcels. Only one written protest per parcel shall be counted in calculating a majority protest to the
Proposed Rate Adjustments subject to the requirements of Section 6 of Article XIII D of the California
Constitution. Written protests will not be accepted by e-mail or by facsimile. Verbal protests will not be
counted in determining the existence of a majority protest. To be counted, a protest must be received in
writing by the City Clerk before the close of the Public Hearing referenced above.
Written protests regarding the solid waste Proposed Rate Adjustments may be mailed to:
City of Arroyo Grande
Attn: City Clerk
300 East Branch Street
Arroyo Grande, CA 93420
Written protests may also be personally delivered to the City Clerk located at 300 East Branch Street, Arroyo
Grande, California, 93420.
If valid written protests are presented by a majority of owners and/or tenants-customers of parcels receiving
solid waste, recycling, and green waste services within the City limits, then the City will not adjust the rates for
the services.
Page 177 of 190
EXHIBIT A
PROPOSED RATE ADJUSTMENTS EFFECTIVE JANUARY 14, 2025
RESIDENTIAL SERVICE:
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 14, 2025
CITY OF ARROYO GRANDE
Current Proposed
Proposed
Pickups Per Monthly Rate Monthly Rate
Service Description Week Effective Rate Effective
1/1/2024 Adjustment 1 1/14/2025
RESIDENTIAL SINGLE FAMILY DWELLING AND MULTI-UNIT(4 UNITS OR LESS):
32 Gallon Waste Wheeler 1 I $26.72 I 1.31 I $28.03
64 Gallon Waste Wheeler 1 $34.72 1.71 $36.43
96 Gallon Waste Wheeler 1 $42.75 2.10 $44.85
TWO-64 Gallon Waste Wheelers 1 $50.78 2.50 $53.28
ONE 64 & ONE 96 Gallon 1 $58.83 2.89 $61.72
TWO-96 Gallon Waste Wheelers 1 $66.83 3.29 $70.12
Residential customers must use the waste wheelers provided by the garbage company. This solid service fee
for residential trash collections (container with black or gray lid) includes once a week pick-up of one
greenwaste/organics container (green lid), and one recycling container(blue lid).
MISCELLANEOUS CHARGES -ALL CUSTOMERS:
Overstacked Garbage & extra bags
Minimum/unit each $7.57 0.37 $7.94
Overstacked Greenwaste & extra
bags Minimum/unit each $3.81 0.19 $4.00
Overstacked Blue Bin & extra bags
Minimum/unit each $4.25 0.21 $4.46
In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE RATES per month $37.78 1.86 $39.64
Monthly charge for additional 96-
gallon green waste service per month $10.44 0.51 $10.95
Extended Vacation Service per month $43.33 2.13 $45.46
Vacant Rate per month $43.33 2.13 $45.46
Waste wheeler cleaning each time $28.18 1.39 $29.57
Trip charge each time $45.40 2.23 $47.63
Non-payment downsize service each time $45.40 2.23 $47.63
Non-payment redeliver waste
wheeler each time $45.40 2.23 $47.63
Non-payment reconnect service each time $45.40 2.23 $47.63
Small item pickup (TV, toilet) each $44.30 2.18 $46.48
Appliance pickup-residential each $62.49 3.07 $65.56
Garbage extras on your scheduled
pickup day per yard $15.97 0.79 $16.76
Garbage extras -NOT ON YOUR
SCHEDULED PICKUP DAY per yard $42.91 2.11 $45.02
Page 178 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 14, 2025
CITY OF ARROYO GRANDE
Current Proposed
Proposed
Pickups Per Monthly Rate Monthly Rate
Service Description Week Effective Rate Effective
1/1/2024 Adjustment 1/14/2025
Re-deliver bin on stopped acct each time $54.15 2.66 $56.81
Stand by time per hour $68.60 3.38 $71.98
Tax Lien Cert. Mail Fee $4.17 0.21 I $4.38
City Clean Up $15.50 0.76 $16.26
Extra bin cleaning $84.52 4.16 $88.68
Damage/Destruction of bins or waste
wheelers by quote only
Larger than residential appliance or
glass, glass doors, or plate glass by quote only
Short Term Dumpsters:
Delivery& Pickup-Bin $54.19 2.67 $56.86
Delivery& Pickup-Waste Wheeler $18.90 0.93 $19.83
Rental Per Day $4.02 0.20 $4.22
Empties Per Yard $42.91 2.11 $45.02
Mattress:
Twin Each $24.59 1.21 $25.80
Double Each $24.59 1.21 $25.80
Queen Each $24.59 1.21 $25.80
King Each $24.59 1.21 $25.80
ADDITIONAL INFORMATION ALL CUSTOMERS:
1. Customers requesting Temporary Bins or Roll-off Box Service can call the office for current rates
2. Polystyrene(Styrofoam, Plastic#6)is not collected for recycling and should be thrown away as trash. Please bag
Styrofoam packing peanuts before placing in trash container.
3. It is encouraged to bag your trash in the garbage container but do not bag your recyclables or green waste in their
respective containers and keep it loose.
4. Recycling,Greenwaste/Organics and Garbage containers should spaced 3 feet apart away from any obstacles(i.e
mailboxes,cars, etc) before 6:00am on collection service day.
5. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees,which are
separately noted on the billings.
6. Late Fees are imposed for residential customers over 30 days delinquent.The fee is 1.5%per month of the
outstanding charge,with a minimum fee of$5.00. No prior notice is required, as this late fee policy is stated at the
bottom of every bill.
7. Customers can be responsible for fines for contamination.
Any additional recycling, including greenwaste/organic services are charged out at 50% of the garbage rate.
Page 179 of 190
NON-RESIDENTIAL SERVICE:
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
1/1/2024 1/1/2025
Mult Family
MULTI-FAMILY (5 or MORE)
Rates are the same as commercial dumpsters and Waste Wheelers rates (below).
COMMERCIAL DUMPSTERS -ALL AREAS:
1 yd dumpster 1 1 $131.99 6.49 $138.48
1 yd dumpster 1 2 I $192.57 9.47 $202.04
1 yd dumpster 1 3 I $253.20 12.46 $265.66
1 yd dumpster 4 $324.49 15.96 $340.45
1 yd dumpster 5 $381.50 18.77 $400.27
1 yd dumpster 6 $452.86 22.28 $475.14
1 yd dumpster 7 $550.43 27.08 $577.51
1.5 yd dumpster 1 $149.80 7.37 $157.17
1.5 yd dumpster 2 $231.79 11.40 $243.19
1.5 yd dumpster 3 $328.12 16.14 $344.26
1.5 yd dumpster 4 $427.90 21.05 $448.95
1.5 yd dumpster 5 $520.67 25.62 $546.29
1.5 yd dumpster 6 $588.41 28.95 $617.36
1.5 yd dumpster 7 $688.99 33.90 $722.89
2 yd dumpster 1 $167.65 8.25 $175.90
2 yd dumpster 2 $281.72 13.86 $295.58
2 yd dumpster 3 $399.42 19.65 $419.07
2 yd dumpster 4 $527.75 25.97 $553.72
2 yd dumpster 5 $652.58 32.11 $684.69
2 yd dumpster 6 $731.05 35.97 $767.02
2 yd dumpster 7 $849.99 41.82 $891.81
3 yd dumpster 1 $199.67 9.82 $209.49
3 yd dumpster 2 $377.99 18.60 $396.59
3 yd dumpster 3 $527.75 25.97 $553.72
3 yd dumpster 4 $688.18 33.86 $722.04
3 yd dumpster 5 $816.59 40.18 $856.77
3 yd dumpster 6 $973.50 47.90 $1,021.40
3 yd dumpster 7 $1,243.39 61.17 $1,304.56
4 yd dumpster 1 $249.64 12.28 $261.92
Page 180 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
1/1/2024 1/1/2025
4 yd dumpster 1 2 I $442.17 21.75 $463.92
4 yd dumpster 3 $634.73 31.23 $665.96
4 yd dumpster 4 $816.59 40.18 $856.77
4 yd dumpster 5 $1,009.17 49.65 $1,058.82
4 yd dumpster 6 $1,198.19 58.95 $1,257.14
4 yd dumpster 7 $1,525.91 75.07 $1,600.98
6 yd dumpster 1 $374.48 18.42 $392.90
6 yd dumpster 2 $663.29 32.63 $695.92
6 yd dumpster 3 $952.07 46.84 $998.91
6 yd dumpster 4 $1,224.93 60.27 $1,285.20
6 yd dumpster 5 $1,513.74 74.48 $1,588.22
6 yd dumpster 6 $1,797.30 88.43 $1,885.73
6 yd dumpster 7 $2,288.88 112.61 $2,401.49
8 yd dumpster 1 $499.27 24.56 $523.83
8 yd dumpster 2 $663.37 32.64 $696.01
8 yd dumpster 3 $1,269.43 62.46 $1,331.89
8 yd dumpster 4 $1,633.22 80.35 $1,713.57
8 yd dumpster 5 $2,018.36 99.30 $2,117.66
8 yd dumpster 6 $1,797.58 88.44 $1,886.02
8 yd dumpster 7 $2,289.25 112.63 $2,401.88
The rates shown above include the monthly container rental fee and a semi-annual dumpster cleaning.
COMMERCIAL GARBAGE CANS -ALL AREAS:
32 Gallon Waste Wheeler 1 1 $32.08 1.58 $33.66
32 Gallon Waste Wheeler 2 $67.75 3.33 $71.08
32 Gallon Waste Wheeler 3 $58.86 2.90 $61.76
32 Gallon Waste Wheeler 4 $74.87 3.68 $78.55
64 Gallon Waste Wheeler 1 $67.75 3.33 $71.08
64 Gallon Waste Wheeler 2 $90.03 4.43 $94.46
64 Gallon Waste Wheeler 7 $269.03 13.24 $282.27
96 Gallon Waste Wheeler 1 $78.48 3.86 $82.34
96 Gallon Waste Wheeler 2 $131.99 6.49 $138.48
96 Gallon Waste Wheeler 3 $166.18 8.18 $174.36
96 Gallon Waste Wheeler 4 $200.77 9.88 $210.65
96 Gallon Waste Wheeler 5 $226.05 11.12 $237.17
96 Gallon Waste Wheeler 7 $308.41 15.17 $323.58
Page 181 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
1/1/2024 1/1/2025
COMMERCIAL - OTHER CHARGES:
Rates for all commercial customers include recycling or greenwaste/organics pickup once per week, included with the
garbage service rate. Customers can choose from a 64 or 96 gallon blue commingled recycle waste wheeler or a 32
or 64 gallon organics waste wheeler included with the garbage service rate (96 gallon waste wheelers can only be
used with green waste due to weight). If you need a bin for recycling there is a charge (see below).
If you need more frequent recycling, including organics/greenwaste service, it can be provided at a 50%
discount from the garbage service rates for the specified level of service required.
MISCELLANEOUS CHARGES -ALL CUSTOMERS:
Overstacked Garbage & extra
bags Minimum/unit each $7.57 0.37 $7.94
Overstacked Greenwaste &
extra bags Minimum/unit each $3.81 0.19 $4.00
Overstacked Blue Bin & extra
bags Minimum/unit each $3.99 0.20 $4.19
Xtra Recycle 32, 64, or 96
waste wheelers per month $1.60 0.08 $1.68
In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE
RATES per month $18.90 0.93 $19.83
Monthly charge for additional
96-gallon green waste service per month $3.91 0.19 $4.10
Waste wheeler cleaning each time $28.18 1.39 $29.57
Trip charge each time $18.90 0.93 $19.83
Non-payment downsize
service each time $18.90 0.93 $19.83
Non-payment redeliver waste
wheeler each time $18.90 0.93 $19.83
Non-payment reconnect
service each time $45.40 2.23 $47.63
Small item pickup (TV, toilet) each $44.30 2.18 $46.48
Appliance pickup-residential each $62.49 3.07 $65.56
Lock Charge $10.52 0.52 $11.04
Garbage extras on your
scheduled pickup day per yard $15.97 0.79 $16.76
Garbage extras -NOT ON
YOUR SCHEDULED PICKUP
DAY per yard $42.91 2.11 $45.02
Commercial Waste Wheeler
rent per month $4.39 0.22 $4.61
Page 182 of 190
SOUTH COUNTY SANITARY SERVICE
RATE ADJUSTMENT EFFECTIVE JANUARY 1, 2025
CITY OF ARROYO GRANDE
Current Proposed
Service Description Pickups Per Week Monthly Rate Proposed Rate Monthly Rate
Effective Adjustment Effective
1/1/2024 1/1/2025
Re-deliver bin on stopped acct each time $54.15 2.66 $56.81
Large Compactor(>4 yards) per yard $17.41 0.86 $18.27
Small Compactors (4 yards & assume 3 to 1 3 times the garbage
below) compaction rate
Sunday Service (in additional
to garbage service level) per month $94.56 4.65 $99.21
Recycle bin rental per month $7.89 0.39 $8.28
Stand by time per hour $68.27 3.36 $71.63
Extra bin cleaning Each $84.52 4.16 $88.68
Larger than residential
appliance by quote only
Damage/Destruction of bins or
waste wheelers by quote only
Short Term Dumpsters:
Delivery& Pickup-Bin $54.19 2.67 $56.86
Delivery& Pickup-Waste
Wheeler $18.90 0.93 $19.83
Rental Per Day $4.02 0.20 $4.22
Empties Per Yard $42.91 2.11 $45.02
Mattress:
Twin Each $24.59 1.21 $25.80
Double Each $24.59 1.21 $25.80
Queen Each $24.59 1.21 $25.80
King Each $24.59 1.21 $25.80
ADDITIONAL INFORMATION ALL CUSTOMERS:
1. Customers requesting Temporary Bins or Roll-off Box Service can call the office for current rates
2. Polystyrene(Styrofoam, Plastic#6)is not collected for recycling and should be thrown away as trash. Please bag
Styrofoam packing peanuts before placing in trash container.
3. It is encouraged to bag your trash in the garbage container but do not bag your recyclables or green waste in their
respective containers and keep it loose.
4. Recycling,Greenwaste/Organics and Garbage containers should spaced 3 feet apart away from any obstacles(i.e
mailboxes,cars, etc) before 6:00am on collection service day.
5. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees,which are separately
noted on the billings.
6. Late Fees are imposed for residential customers over 30 days delinquent.The fee is 1.5%per month of the outstanding
charge,with a minimum fee of$5.00. No prior notice is required, as this late fee policy is stated at the bottom of every bill.
7. Customers can be responsible for fines for contamination.
Any additional recycling, including greenwaste/organic services are charged out at 50% of the garbage rate.
Page 183 of 190