CC 2024-11-12_11a South County Sanitary Rate AdjustmentItem 11.a.
MEMORANDUM
TO: City Council
FROM: Nicole Valentine, Director of Administrative Services
SUBJECT: Request from South County Sanitary Service for Integrated Solid
Waste Collection Rate Adjustment Effective January 14, 2025
DATE: November 12, 2024
RECOMMENDATION:
1) Review the Integrated Solid Waste Collection Rate Adjustment request;
2) Set a public hearing for January 14, 2025, to consider adjusting the waste collection
services rates to be effective January 14, 2025, and each January 1 from 2026 through
2029; and
3) Direct staff to prepare and distribute a Proposition 218 notice for a public hearing
scheduled for January 14, 2025, for the proposed waste collection services rate
adjustment.
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
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
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Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 2
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 Manua l 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
Year
Review
Type
Adjustment
%
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%
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
Page 138 of 174
Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 3
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 method ology
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 will be presented to the City
Council as an amendment to the agreement with SCSS in association with the January
14, 2025, 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%.
ANALYSIS OF ISSUES:
Review of 2025 Rate Adjustment Request
R3 completed a thorough review of SCSS’ 2025 cost-based rate adjustment application
and adjustments necessary for the new recommended rate adjustment methodology.
After careful review of the rate adjustment request, and the outcomes of negotiations of
a new rate adjustment methodology between the City of San Luis Obispo and Waste
Connections, R3 completed a report evaluating the 2025 rate adjustment request and the
new rate methodology (Attachment 1). R3’s review suggests that the original 3.97%
adjustment proposed to be effective January 2025, is justifiable in accordance with the
1994 Rate Manual and may be accepted by the City in the event that the Cit y does not
adopt the new rate adjustment methodology. R3’s report further recommends 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.
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, including the City of Arroyo Grande.
Page 139 of 174
Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 4
Pending City Council approval, the new methodology will replace the 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 including rate stability, predictability, fairness,
transparency, ease of administration, and cost -effectiveness. Additionally, the new
methodology can be applied on a regional scale and is available as recommended
alternative to the 1994 Rate Manual for all agencies, including the City of Arroyo Grande.
The key features of the new methodology include:
Capped CPI Adjustments: Starting in 2026, rate adjustments will be based on
the Consumer Price Index (“CPI”) for all urban consumers U.S. City Average for
all urban consumers U.S. City Average for Garbage and Trash Expenditure
Category as published by the U.S. Bureau of Labor S tatistics, with a floor of 2%
and a cap of 5%. Amounts 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. It should be noted that SCSS’s 2023 net income was such that, were a
revenue balancing mechanism in place at the time, surplus revenues would have
been carried forward to the 2025 rate year and would have offset the forthcoming
rate adjustment.
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, 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 dela y in implementation is
minimized.
Updated Depreciation Lifespan for Trucks: The 1994 Rate Manual set a 7-year
depreciation schedule for solid waste collection trucks. Modern solid waste
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Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 5
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%. For context, the 2025 profit allowance is approximately 5%
of revenues and R3 estimates that the 2026 profit allowance will be approximately
5.5% of revenues.
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 to the extent these costs are attributable to the actual costs of
providing solid waste services. The City and Waste Connections agreed to remove
the prior limitation in order to fund these services.
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 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
CARBS’s ACF electrification 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.
Regional Service Enhancements:
o 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. Funding for the low-
income assistance program shall be from SCSS’s other revenue sources
and not paid for through rate payer funds.
o Free Bulky Waste Collections: Collection of a bulky waste item twice
annually from residential accounts at no cost via bi-annual clean-up weeks.
o Annual Cart Exchange: Once annual exchange of a residential solid
waste, recycling, or organics cart per customer account.
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Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 6
Primary Factors Affecting Rate Adjustment
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 S enate 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 14, 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%
Recalculated Franchise Fee 0.09%
Revised Adjustment for New Methodology 4.92%
Franchise Agreement Termination Clause
The Franchise Agreement also contains language that provides that if the rate adjustment
request compared with the rate in effect at the date of the Franchise Agreement exceeds
the cumulative cost of living increase from that same date, the City has the option of
terminating the Franchise Agreement at any time within nine months following approval
of the requested rate adjustment. The “trigger” calculation does not limit the amount of
adjustment that SCSS can request; it simply incentivizes SCSS to keep its requested
adjustments below the cumulative increase in CPI to avoid the City opting to terminate
the Franchise Agreement.
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Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 7
At this time, staff recommends that the City not pursue the termination (“trigger”) option
set forth in Section 8.3 of the City’s Franchise Agreement with SCSS. Based on a detailed
review of costs as presented in Attachment 1, the costs are reasonable and rates have
been calculated in accordance with the 1994 Rate Manual and the recommended new
rate adjustment methodology. The following table shows that solid waste rates for Arroyo
Grande are among the lowest in the Central Coast area for single family residential
services.
Also, and as previously reported to the Council in 2022 , the requirements of SB 1383
have created significant new regulatory requirements, burdens, and costs for the City, its
solid waste partners such as the San Luis Obispo Integrated Waste Management
Authority (IWMA) and SCSS. SCSS is required by agreement to help the City meet certain
SB 1383 requirements, and termination of the Franchise Agreement with SCSS at this
time would create disruption in the City’s efforts to comply with State regulations.
Proposition 218 Process
Per the provisions of Proposition 218, all property owners receiving solid waste collection
services will receive written notice by mail at least 45 days prior to the date of a public
hearing where the City Council will consider approving solid waste rate adjustments. The
notice will include the amount of the fee, the reason for the increase, 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 rate adjustment. Most recently, the City
conducted Proposition 218 rate hearings for waste collection service rates in 2014, 2015,
2016, 2019 and 2022.
It is recommended that the City Council set the public hearing for January 14, 2025, and
direct staff to ensure that notices are provided to affected property owners of the proposed
rate adjustments stated in the following table in compliance with Proposition 218. 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
Service Description
Current
Monthly Rate
Effective
1/1/2024
Proposed
Rate
Adjustment
Proposed
Monthly Rate
Effective
1/14/2025
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
Page 143 of 174
Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 8
Next Steps
If staff’s recommendations are approved, next steps for the solid waste rate adjustment
will include:
November 30, 2024 – Deadline for mailing the 45-day public hearing notice in
compliance with Proposition 218.
January 14, 2025 – Conduct a public hearing to consider protests regarding the
proposed rate adjustments identified in the Proposition 218 hearing notice .
January 14, 2025 – If approved, new rates go into effect. The rate adjustment will
be prorated based upon a January 14 start date.
ALTERNATIVES:
The following alternatives are provided for the Council’s consideration:
1. Adopt staff’s recommendations to 1) Review the South County Sanitary Service
Integrated Solid Waste Collection Rate Adjustment request; 2) Set a public hearing
for January 14, 2025, to consider adjusting the Solid Waste Collection Rates for
by 4.92% effective on January 14, 2025, and via the new rate adjustment
methodology each January 1 from 2026 through 2029; and 3) Direct staff to prepare
and distribute a Proposition 218 notice for a public hearing to consider increases
to the solid waste rates;
2. Adopt staff’s recommendations to 1) Review the South County Sanitary Service
Integrated Solid Waste Collection Rate Adjustment request; 2) Set a public hearing
for January 14, 2025, to consider adjusting the Solid Waste Collection Rates by
3.97% effective on January 14, 2025, and via the 1994 Rate Manual on January 1,
2026 and January 1, 2027; and 3) Direct staff to prepare and distribute a
Proposition 218 notice for a public hearing to consider increases to the solid waste
rates; or
3. Provide other direction to staff.
ADVANTAGES:
Approval of the rate adjustment is consistent with the underlying conceptual approach in
the 1994 Rate Manual with appropriate revisions to effectuate the new rate adjustment
methodology. The new rate adjustment methodology provides advantages that are not
available under the 1994 Rate Manual, including:
Lengthening the time between cost-based rate adjustments, providing for greater
rate predictability and stability.
New service enhancements including the low income rate customer assistance
program, the free bulky waste collections during clean-up weeks, and free annual
cart exchanges.
Page 144 of 174
Item 11.a.
City Council
Request from South County Sanitary Service for Integrated Solid Waste Collection
Rate Adjustment Effective January 14, 2025
November 12, 2024
Page 9
DISADVANTAGES:
Solid waste customers will see slightly higher rate adjustments in 2025 via the new rate
methodology compared to the 1994 Rate Manual. However, rather than the next cost-
based rate adjustment occurring in 2028, the earliest cost -based adjustment via the new
rate adjustment methodology will be in 2030.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
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.
ATTACHMENTS:
1. R3 Report on 2025 Rate Adjustment and New Rate Methodology
Page 145 of 174
REPORT
City of San Luis Obispo and Participating Agencies
Submitted electronically on October 22, 2020
Submitted electronically: November 1, 2024
New Solid Waste Rate Adjustment
Methodology and 2025 Rates
ATTACHMENT 1
Page 146 of 174
1512 Eureka Road, Suite 220, Roseville, CA 95661 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com
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
Page 147 of 174
1512 Eureka Road, Suite 220, Roseville, CA 95661 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com
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 | Principal
R3 Consulting Group, Inc.
510.292.0853 | gschultz@r3cgi.com
Page 148 of 174
TABLE OF CONTENTS
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates TOC
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
Page 149 of 174
1. EXECUTIVE SUMMARY
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 1 of 19
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
Page 150 of 174
Executive Summary
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 2 of 19
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.
Page 151 of 174
Executive Summary
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 3 of 19
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%
Page 152 of 174
2.BACKGROUND
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 4 of 19
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.
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Background
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Table 2: 2015 – 2024 Rate Adjustments by Agency
Agency 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
City of San Luis
Obispo 0.00% 5.25% 1.00% 1.60% 13.70% 1.70% 0.70% 17.75% 9.10% 3.00%
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%
Oceano CSD 0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 21.03% 9.10% 3.00%
Cayucos SD 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
Business Unit 2018 2019 2020 2021 2022 2023 2024 2025
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%
Page 154 of 174
Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 6 of 19
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
Agency 20 Gallon 32 Gallon 64 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
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Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 7 of 19
Agency 20 Gallon 32 Gallon 64 Gallon 96 Gallon 2 Cubic
Yards
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
Chart 1, which is organized in ascending order of 32-gallon monthly rate, demonstrates that the rates for
32-gallon monthly service (the most subscribed residential service level) for all Participating Agencies
$0
$10
$20
$30
$40
$50
$60
Oceano CSDSan Luis ObispoPismo BeachGrover BeachArroyo GrandeNipomo CSDAvila Beach CSDSanta Barbara County…Cayucos SDSanta Barbara County…City of AtascaderoSan MiguelSanta Barbara County…City of Morro BaySolvangGoletaTempletonLos Osos CSDBuelltonCambria CSDKing CitySanta Barbara County…City of Paso RoblesSanta Barbara County…MRWMDCity of Santa BarbaraWM Area (Formerly Mid-…Santa Barbara County…Santa MariaPage 156 of 174
Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 8 of 19
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
Chart 3: Regional Comparison of Monthly 96-gallon Cart Rates
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
Oceano CSDSan Luis ObispoPismo BeachGrover BeachArroyo GrandeNipomo CSDAvila Beach CSDSanta Barbara County…Cayucos SDSanta Barbara County…City of AtascaderoSan MiguelSanta Barbara County…City of Morro BaySolvangGoletaTempletonLos Osos CSDBuelltonCambria CSDKing CitySanta Barbara County…City of Paso RoblesSanta Barbara County…MRWMDCity of Santa BarbaraWM Area (Formerly Mid-…Santa Barbara County…Santa Maria$0
$20
$40
$60
$80
$100
$120
$140
Oceano CSDSan Luis ObispoPismo BeachGrover BeachArroyo GrandeNipomo CSDAvila Beach CSDSanta Barbara County…Cayucos SDSanta Barbara County…City of AtascaderoSan MiguelSanta Barbara County…City of Morro BaySolvangGoletaTempletonLos Osos CSDBuelltonCambria CSDKing CitySanta Barbara County…City of Paso RoblesSanta Barbara County…MRWMDCity of Santa BarbaraWM Area (Formerly Mid-…Santa Barbara County…Santa MariaPage 157 of 174
Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 9 of 19
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
$0
$50
$100
$150
$200
$250
$300
$350
Oceano CSDSan Luis ObispoPismo BeachGrover BeachArroyo GrandeNipomo CSDAvila Beach CSDSanta Barbara County…Cayucos SDSanta Barbara County…City of AtascaderoSan MiguelSanta Barbara County…City of Morro BaySolvangGoletaTempletonLos Osos CSDBuelltonCambria CSDKing CitySanta Barbara County…City of Paso RoblesSanta Barbara County…MRWMDCity of Santa BarbaraWM Area (Formerly Mid-…Santa Barbara County…Santa MariaPage 158 of 174
3. NEW RATE ADJUSTMENT METHODOLOGY
AND 2025 RATES
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 10 of 19
2025 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.
1 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.
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New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 11 of 19
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
Agency 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.
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New Rate Adjustment Methodology and 2025 Rates
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Table 6: Change in Depreciation Lifespan
San Luis Obispo Los Osos CSD Cambria CSD Cayucos SD Arroyo Grande Pismo Beach Grover Beach Nipomo CSD Oceano CSD Avila CSD 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
Rate
Adjustment
-1.47% -1.62% -1.62% -1.62% -1.33% -1.33% -1.33% -1.33% -1.33% -1.33%
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
San Luis Obispo Los Osos CSD Cambria CSD Cayucos SD Arroyo Grande Pismo Beach Grover Beach Nipomo CSD Oceano CSD Avila CSD Original
Corporate
Overhead
$246,296 $46,213 $36,226 $16,120 $93,625 $74,406 $55,724 $53,009 $26,958 $6,219
Revised
Corporate
Overhead
430,378 80,753 63,301 28,168 163,600 130,017 97,371 92,627 47,106 10,867
Change in
Calculations 184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648
Effect on Rate
Adjustment 1.28% 0.94% 0.94% 0.94% 1.51% 1.51% 1.51% 1.51% 1.51% 1.51%
Page 161 of 174
New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 13 of 19
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
San Luis Obispo Los Osos CSD Cambria CSD Cayucos SD Arroyo Grande Pismo Beach Grover Beach Nipomo CSD Oceano CSD Avila CSD New Annual
Cart Exchange $26,376 $9,889 $7,223 $3,623 $11,445 $7,566 $8,179 $7,987 $3,681 $320
Bulky Clean-up
Enhancements 21,091 7,908 5,776 2,897 9,152 6,050 6,540 6,386 2,944 256
Change in
Calculations 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576
Effect on Rate
Adjustment 0.33% 0.48% 0.45% 0.51% 0.45% 0.37% 0.54% 0.55% 0.50% 0.19%
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.
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City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 14 of 19
Table 9: Corrections to AB 939 Fees
San Luis Obispo Los Osos CSD Cambria CSD Cayucos SD Arroyo Grande Pismo Beach Grover Beach Nipomo CSD Oceano CSD Avila CSD Original
Agency Fees $362,140 $5,226 $4,097 $1,823 $- $- $- $- $- $-
Revised
Agency Fees 439,411 - - 12,754 - - - - - -
Change in
Calculations 77,2713 (5,226) (4,097) 10,931 - - - - - -
Effect on Rate
Adjustment 0.54% -0.14% -0.14% 0.85% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
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.
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City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 15 of 19
Table 10: 9% Profit Allowance on Allowable Collection Costs
San Luis Obispo Los Osos CSD Cambria CSD Cayucos SD Arroyo Grande Pismo Beach Grover Beach Nipomo CSD Oceano CSD Avila CSD Original Profit
Allowance $641,302 $188,392 $170,609 $65,715 $227,094 $180,477 $135,161 $111,295 $65,388 $15,085
Revised Profit
Allowance 768,515 224,623 175,993 78,382 237,649 188,618 141,665 134,797 68,490 15,714
Change in
Calculations 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629
Effect on Rate
Adjustment 0.88% 0.99% 0.19% 0.99% 0.23% 0.22% 0.24% 0.90% 0.23% 0.20%
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.
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New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 16 of 19
Table 11: Overall Revisions to 2025 Rate Adjustments
San Luis Obispo Los Osos CSD Cambria CSD Cayucos SD Arroyo Grande Pismo Beach Grover Beach Nipomo CSD Oceano CSD Avila CSD Original 2025
Revenue
Calculation
$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
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
Overhead
184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648
Enhanced
Services 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576
Updated Profit
Allowance 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629
Corrections to
AB 939 Fees 77,271 (5,226) (4,097) 10,931 - - - - - -
Revised 2025
Revenue
Calculation
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
Revenues at
Current Rates 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
Shortfall (1,428,393) (436,299) (340,970) (165,285) (204,554) (159,564) (124,428) (118,771) (59,655) (12,724)
Revised 2025
Rate
Adjustment4
9.89% 13.18% 12.59% 14.32% 4.92% 4.82% 5.02% 5.04% 4.98% 4.60%
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.
Page 165 of 174
New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 17 of 19
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 INOVA, 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.
Page 166 of 174
New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 18 of 19
Chart 5: Summary Components of 2025 Rate Revenues
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,
Collection
Services
56%
Post-
Collection
Services
29%
Agency Fees
10%
Profit
Allowance
5%
Page 167 of 174
New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 19 of 19
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
2025 2026 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%
Page 168 of 174
San Luis Obispo Los Osos Cambria Cayucos Arroyo Grande Pismo Beach Grover Beach Nipomo Oceano Avila
Single Family Residential $ 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 - - - - - - - - -
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 (Allocated) 20,626 5,073 3,977 1,770 5,462 4,341 3,251 3,092 1,573 363
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
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
Organics Processing 1,108,784 477,019 373,927 166,395 660,852 525,194 393,325 374,162 190,282 43,897
Recyclables 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
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
14,999,432 3,901,203 3,058,090 1,360,825 4,559,552 3,623,582 2,713,750 2,581,537 1,312,853 302,866
641,302 188,392 170,609 65,715 227,094 180,477 135,161 111,295 65,388 15,085
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
(1,205,008) (412,401) (346,206) (143,854) (165,030) (131,153) (98,222) (76,155) (47,518) (10,962)
8.36%11.22%12.01%11.22%3.57%3.57%3.57%2.91%3.57%3.57%
9.29%12.47%12.78%12.47%3.97%3.97%3.97%3.23%3.76%3.97%Grossing up for Franchise Fees
Category
Calculated Adjustment to Rate Revenues
Attachment 1: Summary of Waste Connections' Original 2025 Rate Application Calculations
Total Compensation for Services
Allowed Operating Margin
Total Revenue Requirement
Surplus (Shortfall)
Collection Services
Post-Collection & Affiliated
Party Services
Pass-Through Services
San Luis Garbage
Company (SLG)Mission Country Disposal (MCD)South County Sanitary Service (SCSS)
Total Current Revenues
Current Revenues
Page 169 of 174
San Luis Obispo Los Osos Cambria Cayucos Arroyo Grande Pismo Beach Grover Beach Nipomo Oceano Avila
Single Family Residential $ 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 - - - - - - - - -
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 4,616,153 3,668,565 2,747,439 2,613,584 1,329,152 306,626
Other Income (Allocated) 20,626 5,073 3,977 1,770 5,462 4,341 3,251 3,092 1,573 363
14,435,726 3,677,194 2,882,493 1,282,686 4,621,615 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
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 8,539,055 2,495,814 1,955,476 870,906 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
Recyclables 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 1,180,703 884,245 841,164 427,779 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
AB 939 Fee 368,041 - - 12,754 - - - - - -
Total Pass-Through Services 1,954,453 336,540 263,809 130,147 462,296 367,397 275,149 261,744 133,111 30,708
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
768,515 224,623 175,993 78,382 237,649 188,618 141,665 134,797 68,490 15,714
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
(1,428,393) (436,299) (340,970) (165,285) (204,555) (159,564) (124,428) (118,771) (59,655) (12,724)
9.89%11.86%11.83%12.89%4.43%4.34%4.52%4.54%4.48%4.14%
13.18%12.59%14.32%4.92%4.82%5.02%5.04%4.98%4.60%
9.0%9.0%9.0%9.0%9.0%9.0%9.0%9.0%9.0%9.0%
10.0%10.0%6.0%10.0%10.0%10.0%10.0%10.0%10.0%10.0%
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%
Franchise Fee
Allowed Operating Margin
Total Revenue Requirement
Surplus (Shortfall)
Calculated Adjustment to Rate Revenues
Grossing up for Franchise Fees
Profit Margin on Collection Services (2025)
Total Compensation for Services
Attachment 2: Summary of Revised 2025 Rate Application Calculations
Category
San Luis Garbage
Company (SLG)Mission Country Disposal (MCD)South County Sanitary Service (SCSS)
Current Revenues
Total Current Revenues
Collection Services
Post-Collection & Affiliated
Party Services
Pass-Through Services
Page 170 of 174
Bureau of Labor Statistics
ATTACHMENT 3
Series Id:
Series Title:
Area:
Item:
Base Period:
Years:
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%
U.S. city average
Garbage and trash collection
DECEMBER 1983=100
2014 to 2024
Consumer Price Index for All Urban Consumers (CPI-U)
Original Data Value
CUUR0000SEHG02
Not Seasonally Adjusted
Garbage and trash collection in U.S. city average, all
b t ll dj t d
Source: Bureau of Labor Statistics Generated on: October 8, 2024 (04:11:38 PM)Page 171 of 174
5%5%5%5%
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)
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/A 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)
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 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)
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)
Example CPI
San Luis Obispo
Attachment 4 - Indexed Rate Adjustment Methodology Example Calculations
Arroyo Grande
Los Osos CSD
Pismo Beach
Page 172 of 174
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 N/A N/A N/A 31,486 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)
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)
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 N/A 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)
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)
Cambria CSD
Grover Beach
Nipomo CSD
Oceano CSD
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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)
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)
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)
Cayucos SD
Avila Beach CSD
Total
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