CC 2015-10-13_09a Solid Waste Rate IncreaseMEMORANDUM
TO: CITY COUNCIL
FROM: DEBBIE MALICOAT, DIRECTOR OF ADMINISTRATIVE SERVICES
SUBJECT: CONSIDERATION OF REQUEST FROM SOUTH COUNTY SANITARY
SERVICE FOR INTEGRATED SOLID WAS.TE COLLECTION RATE
INCREASE
DATE: OCTOBER 13, 2015
RECOMMENDATION:
It is recommended the City Council adopt the attached resolution establishing integrated
solid waste collection service rates for January 1, 2016, 2017 and 2018.
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 increase and a minor increase to the
City's cost for solid waste collection. If the proposed multi-year rate setting approach is
approved, future personnel resources will not be required to prepare Interim Year
reviews, thus providing an operational efficiency.
BACKGROUND:
The City has had a Franchise Agreement with South County Sanitary Service (SCSS), a
subsidiary of Waste Connections, for collection, diversion and disposal of solid waste
since 1997. The Franchise Agreement was most recently amended on June 10, 2008,
which extended the franchise for a 15-year period.
Per the Franchise Agreement, rate review is established in accordance with the "City of
San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid
Waste Management Rates" (Manual). The Fr~nchise Agreement allows for a base rate
adjustment every three years and interim rate increases in the other two years. In
interim rate periods, the operator is limited to increases resulting from inflation, tipping
fee adjustments, and franchise or regulatory fee increases. During base rate years, the
operator is able to request adjustments due to changes in other operational costs as set
forth in the Manual. Recently, SCSS was able to enter into a 20 year agreement for
tipping fees at the Cold Canyon Landfill. Because of this, interim rate adjustment factors
are all known, with the exception of inflation.
The City received a base year rate increase request of 3.25% from SCSS on July 30,
2015. In addition, SCSS proposes to include the next two interim rate adjustments in
their request at this time, with the maximum increase based on any increase in the
Consumer Price Index (CPI) for both operational costs and regulatory fees, and an
Item 9.a. - Page 1
CITY COUNCIL ,
INTEGRATED SOLID WASTE RATE INCREASE
OCTOBER 13, 2015
PAGE2
increase of 0.79% (for January 2017) and 0.77% (for January 2018) due to tipping fees.
If the 2017 and 2018 proposed rate increase approach is adopted, subsequent interim
year reviews for 2017 and 2018 will not be required.
The Franchise Agreement also contains language that provides that if the rate increase
reque~t 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 increase. The "trigger" calculation does not limit the
amount of increase that SCSS can request, it simply incentivizes them to keep their
requested increases below the cumulative increase in CPI if they wish to avoid the City
opting to terminate the Franchise Agreement. As discussed more fully _in the attached
report, SCSS has calculated the maximum allowable increase that avoids the potential
"trigger" of this option as 3.25%. The City's consultant disagrees with their calculation,
based on SCSS excluding certain increases. There is some disagreement about
whether these costs should be excluded from the calculation or not. Therefore, if the
·proposed rate increase of 3.25% is approved, it is recommended that the City Council
make findings that they will not pursue the "trigger" option.
ANALYSIS OF ISSUES: .
The City again jointly contracted with c'onsultant Bill Statler to prepare a review of the
rate increase request to determine if it complies with the provisions of the City of San
Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste
Management Rates. Mr. Statler has expertise on rate adjustments since he was
responsible for development of the Manual when he served as the Director of Finance
for the City of San Luis Obispo and has provided similar services to the City of Arroyo
Grande in the past. A copy of the review is attached and Mr. Statler will present the
findings at the City Council meeting.
The review was contracted for jointly with the City of Pismo Beach, City of Grover
Beach and Oceano Community Services District. Each agency is scheduled to consider
the rate increase during October 2015.
The proposed change in monthly rates for residential accounts is as follows:
. 32 gallon container:
64 gallon container:
96 gallon container:
Current rate -$16.30
Current rate -$21.17
Current rate -$26.07
Organics Diversion Program
New rate -_$16.82
New rate -$21.86
New rate -$26.92
Approximately one third of the rate increase (1.1 % of the 3.25%) is due to the
implementation of an Organics Diversion Program as mandated by California AB 1826,
which requires local jurisdictions across the state to develop a recycling program to
divert organic waste from landfills to an authorized composting_ facility. Organic waste
Item 9.a. - Page 2
CITY COUNCIL
INTEGRATED SOLID WASTE RATE INCREASE
OCTOBER 13, 2015 -
PAGE3
means food waste, green waste, landscape and· pruning waste, nonhazardous wood
waste, and food-soiled paper waste that is mixed in with food waste.
With the closure of the green waste composting facility at Cold Canyon Landfill in late
2010, green waste has either been used as alternative daily cover at the Cold Canyon
Landfill or transported to Engle and Gray in Santa Maria for composting. Since 2010
there have been several new developments related to the management of organics.
• In 2011 AB 341 was enacted which raised the statewide diversion goal to 75%.
• In 2014 1 AB 1826 and AB 1594 were enacted. AB 1826 established a mandatory
organics management program which will require businesses to recycle all
organics, including food waste. This requirement phases in with the first deadline
being April 2016 for businesses that generate 8 cubic yards or more per week of
organics. AB 1594 eliminates the diversion credit for using green waste as
alternative daily cover at the landfill
• CalRecycle and the State Water Resources Control Board both issued new
compost regulations in August 2015.
• Governor Brown on April 29, 2015 set the goal of reducing greenhouse gas to
40% below 1990 levels by 2030.
• The Air Resources Board in a concept paper issued on May 7, 2015 set an initial
goal of diverting 75 percent of organics from landfills by 2020 and diverting 90
percent of organics from landfills by 2025, with the resulting need of 100 new or
expanded composting facilities.
The 2014 diversion rate was 67%; to meet a 75% goal by' 2020 an additional 60,000
tons of waste must be diverted from landfills. In addition, the green waste currently
being used as alternative daily cover will not be considered diversion in 2020. Given
the need to increase diversion from the landfill and the AB 1826 mandate for
commercial organics diversion, a comprehensive long term organics management plan
is needed. ,
At the May 13, 2015 San Luis.Obispo County Integrated Waste Management Authority
Board 'Meeting, Waste Connections unveifed their plan for the long term management of
all organic waste, including food waste. The plan would incorporate the entire Waste
Connections service area from San Simeon to Nipomo and cover a 21 year period
beginning in January 2016 through the end of 2037. The plan has two phases as
described below.
Interim Phase (January 2016 to mid-2017). Beginning in January 2016, SCSS would
expand the existing residential green waste collection program to include food waste.
Each home would be provided with a small kitchen pail to collect food waste. The food
waste in the pail would then be dumped into the existing green waste collection waste
wheeler. At the same time, SCSS would start the organics collection program to
Item 9.a. - Page 3
CITY COUNCIL .
INTEGRATED SOLID WASTE RATE INCREASE
OCTOBER 13, 2015
PAGE4
commercial customers. First priority would be to start with businesses that are required
to divert org_anics by April 2016.
The organic waste collected from residential and commercial customers would be taken
to Cold Canyon Landfill and transferred into large semi-tractor trailers (transfer trucks).
The transfer trucks would then take the organics to the Engle and Gray composting
facility in Santa Maria. This composting facility is permitted to compost both yard waste
and food waste.
·Permanent Phase (mid-2017 to end of 2037). Based on a request for proposals,
Waste Connections selected HZI to provide a Kompogas Anaerobic Digestion Plant.
HZI is a world-wide leader in ,the production of energy from waste. The group has
annual revenues of $3 billion, 8,000 employees and 80 years of experience.
The first Kompogas Anaerobic Digestion Plant was built in 1991 in Switzerland and is
still in operation. Currently there are 75 plants operating throughout the wo_rld.
Ana~robic digestion is different than composting in that the process of decomposition
occurs in an oxygen free environment. Unlike composting, this process produces
energy in the form of biogas and minimizes the need for water. In addition, all activities
are inside a vessel and/or building, thus minimizing odors, storm water runoff and litter.
The Kompogas Facility would be located at Waste Connection's existing yard on Old
Santa Fe Road in San Luis Obispo. This industrial site is ideally located in that it is in
the center of the service area, is the location where Waste Connection's trucks start and
end each day and_ has an existing building that can be used for the organics receiving
area.
Waste Connections would enter into a long-term agreement with HZI, where HZI will
build a Kqmpog~s plant at the company's yard using an existing building and Waste
Connections would agree to· deliver organics to the plant through 2037. In return, HZI
would design, finance, build, own and operate a Kompogas plant through 2037 for a
negotiated fee, subject to" cost of living increases and adjustments for the sale price of
electricity and/or compost/compost tea and other uncontrollable costs.
Public Hearing Required
In compli.ance with Proposition 218, notices of the proposed rate increase were mailed
to record property owners (~nd tenants responsible for the account) more than 45 days
prior to the public hearing. If, at the conclusion of the public hearing, written protests
against tt:ie proposed rate increase are received from a majority, the City Council may
not adopt the proposed rates. There are currently 6207 accounts. Therefore, 3, 104
would represent a majority. At the time the report was prepared, there were 3 valid
protest letters received. ·
The City Council consistently places a high priority on ensuring that increases in rates,
fees and taxes levied on the City's residents are minimized as much as possible. While
Item 9.a. - Page 4
CITY COUNCIL
INTEGRATED SOLID WASTE RATE INCREASE
OCTOBER 13, 2015
PAGES
the Manual provides limited" discretion to the Council when reviewing individual rate
increases, it is important to emphasize the efforts by Council to institute rate increase
protections into the process and Franchise Agreement. The Manual was designed to
ensure that the operator can only be reimbursed for appropriate and reasonable costs
through. their rates. Additionally, a clause was added to the Franchise Agreement that
provides the City with the ability to terminate the Franchise Agreement if rate increases
exceed the cumulative increase in the consumer price index up to that date. These
provisions allow the Council to effectively and appropriately protect residents from
undue rate increases.
ALTERNATIVES:
The following alternatives are provided for City Council consideration:
1. Adopt a Resolution approving the proposed rates;
2. Do not approve an increase if justification cannot be found in the rate review;
3,. Do not approve an increase if a majority of protests are received; or
4. Proviqe direction to staff:
ADVANTAGES:
Approval of the rate increase is consistent with the terms of the existing rate setting
methodology. Quality of service provided by SCSS has been good. Therefore, the
recommended action will enable continuation of uninterrupted refuse collection and
recycling services at a reasonable fee level.
DISADVANTAGES:
While staff believes the fee increase request is reasonable and complies with the terms
of the existing rate setting methodology, any increase in fees results in a negative
financial impact to the City and its residents.
ENVIRONMENTAL REVIEW:
No environmental review is required for this item.
PUBLIC NOTIFICATION AND' COMMENTS:
South County Sanitary Service was required to mail notices to all customers and
property owners at least 45 days prior to the public hearing per Proposition 218 and
related implementation regulations. A copy of the Proposition 218 notice is attached.
The Agenda was posted in front of City Hall on Thursday, October 8, 2015. The
Agenda and report were posted on the City's website on Friday, October 9, 2015.
ATTACHMENTS:
1. Solid Waste Rate Review
2. Proposition 218 Public Notice (residential)
3. Proposition 218 Public Notice (commercial)
Item 9.a. - Page 5
RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE,CITY OF
ARROYO GRANDE ESTABLISHING INTE~RATED SOLID
WASTE COLLECTION SERVICE RATES
FOR JANUARY 1, 2016, 2017 AND 2018
WHEREAS, the City of Arroyo Grande establishes rates and charges for solid waste,
recycling and green waste collection services, pursuant to Public Resources Code
Section 40059 (a) and AGMC §§ 8.32.100 and 8.32.210.
WHEREAS, South County Sanitary Service, Inc. .t1as submitted a rate increase
application (the "application") in accordance with the City's franchise agreement for solid
waste, recycling, green waste and organic waste collection services; and
WHEREAS, the application has been comprehensively reviewed in accordance with the
City's rate-setting policies; and
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 October 13, 2015 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.
NOW, THEREFORE, BE IT 'RESOLVED by the City Council of the City of Arroyo
Grande as follows:
1. 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, 2016.
2. Solid waste rates shall' increase as follows on January 1, '20'f7 and January 1,
2018:
a. Increase, if any, in the Consumer Price Index (CPI) for Bureau of
Labor Statistics' Consumer Price Index for Urban Consumers based on
the All U.S. City Average, Bureau of Labor Statistics for the month of June
2016 for January 1, 2017 and June 2017 for January 1, 2018.
b. Increase of 0.79% for 2017 and 0.77% for 2018 for increase in the
cost of landfill disposal.
Item 9.a. - Page 6
RESOLUTION NO.
PAGE2
3. Due to the reasonableness of the rate increase, the City will not pursue the
termination option set forth in Section 8.3 of the City's franchise agreement
with South County Sanitary Service.
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 13th day of October, 2015.
Item 9.a. - Page 7
RESOLUTION NO.
PAGE3
JIM HILL, MAYOR
ATTEST:
KITTY NORTON, DEPUTY CITY CLERK
APPROVED AS TO CONTENT:
DIANNE THOMPSON, CITY MANAGER
APPROVED AS TO FORM:
HEATHER WHITHAM, CITY ATTORNEY
Item 9.a. - Page 8
Exhibit A
SOUTH COUNTY SANITARY SERVICE
RATE INCREASE EFFECTIVE JANUARY 1, 2016
CITY OF ARROYO GRANDE
Service Description
Pickups Per
Week
Current
Monthly Rate
Effective
6-1-2014
Proposed
Rate
Adjustment %
Proposed
Monthly Rate
Effective
1/01/2016
RESIDENTIAL:
32 Gallon Waste Wheeler 1 $16.30 3.25% $16.82
64 Gallon Waste Wheeler 1 $21.17 3.25% $21.86
96 Gallon Waste Wheeler 1 $26.07 3.25% $26.92
TWO-64 Gallon Waste Wheelers 1 $30.96 3.25% $31.97
ONE 64 & ONE 96 Gallon 1 $35.87 3.25% $37.04
TWO-96 Gallon Waste Wheelers 1 $40.76 3.25% $42.08
Residential customers must use the waste wheelers provided by the garbage company.
MISCELLANEOUS CHARGES - ALL CUSTOMERS:
Overstacked Garbage & extra bags
Minimum/unit each $4.61 3.25% $4.76
Overstacked Greenwaste & extra
bags Minimum/unit each $2.31 138% $5.50
Overstacked Blue Bin & extra bags
Minimum/unit each $1.30 3.25% $1.34
In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE RATES per month $11.52 3.25% $11.89
Monthly charge for additional 96-
gallon green waste service per month $1.60 245% $5.50
Extended Vacation Service per month $13.22 3.25% $13.65
Vacant Rate per month $13.22 3.25% $13.65
Waste wheeler cleaning each time $17.18 3.25% $17.74
Trip charge each time $11.52 3.25% $11.89
Non-payment downsize service each time $11.52 3.25% $11.89
Non-payment redeliver waste
wheeler each time $11.52 3.25% $11.89
Non-payment reconnect service each time $27.69 3.25% $28.59
Small item pickup (TV, toilet) each $27.02 3.25% $27.90
Appliance pickup-residential each $38.10 3.25% $39.34
Garbage extras on your scheduled
pickup day per yard $9.73 3.25% $10.05
Garbage extras -NOT ON YOUR
SCHEDULED PICKUP DAY per yard $26.84 3.25% $27.71
Re-deliver bin on stopped acct each time $33.05 3.25% $34.12
Recycle bin rental per month $6.41 3.25% $6.62
Stand by time per hour $56.40 3.25% $58.23
Item 9.a. - Page 9
Exhibit A
Service Description
Pickups Per
Week
Current
Monthly Rate
Effective
6-1-2014
Proposed
Rate
Adjustment %
Proposed
Monthly Rate
Effective
1/01/2016
Tax Lien Cert. Mail Fee $3.87 3.25% $4.00
City Clean Up $10.00 0.00% $10.00
Extra bin cleaning $51.54 3.25% $53.22
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 $33.05 3.25% $34.12
Delivery & Pickup-Waste Wheeler $11.52 3.25% $11.89
Rental Per Day $2.44 3.25% $2.52
Empties Per Yard $26.84 3.25% $27.71
Mattress:
Twin Each $15.00 3.25% $15.49
Double Each $15.00 3.25% $15.49
Queen Each $15.00 3.25% $15.49
King Each $15.00 3.25% $15.49
ADDITIONAL INFORMATION ALL CUSTOMERS:
Late Fees are imposed for residential customers over 30 days delinquent and commercial 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.
Any additional recycling services are charged out at 50% of the garbage rate.
Service Description Pickups Per Week
Current Monthly
Rate Effective
6-1-2014
Proposed Rate
Adjustment %
Proposed
Monthly
Rate
Effective
1/01/2016
APARTMENTS, TRIPLEX, DUPLEX
Rates are the same as commercial rates (below).
COMMERCIAL DUMPSTERS - ALL AREAS:
1 yd dumpster 1 $80.49 3.25% $83.11
1 yd dumpster 2 $117.43 3.25% $121.25
1 yd dumpster 3 $154.41 3.25% $159.43
1 yd dumpster 4 $197.90 3.25% $204.33
Item 9.a. - Page 10
Exhibit A
Service Description Pickups Per Week
Current Monthly
Rate Effective
6-1-2014
Proposed Rate
Adjustment %
Proposed
Monthly
Rate
Effective
1/01/2016
1 yd dumpster 5 $232.66 3.25% $240.22
1 yd dumpster 6 $276.16 3.25% $285.14
1 yd dumpster 7 $335.66 3.25% $346.57
1.5 yd dumpster 1 $91.36 3.25% $94.33
1.5 yd dumpster 2 $141.36 3.25% $145.95
1.5 yd dumpster 3 $200.09 3.25% $206.59
1.5 yd dumpster 4 $260.96 3.25% $269.44
1.5 yd dumpster 5 $317.51 3.25% $327.83
1.5 yd dumpster 6 $358.83 3.25% $370.49
1.5 yd dumpster 7 $420.16 3.25% $433.82
2 yd dumpster 1 $102.23 3.25% $105.55
2 yd dumpster 2 $171.80 3.25% $177.38
2 yd dumpster 3 $243.58 3.25% $251.50
2 yd dumpster 4 $321.84 3.25% $332.30
2 yd dumpster 5 $397.96 3.25% $410.89
2 yd dumpster 6 $445.81 3.25% $460.30
2 yd dumpster 7 $518.34 3.25% $535.19
3 yd dumpster 1 $121.76 3.25% $125.72
3 yd dumpster 2 $230.51 3.25% $238.00
3 yd dumpster 3 $321.84 3.25% $332.30
3 yd dumpster 4 $419.69 3.25% $433.33
3 yd dumpster 5 $497.99 3.25% $514.17
3 yd dumpster 6 $593.67 3.25% $612.96
3 yd dumpster 7 $758.26 3.25% $782.90
4 yd dumpster 1 $152.24 3.25% $157.19
4 yd dumpster 2 $269.65 3.25% $278.41
4 yd dumpster 3 $387.07 3.25% $399.65
4 yd dumpster 4 $497.99 3.25% $514.17
4 yd dumpster 5 $615.42 3.25% $635.42
4 yd dumpster 6 $730.69 3.25% $754.44
4 yd dumpster 7 $930.54 3.25% $960.78
Item 9.a. - Page 11
Exhibit A
Service Description Pickups Per Week
Current Monthly
Rate Effective
6-1-2014
Proposed Rate
Adjustment %
Proposed
Monthly
Rate
Effective
1/01/2016
6 yd dumpster 1 $228.36 3.25% $235.78
6 yd dumpster 2 $404.48 3.25% $417.63
6 yd dumpster 3 $580.60 3.25% $599.47
6 yd dumpster 4 $747.00 3.25% $771.28
6 yd dumpster 5 $923.13 3.25% $953.13
6 yd dumpster 6 $1,096.04 3.25% $1,131.66
6 yd dumpster 7 $1,395.82 3.25% $1,441.18
8 yd dumpster 1 $304.47 3.25% $314.37
8 yd dumpster 2 $539.30 3.25% $556.83
8 yd dumpster 3 $774.13 3.25% $799.29
8 yd dumpster 4 $995.99 3.25% $1,028.36
8 yd dumpster 5 $1,230.85 3.25% $1,270.85
8 yd dumpster 6 $1,461.38 3.25% $1,508.87
8 yd dumpster 7 $1,861.10 3.25% $1,921.59
The rates shown above include the monthly container rental fee and a semi-annual dumpster cleaning.
The rates are the same for bins and garwoods, when volume is identical. Bins and garwoods are types of
containers used for recycling.
COMMERCIAL GARBAGE CANS - ALL AREAS:
1 Can * 1 $19.56 3.25% $20.20
1 Can * 2 $40.12 3.25% $41.42
1 Can * 5 $94.02 3.25% $97.08
1 Can * 7 $130.90 3.25% $135.15
2 Cans * 1 $41.32 3.25% $42.66
2 Cans * 2 $54.90 3.25% $56.68
2 Cans * 7 $164.06 3.25% $169.39
3 Cans * 1 $47.85 3.25% $49.41
3 Cans * 2 $80.49 3.25% $83.11
3 Cans * 3 $101.34 3.25% $104.63
3 Cans * 4 $122.43 3.25% $126.41
3 Cans * 5 $137.87 3.25% $142.35
3 Cans * 7 $188.08 3.25% $194.19
4 Cans * 1 $60.87 3.25% $62.85
4 Cans * 7 $234.61 3.25% $242.23
* Maximum volume and weight per garbage can : 33 gallons / 80 pounds
Item 9.a. - Page 12
Exhibit A
Service Description Pickups Per Week
Current Monthly
Rate Effective
6-1-2014
Proposed Rate
Adjustment %
Proposed
Monthly
Rate
Effective
1/01/2016
MISCELLANEOUS CHARGES - ALL CUSTOMERS:
Overstacked Garbage &
extra bags Minimum/unit each $4.61 3.25% $4.76
Overstacked Greenwaste
& extra bags
Minimum/unit each $2.31 138% $5.50
Overstacked Blue Bin &
extra bags Minimum/unit each $2.43 3.25% $2.51
Xtra Recycle 32, 64, or
96 waste wheelers per month $1.30 3.25% $1.34
In yard service (per can
or commodity) IN
ADDITION TO
STANDARD GARBAGE
RATES per month $11.52 3.25% $11.89
Monthly charge for
additional 96-gallon green
waste service per month $3.19 72% $5.50
Extended Vacation
Service per month $13.22 3.25% $13.65
Vacant Rate per month $13.22 3.25% $13.65
Waste wheeler cleaning each time $17.18 3.25% $17.74
Trip charge each time $11.52 3.25% $11.89
Non-payment downsize
service each time $11.52 3.25% $11.89
Non-payment redeliver
waste wheeler each time $11.52 3.25% $11.89
Non-payment reconnect
service each time $27.69 3.25% $28.59
Small item pickup (TV,
toilet) each $27.02 3.25% $27.90
Appliance pickup-
residential each $38.10 3.25% $39.34
Lock Charges $6.41 3.25% $6.62
Garbage extras on your
scheduled pickup day per yard $9.73 3.25% $10.05
Garbage extras -NOT ON
YOUR SCHEDULED
PICKUP DAY per yard $26.84 3.25% $27.71
Commercial Waste
Wheeler rent per month $3.56 3.25% $3.68
Re-deliver bin on stopped
acct each time $33.05 3.25% $34.12
COMPACTORS (PER
TON) $42.00 5% $44.25
Item 9.a. - Page 13
Exhibit A
Service Description Pickups Per Week
Current Monthly
Rate Effective
6-1-2014
Proposed Rate
Adjustment %
Proposed
Monthly
Rate
Effective
1/01/2016
Sunday Service (in
additional to garbage
service level) per month $57.67 3.25% $59.54
Recycle bin rental per month $6.41 3.25% $6.62
Stand by time per hour $56.40 3.25% $58.23
Extra bin cleaning $51.54 3.25% $53.22
Larger than residential
appliance or glass, glass
doors, or plate glass by quote only
Damage/Destruction of
bins or waste wheelers by quote only
Short Term Dumpsters:
Delivery & Pickup-Bin $33.05 3.25% $34.12
Delivery & Pickup-
Waste Wheeler $11.52 3.25% $11.89
Rental Per Day $2.44 3.25% $2.52
Empties Per Yard $26.84 3.25% $27.71
Mattress:
Twin Each $15.00 3.25% $15.49
Double Each $15.00 3.25% $15.49
Queen Each $15.00 3.25% $15.49
King Each $15.00 3.25% $15.49
ADDITIONAL INFORMATION ALL CUSTOMERS:
Late Fees are imposed for residential customers over 30 days delinquent and commercial 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.
Any additional recycling services are charged out at 50% of the garbage rate.
Item 9.a. - Page 14
South County Sanitary Service
SOLID WASTE RATE REVIEW
For the Communities of
Arroyo Grande
Grover Beach
Oceano
Pismo Beach
September 2015
ATTACHMENT 1
Item 9.a. - Page 15
South County Sanitary Service
Solid Waste Rate Review
September 2015
TABLE OF CONTENTS
Report Purpose 1
Overview of Findings 1
Key Issues for 2016 Rate Review 2
Rate Recommendations 3
Cost of Living “Trigger” Option 4
Rate Summary for Single Family Residential Customers 5
Background 5
Organic Waste Diversion 6
Franchise Agreement Summary 6
Rate Review Workscope 7
Revenue and Rate-Setting Objectives 7
Cost Accounting Issues 8
Financial Overview 10
Costs by Type 10
Revenues by Source 10
Service Accounts by Type 11
Rate-Setting Process 11
Base Year Review 11
Two Interim Year Reviews 11
Rate-Setting History 11
Rate-Setting Methodology 12
Are the Costs Reasonable? 12
Detailed Cost Review 13
Trends in External Cost Drivers 14
Rates in Comparable Communities 14
What Is a Reasonable Return on These Costs? 15
Preparing the Rate Request Application 16
Rate Request Summary 16
Implementation 17
Cost of Living Tigger Option 17
Coordination with Other Agencies 20
Summary 20
APPENDIX
Base Year Rate Request Application from South County Sanitary Service
Item 9.a. - Page 16
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South County Sanitary Service
SOLID WASTE RATE REVIEW
For the Communities of Arroyo Grande, Grover Beach,
Oceano and Pismo Beach
REPORT PURPOSE
On July 30, 2015, South County Sanitary Service (SCSS) submitted a Base Year rate
increase application to be effective January 1, 2016 to the Cities of Arroyo Grande,
Grover Beach and Pismo Beach and the Oceano
Community Services District.
The purpose of this report is to review this request
in accordance with adopted Franchise Agreement
provisions regarding rate increase applications and
to make to make rate recommendations to these
four agencies as appropriate.
Unique Approach for 2017 and 2018. While
generally consistent with the adopted rate-setting
methodology, SCSS is requesting three-year rate
approval in one action. The impact of
implementing this approach, which means that
Interim Year rate reviews by the governing bodies
would no longer be needed, is evaluated as part of
this Base Year rate review.
OVERVIEW OF FINDINGS
SCSS has fully provided the supporting documentation required for rate requests
under the Franchise Agreements in Arroyo Grande, Oceano, Pismo Beach and Grover
Beach. As discussed below, the comprehensive application has been correctly
prepared with one very minor classification error, which does not affect the requested
rate increase of 3.25% in January 2016. The rate increase application is provided in
the Appendix.
124 Cerro Romauldo Avenue
San Luis Obispo, CA 93405
805.544.5838 Cell: 805.459.6326
bstatler@pacbell.net
www.bstatler.com
William C. Statler
Fiscal Policy Financial Planning Analysis Training Organizational Review
. . . . . . . . .
Joint Agency Review
SCSS provides similar
services to each of these
agencies under formally
approved franchise
agreements that regulate rates
and establish procedures for
considering rate increases.
Because the financial
information for SCSS is
closely related for these four
agencies, this report jointly
reviews rate requests and
provides recommendations for
each of them.
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SCSS provides a broad level of high-quality services to these four agencies—including
garbage, recycling and green waste collection and disposal as well as hauler-provided “waste
wheeler” containers for all three services—at very competitive rates compared with many
other communities. In fact, even with the proposed rate increase, rates in these four agencies
will be among the lowest of those surveyed. In short, South County communities have the
best of both worlds: high quality services at) a low cost (compared with other communities).
SCSS has done a good job of managing costs and revenues, especially in light of cost
pressures in key areas such labor, insurance, fuel, tipping fees and new organic waste
diversion requirements.
As discussed in greater detail below, this report includes three separate, independent evaluations
of the SCSS rate increase application:
Proposed rate increase of 3.25% for January 2016 compared with the approved rate-
setting methodology. The requested 3.25% rate increase is slightly below the allowed rate
increase of 3.67%. Accordingly, it is recommended that the four agencies approve the
requested rate increase of 3.25%.
Multi-year rate program proposed for 2017 and 2018. While slightly different from the
Interim Year rate review methodology, the proposed approach yields very similar results. In
the interest of a more straightforward, streamlined process that is consistent with the Interim
Year rate-setting concepts set forth in the Franchise Agreements (as well as in the Proposition
218 notice provided to SCSS customers), it is recommended that the four agencies approve
the proposed rate increase approach for 2017 and 2018.
Calculation of the cost of living threshold that would “trigger” the option of terminating
the Franchise Agreements within nine months after rate approval. I have reached a
different conclusion from SCSS on the “trigger” amount. Under their calculations, the 3.25%
requested rate increase is under the “trigger” amount. However, based on my calculations, a
rate increase greater than 1.5% would trigger the termination option. Given the
reasonableness of the proposed rate increase, I recommend that the four agencies approve the
requested rate increase and make findings that they will not pursue the “trigger” option.
Key Issues for the 2016 Rate Review. As outlined above, along with evaluating the requested
rate increase for 2016 in accordance with the methodology set forth in the Franchise
Agreements, there are two additional issues that complicate this rate review.
SCSS has requested three-year rate approval
in one action. This approach is generally
consistent with the Interim Year rate review
process in the Franchise Agreements; and
SCSS’s proposed methodology for doing so
was appropriately included in the Proposition
218” rate notices. However, as discussed
below, there are methodological concerns
with the 2017 and 2018 proposed rate
increase approach for these two years.
About Proposition 218 Notices
Proposition 218 notices set the
maximum amount that rates can be
increased at the public hearing: rates
can be approved at lesser amounts
without re-noticing. However,
agencies cannot adopt higher rates –
even if they only apply to a few
customers – without another 45-day
re-noticing.
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As further discussed below, the proposed rate increase for January 1, 2016 is within the
allowable amount under the rate methodology set forth in the Franchise Agreements.
However, there are methodological concerns with how SCSS calculated the “trigger” option.
That said, regardless of how these two issues are resolved, they do not directly affect SCSS’s
requested rate increase for January 1, 2016 of 3.25%.
Rate Recommendations
January 1, 2016
It is recommended that the governing bodies of each agency adopt SCSS’s requested Base Year
rate increase for 2016, which reflects a 3.25% across-the-board rate increase for all four
agencies.
As discussed in greater detail below, this is slightly less than the amount that would otherwise be
allowed under the adopted rate-setting methodology (by 0.42%: an increase of 3.67% would be
allowed). This is due to SCSS’s goal of remaining under the cost of living “trigger” option
discussed below, under which the four agencies have the option of terminating the agreement at
any time within nine months following approval of the requested rate increase if it exceeds the
cumulative increase in the consumer price index from June 2009. However, in making the
“trigger” calculation, SCSS excluded increases in tipping fees of 0.96% in 2014 and the
projected increase in tipping fees in 2016 of 0.81%.
In reviewing the Franchise Agreements and the rate increase analysis prepared in 2013 (for rate
increases to be effective in 2014), these adjustments should probably not be made in calculating
the “trigger” amount. The impact of this is discussed below. However, it is important to note
that this “trigger” calculation does not limit the allowable rate increase that SCCS may request
under the methodology set forth in the Franchise Agreements.
January 1, 2017 and January 1, 2018
SCSS has proposed the following methodology for rate increases in January 2017 and January
2018:
Increase, if any, in the Consumer Price Index for Bureau of Labor Statistics’ Consumer Price
Index for Urban Consumers (CPI-U) based on the All U.S. City Average, Bureau of Labor
Statistics for the month of June 2016 for January 1, 2017 and June 2017 for January 1, 2018.
Increase of 0.79% for 2017 and 0.77% for 2018 for increases in the cost of landfill disposal.
As discussed below, the Franchise Agreements provide for Interim Year adjustments (years 2
and 3 after the Base Year review) using a methodology similar to that proposed by SCSS but
there are differences that would most likely result in a very minor difference (perhaps lower,
depending on the circumstances) from the Franchise Agreement methodology.
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The Interim Year methodology in the Franchise Agreements provides for three key adjustment
factors: changes in the CPI-U for “controllable” operating costs; changes in “pass-through costs”
(primarily tipping fees), which SCSS does not control (they are set by the County Board of
Supervisors); and an adjustment to cover increased franchise fees. The first two adjustment
factors are “weighted” by the proportionate share that these costs represent of total costs
(excluding franchise fees). For example, in the current Base Year analysis for 2016 rates,
controllable costs account for 84% of total costs, with tipping fees accounting for 16%.
Based on the Interim Year
methodology, Table 1 provides an
example of the allowable rate
increase for January 2017 if the
CPI-U increased from June 2015
to June 2016 by 2%.
In this example, the tipping fee
adjustment is the same as that
proposed by SCSS; but the
overall increase is slightly less
than the one that would result
from SCSS’s proposed approach:
Interim Year Methodology: 2.75%
SCSS Proposed Methodology: 2.79%
The impact on rates would be very minor: 0.04%. The difference in the monthly rate for the
average South County single family residential (SFR) customer with either 32 or 64-gallon
container service is one-cent.
In summary, while SCSS’s proposed approach for years 2 and 3 is slightly different than the one
set forth in the Franchise Agreements, the end result is likely to be very minor. Accordingly, in
the interest of a more straightforward, streamlined process that is consistent with the Interim
Year rate-setting concepts set forth in the Franchise Agreements (as well as the Proposition 218
notice provided to SCSS customers), it is recommended that the four agencies approve the
proposed rate increase approach for 2017 and 2018. If a multi-year approach is adopted,
subsequent Interim Year reviews for 2017 and 2018 will not be required.
That said, unless modified by the governing bodies, both the Interim Year and proposed
methodologies would trigger the termination option in this example, since they would both
exceed the remaining CPI-U threshold of 2.0%. For that reason, if the governing bodies approve
the 2017 and 2018 rate-setting approach, it is recommended that they make findings that they
will not pursue the “trigger” option.
Cost of Living “Trigger” Option
Along with establishing the rate review methodology, Section 8.3 of the Franchise Agreements
provides that if the rate increase request compared with the rate in effect at the date of the
Table 1. Interim Year Sample
Controllable Cost Factors
CPI-U Increase 2.00%
Percent of Total Costs 84.00%
Allowable Adjustment 1.68%
Tipping Fees
Tipping Cost Increase 4.95%
Percent of Total Costs 16.00%
Allowable Adjustment 0.79%
Total Before Franchise Fee Adjustment (10%)2.47%
Total Allowed Increase 2.75%
Item 9.a. - Page 20
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agreement exceeds the cumulative cost of living increase from that same date, each agency has
the option of terminating the agreement at any time within nine months following approval of the
requested rate increase (assuming it was submitted in accordance with the rate-setting
methodology).
It is important to note that this provision does not directly limit rate increase requests by SCSS to
an amount that may be less than that allowed under the rate-setting methodology. However,
subjecting the Franchise Agreement to possible termination if the rate request is greater than the
cost of living threshold provides a strong incentive for SCSS to do so.
As discussed below, based on SCSS’s calculation of the cost of living increase threshold, the
maximum rate increase to avoid triggering the potential for termination is 3.25%. This is its
requested rate, which is slightly less than the allowable rate increase of 3.67% under the rate-
setting methodology set forth in the Franchise Agreements.
However, as noted above, this is based on their excluding from the threshold increases in tipping
fees of 0.96% in 2014 and the proposed increase for tipping fees in 2016 of 0.81%. In reviewing
the Franchise Agreements and the rate increase analysis prepared in 2013 (for rate increases to
be effective in 2014), these adjustments should probably not be made in calculating the “trigger”
amount. Accordingly, if these are not excluded, the rate increase to avoid triggering the
termination option would be limited to 1.5%. However, it is important to note that this “trigger”
calculation does not limit the allowable rate increase that SCCS may request under the
methodology set forth in the Franchise Agreements. Accordingly, if the proposed rate increase
of 3.25% is approved, it is recommended that the four agencies make findings that they will not
pursue the “trigger” option.
Rate Summary for Single Family Residential Customers
Table 2 summarizes the current and
proposed rates for SFR customers. As
reflected in this summary, the increases
will be very modest. For example, for
collection of a 32-gallon garbage
container (the most common SFR
service level) as well as separate waste
wheelers for recycling and green waste,
the proposed monthly rate will increase
by 48 cents on average for the four
agencies.
BACKGROUND
On July 30, 2015, SCSS submitted a
Base Year rate increase to be effective
January 1, 2016. Its rate request was
prepared in accordance with the rate
review process and methodology
Table 2. Single Family Residential Rates
326496
Proposed
Arroyo Grande$16.83$21.86$26.92
Grover Beach15.25 20.62 25.96
Oceano 13.64 19.62 38.39
Pismo Beach14.97 29.94 44.91
Current
Arroyo Grande16.30 21.17 26.07
Grover Beach14.77 19.97 25.14
Oceano 13.21 19.00 37.18
Pismo Beach14.50 29.00 43.50
Increase
Arroyo Grande0.53 0.69 0.85
Grover Beach0.48 0.65 0.82
Oceano 0.43 0.62 1.21
Pismo Beach0.47 0.94 1.41
Container Size (Gallons)
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formally set forth in its Franchise Agreements with Arroyo Grande, Grover Beach, Oceano and
Pismo Beach.
In establishing a rate-setting process and methodology, each of these Franchise Agreements
specifically reference the City of San Luis Obispo’s Rate Setting Process and Methodology
Manual for Integrated Solid Waste Management Rates. This comprehensive approach to rate
reviews was adopted by San Luis Obispo in 1994, and establishes detailed procedures for
requesting rate increases and the required supporting documentation to do so. It also sets cost
accounting standards and allowable operating profit ratios.
As noted above, the financial information for Arroyo Grande, Grover Beach, Oceano and Pismo
Beach is closely related. For this reason, these four agencies jointly contracted with William C.
Statler (who has extensive experience in evaluating rate requests in accordance with the adopted
methodology) in August 2015 to evaluate SCSS’s rate increase application.
This is the fifth Base Year analysis performed under this rate-setting methodology. The first was
prepared in September 2001; second in August 2004; the third in August 2007; and the last one
in December 2012. As discussed below, several Interim Year rate reviews have prepared since
then, most recently in 2013 (for rates effective in 2014).
Organic Waste Diversion. Along with its rate application, SCSS is also requesting a twenty-
year extension of its Franchise Agreements. As described in their request (Appendix), this is to
cover amortizing the costs of providing organic waste diversion as required under recent State
legislation. While an in-depth review of this proposal is outside the scope of this report,
extending the term of current Franchise Agreements in allowing an adequate timeframe to cover
the long-term cost of this new requirement is reasonable.
Franchise Agreement Summary
Historically, each agency has had its
own approach to determining service
levels and adopted differing Franchise
Agreements accordingly. While these
became similar beginning in 1999, in
2008 the Cities of Arroyo Grande, Grover Beach and Pismo Beach adopted renewed franchise
agreements, followed by the Oceano Community Service District in Summer 2010, which are the
same in all key provisions:
Each agency contracts with SCSS for garbage, green waste and recycling; and SCSS
provides the container (waste wheelers) for each service.
Each agreement is for 15 years.
As noted above, each agency has adopted the same rate-setting methodology, including the
option of terminating the agreement within nine months following approval of the requested
rate increase if it exceeds the cost of living threshold.
All agencies have adopted franchise fees of 10%.
Table 3. Franchise Agreement Effective Dates
Arroyo Grande June 10, 2008
Grover Beach July 7, 2008
Oceano July 14, 2010
Pismo Beach June 3, 2008
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RATE REVIEW WORKSCOPE
This report addresses four basic questions:
Should SCSS be granted a rate increase? And if so, how much?
How much does it cost to provide required service levels?
Are these costs reasonable?
And if so, what is a reasonable level of return on these costs?
The following documents were closely reviewed in answering these questions:
Franchise Agreements and any Amendments for each agency
Audited financial statements for SCSS for 2014 and 2013
City of San Luis Obispo’s Rate Setting Process and Methodology Manual for Integrated
Solid Waste Management Rates (Rate Manual)
SCSS rate increase application and supporting documentation
Follow-up interviews, correspondence and briefings with agency and SCSS staff
Rate surveys of Central Coast communities
REVENUE AND RATE SETTING OBJECTIVES
In considering SCSS’s rate increase request, it is important to note the revenue and rate setting
objectives for solid waste services as set forth in the Franchise Agreements via the Rate Manual.
Revenues. These should be set at levels that:
Are fair to customers and the hauler.
Are justifiable and supportable.
Ensure revenue adequacy.
Provide for ongoing review and rate stability.
Are clear and straightforward for the agency and hauler to administer.
Rate Structure. Almost any rate structure can meet the revenue principles outlined above and
generate the same amount of total revenue. Moreover, almost all rate structures will result in
similar costs for the average customer: what different rate structures tell us is how costs will be
distributed among non-average customers. The following summarizes adopted rate structure
principles for solid waste services:
Promote source reduction, maximum diversion and recycling.
Provide equity and fairness within classes of customers (similar customers should be treated
similarly).
Be environmentally sound.
Be easy for customers to understand.
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COST ACCOUNTING ISSUES
Who’s Paying What?
As noted above, SCSS’s financial operations for Arroyo Grande, Grover Beach, Oceano and
Pismo Beach are closely related. Keeping costs and revenues segregated is further complicated
by the fact that SCSS, as a subsidiary of Waste Connections Incorporated (which acquired the
parent company in April 2002), shares ownership with the following local companies:
San Luis Garbage Company
Mission Country Disposal
Morro Bay Garbage Service
Coastal Roll-Off Service
Cold Canyon Land Fill
Additionally, within the South County, SCSS’s service area includes:
City of Arroyo Grande
City of Grover Beach
City of Pismo Beach
Oceano Community Services District
Nipomo Community Services District
Avila Beach Community Services District
Other unincorporated areas in the South County such as Rural Arroyo Grande
Cost Accounting System
Between Companies. Separate “source” accounting systems are maintained for each company.
Moreover, audited financial statements are prepared for each company by an independent
certified public accountant; and SCSS’s auditors have consistently issued “clean opinions” on its
financial operations. In short, good systems are in place to ensure that the financial results
reported for SCSS do not include costs and revenues related to other companies. Additionally,
virtually all of the financial operations of SCSS and its affiliated companies are regulated by
elected governing bodies such as cities, special districts and the County.
Within the SCSS Service Area. Within the SCSS service area, a combination of direct and
allocation methodologies are used in accounting for costs and revenues between communities.
In general, revenues are directly accounted for each franchising agency, while costs are allocated
using generally accepted accounting principles.
Cost Accounting Findings. The accounting and financial reporting system used by SCSS is
reasonable and consistent with generally accepted accounting principles and practices. It treats
similar costs similarly (such as collection and disposal, where there are no significant differences
in service levels and unit costs between the four agencies), while recognizing community
differences (such as different franchise fee rates). Because the financial operations of SCSS are
closely related for all of the communities it serves, there are significant advantages to performing
concurrent reviews.
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Area of Possible Concern. While the service characteristics and resulting per unit costs are very
similar for Arroyo Grande, Grover Beach, Oceano and Pismo Beach, this is unlikely to be true
for the other areas in South County serviced by SCSS. Because of their lower densities,
collection costs are probably higher in these areas but these are not accounted for separately by
SCSS.
On the other hand, there are three mitigating factors that reduce this concern:
Higher rates. Depending on service type, rates are up to 30% higher in these areas,
recognizing the higher collection costs for similar services. In short, these rate differentials
significantly mitigate “equity” and cost accounting concerns.
Smaller percentage of accounts. The four agencies covered by this report account for about
two-thirds of the accounts serviced by SCSS. Accordingly, while there may be “cost per
account” differences in these other areas, they account for a smaller portion of SCSS
operations.
About 40% of revenues are from non-SFR accounts. 41% of SCSS revenues come from
multi-family and non-residential accounts, which have the same rate structure and similar
service-versus-cost characteristics throughout the SCSS service area.
If costs for Arroyo Grande, Grover Beach, Oceano and Pismo Beach are so similar, why are
the residential rates so different?
The short answer is: history and different approaches to rate structure philosophies.
History
Until 1999, service levels under the Franchise Agreements with SCSS between these four
agencies were significantly different. The rates in place at that time became the basis for
subsequent rate reviews.
Rate Structure Principles
Most significantly, each agency has adopted different rate structure principles to recover similar
costs. For example, Pismo Beach has adopted a rate structure for its residential customers that
more closely reflects a “pay-as-you-throw” philosophy under which the “per gallon” costs for 32,
64 and 96 gallon containers are the same (for example, a 64-gallon container costs twice as much
as a 32-gallon one.) This results in lower monthly costs for 32-gallon customers and relatively
higher rates for 64 and 96-gallon customers.
On the other hand, Arroyo Grande has adopted rates that do not have as much difference
between container sizes (but still offer an incentive for smaller containers over larger ones),
recognizing collection economies of scale for larger versus smaller containers. In this case, 32-
gallon containers in Arroyo Grande are more expensive than in Pismo Beach, but 64-gallon
containers are less.
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Both rate structures have their strong points: in the case of Pismo Beach, rates are more
reflective of disposal costs, whereas in Arroyo Grande they are more reflective of collection
costs. But the important point is that the revenue generating capability is the same even though
the rates are different.
Multi-Family and Non-Residential Rates
Lastly, multi-family and non-residential rates (which account for 41% of SCSS revenues) are
similar in all four agencies: it is only in single family residential rates that there are significant
differences between communities.
FINANCIAL OVERVIEW
While detailed financial and service information is provided in the SCSS rate request application
(Appendix), the following summarizes their actual costs, revenues and account information for
2014 (the last completed fiscal year for which there are audited financial statements) for all areas
serviced by them.
Costs by Type. Total expenses for 2014
(after deducting for non-allowable and
limited costs as discussed later in this
report) were $11.1 million. As reflected
in Table 4, five cost areas accounted for
85% of total costs:
Direct labor for collection: 26%
Vehicle operations and maintenance
(including depreciation): 19%
Disposal (landfill, recycling and
composting): 17%
Franchise fees: 12%
Insurance: 11%
Revenues by Source. Total revenues in
2014 were $11.5 million. As reflected in
Table 5, 58% of SCSS’s revenues come
from single-family residential (SFR)
accounts.
Services to multi-family residential and
non-residential customers account for
41% of their revenues, with a very small
part (1 %) from other revenues such as
interest earnings.
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Service Accounts by Type. While single-
family residences account for 58% of
revenues, they represent 92% of total
accounts (Table 6).
This reflects the fact that per account,
multi-family and non-residential
customers generate more solid waste than
single-family residential customers (and
thus more revenue per account).
RATE-SETTING PROCESS
Under the Rate Manual, the rate-setting process follows a three-year cycle:
Base Year. The first year of the cycle—the Base Year—requires a comprehensive, detailed
analysis of revenues, expenses and operating data. This information is evaluated in the
context of agreed upon factors in the franchise agreements in determining fair and reasonable
rates. As noted above, the last Base Year analysis for SCSS under this approach was
prepared in December 2012.
Two Interim Years. In both the second and third years, SCSS is eligible for Interim Year
rate adjustments that address three key change factors: changes in the consumer price index
for “controllable” operating costs; changes in “pass-through costs” (primarily tipping fees),
which SCSS does not control (they are set by the County Board of Supervisors); and an
adjustment to cover increased franchise fees.
The first two adjustment factors are “weighted” by the proportionate share that these costs
represent of total costs (excluding franchise fees). For example, in the current Base Year
analysis for 2016 rates, controllable costs account for 84% of total costs, with tipping fees
accounting for 16%.
The rate review for the two Interim Years requires less information and preparation time than
the Base Year review, while still providing fair and reasonable rate adjustments.
Rate Increase History
The following summarizes the SCSS rate review history since 2004 (last twelve years) based on
the year of the application (rate increases took place the following year).
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1. From 2004 to 2011, the franchise fee rate in Pismo Beach was 6% compared with 10% in the other
three agencies, and as such, its rate increase was slightly less. In July 2011, Pismo Beach adopted a
10% franchise fee, bringing it in alignment with the other three agencies (as well as most other
agencies in San Luis Obispo County). In implementing the 10% rate in 2011, Pismo Beach adopted
an added 3.9% increase beyond the interim year rate increase of 5.15% requested by SCSS.
2. SCSS did not request a rate increase in 2010 (which would have been the “normal” cycle to do so),
and accordingly, did not submit a Base Year rate application. However, SCSS did submit a rate
request in 2011 using an Interim Year methodology. The reasonableness of using the resulting
“hybrid” approach was discussed in detail in the 2011 Interim Year report, which concluded that this
approach was reasonable given the circumstances.
3. Proposed rate increase, to be effective January 1, 2016.
Assuming the 2015 rate application is approved, this will result in an average annual rate increase
of 2.4% over the last twelve years, which reflects a high level of rate stability and price
containment for South County customers.
RATE SETTING METHODOLOGY
Are the Costs Reasonable?
The first step in the rate review process is to determine if costs are reasonable. There are three
analytical techniques that can be used in assessing this:
Detailed review of costs and service responsibilities over time.
Evaluation of external cost factors, such as general increases in the cost of living (as
measured by the consumer price index).
Comparisons of rates with other communities.
Table 7. Review History: 2004 to 2015 (Last 12 Years)
Year Review Type
Arroyo
Grande
Grover
Beach Oceano
Pismo
Beach (1)
2004 Base Year 5.60%5.60%5.60%5.30%
2005 Interim Year 3.09%3.09%3.09%2.95%
2006 Interim Year 3.76%3.76%3.76%3.60%
2007 Base Year 3.00%3.00%3.00%2.90%
2008 Interim Year 0.00%0.00%0.00%0.00%
2009 Interim Year 0.00%0.00%0.00%0.00%
2010 Interim Year 0.00%0.00%0.00%0.00%
2011 Interim Year (2) 5.15%5.15%5.15%5.15%
2012 Base Year 3.20%3.20%3.20%3.20%
2013 Interim Year 2.05%2.05%2.05%2.05%
2014 Interim Year 0.00%0.00%0.00%0.00%
2015 Base Year (3) 3.25%3.25%3.25%3.25%
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Each of these was considered in preparing this report, summarized as follows.
Detailed Cost Review
In its rate application, SCSS provides detailed financial data for five years:
Audited results for the two prior years (2013 and 2014).
Estimated results for the current year (2015, which is still in progress).
Projected costs for the Base Year (2016).
Estimated costs for the following year (2017).
This allows for a detailed analysis of changes in key cost components such as labor, repairs, fuel,
insurance and tipping fees. In this case, its submittal shows that overall SCSS has done a good
job of containing costs. Excluding pass-through costs (like tipping fees and franchise fees,
which SCSS does not control), very modest cost increases in “controllable” cost are projected:
As reflected above, there are two key areas of change:
Decrease in depreciation. This is due to an aging fleet: as vehicles begin to remain in
service after their useful lives, they become fully-depreciated and no further annual expenses
are recorded. This lower cost is a good thing initially. However, these vehicles will need to
be replaced at some point and higher depreciation costs will then be incurred.
Increase in greenwaste recycling/organics diversion contract services. This reflects the
added cost of the new organics diversion program.
The key drivers behind the 3.25% rate increase request for 2016 can be summarized by three
factors as follows:
Table 8. Cost Trend Summary
ActualEstimatedProjected
2014 2015201620152016
Direct Labor 2,939,7142,997,0513,118,7682.0%4.1%
Allowable Corporate Overhead 324,633331,450338,0792.1%2.0%
Office Salaries 680,438642,308655,155-5.6%2.0%
Depreciation 698,382452,894319,255-35.2%-29.5%
Truck Repairs & Tires 449,119437,867446,624-2.5%2.0%
Fuel & Oil 963,009938,455916,427-2.5%-2.3%
Insurance 1,216,8551,263,1141,288,3773.8%2.0%
Greenwaste/Organics Contract Services378,581365,352606,775-3.5%66.1%
Other Costs 546,434 566,439 608,148 3.7%7.4%
Total Controllable Costs 8,197,165 7,994,930 8,297,608 -2.5%3.8%
Pass-Through Costs
Tipping Fees 1,542,3571,710,0691,711,60310.9%0.1%
Franchise Fees 1,290,0851,334,3201,361,0063.4%2.0%
Other Pass-Through Costs 83,36485,95587,6743.1%2.0%
Total $11,112,971$11,125,274$11,457,8910.1%3.0%
Percent Increase
Item 9.a. - Page 29
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0.81% for the $2.25 per ton increase in the cost of landfill disposal.
1.10% for implementation of the organics waste diversion program.
1.34% for all other cost increases such as vehicle fuel, ongoing maintenance and labor.
Trends in External Cost Drivers
The most common external “benchmark” for evaluating cost trends is the consumer price index.
Over the past two years, the U.S. CPI-U increased by 2.2%. Controllable cost increases of 1.3%
for 2015 and 2016 compare favorably with this CPI benchmark.
Rates in Comparable Communities
Lastly, reasonableness of rates (and underlying costs) can also be evaluated by comparing rates
with comparable communities. However, survey results between “comparable” communities
need to be carefully weighed, because every community is different. For example, even in the
South County where service levels and costs are very similar, there are rate differences. In short,
making a true “apples-to-apples” comparison is easier said than done.
Nonetheless, surveys are useful assessment tools—but they are not perfect and they should not
drive rate increases. Typical reasons why solid waste rates may be different include:
Franchise fees and AB 939 fee surcharges
Landfill costs (tipping fees)
Service levels (frequency, quality)
Labor market
Operator efficiency and effectiveness
Voluntary versus mandatory service
Direct services provided to the franchising agency at no cost, such as free trash container
pick-up at city facilities, on streets and in parks
Percentage of non-residential customers, and how costs and rates are allocated between
customer types
Revenue collection procedures: Does the hauler or the franchising agency bill for service?
And what are the procedures for collecting delinquent accounts?
Services included in the base fee (recycling, green waste, containers, pick-up away from
curb)
Different rates structures
Land use and density (lower densities will typically result in higher service costs)
Mix of residential and non-residential accounts
With these caveats, the following summarizes single family residential rates for other cities in
the Central Coast area compared with the proposed rates for SCSS. As reflected below, even
Item 9.a. - Page 30
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with the proposed rate increases, Arroyo Grande, Grover Beach, Oceano and Pismo Beach will
have among the lowest rates among the agencies surveyed.
Summary: Are the costs reasonable? Based on the results of the three separate cost-review
techniques—trend review, external factor review and rate comparisons—SCSS’s costs are
reasonable.
What Is a Reasonable Return on these Costs?
After assessing if costs are reasonable, the next step is to determine a reasonable rate of return on
these costs. The rate-setting method formally adopted by Arroyo Grande, Grover Beach, Oceano
and Pismo Beach in their Franchise Agreements with SCSS includes clear criteria for making
this assessment. It begins by organizing costs into three main categories, which will be treated
differently in determining a reasonable “operating profit ratio:”
Controllable Costs (Operations and Maintenance)
Direct collection labor Fuel
Vehicle maintenance and repairs Depreciation
Insurance Billing and collection
Pass-Through Costs
Tipping fees
Franchise fees
Payments to affiliated companies (such as leases and trucking charges)
Table 9. Single-Family Residential Rate Survey
Single Family Residential Monthly Trash Rates
30-4060-7090-101
Atascadero (1)$20.63$36.15$46.70
Morro Bay (1)16.09 31.87 47.66
Paso Robles (2)28.79 37.71 41.60
San Luis Obispo (2)14.12 28.25 42.37
Santa Maria (1)n/a28.94 32.82
San Miguel (1)28.04 44.01 60.39
Templeton (1)25.03 36.60 40.81
Proposed: South County Sanitation Service Area
Arroyo Grande 16.83 21.86 26.92
Grover Beach 15.25 20.62 25.96
Oceano 13.64 19.62 38.39
Pismo Beach 14.97 29.94 44.91
1. As of September 2015
2. Approved for January 2016
Container Size (Gallons)
Item 9.a. - Page 31
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Excluded and Limited Costs
Charitable and political contributions Non-IRS approved profit-sharing plans
Entertainment Fines and penalties
Income taxes Limits on corporate officer compensation
After organizing costs into these three categories, determining “operating profit ratios” and
overall revenue requirements is straightforward:
The target is a 92% operating profit ratio on “controllable costs.”
Pass-through costs may be fully recovered through rates but no profit is allowed on these
costs.
No revenues are allowed for any excluded or limited costs.
In the case of SCSS, 72% of their costs are “controllable costs” subject to the 92% operating
profit ratio (or 8% of total allowable “rate base” revenues); and 28% are pass-through costs that
may be fully recovered from rates but no profit is allowed. No recovery is allowed for excluded
costs.
Preparing the Rate Request Application
Detailed “spreadsheet” templates for preparing the rate request application—including
assembling the required information and making the needed calculations—are provided in the
Rate Manual. SCSS has prepared their rate increase application in accordance with these
requirements (Appendix); and the financial information provided in the application for 2013 and
2014 ties to its audited financial statements.
This comprehensive application has been correctly prepared with one very minor classification
error, which does not affect the allowable rate increase of 3.67% (or the requested lower rate
increase of 3.25%).
Under the Rate Manual, lease and trucking costs with related parties are eligible for “pass-
through” recovery but are not eligible for operating profit recovery. The rate application
classifies $49,059 for transportation costs paid to related parties in 2016 as eligible for the
operating cost ratio. It should be classified as a pass-through cost (like lease payments to
affiliated companies, which are correctly classified). This makes a very small difference in
allowable profit ($4,266); and is so minor that it has no effect on the allowable rate increase of
3.67% or lower requested increase of 3.25%.
Rate Request Summary
The following summarizes the calculations that support an allowable rate increase of 3.67%:
Item 9.a. - Page 32
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Implementation
The following summarizes key implementation concepts in the adopted rate-setting model:
The “92% operating profit ratio” is a target; in the interest of rate stability, adjustments are
only made if the calculated operating profit ratio falls outside of 90% to 94%. For the last
completed year (2014) the ratio was 96.0%; and for 2016, without the proposed rate increase,
the operating ratio would be 95.5%. Both of these are outside the 90% to 94% range and as
such, a rate increase is warranted under the rate-setting methodology.
There is no provision for retroactivity: requested rate increases are “prospective” for the year
to come; there is no provision for looking back. This means that any past shortfalls from the
target operating profit cannot be recaptured.
On the other hand, if past ratios have been stronger than this target, then the revenue base is
re-set in the Base Year review.
As discussed above, detailed Base Year reviews are prepared every three years; Interim Year
reviews to account for focused changes in the consumer price and tipping fees are prepared
in the two “in-between” years.
Special rate increases for extraordinary circumstances may be considered. This has never
occurred in any of the agencies that use this rate-setting methodology.
The result of this process is an allowed rate increase of 3.67%. However, SCSS has requested a
lower rate increase of 3.25%.
COST OF LIVING “TRIGGER OPTION”
As noted above, Section 8.3 of the Franchise Agreements provides that if the rate increase
request compared with the rate in effect at the date of the agreement exceeds the cumulative cost
Table 10. Rate Increase Summary
Allowable Costs (1)8,248,549
Allowable Profit (92% Operating Ratio)717,264
Pass-Through Costs
Tipping Fees 1,711,603
Franchise Fees 1,361,006
Other Pass-Through Costs (1)136,733
Allowed Revenue Requirements 12,175,155
Revenue without Rate Increase 11,789,890
Revenue Requirement: Shortfall (Surplus)$385,265
Percent Change in Revenue Requirement 3.30%
Allowed Revenue Increase (2)3.67%
1. Reflects Reclassification of Related Party Transportation Costs
2. Adjusted for 10 % Franchise Fee
Item 9.a. - Page 33
Solid Waste Rate Review
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of living increase from that same date, each agency has the option of terminating the agreement
at any time within nine months following approval of the requested rate increase (assuming it
was submitted in accordance with the rate-setting methodology).
While this provision does not directly limit rate increase requests by SCSS to an amount that
may be less than that allowed under the rate-setting methodology, subjecting the Franchise
Agreement to possible termination if the rate request is greater than the cost of living threshold
provides a strong incentive for SCSS to do so.
As discussed previously, based on SCSS’s calculation of the cost of living increase threshold, the
maximum rate increase to avoid triggering the potential for termination is 3.25%. This is its
requested rate, which is slightly less than the allowable rate increase of 3.67% under the rate-
setting methodology set forth in the Franchise Agreements.
However, this is based on their excluding from the threshold increases in tipping fees of 0.96%
in 2014 and the proposed increase for tipping fees in 2016 of 0.81%. In reviewing the Franchise
Agreements and the rate increase analysis prepared in 2013 (for rate increases to be effective in
2014), these adjustments should not be made in calculating the “trigger” amount.
Section 8.3 of the Franchise Agreements addresses these types of pass-through costs:
When calculating the change in the rate, costs resulting from Article 7, Payments to City,
Section 4.5 City Request to Direct Changes, Section 5.10 Garbage and Recycling Service in
Public Areas and new regulatory costs will not be included. However any increase resulting
from an increase in the pass through costs associated with the processing and/or disposal of
Garbage and Recyclable Material including greenwaste are included in the rate change
calculation.
Accordingly, if these are not excluded, the rate increase to avoid triggering the termination
option would be limited to 1.5%.
Calculation of the CPI Threshold
As recommended in the 2013 Interim Year rate review for consistency and clarity, the CPI-U rate
increases used in calculating Interim Year increases and the “trigger” threshold are based on
changes from June to June (given application submittal targets, this was the most recent date that
would consistently be available).
The following summarizes the different approaches in calculating the threshold:
Item 9.a. - Page 34
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The following summarizes the variance from the “trigger” depending on the approach in
calculating rate increases that are subject to the “trigger:”
As reflected in Table 12, the requested rate increase is slightly below the “trigger” amount based
on SCSS’s approach to calculating the rate increases that are subject to the “trigger.” However,
if the Alternate calculation is used, the requested rate increase would need to be reduced to 1.5%
to remain under the “trigger.”
There are several policy options in considering the “trigger” threshold:
Agree with the exclusions made by SCSS in calculating rate increases subject to the
“trigger.” This would be conceptually similar to the 1.7% exclusion agreed to 2011.
Use the “Alternative” calculation but make findings that the agencies will not pursue the
“trigger” option if the requested rates are approved.
This is the recommended approach: it allows approval of the current requested rates as
reasonable but retains flexibility in future rate reviews by retaining the “Alternative”
methodology as the basis for this and future rate increases.
Table 11. CPI-U Trigger Option
JuneCPI-UApproved Subject toApproved Subject to
to JuneIncreaseIncreaseAdjustmentThresholdIncreaseAdjustmentThreshold
2010 1.1%0.00%0.00%0.00%0.00%
2011 3.50%5.15%-1.70%3.45%5.15%-1.70%3.45%
2012 1.70%0.00%0.00%0.00%0.00%
2013 1.70%3.20%3.20%3.20%3.20%
2014 2.00%2.05%-0.96%1.09%2.05%2.05%
2015 0.20%0.00%0.00%0.00%0.00%
2016 3.25%-0.81%2.44%3.25%3.25%
Total10.20%13.65%-2.66%10.18%13.65%-1.70%11.95%
Note: Under either option, the adjustment of 1.7% for contact greenwaste in 2011 is
appropriate, since the agencies formally agreed to this prior to the rate application process.
SCSS Calculation Alternative CalculationCPI-U Increase
Table 12. Variance from "Trigger Option:" Favorable (Unfavorable)
Requested
Rate
CPI-USubject to
CalculationTriggerVariance
SCSS Proposed Calculation 10.20%10.18%0.02%
Alternative*10.20%11.95%-1.75%
* Under the Alternative calculation, the requested rate increase would
need to be 1.5% or less to avoid the "Trigger Option."
Item 9.a. - Page 35
Solid Waste Rate Review
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Use the “Alternative” methodology and approve the requested rate increase but retain the
right to potentially pursue contract termination over the next nine months.
However, it is important to note that this “trigger” calculation does not limit the allowable rate
increase that SCCS may request under the methodology set forth in the Franchise Agreements.
Accordingly, as noted above, if the proposed rate increase of 3.25% is approved, it is
recommended that the four agencies make findings that they will not pursue the “trigger” option.
COORDINATION WITH OTHER AGENCIES
SCSS has submitted similar rate requests to the three other agencies that regulate rates and
services in the other South County areas that they serve: the County of San Luis Obispo, Avila
Beach Community Services District and the Nipomo Community Services District. These
agencies are likely to act on the requested rate increases within the same time frame as the four
agencies covered in this report.
SUMMARY
Based on the rate-setting policies and procedures formally adopted by Arroyo Grande, Grover
Beach, Oceano and Pismo Beach in their Franchise Agreements, this report concludes that:
SCSS has submitted the required documentation required under its Franchise Agreements
with the four agencies.
SCSS’s costs are reasonable.
Its rate application supports an increase of 3.67% for 2016, which meets the “reasonable
return” criteria set forth in the Franchise Agreements. Accordingly, this report recommends
adoption of the 3.25% rate increase requested by SCSS, which is lower than this.
The requested rate increase of 3.25% for 2016 is based on SCSS’s calculations of the rate
increase available in avoiding the “trigger” that would allow the four agencies the option of
early termination of their Franchise Agreements. Based on my calculations, the actual
threshold is lower than this.
SCSS has requested rate increases for 2017 and 2018 based on concepts that are very similar
to the Interim Year rate increase methodology set forth in the Rate Manual. Given the very
similar results, this report recommends adoption of the proposed rates for 2017 and 2018.
This will mean that Interim Year reviews for 2017 and 2018 will not be required.
If the governing bodies approve the requested rate increases, it is recommended that they also
make findings that they will not pursue the “trigger” option.
ATTACHMENT
Appendix: Base Year Rate Request Application from South County Sanitary Service
Item 9.a. - Page 36
Appendix
BASE YEAR RATE REQUEST
APPLICATION
1. Request Letter from South County Sanitary Service
2. Base Year Application Summary
City of Pismo Beach
City of Arroyo Grande
City of Grover Beach
Oceano Community Services District
3. Supporting Schedules
Financial Information: Cost and Revenue Requirements Summary
Revenue Offset Summary
Cost Summary for Base Year
Base Year Revenue Offset Summary
Operating Information
Item 9.a. - Page 37
Appendix 1
Item 9.a. - Page 38
Appendix 1
Item 9.a. - Page 39
Appendix 1
Item 9.a. - Page 40
South County Sanitary Service
2016 Base Year Rate Adjustment Application
Summary CITY OF PISMO BEACH
Requested Increase
PI 1.34%
Landfill 0.81%
Organics 1.10%
1.Rate Increase Requested 3.25%
Rate Schedule
CurrentIncreasedAdjustmentNew
Rate Schedule RateRate (a)Rate
Single Family Residential
2.Economy Service (1 - can curb)$14.50 $0.47 $14.97
4.Standard Service (2- can curb)$29.00$0.94 $29.94
5.Premium Service (3 - can curb)$43.50$1.41 $44.91
(a) Calculated rates are rounded up to the nearest $0.01.(a) Calculated rates are rounded up to the nearest $0.01.
6.Multiunit Residential and Non-residential Rate increases of 3.25%
will be applied to all rates in each structure
with each rate rounded to the nearest $0.01
Certification
To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions
provided by the Rate Setting Manual.
Name:Patrick Fenton Title:District Manager
Signature:Date:07/30/15
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 1 of 6
Appendix 2
Item 9.a. - Page 41
South County Sanitary Service
2016 Base Year Rate Adjustment Application
Summary CITY OF ARROYO GRANDE
Requested Increase
PI 1.34%
Landfill 0.81%
Organics 1.10%
1.Rate Increase Requested 3.25%
Rate Schedule
CurrentIncreasedAdjustmentNew
Rate Schedule RateRate (a)Rate
Single Family Residential
2.Economy Service (1 - can curb)16.30$ $0.53 $16.83
4.Standard Service (2- can curb)21.17$ $0.69 $21.86
5.Premium Service (3 - can curb)26.07$ $0.85 $26.92
(a) Calculated rates are rounded up to the nearest $0.01.(a) Calculated rates are rounded up to the nearest $0.01.
6.Multiunit Residential and Non-residential Rate increases of 3.25%
will be applied to all rates in each structure
with each rate rounded to the nearest $0.01
Certification
To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions
provided by the Rate Setting Manual.
Name:Patrick Fenton Title:District Manager
Signature:Date:07/30/15
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 1 of 6
Appendix 2
Item 9.a. - Page 42
South County Sanitary Service
2016 Base Year Rate Adjustment Application
Summary CITY OF GROVER BEACH
Requested Increase
PI 1.34%
Landfill 0.81%
Organics 1.10%
1.Rate Increase Requested 3.25%
Rate Schedule
CurrentIncreasedAdjustmentNew
Rate Schedule RateRate (a)Rate
Single Family Residential
2.Economy Service (1 - can curb)14.77$ $0.48 $15.25
4.Standard Service (2- can curb)19.97$ $0.65 $20.62
5.Premium Service (3 - can curb)25.14$ $0.82 $25.96
(a) Calculated rates are rounded up to the nearest $0.01.(a) Calculated rates are rounded up to the nearest $0.01.
6.Multiunit Residential and Non-residential Rate increases of 3.25%
will be applied to all rates in each structure
with each rate rounded to the nearest $0.01
Certification
To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions
provided by the Rate Setting Manual.
Name:Patrick Fenton Title:District Manager
Signature:Date:07/30/15
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 1 of 6
Appendix 2
Item 9.a. - Page 43
South County Sanitary Service
2016 Base Year Rate Adjustment Application
Summary OCEANO COMMUNITY SERVICE DISTRICT
Requested Increase
PI 1.34%
Landfill 0.81%
Organics 1.10%
1.Rate Increase Requested 3.25%
Rate Schedule
CurrentIncreasedAdjustmentNew
Rate Schedule RateRate (a)Rate
Single Family Residential
2.Economy Service (1 - can curb)13.21$ $0.43 $13.64
4.Standard Service (2- can curb)19.00$ $0.62 $19.62
5.Premium Service (3 - can curb)37.18$ $1.21 $38.39
(a) Calculated rates are rounded up to the nearest $0.01.
6.Multiunit Residential and Non-residential Rate increases of 3.25%
will be applied to all rates in each structure
with each rate rounded to the nearest $0.01
Certification
To the best of my knowledge, the data and information in this application is complete, accurate, and consistent with the instructions
provided by the Rate Setting Manual.
Name:Patrick Fenton Title:District Manager
Signature:Date:07/30/15
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 1 of 6
Appendix 2
Item 9.a. - Page 44
South County Sanitary Service
Base Year 2016 Rate Adjustment Application
Current
Financial Information Base Year
2013 2014 2015 2016 2017
(from Pg. 4)
6.Direct Labor $2,804,158$2,939,714$2,997,051$3,118,768$3,181,144
7.Corporate Overhead $318,893$324,633$331,450$338,079$344,840
8.Office Salaries $514,066$680,438$642,308$655,155$668,258
9.Other General and Admin Costs $4,151,237$4,252,380$4,024,121$4,185,606$4,269,318
10 Total Allowable Costs $7,788,354$8,197,164$7,994,930$8,297,608$8,463,560
11.Operating Ratio 93.2%96.0%94.3%92.0%92.0%
12.Allowable Operating Profit $568,380$345,466$484,959$721,531$735,962
13.Tipping Fees $1,481,214$1,542,357$1,710,069$1,711,603$1,745,835
14.Franchise Fees $1,272,560$1,290,085$1,334,320$1,361,006$1,388,227
15.AB939 Fees $0 $0 $0 $0 $0
16.Lease Pmts to Affiliated Companies $50,575$83,364$85,955 $87,674 $89,427
17.Total Pass Through Costs $2,804,349$2,915,806$3,130,344$3,160,283$3,223,489
18.Revenue Requirement $11,161,082$11,458,437$11,610,234$12,179,422$12,423,011
19.Total Revenue Offsets $11,161,082$11,458,437$11,610,234$11,789,890$12,290,960
(from Page 3)
20.Net Shortfall (Surplus)$389,533
21.Total Residential and Non-residential Revenue without increase Nipomo
in Base Year (pg.5, line 76)$11,789,890 $11,789,890 $11,789,890
22.Percent Change in Residential and Non-residential Revenue Requirement 3.30%3.3%3.3%
23.Franchise Fee Adjustment Factor (1 - 6 percent)90.000%94.000%91.870%
3.67%3.51%3.60%
Limitation due to cumlative increases -0.42%-0.42%
24.Percent Change in Existing Rates 3.25%3.51%3.18%
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 2 of 6
Section I-Allowable Costs
Section II-Allowable Operating Profit
Section III-Pass Through Costs
Section III-Pass Through Costs
Section III-Pass Through Costs
Historical Projected
Appendix 3
Item 9.a. - Page 45
South County Sanitary Service
Base Year 2016 Rate Adjustment Application
Revenue Offset Summary
Current
Base Year
2013 2014 2015 2016 2017
Residential Revenue (without increase in Base Yr.)
28.Single Family Residential $6,568,201$6,754,381$6,903,275$6,972,308$7,268,631
Multiunit Residential Dumpster
29. Number of Accounts
30. Revenues
31.Less Allowance for Uncollectible Resi Accounts $0 $0 $0 $0 $0
32.Total Residential Revenue $6,568,201$6,754,381$6,903,275$6,972,308$7,268,631
Non-residential Revenue (without increase in Base Yr.)
Account Type
Non-residential Can
33. Number of Accounts 10 10 8 8 $8
34. Revenues $1,212 $1,237$1,289
Non-residential Wastewheeler
35. Number of Accounts 218 220 358 361 $376
36. Revenues $193,471$197,399$205,788
Non-residential Dumpster
37. Number of Accounts 1925 1912 1791 1812$1,889
38. Revenues $4,544,805$4,666,742$4,496,809$4,607,749$4,803,578
39.Less: Allowance for Uncollectible Non-resid $0 $0 $0 $0 $0
40.Total Non-residential Revenue $4,544,805$4,666,742$4,691,491$4,806,384$5,010,655
45.Interest on Investments $29,288$23,837 $99($1,402)($1,462)
46.Other Income $18,788$13,477$15,368$12,600$13,136
47.Total Revenue Offsets $11,161,082$11,458,437$11,610,234$11,789,890$12,290,960
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 3 of 6
Section VII - Revenue Offsets
Historical Projected
Appendix 3
Item 9.a. - Page 46
South County Sanitary Service
Base Year 2016 Rate Adjustment Application
Cost Summary for Base Year
Description of Cost BASE YEAR
2013 2014 2015 2016
Labor $2,601,180$2,723,391 $2,775,882 $2,893,176
Payroll Taxes $202,978$216,322 $221,169 $225,592
48.Total Direct Labor $2,804,158$2,939,714 $2,997,051 $3,118,768
49.Corporate Overhead $503,012$540,490 $563,745 $575,020
Less limitation (enter as negative)($184,119)($215,857)($232,295)($236,941)
Total Corporate Overhead $318,893$324,633 $331,450 $338,079
Office Salary $461,252$630,822 $595,085 $606,986
Payroll Taxes $52,814 $49,617 $47,224 $48,168
50.Total Office Salaries $514,066$680,438 $642,308 $655,155
Allocated expenses $0 $0 $0 $0
Bad Debt $16,395 ($3,309)($1,907)($1,945)
Bond expense $7,524 $6,823 $6,624 $6,756
Computer services
Depreciation on Bldg and Equip
Depreciation on Trucks/Containers$871,346$698,382 $452,894 $319,255
Drive Cam fees $27,694 $31,579 $31,800 $32,436
Dues and Subscriptions $4,688 $5,350 $4,898 $4,996
Gas and oil $955,955$963,099 $938,455 $957,225
Interest Expense
Laundry $18,762 $21,374 $20,010 $20,410
Legal and Accounting $37,934 $28,537 $33,371 $34,038
Miscellaneous and Other $8,989 $18,638 $18,789 $19,165
Moving expense $2,681 $3,920 $4,704 $4,798
Office Expense $152,167$171,740 $174,814 $178,310
Operating Supplies $23,106 $38,353 $37,179 $37,922
Other insurance $514,427$526,663 $537,186 $547,930
Other Insurance-medical $587,834$690,192 $725,928 $740,447
Other Taxes $40,605 $33,782 $37,196 $37,940
Outside Services $336,171$378,581 $365,352 $606,775
Postage $17,089 $9,160 $20,816 $10,816
Public Relations and Promotion $1,712 $1,391 $1,720 $1,754
Permits $74,170 $67,898 $66,350 $67,677
Rent $6,500 $3,000 $3,000 $3,060
Telephone $21,603 $22,764 $21,611 $22,044
Tires $118,130$127,741 $114,668 $116,961
Transportation (related party)$37,365 $48,634 $48,097 $49,059
Travel $20,010 $11,575 $12,350 $12,597
Truck Repairs $225,916$321,378 $323,199 $329,663
Utilities $22,462 $25,136 $25,016 $25,517
51.Total Other Gen/Admin Costs $4,151,237$4,252,380 $4,024,121 $4,185,606
52.Total Tipping Fees $1,481,214$1,542,357 $1,710,069 $1,711,603
53.Total Franchise Fee $1,272,560$1,290,085 $1,334,320 $1,361,006
54.Total AB 939/Regulatory Fees $0 $0 $0 $0
55.Total Lease Pmt to Affil Co.'s $50,575 $83,364 $85,955 $87,674
56.Total Cost $10,592,703$11,112,970 $11,125,274 $11,457,891
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 4 of 6
Appendix 3
Item 9.a. - Page 47
South County Sanitary Service
Base Year 2016 Rate Adjustment Application
Base Year Revenue Offset Summary For Information Purposes Only
2016 Volume Growth 1.01
Description of Revenue OverallFranchise Refuse Collection Non-franchise
Total TotalArroyoPismoGroverUnincorporatedTotal
Residential Revenue 32000Hauling Revenue - Residential MSW 6,672,869
(without increase in Base Year)32001Hauling Revenue - Residential MSW Extras112,470
57.Single Family Residential $6,972,308$6,972,308$1,396,589$901,993$932,2843,741,440.83 32002Hauling Revenue - Residential MSW Adjust117,936
6,903,275
Multiunit Residential Dumpster CHECKER 69,033 2016 Volume Growth RESI
58. Number of Accounts 0 0 6,972,308
59. Revenues $0 $0
60.Less Allowance for Uncollectable $0 $0
61.Total Residential Revenue $6,972,308$6,972,308$1,396,589$901,993$932,284$3,741,441 $0
Non-residential Revenue (without increase in Base Year)
Account Type
0.34%0.35%33.05%15.36%0.00%0.00%
Non-residential Can
62. Number of Accounts 8 8 2 2 1 3
63. Revenues $1,237$1,237 $237 $457 $236 $307
Non-residential Wastewheeler 3.4%0.0%
64. Number of Accounts 361 361 121 85 47 108
65. Revenues $197,399$197,399$50,094$84,630$14,616$48,058
Non-residential Dumpster 96%17%38%3%33000Hauling Revenue - Commercial FEL 4,496,000
66. Number of Accounts 1,812 1809 363 285 396 765 3 33001Hauling Revenue - Commercial FEL Extras189,355
67. Revenues $4,607,749$4,539,771$959,874$585,780$988,1401,937,999 $67,978 33002 Hauling Revenue - Commercial FEL Adjustm 6,136
68.Less: Allowance for Uncollectible 4,691,491
Non-residential Accounts $0 $0 4,738,406
69.Total Non-residential Revenue$4,806,384$4,738,406$1,010,206$670,867$1,002,992$1,986,364$67,978 46,915 2016 Volume Growth COMM
74.Interest on Investments ($1,402)$0 $0 $0 $0 $0($1,402)11,710,714 - CHECKER
75.Other Income $12,600 $0 $0 $0 $0 $0$12,600
76.Total Revenue Offsets $11,789,890$11,710,714$2,406,795$1,572,860$1,935,276$5,727,805$79,176
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 5 of 6
Section VII-Revenue Offsets
Appendix 3
Item 9.a. - Page 48
South County Sanitary Service
Base Year 2016 Rate Adjustment Application
Operating Information
Percent Percent PercentBase YearPercent
2013Change2014Change2015Change2016Change2017
Residential
Accounts
77. Arroyo Grande 5,6730.6%5,7060.2%5,7171.0%5,7741.0%5,832
Grover Beach 4,0760.7%4,1060.8%4,1381.0%4,1791.0%4,221
Pismo Beach 3,5980.8%3,6270.3%3,6381.0%3,6741.0%3,711
Oceano CSD 1,7171.7%1,7470.8%1,7611.0%1,7791.0%1,796
Nipomo CSD 3,9270.6%3,9510.1%3,9551.0%3,9951.0%4,034
County 5,9923.0%6,1690.8%6,2171.0%6,2791.0%6,342
24,9831.3%25,3060.5%25,4261.0%25,6801.0%25,937
78.Routes-Garbage 10-20.0%8-25.0%60.0%60.0%6
79.Routes-Recycling 60.0%60.0%60.0%60.0%6
80.Direct Labor Hours33,280-12.5%29,120-14.3%24,9600.0%24,9600.0%24,960
Non-residential Garbage
Accounts
80. Arroyo Grande 4770.8%481-0.2%4801.0%4851.0%490
Grover Beach 4272.3%4370.0%4371.0%4411.0%446
Pismo Beach 3661.1%370-1.1%3661.0%3701.0%373
Oceano CSD 193-5.2%1830.0%1831.0%1851.0%187
Nipomo CSD 2120.5%2130.0%2131.0%2151.0%217
County 4560.9%4601.3%4661.0%4711.0%475
2,1310.6%2,1440.0%2,1451.0%2,1661.0%2,188
81.Routes-garbage 60.0%6-16.7%50.0%50.0%5
Routes-recycling 20.0%20.0%20.0%20.0%2
82.Direct Labor Hours16,6400.0%16,640-12.5%14,5600.0%14,5600.0%14,560
Recyclable Materials - All areas-Commingled Recycling (in tons)
Accounts
83. Tri-Cities 8,04610.8%8,916-1.1%8,8191.0%8,9071.0%8,996
Nipomo/Oceano CSD2,95810.8%3,278-1.1%3,2421.0%3,2751.0%3,308
84. County 94710.8%1,049-1.1%1,0381.0%1,0481.0%1,058
11,95010.8%13,243-1.1%13,0991.0%13,2301.0%13,362
Recyclable Materials - All areas-Greenwaste Recycling
Routes 40.0%40.0%40.0%40.0%4
Tons Collected 12,114-1.8%11,902-7.0%11,0711.0%11,1821.0%11,294
Direct Labor Hours10,4000.0%10,4000.0%10,40020.0%12,4800.0%12,480
Garbage Tons Collected40,5521.5%41,1421.2%41,6211.0%42,0371.0%42,457
Fiscal Year: 1-1-2016 to 12-31-2016 Pg. 6 of 6
Historical Current Projected
Section IX-Operating Data
Appendix 3
Item 9.a. - Page 49
CITY OF ARROYO GRANDE
NOTICE OF PUBLIC HEARING REGARDING
PROPOSED SOLID WASTE RATE INCREASE
Dear 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
solid waste disposal rate increases (the “Proposed Rate Increase”) proposed by South County Sanitary Service (“the
Garbage Company”) for properties and customers receiving solid waste services within the City. The Proposed Rate
Increase will be considered by the Arroyo Grande City 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:
Date, Time and Place of the Public Hearing
Majority Protest Procedures
Reason for the Proposed Rate Increase
Basis Upon Which the Proposed Rate Increase is Calculated
Proposed Rate Increase Amounts
NOTICE OF PUBLIC HEARING
A Public Hearing for the Proposed Solid Waste Rate Increases within the City limits will be held on:
Date: October 13, 2015
Time: 6:00 pm
Place: Arroyo Grande City Council Chambers, 215 East Branch Street, Arroyo Grande, CA
At the Public Hearing, the Arroyo Grande City Council will consider all public comment in support and in
opposition of the Proposed Rate Increase and whether or not a Majority Protest exists pursuant to the California
Constitution (below). If approved, the Proposed Rate Increase would become effective January 1, 2016.
MAJORITY PROTEST PROCEDURES
Pursuant to Section 6 of Article XIII D of the California Constitution, the following persons may submit a written protest
against the Proposed Rate Increase to the City Clerk before the close of the Public Hearing referenced above.
•An owner(s) of property (parcel(s)) receiving solid waste service 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 solid waste 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 service within the city limits (tenant-customer).
A valid written protest must contain a statement that you protest the increase in solid waste rates, the address OR
Assessor’s Parcel Number (APN) of the parcel or parcels which receive solid waste service and must be signed by either
the owner or the tenant-customer of the parcel or parcels. One written protest per parcel shall be counted in calculating a
majority protest to the proposed solid waste rate increase 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. Although oral comments at the
public hearing will not qualify as formal protests unless accompanied by a written protest, the Mayor and City Council
welcome input from the community during the public hearing. To be counted, a protest must be received in writing by the
City Clerk before the close of the Public Hearing referenced above.
ATTACHMENT 2
Item 9.a. - Page 50
Written protests regarding the solid waste rate increase 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 at Arroyo Grande City Hall located at 300 East Branch
Street, Arroyo Grande, California.
If valid written protests are presented by a majority of owners and/or tenants-customers of parcels receiving solid waste
service within the city limits, then the City will not adjust/increase the solid waste disposal rates. Only one protest per
parcel will be counted in determining whether or not a majority protest exists.
REASON FOR THE PROPOSED RATE INCREASES
The Proposed Rate Increases (amounting to an average increase of approximately 3.25% for each category of service) are
necessary for the Garbage Company to continue to provide safe, environmentally sound and reliable solid waste removal,
transportation and disposal services to the citizens of the City of Arroyo Grande. The increases requested by the Garbage
Company are due to increasing operational costs. Several factors have contributed to these increased costs, including, but
not limited to: the rising costs associated with the operation of a garbage company, increased costs associated with
operation and fuel for vehicles, increased labor costs, increased landfill rates, and costs associated with the
implementation of an Organics Program as mandated by California AB 1826, which requires local jurisdictions across the
state to develop a recycling program to divert organic waste from landfills to an authorized composting facility. Organic
waste means food waste, green waste, landscape and pruning waste, nonhazardous wood waste, and food-soiled paper
waste that is mixed in with food waste.
BASIS UPON WHICH THE PROPOSED RATE INCREASE IS CALCULATED
The Proposed Rate Increases ( 3.25% for each category of service are based on the following cost increases incurred by
the Garbage Company:
1. 1.34% of the Proposed Rate Increase is based on increased costs for fuel, for vehicles, ongoing
maintenance, and increased labor costs.
2. 0.81% of the Proposed Rate Increases are based on a $2.25 per ton increase in the cost of landfill
disposal.
3. 1.10% of the Proposed Rate Increases are based on the implementation of an Organics Program.
In addition, commencing on January 1, 2017 and January 1 2018, all the rates shall be increased based on the following:
1. Increase, if any, in the Consumer Price Index (CPI) for Bureau of Labor Statistics’ Consumer Price Index
for Urban Consumers based on the All U.S. City Average, Bureau of Labor Statistics for the month of
June 2016 for January 1, 2017 and June 2017 for January 1, 2018.
2. Increase of 0.79% for 2017 and 0.77% for 2018 for increase in the cost of landfill disposal.
3. Increase, if any, in the Consumer Price Index (CPI) for Bureau of Labor Statistics’ Consumer Price Index
for Urban Consumers based on the All U.S. City Average, Bureau of Labor Statistics for increase in
AB939 fee cost.
A copy of the 2016 Base Year Rate Adjustment Application, which provides additional information
on the proposed rate increase is available at the City Clerk’s office located at 300 East Branch,
Arroyo Grande, CA
Item 9.a. - Page 51
PROPOSED RATE INCREASE AMOUNTS
The following charts provide a summary of the current solid waste rates and the Proposed Rate Increases:
SOUTH COUNTY SANITARY SERVICE
RATE INCREASE EFFECTIVE JANUARY 1, 2016
CITY OF ARROYO GRANDE
Service Description
Pickups Per
Week
Current
Monthly Rate
Effective
6-1-2014
Proposed
Rate
Adjustment %
Proposed
Monthly Rate
Effective
1/01/2016
RESIDENTIAL:
32 Gallon Waste Wheeler 1 $16.30 3.25% $16.82
64 Gallon Waste Wheeler 1 $21.17 3.25% $21.86
96 Gallon Waste Wheeler 1 $26.07 3.25% $26.92
TWO-64 Gallon Waste Wheelers 1 $30.96 3.25% $31.97
ONE 64 & ONE 96 Gallon 1 $35.87 3.25% $37.04
TWO-96 Gallon Waste Wheelers 1 $40.76 3.25% $42.08
Residential customers must use the waste wheelers provided by the garbage company.
MISCELLANEOUS CHARGES - ALL
CUSTOMERS:
Overstacked Garbage & extra bags
Minimum/unit each $4.61 3.25% $4.76
Overstacked Greenwaste & extra
bags Minimum/unit each $2.31 138% $5.50
Overstacked Blue Bin & extra bags
Minimum/unit each $1.30 3.25% $1.34
In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE RATES per month $11.52 3.25% $11.89
Monthly charge for additional 96-
gallon green waste service per month $1.60 245% $5.50
Extended Vacation Service per month $13.22 3.25% $13.65
Vacant Rate per month $13.22 3.25% $13.65
Waste wheeler cleaning each time $17.18 3.25% $17.74
Trip charge each time $11.52 3.25% $11.89
Non-payment downsize service each time $11.52 3.25% $11.89
Non-payment redeliver waste
wheeler each time $11.52 3.25% $11.89
Non-payment reconnect service each time $27.69 3.25% $28.59
Small item pickup (TV, toilet) each $27.02 3.25% $27.90
Appliance pickup-residential each $38.10 3.25% $39.34
Garbage extras on your scheduled
pickup day per yard $9.73 3.25% $10.05
Item 9.a. - Page 52
Garbage extras -NOT ON YOUR
SCHEDULED PICKUP DAY per yard $26.84 3.25% $27.71
Re-deliver bin on stopped acct each time $33.05 3.25% $34.12
Recycle bin rental per month $6.41 3.25% $6.62
Stand by time per hour $56.40 3.25% $58.23
Tax Lien Cert. Mail Fee $3.87 3.25% $4.00
City Clean Up $10.00 0.00% $10.00
Extra bin cleaning $51.54 3.25% $53.22
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 $33.05 3.25% $34.12
Delivery & Pickup-Waste Wheeler $11.52 3.25% $11.89
Rental Per Day $2.44 3.25% $2.52
Empties Per Yard $26.84 3.25% $27.71
Mattress:
Twin Each $15.00 3.25% $15.49
Double Each $15.00 3.25% $15.49
Queen Each $15.00 3.25% $15.49
King Each $15.00 3.25% $15.49
ADDITIONAL INFORMATION ALL CUSTOMERS:
Late Fees are imposed for residential customers over 30 days delinquent and commercial 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.
Please recycle, its cheaper and it helps the Community achieve its AB939 goal to reduce waste.
Any additional recycling services are charged out at 50% of the garbage rate.
FURTHER INFORMATION
If you have questions about the Proposed Rate Increase, please contact Patrick Fenton at 805-489-4246.
Item 9.a. - Page 53
CITY OF ARROYO GRANDE
NOTICE OF PUBLIC HEARING REGARDING
PROPOSED SOLID WASTE RATE INCREASE
Dear 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
solid waste disposal rate increases (the “Proposed Rate Increase”) proposed by South County Sanitary Service (“the
Garbage Company”) for properties and customers receiving solid waste services within the City. The Proposed Rate
Increase will be considered by the Arroyo Grande City 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:
Date, Time and Place of the Public Hearing
Majority Protest Procedures
Reason for the Proposed Rate Increase
Basis Upon Which the Proposed Rate Increase is Calculated
Proposed Rate Increase Amounts
NOTICE OF PUBLIC HEARING
A Public Hearing for the Proposed Solid Waste Rate Increases within the City limits will be held on:
Date: October 13, 2015
Time: 6:00 pm
Place: Arroyo Grande City Council Chambers, 215 East Branch Street, Arroyo Grande, CA
At the Public Hearing, the Arroyo Grande City Council will consider all public comment in support and in
opposition of the Proposed Rate Increase and whether or not a Majority Protest exists pursuant to the California
Constitution (below). If approved, the Proposed Rate Increase would become effective January 1, 2016.
MAJORITY PROTEST PROCEDURES
Pursuant to Section 6 of Article XIII D of the California Constitution, the following persons may submit a written protest
against the Proposed Rate Increase to the City Clerk before the close of the Public Hearing referenced above.
•An owner(s) of property (parcel(s)) receiving solid waste service 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 solid waste services; and
•A Tenant(s) whose name appears on the Garbage Company’s records as the customer of record for the
corresponding parcel receiving solid waste service within the city limits (tenant-customer).
A valid written protest must contain a statement that you protest the increase in solid waste rates, the address OR
Assessor’s Parcel Number (APN) of the parcel or parcels which receive solid waste service and must be signed by either
the owner or the tenant-customer of the parcel or parcels. One written protest per parcel shall be counted in calculating a
majority protest to the proposed solid waste rate increase 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. Although oral comments at the
public hearing will not qualify as formal protests unless accompanied by a written protest, the Mayor and City Council
welcome input from the community during the public hearing. To be counted, a protest must be received in writing by the
City Clerk before the close of the Public Hearing referenced above.
ATTACHMENT 3
Item 9.a. - Page 54
Written protests regarding the solid waste rate increase 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 at Arroyo Grande City Hall located at 300 East Branch
Street, Arroyo Grande, California.
If valid written protests are presented by a majority of owners and/or tenants-customers of parcels receiving solid waste
service within the city limits, then the City will not adjust/increase the solid waste disposal rates. Only one protest per
parcel will be counted in determining whether or not a majority protest exists.
REASON FOR THE PROPOSED RATE INCREASES
The Proposed Rate Increases (amounting to an average increase of approximately 3.25% for each category of service) are
necessary for the Garbage Company to continue to provide safe, environmentally sound and reliable solid waste removal,
transportation and disposal services to the citizens of the City of Arroyo Grande. The increases requested by the Garbage
Company are due to increasing operational costs. Several factors have contributed to these increased costs, including, but
not limited to: the rising costs associated with the operation of a garbage company, increased costs associated with
operation and fuel for vehicles, increased labor costs, increased landfill rates, and costs associated with the
implementation of an Organics Program as mandated by California AB 1826, which requires local jurisdictions across the
state to develop a recycling program to divert organic waste from landfills to an authorized composting facility. Organic
waste means food waste, green waste, landscape and pruning waste, nonhazardous wood waste, and food-soiled paper
waste that is mixed in with food waste.
BASIS UPON WHICH THE PROPOSED RATE INCREASE IS CALCULATED
The Proposed Rate Increases (3.25% for each category of service are based on the following cost increases incurred by the
Garbage Company:
1. 1.34% of the Proposed Rate Increase is based on increased costs for fuel, for vehicles, ongoing
maintenance, and increased labor costs.
2. 0.81% of the Proposed Rate Increases are based on a $2.25 per ton increase in the cost of landfill
disposal.
3. 1.10% of the Proposed Rate Increases are based on the implementation of an Organics Program.
In addition, commencing on January 1, 2017 and January 1 2018, all the rates shall be increased based on the following:
1. Increase, if any, in the Consumer Price Index (CPI) for Bureau of Labor Statistics’ Consumer Price Index
for Urban Consumers based on the All U.S. City Average, Bureau of Labor Statistics for the month of
June 2016 for January 1, 2017 and June 2017 for January 1, 2018.
2. Increase of 0.79% for 2017 and 0.77% for 2018 for increase in the cost of landfill disposal.
Increase, if any, in the Consumer Price Index (CPI) for Bureau of Labor Statistics’ Consumer Price
Index for Urban Consumers based on the All U.S. City Average, Bureau of Labor Statistics for
increase in AB939 fee cost.
A copy of the 2016 Base Year Rate Adjustment Application, which provides additional information
on the proposed rate increase is available at the City Clerk’s office, located at 300 East Branch,
Arroyo Grande, CA
Item 9.a. - Page 55
PROPOSED RATE INCREASE AMOUNTS
The following charts provide a summary of the current solid waste rates and the Proposed Rate Increases:
SOUTH COUNTY SANITARY SERVICE
RATE INCREASE EFFECTIVE JANUARY 1, 2016
CITY OF ARROYO GRANDE
Service Description Pickups Per Week
Current Monthly
Rate Effective
6-1-2014
Proposed Rate
Adjustment %
Proposed Monthly
Rate Effective
1/01/2016
APARTMENTS, TRIPLEX, DUPLEX
Rates are the same as commercial rates (below).
COMMERCIAL DUMPSTERS - ALL AREAS:
1 yd dumpster 1 $80.49 3.25% $83.11
1 yd dumpster 2 $117.43 3.25% $121.25
1 yd dumpster 3 $154.41 3.25% $159.43
1 yd dumpster 4 $197.90 3.25% $204.33
1 yd dumpster 5 $232.66 3.25% $240.22
1 yd dumpster 6 $276.16 3.25% $285.14
1 yd dumpster 7 $335.66 3.25% $346.57
1.5 yd dumpster 1 $91.36 3.25% $94.33
1.5 yd dumpster 2 $141.36 3.25% $145.95
1.5 yd dumpster 3 $200.09 3.25% $206.59
1.5 yd dumpster 4 $260.96 3.25% $269.44
1.5 yd dumpster 5 $317.51 3.25% $327.83
1.5 yd dumpster 6 $358.83 3.25% $370.49
1.5 yd dumpster 7 $420.16 3.25% $433.82
2 yd dumpster 1 $102.23 3.25% $105.55
2 yd dumpster 2 $171.80 3.25% $177.38
2 yd dumpster 3 $243.58 3.25% $251.50
2 yd dumpster 4 $321.84 3.25% $332.30
2 yd dumpster 5 $397.96 3.25% $410.89
2 yd dumpster 6 $445.81 3.25% $460.30
2 yd dumpster 7 $518.34 3.25% $535.19
3 yd dumpster 1 $121.76 3.25% $125.72
3 yd dumpster 2 $230.51 3.25% $238.00
3 yd dumpster 3 $321.84 3.25% $332.30
3 yd dumpster 4 $419.69 3.25% $433.33
Item 9.a. - Page 56
3 yd dumpster 5 $497.99 3.25% $514.17
3 yd dumpster 6 $593.67 3.25% $612.96
3 yd dumpster 7 $758.26 3.25% $782.90
4 yd dumpster 1 $152.24 3.25% $157.19
4 yd dumpster 2 $269.65 3.25% $278.41
4 yd dumpster 3 $387.07 3.25% $399.65
4 yd dumpster 4 $497.99 3.25% $514.17
4 yd dumpster 5 $615.42 3.25% $635.42
4 yd dumpster 6 $730.69 3.25% $754.44
4 yd dumpster 7 $930.54 3.25% $960.78
6 yd dumpster 1 $228.36 3.25% $235.78
6 yd dumpster 2 $404.48 3.25% $417.63
6 yd dumpster 3 $580.60 3.25% $599.47
6 yd dumpster 4 $747.00 3.25% $771.28
6 yd dumpster 5 $923.13 3.25% $953.13
6 yd dumpster 6 $1,096.04 3.25% $1,131.66
6 yd dumpster 7 $1,395.82 3.25% $1,441.18
8 yd dumpster 1 $304.47 3.25% $314.37
8 yd dumpster 2 $539.30 3.25% $556.83
8 yd dumpster 3 $774.13 3.25% $799.29
8 yd dumpster 4 $995.99 3.25% $1,028.36
8 yd dumpster 5 $1,230.85 3.25% $1,270.85
8 yd dumpster 6 $1,461.38 3.25% $1,508.87
8 yd dumpster 7 $1,861.10 3.25% $1,921.59
The rates shown above include the monthly container rental fee and a semi-annual dumpster cleaning.
The rates are the same for bins and garwoods, when volume is identical. Bins and garwoods are types of containers used for
recycling.
COMMERCIAL GARBAGE CANS - ALL AREAS:
1 Can * 1 $19.56 3.25% $20.20
1 Can * 2 $40.12 3.25% $41.42
1 Can * 5 $94.02 3.25% $97.08
1 Can * 7 $130.90 3.25% $135.15
2 Cans * 1 $41.32 3.25% $42.66
2 Cans * 2 $54.90 3.25% $56.68
2 Cans * 7 $164.06 3.25% $169.39
3 Cans * 1 $47.85 3.25% $49.41
3 Cans * 2 $80.49 3.25% $83.11
3 Cans * 3 $101.34 3.25% $104.63
Item 9.a. - Page 57
3 Cans * 4 $122.43 3.25% $126.41
3 Cans * 5 $137.87 3.25% $142.35
3 Cans * 7 $188.08 3.25% $194.19
4 Cans * 1 $60.87 3.25% $62.85
4 Cans * 7 $234.61 3.25% $242.23
* Maximum volume and weight per garbage can : 33 gallons / 80 pounds
MISCELLANEOUS CHARGES - ALL CUSTOMERS:
Overstacked Garbage & extra bags
Minimum/unit each $4.61 3.25% $4.76
Overstacked Greenwaste & extra
bags Minimum/unit each $2.31 138% $5.50
Overstacked Blue Bin & extra bags
Minimum/unit each $2.43 3.25% $2.51
Xtra Recycle 32, 64, or 96 waste
wheelers per month $1.30 3.25% $1.34
In yard service (per can or
commodity) IN ADDITION TO
STANDARD GARBAGE RATES per month $11.52 3.25% $11.89
Monthly charge for additional 96-
gallon green waste service per month $1.60 245% $5.50
Extended Vacation Service per month $13.22 3.25% $13.65
Vacant Rate per month $13.22 3.25% $13.65
Waste wheeler cleaning each time $17.18 3.25% $17.74
Trip charge each time $11.52 3.25% $11.89
Non-payment downsize service each time $11.52 3.25% $11.89
Non-payment redeliver waste
wheeler each time $11.52 3.25% $11.89
Non-payment reconnect service each time $27.69 3.25% $28.59
Small item pickup (TV, toilet) each $27.02 3.25% $27.90
Appliance pickup-residential each $38.10 3.25% $39.34
Lock Charges $6.41 3.25% $6.62
Garbage extras on your scheduled
pickup day per yard $9.73 3.25% $10.05
Garbage extras -NOT ON YOUR
SCHEDULED PICKUP DAY per yard $26.84 3.25% $27.71
Commercial Waste Wheeler rent per month $3.56 3.25% $3.68
Re-deliver bin on stopped acct each time $33.05 3.25% $34.12
COMPACTORS (PER TON) $42.00 5% $44.25
Sunday Service (in additional to
garbage service level) per month $57.67 3.25% $59.54
Recycle bin rental per month $6.41 3.25% $6.62
Stand by time per hour $56.40 3.25% $58.23
Extra bin cleaning $51.54 3.25% $53.22
Item 9.a. - Page 58
Larger than residential appliance or
glass, glass doors, or plate glass by quote only
Damage/Destruction of bins or
waste wheelers by quote only
Short Term Dumpsters:
Delivery & Pickup-Bin $33.05 3.25% $34.12
Delivery & Pickup-Waste Wheeler $11.52 3.25% $11.89
Rental Per Day $2.44 3.25% $2.52
Empties Per Yard $26.84 3.25% $27.71
Mattress:
Twin Each $15.00 3.25% $15.49
Double Each $15.00 3.25% $15.49
Queen Each $15.00 3.25% $15.49
King Each $15.00 3.25% $15.49
ADDITIONAL INFORMATION ALL CUSTOMERS:
Late Fees are imposed for residential customers over 30 days delinquent and commercial 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.
Please recycle, its cheaper and it helps the Community achieve its AB939 goal to reduce waste.
Any additional recycling services are charged out at 50% of the garbage rate.
FURTHER INFORMATION
If you have questions about the Proposed Rate Increase, please contact Patrick Fenton at 805-489-4246.
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