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Agenda Item - 2020-11-17 - Number 9.2 - Resolution 20-38 Republic Services Rate Adjustments 9.2 D 0s COUNCIL REPORT 442, ro OREOOt.4 Subject: Resolution 20-38, Adjusting the solid waste, recycling, and organics collection rate for Republic Services of Lake Oswego Meeting Date: November 17, 2020 Staff Member: Jenny Slepian Department: CMO Action Required Advisory Board/Commission Recommendation ❑ Motion ❑ Approval ❑ Public Hearing ❑ Denial ❑ Ordinance ❑ None Forwarded ❑X Resolution ❑X Not Applicable ❑ Information Only Comments: ❑ Council Direction ❑ Consent Agenda Staff Recommendation: Approve Resolution 20-38 Recommended Language for Motion: Move to approve Resolution 20-38, adjusting the solid waste, recycling, and organics collection rate for Republic Services of Lake Oswego Project/ Issue Relates To: ❑Council Goals/Priorities ❑Adopted Master Plan(s) ❑X Not Applicable ISSUE BEFORE COUNCIL Resolution 20-38, an adjustment of Republic Services' solid waste collection rates. BACKGROUND Collection of waste and recycling within the City of Lake Oswego (City) is accomplished under an exclusive franchise agreement between Rossman Sanitary Service doing business as Republic Services and the City. 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeosweao.city Page 2 As the regulator of waste and recycling, City Council is responsible for ensuring rates are just and reasonable and adequate to provide necessary public service. Section 13, paragraph E, states the following: Rates shall be approved by the City Council from time-to-time by resolution, as provided by LOC 20.10.720. In determining the appropriate rate to be charged by the Franchisee, the City Council shall consider: (1) The cost of performing the service provided by the Franchisee, including any additional costs (or savings) resulting from recycling. (2) Anticipated increases in the cost of providing services. (3) The need for equipment replacement and the need for additional equipment to meet service needs; compliance with federal, state, and local law, ordinances and regulations; or technological change. (4) The investment of the Franchisee and the value of its business and the necessity that the Franchisee have a reasonable rate of return of fair operating margin. (5) Rates in other cities in this metropolitan area. (6) Other factors deemed relevant by the City Council. Republic Services submitted a rate increase request to the City Council on May 14, 2020. To assist with reviewing the reported results and calculating the rates, the City contracted with Bell & Associates, a consulting firm with expertise in solid waste collection operations, to provide the City with solid waste and recycling consulting services. At the October 20, 2020 meeting, the City Council directed staff to return with a resolution approving the following rate adjustment: • $1.80 rate increase for 20, 35, 60, and 90-gallon carts • Cost of service rate increase for drop box services • No increase to commercial container rates DISCUSSION Republic Services submitted a rate request proposal on May 14, 2020. This was followed up with a revised rate sheet on August 18, 2020. The proposed rate increase called for an across the board 12% increase for residential, commercial, and industrial rates. The previously approved Metro Recycling Surcharge is listed as an additional fee for customers on the rate sheet as $2.50/month for residential customers and $1.50/month for commercial customers. Additional services provided by Republic Services that are also subject to a rate increase are multifamily collection, drop box service, on-call, and extra container pick-ups. Given that the 12% rate increase request was double what was approved in 2018, the City contracted with Chris Bell of Bell & Associates to provide a detailed analysis of Republic Services' financial statements, costs, and expenditures to provide a recommendation to the City 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 3 Council on whether to approve Republic Services' rate increase request and to provide additional options for Council to consider. The City Council voted 7-0 to direct staff to prepare a resolution adjusting rates in accordance with the Gradual Reduction of Commercial Subsidy option. Gradual reduction of the commercial subsidy would keep commercial container service unchanged and increase residential cart rates to generate the additional $252,100 of income needed to achieve the 10.5% rate of return. As a percentage of revenue, $252,100 is a 5.6% increase. In future years, cart rates would be adjusted while container rates would remain unchanged until both services' return contribution was within a reasonable range. The proposed increase for cart service is $1.80 for all customers with weekly service. The increase is for collection operations, which is uniform for all weekly cart customers regardless of cart size. A second reason for a uniform increase is that the rates for higher volume carts (64 and 96) are more than the cost of service, while rates for smaller carts (20 and 32) are less than the cost of service. The table below compares the Status Quo rates to the Gradual Reduction rates before the Metro recycling surcharge of$2.50/month for residential customers and $1.50/month for commercial customers: Current Rate Gradual Service 1 Status Quo Reduction 20 gal $21.20 $21.94 $23.00 35 gal $30.06 $31.11 $31.86 60 gal $46.77 $48.41 $48.57 90 gal $49.21 $50.93 $51.01 2 yd. weekly $211.80 $219.21 no change 3 yd. weekly $279.85 $289.64 no change 4 yd. weekly $351.51 $363.81 no change 8 yd. weekly $568.54 $588.44 no change RECOMMENDATION The Gradual Reduction of Commercial Subsidy is recommended as the preferred rate adjustment option for Lake Oswego. The historical reliance on commercial customers to subsidize the collection of solid waste for residential and drop box customers is no longer sustainable given the closures of commercial businesses in 2020. For those still in operation, volumes have reduced based on a smaller customer base and declining solid waste generation. Equally important, City Council should consider the financial difficulties being faced by Lake 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city Page 4 Oswego businesses. As residential waste volumes continue to rise, it makes more sense to re- apportion rates onto these customers over time. It is also recommended that drop boxes be treated separately and be charged at the rate of service, given that they have accounted for significant drops in rate of return in previous years and are a substantially different business model than weekly cart and container collection Staff recommends that the City Council approve Resolution 20-38 adopting the Gradual Reduction of Commercial Subsidy rate model for all cart customers, resulting in a $1.80 rate increase with commercial container rates unchanged. Drop box rates should be set at a cost of service model using the rates shown above. ATTACHMENTS 1. Resolution 20-38 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.lakeoswego.city ATTACHMENT 1 RESOLUTION 20-38 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE OSWEGO AUTHORIZING AN INCREASE IN THE SOLID WASTE, RECYCLING, AND ORGANICS COLLECTION RATES BY REPUBLIC SERVICES OF LAKE OSWEGO WHEREAS, Ordinance 2600 grants Rossman Sanitary Service, Inc., doing business as Allied Waste of Lake Oswego, now doing business as Republic Services of Lake Oswego ("Franchisee") and exclusive franchise to collect solid waste within the City, and reserved to the City to right to modify the schedule of rates; and WHEREAS, Ordinance 2600 provides that rates may be approved by the City Council by resolution, and that, in determining the appropriate rates, the Council shall consider: 1. The cost of performing the service provided by the Franchisee, including any additional costs (or savings) resulting from recycling; 2. Anticipated increases in the cost of providing the services; 3. The need for equipment replacement and the need for additional equipment to meet service needs, compliance with federal, state, and local law, ordinances and regulations, or technological change; 4. The investment of the franchisee and the value of its business and the necessity that the franchisee have a reasonable rate of return or fair operation margin; 5. Rates in other cities in the metropolitan area; and 6. Other factors deemed relevant by the City. WHEREAS, the Franchisee submitted a request for a rate increase on May 14, 2020; and WHEREAS, The City Council at the October 20, 2020 Council Meeting tentatively approved a proposed $1.80 rate increase for 20, 35, 60, and 90 gallon customer carts, a cost of service increase for all drop boxes, and no change to commercial container rates; and WHEREAS, The City Council at the October 20, 2020 Council Meeting requested staff to return with a resolution to authorize a rate adjustment for the franchisee; and WHEREAS, the City Council has considered the factors outlined above, and has given careful consideration to the interests of the public and the Franchisee alike, and concludes that an increase in solid waste collection rates should be granted; NOW,THEREFORE, BE IT RESOLVED by the City Council of the City of Lake Oswego that: Section 1. Effective January 1, 2021 the rate increases attached as Exhibit A are approved and adopted for the solid waste collection franchise granted pursuant to Ordinance No. 2600 Resolution 20-38 Page 1 of 2 Section 2. November 17, 2020. This Resolution shall take effect upon passage. Considered and enacted at the regular meeting of the City Council of the City of Lake Oswego on the day of , 20 . AYES: NOES: EXCUSED: ABSTAIN: Kent Studebaker, Mayor ATTEST: Anne-Marie Simpson, City Recorder APPROVED AS TO FORM: David Powell, City Attorney Resolution 20-38 Page 2 of 2 Exhibit A to Resolution 20-38 A City of Lake Oswego 2020 Updated Rate Sheet an. . . 1 , 1 . :... ,... .. , . . . .. ____, ,-.,,,, . . -.-... „ .N. ,. . • ., - . i . •_. ___ ... I 1 I . ' \ , i , 1 .. _ .\\\ 1 op . - • ,• • \ k 1-' + . V. '; . .- -- — .. . '\ ,, \ \ ',4,7, 1\;____, . , ,,is,_, _.,7,1_ IP 1111'11111.140. .4 -Of ‘,01: y \ ... f Ida . llrimr:I174 1114411:•,, \\ ler' zaK�os�+eGo,o9 011111111111.7.-• �06 : ltSaaT T07455 1 ' i ... . i. ° '❑ 1 Republic Services of Lake Oswego New Rate Sheets: Residential 2020 Rate Adjustment Council Packet Residential Rates 20 gallon $23.00 35 gallon $31.86 60 gallon $48.57 90 gallon $51.01 Up the Drive Rate - 20gallon &35 gallon cart add'I $1.14for every 50feet $4.33 Up the Drive Rate - 60 gallon &90 gallon carts add'I $1.14 for every 50 feet $5.79 Mountain Park-Trash and Recycling Only,Home Owners Association(HOA)manages Yard Debris in the area. 20 ga l l o n $20.25 35 gallon $29.11 60 gallon $45.82 90 gallon $48.26 Misc Charges and Limited Services 35 gallon cart- monthly service $17.88 Recycling Only (Weekly with 60 gal cart and bin) $5.50 On Call (Trash Only) 35 gallon $13.02 *Must service at least once every 2 months Lost or damaged cart(Garbage, Yard Debris, Recycling) $69.81 Lost or damaged Recycling Bin $11.81 Extra Can/Bag/Box (CBB) Yard Debris $7.57 Contaminated Cart $14.20 Return Trip Fee (RTN) same day $19.07 Return Trip Fee (CAL) Off day $30.29 Gate Opening/Roll Out Container(Monthly), per enclosure $17.18 New Rate Sheets: Industrial 2020 Rate Adjustment Council Packet Industrial Rates 10 yard dropbox $153.00 20 yard dropbox $158.00 30 yard dropbox $158.00 40 yard dropbox $168.00 Dropbox delivery $36.96 Relocate dropbox $95.25 Dry run $115.00 Compactor rate $210.00 Misc Charges and Limited Services Fee for less than 4 hauls per month $22.87 Round tripped custom/lidded box (per haul) $29.73 Custom/lidded box rental (per month) $6.86 Multifamily Recycling Services for Drop Box or Compactor Customers Number of Units: 5-199 200-299 300-399 399+ New Rates: $2.87 $2.42 $2.19 $2.12 Misc Charges and Limited Services Extra Can/Bag/Box (CBB) $7.57 Yard Debris Cart $12.87 Yard Debris Cart Extra Can/Bag/Box (CBB YD) $5.60 Cart Redelivery Fee $31.99 Switch/Wash Out Cart **1 free per year $32.21 Lock $26.84 Contamination Fee $14.19 Reinstatement Fee $31.99 Return Trip Fee same day/cart only (RTN) 33% of monthy rate Return Trip Fee off service day/cart only (CAL) $30.27 Extra Yardage (EXY) per yard $31.48 *Compacted containers charged at 2.2x the loose rate *Organic rate is commercial rate minus 4% New Rate Sheets: Unchanged Commercial Rates 2020 Rate Adjustment Commercial Rates 35 gallon $ 27.58 65 gallon 41.10 90 gallon 43.71 1 yard 137.64 1 yard each additional 110.11 1 yard 2x per week 239.00 1 yard each additional 2x per week 191.20 1 yard 3x per week 353.24 1 yard each additional 3xperweek 282.59 1 yard 4x per week 466.98 1 yard each additional 4x per week 373.58 1 yard 5x per week 580.70 1 yard each additional 5x per week 464.56 1 yard 6x per week 694.44 l yard each additional 6x per week 555.55 1.33 yard 150.97 1.33 yard each additional 120.78 1.33 yard 2xperweek 288.09 1.33yard each additional 2xperweek 230.47 1.33 yard 3xperweek 422.60 1.33 yard each additional 3xperweek 338.08 1.33 yard 4xperweek 665.23 1.33 yard each additional 4x per week 532.18 1.33 yard 5x per week 679.15 1.33 yard each additional 5x per week 543.32 1.33 yard fix p e r week 793.79 1.33 yard each additional 6x per week 635.03 1.5 yard 169.48 1.5 yard each additional 135.58 1.5 yard 2x per week 326.25 1.5 yard each additional 2x per week 261.00 1.5 yard 3x per week 483.01 1.5 yard each additional 3x per week 386.41 1.5 yard 4x per week 639.81 1.5 yard each additional 4x per week 511.85 1.5 yard 5xperweek 796.60 1.5 yard each additional 5x per week 637.28 1.5 yard 6xperweek 953.42 1.5 yard each additional 6x per week 762.74 Effective upon Council Adoption New Rate Sheets: Unchanged Commercial Rates 2020 Rate Adjustment Commercial Rates 2 yard $ 211.80 2 yard each additional 180.03 2 yard 2xperweek 410.87 2yard each additional 2xperweek 349.24 2 yard 3xperweek 609.94 2 yard each additional 3x per week 518.45 2 yard 4x per week 809.04 2 yard each additional 4x per week 687.68 2 yard 5x per week 1,008.14 2 yard each additional 5x per week 856.92 2 yard 6x per week 1,207.21 2 yard each additional 6x per week 1,026.13 3 yard 279.85 3 yard each additional 237.87 3 yard 2x per week 539.29 3 yard each additional 2x per week 458.40 3 yard 3xperweek 798.71 3 yard each additional 3xperweek 678.90 3 yard 4x per week 1,058.15 3 yard each additional 4x per week 899.43 3 yard 5x per week 1,317.58 3 yard each additional 5x per week 1,119.94 3 yard 6x per week 1,577.02 3 yard each additional 6x per week 1,340.47 4 yard 351.51 4 yard each additional 298.78 4 yard 2x per week 682.59 4 yard each additional 2x per week 580.20 4 yard 3x per week 1,013.66 4 yard each additional 3x per week 861.61 4 yard 4x per week 1,344.74 4 yard each additional 4x per week 1,143.03 4 yard 5x per week 1,675.84 4 yard each additional 5x per week 1,424.46 4 yard 6x per week 2,006.91 4 yard each additional 6x per week 1,705.87 Effective upon Council Adoption New Rate Sheets: Unchanged Commercial Rates 2020 Rate Adjustment Commercial Rates 5 yard 419.30 5 yard each additional 377.37 5 yard 2xperweek 816.23 5 yard each additional 2x per week 734.61 5 yard 3x per week 1,213.17 5 yard each additional 3x per week 1,091.85 5 yard 4x per week 1,610.11 5 yard each additional 4x per week 1,449.10 5 yard 5x per week 2,007.04 5 yard each additional 5x per week 1,806.34 5 yard 6x per week 2,403.97 5 yard each additional 6x per week 2,163.57 6 yard 475.49 6yard each additional 427.94 6yard 2xperweek 860.80 6 yard each additional 2x per week 774.72 6 yard 3x per week 1,381.56 6 yard each additional 3x per week 1,243.40 6 yard 4x per week 1,700.83 6 yard each additional 4x per week 1,530.75 6 yard 5x per week 2,287.25 6 yard each additional 5x per week 2,058.53 6 yard 6x per week 2,540.90 6 yard each additional 6x per week 2,286.81 8 yard 568.54 8 yard each additional 511.69 8 yard 2xperweek 1,114.66 8 yard each additional 2x per week 1,003.19 8 yard 3x per week 1,660.83 8 yard each additional 3x per week 1,494.75 8 yard 4x per week 2,206.98 8yard each additional 4xperweek 1,986.28 8 yard 5x per week 2,753.15 8 yard each additional 5x per week 2,477.84 8 yard 6x per week 3,299.31 8 yard each additional 6x per week 2,969.38 Effective upon Council Adoption Republic Services of Lake Oswego 10295 SW Ridder Road Wilsonville, OR 97070 repu bl icservices .com 44.r iiii ,... , ., ., ' j i I,) ;5. , idk 101" 1 1 • '11 ., ' Protecting I .,„1i' -- Blue Planet. I 't . T ' a ,l .\ \ " Ir-MI IM mir .11 7I1 l".1 it .- .. - lila I JO MM." Pli li_ •. r'- '- _,i i .4 . . (1/4,_e _. p _ _ ',....„ Ng •,ci, - Assembled by Travis Comfort, Municipal Contract Administrator R 1; REPUBLIC d.4 SERVICES We'll handle it from here.