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Agenda Item - 2022-11-15 - Number 08.1 - Resolution 22-27, Adjusting Solid Waste Service Rates 8.1 o�c t COUNCIL REPORT �� o AEG% Subject: Resolution 22-27, Garbage and Recycling Collection Service Rates Meeting Date: November 15, 2022 Staff Member: Amanda Watson, Sustainability Program Manager Report Date: November 4, 2022 Department: City Manager's Office Action Required Advisory Board/Commission Recommendation ❑ Motion ❑ Approval ❑ Public Hearing ❑ Denial ❑ Ordinance ❑ None Forwarded O Resolution 0 Not Applicable ❑ Information Only Comments: ❑ Council Direction O Consent Agenda Staff Recommendation: Adopt Resolution 22-27. Recommended Language for Motion: Move to adopt Resolution 22-27. Project/ Issue Relates To: Solid Waste Franchise; Sustainability Issue before Council (Highlight Policy Question): ❑Council Goals/Priorities ❑Adopted Master Plan(s) ONot Applicable ISSUE BEFORE COUNCIL Adjustment of Republic Services' solid waste collection rates. Respect. Excellence. Trust. Service. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO,OR 97034 WWW.LAKEOSWEGO.CITY Page 2 BACKGROUND Garbage and recycling collection services in Lake Oswego are provided by Republic Services, operating under a 10-year exclusive franchise within the city (Ordinance No. 2600). The franchise expires on Dec. 12, 2022. A new franchise ordinance, Ordinance No. 2901, was adopted by Council on October 18, 2022 and granted Republic Services a new 10-year franchise, starting December 13, 2022. As part of the City's regulation of solid waste collection, the Council is responsible for ensuring that rates are just and reasonable and adequate to provide necessary public service. The process for establishing service rates outlined in the City's 2012 franchise (Subsection 13(E)), and continuing in the 2022 franchise (Subsection 8(B)(ii)), is as follows: "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 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 operating margin. (5) Rates in other cities in this metropolitan area. (6) Other factors deemed relevant by the City Council." The services provided by Republic Services for which the Council establishes rates include residential, commercial, and industrial collection of garbage, recycling, and organics (food scraps and yard debris), as well as drop box service and on-call and extra container pick-ups. Rates for each customer type vary based on the level of service—the size of the roll cart or container and the frequency of pickup. Republic Services submitted a rate increase request on August 5, 2022. The City contracted with Chris Bell of Bell &Associates, Inc., a consulting firm with expertise in solid waste collection operations and providing similar services to Clackamas County, to review the submitted request and financial reports and provide recommendations to the City on options for rate adjustment. DISCUSSION At the October 18, 2022 Council Meeting, staff presented the findings of Bell & Associates' rate review (Attachment 2) and options and recommendations for City Council to adjust rates effective January 1, 2023. Council directed staff to return with a resolution approving the following proposed rate adjustment options: Respect. Excellence. Trust. Service. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO,OR 97034 WWW.LAKEOSWEGO.CITY Page 3 • Increase residential rates by 5.27%, maintaining the current rate structure. • Bundle commercial food waste collection into commercial rates, and increase commercial rates by 5.17%. • Set rates for drop box and roll off compactor service at the cost of service. Additionally, the Council directed staff to include in the Resolution continuation of the 50% discount on solid waste collection services for Lake Oswego School District facilities that was included in the 2012 franchise agreement (Ordinance 2600) and include extension of the discount to other schools. There are five private schools that provide education to students in grades 1— 12: Our Lady of the Lake, Mayaan Torah Day School, Park Academy, St Stephen's Academy, and International Leadership Academy. The impact of extending the discount to additional schools on rates is approximately 10 cents per yard for all commercial container customers. Together the subsidy for schools and bundling of organics collection into commercial container rates adds $1.25 per yard to commercial container rates. Monthly commercial container rates will increase by an average of 10%, varying based on container size and collection frequency. Increasing residential rates by 5.27% and commercial rates by 5.17%, and setting rates for drop box and roll off compactor service at the cost of service is necessary for Republic Services to achieve the target 10% operating margin in 2023 in light of rising costs of fuel, disposal, and labor, inflation, and decreasing recycling markets. Maintaining the current structure for residential rates continues to provide a waste reduction incentive by keeping the costs for smaller cart sizes slightly lower than the cost of service. Adopting a bundled commercial container rate that includes organics collection will make it easier for Lake Oswego businesses to comply with the new Metro business food scraps separation requirements. RECOMMENDATION Staff recommends that the City Council approve Resolution 22-27, adopting new rates that will be effective for all customers January 1, 2023. ATTACHMENTS 1. Resolution 22-27 (including rate sheet as Exhibit A) 2. 2022 Solid Waste Rate Review Report by Bell & Associates, Inc. Respect. Excellence. Trust. Service. 503-635-0215 380 A AVENUE PO BOX 369 LAKE OSWEGO,OR 97034 WWW.LAKEOSWEGO.CITY ATTACHMENT 1 RESOLUTION 22-27 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE OSWEGO ADJUSTING SOLID WASTE COLLECTION SERVICE RATES WHEREAS, Ordinance 2600 grants Rossman Sanitary Services Inc.,doing business as Allied Waste of Lake Oswego("Franchisee"),an exclusive franchise for solid waste collection services within the City limits, and reserves to City Council the right to establish and modify service rates charged by the Franchisee; and WHEREAS, on October 18, 2022, City Council adopted Ordinance 2901 granting Rossman Sanitary Service Inc.,doing business as Allied Waste of Lake Oswego(also doing business as Republic Services of Lake Oswego) ("Franchisee")a new ten-year franchise for solid waste collection services effective December 13, 2022; and WHEREAS, Ordinance 2600 and Ordinance 2901 provide that rates shall be approved by the City Council by resolution,and that, in determining the appropriate rates,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 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 operating margin; 5. Rates in other cities in this metropolitan area; and 6. Other factors deemed relevant by the City Council. WHEREAS,the Franchisee submitted a rate increase request on August 5, 2022; and WHEREAS, the City contracted with Bell & Associates, Inc. to review the submitted request and Franchisee financial reports and provide recommendations to the Council on rate adjustments; and WHEREAS, the City Council at the October 18, 2022 Council Meeting directed staff to prepare a Resolution for Council consideration with the following rate adjustments: 1. Increase residential collection rates by 5.27%; 2. Bundle commercial food waste collection into commercial rates, and increase commercial collection rates by 5.17%; 3. Set rates for drop box and roll off compactor service at the cost of service; and 4. Continue the 50% discount on collection service rates for Lake Oswego School District facilities, and extend the discount to other schools. Resolution 22-27 Page 1 of 2 WHEREAS, the City Council at the October 18, 2022 Council Meeting directed staff to return with a resolution to include the above and 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, 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, 2023 the rate schedule attached as Exhibit A is approved and adopted for the solid waste collection franchise pursuant to Ordinance 2600 and Ordinance 2901. Section 2. 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 15th day of November, 2022. AYES: NOES: EXCUSED: ABSTAIN: Joseph M. Buck, Mayor ATTEST: Kari Linder, City Recorder APPROVED AS TO FORM: Evan Boone, City Attorney Pro Tern Resolution 22-27 Page 2 of 2 EXHIBIT A REGa2 City of Lake Oswego Republic Services Rate Schedule for Solid Waste, Recycling, Yard Debris, and Organic Materials Collection Effective January 1, 2023 RESIDENTIAL SERVICE RATES Residential Roll Cart Rate 20 gallon $26.84 35 gallon $36.17 60 gallon $53.76 90 gallon $56.33 Up the Drive Rate-20 gallon &35 gallon cart add'I $1.14 for every 50 feet $4.56 Up the Drive Rate-60 gallon &90 gallon carts add'I $1.14 for every 50 feet $6.10 Mountain Park Roll Cart—Trash and Recycling Only, Home Owners Association (HOA) manages Yard Debris in the area. 20 gallon $23.95 35 gallon $33.28 60 gallon $50.88 90 gallon $53.44 Misc. Charges and Limited Services 35 gallon cart—monthly service $21.45 Recycling Only(weekly with 60 gal. cart and bin) $5.79 On Call (Trash Only) 35 gallon cart *Must service at least once every 2 months $13.71 Extra Can/Bag/Box (CBB) $7.97 Yard Debris Only Service (96 gallon cart) $16.18 Yard Debris Extra Can/Bag/Box (CBB YD) $5.90 Contaminated Cart (Recycling) $14.95 Return Trip Fee (RTN) same day $20.07 Return Trip Fee (CAL) off service day $31.89 Gate Opening/Roll Out Container(monthly), per enclosure $18.09 Lost or Damaged Cart (Garbage, Yard Debris, Recycling) $73.49 Lost or Damaged Recycling Bin $12.43 Cart Redelivery Fee $33.68 (I‘Vi‘ E°s City of Lake Oswego r- c) , Republic Services Rate Schedule v °ReG°� Switch/Wash Out Cart (second) *1 free per year $33.91 Reinstatement Fee $33.68 Bulky Waste Pick Up (Furniture, Appliances, Tires, Mattresses, etc.) Fee based on yardage and special handling needs. Minimum Fee: $31.48 + per yard rate Additional charge for appliances with freon (applies to refrigerators, freezers, air conditioners): $39.71 COMMERCIAL SERVICE RATES Commercial Roll Cart Rate 35 gallon $31.67 60 gallon $45.90 90 gallon $48.65 Commercial Front Load Container' Weekly Collection Frequency(#Collections Per Week) Container Size 1 2 3 4 5 6 1 yardZ $157.30 $277.08 $409.12 $541.28 $673.42 $805.58 multiple $125.84 $221.66 $327.30 $433.02 $538.74 $644.46 1.33 yard2 $175.45 $336.34 $494.48 $661.15 $797.64 $934.92 multiple $140.36 $269.07 F $395.59 I $528.92 $638.11 $747.94I 1.5 yard $197.05 $380.74 $564.41 $748.12 $931.82 $1,115.57 multiple $157.64 $304.59 $451.53 $598.50 $745.46 $892.45 2 yard $247.83 $482.27 $716.71 $951.18 $1,185.65 $1,420.09 multiple $198.26 $385.81 $573.37 $760.94 $948.52 $1,136.07 3 yard $331.94 $642.40 $952.86 $1,263.32 $1,573.80 $1,884.25 multiple $282.15 $546.04 $809.93 $1,073.82 $1,337.73 $1,601.61 4 yard $419.84 $818.19 $1,216.53 $1,614.19 $2,013.26 $2,411.60 multiple $356.86 $695.46 $1,034.05 $1,372.06 $1,711.27 $2,049.86 6 yard $575.32 $1,055.77 $1,678.68 $2,089.69 $2,781.66 $3,123.66 multiple $517.78 I $950.191 $1,510.82I $1,880.72 $2,503.50I $2,811.29 8 yard $698.24 $1,372.91 $2,047.62 $2,722.32 $3,397.04 $4,071.74 11 multiple $628.42 1 $1,235.62 $1,842.86 I $2,450.09 $3,057.33 I $3,664.57 1 Compacted containers charged at 2.2x the loose rate. 2 As of September 1, 2015, 1-yard and 1.33-yard front load containers have not been available for new customers. Current customers with these containers will be allowed to continue service with them at the approved rates. 2 p� °s City of Lake Oswego r- c) , Republic Services Rate Schedule v REGa Misc. Charges and Limited Services Rate Return Trip Fee same day/cart only (RTN) 33% of monthly rate Return Trip Fee off service day/cart only(CAL) $31.83 Extra Yardage (EXY) per yard $33.11 Lock $28.23 INDUSTRIAL SERVICE RATES Drop Box/ Roll Off Compactor Rate 10 yard drop box $174.00 20 yard drop box $174.00 30 yard drop box $174.00 40 yard drop box $174.00 Drop Box Delivery $72.00 Relocate Drop Box $96.00 Dry Run $115.00 Compactor Rate $239.00 Misc. Charges and Limited Services Fee for less than 4 hauls per month $25.00 Round tripped custom/lidded box (per haul) $35.00 Custom/lidded box rental (per month) $12.00 Multifamily Recycling Services for Drop Box or Compactor Customers Number of Units Rate per Unit 5-199 $3.02 200-299 $2.55 300-299 $2.31 399+ $2.23 3 OeDifi Solid Waste and Recycling o y g ATTACHMENT2 wasp OREGO\-' Collection Rate Report • • • • • -54 T. Ilk LL • -ram - _ d _ "` .� ma` - ' Bell & Associates, Inc. &IONAl.S.. October 2022 2022 SW Rate Review Report City of Lake Oswego Solid Waste Rate Review Table of Contents Project Background 1 Annual Cost Report 1 Adjusted Report 2 Table 1: 2021 Lake Oswego Franchise Results 2 Projected Results for 2022-23 2 Table 2: Assumed Expense Factors 2 Year to Year Comparison of Expenses 3 Table 3: Revenue and Expense Comparison from 2021 to 2022-23 3 Table 4: Projected 2022-23 Lake Oswego Results 3 Solid Waste Disposal 4 Table 5: Metro Disposal Fee Four-Year Estimated Cost 4 Commercial Collection Rates 4 Table 6: Proposed Commercial Collection Rates Effective January 1, 2023 4 Residential Collection Rate Consideration 5 Table 7: Residential Cost of Service Rates 5 Table 8: Current Residential Rates Increased by 5.27% 5 Drop Box/ Roll Off Compactor Service Rate Calculation 6 Table 9: Drop Box/ Roll Off Compactor Cost of Service Rate Calculation 6 Commercial Food Waste Service Rate Consideration 7 Table 10: Commercial Food Waste Collection Rate Alternatives 7 2022 SW Rate Review Report Project 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. 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 August 5, 2022. To review the reported results and calculate 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. Annual Cost Report The annual cost report provides line-item costs and revenues associated with providing service within the City and combined line-item totals for their operations outside of Lake Oswego. The report format provides the capacity to calculate the cost of service for each line of business (cart, container, and drop box). Cart collection is primarily for residential customers, whereas business customers are serviced with a container. Reported results were analyzed, and the following tasks were completed: a. Analyze reported route collection hours to the reported customer counts for each line of business. b. Using a predictive test of revenue for each line of business, ensure the reported revenues are reasonable for the number of reported customers. c. By thoroughly reviewing the reported direct cost line items, determine if the expense is reasonable in relation to the customer and operational data entered from the detailed cost report. d. Utilize a predictive test of disposal to determine if the reported disposal expense is reasonable. e. Using the reported administrative line items, determine if the expense is reasonable in relation to the operational data entered from the detailed cost report. f. Review the costs between the City and Republic's other franchised collection operations to determine if the allocations are reasonable. Bell &Associates, Inc. Page 11 2022 SW Rate Review Report Adjusted Report Financial data was consolidated by service, showing the collection system's total revenues and expenses. This consolidated report allows the calculation of the system's return-on-revenue and provides a measure of the adequacy of rates. Table 1 details the return for each collection service provided within the Lake Oswego franchise collection system. Table 1: 2021 Lake Oswego Franchise Results Cost Component Roll Cart Container Drop Box Total Revenues $5,597,211 $2,398,241 $1,264,306 $9,259,758 Allowable Costs for Rates $5,077,058 $2,153,446 $1,192,162 $8,422,666 Franchise Income $520,153 $244,795 $72,144 $837,092 Return on Revenues 9.3% 10.2% 5.7% 9.0% Projected Results for 2022-23 Projecting the financial performance for 2022-23 was completed by applying the following assumptions to the Table 2: Assumed Expense Factors 2021 adjusted expenses. Expense Increase • The driver wage increase is calculated on the hourly Driver Wages 2.20% wage increase from the Teamster's contract, which is Inflation 6.58% $0.63 per hour on July 1, 2022 —an increase of 2.2%. Fuel 10.0% Health insurance for union employees will remain Recycling Processing 52% unchanged from the previous year. Solid Waste Disposal 6.0% • Inflation increased by 6.58% YTD in 2022 compared Organic Waste Disposal 3.5% to 2021, according to the US Bureau of Labor Statistics. (All items in West-Size Class A, urban wage earners and clerical workers, not seasonally adjusted) • Fuel is expected to increase by only 10% from the increased cost of natural gas. While the price of natural gas has increased, it is still significantly lower than diesel. • Decreasing markets for recycling in 2022 have increased processing costs by 52% compared to the previous year. • Disposal costs are estimated to increase by 6% in the calendar year 2023 for solid waste and 3.5% for organic waste compared to the 2021 expense. � ` Bell &Associates, Inc. Page 12 2022 SW Rate Review Report Year to Year Comparison of Expenses Projected increases in expenses from 2021 to 2022-23 are summarized in Table 3. Table 3: Revenue and Expense Comparison from 2021 to 2022-23 Description 2021 Actual Increase Projected % • Service Revenue $9,259,758 $55,506 $9,315,264 0.6% Solid Waste Disposal 2,456,773 154,829 2,611,602 6.3% Recycling /Yard Debris 812,741 133,981 946,722 16.5% Disposal Labor 2,475,141 44,943 2,520,084 1.8% Truck 1,069,842 47,505 1,117,347 4.4% Equipment 158,148 3,274 161,422 2.1 Franchise Fees 1 480,333 (14,569) 465,764 -3.0% Other Direct/ Oregon CAT 137,280 1,799 139,079 1.3% G &A 835,073 19,865 854,938 2.4% Total Expenses 8,425,331 391,627 8,816,958 4.6% Table Note 1: Franchise fees are calculated at 5% of projected revenue; however, payments are reported by the City based on cash receipts and will fluctuate due to the invoice cycles and the submission of customer payments. Combining the increased revenue and expenses allows for the projection of the expected results of collection operations for the calendar years 2022 and 2023. Projected results by line of business for 2022-23 are summarized in Table 4. Table 4: Projected 2022-23 Lake Oswego Results Cost Component Roll Cart Container Drop Box Composite Revenues $5,597,211 $2,398,241 $1,319,812 $9,315,264 Allowable Cost $5,288,364 $2,263,883 $1,262,046 $8,814,293 Franchise Income $308,847 $134,358 $57,766 $500,971 Return on Revenues 5.52% 5.60% 4.38% 5.38% Target Rate of Return 10.00% 10.00% 10.00% 10.00% 011 ` Bell &Associates, Inc. Page 13 2022 SW Rate Review Report Solid Waste Disposal Metro is the regional wasteshed manager for all waste disposed within its boundaries. As the regulator, Metro assesses a Regional System Fee (RSF) and excise tax on every ton of waste generated and delivered to a licensed disposal facility within the Metro region. The current RSF is $29.43 per ton, and the excise tax is $12.80 per ton. Earlier this year, Metro staff presented Metro Council with a plan to increase the disposal fees by approximately 7% annually over the next four years. Table 5 summarizes Metro's proposed increases. Table 5: Metro Disposal Fee Four-Year Estimated Cost Rate Component FY23 FY24 FY25 FY26 Mixed Waste Fee $78.17 $85.87 $94.46 $102.15 Regional System Fee $29.43 $31.37 $33.31 $35.76 Metro Excise Tax $12.80 $12.80 $12.80 $12.80 Metro Host Fee $1.50 $1.50 $1.50 $1.50 Oregon DEQ Fee $1.89 $1.89 $1.89 $1.89 Total Tip Fee at Metro stations $123.79 $133.43 $143.96 $154.10 % Increase from the prior year 7.10% 7.80% 7.90% 7.10% Metro is also a competitor for regional waste and controls the amount of wet garbage each facility can accept. Metro's current allocation of tonnages to private transfer stations is approximately 40% of all waste tons generated within the region. Willamette Resources Incorporated (WRI) is the transfer station that takes Lake Oswego's waste. Over the last three years, Metro has reduced WRI tonnage allocation to 74,606 in FY20, 70,782 tons in FY21, and 70,108 tons in FY22. Therefore, the estimated disposal rate charged to Lake Oswego depends on WRI receiving at least 70,100 tons of waste in FY23. If WRI's tonnage allocation is lowered by Metro, the disposal fee charged by WRI will increase. Commercial Collection Rates The overall increase necessary to return a 10% margin for commercial collection is $124,078, which is a revenue increase of 5.17%. Table 6 details the proposed rates for the most popular container sizes effective January 1, 2023. Table 6: Proposed Commercial Collection Rates Effective January 1, 2023 Level of Service Current $ ♦ Proposed 2 Yard Weekly $224.79 $11.62 $236.41 3 Yard Weekly $299.34 $15.48 $314.82 4 Yard Weekly $377.49 $19.52 $397.01 6 Yard Weekly $514.47 $26.60 $541.07 8 Yard Weekly $620.50 $32.08 $652.58 Bell &Associates, Inc. Page 14 2022 SW Rate Review Report Residential Collection Rate Consideration There are two methods to increase the rates to achieve a 10% return on revenue; the cost of service or applying a flat percentage increase. The current rates for residential roll cart collection service were not set at the cost of service. Customers with smaller carts (20 and 35 gallons) receive a discount, whereas those with 65 or 95 gallon garbage cart pay more to subsidize the customers with the lower volume carts. Table 7 details the cost of service by component for residential service. Table 7: Residential Cost of Service Rates Level of Service 20 gal 35 gal 65 gal 95 gal Collection Cost $17.01 $17.01 $17.01 $17.01 Administration Cost $3.76 $3.76 $3.76 $3.76 Garbage Disposal $3.59 $6.08 $10.49 $15.19 Recycling Processing $1.29 $1.29 $1.29 $1.29 Yard Debris Disposal $4.83 $4.83 $4.83 $4.83 Margin & Franchise Fee $5.38 $5.82 $6.60 $7.43 Total Cost of Service Rates $35.86 $38.79 $43.98 $49.51 Current Rate $25.50 $34.36 $51.07 $53.51 Rate Difference (Cost of $10.36 $4.43 $(7.09) $(4.00) Service- Current) Residential Customer Count 1,458 6,892 2,461 958 The increase for residential cart collection to achieve a 10% return is to raise rates by 5.27%. Therefore, table 8 multiplies the current rates by 5.27%. Table 8: Current Residential Rates Increased by 5.27% Level of Service Current $ ♦ Proposed 20 Gal. Can $25.50 $1.34 $26.84 35 Gal Cart $34.36 $1.81 $36.17 60 Gal. Cart $51.07 $2.69 $53.76 90 Gal Cart $53.51 $2.82 $56.33 Monthly $20.38 $1.07 $21.45 The question for City Council is what method should be applied to set the residential collection rates. ea- 140 Bell &Associates, Inc. Page 15 2022 SW Rate Review Report Drop Box / Roll Off Compactor Service Rate Calculation Drop box hauling fees are calculated on the operational costs per hour multiplied by the average time to provide the service, plus the administrative cost, margin, and franchise fees. Disposal fees for drop box and roll off compactor service are a separate charge not included in the rates calculation. Disposal fees are passed through on the invoice without any margin or franchise fee markup. Therefore, customers should be able to compare the disposal charge on their invoice to the posted fee schedules for the various disposal sites. Table 9 details the rate calculation for both drop box and compactor service. Table 9: Drop Box/ Roll Off Compactor Cost of Service Rate Calculation Description Note Drop Box Compactor Drop Box Delivery Average Haul Time in Minutes A 60 90 30 Operational Cost per Hour B $123.29 $123.29 123 Haul Cost C $123.29 $184.94 $61.50 Admin Cost per Haul D $25.00 $18.00 $- Operation Margin & Franchise Fee @ 15% E $26.17 $35.81 $10.85 Proposed Rate (rounded to the nearest$1) F $174.00 $239.00 $72.00 Current Drop Box/ Roll Off Compactor $158 (20-30 yd.) Rates $168 (30 yd.) $210 $36.96 Table 5 Notes A: Estimated average time in minutes to pick up the drop box or container. Compactor service takes additional minutes to unhook and hook the container to the compaction system. B: Projected drop box cost per hour C: Haul Cost is calculated as a percentage of time multiplied by the Operational Cost per Hour D: Admin Costs are slightly higher on an occasional customer or a one-time haul, whereas compactor hauls are typically on a regular schedule. E: Margin (10%) and Franchise Fees (5%) are calculated as (Haul Cost + Admin Cost)/ (1 — 15%) F: Proposed Rate is the sum of Haul Cost + Admin Cost + Margin & Franchise Fee rounded to the nearest$1. Bell &Associates, Inc. Page 16 2022 SW Rate Review Report Commercial Food Waste Service Rate Consideration Metro's commercial food waste program goes into effect on March 31, 2023, for customers that generate over 1,000 pounds of food waste per week. The program aims to divert food from the waste stream to higher uses such as compost. The requirement designates businesses into different groups based on the amount of food waste they generate and has phased compliance deadlines, starting with the largest generators. There are three tiers of food waste generators ranging from 1,000 pounds of food scraps per week (Group 1), followed by customers that generate 500 pounds of food scraps (Group 2), and customers that generate 250 pounds of food scraps per week (Group 3). Low food waste generators not required to participate but choose to are classified as Group 4 under the program requirements. Clackamas County has identified 17 businesses as Group 1, 45 businesses in Group 2, and 64 businesses in Group 3. According to Clackamas County records, eight Group 1 businesses are participating in the program. While the larger food waste generators are required to participate in the program, any business that generates food waste can participate. Republic Services is currently providing food waste collection services to 45 customers within the City. Service levels vary from as little as one 64 gallon cart collected once a week to a three yard container collected four times a week. The rates charged to the food waste generators are subsidized by approximately 30% below the service cost. Implementing the collection rates to support the program can be accomplished by three methods: 1. Cost of Service, 2. Subsidized, which is the amount current food waste participants are paying, or 3. Bundled, which is spreading the cost of the food collection program to all commercial customers. Table 10 summarizes the rate impacts for all three rate methods for full participation for the current participants plus the remaining nine food waste generators that are not participating in the program. Table 10: Commercial Food Waste Collection Rate Alternatives Level of Service Current Cost Current Rate Bundled Rate of Service (30% subsidy) 64 gallon cart weekly $56.37 $39.46 $0 90 gallon cart weekly $59.94 $41.96 $0 2 yard container weekly $290.46 $203.32 $0 3 yard container weekly $383.79 $268.65 $0 Subsidy Cost per Yard of SW $- $0.31 $1.15 Rate Impact (3 yard weekly) $0 $4.03 $14.94 The Cost of Service method is the additional amount charged to the food waste generator to divert food waste from their garbage. The rate impact would be to businesses identified by Clackamas County as large food waste generators. Bell &Associates, Inc. Page 17 2022 SW Rate Review Report The Current Rate is a 30% subsidized rate for targeted businesses, impacting all commercial customers by $0.31 per collected yard of waste. For example, a business that has three yards of garbage collected once a week, the rate impact is $4.03 per month (3 yards x 4.33 pickups per month x $0.31 per yard) to maintain the program. The current program was implemented to "buy down" the large commercial subsidy identified during the previous rate review. Implementing the Bundled Rate would eliminate the additional food waste charge and allocate the program's cost to all business customers that use a commercial container for service. The rate impact to the business customer with a 3 yard container collected once a week would be $14.94 (3 yards x 4.33 pickups per month x $1.15 per yard) The question for City Council consideration is what rate method should be implemented for the food waste program. en- 140 Bell &Associates, Inc. Page 18