For City Council Meeting [June 27, 2023]
TO: Honorable Mayor and City Council
APPROVAL: Arron Brown, Acting City Manager
FROM: Timothy Sullivan, Director of Maintenance and Facilities
Title
Request City Council to Conduct a Public Hearing in Accordance with Proposition 218 Procedures and Consider Adopting the Four Year Municipal Solid Waste Collection, Recycling, Organics and Disposal Rates for Fiscal Years 2023/2024 through 2026/2027 and Request City Council to Adopt Resolution No. 8109, Approving Municipal Solid Waste Collection, Recycling and Disposal Service Rates for Fiscal Years 2023/2024 through 2026/2027.
POWERPOINT
(ACTION)
Body
BACKGROUND
Burrtec Franchise Agreement and Refuse Collection Rates
On April 16, 1996, the City Council approved a Franchise Agreement with Burrtec Waste Industries, Inc. (“Burrtec,” formerly EDCO Disposal Corporation) for municipal refuse/recycling collection and disposal services. In accordance with Section 3.2, “Change in Cost of Doing Business” of the Franchise Agreement, an allowance was made for adjustment of rates to reflect changes in the cost of doing business, as measured by fluctuations in the Consumer Price Index (CPI), published by the U.S. Department of Labor, Bureau of Labor Statistics, for the Los Angeles, Long Beach, Anaheim Standard Metropolitan Statistical Area, in addition to other options.
On November 5, 1996, the people of the state of California voted in favor of Proposition 218, the “Right to Vote on Taxes Act.” Proposition 218 added Articles 13C and 13D to the California Constitution, implementing restrictions on methods by which local governments can create or increase taxes, fees, and charges without taxpayer consent. Specifically, Proposition 218 requires the City to provide certain notification of new or increased assessments, charges, and user fees, and in certain cases, requires a balloting and election of property owners prior to implementing any new or increased assessments, charges, and user fees.
Pursuant to Article 13D of the California Constitution, (Article 13D), a "fee" or "charge" means any levy other than an ad valorem tax, a special tax, or an assessment, imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user fee or charge for a property related service. “Property related service” means a public service having a direct relationship to property ownership. Section 3 of Article 13D allows the City to assess a fee or charge for property related services upon any person as an incident of property ownership. Pursuant to Section 6 of Article 13D, the City must follow prescribed procedures for imposing or increasing any fee or charge for property related services.
In 1997, the California Legislature approved the “Proposition 218 Omnibus Implementation Act”, adding California Government Code Sections 53750 - 53758. This Act incorporated regulations necessary to implement the intention of Proposition 218, to ensure local government followed the appropriate process to establish new or increase existing assessments, charges, and user fees. Of importance, California Government Code Section 53750 clarified that an “increase” as applied to a property related fee or charge does not occur when the increase “adjusts the amount of a tax or fee or charge in accordance with a schedule of adjustments, including a clearly defined formula for inflation adjustment that was adopted by the agency prior to November 6, 1996.” Since the City’s Franchise Agreement with Burrtec incorporated a formula for adjustment of rates pursuant to the CPI, and the Franchise Agreement and its corresponding rates were approved before November 6, 1996, the City is empowered to annually increase and adjust rates and charges for refuse collection services up to, but not exceeding, the CPI.
California Government Code Section 53756 allows an agency providing refuse collection services to adopt a schedule of fees or charges authorizing automatic adjustments that pass-through adjustments for inflation if it adopts the schedule of fees or charges for a property-related service for a period not to exceed five years pursuant to California Government Code Section 53755. Further, the schedule of fees or charges may include a schedule of adjustments, including a clearly defined formula for adjusting for inflation; however, any inflation adjustment to a fee or charge for a property-related service shall not exceed the cost of providing that service.
On April 25, 2023, the City Council adopted Resolution No. 8069 setting a Public Hearing for June 27, 2023, to consider the adoption of the Four Year Municipal Solid Waste Collection, Recycling, Organics and Disposal Rates for Fiscal Years 2023/2024 through 2026/2027. In accordance with California Government Code Section 53755 and Section 6 of Article 13D of the California Constitution, notices regarding the rate increases were mailed to all residents and business owners within the City of Rialto at least 45 days prior to the June 27, 2023, Public Hearing.
Senate Bill 1383 - “Mandatory Organics Recycling”
In 2016, the California Legislature adopted Senate Bill 1383 (“SB 1383”) - the “Short-Lived Climate Pollutants” mandate. SB 1383 introduced more stringent waste recovery requirements than the prior legislation, AB 341 and AB 1826. The stated purpose of California’s SB 1383 is to reduce organic waste disposal, recover edible food waste from the waste stream and reduce methane emissions. The law is an unfunded State mandate which passes responsibility for achieving the targets to local agencies.
SB 1383 is mandatory, and the requirements of the Senate Bill became effective on January 1, 2022. SB 1383 is a California state law that targets reducing organic waste disposal and methane emissions from landfills. The law established regulatory requirements for jurisdictions, generators, haulers, solid waste facilities, and other entities to support the achievement of these targets.
In 2021, the California Legislature introduced and adopted SB 619, allowing jurisdictions to request a delay of SB 1383 implementation by submitting a Notice of Intent to Comply (“NOIC”) with a specific performance and corrective action plan. In consultation with CalRecycle, staff prepared the required Resolution, corrective action plan, and SB 1383 ordinance. These items were approved and adopted by the City Council on February 22, 2022.
On March 29, 2023, the City received notice that CalRecycle approved its NOIC. CalRecycle reviewed the City’s NOIC, the description of the City’s disclosed violations of the SB 1383 regulations, and proposed actions and schedule for those actions to remedy all violations. CalRecycle approved the City’s proposed NOIC and created a formal Corrective Action Plan (“CAP”). As stated within this CAP, the City must finalize and implement rate adjustments by July 31, 2023, or face significant administrative civil penalties.
ANALYSIS/DISCUSSION:
SB 619 Delayed Implementation of SB 1383 Programs
Many agencies pursued legislation to defer the implementation of SB 1383 for several years due to the continued impacts of the COVID-19 pandemic. Despite this legislative effort, the final adopted law through SB 619 did not automatically delay SB 1383 implementation. Still, it offered an option to cities and counties to submit for CalRecycle consideration and approval a timeline and schedule for compliance with SB 1383. Specifically, SB 619 created a NOIC mechanism through which a local jurisdiction may secure administrative civil penalty relief from any continuing violations of the regulations for the 2022 calendar year and may be eligible for a broader and longer-term regulatory compliance path, including suspended administrative civil penalties, through a CAP.
Agencies pursuing the delay of SB 1383 implementation were required to adopt a Resolution authorizing the jurisdiction’s submittal of the NOIC with a specific corrective action plan. The Rialto City Council adopted such Resolution on February 22, 2022, thus initiating the request to extend the City’s compliance deadline. CalRecycle approved the City’s proposed NOIC actions and schedule and placed the City on a formal CAP.
The CAP provides a schedule for completing various actions leading to full SB 1383 implementation. The City’s CAP outlines the different sequences of events that are required by CalRecycle:
1. Full evaluation of the SB 1383 program elements.
2. Identify the assignment of responsibilities between the City and Burrtec (and potentially San Bernardino County through a coordinated Edible Food Recovery Program).
3. SB 1383 program cost evaluation - develop cost estimates for (1) administrative costs, including the need for new personnel for regulatory monitoring, compliance, record keeping, and the overall administration of the SB1383 program if required; (2) capital costs, including costs (and lead-time for delivery) of new solid waste collection vehicles and containers required for residential, multi-family and/or commercial properties; (3) operational costs related to the transport, processing, and disposal of the organics waste stream.
4. Development of a solid waste rate study.
5. Solid waste rate adjustment and completion of a Proposition 218 rate-setting process.
To meet the State’s requirements identified in the CAP, the City of Rialto must adopt new waste and recycling rates that include the required SB 1383 program elements of food waste recycling for residential and multi-family customers by July 31, 2023. City staff, Burrtec, and R3, an independent consulting firm, have evaluated the aspects of SB 1383 to develop a program that complies with the State of California’s mandate. Costs for SB 1383 implementation include but are not limited to the following:
1. The inclusion of food waste collection in the residential and commercial sectors, including potential additional hauling costs to transport the mixed organic stream to a suitable facility and increased tipping costs at the facility.
2. Expanding organics collection routes to facilitate universal compliance with the state mandate.
3. Route reviews.
4. Replacement of commercial bin lids and application of container labels, as applicable, as well as any residential containers that may not comply with color requirements.
5. Increased annual education.
6. Expansion of Burrtec staffing for recycling outreach, particularly in the commercial sector, and to expand the SB 1383 waiver program.
7. Assistance in meeting SB 1383 procurement targets.
Residential Food Waste Recycling Collection Method Options
In preparation for the rate development, the following collection method options were presented and considered by the Rialto Waste Management Subcommittee, Utilities Commission, and the City Council. At their March 14, 2023, meeting, City Council directed staff to present the collection methods to the Utilities Commission for review and comment. The options were as follows:
1. Utilize the existing residential 3-container system. Bagging of food waste using customer-supplied bags for disposal in the Green Waste container
2. Introduction of a fourth barrel for disposal of Food Waste. Bagging of food waste using customer-supplied bags for disposal in the Food Waste container.
3. Distribution of food waste pails to all single-family residential accounts for indoor food waste collection and bagging of food waste using customer-supplied bags for disposal in the Green Waste or Food Waste barrel.
At the March 21, 2023, meeting, the Utilities Commission unanimously selected Option 1 as the preferred collection method. The Rialto Waste Management Subcommittee also recommended this option at their February 16, 2023, meeting; not requiring a fourth barrel for residential customers, not distributing food pails to single-family residential accounts, and requiring customers to bag their food scraps before placing them in their green waste barrels. This option would have the most negligible financial impact on Rialto residents while meeting the State’s food waste recycling requirements.
Based on the recommendations of the Rialto Waste Management Subcommittee and the Utilities Commission, Burrtec incorporated the preferred food waste collection method into the proposed rate structure that meets the needs of the City and the requirements of the State of California.
Cost Savings Actions
Considering the financial impact on the Rialto community, the City Council suspended the pavement maintenance fee for residential customers in 2021 and placed a moratorium on the pavement maintenance fee for commercial accounts on April 14, 2023.
On December 13, 2023, Council approved staff’s request to terminate participation in the Comprehensive Disposal Site Diversion Program (“CDSDP”) with the County Landfill system, which impacted commercial businesses. Withdrawal from the CDSDP program became effective in February of 2023. It resulted in savings of $12 per ton for roll-off customers, potentially reducing roll-off rates by $120 per load depending on the weight of the refuse being delivered to the landfill.
City Council approved staff’s recommendation to amend the San Bernardino County Waste Disposal Agreement (“WDA”) in 2022. This amendment established a cap such that the adjusted WDA rate does not exceed 85% of the County Board approved gate rate for the proposed rate year, thus eliminating the possibility of the City paying higher disposal fees than non-WDA members.
Additionally, the proposed rate adjustments for Fiscal Years 2023/2024 through 2026/2027 include a 20% reduction in the City’s Household Hazardous Waste Fee from $0.49 to $0.38 and a reduction of the AB 939 Fee from $0.49 to $0.39.
Historical Rate Adjustment History
Because of the COVID-19 global pandemic, the City requested that Burrtec defer its annual increases, which would otherwise have been scheduled for July 1 of 2020, 2021, and 2022. Burrtec deferred both rate adjustments in 2020 and 2022; in 2021, there was a partial residential rate adjustment and a full commercial rate increase, although there was no “catch-up” for the deferred 2020 rate increase. The deferred 2022 rate increase is included in the proposed rate schedule for Fiscal Year 2023/24, but Burrtec has removed the carry-forward from 2020.
Proposed Residential Rates
Burrtec proposes the following rates for Residential and Commercial accounts. Fiscal Year 2023/2024 rates for Residential Customers are recommended to include the following components:
• CPI adjustment for the FY2023/2024 Residential Hauler Fee equal to 7.45%.
• Inclusion of the new Food Waste (Mixed Organics) Processing Fee at $86.96 per ton which replaced the Green Waste Processing Fee at $57.29 per ton.
• Compliance Fee - For residential customers, this equates to cost savings from the “equalized” per customer rate of $1.54 to $0.90 per month.
• The deferred carryover FY2022/2023 cost increases (the “Deferment Stabilization Fee”) that stemmed from the FY 2020/21 rate review cycle.
• An increase in the WDA solid waste disposal rate from $40.75 to $42.07 per ton.
• An increase in the recycling processing fee from $66.90 to $71.23 largely resulting from decreases in the recycling commodities markets.
• Reduction in the Windy Day Tonnage charge from $0.07 to $0.03 per month.
The proposed residential rates are identified in Table 1 below.
Table 1
Residential Rates
The proposed residential rates are based on Option 1 and utilize the existing residential 3-container system. Residents will be educated on the process of bagging their food waste using customer-supplied bags for disposal in the Green Waste container.
Proposed Commercial Rates
Fiscal Year 2023/2024 rates for Commercial Customers are recommended to include the following components:
• CPI adjustment for the FY 2023/2024 Commercial Hauler Fee equal to 7.45%.
• An increase in the WDA solid waste disposal rate from $40.75 to $42.07 per ton.
• Commercial and Multi-Family state mandated expanded recycling program adjustments.
• Compliance Fee - For Commercial customers, this equates to a cost increase from $0.15/yard to $0.38/yard.
• An increase in the recycling fees from $2.96/yard to $4.05/yard.
• Decreases in Food Waste recycling fees from $2.43/yard to $1.42/yard.
• Decreases in the Multi-Family Bulky Program from $1.79/yard to $1.74/yard.
• Reduction in the Windy Day Tonnage charge from $0.05/yard to $0.03/yard.
Table 2 below shows the most common Commercial Service Rates with the various Fiscal Year 2023/2024 Rate adjustments.
Table 2
Commercial Rates
Attachment 1 provides the full rate analysis summary for both Residential and Commercial accounts.
A jurisdiction comparison of the rates depicted in the above tables is outlined in Table 3 below.
Table 3
Collection Rate Comparison
City Solid Waste Program Fees
The Waste Management and Environmental Division (“Division”) manages programs for the City to reduce the impacts of solid waste generated within the City. These fees include a Household Hazardous Waste fee and AB 939 fee. Activities funded by these fees include target waste reduction, reuse, recycling, and education. Activities include quarterly Clean-up Day, where residents can dispose of electronic waste and bulky items, including household trash, shred personal documents for recycling, and donate various reusable goods. The City operates a Household Hazardous Waste collection site where trained City personnel collect chemical waste, including, but not limited to, waste oil and filters, batteries, antifreeze, paint, household cleaners, sharps/needles, and lancets from Rialto residents. In addition, the staff manages three (3) Community Gardens where residents can attend waste reduction and education classes on a monthly basis. Operational expenses for the Community Gardens have been removed from the proposed rate adjustment; only costs associated with the education and outreach activities are funded by program fees.
The City had historically included fees for the maintenance of pavement, which has a nexus with solid waste collection service because of the weight of the trucks used to perform such collection; pavement maintenance fees were excluded from the 2023 rate increase to reduce the impact of those fees on ratepayers. City Council suspended the pavement maintenance fee for residential customers in 2021, and the decision to place a moratorium on all pavement maintenance fees, including commercial services, from the rate base was made by City Council on March 14, 2023, with an effective date of April 1, 2023.
The City assesses fees to support the City’s costs in complying with regulatory requirements: AB 939 fee, which is assessed on each residential services subscriber at $0.49 per month; and HHW Program fee, which is assessed on each residential services subscriber at $0.49 per month. On June 20, 2023, the Utilities Commission reviewed staff’s proposal to reduce the City’s Household Hazardous Waste fee from $0.49 to $0.38 and the City’s AB 939 fee from $0.49 to $0.39 for Fiscal Years 2023/2024 through 2026/2027. The Commission, by a unanimous vote, passed the recommendation to reduce the fees and recommend the reduction to City Council. The solid waste collection rates, as presented in this report, account for the reduction in both fees as recommended by the Commission.
These City fees are deposited into dedicated waste management funds and used to fund programs supporting compliance with the State’s requirements for the diversion of recyclable and compostable material source-separation programs and State-mandated HHW outreach and collection programs.
Franchise fees are applied at a variable rate per year, equaling 6.7% - 10.9% of the total customer rate in the commercial sector, and the dollar value of the franchise fee has been held static since at least the July 1, 2020, rates.
Review of Burrtec’s Rate Adjustment Request
R3 Consulting Group, Inc.
The City retained the services of R3 Consulting Group Inc. to provide an independent review and analysis of Burrtec’s proposed rates. The primary objectives of the review were to confirm that, for Burrtec’s rate application:
• It is mathematically accurate.
• Expense and revenue projections are reasonable in keeping with industry standards and address near-term market conditions.
• Any applicable allocations between Burrtec franchise areas are appropriate.
• It is consistent with the applicable terms and conditions of the agreement.
• The correct market indices were used.
R3’s review determined that Burrtec’s rate request is materially in line with other cities’ cost for regulatory compliance with SB 1383 and found that the rate application demonstrates that the company is requesting compensation for the costs of doing business, including industry-standard profit for collections operations. A report of their findings is included in this report as Attachment 2.
Solid Waste Subcommittee Review
At its April 13, 2023, meeting, the Solid Waste Subcommittee reviewed the proposed rate adjustment.
Utilities Commission Review
At its April 18, 2023, meeting, the Utilities Commission reviewed the proposed rate adjustment and recommended that the City Council approve the rates as proposed. The Commission also made a motion to strongly encourage the City Council to consider reducing or eliminating the Franchise Fee and reducing the AB 939 and HazMat (HHW) fees.
On June 20, 2023, the Commission reviewed staff’s proposal to reduce the City’s Household Hazardous Waste fee from $0.49 to $0.38 and the City’s AB 939 fee from $0.49 to $0.39 for Fiscal Years 2023/2024 through 2026/2027. The Commission, by a unanimous vote, passed the recommendation to reduce the fees and recommend the reduction to City Council. The solid waste collection rates, as presented in this report, account for the reduction in both fees as recommended by the Commission.
City Council Review
On April 25, 2023, the City Council adopted Resolution No. 8069 setting a Public Hearing for June 27, 2023, to consider the adoption of the Four Year Municipal Solid Waste Collection, Recycling, Organics and Disposal Rates for Fiscal Years 2023/2024 through 2026/2027. In accordance with California Government Code Section 53755 and Section 6 of Article 13D of the California Constitution, notices regarding the rate increases were mailed to all residents and business owners within the City of Rialto at least 45 days prior to the June 27, 2023, Public Hearing. A copy of the notices mailed on behalf of the City by Burrtec is included as Attachment 3.
ENVIRONMENTAL IMPACT:
This is not a “Project” as defined by the California Environmental Quality Act (CEQA). Pursuant to Section 15378(a), a “Project” means the whole of an action, which has a potential for resulting in either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. According to Section 15378(b), a Project does not include: (5) Organizational or administrative activities of governments that will not result in direct or indirect physical changes in the environment.
GENERAL PLAN CONSISTENCY:
The City of Rialto General Plan establishes various guiding principles, goals, and objectives through which the City looks to improve the community and protect the quality of life for our residents. This action is consistent with Guiding Principle 3A in the General Plan:
Our City government will lead by example, and will operate in an open, transparent, and responsive manner that meets the needs of the citizens and is a good place to do business.
Approval of this action also complies with the following City of Rialto General Plan Goals and Policies:
Goal 2-34: Achieve waste recycling levels that meet or exceed State mandates. Achieve maximum waste recycling in all sectors of the community: residential, commercial, industrial, institutional, and construction.
Policy 2-34.1: Develop programs that promote reuse and recycling throughout the community.
Policy 2-34.2: Utilize source reduction, recycling, and other appropriate measures to reduce the amount of solid waste generated in Rialto that is disposed of in landfills.
Goal 3-10: Minimize the volume of solid waste that enters local and regional landfills.
Policy 3-10.1: Encourage additional recycling in all sectors of the community.
Policy 3-10.4: Continue to educate the community regarding the benefits of solid waste diversion and recycling, and maintain programs that make it easy for all residents and businesses to work toward City waste reduction objectives.
Goal 5-4: Protect the health and welfare of the public, environment, and economy by providing for the safe and responsible management of hazardous materials and wastes.
Policy 5-4.2: Coordinate City enforcement efforts with San Bernardino County, the California Department of Health Services, the Regional Water Quality Control Boards, and the Air Quality Management District, for the management and disposal of hazardous wastes.
Goal 5-5: Minimize the generation of hazardous waste in Rialto.
Policy 5-5.1: Prohibit unauthorized disposal of household hazardous waste in the Mid Valley County Landfill.
Policy 5-5.2: Encourage and promote practices that will reduce the use of hazardous materials and the generation of hazardous waste at their source, recycle the remaining hazardous wastes for reuse, and treat those wastes which cannot be reduced at the source or recycled.
Goal 5-6: Educate the public and private businesses about proper disposal of hazardous waste.
Policy 5-6.1: Conduct regularly scheduled household hazardous waste roundup and disposal events.
LEGAL REVIEW:
The City Attorney has reviewed and supports this staff report.
FINANCIAL IMPACT:
Operating Budget Impact
Charges and fees for refuse collection services are collected by Burrtec. The City derives revenues from these charges, including Household Hazardous Waste (HHW) fees and AB 939 (recycling) revenues, which are used to fund the City’s household hazardous waste programs and public education on recycling and protection of the environment.
Increased revenues from residential customers, as recommended in the rate increase proposed for FY2023/2024, are estimated as follows:
• AB 939 funds are estimated to decrease by $23,560 annually and will be credited to Account No. 212-400-7040-7544
• HHW funds are estimated to decrease by $25,916 annually and will be credited to Account No. 212-400-7041-7542
• Franchise fees are estimated to increase by $5,552 annually and will be credited to Account No. 010-400-0001-7116
Increased revenues on commercial customers, as recommended in the rate increase proposed for FY2023/2024, are estimated as follows:
• AB 939 funds are estimated to increase by $3,540 annually and will be credited to Account No. 212-400-7040-7544
• HHW funds are estimated to increase by $3,660 annually and will be credited to Account No. 212-400-7041-7542
• Franchise fees are estimated to increase by $13,200 annually and will be credited to Account No. 010-400-0001-7116
A copy of the Proposition 218 Notice, proposed rates, and rate analysis worksheets are included as an attachment to this staff report.
Capital Improvement Budget Impact
There is no impact to the Capital Improvement Budget.
Licensing
A Business License application and payment of a Business License tax is not required for this action.
RECOMMENDATION:
Staff recommends that the City Council:
1. Open the Public Hearing and receive public testimony;
2. Close the Public Hearing, consider protests received, and determine if a majority protest has occurred pursuant to California Government Code Section 53755 and Section 6 of Article 13D of the California Constitution; and
3. On the basis that a majority protest has not occurred, adopt Resolution No. 8109, Approving Municipal Solid Waste Collection, Recycling and Disposal Service Rates for Fiscal Years 2023/2024 through 2026/2027.