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Home My WebLink About06.F- Public Works DOC ID: 1532 C CITY OF SAN BERNARDINO—REQUEST FOR COUNCIL ACTION Public Hearing From: Nadeem Majaj M/CC Meeting Date: 01/23/2012 Prepared by: Javier Ochiqui, (909)384-5140 Dept: Public Works Ward(s): All Subject: Set Public Hearing for March 19, 2012 at 4:00 P.M. in the Council Chambers to Consider Rate Adjustments for Integrated Waste Division Customers. (Recommended for Approval at the Ways and Means Committee Meeting of January 11, 2012 - Committee Members Present: Kelley, Johnson, Shorett) Financial Impact: Additional revenue of$1.1 Million projected by end of Fiscal Year 15/16 Motion: Set a public hearing for March 19, 2012, at 4:00 p.m. in the Council Chambers to consider rate increase for Integrated Waste Management customers; and that the required notifications be authorized. Synopsis of Previous Council Action: On January 11, 2012, the Ways and Means Committee recommended setting a date for public hearing for the rate adjustments. On November 17, 2008, the Mayor and Common Council approved a resolution establishing the fees and rates to be charged for the collection of refuse, green wastes and recyclables, and repealed resolution 2004-239. BACKGROUND The Department of Public Works manages two Enterprise funds: Integrated Waste Management (IWM) and Sewer. Each year, these funds are evaluated to ensure that they are operating efficiently and with appropriate liquidity. If these funds are not solvent, it is the department's obligation to make recommendations on how to address the financial shortfalls and bring solutions forward to the Mayor and Common Council. A review of the IWM fund determined that the fund is facing an approximate $1.4 million shortfall by the end of this current FY 2011- 12 (See pg. 4 of attached presentation). This shortfall can be attributed to many factors such as declining collection revenues, increased labor, and operational costs (See pg. 3 of attached presentation). ANALYSIS In fiscal year 2008-2009, the City was faced with a previous IWM fund deficit, resulting in the Mayor and Common Council's approval of a rate increase on November 17, 2008, (Resolution 2008-433) with an effective date of January 2009. Also, in 2009, the City contracted with Updated: 1/19/2012 by Mayra Ochiqui C 1532 Matrix Consulting Group (Matrix)to conduct a management study of the IWM Division to help increase efficiencies and reduce operational costs. The study involved a comprehensive organization and management analysis of IWM's operations, service levels, management practices, and staffing levels. One of the primary recommendations provided in the Matrix report was to conduct a Cost-of-Service Study for the solid waste collection services and to prepare a five-year financial plan for this service. In order to accomplish these tasks, on September 7, 2010, (Resolution 2010-297) the Mayor and Common Council authorized R.W. Beck, Inc., to complete an Integrated Waste Rate Study. In addition to this study, the City also initiated a Cost Allocation Plan (CAP) in March of 2011. The thorough CAP identified additional costs for the IWM Division which were not included in the initial rate study. As a result, Public Works commissioned additional rate scenarios with R.W. Beck, Inc., to account for the increased financial obligations for this fund. The results of the last rate study indicate a need for an immediate rate adjustment because the current rates for recycling, refuse, and green waste collections are insufficient to meet current and future financial obligations and operational costs. R.W. Beck, Inc. created multiple rate scenarios and presented the following four most viable options: Option I is the "Status Quo Option." In this option, the Integrated Waste Fund will face a $20.4 million shortfall by the end of FY 2015-16 (See pg. 5 of attached presentation). Pros:No rate increase Cons: Severe program cuts such as the elimination of the right-of-way and environmental programs,and a reduction of street sweeping from twice to once per month. Option 2 establishes a 13 percent or $2.97 rate increase for residents for the I't year and subsequent increases every January 2013, 2014, 2015 and 2016 of three (3) percent, two (2) percent,two(2)percent and two(2)percent, respectively (See pg. 6 of attached presentation). Pros: No program cuts. Establishes a new street sweeping fee and creates a $4.3 million reserve by FY 2015-16. This will allow the IWM Division to purchase refuse vehicles instead of leasing them to save tens of thousands of dollars in interest charges. Cons:A 13 percent or$2.97 rate increase the first year. Option 3 establishes a five(5)percent or$1.14 rate increase for residents the ls`year and five(5) percent every January 2013, 2014,2015 and 2016(See pg. 7 of attached presentation). Pros: No program cuts. This option has the lowest financial impact to the residents by spreading out the rate increase more evenly, establishes a new street sweeping fee, and creates a modest$1.1 million reserve by end of FY 2015-16. Cons: Still has a$478,200 fund deficit at end of FY 2011-12. Option 4 establishes a 13 percent or $2.97 rate increase for residents in the I' year and subsequent increases every January 2013, 2014, 2015, and 2016 of three (3) percent, three (3) percent,three (3)percent and two(2)percent respectively (See pg. 8 of attached presentation). Pros: No program cuts. Establishes a new street sweeping fee and creates a $5.5 million reserve by end of FY 2015-16. This will allow the IWM Division to have a standard three to six month of operational costs in reserves, purchase refuse vehicles instead of leasing them to save tens of thousands of dollars in interest charges. j I Updated: 1/19/2012 by Mayra Ochiqui C 1532 Cons:A 13 percent or$2.97 rate increase the first year. In compliance with Article XIIID of the California State Constitution and the Proposition 218 Omnibus Implementation Act, notice must be given 45-days before the hearing to customers of record and parcel owners. The notice will describe the date, time, and place for the hearing and provide an explanation of the proposed increases. It is recommended that noticing be completed to allow the public hearing to be set for March 19, 2012,at 4:00 PM in the City Council Chambers. In the event the new rates are approved on March 19, 2012, then a notice of rate adjustment would be mailed to all customers in March and the new rates would become effective April 1,2012. FINANCIAL IMPACT In order to address the Integrated Waste Fund's deficit of approximately $1.1 million, the Public Works Department recommends the implementation of Option 3. This option proposes an increase of five (5)percent for the first year and a five (5)percent increase for the following four (4) years, with an effective date of April 1, 2012. If approved, the new rate for residential collections will increase from $22.84 to $23.98 per month ($1.14 per month increase). Commercial collection rates have numerous variations and are based on the number of and types of collections per week. In addition to an increase in the refuse rates, Public Works also recommends the implementation of a new street sweeping fee. Currently, the cost of this operation is being absorbed by the IWM fund. The Matrix Consulting Group recommended that this operation become a financially self- sustaining City program. The proposed street sweeping fee will be $1.73 for residents and $5.06 for commercial businesses per month effective April 1, 2012. RECOMMENDATION The Public Works Department recommends setting a public hearing for March 19, 2012, at 4:00 p.m.;and that the required notifications be authorized. Supoortine Documents: PowerPoint 011812 (PDF) Updated: 1/19/2012 by Mayra Ochiqui C 2 \ / § \ \ \ \ \ c f - _ - ƒ - o - � : : g CL G O LV - L P J � - G - r ti - - J _ Y 'J �D Mrs _ f IL f � ti - � r•) r cl n Y _c "r Y - y _ � Y J i ✓1 - - V _ J c_ m.___. ___iBel, , mw) UM___ ___ L b !| - ! ., ; ;; . . . . !! !) - - !! l ; � ; .; ; /| IL | § k }\ §! ! ®) § r ! ! ! j) � | c_ _,m__. ___JBai, , mwmm___ ____ !! ) t ' " �! ; - _ • ° !! !! ƒ \ /A, , | r ! r ■ ! ®\ ) \ c_ _,m__. __ _J68J« mwm.m___ ___V _ § IL IL ,« ! ! § « • ! !! §§ ; § § 3 ; / 51 !) � : � ; ; . , — I _ l - _ � J _ m p m {{pp aa c - I N £ .5 m cm G ° m p p 'A m O m O G lC r Ch CL i ep q O W N CJ: i - / Cb IL \ \ \ \ \