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ORIGINAL
CITY OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION
Dept: City Administrator's Office
Subject: RESOLUTION AUTHORIZING THE
MAYOR TO EXECUTE AN AMENDMENT TO
THE SERVICES AGREEMENT WITH R3
CONSUL TING GROUP, INC., FOR ASSISTANCE
CONCERNING COMMERCIAL REFUSE
SERVICES PROVIDED BY FRANCHISED
REFUSE HAULERS
From: Fred Wilson, City Administrator
Date: July 28, 2005
MICC Meeting Date: August 15, 2005
Synopsis of Previous Council Action:
June 21,2004 - Mayor and Council adopt Resolution 2004-206, approving an agreement with R3
Consulting for assistance concerning expansion of commercial refuse services provided by franchised
refuse haulers
Recommended Motion:
Adopt resolution, and authorize the Director of Finance to amend the FY 2005-06 Budget as indicated in
the staff report.
Contact person: Fred Wilson
Phone:
5122
Supporting data attached: staff report, resolution Ward: all
FUNDING REQUIREMENTS:
Amount: $30,000 in additional cost for this amendment
Source: (Accl. No.) 527-411-5505
(Accl. Description) Refuse Fund
Finance:
Council Notes:
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Agenda Item No.
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STAFF REPORT
Subiect:
Resolution authorizing the Mayor to execute an amendment to the Services Agreement
with R3 Consulting Group, Inc., for assistance concerning commercial refuse services
provided by franchised refuse haulers
Back2round:
In 2004, various options were evaluated for increasing revenues to the General Fund.
One area under consideration was the City's possible expansion of franchised
commercial refuse services.
In the Spring of 2004, R3 Consulting Group was retained to provide an analysis
concerning options to enhance revenues in this regard. One option identified was to
assign all new commercial refuse customers to a franchisee. As an alternative, R3 was
asked to evaluate whether or not a similar financial benefit could be realized through an
expansion of the City's in-house commercial refuse operation. In summary, though that
option is available, it contains risk and would not provide the same level of financial
benefit to the General Fund.
In June of 2004, the Mayor and Council approved another agreement with R3 Consulting
to assist the City through a competitive proposal process that would result in assigning all
new commercial customers to a franchisee. At that time, it was anticipated that the
process would take 60-90 days before a recommendation could be made to the Mayor and
Council concerning award of a franchise.
Activities to Date
In the summer and fall of 2004, the consultant drafted an initial RFP and franchise
agreement that would have assigned all new commercial refuse customers to a franchisee.
However, as the concept evolved, it became apparent that this franchise would be
difficult to administer. Definitions of "new" commercial refuse customers would be
problematic to enforce, and franchise monitoring costs were anticipated to be high. Staff
and the consultant began to consider other options that would still generate revenue for
the General Fund while minimizing the impact on current refuse operations, but also be
easier to administer for both the City and the potential franchisee.
Under a new franchise concept, it was recommended that a Request for Proposals (RFP)
be issued for the purposes of defining the financial benefits of franchising the City's roll-
off operations. Roll-off operations are those bins delivered to businesses and/or residents
for debris removal, construction projects, etc. The current roll-off operation involves six
(6) refuse operators, making it a relatively small component of the City's commercial
refuse operations. A minimum one-time payment of $5.6 million for this franchise and
$500,000 for the associated equipment would be established, plus annual franchise fee
and other revenues that were estimated at more than $600,000 annually.
At the Mayor's direction, an RFP for this work was released on Tuesday, February 15,
2005. The Council was informed of the action via memo, and also given a copy of the
letter sent to refuse vendors. Following a process of working with the proposers to
maximize revenues while minimizing impacts on customer rates, the City was able to
negotiate a $8.5 million transItion payment and a $500,000 equipment transitIOn
payment, for a total up-front payment of $9 million from Burrtec Waste Industries, Inc.
However, at the direction of the City Administrator, Finance and Public Services staff
began additional in-depth analysis of the roll-off operation in late May, using new data
available through Refuse's new billing system. Staff also hand-audited roll-off
paperwork to verify the amount of revenue that is being generated from this program for
the Refuse Fund, in order to be sure that the fund could continue to be self-sustaining if
the roll-off operation were to be franchised.
In the end, this analysis showed that the roll-off operation is generating more in revenue
than was originally estimated in the analysis. Part of this revenue offsets costs of the
Refuse Division's environmental projects, including source reduction and recycling
programs, as well as administrative costs. Over the long term, the Refuse Fund could not
sustain that revenue loss without significant budget reductions that would impact other
Refuse operations (such as environmental projects and administration), and/or
considerable reductions to the transfer from the Refuse Fund to the General Fund.
In short, it does not appear that franchising the City's roll-off operation would be
beneficial to the City at this time.
Amendment to the Al!reement with R3 ConsuItinl!:
The agreement approved with R3 Consulting by the Mayor and Council in June 2004 was
for an amount not to exceed $58,070. The project evolved significantly since that time,
requiring additional work by the consultant. The proposed amendment to R3's
agreement will provide for the payment of remaining services related to the franchise
process ($25,000 in FY 04-05), as well as a contingency for any outstanding wrap-up
issues ($5,000 in FY 05-06), for a total additional cost of $30,000.
The total contract cost of $88,070 has been offset to some degree by revenue from
proposer submittal fees of $30,000.
Financial Impact:
As noted earlier, the proposed amendment to R3's agreement will provide for the
payment of remaining services related to the franchise process ($25,000 in FY 04-05), as
well as a contingency for any outstanding wrap-up issues ($5,000 in FY 05-06), for a
total additional cost of $30,000.
It is recommended that the Director of Finance be authorized to amend the FY 04-05 and
FY 05-06 Refuse Fund Budgets to reduce the Refuse Fund Undesignated Balance by this
amount, and increase the Refuse contractual services budgets by the corresponding
amounts indicated above.
Recommendation:
Adopt resolution, and authorize the Director of Finance to amend the FY 05-06 Budget as
indicated in this staff report.
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RESOLUTION NO. t ({j) IPY
nESOLUTIO:\1 OF THE MA yon A:\'D COMMO:\1 COUNCIL OF THE CITY OF SAN
BEnNARDINO AUTHORIZING THE MAYOR TO EXECUTE Al\' A\IE:\'D:\IENT TO
THE SERVICES AGREEMENT WITH R3 CONSUL TI:\'G GROUP, INC., FOR
ASSISTANCE CONCERl\ING COMMERCIAL REFUSE SERVICES PROVIDED BY
FRANCHISED REFUSE HAULERS
BE IT RESOLVED BY THE MAYOR AND COMMON COUNCIL OF THE
CITY OF SAN BERNARDI:\'O AS FOLLOWS:
SECTION 1. The Mayor of the City of San Bernardino is hereby authorized and
directed to execute on behalf of said City, Amendment !\'o. I to the Services Agreement
bet\\ecn the City of San Bernardino and R3 Consulting Group, Inc., a copy of which is attached
hereto marked Exhibit "A" and incorporated herein by reference as fully as though set forth at
length.
SECTION 2.
The authorization to execute the above-referenced agreement is
rescinded if the parties to the agreement fail to execute it \\ithin sixty (60) days of the passage
of this resolution.
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RESOLllTIO;\I OF THE MAYOR AND COMMON COUI\CIL OF THE CITY OF SA:\"
BERNARDI;\IO AUTHORIZI:"G THE l\lA YOR TO EXECllTE AN Al\1E!\D\IENT TO
THE SERVICES AGREEMENT WITH R3 COl\Sl:L TI;\IG GROUP, INC., FOR
ASSISTANCE CONCERNING CO!\IMERCIAL REFUSE SERVICES PROVIDED BY
FRANCHISED REFUSE HAULERS
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I HEREBY CERTIFY that the foregoing Resolution was duly adopted by the Mayor
6 and Common Council of the City of San Bernardino at a
meeting thereof. held on the
day of
,2005, by the following vote, to wit:
Council i\1embers:
AYES
NAYS
ABST AI~ ABSENT
EST~\DA
LONGYILLE
MCGINNIS
DERRY
KELLY
JOHNSON
\1CCAM\fACK
City Clerk
The foregoing resolution is hereby approved this
dJY of
2005.
Judith Yalles, l\1ayor
City of San Bernardino
Approved as to
Form and legal content:
James F. Penman, City Attornev
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Exhibit "A"
AJ\IE:\'DJ\IEl\'T 1\'0. 1
TO THE
SERVICES AGREEl\1El\'T
This Amendment No. I to the Services Agreement is entered into this day
of . 2005. by and bet\\een the City of San Bernardino ('"CITY") and R3
Consulting Group. Inc.. C'C01\'SULT:'\l\T") relating to assistance concerning
commercial refuse services jxO\'ided by franchised refuse haulers and other issues related
to refuse regulations and operations.
I. The Section No. 2 entitled "COtvlPENSA nON A\'D EXPENSES" IS
hereby amended to now read as follows:
"'For the services performed pursuant to Section I of this Agreement
CITY shall pay CONSULTANT a fee not to exceed S88.070."
2. lhe Section No.3 entitled "TERM; SEVERABILITY" is hereby amended
to now read as follows:
"'The term of this Agreement shall be for a period of eighteen (18) months.
commencing on July I, 2004, and terminating on December 31. 2005,
unless previously modified. amended. or cancelled by the \\Titten mutual
consent of the parties. This Agreement may be terminated at any time by
thirty (30) days written notice by either party. The terms of this
Agreement shall remain in force unless mutually amended in \\riting. The
duration of this Agreement may only be extended with the written consent
of both parties."
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AMENDMENT No. I
TO THE
SERVICES AGREEMENT
TN WITNESS \VHEREOF. the parties have executed this instrument upon the date first
herein above appearing.
ATTEST:
CITY OF SAN BERNARDI;\JO
Bv:
Rachel Cbrk. City Clerk
By:
Judith Valles. Mayor
R3 CONSULTING GROUP. INC.
By:
Title:
Approwd as to form
and legal content:
JA\!ES F. PENlvlAN
City Attorney
By:
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