SR-503-001 (3)~ ~
Council Meeting: March 14, 2006
To: Mayor and City Council
From: City Staff
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Santa Monica, CA
Subject: Study Session on Solid Waste Rate Structure and Options for Solid Waste
Operations
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At its October 25, 2005 meeting, the City Council awarded a professional services
agreement with Gershman, Brickner & Bratton, Inc. (GBB) for a two-phased
engagement related to the City's solid waste enterprise. The first phase includes a study
of the operations, financial conditions, and rate structure of the City's solid waste
enterprise. The second phase, if executed, includes development of a Request for
Proposal for selected alternative delivery methods and updating of financial conditions
and rates resulting from implementation of proposals. The attached report represents
work completed by GBB for the first phase of the engagement.
Discussion
On June 28, 2005, Council authorized the formation of an Ad Hoc Committee consisting
of Council Members Ken Genser and Herb Katz to participate with staff in the
identification and analysis of a range of solid waste management options. On October
25, 2005, GBB was retained for this engagement.
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This study session and the attached report present to the City Councii the results of the
analysis completed by GBB related to the operations, financial conditions, and rate
structure of the solid waste operations (Phase I of its agreement). A draft report was
reviewed by the Ad Hoc committee on February 24, 2006, with Mayor Holbrook filling in
for Council member Genser at that meeting.
Budqet/Financial Impact
There is no budget or financial impacts associated with this study session, however,
policy decisions by Council as a result of the study could have impact on Solid Waste
rates, revenues and expenditures in the upcoming budget process.
Recommendation
It is recommended that the City Council receive the attached report and provide policy
guidance to staff based on the results of the study session.
Prepared by: Craig Perkins, Director of Environmental and Public Works Management
Steve Stark, Director of Finance
Donald Patterson, Acting Assistant to the City Manager,
Management Services
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City of Santa Monica Council Workshop March 14, 2006
Draft City of Santa Monica Solid Waste Operations & Financial Review
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tt~r~ Table of Contents
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1. Background
2. Current System Description
3. Benchmarking Survey
4. Financial Review and Baseline Activity-based
Full Cost Model
5. Operational Alternatives
6. Rate Options
7. Appendices
A. City of Santa Monica Rate Sheets
B. Benchmarking Comparison
C. Activity-based FCA Rate Model
D. Rates Background
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tt~Y~~ T t i ~ ty i ~ t, T n
rt~ FY2 /2 (CI ort)
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,~~ Total Tons = 139,279
^ Collected, processed
& disposed by SWMD
Non-SWMD collected;
SWMD processed &
disposed
Privately collected,
processed &
disposed
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~t~~~ coll Ction FYZ ~2 (tons)
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~~` Total Tons = 15,544
^ Refuse Collection
^ Bulky Waste Collection
Green Waste
~ Recycling Collection
^ Street Sweeping
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~~~ ulti-F ily si nti I
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frt~ Collection FY2004/2005 (tons)
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,~ Total Tons = 38,315
^ Refuse Collection
^ Bulky Waste Collection
Recycling Collection
~ Street Sweeping
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' ~`~~ rCl I II Ctl n
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~t~ FY2004/2005 (tons)
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;~~` Total Tons = 17,634
^ Refuse Collection
^ Bulky Waste Collection
Recycling Collection
~ Street Sweeping
Beach Maint.
^ Promenade Maint.
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• Fund 27 in FY 2004/2005 had the
actual cost and revenues as
follows:
- Costs $18,130,109
- Revenues $18,642,215 including
one time revenues
- Carry-over committment $1,400,000
(City Yard Master Plan, etc.)
Source: Finance Department
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..,_._ .. ~. urr nt y t cri ti n
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A. Single-family Residential Service
B. Multi-family Residential Service
C. Commercial Service
D. Special Services
E. Transfer and Disposal
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Green Waste
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• Six cities in Los Angeles County
to compare with Santa Monica:
- Beverly Hills
- Burbank
- Culver City
- Glendale
- Los Angeles
- Pasadena
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• Benchmarking provides data which is not fully
comparable because cost and revenue data are
lacking
• Not all cities operate on Enterprise Fund basis,
for example, Los Angeles
• City of Santa Monica is the highest level service
provider
• City of Santa Monica residential rates are the
second highest
• City of Santa Monica commercial rates are
competitive with private-sector providers
• City of Santa Monica diversion rate exceeds
AB939 mandate of 50%
• Disposal cost varies from $20 to $100 per ton
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~~~~~~~~~~~{q~• ,~~'{~ Family Residential Fee
City of Santa Monica - $31.00
• Beverly Hills -$0.0085 per sq. ft.
-$64 for a 7,500 sq. ft. lot
-$77 for a 9,000 sq. ft. lot
• Burbank - $13.00
• Culver City - $22.17 (Recycling biweekly)
• Glendale - $14.41
• Los Angeles -$11.00 plus subsidy from
General Fund
• Pasadena - $29.30
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~~~~~~~°°~~{p~# ~''{~ Activity-based Full Cost Model
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• FY 2004/2005 Rates Comparison
• Full Cost Accounting (FCA) Model
Assumptions
• FCA Model Structure
• FCA Model Findings
• FCA Model Printouts are in
Appendix C
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• Baseline Service, one 95-gallon
cart collected once per week
-Single-family - $62
-Multi-family - $50
- Commercial - $37
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• Rates differ among single-family,
multi-family and commercial base
refuse service
• Other services are added in addition
to refuse collection without extra
charge, including
- Recycling
- Green waste collection and recycling
- Residential street sweeping
- Food waste collection and recycling
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Activities by Service Area
Single-family Multi-family Commercial
Refuse Collection X X X
Bulky Waste Collections X X
Recycling Collection x x x
Green Waste Collection X
Refuse Transfer & Disposal X X X
Recycling Transfer X X X
Green Waste Transfer X
Promenade X
Street Sweeping x x x
Litter Management X
Food Waste Recycling X
Cardboard Recycling X X
Administration X X X
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1. Overall costs are slightly higher than revenue
2. There are no reserve funds, equipment or
operating reserve
- Best practice is 3 months' expenses
- Target $4,500,000
- Build up gradually
3. Single-family rate does not cover the cost of
providing services
4. Multi-family rate covers costs and results in Net
Revenue
5. Commercial services rates do not cover the
cost of providing services
6. Transfer & Disposal costs exceed revenues
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U I I Cl I Cl
Cost per Unit per Year
Single- Multi- Commercial
Family Family Service
Service Service
Number of Units 7,819 41,788 1,568
Basic (Collection, transfer ($19~)* ($5~)* $297
& disposal, Admin.)
Other Services (Recycling, $282 $40 $128
street sweeping, etc)
All services $84 ($1 ~)* $425
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*Surplus revenue
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Program Single- Multi- Com- Non-
Name Family Family mercial SWMD Total
Service Service Service Mat'I
Total Labor $1.8 M $2.9 M $3.4 M 0 $8.1 M
Expenses $1.7 M $3.4 M $2.5 M $0.8 M $8.4 M
Total
Expenses $3.9 M $7.0 M $6.4 M $0.8 M $18.1 M
Revenue ($3.2 M)~ ($7.8 M) ($5.7 M) ($1.4 M) ($18.1 M)
Net Expenses $657,853 ($747,515) $666,082 ($527,699) $48,720
Net Program $g4.14
($17.89)
$424.80
N/A
$0.95
Cost Per Unit
"Revenue and net revenue show in (red}.
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Work Elements:
1. Visit Facilities
2. Observe Operations
3. Analyze Operations
4. Develop Operational Parameters
5. Identify Alternative Options
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G66 has:
• Analyzed several short-term options
using the FCA Rate Model
• Summarized Phase II options
• Identified policy considerations
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'~ '`rt tion 1. Curr nt t s
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Uses current rate structure and FCA model with Baseline
revenues and expenses; no change in services except for
short-term improvements to operations as suggested by
GBB and to be implemented by City of Santa Monica prior
to end of FY2006, as follows:
A. Driver Management & Accountability; overtime savings
B. Driver Management & Accountability; equipment operational
savings
C. Collection Route Optimization; eliminate 2 routes overall
• Reduce direct labor
• Reduce vehicle maintenance
• Reducefuel
D. Restructure transfer work day, stage trailers
E. Resolve driver/tractor shortage, overtime
F. Optimize disposal location to reduce tipping fees but keep
recycling credits
Estimated savings from FCA Model -$616,000 with range
of $500,000 to $700,000
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~~~~~~~°°~~{q~' ~''{ Option 2. Current Rates with Capital
• Same as Option 1 and with capital
investment to replace the current transfer
trailers with top load trailers:
- Improvements as in Option 1
- Capital cost, GBB estimate - $400,000
- Reduce labor costs
- Reduce vehicle maintenance costs
- Eliminate Special Equipment Maintenance
- Reduce fuel usage
• Estimated savings from FCA Model -
$704,000 with range of $600,000 to
$800,000
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~~$ Short-term Rate Options
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'rt~ O tion 3. No Rate Increase
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• Same as Option 1 and avoid increases in rates via
elimination of services:
A. Franchise commercial collection operations:
• Operational savings
• Lost revenue
• Potential franchise fees (not included)
• Estimated savings from FCA Model $903,000 with
range of $800,000 to $1,000,000
B. Eliminate selected commercial service activities:
• Recycling Transfer
• Food Waste Recycling
• Cardboard Recycling
• Estimated savings from FCA Model -$798,538 with
range of $700,000 to $800,000
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Option 4. Balanced Rates
• Adjust rates so that revenue covers costs
in the different service areas; no change in
services except for short-term
improvements to operations as identified in
Rate Option 1:
- Raise single-family residential rates 12 percent
- Lower multi-family rates 13 percent
- Raise commercial rates 20 percent
• Raising of Commercial Rates by 20
percent will make the City uncompetitive
with a resulting loss of customers
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,~~~ Annual Rate Impacts
Scenario Projected Annual Savings
Option 1 (~s1~,oaa>
Option 2 ($704,oaa>
Option 3 ($1.7 nnillic~r~)
Option 4 ($52~,oaa>
"Net Revenue shown in (red}.
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• Phase II:
- Rates cover current costs with Reserve Funds
- Balanced and Simplified Rates with CSM
Improvements (Option 3 with capital
improvements)
- Balanced and Simplified Rates meeting
Sustainable City goal of 70% diversion by 2010
- CSM with Other Local Governments, e.g., City of
Los Angeles (Option 6 with regional participation)
- Minimize Land Use at Current City Services
Center
- Franchise some or all services
- City completed notice requirements
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• Short-term operational efficiencies will
take up to 12 months to be fully in place.
• Residential and Multi-family rates should
increase by more than CPI.
• Commercial rates should not increase by
more than CPI.
• Increase rates more if the City of Santa
Monica wants to start building up
operating reserve fund (e.g., one-month's
operating reserve worth would be an
additional $1.7 million).
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Discussion and Comment
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Thank you!
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