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SR-03-18-2014-3FCity Council Meeting: March 18, 2014 Agenda Item: 3® F To: Mayor and City Council From: Martin Pastucha, Director of Public Works Subject: Second Agreement Modification with Cedarwood- Young, Inc. d /b /a Allan Company for Recycling Processing Services and First Agreement Modification with Southern California Disposal for Transfer and Hauling Services Recommended Action Staff recommends that the City Council: 1. Authorize the City Manager to negotiate and execute a second modification to service agreement 9012 (CCS) with Cedarwood- Young, Inc. d /b /a Allan Company to reflect changes in the scope of services outlined in this report. 2. Authorize the City Manager to negotiate and execute a first modification to service agreement 9011 (CCS) with Southern California Disposal to reflect changes in the operation outlined in this report. Executive Summary In November 2008, Allan Company entered into a service agreement with the City to provide recycling processing services for the City's recycling collections operations as well as operate a drop -off recycling facility within the City limits open to the public. An integral part of the agreement was for Allan Company to operate the proposed Resource Recovery Center to be built by the City. In November 2008, Southern California Disposal entered into a service agreement with the City to provide transfer and hauling services of the City's mixed waste, green waste, food waste, construction and demolition debris, street sweeping and other acceptable materials. As part of the agreement, Southern California Disposal would operate the proposed Self -Haul Facility to be constructed as part of the proposed Resource Recovery Center. In December 2011, staff recommended that the Resource Recovery Center and the Self -Haul Facility not be constructed due to operational and cost issues, and that Council direct staff to develop a new material processing plan with Allan Company and Southern California Disposal. 1 The Allan Company service agreement included transitional provisions pending the completed construction of the new facility. Allan Company is currently operating under the transitional requirements of the service agreement, which are not representative of the current operating environment. The Southern California Disposal Agreement is pending authorization to negotiate a modification to the existing service agreement. Staff is recommending that Council authorize the City Manager to negotiate modifications to both agreements in order to reflect changes in current operating services with both contractors and to continue to negotiate terms of a new processing plan. Background On November 25, 2008, Council approved a public /private partnership with Allan Company. The service agreement included processing of all recyclable materials collected curbside, the continuation of a buy back center and a 24 hour drop off area for recyclable materials. During the transitional period, the operation would continue in the existing location (Santa Monica Community Recycling Center) and move to the new Resource Recovery Center after it was constructed. In February 2010, the first modification to the service agreement was issued modifying the hours of operation on Saturdays. On November 25, 2008, Council approved a public /private partnership with Southern California Disposal. This service agreement included the transfer and hauling services of the City's mixed waste, green waste, food waste, construction and demolition debris, street sweeping and other acceptable materials. On December 6, 2011, Council approved staff's recommendation to cancel the design and construction of the Resource Recovery Center and the Self -Haul Facility at the City Yards due to costly construction estimates and operational issues, and directed staff to develop a new materials processing plan in conjunction with Allan Company and Southern California Disposal. Discussion Allan Company's existing service agreement is not in full effect until a notice to proceed is issued. This notice would have been issued after the Resource Recovery Center was 2 fully operational (construction cancelled in December 2011). During the transitional period (between execution and the notice to proceed), Allan Company has continued to provide recycling services under the former operations agreement 6053 (CCS). Allan Company Agreement Modification The modification to Allan Company's existing agreement would include but not limited to the following options: • Per Ton Rate Increase: Allan Company would continue to pay the City a per ton rate of $35.00 per ton for all commingled recycled materials collected curbside and delivered to Allan Company for processing, representing an increase from the base contract rate of $27.50 per ton. The $35.00 per ton rate for mixed recyclable materials would increase effective January 1St of each year in accordance with percentage increases, if any, in the Consumer Price Index as published at www.bls.gov /cpi for the Los Angeles- Riverside - Orange area, and shall mean the percentage increase in the cost of living index as measured by the Consumers Price Index for All Urban Consumers, less Energy for the 12 month period November to November of the prior year. • Electronic Waste: Allan Company would pay the City market value for electronic waste materials. Allan Company agrees to collect all electronic waste from the City and the residents of Santa Monica at no charge. For the purposes of this amendment, Electronic Waste shall include, but not be limited to: computers, televisions, DVD players, VCR's, computer and electronic peripherals, fax machines, scanners, printers, gaming controls, and other electronic equipment containing a circuit board or power cord. The City would accept the current market value price being offered to the public for eligible electronic waste as set by Allan Company's posted door price. Allan Company agrees to accept any and all electronic waste materials received from City sponsored electronics waste collection events and pay the City posted door price for these materials. The City agrees that Allan Company can select its own electronic waste recycler for city generated electronic wastes that conform to City criteria. • Scrap Metal and White Goods: Allan Company would continue to purchase scrap metal and receive white goods from all sources. Allan Company would continue to pay the City for scrap metals and white goods delivered by the City. • Loose Plastics: Allan Company would continue to receive loose plastics (refuse carts) from the City and the public. Allan Company would pay the City for scrap plastics delivered by the City. • Host Fee: Allan Company would pay the City a host fee in the amount of $2.00 per ton for each ton of recyclables processed and recovered by Allan Company's Santa Monica operations regardless of the source of recyclables, subject to annual escalation by the CPI. 9 • Rent Increase: Allan Company would pay an annual rent increase for the property leased at the City Yards for recycling processing operations. The monthly lease payment shall be increased annually by a factor equal to the difference in the Los - Angeles Riverside Orange County Consumer Price Index for Wage Earners and Clerical Workers for the twelve month period November to November of the prior fiscal year. • Residual Trash Cost Recovery: The City would pay Allan Company for the residual trash from City collected recyclable materials delivered to the Contractor above a designated percentage threshold determined by both Allan Company and the City on a quarterly basis. • Transition Term: The City would negotiate the transition term of the existing service agreement which would remain in effect until June 30, 2015 at which time the City would propose to deliver a minimum of six months' notice to vacate property if the City determines that the contract will not be renewed for another term. If notice to vacate is not delivered by June 30, 2015, the City would continue to deliver a minimum of six months' notice to vacate property on a rolling six month calendar year until a definitive date is determined. • Original Signing Bonus: Because the Resource Recovery Center was not constructed, the City would refund the original signing bonus of $526,000 that Allan Company contractor paid to the City upon execution of the original service agreement less any costs that Allan Company has due and payable to the City for annual rent increases and legacy trash costs. Southern California Disposal Agreement Modification Southern California Disposal's service agreement is not in full effect until a Notice to Proceed is issued. This notice would have been issued after the Self -Haul Facility (construction cancelled in December 2011) was fully operational. Beginning December 2011, the City closed its transfer station and began utilizing the services of Southern California Disposal in accordance with the original service agreement. The modification to the existing agreement would include but not limited to negotiating the new processing plan and a notice to proceed. The Notice to Proceed would include the following payment options in accordance with the original agreement as well as additional service options: • CPI increase effective January of Each Year: The annual CPI adjustment shall be increased effective January 1St of each year in accordance with percentage increases, if any, in the Consumer Price Index as published at www.bls.gov /cpi for the Los Angeles- Riverside - Orange area, and shall mean the n percentage increase in the cost of living index as measured by the Consumers Price Index for All Urban Consumers, less Energy for the 12 month period November to November of the prior year. • Monitor Loads at Southern California Disposal: In addition, the City would monitor a variety of loads tipped from the City's curbside collection program at Southern California Disposal's Transfer Station to insure that the City is meeting its disposal and recycling residual requirement with the City's approved processing facilities. The approximate amount per ton for the residual trash is $27.66 depending on the final disposal site and annual processing and disposal fee adjustments at these various locations. • Fuel Service Calculation: The City would negotiate the average fuel price, fuel index multiple, hauling price fuel component and the base fuel rate. The monthly surcharge fuel rate would adjust each month based on calculations determined by both the City and Southern California Disposal. Financial Impacts & Budget Actions Financial impacts are unknown at this time pending negotiations of the new agreements. However, the City may need to reimburse Allan Company a maximum of $526,000 for the original signing bonus as a result of the negotiations because the Resource Recovery Center was not constructed. The original signing bonus was not spent and is available in the FY 2013 -14 operating budget in division 27441. Funds in the amount of $526,000 to reimburse Allan Company are included in the FY 2013 -14 budget at account number 27441.555010. Prepared by: Kim Braun, Resource Recovery & Recycling Manager Approved: Forwarded to Council: Martin Pastucha Rod Gould Director of Public Works City Manager 5 Reference: Amended Contract 9011 (CCS) & 9012 (CCS)