CC 12-05-2023 Item No. 6. Recology Rates_Supplemental Report
CITY COUNCIL STAFF REPORT
SUPPLEMENTAL 1
Meeting: December 5, 2023
Agenda Item #6
Subject
Adopt a maximum rate schedule for Rate Period Four for Recology to provide
recycling, organics, and solid waste collection, recycling and organics processing
services, and transport for disposal as calculated using the allowed and approved
methodology in the Franchise Agreement.
Recommended Action
Adopt Resolution No. 23‐XXX (Attachment A) to:
1) Adopt a maximum rate schedule for Rate Period Four for Recology to provide
recycling, organics, and solid waste collection, recycling and organics processing
services, and transport for disposal pursuant to the franchise agreement
(Attachment B; (FA Exhibit E2)), and
2) Authorize the use of $547,800 of restricted‐use enterprise funds to smooth and
mitigate the Rate Period Four adjustment.
Staff’s responses to questions received from councilmember are shown in italics.
Q1: What is the new annual expected Franchise Fee amount? Is this still going
to be calculated at 12% (Gross Receipts – Solid Waste Fund Operations Fee)?
(Moore)
Staff response: Per the Franchise Agreement (section 7.1) the Franchise Fee will
remain the same for the term of the agreement at 12% of Recology’s gross receipts less
the Solid Waste Fund Operations Fee.
Q2:
Our city has a significant number of recyclables and food waste mixed
in with our trash which does not get sorted and goes directly to the
landfill.
San Jose has a higher cost, but their waste is sorted and diverted
without the customer having to separate food waste out.
Sunnyvale requires food and recyclables to be sorted out, but the trash
is further sorted to increase the diversion.
To have our trash sorted and diverted, Cupertino residential rate
increases would be estimated at $5‐8/month.
Please add the information about what the customers in each city are
provided with their solid waste services and a note about the cost to sort if
Cupertino were to add that so that we can make a fairer comparison.
For example: Does the customer at City X pre‐sort food waste and recyclables?
Is there post‐pickup waste diversion or is misplaced waste sent to the landfill
as is done in Cupertino? (Moore)
Staff response:
There are multiple inputs to determine waste material collection and handling rates
for a jurisdiction that go beyond the difference in the type of pre‐collection sorting
requested of customers and post‐collection processing provided. That said, below is a
color key of the 5 categories of pre‐ and post‐collection waste sorting and processing
and a table showing the jurisdictions coded appropriately.
Color‐key to explain different pre‐sorting and post‐collection protocols
3‐category pre‐sort:
‐garbage
‐yard waste and food scraps together
‐recyclable containers and paper together
NO post‐collection processing of garbage.
Anything placed in garbage container goes directly to landfill.
3‐category pre‐sort:
‐garbage with food scraps
‐yard waste
‐recyclable containers and paper together
Post‐collection processing of garbage.
Recyclable and compostable material sorted out of garbage before remaining amount sent to landfill.
3‐category pre‐sort:
‐garbage
‐food scraps together with yard waste
‐recyclable containers and paper together
Post‐collection processing of garbage.
Recyclable and compostable material sorted out of garbage before remaining amount sent to landfill.
4‐category pre‐sort:
‐garbage
‐food scraps together with yard waste
‐recyclable containers
‐paper
Post‐collection processing of garbage.
Recyclable and compostable material sorted out of garbage before remaining amount sent to landfill.
5‐category pre‐sort:
‐garbage
‐food scraps
‐yard waste
‐recyclable containers
‐paper
Post‐collection processing of garbage.
Recyclable and compostable material sorted out of garbage before remaining amount sent to landfill.
City 20 or 24
gallon cart
32 or 35
gallon cart Extra per month
Milpitas $36.46 $39.63
Cupertino $37.78 $40.18 Current
Mountain View $28.90 $42.10
Cupertino $39.67 $42.19 5% increase $2.01
Campbell $34.51 $42.74
Sunnyvale $38.46 $44.64
Los Gatos $36.73 $45.74
Saratoga $37.38 $46.40
Los Altos $44.98 $48.45
Santa Clara $41.41 $49.12
Palo Alto $27.81 $50.07
San Jose n/a $51.40
Q3: The Resource Recovery Fund (Solid Waste Fund Operations Fee) is
approximately $5.4 M as of October 31, 2023 and receives revenue ranging
from a low of $123,429 (the contracted amount) to over $200k in a month,
what accounts for the receipts over the contract amount? (Moore)
Staff response:
To avoid confusion on terms, the Resource Recovery Fund is the City’s Fund 520, and
the $5.4 M amount refers to the cash balance in the fund on October 31, 2023, which
is not reflective of restricted funds or non‐cash transactions. The Solid Waste Fund
Operations Fee is the amount that the City’s Environmental Programs division
calculates annually based on projected need to run the division, which Recology then
pays to us. Receipted funds also include revenues such as AB939 revenue (a per‐ton
fee assessed on all tons disposed of in Santa Clara County and then provided back to
the jurisdiction the tons came from), CalRecycle grant dollars, and Earth and Arbor
Day Festival registration and sponsorship fees.
Q4: The 2021 Contract with Recology does not appear to have language that
the Solid Waste Fund Operations Fee/Resource Recovery Fund is to be used to
subsidize residential charges. It also states that it would not have profit mark‐
up. How could this fund be used to subsidize residential charges if that would
require there be excess charged? Wouldn’t that be profit mark‐up? (Moore)
Staff response:
There may be confusion on terms:
1. The Solid Waste Fund Operations Fee is the amount that the City’s
Environmental Programs division calculates based on projected need to run
the division, which Recology then pays to the City. Per the Franchise
Agreement section 7.2: “This fee shall be considered an allowable cost of
business not subject to profit mark‐up and may be included in the adjustment
of Rates as described in Exhibit E.”
2. The “City Payment” as it is called in the Franchise Agreement is the amount
that the City can elect to pay to smooth rates. “City Payments” is defined in
Exhibit E to the Franchise Agreement (page E‐2). (Snip below). Using the
fund for smoothing is also discussed in section 8.2, line 2463 (snip below).
Q5: If we are currently subsidizing the residential costs with the Resource
Recovery Fund, where is the language in a contract somewhere showing that
the purpose of the fund includes that use? (Moore)
Staff response:
There is no Contractual obligation to smooth rate increased with City funds; that is a
policy decision made by City Council. During adoption of the Franchise Agreement at
the December 15, 2020 Council meeting, the use of the fund for that purpose was
authorized. (Snip below from page 11 of the 12/15/2020 staff report). Staff
recommends continuing to implement the previously adopted Council policy.
Attachments Provided with Original Staff Report:
A. Attachment A – Draft Resolution from published agenda
B. Attachment B – Recology Franchise Agreement from published agenda
C. Attachment C ‐ HF&H Report – Review of Recology RP 4 Application from
published agenda