CC 12-05-23 Item No. 6 Adapt a maximun rate schedule for Rate Period Four for Recology_Written Communications (2)CC 12-05-2023
Item No. 6
Adopt a maximum
rate schedule for Rate
Period Four for
Recology
Written Communications
From:Tracy Kosolcharoen
To:City Council
Cc:City Clerk
Subject:Written comment for Dec 5th City Council Meeting
Date:Tuesday, December 5, 2023 3:06:05 PM
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recognize the sender and know the content is safe.
Dear City Council,
Please pull items 6 & 8 from the consent calendar.
#6 - If you are approving higher garbage rates on homeowners, this should be discussed.
- How exactly is the 10 year rate smoothing going to happen? I understand there's a 5%
increase for the first year but what about subsequent years? Are we eventually going to end up
at the top of the pack when it comes to rates? Please provide clarity for the 10 year rate hike
schedule.
- Is it fair to compare Cupertino to other cities that have higher levels of garbage sorting? Are
we paying more for the same lower level of service while other cities are receiving a higher
level of service?
- Why is only $547k of the franchise fees used to offset higher rates for ratepayers? Can you
please provide a clearer breakdown of what happens with the rest of $3.7M, and how the split
was determined?
#8 - It's great that we have a grant from SVCE. However, grant funding is finite and the
products we receive for free have the risk of negatively burdening this city once the funding
runs out. This is especially important to consider if Cupertino is in dire financial straights (and
can't even fund, say, July 4th fireworks).
- Who will have liability for the BEAM products if something wrong happens to a car that
uses them?
- Who bears the cost of "additional support and maintenance"? How much does it cost and
how frequently is this cost incurred? I get that the purchase is free from a grant, but similar to
cars, the maintenance and servicing is usually extra!
What I don't want is to end up after a few years with yet another cost line item that this city
must bear, while all our community services have been cut.
Thank you,
Tracy
From:Peggy Griffin
To:City Council
Cc:Ursula Syrova (she/her); City Clerk
Subject:FW: 2023-12-05 City Council Mtg-Agenda ITEM 6-Recology Profit is 27.5%!!!:
Date:Tuesday, December 5, 2023 2:33:19 PM
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CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you
recognize the sender and know the content is safe.
City Clerk: Please include this email as part of written communications for 12-5-2023 CC Agenda
Item #6.
Dear City Council,
FYI…I’m not sure if you were blind copied so I’m sending this information provided by Ursula Syrova.
Sincerely,
Peggy Griffin
From: Peggy Griffin <griffin@compuserve.com>
Sent: Tuesday, December 5, 2023 2:05 PM
To: 'Ursula Syrova (she/her)' <UrsulaS@cupertino.org>
Subject: RE: 2023-12-05 City Council Mtg-Agenda ITEM 6-Recology Profit is 27.5%!!!:
Ursula,
Thank you for taking the time to answer my questions. I really appreciate it.
I now remember reading some place that the fund was going for 20 years. I still think even 17%
profit is very high. I believe Gilroy or Morgan Hill’s agreement is at 9% profit. That said, I now
understand that if they exceed their capped 5% on line items that has the potential of eating into
their profits so it’s an incentive to keep it to a max of 5%.
Sincerely,
Peggy Griffin
From: Ursula Syrova (she/her) <UrsulaS@cupertino.org>
Sent: Tuesday, December 5, 2023 10:08 AM
To: Peggy Griffin <griffin@compuserve.com>
Subject: RE: 2023-12-05 City Council Mtg-Agenda ITEM 6-Recology Profit is 27.5%!!!:
Hi Peggy,
Thank you for your close reading of the Council packet and attention to detail and for your
questions. I have provided responses below in blue and I hope that helps clarify some points and
answer others, but let me know if you have additional questions.
Best,
Ursula
Ursula Syrova (she/her)
Environmental Programs and Sustainability Manager
Public Works
UrsulaS@cupertino.gov
(408) 777-7603
From: Peggy Griffin <griffin@compuserve.com>
Sent: Sunday, December 3, 2023 7:49 PM
To: Ursula Syrova (she/her) <UrsulaS@cupertino.org>
Cc: City Council <CityCouncil@cupertino.org>; City Clerk <CityClerk@cupertino.org>; Matt Morley
<MattM@cupertino.org>
Subject: 2023-12-05 City Council Mtg-Agenda ITEM 6-Recology Profit is 27.5%!!!:
CAUTION: This email originated from outside of the organization. Do not click links or open attachments unless you
recognize the sender and know the content is safe.
PLEASE INCLUDE THE FOLLOWING EMAIL AND ATTACHMENTS AS PART OF WRITTEN
COMMUNICATIONS FOR THE ABOVE CITY COUNCIL MEETING AGENDA ITEM.
Dear Manager Syrova,
I have several questions regarding this Recology rate increase and I’d appreciate it if you could
answer these questions before the upcoming City Council meeting on Dec. 5, 2023.
Q1: How much percentage profit is Recology guaranteed to receive in this agreement each year?
Is it really approximately 27.5%?
If so, why so high?
In Attachment C – HFH Report – Review of RP 4 Application.pdf, Section I Profit, Page 7 of 12
The Franchise Fee remitted to the City comes out of Recology’s profit, and that is set at 12%,
so profit beyond that for Recology would be around 17%, which is within the typical range for
the industry.
We’re not guaranteeing a profit - the company needs to operate responsibly, and we’re not
even guaranteeing we'll cover their costs because there are caps built into the methodologies
– a 5% cap on allowable cost of operations during cost-based adjustment years and a 5% cap
on total calculated costs during index-adjusted years.
Q2: Is there any incentive in the agreement for Recology to reduce their costs from year-to-
year? If so, what are they?
The caps built into the methodologies provide a built-in incentive to keep costs below those.
Q3: Can this agreement be terminated and re-negotiated?
This is an unreasonable “guaranteed profit” not to mention during a time of financial stress on
residents and the city. Going out to bid would be a reasonable approach to reduce costs. It seems
that the profit margin given Recology is not comparable to other cities that have agreements with
them (Gilroy, Morgan Hill to name a few). I have never seen a contract where you guarantee the
recipient a profit that large! This is in addition to all the pass-through costs that they get re-
imbursed for as specified in the contract. What a sweet deal!
There is language in the agreement about terminating specifically in response to inability to
perform services as described. At this time quality of service continues to be good and rates
remain competitive.
The Resource Recovery Enterprise Fund 520-330 started out funded with $500k transferred from
the General Fund in (Dec. 15, 2020 resolution) plus an increased appropriations of $285,864 for a
total of $785,864. That total was Dec. 2020 or early 2021. Now that Resource Recovery enterprise
Fund 520-330 sits at a balance of approximately $5,386,568 as of Oct. 31, 2023. $5 MILLION
dollars! I’ve attached the Treasurer’s Report for Oct. 2023 for your reference.
Q4: Where did all this money come from?
Q5: Did it come from our Recology rate increases since Dec. 2020? If not, where did it come
from?
The Resource Recovery Fund has been accruing for over 20 years, separate from the General
Fund, and it was prudent to have a reserve in case of a sudden need to cover the cost of all
operations for some limited amount of time. Rather than a beginning balance, the $500,000 is
a suggested prudent reserve amount that was approved by Council in 2020. During the 2020
approval of the current franchise agreement, Council approved use of the Resource Recovery
fund to smooth rate increases for ratepayers with a goal of drawing the fund down to that
prudent reserve by the end of the current agreement term.
Sincerely,
Peggy Griffin