COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

DATE:

January 8, 2004

BOARD MEETING DATE:

January 27, 2004

TO:

Honorable Board of Supervisors

FROM:

Neil R. Cullen, Director of Public Works

SUBJECT:

Garbage and Recyclables Collection Rate Increase in County Service Area No. 8 - North Fair Oaks Area

Recommendation

Adopt a resolution:

adopting new garbage and recyclables collection rates in County Service Area No. 8 (CSA8 in the North Fair Oaks area);

establishing the user charge rate for the Garbage and Recyclables Collection Services Charges Report for CSA8; and

authorizing the Director of Public Works to make a payment of $96,000 to Browning Ferris Industries - San Mateo (BFI) to mitigate the projected 2004 garbage and recyclables collection revenue shortfall in CSA8.

Previous Board Action

Entered into the Franchise Agreement with BFI for garbage and recyclables collection service for the CSA8 area.

Adopted the current garbage and recyclables collection rate schedule for CSA8 in 2002.

Background

The County, for CSA8, is a member agency of the South Bayside Waste Management Authority (SBWMA), a joint powers authority of the cities of Burlingame, Hillsborough, San Mateo, Foster City, Belmont, San Carlos, Redwood City, Atherton, Menlo Park and East Palo Alto, the West Bay Sanitary District and the County. Each year BFI submits a rate application and the SBWMA conducts a review of that application.

Key Facts

Rates for the garbage and recyclables collection service in CSA8 are set by your Board based on recommendations from the SBWMA's review of BFI's annual rate application to the SBWMA.

The SBWMA's review of BFI's 2004 rate application identifies an 18.4% revenue shortfall in CSA8.

We recommend a 12.8% rate increase for 2004 and a direct payment of $96,000 to BFI from CSA8 service area funds to meet this shortfall.

This recommendation will be presented to North Fair Oaks Council at their January 15, 2004, meeting and comments of the Council will be reported to your Board at your January 27^th meeting when our recommendations are considered.

Discussion

The SBWMA retained a consultant to review and analyze BFI's annual rate application to ensure that rates reflect as closely as possible the cost of providing garbage and recyclables collection service in each of the twelve jurisdictions that are members of the SBWMA. The results of the 2004 rate review project that the 2004 revenues in CSA8 will be 18.4% less than required to meet 2004 expenses, which include the 2003 year-ending deficit.

There are several factors that have created this shortfall: expenses associated with the collection, transport and disposal of garbage have increased, while past revenue projections were not met. As an example, the last rate increase was in mid-year 2002, and therefore only in affect for the last half of the year. This increase only produced a portion of the needed revenue increase. The consultant's revenue projections for 2003 indicated sufficient revenue to cover this shortfall and therefore, no increase was proposed for 2003. Unfortunately, the consultant's revenue projections were not met resulting in a significant deficit at the close of 2003 (2002 deficit plus the 2003 deficit).

The net effect of these factors is the 18.4% revenue shortfall in CSA8 as mentioned above, which we are recommending be covered by a one time payment of $96,000 from CSA8's fund balance and a rate increase of 12.8%.

Vision Alignment

We believe our recommendation is consistent with the Shared Commitment to be a "responsive, effective and collaborative government," as the proposed rate increase will ensure that garbage collection and recyclables collection in County Service Area No. 8 are maintained at the comprehensive levels expected by the community and the North Fair Oaks Council.

Fiscal Impact:

The following is a summary of the expense/ revenue projections for CSA8:

Expenses

2004 Expenses

$1,791,000

2002/2003 Revenue Shortfall

$ 220,000

Total Expenses for 2004

$2,011,000

Revenue

2004 Revenue Based on Current Rates

$1,698,000

Direct Payment to BFI from CSA8 Fund Balance

$ 96,000

Total Revenue

$1,794,000

Projected Shortfall (Expenses Less Revenue)

$ 217,000

Proposed Rate Increase ($217,000/$1,698,000)

12.8%

The most common residential service is two-can service. The proposed rate increase would raise the cost of this service by $2.05 per month- from $16.00 to $18.05 per month. However, as shown in the table below, CSA8 will continue to have the lowest cost for this service in the SBWMA service area.

Residential Two-Can Rates by SBWMA Jurisdiction

Jurisdiction

Current Rates

Proposed 2004 Rates

Burlingame

$ 21.44

$ 25.07

San Mateo

$ 21.30

$ 21.84

Hillsborough

$ 43.42

Belmont

$ 28.80

$ 29.42

San Carlos

$ 30.40

$ 34.94

Redwood City

$ 31.36

Atherton

$ 47.36

Menlo Park

$ 27.16

$ 29.50

West Bay SD

$ 26.81

$ 27.13

East Palo Alto

$ 77.10

Foster City

$ 21.84

$ 25.01

Fair Oaks

$ 16.00

$ 18.05

Note:

Rates shown are for two standard 32-gallon garbage cans except for Redwood City where the rates shown are for two 40-gallon cans and East Palo Alto where the standard can is a 95-gallon container.

Source:

Hilton Farnkopf & Hobson, LLC Report: "Review of BFI-San Mateo's Refuse, Recyclable, and Plant Materials Collection Rate Application for 2004"

The complete rate schedule is attached as Exhibit "A" to the proposed resolution.

The base rate of $18.05 per month will also be used in preparing the Garbage and Recyclables Collection Service Charges Report of CSA8, if the rate is approved by your Board.

The $96,000 payment to BFI is proposed to be made from the CSA8 fund balance, that accrued administrative fees charged in the service area. The administrative fees have been collected together with the specific fee charged by BFI to cover other garbage collections as may be recommended by the North Fair Oaks Council or others, and the costs of administering the BFI contract and responding to garbage related complaints in the area. There is no impact on the General Fund.

A form of a resolution has been approved by County Counsel.