COUNTY OF SAN MATEO

Inter-Departmental Correspondence

Department of Public Works

 

DATE:

May 2, 2005

BOARD MEETING DATE:

May 17, 2005

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

 

TO:

Honorable Board of Supervisors

FROM:

Neil R. Cullen, Director of Public Works

SUBJECT:

Extending the Term of the Agreement with BFI Waste Systems of North America, Inc. for Solid Waste, Recyclable Materials and Plant Materials Collection Services in County Service Area No. 8 (North Fair Oaks)

 

Recommendation

A.

Determine if your Board wishes to extend the term of the existing agreement (Collection Agreement) with BFI Waste Systems of North America, Inc. (BFI) for Solid Waste, Recyclable Materials and Plant Materials Collection Services in County Service Area No. 8 (North Fair Oaks area) by four years to December 31, 2010.

 

B.

If your Board determines to extend the Collection Agreement with BFI, then adopt a resolution authorizing the President of the Board to execute the amendment to the Collection Agreement extending its term as described above.

 

Vision Alignment

Commitment: Responsive, effective and collaborative government.

Goals 20 and 22: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain; and County and local governments effectively communicate, collaborate and develop strategic approaches to issues affecting the entire County.

 

Your Board authorizing the extension of the Collection Agreement, together with the other member agencies of the South Bayside Waste Management Authority (SBWMA) agreeing to extend their collection agreements with BFI, is required before agreements between SBWMA and BFI go into affect. However, the SBWMA/BFI disposal agreement has language that we believe may be objectionable to your Board.

 

Background:

Previous Board Action

*

Executed an agreement with BFI which describes that terms and conditions for the operation of the Ox Mountain Landfill (BFI/Ox Agreement) by BFI.

 

*

Entered into the Collection Agreement with BFI for County Service Area No. 8 (CSA8) (North Fair Oaks) effective January 1, 2000, with an initial term of seven years (terminating December 31, 2006); and approved three Amendments: the first for commercial plant material collection; the second to modify the method of commercial sector billing; and the third for commercial organics (food waste) collection.

 

*

Became a member of the SBWMA, which is comprised of 12 jurisdictions: Atherton, Belmont, Burlingame, East Palo Alto, Foster City, Hillsborough, Menlo Park, Redwood City, San Carlos, the City of San Mateo, the County of San Mateo, and the West Bay Sanitary District. The SBWMA purchased the transfer station and recyclery and the member agencies are committed to use these facilities in conjunction with disposing of waste and other material collected within the member agencies' respective jurisdictions.

 

History

Three Year Extension of the Collection Agreement

In order to create an incentive to provide a high level of service, the Collection Agreement provided for an automatic three year extension of its term based on BFI’s performance related to recycling, liquidated damages, delinquent payments, criminal behavior, customer satisfaction and the competitiveness of rates for service on behalf of its member agencies. The SBWMA conducted a performance hearing of BFI on November 10, 2004, on behalf of its member agencies. The SBWMA Board concluded that BFI substantially complied with five of the six requirements for extension of the collection agreements. Staff concurs in SBWMA’s conclusion.

 

SBWMA Agreements

The collection agreements are contracts between each SBWMA member agency and BFI and must be approved by each jurisdiction’s governing body. However, SBWMA itself entered into two separate agreements with BFI: an Operating Agreement for the Recyclery and the transfer station; and a Solid Waste Disposal Agreement for landfill disposal at Ox Mountain.

 

SBWMA Disposal Agreement

On April 6, 2005, the SBWMA Board considered entering into a new fifteen-year Solid Waste Disposal Agreement with BFI for the disposal of the SBWMA’s solid waste at the Ox Mountain Landfill, in exchange for a tipping fee decrease of $12.49 per ton from the then current rate of $43.56 per ton retroactive to January 1, 2005; and a payment of $11.6 Million to SBWMA over the first three years of the Disposal Agreement. Drafts of the Disposal Agreement had earlier been provided to County Counsel for review, with particular emphasis on the impact of the proposed Disposal Agreement on the County’s existing BFI/Ox Agreement for the operation of the Ox Mountain Landfill. County Counsel’s review identified numerous instances of problematic language in the Disposal Agreement. The most notable passages included language to challenge the County’s ability to adjust the County Compensation Fee levied on solid waste received at the landfill, and the potential for BFI to provide favorable treatment of transfer trucks from the SBWMA transfer station at the expense of other customers at the landfill.

 

Public Works staff and County Counsel met with the negotiator and the attorney for SBWMA, and separately with BFI to inform them of the County’s concerns with the Disposal Agreement. Neither the SBWMA nor BFI were willing to alter the language of the agreement. Therefore, the County representative voted “no” on April 6th when the Disposal Agreement was considered by SBWMA. However, the SBWMA/BFI Disposal Agreement was approved as the 11-1 vote met SBWMA’s two-thirds member approval requirement.

 

SBWMA Transfer Station/Recyclery Agreement

The SBWMA, on April 6th, also voted unanimously to grant a four-year extension of the Transfer Station/Recycling Facility Operating Agreement with BFI, which will now terminate on December 31, 2010.

 

SBWMA Recommendation that Member Agencies Extend their Franchise Agreements

Member agencies also have the option to extend the term of the Franchise Collection Agreement beyond this initial extension for a period of one to seven years in increments of at least 12 months. The proposed Fourth Amendment to the Franchise Collection Agreement would grant the initial three-year extension and one additional year, thereby extending the term to December 31, 2010, to keep it on the same termination date as the Operating Agreement for the Recyclery/Transfer Station Facility.

 

The SBWMA voted 11-0-1 on April 6th to recommend this four-year extension of the Franchise Collection Agreement to all member agencies. The County abstained from this vote as we did not want to constrain your Board’s consideration of the extension of the Franchise Agreement. The two previously discussed SBWMA/BFI agreements, which includes the landfill disposal fee decrease and the $11.6 Million payment, are both dependent on the approval by each member agency of a four-year extension of their Franchise Collection Agreement. As discussed previously, the Landfill agreement has language that is objectionable.

 

Discussion

County/CSA 8 Issues

We believe your Board must consider your two roles in considering the extension of the BFI/CSA8 Franchise Agreement: one as the county wide overseer of the County/BFI Ox Mountain Landfill agreement; and one as the governing body of CSA 8.

 

1.

County/BFI Ox Mountain Agreement

 
 

The SBWMA/BFI Disposal Agreement has been approved as more than two-thirds of the SBWMA member agencies voted in favor of the agreement. As a result, the County will have to deal with whatever conflicts or litigation that may develop in the future, that are associated with the County increasing its fees at Ox Mountain or BFI implementing procedures at the landfill as required by SBWMA but which may be contrary to the County/BFI Ox Mountain Landfill Agreement, based on differences in interpretation of the BFI/County and the BFI/SBWMA Ox Mountain agreements.

 

2.

Benefit to CSA 8

 
 

Executing the four-year extension to the Franchise agreement will result in significant cost savings for the ratepayers of CSA8. If your Board decides to grant BFI a three-year extension but not a four-year extension to the Franchise Agreement, then the entire package negotiated by SBWMA and BFI will fail. However, if that happens, SBWMA has indicated that it will likely go back to BFI to redo the agreements without the County as a party. Since the amount of solid waste from CSA 8 is a very small percentage of the total SBWMA solid waste stream, it is likely that the deal can be salvaged for the other SBWMA member agencies. County Service Area No. 8, however, would be left with, at best, a status quo situation with regards to disposal costs and no decrease in the tipping fee.

 

Other Issues

The SBWMA will begin receiving quarterly payments from BFI towards the $11.6 Million payment that is a component of the agreements if all the member agencies execute the four-year extension of their franchise agreements. SBWMA recently determined on a 10-2 vote to distribute the $11.6 Million payment back to the respective agencies. We will make recommendations on the use of CSA8’s portion of these funds to your Board in a separate report after all agencies have considered an extension to their collection franchise agreements and the funds are confirmed.

 

Fiscal Impact

The extension of the Franchise Collection Service Agreement does not impact the County General Fund as BFI services in CSA 8 are funded through garbage fees collected in CSA8. Customer rates will be moderated over several years due to the decreased tipping fee at the landfill and the fifteen-year Disposal Agreement means long-term solid waste disposal certainty and more control of disposal costs. The four-year extensions of the Franchise Collection Agreement and the Operating Agreement will allow time to competitively bid garbage and recyclables collection by the member agencies of SBWMA, which could result in lower costs. The $11.6 Million Dollar payment to the SBWMA will have a positive impact on the rates paid by ratepayers in CSA 8, either directly or indirectly.