Inter-Departmental Correspondence

Department of Public Works



October 7, 2009


October 20, 2009







Honorable Board of Supervisors


James C. Porter, Director of Public Works


Franchise Agreement with Recology San Mateo County to Provide Services for the Collection of Recyclable Materials, Organic Materials, and Solid Waste in CSA-8 (North Fair Oaks), and in the Remainder of the Unincorporated South Bayside Waste Management Authority Service Area (Burlingame to Menlo Park)



Adopt a resolution:



Approving the franchise agreement with Recology San Mateo County (formerly Norcal Waste Systems) to provide services for the collection of recyclable materials, organic materials, and solid waste in County Service Area 8 (North Fair Oaks), and in the remainder of the unincorporated South Bayside Waste Management Authority Service Area (Burlingame to Menlo Park) from January 1, 2011 through December 31, 2020, and



Authorizing and directing the County Manager or the County Manager’s designee to execute the Agreement in substantially the form presented to this meeting with such non-substantive additions, clarifications and other changes as the County Manager or the County Manager’s designee deems necessary or advisable after consultation with County Counsel.



Public Resources Code section 40059 says that local governmental agencies may determine aspects of solid waste handling which are of local concern, including the frequency of collection, means of collection and transportation, level of services, charges and fees, and whether the services are to be provided by means of a franchise. To date, the County’s regulation and franchising of solid waste in the unincorporated area is limited to County Service Area 8 (CSA-8), in North Fair Oaks.


Twelve local agencies in the County have entered into a Joint Powers Agreement (JPA) that provides for the South Bayside Waste Management Authority (SBWMA) to make decisions and recommendations on regional issues related to solid waste and recycling. The SBWMA service area is served by a longstanding franchise agreement with Republic Waste Services, which took over from Allied Waste Services, which took over from Browning Ferris Industries (BFI). That franchise will expire on December 31, 2010.


In 2005, SBWMA initiated a competitive procurement process for the selection of a provider of collection services for recycling and solid waste collection services for the twelve member agencies of SBWMA. In 2007, your Board affirmed the SBWMA Board recommendations regarding future services and committed the County’s participation in the SBWMA Collection Services RFP process. The Board also directed the Director of Public Works to notify homeowner associations and advisory committees in the unfranchised unincorporated areas within the SBWMA service area that were not currently provided franchised garbage collection service, to advise them of the criteria for providing collection service and to explain the differences between franchised and non-franchised collection service. In 2007, those notices were sent to the groups that might be affected by a change in the scope of the franchise area.


On November 1, 2007, SBWMA released the Collection Services RFP. The RFP prescribed a thorough process to evaluate the proposals using an Evaluation Team which included representatives of SBWMA, its member agencies, and outside agencies. SBWMA received four responsive proposals from companies capable and qualified to provide the collection services described in the RFP, and on August 28, 2008, the Selection Committee recommended to select Norcal Waste Systems, which is now known as Recology San Mateo County. The SBWMA Board of Directors has confirmed the selection, and on March 3, 2009, the Board adopted Resolution No. 069934, approving the selection of Norcal Waste Systems to provide refuse collection services for the CSA-8 and other currently non-franchised unincorporated areas within the South Bayside Waste Management Authority (SBWMA) service areas. At the Board’s direction, Public Works notified all known homeowners associations and advisory committees in the affected unincorporated areas of the selection.



The execution of the agreement with Recology San Mateo County as the new Collection Services company will mark a new era in recycling and solid waste collection for the unincorporated areas within the SBWMA service area. The company has considerable experience implementing the new scope of services the County is requiring and provision of these new services will be made possible by the renovation of the Shoreway Recycling and Disposal Center (Shoreway facility) to accommodate processing of single-stream recycling.


The roll-out of new services and the renovation of the Shoreway facility will allow the County to provide its residents and businesses a cost-effective and comprehensive array of new collection services that will result in reducing solid waste going to landfill through a reliable, customer-friendly system designed to conveniently collect common recyclable materials such as cans/bottles, paper, plastics, cardboard, old cell phones, used household batteries, used motor oil and filters, and organic materials (including yard trimmings, food scraps and soiled paper). In addition, Recology will be required to collect all of the solid waste generated in the unincorporated SBWMA service area, provide recycling and garbage collection services to County & City sponsored community events, provide bulky good pick ups; increase commercial recycling efforts; collect all public right-of-way litter and recycling receptacles; picking up illegally dumped trash; and deliver compost to events for residents.


A description of the complete scope of services Recology will provide is included as Attachment A to this memo. The Franchise Agreement for the new collection services that will be provided by Recology includes the following fundamental contract terms:


The new contract will have a ten-year term commencing on January 1, 2011 upon expiration of the contract with the current service provider for CSA-8.


The collection services will be “automated” thus providing a more cost-effective collection approach, ensuring higher productivity, reducing costs and resulting in significantly fewer injuries and claims related to handling recycling and refuse receptacles.


Recycling in both the residential and commercial sectors will be substantially improved with the introduction of single-stream recycling which is significantly more convenient, thus resulting in more diversion from landfill and an increased generation of valuable commodities at the Shoreway facility.


The public education and outreach campaign will be a collaborative effort between Recology and the SBWMA, thus resulting in the benefits of cost efficiencies associated with developing a regional campaign in lieu of a stand-alone campaign which would be more costly.


The contract includes extensive reporting requirements which will be a great improvement in the scope and timeliness of information shared between the collection company and the County.


The contract includes extensive performance incentives/disincentives (Attachment B to this memo) and liquidated damages provisions (Attachment C to this memo) to ensure that anticipated performance by the company is achieved, maintained and potentially exceeded.


The method to pay the company for services provided will be significantly simpler than the current “cost-plus” system. Adjustments to compensation in the new contract will be primarily based on predetermined published indices (Attachment D to this memo). In addition, the process to make the annual adjustments to compensation will also be brought in-house to the SBWMA, thus saving approximately $200,000 in consultant fees annually. Future steps for implementation are described in Attachment E to this memo.


In addition to the general franchise agreement developed by SBWMA, the new franchise agreement features several contract issues that are specific to the unincorporated areas of the County.


1. Unincorporated Areas Currently Under Franchise in the SBWMA Service Area

CSA-8 covering the North Fair Oaks area is currently the only unincorporated area in the SBWMA service area that is covered by a franchise agreement between the County and the service provider. The current amended franchise agreement, approved by the Board on May 17, 2005, is between the County of San Mateo and Browning Ferris Industries Waste Systems of North America Inc. (currently Allied Waste Services) for solid waste, recyclable and plant materials collection services which will expire on December 31, 2010.


2. Addition of new unincorporated areas to the Collection Franchise Area

Historically, there has been little difference between garbage and recycling services provided in franchised versus non-franchised unincorporated areas, as the unincorporated areas had received the same level of service at the same rates as property owners in the adjacent County’s franchised area.
However, one significant difference is that the unincorporated areas that are not under a franchise agreement are not represented during the SBWMA’s annual rate review process. This annual process allows for a public review in the establishment of rates that does not currently exist for these unincorporated areas since property owners are free to contract for this service with any provider. On June 1, 2006, the current collection service provider increased collection rates by 11.4%, for a Fuel and Environmental Fee for those customers in the unincorporated areas that are not covered by the current franchise agreement.
Public Works believes that ratepayers in the non-franchised area would benefit from having the County represent their interests during the SBWMA rate review process, and to have their areas covered by a Franchise Agreement. Therefore, the County has been exploring the benefits of franchising the remaining unincorporated areas in the SBWMA service area. There are several important differences between those areas that are franchised and those that are not. In franchised areas, the County may provide that service is mandatory, may set minimum service levels, may set rates, may receive a franchise fee, may provide oversight and technical assistance on complaints regarding service, and may specify the means of payment for collection services. On balance, it appears that the property owners of other unincorporated areas will benefit from inclusion in the franchise. The unincorporated areas to be added to the Franchise Agreement include Burlingame Hills, San Mateo Highlands and Baywood Park (Crystal Springs area), Harbor Industrial, Devonshire Canyon, Palomar Park, Oak Knoll, Kensington Square, Emerald Lake Hills, Sequoia Tract, Peninsula Golf Club, and Trailer Ranchero, as depicted on the attached map. The County will continue to collect garbage/recycling fees on the annual property tax bill in CSA-8 for residential properties. Unincorporated areas to be franchised as listed above will be billed quarterly by Recology for residential accounts; and commercial accounts will be billed monthly by Recology.
In consideration of granting the franchise, the County will be paid a franchise fee in the amount of 5% of Recology’s billing charges to customers.
3. Services Provided to Property Owners in West Bay Sanitary District Portion of SBWMA service area

The West Bay Sanitary District (WBSD) provides sewer service within its boundaries and maintains a garbage collection service franchise agreement for the unincorporated areas within its boundaries (Ladera, Menlo Oaks, and West Menlo Park). These unincorporated areas include approximately 2,000 households. The Local Agency Formation Commission completed a Municipal Service Review for the West Bay Sanitary District in February 2009, and recommended that since the WBSD is the garbage collection franchise holder for several, non-contiguous unincorporated areas that represent a small share of residential customers in the SBWMA service area, the WBSD and the County of San Mateo may wish to examine whether inclusion of the WBSD customers in a broader franchise agreement under the County of San Mateo jurisdiction with other unincorporated communities would provide for more cost effective garbage service and provide for more consistent representation on SBWMA for residents of unincorporated communities.


Staff is currently evaluating this recommendation and has been discussing this issue with the WBSD and SBWMA. A determination and subsequent recommendation on this issue will be made to your Board after the subject has been thoroughly explored and understood.

4. Rates and Rate Setting Process

Contractors that submitted proposals were required to submit detailed pricing information using the approved 2008 Allied Waste Collection Service Rates as a baseline to estimate the rate impact for the new services. The final rates per jurisdiction will be determined approximately six months prior to commencement of the new collection service during the annual rate review by SBWMA in 2010.

The rates for collection services in CSA-8 have been adjusted in the last four years to: pay off the balancing account with Allied Waste by the end of the current Agreement (December 31, 2010), to cover current rate shortfalls under the existing Agreement with Allied Waste, and to include the anticipated costs of the bonds for the renovation of the Shoreway facility. CSA-8 ratepayers may see a minimal rate increase once Recology’s rates are determined in 2010. The SBWMA is working diligently to manage and minimize the need for rate increases, and to minimize unnecessary costs.
The rates in the other unincorporated areas being recommended for franchising have not yet been developed, because the area is currently served directly by Allied Waste without a franchise agreement. Therefore the preliminary rate projections are based upon the rate information Allied Waste has provided to the SBWMA consultant for the 2009 rate review. However, given the surcharge of 11.4% that Allied Waste charged to these areas in the past, we anticipate the rate increase will be minimal, if any.
Once the recommended rates for collection service commencing on January 1, 2011 are determined, your Board will be required to hold a public hearing to consider adoption of the proposed rates. The County will be required to notify the property owners in accordance with Article X11C and X11D of the State Constitution (Proposition 218), which requires that a notice be sent to property owners alerting them of the public hearing to consider any new or increased property related fees, thereby providing property owners a mechanism for blocking fee increases via a majority protest at the public hearing. Subsequent rates will be recommended in accordance with the formula specified in the Franchise Agreement.
Under the expanded franchise area, the County will be setting collection rates for areas for which the rates have historically been set by the contractor. In light of this new responsibility, the agreement provides that the County will not be in default of the Franchise Agreement if a majority protest prevents a proposed Rate increase from being adopted, and that in the event of a majority protest, the parties shall promptly meet and confer in good faith to consider modifications to service levels commensurate with the Rates that Contractor may legally charge.
California Environmental Quality Act (CEQA)
The Franchise Agreement will provide for an increased level of service in the unincorporated County areas being considered for the Franchise Agreement that could potentially have some environmental impacts related to traffic, noise, pollution etc. Such matters were discussed and analyzed in a 2008 Mitigated Negative Declaration (MND) for a Use Permit in San Carlos for the improvements to the Shoreway Facility. A legal opinion obtained by legal counsel to the SBWMA indicates that CEQA can be complied with by referring to the MND as an adequate environmental document pursuant to CEQA and CEQA Guidelines for the purposes of analysis and consideration of a Franchise Agreement for Collection Services. A copy of the MND has been filed with the Clerk of the Board and is available for review. CEQA language has been included in the Resolution approving the Franchise Agreement.
County Counsel has reviewed and approved the Resolution and Agreement as to form.
Approval of this Franchise Agreement will contribute to the Shared Vision 2025 outcome of an Environmentally Conscious Community by complying with the California Integrated Waste Management Act of 1989, creating new diversion opportunities for residents and businesses, encouraging source reduction, recycling, or reuse of solid waste generated in the unincorporated areas of the County and preserving landfill capacity. It is anticipated that 63% of the waste generated in the unincorporated areas of the County will be diverted from the landfill partially through the efforts supported by the Franchise Agreement. This performance target remains unchanged for the estimate for the current fiscal year and continues to surpass the AB939 targets of 50% diversion imposed by the California Integrated Waste Management Act of 1989; however, with the future implementation of single stream recycling through the Franchise Agreement the diversion percentages are anticipated to increase in the future.

Performance Measure(s):



FY 2009-10

FY 2010-11

AB 939 solid waste diversion rate for Unincorporated San Mateo County





It is anticipated that the recommended rates will be determined by July 2010 and that subsequent annual rates will be recommended in accordance with the Franchise Agreement as specified in Section 11.02 “Determination of Contractor’s Compensation”. The Franchise Agreement requires that the contractor pay a franchise fee of 5%, which will be used to offset staff time involved in administering the Franchise Agreement and providing customer support.


There is no direct impact to the General Fund.



Map of Areas to be Franchised and CSA-8


Attachment A -

Scope of Services


Attachment B -

Performance Incentives and Disincentives


Attachment C -

Liquidated Damages


Attachment D -

Contractor Compensation Process


Attachment E -

Implementation Schedule