Special Notice / Hearing: Complied with Notice Requirements/Public Hearing
Vote Required: Majority
To: Honorable Board of Supervisors, Acting as the Governing Board of County Service Area No. 8
From: Carolyn Bloede, Director, Office of Sustainability
Subject: Adoption of the 2024 Garbage and Recyclables Collection Rates in County Service Area No. 8 (North Fair Oaks)
RECOMMENDATION:
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Acting as the Governing Board of County Service Area No. 8, recommendation to conduct a public hearing:
A) Open public hearing
B) Close public hearing
C) Adopt a resolution adopting the 2024 Garbage and Recyclables Collection Rates for County Service Area No. 8 (North Fair Oaks).
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BACKGROUND:
The South Bay Waste Management Authority (SBWMA) is a joint powers authority formed by eleven local government jurisdictions. This authority owns and manages the Shoreway Environmental Center, and provides oversight, and support of service providers that collect, process, and dispose of materials. Recology San Mateo County (Recology) is the current franchise holder and provides solid waste collection services to County Service Area No. 8 (CSA-8) and the Unincorporated Franchised Area (CFA) within the SBWMA service area (Burlingame to Menlo Park).
On October 20, 2009 this Board adopted Resolution No. 070423 which approved a franchise agreement with Recology to provide services for the collection of recyclable materials, organic materials, and garbage from January 1, 2011, through December 31, 2020. On June 4, 2019 this Board adopted Resolution No. 076641 approving the Amended and Restated Recology Franchise Agreement (Recology Franchise Agreement) for an additional 15-year term expiring on December 31, 2035.
On July 25, 2023 this Board adopted Resolution No. 079821, approving the FY 2023-24 Garbage and Recyclables Collection Service Charges Report for CSA-8. These charges appear on the tax roll for FY 2023-24 and are calculated based on the effective rates adopted in January 2023.
On November 14, 2023 this Board adopted Resolution No. 080029 setting January 23, 2024 at 9:30 a.m. as the time and place for a public hearing on the 2024 Garbage and Recyclables collection rates for the CSA-8. On this same date, this Board adopted Resolution No. 080028 approving the County Executive or designee to exercise the Carry Forward contract provision per the Recology Franchise Agreement, Attachment K (adopted June 4, 2019, Resolution No. 076641) for Calendar Year (CY) 2024, which limits certain Recology indices increases to five percent and defers the remaining cost increase to the subsequent rate year.
The adoption of the annual garbage and recyclables collection rates follows a Proposition 218 rate setting process as defined under Articles XIII C and XIII D of the State Constitution. The County Office of Sustainability (OOS) completed this process for 2024 by: setting a public hearing to consider any new or increased property related fees (rates), mailing mandated notices to property owners alerting them of the public hearing and the opportunity to submit protest letters, and publishing a notice of the public hearing twice in a local newspaper. Additionally, in November 2023, OOS presented information on the proposed rate increases to the North Fair Oaks Community Council. To date, no protest letters have been received by the Clerk of the Board. If there were a successful majority protest in writing from the property owners, the Board would be prevented from increasing the rates for the service area. In CSA-8, this could lead to larger rate increases in the future due to the amended solid waste contracts and the need to achieve cost recovery for services provided.
DISCUSSION:
Rate Development
The proposed rates are developed using the cost and revenue data provided by the SBWMA for the CSA-8 service area. The proposed rates for CY 2024 are listed in Exhibit A to the Resolution and represent a recommendation for a 12.7 percent rate increase for residential dwellings mandatory services (two 32-gallon or one 64-gallon cart) and for commercial cart and bin services from the rates previously set by the Board in CY 2023.
The proposed rate increases for two 32-gallon garbage carts or one 64-gallon garbage cart for one to four residential dwelling units will be $4.67 per month, representing an increase in monthly charges from $36.79 to $41.46. For dwellings that contain over four units, or are considered a mixed-use parcel, the proposed rate increase for 32-gallon garbage carts is $4.67 per month (an increase from $36.79 to $41.46 per month) (referenced in Exhibit A). The 32-gallon minimum service for mixed-use parcels will appear on the tax roll. The recommended rates will continue to reflect a five percent franchise fee that will be paid to the County from Recology to administer these programs.
Annually the SBWMA provides cost and revenue data to each jurisdiction in a report. The report, titled “SBWMA Final Report Reviewing the 2024 Recology San Mateo County Compensation Application” dated September 21, 2023 (SBWMA 2024 Rate Report), was adopted by the SBWMA Board on September 28, 2023. The report contains collection, disposal, and processing costs and the revenue collected for the service area. These costs are allocated each year based on the updated indices and statistics. Therefore, the percent of cost allocated to each Member Agency changes each rate year.
Rate Reduction Strategies
The garbage and recycling service costs include two primary components: (1) processing and disposal; and (2) the Recology collection services. The SBWMA 2024 Rate Report indicated that, in CSA-8, a 19.3 percent rate increase was needed to cover the anticipated costs, representing an estimated $629,503 revenue shortfall for collection, disposal, and processing services. On September 28, 2023, the SBWMA Board approved a one-time reduction in costs using the SBWMA Rate Stabilization Reserve, thereby reducing the overall shortfall for this rate year to an estimated $554,048, decreasing the projected rate increase to 16.9 percent.
The cost adjustments prescribed in the SBWMA 2024 Rate Report for collections are based on an increase in labor costs due to an increase in the Consumer Price Indices (CPI), and an increase in fuel costs. The largest cost increase for CSA-8 was due to a 27 percent increase in costs for processing and disposal that is due in part to a newly bid contract and new rates at the Shoreway Environmental Center.
To further reduce the proposed rate increases in CSA-8 for CY 2024, OOS identified the following strategies for residential and commercial services:
1. This Board exercised the Carry Forward provision allowed in the Recology contract; this limited Recology cost increase for certain indices for CY 2024 and will carry forward the excess costs to the subsequent rate year;
2. OOS applied a 2021 surplus identified in the SBWMA 2024 Rate Report;
3. OOS proposes increasing the rates over a two-year period to meet the new revenue requirements for CY 2024, with 12.7 percent of the increase occurring in the 2024 rate year and the remaining cost increase being included in the 2025 rate application process.
Utilizing the SBWMA Rate Stabilization Reserve and the strategies outlined above, the proposed rate increase was reduced from 19.3 percent (SBWMA 2024 Rate Report) to 12.7% for rate year 2024. If approved by the Board, these new rates will be effective on January 1, 2024 (Exhibit A). The charges based on the rates will appear on the property owner’s tax bill for FY 2024-25 for all parcels with dwelling units, pursuant to County Ordinance Codes 4.04.200 and 4.04.220, and any additional elective services will be billed directly by Recology. Commercial parcels without dwelling units will be directly billed by Recology for all services.
Unscheduled Services (Additional Services)
The rates for Unscheduled Services are additional services beyond the basic mandatory collection services and are electively subscribed to by the ratepayers, per the Recology Franchise Agreement. The Recology Franchise Agreement allows for a CPI increase to the Unscheduled Service fees. The Unscheduled Service fees for CY 2024 reflect a 5.27 percent CPI adjustment above the CY 2023 fees charged by Recology. Any unscheduled service requested by the customer will be billed directly to the customer by Recology effective January 1, 2024. These Unscheduled Service fees are not property related fees and, therefore, not subject to the Proposition 218 rate setting requirements. These fees are reflected in Exhibit B to the Resolution.
County Attorney has reviewed and approved the Resolution as to form.
FISCAL IMPACT:
There is no direct impact to Net County Costs. The garbage and recyclables rates are levied on properties that are leased or owned by the County that are located in the CSA-8.
ATTACHMENTS:
1) Resolution to adopt the 2024 Garbage and Recyclables Collection Rates for County Service Area No. 8 (North Fair Oaks).
2) Exhibit A to Resolution, 2024 Garbage and Recyclables Collection Rates in County Service Area No. 8
3) Exhibit B to Resolution, 2024 Unscheduled Service Fees for County Service Area No. 8.