HomeMy WebLinkAbout13 - Residential Solid Waste and Recycling Franchise Update to Comply with State Organics Recycling MandatesQ �EwPpRT
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<,FORN'P City Council Staff Report
January 26, 2021
Agenda Item No. 13
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: David A. Webb, Public Works Director - 949-644-3311,
dawebb@newportbeachca.gov
PREPARED BY: Micah O. Martin, Deputy Director, Public Works,
mmartin@newportbeachca.gov
PHONE: 949-644-3059
TITLE: Residential Solid Waste and Recycling Franchise Update to Comply
with State Organics Recycling Mandates — Request for Council
Action on Franchise Extension Options
ABSTRACT:
The City currently has two residential solid waste hauling contracts with CR&R
Incorporated (CR&R). The first contract is known as the City Contract (C-5649), which
covers all of the City except for Newport Coast and some areas of Santa Ana Heights
(which receive residential refuse service from the Costa Mesa Sanitary District). The
second contract is known as the Newport Coast Contract (C-3942), which came with the
annexation of the Newport Coast area from the County in 2001. Both of these residential
waste hauling contracts have been in place for many years and are nearing the end of
their respective terms.
Additionally, as a result of recent State mandates/law/regulation changes associated with
the collection, processing, and disposal of solid waste, the City's residential waste
collection program must be modified in order to remain in compliance with these new
State requirements. Necessary modifications to the existing residential waste collection
and disposal process can be made by either processing an amendment to the current
residential waste hauling contracts with CR&R, or preparing a new Request for Proposals
(RFP) for services and incorporating the new State required collection and disposal
requirements into the scope of required services. With that in mind, the City Council Solid
Waste Working Group, the City's Consultant (EcoNomics), and staff have spent many
months defining and negotiating needs, processes, and terms with CR&R to provide the
necessary residential solid waste service.
On November 24, 2020, the full City Council was briefed on the new and pending State
requirements, as well as the status of contract negotiations with CR&R. City Council then
directed staff to extend CR&R's current City Residential Solid Waste Contract (C-5649)
to a new expiration date of October 1, 2021 and continue negotiations with the intent to
process an amendment to consolidate both current contracts (City and Newport Coast)
into a new modified Citywide Residential Solid Waste Collection & Recycling Contract
that incorporates the necessary means and methods to cost effectively and efficiently
achieve compliance with current and pending state mandates, laws and regulations.
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Request for Council Action on Franchise Extension Options
January 26, 2021
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Staff is now returning, after further and extended negotiations with CR&R, to provide City
Council with CR&R's best and final offer. In summary, CR&R's offer to provide a State
compliant residential solid waste collection, processing and disposal program is for a
starting monthly rate of $24.08 per residential household (approximate annual Citywide
cost of $7,814,000), with an annual 2% CPI adjustment. The contract would be for an
8 -year term with one 2 -year extension option. Additionally, it is important to note that
Newport Beach residents do not directly pay for their residential refuse service as this
cost is directly paid for by the City. The monthly household rate identified above is
developed strictly as a means for comparison purposes as an equivalent residential
refuse service cost to other cities where residents do pay directly for refuse services.
Staff is requesting formal City Council approval of this tentative proposal and direction to
proceed with preparation of a new amended Residential Solid Waste Franchise contract
to replace the two existing Residential Solid Waste Contracts (C-5649 & C-3942) with
CR&R.
RECOMMENDATION:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Undertake one of the following actions:
1) Direct staff to proceed with preparation of an amended Residential Solid Waste
Franchise contract with CR&R to replace their two existing Residential Solid Waste
Collection & Recycling Contracts (C-5649 & C-3942), beginning on October 1,
2021 at an initial monthly rate of $24.08 per residential household, with an annual
2% CPI adjustment, and a contract term of 8 -years with one 2 -year extension
option;
2) Reject the amendment offer by CR&R and direct staff to proceed in preparing and
issuing a Request for Proposals (RFP) for Residential Solid Waste Collection &
Recycling Services, incorporating all State required collection and disposal
requirements into the scope of services, and bring back any and all qualified
proposals to City Council for consideration; or
3) Provide alternative direction to staff.
FUNDING REQUIREMENTS:
The City's General Fund covers the majority of the cost for Residential Solid Waste
Collection & Recycling services provided by CR&R to approximately 27,043 households
within the City (residents do not directly pay for municipal waste collection and disposal).
CR&R's City Contract (C-5649) is expensed to the Residential Refuse Collection Account
No. 0108051-851006 at an annual cost of approximately $4.2 million and their Newport
Coast Contract (C-3942) is expensed to the Newport Coast Refuse Services Account
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Request for Council Action on Franchise Extension Options
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No. 0108051-811014 at an annual cost of approximately $760,000. Total annual cost for
both CR&R residential refuse contracts is approximately $4,960,000. A City Recycling
Services Fee provides approximately $970,000 toward the recycling cost of these
contracts, which is about 20% of the current program costs.
The recommendation for CR&R to provide one Citywide Residential Solid Waste
Collection & Recycling Contract at an initial monthly rate of $24.08 per residential
household, will result in an estimated initial cost of $7,814,000 per year. This represents
an initial year increase cost of approximately $2,854,000. Annual cost thereafter will
increase at 2.0% CPI until the conclusion of the contract term.
Under a separate item on tonight's agenda, based on a fee study, staff is recommending
increasing the City Recycling Services Fee to fully cover the current recycling costs. If
approved, this would generate an additional approximate $1,361,000, reducing the
General Fund impact of the total contract increase to $1,493,000 annually.
DISCUSSION:
State Assembly Bill 939, passed in 1989, requires the City to divert at least 50 percent of
its waste away from the landfills or face monetary penalties of up to $10,000 per day.
More recent legislation, including Senate Bill 1383, also now requires cities to provide
residential organic waste recycling services, which include programs to collect and divert
food scraps and landscaping waste rather than landfill disposal. The implementation date
for this program must occur on or before January 1, 2022.
There are two primary waste hauling contracts for the residential areas within the City,
both of which are serviced by CR&R. The City Contract has been in place since
November 2013, when CR&R was selected after a competitive procurement process to
take over the formerly City operated residential refuse collection operation. The Newport
Coast Contract has been in place since 2007. CR&R receives compensation for
residential collection in the amount of approximately $5 million per year (a per household
monthly cost of approximately $13.63 for the Newport Coast Contract and $15.55 for the
City Contract). Under Section 6.04.140 of the Newport Beach Municipal Code, residents
are not charged for residential refuse collection service, and thus this entire contracted
cost for service is paid for out of the City's General Fund. There is a small amount of
offsetting revenue collected under the City's Recycle Services fee of approximately
$970,000 per year. Both contracts are nearing contractual end dates. The Newport Coast
Contract renews on an annual basis with a final expiration date of October 1, 2022.
Following October 1, 2022, there are no further term extensions available on the Newport
Coast franchise. The City Contract is set to terminate on October 1, 2021.
Currently, the two residential Solid Waste Collection & Recycling franchise contracts do
not provide organic waste collection services and only provide separate recycling cart
services to residents who request it. As of now, 75 percent of residents currently have
recycling carts, which in turn impacts the City's recycling rates. In order to meet
increasing State waste diversion requirements, negotiations with CR&R were initiated to
update and expand recycle and diversion programs so as to meet current and pending
state law and regulation changes, as well as also combine both existing residential refuse
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contracts into one Citywide contract for more efficiency and cost effectiveness purposes.
CR&R submitted an initial cost proposal on October 16, 2020. CR&R's initial cost
proposal showed an increase of over 60 percent, or over a $10 per household per month
increase to provide the program parameters requested.
This would increase the City's total annual payments to CR&R by over $3 million. The
City sent a letter response to CR&R on November 5, 2020 indicating the proposed cost
of providing residential organics services was far higher than anticipated. This letter was
accompanied by 17 requests for additional information and supporting documentation of
CR&Rs pricing assumptions. On November 9, 2020, the City and CR&R met to discuss
the proposal further and to review the questions the City provided CR&R. The City and
CR&R agreed that further discussion and cost modeling was needed to arrive at a cost
that was acceptable to the City. Both CR&R and the City acknowledged that some key
data that will impact pricing, such as resident participation rates, green waste volumes,
and driver productivity, will not be known until well after the program is implemented.
In a parallel effort to this contract negotiation, the City Council Solid Waste Working Group
has been looking at ways to improve program efficiency and reduce both program cost
and impacts to residents through incorporation of new or improved collection and
processing method or technologies. With that direction, staff asked CR&R to provide
pricing based towards industry standards and assuming that the City's policy limits the
number of `free' trash carts provided to residents to one trash, recycle and organics cart
per household, requiring that all waste and recycling material be placed within the
appropriate provided collection carts - `containerized' (i.e. the hauler would no longer
collect waste placed on the ground in streets or alleyways outside of trash cans) so as to
further automate the collection process, and that organics are processed in the least
expensive acceptable option. Similarly, the City asked CR&R to review route efficiencies
with the combining of the contracts and provide cost projections that consolidated bulky
item pick-up service to up to five specific collection pick-ups (with up to five items each)
per household per year. Currently, residents are allowed unlimited trash, recycling, and
bulky collection service at no charge.
On November 24, 2020, after a discussion and review of the status of negotiations with
CR&R, Council directed staff to extend CR&R's City Contract (C-5649) to a new ending
date of October 1, 2021, and to continue negotiating on terms and price. After several
rounds of further diligent negotiations conducted by EcoNomics and staff, the City
received a final counterproposal by CR&R on December 21, 2020 to amend and combine
both residential waste hauling contracts (C-5649 & C-3942), and implement a State
compliant residential 3 -cart source separated recycling and organics waste diversion
program.
The proposal includes the addition of the following program elements:
1. The expansion of the existing blue recycling dry cart program to the remaining,
non -participating residential households in the City (approx. 7,300 households).
2. The inclusion of a third, organics cart (green) to all households (in addition to a
waste cart and blue recycling cart).
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3. New collection trucks to service the organics routes.
4. Maintaining an average fleet age of 7 -years, with no trucks older than 10 years, for
all collection vehicles in service in the City.
5. The provision of two full-time recycling coordinators (employed by CR&R) for
18 months to provide outreach and education to residents that will incorporate the
new collection cart system and reduce the contamination of materials per SB 1383
requirements and ensure full participation.
6. Extensive auditing and monitoring of contamination by CR&R staff, as required by
state law.
As part of the proposal to implement the above elements, the proposal included the
following two contract rate options:
Option One — Fixed per household rate with annual CPI adjustments
This proposal is for a fixed (City Paid) monthly per household rate of $24.08 with
an annual 2% CPI adjustment (7,814,000). The contract will be an 8 -year term
with one
2 -year extension option. This option is a fixed rate and will not require further
contract negotiations.
Option Two — Initial lower fixed per household rate, with a reconciliation of
true cost and corresponding adjustment to new fixed per household rate in
year three, with annual CPI Adjustments
This proposal is an initial monthly per household rate of $22.69 with an annual 2%
CPI adjustment for year 1 and year 2, with reconciliation of the rate in year three.
This option also would include a monthly rate cap of $26.31 per household
associated with the year three reconciliation process to provide a safeguard
against unknown upward cost.
After extensive review and discussion of both options submitted by CR&R with the City
Council Solid Waste Working Group, Consultant and staff, it was determined that Option
Two has too many unknown variables associated with compliance, reconciliation of data,
and further negotiations that had more risk of a larger rate increase in year three through
eight. Option One was found to be a fair competitive market price that is in close proximity
to recently bid refuse rates of similar Orange County cities. This option would place the
focus on the current necessary expansion and implementation of curbside recycling
service to all households in the City rather than focusing on additional future negotiations
via a complex reconciliation process.
Staff is now seeking approval from City Council to proceed with Option One — setting a
new (City Paid) fixed monthly rate per residential household of $24.08, with an annual 2%
CPI adjustment per household rate for the life of the contract; and direct staff to proceed
with preparation of a new amended Residential Solid Waste Franchise contract with
CR&R to replace the two existing Residential Solid Waste Collection & Recycling
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Contracts (C-5649 & C-3942) held by CR&R. The new contract will be an 8 -year term
with one 2 -year extension, and a starting date of October 1, 2021.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
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