HomeMy WebLinkAbout09. Approve Annual Rate Adjustment Requested by CALMETTO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM- OFFICE OF ,
JOHN OSKOUI,m,
SUBJECT: APPROVE ANNUAL RATE ADJUSTMENTS REQUESTED BY CALMET
SERVICES INC., CITY'S SOLID WASTE COLLECTIONAND RECYCLING
SERVICES
That the City Council adopt:
RON
i •` • r r
The City of Downey entered into an Agreement with CalMet Services, Inca (CalMet) for exclusive
residential and commercial solid waste and recycling services. The Agreement became effective
on April 1, 2016 and is due to expire on March 31, 2026.
The agreement included a number of provisions improving the City's waste hauling services such
as:
• A freeze on residential rates for one year (April 1, 2016 to April 1, 2017)
• Replacement of Cal Met's fleet of gasoline fueled trucks with new Compressed Natural
Gas (CNG) vehicles
• Replacement of approximately 63,000 carts and bins
• Implementation of 10% discount for qualified senior citizens
• Establishing a 10% vehicle impact fee to be used to rebuild city's local road
• Implementation of new customer service programs that include free a -waste and dry cell
batteries collection events, paper shredding events, and mulch events.
The agreement includes certain provisions for "Adjustment of Rates" allowing CalMet Services to
request an adjustment to its rates. This enables CalMet to submit a request, on an annual, basis
for a rate increase to be received by City of the following year by December 1 of each year for an
adjustment to be effective on April 1. CalMet's residential and commercial rates are adjusted
annual using a Refuse Rate Index (RRI). The RRI is a series of indices that are tied to CalMet's
major cost centers (labor, fuel, vehicle and equipment replacement, vehicle maintenance, and all
other costs). Each annual RRI rate adjustment is set at the annual percentage change in the RRI:
The 2017 rates were approved per RRI method on April 11, 2017.
Calmet Rate Adjustment Request
March 13, 2018
FBIT � *
The City's Agreement with CalMet grants CalMet the right to request one Detailed Rate Review in
place of its regularly scheduled annual RRI rate adjustment for the rate period beginning April 1,
2018, provided CalMet requests the Detailed Rate Review by December 1, 2017. As such
CalMet requested a Detailed Rate Review on December 1, 2017 and submitted its Detailed Rate
Application (Application) to the City on January 30, 2018. That Application requested the following
rate increases effective April _1, 2018:
• Residential — 9.17% rate increase; this includes a $0.14 increase for the allowed
residential "Disposal Cost Recoup", which is a one-year adjustment and needs to be
removed from the rates as part of the next year's Refuse Rate Index (RRI) calculation that
sets the rates for April 1, 2019;
• Commercial — Rate increases ranging from 5.98% to 7.98% depending on the service
level.
The Agreement also established a 90% operating ratio (11.1 % profit on expenses) as the target
profit level for CalMet as part of the Detailed Rate Review. It also limited the commercial rate
increase to no more than 8%.
Pursuant to City Council action on February 13, 2018,_ the City contracted with R3 Consulting
Group (R3)to complete a Detailed Rate Review Study which was completed on February 22,
2018 (please see attached).
In order to determine if CalMet's rate adjustment Application was mathematically accurate and
logically consistent, R3
• Obtained and reviewed support 'for "the allocation factors used by CalMet to allocate
companywide expenses to the City's franchise, and those expenses among its residential
and commercial operations;
• Obtained and reviewed CalMet's franchised tonnages and determining the accuracy of
CalMet's calculated residential Disposal Cost Recoup;
• Obtained support for the gate fees used to calculate the change in the disposal costs;
• Reviewed the accuracy of CalMet's applicable indexed adjustment calculations;
• Reviewed CalMet's expense projections for November 2017 through October 2018 byline
item, and requesting and reviewing support for those line items for which CalMet has
forecasted major increases;
• Identified appropriate adjustments to CalMet's forecasted expenses;
• Reviewed CalMet's reported residential, commercial and roll -off revenues for November
2016 through October 2017, and adjusting those revenues to reflect the full impact of the
April 1, 2017 rate adjustment;
F1
Calmet Rate Adjustment Request
March 13, 2018
• Reviewed CalMet's projected profit level for both residential and commercial services
based on its reported actual revenues and forecasted expenses, as adjusted by R3;
• Determined if CalMet's projected profit supports its requested residential, and commercial
rate increases; and
• Determined if CalMet correctly calculated the residential, and commercial rates; and if the
calculated commercial rates (multi -family, commercial, and roll -off) comply with the 8.0%
maximum allowed commercial rate adjustment; and
• R3 also reviewed CalMet's December 31, 2016, financial statement and its corporate profit,
r
R3 has concluded that, even under the most conservative expense adjustment assumption (i.e.,
no increase in expenses), which is most favorable to the City's ratepayers, CalMet's profit did not
result in a profit level in excess of the established 90% target operating ratio. As such, R3 found
both CalMet's requested residential and commercial rate adjustments to be reasonable.
Furthermore, R3 has established that:
• CalMet correctly calculated the residential Disposal Cost Recoup of $0.14 per month for
each residential account (for the next year only); and
• A number of CalMet's calculated commercial rates (multi -family, commercial, roll -off)
exceeded the 8.0% maximum allowed commercial rate adjustment and need to be
reduced to comply with that limit.
s _ M►
Accounting to the proposed rate adjustments, the existing Single Family Residential Rate will
increase by 9.13% (lower than CalMet's requested 9.17%), from $18.42 per month to $20.11 per
month, as shown in the following table.
3
Calmet Rate Adjustment Request
March 13, 2018
Also, the commercial rate for a 3 cubic yard bin with once a week pick up will increase by 6.63%
from $131.73 per month to $140.46 per month as shown in the following table.
A recent comparison of the City of Downey's commercial rate for a three -yard container 1 time per
week (a common service level) and single family residential rate to those rates in jurisdictions
close to Downey shows that the City's proposed rates will be slightly less than the average.
Solid Waste & Recycling Rate Survey (1/25/18)
A complete list of adjustments to current rates for different categories of customers and various
types of services provided by CalMet is included in the Resolution attached to this report. Staff
recommends adoption of the attached Resolution.
0
Commercial -
Residential
City
3yd-1x
(Single Family)
Artesia
$
167.10
$
22.71
Lomita (Cal Met provided services)
$
128.01
$
23.16
Whittier
$
160.87,
$
22.37
Santa Fee Springs
$
199.74
$
21.49 ;
Norwalk
$
113.89
$
20.79
Lakewood
» $
122.17
$
19.75
Bellflower
$
122.01
$
19.24
Cerritos (Cal Met provided services)
$
133.68
$
17.60
Downey (Proposed)
$
140.46
$
20.11
Average (without Downey)
$
143.43
$
20.89
$
(2.97)
$
(0.78)
Downey vs. Average
-2.1%
-3.9%
A complete list of adjustments to current rates for different categories of customers and various
types of services provided by CalMet is included in the Resolution attached to this report. Staff
recommends adoption of the attached Resolution.
0
Calmet Rate Adjustment Request
March 13, 2018
There is no fiscal impact to the City from the rate increases. The rate increases for solid waste
collection services will be passed through to the residential and commercial customers utilizing
CalMet's services.
Attachments:
• Attachment 4 -Resolution
• Attachment B-Ce|K8et'erequest for rate adjustment dated December 1.2O17and January 3D.2U18
• Attachment C-R3Consulting Group, Inc. report dated February 22.2018
OEM 6 iILI] I [CowC I m4i I WAILei0illr'
WHEREAS, on April 1, 2016, the City of Downey entered into a ten (10) year Agreement
with CalMet Services, Inc. (CalMet) for solid waste disposal and recycling service to the City;
and
WHEREAS, the rate adjustmentsrequested by CalMet are in accordance with those
provisions of the Agreement specifying the methodologies_ for calculating adjustment to rates
and fixing maximum rates; and
WHEREAS, pursuant to the Agreement, CalMet has requested an annual adjustment to
increase the maximum rates for solid waste and recycling services; and
WHEREAS, the City Council confirms that the requested annual rate adjustment is
consistent with the methodology set forth in the Agreement;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DOWNEY DOES
HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council hereby approves the CalMet requested rate increase and
determines and fixes the maximum monthly rates for collection and recycling of solid waste in
accordance with the schedule set forth below effective April _1 2018:
SINGLE FAMILY RESIDENTIAL SERVICES
CURRENT RATE PER
PROPOSED RATE PER
CATEGORIES
MONTH
MONTH
Single Family
$
18.42
$
20.11
Multi Family (2-4 units)
$
17.59
$
18.99
Extra Trash Container
$
4.09
$
4.40
Extra Green Waste Container
$
3.99
$
4.34
Discount Rate forSmall Container
$
(1.84)'
$
(2.01)
CURRENT
RATE PER
PROPOSED RATE PER
PICKUP
PICKUP
Contamination Charge
$
23.62
$
25.65
Extra Pickup -Trash
$
15.78
$
17.12
Extra Pickup -Green Waste
$
12.59
$
13.68
Temporary 3 cy Bin
$
127.42
$
137.93
BIN SIZE OR
Number of Pickups Per Week/ Billed Monthly
EXTRA PICKUP
SERVICE
1
2
3
4
5
6
PER OCCASION
1 cy
$ 79.00
$142.29
$ 205.56
$ 268.86
$ 332.16 '
$ 458.28
$
55.12
2 cy
$ 99.07
$170.65
$ 242.22
$ 313.81
$ 385.39
$527.67
$
63.04
3 cy
$119.15
$199.02
$ 278.87
$ 358.74
$ 438.62
$ 597.05
$
71.00
4 cy
$139.22
$ 227.38
$315.53
$ 403.66
$491.81
$ 666.38
$
78.99
6 cy
$179.35
$ 284.11
$ 388.81
$ 493.54
$ 598.26
$ 860.11
$
94.89
Roll-out Service
$ 39.26
$ 78.52
$117.80
$157.06
$196.32
$ 235.59
$
9.06
Bin LockService
$ 39.26=78.52
$ 84.79
$117.80
$157.06
$196.32
$ 235.59
$
9.06
BIN SIZE OR
Number of Pickups Per Week / Billed Monthly
EXTRA PICKUP
SERVICE
1
2
3
4
5
6
PER OCCASION
1 cy
$ 84.96
$152.87
$ 220.74
$ 288.62
$ 356.54
$ 492.71
$
59.52
2 cy
$105.91
$181.93
$ 257.96
$ 334.00
$ 410.04
$ 562.89
$
68.08
3 cy
$126.86
$ 211.04
$ 295.18
$379.35
$ 463.54
$ 633.07
$
76.54
4 cy
$147.79
$ 240.09
$ 332.41
$ 424.69
$ 517.00
$703.18
$
85.01
6 cy
$189.66
$ 298.27
$ 406.82
. $ 515.40
$ 623.98
$ 903.26
$
101.91
Roll-out Service
$ 42.39
$ 84.79
$127.21 ',
$169.61
$ 212.01
$254.42
$
9.78
Bin Lock Service
$ 42.39
$ 84.79
$127.21
$169.61
$212.�1$54.42
$
9.78
�;wflffllwtlwl #IF
Page 3
BIN SIZE OR
Number of Pickups Per Week / Billed Monthly
EXTRA PICKUP
SERVICE
1
2
3
4
5
6
PER OCCASION
I cy
$
54.65
$ 81.99
$109.32
$136.65
$163.98
` $191.29
$
55.01
2 cy
$
68.33
$109.32
$150.32
i, $ 191.29
$ 232.29
; $ 273.28
$
62.85
3 cy
$
81.99
$136.65
$191.29
$ 245.96
$300.64
$ 355.29
$
70.71
4 cy
$
95.18
$164.44
$ 232.42
$ 300.41
$ 369.67
$ 437.64
$
78.58
Roll-out Service
$
39.26
$ 78.52
$117.80
$ 157.06
$196.32
$ 235.59
$
9.06
Bin Lock Service
$
39.26
$ 78.52
$117.80
$157.06
$196.32
'$ 235.59
$
9.06'
` STS r
BIN SIZE OR
Number of Pickups Per Week / Billed Monthly
EXTRA PICKUP
SERVICE
1
2
3
4
5
6
PER OCCASION
1 cy
$
59.01
$ 88.54
$117.94
$147.56
$177.09
$ 206.58
$
59.40
2 cy
$
73.79
'; $118.06
$162.33
$ 206.58
$ 250.85
$ 295.13
$
67.87
3 cy
$
88.54
$147.56
$206.58
$265.62
$ 324.67
$ 383.69
$
76.35
4 cy
$102.78
$177.59
$ 251.00
$ 324.40
$ 399.22
$ 472.62
$
84.85
Roll-out Service
$
42.39
$ 84.79
$127.21
$169.61
$ 212.01
$ 254.42
$
9.78
Bin Lock Service
$
42.39
$ 84.79
$127.21
$169.61
$ 212.01
$ 254.42
$
9.78
• ff I K qY V 9 vio
Page 4
Im
-
i' ► T M T T ■
MOM
BIN SIZE OR
Number of Pickups Per Week / Billed Monthly
EXTRA PICKUP
CURRENT
1
2
3
4
BIN SIZE OR
Number of Pickups Per Week/ Billed Monthly
EXTRA PICKUP
SERVICE
1
2
3
4
5
6
PER OCCASION
1 cy
$ 90.52
$154.34
$ 218.14
$ 281.96
$ 345.76
$ 472.44
$
55.24
2 cy
$111.12
$183.73
$ 256.35
$ 328.98
$ 401.60
$ 544.93
$
63.28
3 cy
$131.73
$ 213.15
$ 294.59
$ 376.02
$ 457.45
$ 617.44
$
71.35
4 cy
$152.31-
$ 242.54
$332.80
$ 423.04
$ 513.26
$ 689.93
$
79.46
6 cy
$193.49
$ 301.38
$ 409.22
$ 517.07
, $ 624.93
$ 834.92
$
95.62
Roll-out Service
$ 39.26
$ 78.52
i$117.80
$157.06
$196.32
$235.59
'$
9.06
Bin Lock Service
$ 39.26
$ 78.52
-$117.80
$157.06
1 $196.32
$235.59
$
9.06
MOM
BIN SIZE OR
Number of Pickups Per Week / Billed Monthly
EXTRA PICKUP
SERVICE
1
2
3
4
5
6
PER OCCASION
1 cy
$ 97.46
$ 165.91
$ 234.33
$ 302.78
$ 371.21
$ 507.94
$
59.65
2 cy
$118.94
$196.05
$ 273.18
-$ 350.29
$427.41
$ 581.36
$
68.34
3 cy
$140.46
; $ 226.24
$ 312.05
$ 397.86
$ 483.66
$ 654.80
$
76.91
4 cy
$161.92
$ 256.39
$ 350.91
$ 445.38
$ 539.84
$728.22
$
85.51
6 cy
$ 204.88
$ 316.76
$428.59
' $ 540.42
$ 652.27
$ 875.09
$
102.66
Roll-out Service
$ 42.39
$ 84.79
$127.21
$169.61;
$ 212.01
$ 254.42
$
9.78
Bin Lock Service
$ 42.39
$ 84.79
$127.21
$169.61
$212.01T$254.42
$
9.78
RESOLUTION •
Page
Mr.\1
BIN SIZE OR
Number of Pickups Per Week / Billed Monthly
EXTRA PICKUP
SERVICE
1
2 3 4 5
6
PER OCCASION
2 cy
$
226.71
$ 376.41 $ 526.11 ; $ 675.80 $ 825.49
$ 1,116.62
$ 126.66
3 cy
$
270.14
$ 439.71 $ 609.25 $ 778.80 $ 948.35
$1,275.04
$ 143.25
4 cy
$
313.54
$ 502.92 $ 692.34 $ 881.72 $1, 071.15
$1,433.41
$ 159.80
Roll-out Service
$
39.26
$ 78.52 $ 117.80$ 157.06 $196.32
$ 235.59
$ 9.06
PROPOSED
BIN SIZE OR
Number of Pickups Per Week /Billed Monthly
EXTRA PICKUP
SERVICE
1
2 3 4 5
6
PER OCCASION
2 cy
$
244.80
$ 405.95 $ 567.07 $ 728.20 $ 889.33
$1,204.13
$ 136.78'
3 cy
$
291.24
$ 473.20 ` $ 655.14 $ 837.09 ! $ 1,019.05
$1,371.72
$ 154.69
4 cy
$
337.65
$ 540.38 ` $ 743.16 $ 945.89 $1,148.71
$ 1,539.26
$ 172.56
Roll-out Service
$
42.39
$ 84.79 $ 127.21 $ 169.61 $ 212.01
$ 254.42
$ 9.78
COMMERCIAL ORGANIC RECYCLING
PROPOSED
Number of Pickups Per
Container Type Week/ Billed Monthly
Size
1 2
65 gallon $ 86.93 $ 173.86
RESOLUTION NO.
Page 6
SECTION 2, The City Clerk shall certify to the adoption of this Resolution.
APPROVED AND ADOPTED this 13th day of March, 2018.
SEAN ASHTON, Mayor
ATTEST:
MARIA ALICIA DUARTE, CMC
City Clerk
I HEREBY CERTIFY that the foregoing Resolution was adopted by the City Council of the City
of Downey at a Regular Meeting held on the 13th day of March 2018, by the following vote, to
wit:
AYES:
CURRENT RATE
PROPOSED RATE
BIN SIZE OR SERVICE
ABSENT:
Council Members:
ABSTAIN:
Council Member&
PER MONTH
PER MONTH
3 CY Cleanup Bin
$
127.42
$
137.93
20 CY Roll -Off Bin
$
411.95
$
444.09
30 CY Roll -Off Bin
$
588.19
$
632.08
40CY Roll -Off Bin
$
588.19
$
632.08
Compactor
$
631.33
$
678.26
Low -Boy Construction Box
$
588.19
$
632.08
Demo& Constuction Roll -Off
$
754.26
SECTION 2, The City Clerk shall certify to the adoption of this Resolution.
APPROVED AND ADOPTED this 13th day of March, 2018.
SEAN ASHTON, Mayor
ATTEST:
MARIA ALICIA DUARTE, CMC
City Clerk
I HEREBY CERTIFY that the foregoing Resolution was adopted by the City Council of the City
of Downey at a Regular Meeting held on the 13th day of March 2018, by the following vote, to
wit:
AYES:
Council Members:
NOES:
Council Members:
ABSENT:
Council Members:
ABSTAIN:
Council Member&
Maria Alicia Duarte, CMC
City Clerk
CALMLETSCERVIC-IC Y
Mr. John Oskoul
Assistant City Manager
City of Downey
11,111 Brookshire Avenue
Downey, CA 90241
In accordanc
I-
Xetween the City of Downey and CalMet Services, CalMet is submittinga request foran
,adjustment In rates effective April 1, 2017. Please see attached for the detailed calculations of
the regular rate adjustment.
In addition, I would like this letter to serve as CalMet's request for a Detail Rate Review per
Section 1.5.11 of the Agreement. I understand that the review will be paid for by CalMet. Our
CFO, Tony Serge, will be handling the production of the required materials per Exhibit 5 for the
review. His contact Information Is below, Please let him know how the City would like to
receive the information and to whom he should work with from the City. If you prefer, we,
could schedule a meeting to go over the logistics of this request,
If you have any questions please do not hesitate to give me a call.
Sincerely,
'AA Wsouza
Vice President
Tony Serge
Chief Financial Officer
A E 1
CaNet Services,
City
April March ss
Financial r City
Labor
Fuel and Lubricants
Vehicle l t
Vehicle Maintenance
All Other Expenses
Total Costs, Excluding Franchise Fees and Disposal
-2016/17
Downey>
Amount
of Total
3,247,340
451°
463,286
6.%
837,928
11<6%
$
465;344
6,°
$
2,180,242
30.3%
7,194,140
100.0
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Tipping M SolidWaste andRecyclables
Payment at the scales must be In cash, , (MC, American Express, &
Discover debit card, or by . --arranged credltNo, r accepted.
i _
mw- WIN pwp%1ii 9ov§ABWANkl§. ebW 81a
RATES
December 1, 2017
Pugnte Hills Materiats e-c-2very Facility {PH9y#Ra,. Whittier fap;
Municipal Solid and Inert Waste $58,40 per ton
Hard -to -Handle, Bulky items $68,40 per ton
_ Minimum Charge (Municipal Solid and Inert Waste) $49,64 per load
Minimum Charge (Hard -to -Handle) $59.64 per load
Segregated Uncontaminated Green Waste (1 -Ton Minimum Charge) $45,50 per ton
Food Waste $70,00 per ton
Pull -offs $44,7r each
Additional Fees. Uncovered Loads Capable of Producing Litter Surcharge ($4.40 Minimum) $4.40 per ton
Safety Vests are required at this facility and available at the Scale House at a cost of $4,50 per vest.
tafe�rwt rq a 1t��ti,��srt 'rr ara�flar 1ziiit2.Lt11�i�T)� to+nc fat
Municipal Solid and Inert Waste $62,49 per tori
- Hard -to -Handle Bulky Items $72,49 per ton
Minimum Charge (Municipal Solid and Inert Waste) $53.12 per load
Minimum Charge (Hard -to -Handle) $63,12 per load
Segregated Uncontaminated Green Waste (1 -ton Minimum Charge) $47,50 per ton
Pull -Offs $44.75 each
Additional Fees: Uncovered Loads Capable of Producing Litter Surcharge ($4,40 Minimum) $4,40 per ton
Safety Vests are required at this facility and available at the Scale House at a cost of $4.50 per vest
South GateTrarvgo Stationij thoi Lelpl
Municipal Solid and Inert Waste $63.16 per ton
Hard-to-hiandle Bulky Items $73,16 per ton
Minimum Charge (Municipal Solid and Inert Waste) $53,69 per load
inimum Charge (Hard -to -Handle) $63,69 per load
Pull -offs $44.75 each
Additional fees; Uncovered Loads Capable of Producing Litter Surcharge ($4,40 min,) $4,40 per ton
Iray10iaMt»mEt tp d )y f)istt arts 0.25 ton laarrsrrrrtl,xt
Neto: Itaa;yclabie Rtatas frequently change. Pluase thank mbskte Fair currant rata.%,
'rhe WcyrLOJIO..IlSta°si b4lOOW ares AC01 !W(f at PHMRF and DART
C $53,00 per torr
HDI,E-Natural Contalnep-5 $7,66,00 per toll
i-16f°f-Colored Container's $76,00 per ton
It 1 11 11 Pilill 11, F It
Commerce Refuse -to -Ener, Facilit)Lt1trtatt*r t Is)
Refuse (Minimum Charge -$40,00 per load) $84.00 per ton
High Energy Rel i¢) ( Inlrnum Charge - $40,00 per load) $58.00 per ton
Certified Destruction $1,20,00 per load plus $130,00 per ton
or $40,00 minimum
USDA Regulated Waste17 $160,00 per load plus $180,00 per ton
or $40,00 minimum
Additional Fees: Uncovered Loads Capable of Producing Litter $6,00 per ton surcharge
$6.00 minimum
South€wst Resourco Lt€tc:ravr=ry aCtIlty { iRPIR LoyQe;a�13 lni
rm; m.
Municipal Solid and Inert Waste (1 -ton Minimum Charge) $70,00 per ton
Tipping Fees for Solid Waste and Recyclables
Payment at the scales must be in cash, credit card (IVIC, American Express, & RATES
Discover only), debit card, or by pre -arranged credit, No checks are accepted. December 1; 2017
C all,
salaat ful Am rat MW
dt
-
Municipal Solid and Inert Waste $52.32 per ton
Hard -to -Handle Bulky items $62.32 per ton
Tires (Minimum Charge - $95.00 per load) $95.00 per ton
Special Handling $62,32 per ton
Minimum Charge (Municipal Solid and Inert Waste) $45.50 per load
Minimum Charge (Hard to Handle) $55.50 per load
Pull -Offs $44.75 each
Segregated Uncontaminated Green Waste (140rl Minimum Charge) $36.98 per ton
Clean, segregated asphalt (Minimum Charge - $50 per load) $20.00 per ton
Additional Fees: lUncovered Loads Capable of Producing Litter and Non- $4.40 per ton
Manifested Tire Loads Surcharge ($4.40 Minimum)
Scholl l an on OnElti,11 fije_q&j_e tout
Municipal Solid and Inert Wasto $53.83 per ton
Hard -to -Handle Bulky Items $63.83 per ton
Tires $95,00 per ton
Special Handling $66.99 per ton
MItilmurn Charge (Municipal Solid and Inert Waste) $48,44 per load
Minimum Charge (Hord-to-l-landle) $58.44 per load
Pull -Offs $44-75 each
Segregated Uncontaminated Green Waste (1 -ton Minimum Charge) $37,04 per ton
Clean Dirt (Minimum Charge - $45.00 per load) $9.00 per ton
Cleat), segregated asphalt (Minimum Charge - $30.00 per load) $8.50 per ton
Additional Fees: Uncovered Loads Capable of Producing Litter and Non- $5.00 per ton
Manifested Tire Loads Surcharge ($5,00 Minimurn)
Grindings — Asphalt No Charge
Please Note:
1, All rates excluding pull -offs, green waste, asphalt ind clean dirt Include the following fees;
*Coliforrfla Integrated Solid Wi5te Management FeQ: $1,40 per ton
*L, A. County Solid Waste Management Fee; $1.50 per ton
*L, A. County Departryient of Heallh Services Regulation SeMCO lice: $0.36 penton
2. All rites incl 51,IrChir[ICS Include the L.A. County Business License Tax: 10% of gross receipts, excluding state and local fees
and taxes,
3. All rates and surchorges (except for Clean Dirt) Include the City of Glondole - Scholl Canyon Landfill Assessment: 25% of gro5s
recelpts; vehicles owned and operated by the City of Glendale are exempl.
4. Rate effLctive as noted and subject to Change pursuant to SFRRF Joint Powel S Agreement.
5. Rates effective is noted and subject to change pursuant to CRFF Operating Agreement,
6. High Energy Waste consists of dry scrap wood, textile waste, unrecyclable paper and cardboard and addillonol unrecyclablL
materials.
7. USDA Regulated Waste is the destrvction of regulated foreign waste In accordance with the reputation of the United Status
Department of AgrIculture ("USDA") and the terms of the Facility USDA compliance agrournent,
8, In order to be considered recyclable MRP, the Indlviduol PIRCON of PIRMIC MUSt Meet the Districts' SpVdficatiom. As a general
guidance, the individual pieces of plastic must be a minimum of 0.5 pounds, must not exceed 1he maximurn capacity of the
baler to bale the MRP, must not exceed eight feet in length, 100 pounds in weight or be greater than 0,75 Inches thick. The
Individual PiCCOS of plastic cannot be HIM plastic or be comprised of PVC, This specIfIcation for MRP may be changed from
time to time by the Districts'Chlef Engineer and General Managur depending upon market conditions.
January 2017 $8&50
Mr, John 0skoui
Assistant City Manager
City of Downey
1:1111 Brookshire'Avenue
City of Downey, CA 90241
RECEIVED
JAN 3 0 2018
REM
Caret Services hereby submits this rate adjustment request in accordance with the Detailed Rate
Review procedure specified in Exhibit 5 of the solid waste services agreement. Together with this rate
adjustment request, we are providing rate forms and worksheets used to prepare and calculate the rate
adjustment
Residential Rate Adjustment
requestThe residential rate h table
regularlybelow with the current rate reflected in Column A, The
it Is reflected in column 8 and Is the same as the annual rate adiustment submitted December 1. 2011
proposed rate adjustment under the [retailed Rate Review procedure Is calculated as follows,
In addition to the rate adjustment resulting from the application of the RRI procedure, the Disposal
Costs Component may be adjusted to "recoup' any shortfall If the actual disposal costs for the twelve-
month period from April 18 2016 through March 31, 2017 exceed the rates that were effective April 1,
2016, CalMet has calculated the shortfall to be recouped as $0.24 for the Disposal Transfer/landfill,
and ($0,10) for the Disposal — Green Waste. The "recoup" amounts are temporary and will be remove
from the residential rates after a one-year period. These two amounts are reflected in in Column C of
the table below.
The proposed now rate is reflected In Columb E which Includes the adjustments to the S.0 Franchise
Fee and the 109 Vehicle Impact Fee as required In the franchise agreement.
7202 Pelttar on R nP/ PO M)m 2137, 6'.umnount, CA 90723 {ti) 562-259,1731), Is) 562, r,79 71158
CA LME T SER VICES. INC
Rate
Adjustment
i l Collection
current
Cost Component
Proposed_
Cost Components
Rate®'
stment
Rate
1. Disposal - Transfer/Landfill
$4.44
$4.75
$014
$4.99
2. Disposal- Green Waste-SUO
$2.43
. Collection C n nt
$8,90
$834
$0,77
7
. Franchise Fee
$012
$0.95
$1. 1
. Vehicle Impact
1.
2.
MonthlyI to Collectiont0,77
20.11
rc nt fr rr t
.7
Costs. Component based on the regular annual proceduremethodology...
Collection t Component be adjusted .. • ! upon a review of the costs
period ending October 31, 2017. This procedure is the same procedure as for the Residential Collectlon
Costs
Component.
... . a - •re, the total Commercialadjustment* exceed 8.0% under
Detailed Rate Review procedure.
a . ♦ ■ a . . l . Y ►
Vii. ,.� � i .s . � ! i `: ! . �.! . • 1 l M
from to 0 6.63% change.
CalMet Services Is dedicated to providing the highest value to Its residents and businesses, This
Information 1ifinalize Its approval.
R Oec fully,
1,04hy F, Baas
Chief incl I Officer
� �� — — -;,,�. � - 7202 Petterson Lane/ Pi Bux 2237, Pafamount, CA 90723 �P@ 562-259 5239, (F) 562,529 7958
Mt Ser0ces, Inc.
City of Downey
idW for City of Downey
CoHection Eaments
Nav'16 - Oct 17
�
Nov'17 4, OWN
Downey
Downey
Commercial
Residential
Commercial
Residential
1,522,292
1,446,699
1,704,994
1,621, 999
217,171,
206,596
221,017
210,245
992,790
373,645
392,794
979,945
216,196
207,504
237,925
225,753
1,615,947
965®666
1,106,516
2,046,871
9,965,677
.9,20.1,634
3,656,696
3,473,419
&64%
&64%
�- I
ME
DISPOSAL COMPONENT
RecyclabWs
PH MRF
DART75%
PRR
Detailed Rate Review
Disposal Collection Element Detail
Approved
#Of Actual Per Component
Tons Amount Downey HH Unit Costs 4/1116
4.74 202.11
22,940,92 1,023,443.05
2,067.99 166,532.14
25,013.65 1,190,177.30 99,181,44 21,204 —$47441--- �_O.24_l
439.67
17466.93
659,21
20,501,30
8,707,85
390,021.50
0.00
OW
3,368.49
121,61&93
207A2
15,059.07
13,38164
564,66734 47,055.64 21,204
COLLECTION COMPONENT
2,72536 -2,930.63
4,463.07 -4,297,36
19917 0.00
7,388,10 -7,227,93
Chan getip_prWd_
Collection
Component
Costs
4/1/16 Adjustment
8,6496
58.90 $0.77
Z3CONSULTING GROUP, INC.
RESOURCES • RESPECT- RESPONSIBILITY www.r3cgi.com
1512 Eureka Road, Suite 220, Roseville, CA 95661 2600 Tenth Street, Suite 424, Berkeley, CA 94710
Tel: 916-782-7821 1 Fax: 916-782-7824 Tel: 510-647-9674
627 S. Highland Avenue, Suite 300, Los Angeles, CA 90036
Tel: 323-559-7470
February 22, 2018
Mr. John Oskoui, P.E.
Assistant City Manager
City of Downey
11111 Brookshire Avenue
Downey, CA 90241
Dear Mr. Oskoui:
R3 Consulting Group, Inc. (133) was engaged by the City of Downey (City) to review CalMet Services, Inc.
(CalMet) request for a detailed rate review with rates becoming effective on April 1, 2018. Section 15.11
(Detailed Rate Review) of the City's franchise Agreement (Agreement) with CalMet grants CalMet the
right to request one detailed rate review in place of its regularly scheduled annual refuse rate indexed
(RRI) rate adjustment for the rate period beginning April 1, 2018, provided CalMet requests the Detailed
Rate Review by December 1, 2017. CalMet submitted its request to the City for a detailed rate review on
December 1St, consistent with that requirement. It submitted its detailed rate review application on
January 30, 2018.
DISCLOSURE
Before providing R3 with requested information in support of our review, CalMet required that
R3 sign a confidentiality agreement. That Agreement treated all the information CalMet provided
to R3 as confidential information, precluding R3 from making public any of that information
without CalMet's consent.
To ensure compliance with the confidentiality agreement and provide CalMet with the
opportunity to clarify any information that may have been misreported or misunderstood, on
February 19, 2018, R3 provided CalMet with a preliminary draft of this report. We requested that
CalMet identify any information included in that preliminary draft that it wished to treat as
confidential. Identified confidential information was then removed, prior to issuing this Draft
Report.
The City's Agreement with CalMet became effective on April 1, 2016. Exhibit 5 (Detailed Rate Review
Methodology) of the Agreement places an 8.00% limit on the maximum rate increase to commercial
customers. There is no limit on the maximum rate increase to residential customers. As part of the
Agreement, CalMet agreed to provide the City with a 10% Vehicle Impact Fee, without any rate increase.
CalMet also agreed to forego a rate increase in 2016, except for the disposal component of the non-
residential rates which was to be adjusted for any changes in the per ton disposal rate as of April 1,
2016.
s • •
February 22, 2018
Page 2 of s
On December 1, 2017, pursuant to the Agreement dated April 1, 2016, Calmet submitted their detailed
rate adjustment based on the Refuse Rate Index (RRI) and also requested a Detail Rate Adjustment
Review, consistent with the requirement of the Agreement. Subsequently, CalMet submitted its detailed
rate application (Application) to the City on January 20, 2018. The Application provide CalMet's
calculated rate adjustments, which CalMet reported are as follows:
1 Residential — 9.17% increase;' and
2 Commercial / Roll -Off — Rate adjustments ranging from 5.98% to 7.98% depending on the
service level.
The single family residential rate was calculated to be $20.11 per month. The rate for commercial 3
cubic yard bin with once a week pick-up was calculated to be $140.46 per month.
1. Residential Rates - Based on the City's detailed rate review methodology, we found that the
information provided by CalMet fully supported its requested residential rate increase (i.e.,
CalMet's calculated rate increase for its residential rates did not result in a profit level more
than the established 90% target operating ratio).
2. Commercial / Roll -Off Rates - Based on the City's detailed rate review methodology, we
found that the information provided by CalMet fully supported its commercial / roll -off rate
increase up to the 8.00% maximum rate increase (i.e., CalMet's calculated rate increase for its
commercial rates did not result in a profit level more than the established 90% target operating
ratio).
Note: While CalMet reported that its commercial/ roll -off rate increases ranged from 5.98% to
7.98°0, we found that a number of CalMet's calculated multi family, commercial, and
roll -off rates exceeded the 8.00% maximum allowed rate increase. As such, those
calculated commercial rate increases that exceed 8.00% need to be reduced to comply
with the 8.00% maximum commercial rate increase limit.
We performed the detail review within a very short time frame. As part of that review we received and
reviewed CalMet's audited financial statement for its overall operations and obtained and tested
supporting documentation for certain data including expense allocation factors. In other cases we relied
on the data as presented by CalMet.
The City's rates include the following four (4) rate elements (components),
This includes a $0.14 increase for the allowed residential ' "Disposal Cost Recoup", p', which is a one-year
adjustment and needs to be removed from the rates as part of the next year's Refuse Rate Index (RRI)
calculation that sets the rates for April 1, 2019.
2 Note: The rate increase for the basic service level (65 -gallon trash, 96 -gallon recycling and 96 -gallon green
waste) was calculated to be 9.13% versus the 9.17% reported by CalMet.
Mr. John Oskoui, P.E,
February 22, 2018
Page 3 of 6
a. Transfer/Landfill
b. MRF Processing
c. Residential Green Waste
d. Commercial Organics
3. Franchise Fee
4. Vehicle Impact Fee
As specified in Exhibit 5 of the Agreement, the Detailed Rate Review will be applied to the Collection
Element of the Maximum Customer Rates. The Disposal Element, the Franchise Fee Element, and the
Vehicle Impact Fee Element will continue to be adjusted using the methodology set forth in Exhibit 2
(Refuse Rate Index) of the Agreement in the event of a Detailed Rate Review. Those methodologies are
as follows:
1. Disposal Element
a. Transfer Landfill
b. MRF Processing
c. Residential Green Waste
d. Commercial Organics
2. Franchise Fee Element
customer rate.
Change in posted gate rate at Downey Area Recycling
and Transfer (DART)
Change in posted gate rate at Paramount Resource
Recycling (PRR)
Change in posted gate rate at DART
[To be determined ]3
To be adjusted so as to always equal 5% of each
3. Vehicle Impact Fee Element— To be adjusted so as to always equal 10% of each customer rate.
Our review included, but was not limited to the following:
1. Determining if CalMet's "Rate Application" is mathematically accurate and logically consistent;
2. Reviewing CalMet's financial statement and its corporate profit level;
3. Obtaining and reviewing support for the allocation factors used by CalMet to allocate
companywide expenses to the City's franchise, and those expenses among its residential and
commercial operations;
4. Obtaining and reviewing CalMet's franchised tonnages and determining the accuracy of
CalMet's calculated residential Disposal Cost Recoup;
5. Reviewing the accuracy of CalMet's applicable Exhibit 2 indexed rate adjustment calculations;
6. Obtaining support for the gate fees used to calculate the change in the three Disposal Elements;
7. Reviewing CalMet's expense projections for November 2017 through October 2018 by line item,
and requesting and reviewing support for those line items for which CalMet has forecasted
major increases;
3 For its calculated Commercial Organics Disposal cost adjustment, CalMet used the reported change in the
Puente Hills Material Recovery Facility's gate rate for "Food Waste".
Mr. John Oskoui, P.E.
February 22, 2018
Page 4 of 6
8. Identifying appropriate adjustments to CalMet's forecasted expenses;
9. Reviewing CalMet's reported residential, commercial and roll -off revenues for November 2016
through October 2017, and adjusting those revenues to reflect the full impact of the April 1,
2017 rate adjustment;
10. Reviewing CalMet's projected profit level for both residential and commercial services based on
its reported actual revenues and forecasted expenses, as adjusted by R3;
11. Determining if CalMet's projected profit supports its requested residential, and commercial rate
increases; and
12. Determining if CalMet correctly calculated the residential, and commercial rates; and if the
calculated commercial rates (multi -family, commercial, and roll -off) comply with the 8.00%
maximum allowed commercial rate adjustment.
Cost Allocation Methodology
CalMet allocated 33.03% of its total FY 16-17 income statement expenses to the City's franchise. That
allocation was based on actual driver hours in total, without regard for type (regular versus overtime),
during 2017 separated by municipality. Hours were further split between residential and commercial
route drivers for purpose of allocating City franchised costs to the residential (48.75%) and commercial
sectors (51.25%). R3 verified the mathematical accuracy of this calculation and then tied the figures to
the underlying support documents without exception.
Collection Component
Using reported actual results for the period from November 2016 through October 2017 as the base,
CalMet projected results for November 2017 through October 2018 that were 8.64% higher than the
November 2016 through October 2017 actual results. CalMet set the Collection Component increase at
8.64%. R3 reviewed CalMet's expense projections and requested support for those line items for which
CalMet was projecting significant increases. R3 identified a number of adjustments to those projected
expenses, and also evaluated the impact of no increase to the Collection Component on CalMet's
projected profit as part of our Profit Analysis (see below).
Indexed Adjustments
We found that CalMet correctly calculated each of the following three (3) Rate Elements:;
1. Disposal Element
a. Transfer/Landfill
b. MRF Processing
c. Residential Green Waste
d. Commercial Organics
2. Franchise Fee Element
3. Vehicle Impact Fee Element
Disposal Cost Recoup
As part of the detailed rate review, a review of the actual residential disposal costs for 4/1/2016
3/31/2017 was conducted (i.e., residential Disposal Cost Recoup). As specified in the Agreement, the
Mr. John Oskoui, P.E.
February 22, 2018
Page 5 of 6
Disposal Elements of the residential rates effective 4/1/16 will be used to determine if the actual
disposal costs for 4/1/2016 — 3/31/2017 were recovered. In the event that this review shows that the
actual residential disposal costs were not recovered, an increase will be applied to the residential
Disposal Elements effective 4/1/2018 to recoup those additional disposal costs. The City has the right to
spread out any such increase over a multi-year period, not to exceed five years.
CalMet calculated a Disposal Cost "Recoup" amount of $0.14 per month per residential account. R3
verified the mathematical accuracy of this calculation and the tied the figures to the underlying support
documents without exception.
Note: This $0.14 per month additional residential rate is for one (1) year only and needs to be
removed from the residential rate as part of next year's indexed rate adjustment process.
rof it An a lsis
The City's Detailed Rate Review Methodology (Exhibit 5) establishes CalMet's profit target level at a 90%
operating ratio (11.11% profit on non -pass through expenses). Our assessment of the reasonableness of
CalMet's requested rate adjustments considered its projected profit based on its reported revenues for
November 2016 through October 2017, adjusted to reflect the full impact of the April 1, 2017 rate
adjustment, and various scenarios involving its projected expenses. For even the most conservative
expense adjustment assumptions, (i.e., most favorable to the ratepayers), CalMet's calculated rate
increases for its residential and commercial rates did not result in a profit level in excess of the
established 90% target operating ratio. As such, we find CalMet's requested rate adjustments to be
reasonable and supported, with the exception of the required adjustment to those multi -family,
commercial and roll -off rates that exceed the 8.00% maximum rate increase limit, as discussed above.
CalMet's calculated FY 18-19 rates are provided in Attachment 1. We found that CalMet correctly
calculated the FY 18-19 residential and commercial rates, accounting for the proper adjustments to each
of the four (4) rate elements. However, as mentioned above, we found that in a number of cases,
CalMet's calculated multi -family, commercial, and roll -off rates exceed the 8.00% limit on the maximum
rate increase for commercial rates, and corresponding adjustments to those rates to comply with the
8.00% maximum limit have been made and are reflected in Attachment 1.
While not specific to our detailed review, R3 requested safety and customer service metrics from
CalMet for purposes of providing the City with a high-level review of CalMet's safety and customer
service performance. We consider safety and customer service to be two of the most important
operational performance considerations.
Safety
Safety is key to effective solid waste management operations. It impacts customer service, employee
morale, operational costs and other factors. Our experience has been that a company that has an
effective focus on safety tends to pay attention to the other aspects of their operation.
CalMet's safety program has been effective, as demonstrated by its historical Experience Modification
Factor or Ex Mod .4 Over each of the past 10+years CalMet's Ex Mod has compared favorably to the
4 The Experience Modification Factor, which is calculated by the National Council on Compensation, provides a
means for comparing a company's safety record to the performance of similar businesses within its industry. A
Mr. John Oskoui, P.E.
February 22, 2018
Page 6 of 6
industry, except for 2017. CalMet's 2017 Ex Mod is, for the first time in the past 10+ years higher,
although just barely, then the industry standard of 100.
Attachment 2 provides various customer service center performance metrics for January 2018. As
reported, over the past month CalMet's customer service center received more than 1,0,500 calls and
answered 99.8% of those calls. The average daily speed of answer ranged from 4 seconds to 17 seconds
on weekdays, and from 13 to 44 seconds on Saturday.s The average call handling time over that period
averaged 2 minutes and 49 seconds.
We appreciate the opportunity to assist the City. If you have any questions about this submittal, please
contact me or Richard Tagore-Erwin at (916) 782-7821, or by email at: schoerr r3c `i.com, or
rterwin r3 Lcom.
F-AiFUM-1 M-1
1 Calculated FY 18/19 Rates (Excel spreadsheet provided to the City under separate cover)
2 Call Center Customer Service Statistics
R:\+Projects\Downey - Detailed Rate Review - 118010\Report\Downey Draft Report 022218 - with City
comments.docx
rating of 1.00 is average (i.e., the Industry Standard); a rating of less than 1.0 is favorable and a rating greater
than 1.00 is unfavorable. The Experience Rating Plan places an emphasis on the number (frequency) of claims
and, to a lesser extent, the severity of workplace accidents.
5 Customer service center staffing levels drop from 11 representatives to 2 on Saturdays.