By Theresa-Marie Wilson ~
Garbage collection rates will increase a modest amount after a multi-agency agreement was approved.
I do recognize that every increase, even $2 a month, is significant for portions of our population. The other side of that is the alternative. It isn’t like we can just come up with another solution, unless we are going to stop trash pickup.
The contract with South County Sanitation Services (SCSS) is held jointly with the cities of Arroyo Grande, Pismo Beach and Grover Beach as well as the Oceano Community Services District.
Last week both the Grover Beach and Pismo Beach city councils approved a multi-year rate-setting proposal with SCSS.
The Arroyo Grande City Council recently discussed the issue, however a final decision was continued due to a line item clerical error, but the rate increase is likely to be approved at a future date after a 45-day public notice is issued.
“The costs are what they are,” said Councilman Jim Guthrie. “I do recognize that every increase, even $2 a month, is significant for portions of our population. The other side of that is the alternative. It isn’t like we can just come up with another solution, unless we are going to stop trash pickup.”
Entering into the current agreement is not set in stone; there is an option to “trigger” termination after nine months if the franchise agreement exceeds the cumulative cost of living increase.
“Conceptually you could approve the rate increase, and at some subsequent point and time decide that you don’t want to continue with the franchise agreement,” said consultant Bill Statler.
The termination option does not directly limit the rate increase the SCSS could ask for, but Statler said it is a “strong incentive” to keep rates below the trigger point.
“They believe that an increase of 3.25 % avoids the trigger option,” Statler said adding, “I believe that a rate increase that is greater than 1.5 % potentially triggers that option.”
Statler and SCSS calculations both agree that a 1.79 % increase previously approved in 2011 to go towards cost associated with transportation of green waste to a facility in Santa Maria rather than the Cold Canyon Landfill not go towards the trigger point.
SCSS believes pass through tipping fees in both 2014 (.96%) and 2016 (.81%) should be excluded as well.
“In my reading of your franchise agreement, I don’t believe that those are subject to exclusion,” Statler said. “That is really the ultimate difference.”
Based on that, whereas SCSS calculates that their increase in under by .02 %, Statler believes the increase is over by 1.75 % and would thus need to be 1.5 percent to avoid the trigger.
“I think my calculations are correct,” Statler said. “I think you want to set a precedent that this is, in fact how you calculate the trigger.”
Long-term plans include building a Cold Canyon green waste facility in San Luis Obispo in 2017 thereby eliminating the need for transportation to Santa Maria.
Ultimately, Statler recommended approving the rate increase and agreeing not to pursue the trigger, but reformulating how the trigger is calculated.
SCSS proposes that the next two interim rate adjustments, based on any increase in the CPI for both operational costs and regulatory fees, and an increase of 0.79% (for January 2017) and 0.77% (for January 2018) due to tipping fees.
In comparison to neighboring communities, Arroyo Grande would be higher than the cities of San Luis Obispo and Morro Bay in the 30-40 gallon trashcan pricing, but lower than any other city in the County in the 60 gallon and up range.
For example, San Miguel residents would pay $60.39 a month for a 90-101 gallon trashcan versus $26.92 in Arroyo Grande.
Key cost drivers include a .81%: $2.25 per ton increase in landfill disposal costs; 1.10%: implementing an organic waste diversion program; and 1.34%: operation costs such as fuel and maintenance.
The city has been in a contract with SCSS since 1997. The agreement was amended in 2008 to extend the contract for 15-year period. The agreement allows for a base rate adjustment every three years. The last base year review was completed in December of 2012.
Rate increases are allowed for the interim two years based on consumer price index (CPI), pass through costs such as for tipping fees, which are based on quantity of waste deposited at the landfill, and general franchise fees.
Generally controllable cost account for 84 % of SCSS operations and the remaining 16 percent are a result of tipping fees.
The rate increase of 3.25 percent would apply to the next three years and would eliminate the need for interim year rate reviews.
“I think it is a more straightforward streamlined system process,” said Statler. “The advantage, I think, to you and the trash company as well, is that you wouldn’t need to have the interim review. It’s the same process.”
For example a 32-gallon container currently cost a residential consumer in Arroyo Grande $16.30 per month and that rate would increase to $16.82, or $6.24 per year.
“When you take a look at the level of service that SCSS provides, it is really clear that they are providing that to you and the other South County agencies at very competitive rates compared with similar communities,” said Statler. “I believe that they have done a good job of managing their costs and revenues.”
Approximately one third of the rate increase is due to the implementation of an Organics Diversion Program as mandated by California AB 1826 requiring local jurisdictions across the state to develop a recycling program to divert organic waste from landfills to an authorized composting facility.
The SCSS average annual rate increase has been 2.4% annually for the past eight years.
“The costs are reasonable,” Statler said. “The proposed rate increase meets the reasonable return criteria. The requested rate increase of 3.25% is slightly less that the allowable increase of 3.67%.”
The rate review is established in accordance with the “City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates” manual.