HomeMy WebLinkAboutCM MSS Rate Review 2017411I
SAN RAFAEL Agenda Item No: 4_b
THE CITY WITH A MISSION Meeting Date: May 15, 2017
SAN RAFAEL CITY COUNCIL AGENDA REPORT
Department: CITY MANAGER
Prepared by: Cory Bytof, City Manager Approval:
Sustainability & Volunteer Program Coordinator
TOPIC: REVIEW OF MARIN SANITARY SERVICE REFUSE RATE METHODOLOGY
SUBJECT: RESOLUTION OF THE CITY OF SAN RAFAEL AUTHORIZING THE CITY MANAGER TO
ENTER INTO A CONTRACT WITH R3 CONSULTING GROUP, INC. IN AN AMOUNT NOT
TO EXCEED $80,360 FOR A REVIEW OF THE MARIN SANITARY SERVICE REFUSE RATE
METHODOLOGY AND RECYCLING REVENUE FUND, AND TO ASSIST WITH THE MEET -
AND -CONFER PROCESS FOR THE CITIES OF SAN RAFAEL & LARKSPUR, TOWN OF
ROSS, LAS GALLINAS SANITARY DISTRICT, AND THE COUNTY OF MARIN
RECOMMENDATION:
Adopt the resolution authorizing the City Manager to enter into an agreement with R3 Consulting
Group, Inc.
BACKGROUND:
The City of San Rafael, the City of Larkspur, the Town of Ross, Las Gallinas Sanitary District, and the
County Of Marin all have contracts with MSS utilizing a similar rate setting methodology. In order to
achieve economies of scale to reduce costs and staff time, and to streamline services across
jurisdictional lines, the agencies joined together as a Franchisors' Group. The Franchisors' Group meets
several times per year to oversee MSS's operations, review MSS's rate proposals, and oversee the work
of a third party consultant hired to conduct annual rate reviews. In addition, the Franchisors' Group
works together to update the Franchise Agreement and conduct reviews of services and rate setting
procedures. In these instances the City of San Rafael typically acts as lead agency since San Rafael
comprises the majority of MSS' accounts.
This year the Franchisors' Group is contractually obligated to engage in a meet and confer process with
MSS due to recycling losses exceeding an agreed upon threshold in the 2016 rate year. In addition, the
Franchisors' Group wishes to simultaneously review the rate setting methodology that establishes
annual MSS refuse and recycling rates in order to simplify and streamline the process going forward.
The Franchisors' Group and MSS have agreed to contract with a third party consultant to assist with the
FOR CITY CLERK ONLY
File No.: 4-3-646 x 4-3-32
Council Meeting: 05/15/2017
Disposition: Resolution 14318
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2
engagement process and conduct the work. The contract is with R3 Consulting Group, Inc. for a not -to -
exceed amount of $80,360.
ANALYSIS:
The City's Franchise Agreement calls for reviewing the contract every five years and revising as
necessary. The last time this was done was in 2012. Therefore, this year is an opportunity for the City
and the other Franchisors' Group agencies to review and modify the agreement. This section will
present the actions of the Franchisors' Group to date leading to the development of the proposed
agreement with R3 Consulting Group, Inc. including rationale, next steps, and timeline.
There are two components to the Scope of Work for the proposed contract with R3; 1) addressing the
recycling losses via the meet and confer process, and 2) reviewing the rate setting methodology to
simplify and streamline it.
Recvcling Losses and Meet & Confer
Recycling commodities markets have suffered some drastic drops and have been generally on the
decline for the past three years, resulting in losses for recycling companies throughout the state.
Commodity pricing dropped an average of 14.03% per ton during 2015 alone. This collapse is not only
being felt in our local jurisdictions, but has been widespread throughout California and the rest of the
nation. The existing market conditions are expected to continue into the foreseeable future. MSS has
been seeing annual losses as well and, as noted in previous staff reports during the annual rate reviews,
the Recycling Revenue Fund went from a positive to a negative balance.
MSS initially included an emergency request in the 2017 rate application to address recycling losses,
which were approaching $250,000 at the time of the August 1 submittal date. As noted above, the
current contract calls for a meet and confer process between MSS and the Franchisor's Group if the
Recycling Revenue Fund drops below a $250,000 negative balance. The Franchisors' Group declined the
2017 emergency rate request because the Franchisors' Group determined the best approach to
addressing the recycling losses was to evaluate the issue as strategically as possible and in the overall
context of how the rates are set. This approach was chosen to ensure the most equitable solution for
MSS as well as the rate payers. In addition, the rate setting methodology is somewhat complex and
requires a significant amount of staff time, and can be difficult for elected bodies and the general public
to understand. Therefore, the Franchisors' Group requested that the meet and confer process include a
full review of the rate setting methodology with the additional goal of simplifying the process and
methodology.
As of 3rd quarter 2016, the Fund exceeded the negative $250,000 threshold. On November 15, 2016
MSS sent a notice of request to meet and confer to all the members of the Franchisors' Group stating
that the Fund had hit a $364,217 negative balance. MSS agreed to remove the emergency request from
the 2017 rate application and to include a comprehensive review of the rate setting methodology and
as part of the meet -and -confer process to address the recycling losses. The Franchisors' Group officially
initiated the meet -and -confer process on February 2, 2017. Throughout this process, Vice Mayor
Maribeth Bushey and Councilmember Kate Colin have been apprised as an ad-hoc subcommittee to
provide insights and feedback in order to help guide the process.
Since February 2, the Franchisors' Group and MSS have met several times and developed a Request for
Information (RFI) in order to identify vendors that have the experience and ability to assist with this
effort. The RFI included goals and guiding principles that were agreed to by MSS and the Franchisors'
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3
Group (see Attachment C). It was released and circulated to over a dozen consulting firms on February
24, 2017. A small subcommittee of the Franchisors' Group was formed to expedite the process, which
included City Sustainability and Volunteer Program Coordinator Cory Bytof, County of Marin Waste
Management Program Manager Steve Devine, and Las Gallinas Valley Sanitary District Administrative
Services Manager Susan McGuire.
Four firms responded to the RFI. Three were chosen to be interviewed based on pre -determined
evaluation criteria. HF&H Consultants, LLC and R3 Consulting Group, Inc. were the two finalists. At an
all -Franchisors' Group meeting along with MSS's input, R3 was selected to conduct the analysis and
assist with the meet -and -confer process. Their final Scope of Work Proposal is included as Exhibit A to
the Professional Services Agreement (Attachment B to Staff Report) and reflects the goals outlined in
the RFI.
Next Steps and Timeline
The official kick-off meeting with R3 Consulting Group, Inc., the Franchisors' Group, and MSS will occur
on Thursday, May 18. The scope of work includes several meetings with the Franchisors' Group,
extensive work with MSS to understand the financial underpinnings of the rate setting methodology
and Recycling Revenue Fund, development of alternative models, and a comparison of rates using the
current methodology and a revised methodology. In addition, the consultant will help present to boards
and councils and will provide documentation of the rationale for the changes for historical record.
One of the goals for the rate setting methodology is to simplify it and make it easier to understand for
rate -payers. Currently the various indices used and annual true -ups cause a lot of confusion and rely on
extensive consultant time to review and explain during the rate reviews. In addition, the Franchisors'
Group would like to reduce the amount of staff time required to do the annual rate reviews each year.
These should result in cost savings to both the Franchisors' agencies and the rate -payers.
The current timeline calls for the analysis to be done in time for this year's annual rate review, which
will occur in the fall of 2017. However the extent of the changes to the rate setting methodology are
not yet known therefore it is difficult to predict how feasible implementing these changes will be for the
2018 rate review. Staff will continue to keep the ad-hoc Council subcommittee apprised and will return
to report the results of this project in late summer 2017.
COMMUNITY OUTREACH:
This project was discussed during the public hearing during the 2017 rate review at the December 19,
2016 City Council meeting. In addition, it has been discussed at the Climate Change Action Plan
quarterly implementation forum and the monthly San Rafael Chamber of Commerce Green Business
Committee meetings.
FISCAL IMPACT:
The agreement stipulates a not -to -exceed amount of $80,360. The cost for this contract is not an
expense of either the City of San Rafael or the other members of the Franchisors' Group. Since these
contract costs are considered operating expenses of MSS, they will be included in the annual refuse
collection rates for 2018. All participating agencies have received a copy of this agreement and are
aware of the scope of work and project costs.
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 4
OPTIONS:
The City Council may choose to:
1. Adopt the resolution approving the agreement with R3 Consulting Group, Inc.
2. Not adopt the resolution, and provide additional direction to staff
RECOMMENDED ACTION:
1. Accept the report and adopt the resolution as presented authorizing the City Manager to enter
into an agreement with R3 Consulting Group, Inc.
ATTACHMENTS:
Attachment A: Resolution
Attachment B: Resolution Attachment 1 -Professional Services Agreement with Exhibit A, Scope of
Work Proposal and Exhibit B, Hourly Rates
Attachment C: Goals and Guiding Principles
RESOLUTION NO. 14318
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL
AUTHORIZING THE CITY MANAGER TO ENTER INTO A CONTRACT WITH R3
CONSULTING GROUP, INC. IN AN AMOUNT NOT TO EXCEED $80,360 FOR A
REVIEW OF THE MARIN SANITARY SERVICE REFUSE RATE METHODOLOGY
AND RECYCLING REVENUE FUND, AND TO ASSIST WITH THE MEET -AND -
CONFER PROCESS FOR THE CITIES OF SAN RAFAEL & LARKSPUR, TOWN OF
ROSS, LAS GALLINAS SANITARY DISTRICT, AND THE COUNTY OF MARIN
THE CITY COUNCIL OF THE CITY OF SAN RAFAEL RESOLVES AS FOLLOWS:
The CITY MANAGER is authorized to execute, on behalf of the City of San Rafael, a
Professional Services Agreement with R3 Consulting Group, Inc. for Marin Franchisors' Group
Rate Methodology and Recycling Revenue Fund Review and Meet and Confer Assistance, in the
form attached hereto as Attachment 1, subject to final approval by the City Attorney. The
agreement shall be for an amount not to exceed $80,360, for the work described in the May 1, 2017
R3 Consulting Group, Inc. Scope of Work Proposal attached as Exhibit A to the Professional
Services Agreement and incorporated herein by reference.
I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing
resolution was duly and regularly introduced and adopted at a regular meeting of the City Council
of said City held on Monday, May 15, 2017, by the following vote, to wit:
AYES: COUNCILMEMBERS: Bushey, Colin, Gamblin, McCullough & Mayor Phillips
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
ESTHER C. BEIRNE, City Clerk
AGREEMENT FOR PROFESSIONAL SERVICES
FOR MARIN FRANCHISORS' GROUP RATE METHODOLOGY AND RECYCLING
REVENUE FUND REVIEW AND MEET AND CONFER ASSISTANCE
This Agreement is made and entered into this 12 Ndday of May , 2017, by
and between the CITY OF SAN RAFAEL (hereinafter "CITY"), and R3 Consulting Group, Inc.
(hereinafter "CONTRACTOR").
RECITALS
WHEREAS, the City of Larkspur, the City of San Rafael, the Town of Ross, the County of
Marin and the Las Gallinas Valley Sanitary District (hereinafter "FRANCHISORS' GROUP")
have similar franchise agreements with Marin Sanitary Services; and
WHEREAS, the FRANCHISORS' GROUP utilizes jointly sponsored programs to
achieve financial and staff time savings through collaborative analyses such as the annual reviews
of Marin Sanitary Services operations and expenses pursuant to the Franchise Agreements; and
WHEREAS, the FRANCHISORS' GROUP desires to utilize the services of the
CONTRACTOR to conduct an analysis of the rate -setting methodology and recycling revenue
fund; and
WHEREAS, the CITY has in the past acted as the contracting agency on behalf of the
FRANCHISORS' GROUP, and has agreed to do so in this instance as well; and
WHEREAS, the FRANCHISORS' GROUP entities (each a "Participating Entity" and
collectively, "the Participating Entities") have agreed to share equally in the cost of the analysis, to
be paid for by Marin Sanitary Service and allocated through each city/town's annual rate setting
review as set forth below;
AGREEMENT
NOW, THEREFORE, the parties hereby agree as follows:
1. PROJECT COORDINATION
A. CITY. The City Manager shall be the representative of the CITY for all purposes
under this Agreement. Sustainability and Volunteer Program Coordinator Cory Bvtof is hereby
designated the PROJECT MANAGER for the CITY, and said PROJECT MANAGER shall
supervise all aspects of the progress and execution of this Agreement.
B. CONTRACTOR. CONTRACTOR shall assign a single PROJECT DIRECTOR
to have overall responsibility for the progress and execution of this Agreement for
CONTRACTOR. Garth Schultz is hereby designated as the PROJECT DIRECTOR for
Rev. Date: 1/30i14
CONTRACTOR. Should circumstances or conditions subsequent to the execution of this
Agreement require a substitute PROJECT DIRECTOR for any reason; the CONTRACTOR shall
notify the CITY within ten (10) business days of the substitution.
2. DUTIES OF CONTRACTOR
CONTRACTOR shall perform the duties and/or provide services as described in
CONTRACTOR's Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate
Methodology Review, dated May 1, 2017, attached hereto as Exhibit "A" and incorporated herein.
3. DUTIES OF CITY
CITY shall cooperate with CONTRACTOR in its performance under this agreement and
shall compensate CONTRACTOR as provided herein.
4. COMPENSATION.
For the full performance of the services described herein by CONTRACTOR,
CONTRACTOR shall be compensated as described in the Estimate of Costs, Hours and
Contingencies set forth in Exhibit "A", referencing the Hourly Billing Rates & Other Costs dated
March 23, 2017 attached hereto as Exhibit `B" and incorporated herein, in a total contract amount
not to exceed $80,360.00. It is understood and agreed by the parties that payment of compensation
hereunder shall be made as follows: CONTRACTOR shall submit monthly invoices to CITY for
review and approval, then CITY shall forward CONTRACTOR's approved invoices to Marin
Sanitary Services, which shall remit payment on each invoice directly to CONTRACTOR within
thirty (30) days of receipt thereof.
5. TERM OF AGREEMENT.
The term of this Agreement shall commence upon the date of execution of this agreement
and shall end on February 28, 2018.
6. TERMINATION.
A. Discretionary. Either party may terminate this Agreement without cause upon
thirty (30) days written notice mailed or personally delivered to the other party.
B. Cause. Either party may terminate this Agreement for cause upon fifteen (15) days
written notice mailed or personally delivered to the other party, and the notified party's failure to
cure or correct the cause of the termination, to the reasonable satisfaction of the party giving such
notice, within such fifteen (15) day time period.
C. Effect of Termination. Upon receipt of notice of termination, neither party shall
incur additional obligations under any provision of this Agreement without the prior written consent
of the other.
Rev. date: 1/30/14
D. Return of Documents. Upon termination, any and all CITY documents or
materials provided to CONTRACTOR and any and all of CONTRACTOR's documents and
materials prepared for or relating to the performance of its duties under this Agreement, shall be
delivered to CITY as soon as possible, but not later than thirty (30) days after termination.
7. OWNERSHIP OF DOCUMENTS,.
The written documents and materials prepared by the CONTRACTOR in connection with
the performance of its duties under this Agreement, shall be the sole property of CITY. CITY may
use said property for any purpose, including projects not contemplated by this Agreement.
INSPECTION AND AUDIT.
Upon reasonable notice, CONTRACTOR shall make available to CITY, or its agent, for
inspection and audit, all documents and materials maintained by CONTRACTOR in connection
with its performance of its duties under this Agreement. CONTRACTOR shall fully cooperate
with CITY or its agent in any such audit or inspection.
9. ASSIGNABILITY.
The parties agree that they shall not assign or transfer any interest in this Agreement nor the
performance of any of their respective obligations hereunder, without the prior written consent of
the other party, and any attempt to so assign this Agreement or any rights, duties or obligations
arising hereunder shall be void and of no effect.
10. INSURANCE.
A. Scope of Coverage. During the term of this Agreement, CONTRACTOR shall
maintain, at no expense to CITY, the following insurance policies:
1. A commercial general liability insurance policy in the minimum amount of
one million dollars ($1,000,000) per occurrence/two million dollars ($2,000,000) aggregate, for
death, bodily injury, personal injury, or property damage.
2. An automobile liability (owned, non -owned, and hired vehicles) insurance
policy in the minimum amount of one million dollars ($1,000,000) dollars per occurrence.
3. If any licensed professional performs any of the services required to be
performed under this Agreement, a professional liability insurance policy in the minimum amount
of one million dollars ($1,000,000) per occurrence/two million dollars ($2,000,000) aggregate, to
cover any claims arising out of the CONTRACTOR's performance of services under this
Agreement. Where CONTRACTOR is a professional not required to have a professional license,
CITY reserves the right to require CONTRACTOR to provide professional liability insurance
pursuant to this section.
4. If it employs any person, CONTRACTOR shall maintain worker's
Rev. date: 1/30/14
compensation insurance, as required by the State of California, with statutory limits, and
employer's liability insurance with limits of no less than one million dollars ($1,000,000) per
accident for bodily injury or disease. CONTRACTOR'S worker's compensation insurance shall
be specifically endorsed to waive any right of subrogation against CITY.
B. Other Insurance Requirements. The insurance coverage required of the
CONTRACTOR in subparagraph A of this section above shall also meet the following
requirements:
1. Except for professional liability insurance, the insurance policies shall be
specifically endorsed to include the CITY, its officers, agents, employees, and volunteers, as
additionally named insureds under the policies.
2. The additional insured coverage under CONTRACTOR'S insurance
policies shall be primary with respect to any insurance or coverage maintained by CITY and shall
not call upon CITY's insurance or self-insurance coverage for any contribution. The "primary and
noncontributory" coverage in CONTRACTOR'S policies shall be at least as broad as ISO form
CG20 0104 13.
3. Except for professional liability insurance, the insurance policies shall
include, in their text or by endorsement, coverage for contractual liability and personal injury.
4. CONTRACTOR will provide the PROJECT MANAGER with thirty (30)
days written notice prior to any planned cancellation or planned non-payment of premium, or
planned modifications of the terms and conditions of said insurance policies. In addition,
immediately upon CONTRACTOR's receipt during the term of this Agreement of any notice of
cancellation or of intent to cancel any policy of insurance required herein issued by
CONTRACTOR's insurance carrier for any reason, CONTRACTOR shall provide PROJECT
MANAGER with a copy of said notice by personal delivery or overnight mail.
5. If the insurance is written on a Claims Made Form, then, following
termination of this Agreement, said insurance coverage shall survive for a period of not less than
five years.
6. The insurance policies shall provide for a retroactive date of placement
coinciding with the effective date of this Agreement.
7. The limits of insurance required in this Agreement may be satisfied by a
combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall
contain or be endorsed to contain a provision that such coverage shall also apply on a primary and
noncontributory basis for the benefit of CITY (if agreed to in a written contract or agreement)
before CITY'S own insurance or self-insurance shall be called upon to protect it as a named
insured.
8. It shall be a requirement under this Agreement that any available insurance
proceeds broader than or in excess of the specified minimum insurance coverage requirements
Rev. date: 1/30/14 4
and/or limits shall be available to CITY or any other additional insured party. Furthermore, the
requirements for coverage and limits shall be: (1) the minimum coverage and limits specified in this
Agreement; or (2) the broader coverage and maximum limits of coverage of any insurance policy or
proceeds available to the named insured; whichever is greater.
C. Deductibles and SIR's. Any deductibles or self-insured retentions in
CONTRACTOR's insurance policies must be declared to and approved by the PROJECT
MANAGER and City Attorney, and shall not reduce the limits of liability. Policies containing any
self-insured retention (SIR) provision shall provide or be endorsed to provide that the SIR may be
satisfied by either the named insured or CITY or other additional insured party. At CITY's option,
the deductibles or self-insured retentions with respect to CITY shall be reduced or eliminated to
CITY's satisfaction, or CONTRACTOR shall procure a bond guaranteeing payment of losses and
related investigations, claims administration, attorney's fees and defense expenses.
D. Proof of Insurance. CONTRACTOR shall provide to the PROJECT
MANAGER or CITY'S City Attorney all of the following: (1) Certificates of Insurance
evidencing the insurance coverage required in this Agreement; (2) a copy of the policy
declaration page and/or endorsement page listing all policy endorsements for the commercial
general liability policy, and (3) excerpts of policy language or specific endorsements
evidencing the other insurance requirements set forth in this Agreement. CITY reserves the
right to obtain a full certified copy of any insurance policy and endorsements from
CONTRACTOR. Failure to exercise this right shall not constitute a waiver of the right to
exercise it later. The insurance shall be approved as to form and sufficiency by PROJECT
MANAGER and the City Attorney.
11. INDEMNIFICATION.
A. Except as otherwise provided in Paragraph B., CONTRACTOR shall, to the
fullest extent permitted by law, indemnify, release, defend with counsel approved by CITY, and
hold harmless CITY, its officers, agents, employees and volunteers (collectively, the "City
Indemnitees"), from and against any claim, demand, suit, judgment, loss, liability or expense of
any kind, including but not limited to attorney's fees, expert fees and all other costs and fees of
litigation, (collectively "CLAIMS"), arising out of CONTRACTOR'S performance of its
obligations or conduct of its operations under this Agreement. The CONTRACTOR's
obligations apply regardless of whether or not a liability is caused or contributed to by the active
or passive negligence of the City Indemnitees. However, to the extent that liability is caused by
the active negligence or willful misconduct of the City Indemnitees, the CONTRACTOR's
indemnification obligation shall be reduced in proportion to the City Indemnitees' share of
liability for the active negligence or willful misconduct. In addition, the acceptance or approval
of the CONTRACTOR's work or work product by the CITY or any of its directors, officers or
employees shall not relieve or reduce the CONTRACTOR's indemnification obligations. In the
event the City Indemnitees are made a party to any action, lawsuit, or other adversarial
proceeding arising from CONTRACTOR'S performance of or operations under this
Agreement, CONTRACTOR shall provide a defense to the City Indemnitees or at CITY'S
option reimburse the City Indemnitees their costs of defense, including reasonable attorneys'
fees, incurred in defense of such claims.
Rev. date: 1/30/14 5
B. Where the services to be provided by CONTRACTOR under this Agreement are
design professional services to be performed by a design professional as that term is defined
under Civil Code Section 2782.8, CONTRACTOR shall, to the fullest extent permitted by law,
indemnify, release, defend and hold harmless the City Indemnitees from and against any
CLAIMS that arise out of, pertain to, or relate to the negligence, recklessness, or willful
misconduct of CONTRACTOR in the performance of its duties and obligations under this
Agreement or its failure to comply with any of its obligations contained in this Agreement,
except such CLAIM which is caused by the sole negligence or willful misconduct of CITY.
C. The defense and indemnification obligations of this Agreement are undertaken in
addition to, and shall not in any way be limited by, the insurance obligations contained in this
Agreement, and shall survive the termination or completion of this Agreement for the full period
of time allowed by law.
12. NONDISCRIMINATION.
CONTRACTOR shall not discriminate, in any way, against any person on the basis of age,
sex, race, color, religion, ancestry, national origin or disability in connection with or related to the
performance of its duties and obligations under this Agreement.
13. COMPLIANCE WITH ALL LAWS.
CONTRACTOR shall observe and comply with all applicable federal, state and local laws,
ordinances, codes and regulations, in the performance of its duties and obligations under this
Agreement. CONTRACTOR shall perform all services under this Agreement in accordance with
these laws, ordinances, codes and regulations. CONTRACTOR shall release, defend, indemnify
and hold harmless CITY, its officers, agents and employees from any and all damages, liabilities,
penalties, fines and all other consequences from any noncompliance or violation of any laws,
ordinances, codes or regulations.
14. NO THIRD PARTY BENEFICIARIES.
CITY and CONTRACTOR do not intend, by any provision of this Agreement, to create in
any third party, any benefit or right owed by one party, under the terms and conditions of this
Agreement, to the other party.
15. NOTICES.
All notices and other communications required or permitted to be given under this
Agreement, including any notice of change of address, shall be in writing and given by personal
delivery, or deposited with the United States Postal Service, postage prepaid, addressed to the
parties intended to be notified. Notice shall be deemed given as of the date of personal delivery, or
if mailed, upon the date of deposit with the United States Postal Service. Notice shall be given as
follows:
Rev. date: 1/30/14 6
TO CITY: Cory Bytof
Sustainability & Volunteer Program Coordinator
City of San Rafael
1400 Fifth Avenue
P.O. Box 151560
San Rafael, CA 94915-1560
TO CONTRACTOR: Garth Shultz
Principal
R3 Consulting Group, Inc.
2600 Tenth Street, Suite 411
Berkeley, CA 94710
16. INDEPENDENT CONTRACTOR,.
For the purposes, and for the duration, of this Agreement, CONTRACTOR, its officers,
agents and employees shall act in the capacity of an Independent Contractor, and not as employees
of the CITY. CONTRACTOR and CITY expressly intend and agree that the status of
CONTRACTOR, its officers, agents and employees be that of an Independent Contractor and not
that of an employee of CITY.
17. ENTIRE AGREEMENT -- AMENDMENTS,.
A. The terms and conditions of this Agreement, all exhibits attached, and all documents
expressly incorporated by reference, represent the entire Agreement of the parties with respect to the
subject matter of this Agreement.
B. This written Agreement shall supersede any and all prior agreements, oral or written,
regarding the subject matter between the CONTRACTOR and the CITY.
C. No other agreement, promise or statement, written or oral, relating to the subject
matter of this Agreement, shall be valid or binding, except by way of a written amendment to this
Agreement.
D. The terms and conditions of this Agreement shall not be altered or modified except
by a written amendment to this Agreement signed by the CONTRACTOR and the CITY.
E. If any conflicts arise between the terms and conditions of this Agreement, and the
terms and conditions of the attached exhibits or the documents expressly incorporated by reference,
the terms and conditions of this Agreement shall control.
18. SET-OFF AGAINST DEBTS.
CONTRACTOR agrees that CITY may deduct from any payment due to
CONTRACTOR under this Agreement, any monies which CONTRACTOR owes CITY under
Rev. date: 1/30/14
any ordinance, agreement, contract or resolution for any unpaid taxes, fees, licenses, assessments,
unpaid checks or other amounts.
19. WAIVERS.
The waiver by either party of any breach or violation of any term, covenant or condition of
this Agreement, or of any ordinance, law or regulation, shall not be deemed to be a waiver of any
other term, covenant, condition, ordinance, law or regulation, or of any subsequent breach or
violation of the same or other term, covenant, condition, ordinance, law or regulation. The
subsequent acceptance by either party of any fee, performance, or other consideration which may
become due or owing under this Agreement, shall not be deemed to be a waiver of any preceding
breach or violation by the other party of any term, condition, covenant of this Agreement or any
applicable law, ordinance or regulation.
20. COSTS AND ATTORNEY'S FEES.
The prevailing party in any action brought to enforce the terms and conditions of this
Agreement, or arising out of the performance of this Agreement, may recover its reasonable costs
(including claims administration) and attorney's fees expended in connection with such action.
21. CITY BUSINESS LICENSE / OTHER TAXES.
CONTRACTOR shall obtain and maintain during the duration of this Agreement, a CITY
business license as required by the San Rafael Municipal Code CONTRACTOR shall pay any and
all state and federal taxes and any other applicable taxes. CITY shall not be required to pay for any
work performed under this Agreement, until CONTRACTOR has provided CITY with a
completed Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and
Certification).
22. APPLICABLE LAW.
The laws of the State of California shall govern this Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day, month
and year first above written.
CITY OF SAN RAFAEL CONTRACTOR
JI SC _ TZ,q- ager
Rev. date: 1/30/14
By: ._
Name: GAR I SCLT
Title: VI -P SID
ATTEST:
ESTI F FR C. BEIRNE, City Clerk
APPROVED AS TO FORM:
&Q1, - -1, FF -,E -
ROBERT F. EPSTE7qCity Attorney
Rev. date: 1/30/14
Z3CONSULTING GROUP, INC.
RESOURCES•RESPECT- RESPONSIBILITY
1512 Eureka Road, Suite 220, Roseville, CA 95661
Tel: 916-782-7821 1 Fax: 916-782-7824
May 1, 2017
www.r3cgi.com
2600 Tenth Street, Suite 411, Berkeley, CA 94710
Tel: 510-647-9674
627 S. Highland Avenue, Suite 300, Los Angeles, CA 90036
Tel: 323-559-7470
Mr. Cory Bytof
Sustainability & Volunteer Program Coordinator
City of San Rafael
1313 Fifth Avenue
San Rafael, CA 94901
Subject: Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate
Methodology Review
Dear Mr. Bytof:
R3 Consulting Group, Inc. (R3) is pleased to submit our scope of work proposal (SOW) for the Solid
Waste Rate -Setting Methodology, Recycling Fund Meet and Confer Assistance, and 2018 Rate Review
for the cities of San Rafael, Larkspur, and Ross, the County of Marin, and the Las Gallinas Valley Sanitary
District (henceforth referred to as "Franchisors' Group" or "Group"). This SOW addresses the specific
items included in your email from April 7, 2017, and further describes proposed Project Tasks that will
be undertaken via this SOW. It also reflects changes to our original SOW dated April 18, 2017 as
requested per your letter dated April 25, 2017.
We appreciate the opportunity to submit this SOW to the Franchisors' Group. Should you have any
questions regarding our proposal, or need any additional information, please contact me (Project
Director Garth Schultz) by phone at (510) 292-0853 or by email at gschultz@r3cgi.com, or Project
Manager William Schoen by phone at (916) 782-7821 or by email at wschoen@r3cgi.com.
Sincerely,
R3 CONSULTING GROUP
Garth Schultz I Principal
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
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Mr. Cory Bytof
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Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
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Scope of Work
This SOW provides details for each of the key areas indicated by the Franchisors Group, which are
restated below:
1. Proposal for the decision-making process, keeping in mind that there are five jurisdictions
plus the refuse hauler — and that with our timeline, not all members may be able to attend
every meeting, but may want to provide input.
2. Proposed meeting schedule including kickoff meeting, follow up meetings to review
progress, gather input, and final draft review. There will most likely need to be additional
meetings required for presentation to Council and Board members either as workshops
and/or public meetings.
3. Schedule of deliverables based on your approach to assist the Franchisors' Group and Marin
Sanitary Service (MSS) in developing a rate setting methodology to address simplifying the
current method and address the recycling component of the rate.
4. Proposed method of addressing commercial service migration, i.e. more recycling and
composting results in a smaller garbage cart and lower price, but not less service or cost.
5. Proposed method of utilizing a balancing account to address recycling commodities
fluctuations, including how the processing cost and recycling revenue projections might be
set at the beginning and adjusted after that.
6. Proposed method of addressing changes and challenges in the industry in the coming
years. Where do you see it going, and what should we be planning for?
7. Proposed approach to address potential company (MSS) desired carve-outs/exceptions to
a more streamlined and appropriate multi -index rate adjustment methodology.
8. Include an estimate of hours by task and associated cost.
9. Include contingencies for extra meetings or activities as a separate line item.
This SOW addresses each of these key areas of interest in the general order that they were presented by
the Group, though Items 4 through 7 are addressed within the context of describing our approach to the
Project Tasks proposed for this project.
Item 1 Proposed Decision Making Process
R3's proposal for the decision-making process for this project is based on direct and iterative
engagement of the Franchisor's Group, its members, and Marin Sanitary Service (MSS). The foundation
of this decision-making process includes R3 conducting jointly with Group representatives and MSS:
first, via one (1) initial meeting to agree on a Draft Approach, and then via up to two (2) follow-up
meetings to discuss, review, and revise a set of Draft Deliverables (described in our response to Item 3,
in the following pages), and one (1) final meeting, ultimately resulting in Final Deliverables for Board and
Council consideration.
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
Page 4 of 10
It is anticipated that these meetings will serve as the primary means of soliciting input and establishing
an agreed-upon approach between all Group members. That said, the process is meant to be flexible,
R3 has conducted similar processes like the one described in this SOW, in which member
agencies have been positively engaged to provide initial input, feedback, and comments on draft
deliverables. Most recently, R3 completed such a process via a series of several deliverables for
the West Contra Costa Integrated Waste Management Authority (RecycleMore), which resulted
in presentations of completed work products to the RecycleMore Board of Directors.
and above all else, to ensure that Group member interests and concerns are represented and addressed
during the development of Draft and Final Deliverables. R3 will provide for opportunities for Group
members to join meetings via conference call or to provide input to R3 via phone or email directly as
needed during the project to stay on schedule, while ensuring that all members have adequate
opportunity to ensure that the needs of their communities and ratepayers are met.
Initial Meeting with Franchisor's Group and MSS
At the outset of the project, and immediately following a kickoff meeting with all parties (including the
Franchisor's Group and MSS, which will affirm the scope, schedule, and deliverables for the project), R3
will meet jointly with the five jurisdictions to determine goals, objectives, questions, concerns, and initial
positions regarding the work to be undertaken. Prior to this meeting, R3 will prepare and distribute a
brief written "Draft Approach"' document that will include details regarding R3's specific initial
approach to each of the proposed Project Tasks, including:
■ Task 1: Development of a new methodology for the recycling revenues balancing account;
■ Task 2: Development of a methodology for addressing commercial migration; and
■ Task 3: Development of simplified rate adjustment methodology that will include a proposed
method of addressing changes/challenges to the industry in coming years, as well as a proposed
method to address potential MSS exceptions.
R3 will meet with the Group as a whole to establish areas of mutual concurrence regarding the Draft
Approach, including working through differences of opinion between Group members, if any, via further
refinement of the Draft Approach document. Ultimately, the Draft Approach document will continue to
develop into a set of Draft Deliverables, with each being iteratively revised until completion of the Final
Deliverables — prior to presentation to Boards and Councils.
Following the first portion of the meeting with the Group, MSS would be invited to join the meeting,
with R3 and the Group seeking MSS's input, comments, and feedback. Revisions to the Draft
Deliverables document may be necessary, and will be performed by R3, subject to the direction of the
Group.
1 All documents shared during the project will primarily be in electronic format via email, with print copies only
being provided as necessary to ensure active engagement of Group members and MSS.
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
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Follow-up Meetings
Following the initial meeting, R3 will proceed to produce a set of Draft Deliverables, including draft
language for potential inclusion as amendment to the Franchise Agreements (specifically to Exhibit B-1)
and draft memoranda discussing the proposed changes, the process for developing them, how they will
revise the rate setting process, and how the Group's goals and objectives for this project are being met.
Once completed, the Draft Deliverables document set will be shared with the Group.
R3 will then meet with the Group in up to two (2) follow-up meetings to ensure discussion and seek
feedback from each group member. These meetings are meant to guarantee that the Draft Deliverables
meet the need and intent of the Group as established during the initial meetings, and may result in
revisions to the Draft Deliverables as needed (note that our estimated project hours and costs described
in our response to Item 8 only anticipates one round of robust revisions at this stage) prior to sharing
the Draft Deliverables with MSS. Once the Draft Deliverables have been vetted by the Group and revised
by R3, MSS will be invited to share its response and feedback.
Finalize Deliverables
Upon completion of the follow-up meetings, R3 will proceed to produce a set of Final Deliverables,
which will be circulated to all parties for final review prior to Board and Council consideration.
Additional rounds of revision are not currently anticipated at this stage, though we have proposed a 20%
contingency which could be applied to additional rounds of revision if necessary; alternatively,
additional rounds of revision will be at R3's standard billable rates as provided in our Letter of Interest.
Board and Council Adoption Deliverables
Following development of the Final Deliverables — which is anticipated to occur by the end of July 2017,
in order to allow for the possibility that MSS might submit its 2018 rate application in accordance with
the potential changes discussed in this SOW — R3 will prepare to present the Final Deliverables to the
Franchisor's Group Boards and Councils.
The specific form and format of these presentations is yet to be determined, though R3 anticipates that
these presentations will coincide with Board and Council consideration of MSS's 2018 rate applications.
It is understood that the presentations may take the form or a workshop, study session or hearing
depending on the desires of each member, though R3 also anticipates that Board and Council action
approving Franchise Agreement amendment language governing the proposed changes to the rate
setting process will also be necessary.
In our estimated hours and cost for this project, R3 is assuming one (1) presentation to the governing
body for each Franchisor's Group member (five meetings total), and our assumptions include travel time
to and from meetings, as well as preparation and follow-up from those meetings. Additional meetings
may be considered via proposed contingency (if it remains available at this stage); if necessary,
additional meetings will be at R3's standard billable rates as provided in our Letter of Interest.
Item 2 Proposed Meeting Schedule
The proposed initial meeting schedule for this project is shown in Table 1, below. This schedule is based
on the assumption that the Franchisor's Group still wishes to implement proposed changes to the rate
adjustment process for the 2018 rate setting process. As such, completion of initial meetings leading up
to a Final Draft of Proposed Deliverables is anticipated prior to the August 1, 2017 due date of the MSS
2018 Rate Application. The intent of this schedule is to provide the ability for the Group and MSS to
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
Page 6 of 10
utilize the Proposed Deliverables in the 2018 rate setting process. It is anticipated that Council and
Board hearings and/or workshops regarding the proposed changes to the rate setting methodologies
described in this SOW will occur between September and December 2017, in conjunction with Council
and Board consideration of the MSS Rate Application.
Table 1
Proposed Meeting Schedule
Meeting Type
Kick-off Meeting (1)
Initial Group Meeting (1)
Follow-up Meeting with Parties (1 of 2)
Follow-up Meeting with Parties (2 of 2)
Final Draft Review with Group and MSS (1)
Council/Board Public Meetings (5)
Anticipated Week of:
May 15, 2017
May 29, 2017
July 3, 2017
July 10, 2017
July 24, 2017
September 11, 2017 through December 4, 2017
Item 3 Schedule of Deliverables
As noted on the following pages, R3 is proposing to complete three main Project Tasks. For each of
these Project Tasks, R3 is proposing the following set of deliverables:
■ One (1) kick-off meeting with Group members and MSS;
■ One (1) discussion of approach to Project Tasks in the Draft Approach document, with revisions;
■ One (1) set of documents included in the Draft Deliverables, for each Project Task:
o Draft Franchise Agreement/Exhibit B-1 language revising the rate setting methodology
(with strikeouts and additions clearly shown);
o Draft Memorandum discussing the proposed changes, the process for developing them,
how they will revise the rate setting process, and how the Group's goals and objectives
for this project are being met; and
o Draft Excel model demonstrating the use and application of the revised methodology.
■ One (1) round of robust (meaning in response to a complete set of written comments from
Group members and MSS) revisions to the Draft Deliverables;
■ One (1) set of Final Deliverables covering each Task;
■ Up to a maximum of four (4) three (3) hour meetings (one initial meeting, two interim meetings,
one final meeting) during the decision-making process with Group members and MSS leading up
to the development of the Final Deliverables (budget includes time for travel to/from meetings
and meeting preparation);
■ One (1) presentation to the governing body of each Group member, for a total of five (5)
presentations; and
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
Page 7 of 10
■ Additional meetings as necessary and requested, subject to time and budget constraints
including the 20% project contingency.
Items 4-7 Project Tasks
Task 1 Develop New Methodology for Recycling Revenues
Balancing Account
Objective
Describe the proposed method of utilizing a balancing account to address recycling commodities
fluctuations, including how the processing cost and recycling revenue projections might be set at the
beginning and adjusted after.
Methodology
There are two methodologies that R3 proposes for consideration by the Group, one of which would
involve including the balance of the Balancing Account into the rates (like Novato Sanitary District) on a
set schedule (e.g. every five years); the other would be to eliminate the Balancing Account, pay down
the balance over time via the rates, and then set a "processing cost" and "recycling revenue"
component of the rate that would be adjusted over time.
Based on Item 5 included in the April 7, 2017 email, it is not clear to R3 whether the Group is interested
in one option over the other, thus we discuss both below:
Revised Balancing Account Model
The basic model involves establishing the processing/revenue break-even point (i.e., the point at which
per ton revenue fully covers the processing cost without surplus or subsidy). That break-even per ton
revenue figure is then adjusted monthly, based on a material sales revenue index (e.g., Official Board
Markets — Yellow Sheet). Each month, the break-even per ton figure is subtracted from the current
calculated monthly per ton figure, and that difference is multiplied by the number of recyclable tons for
that month to calculate the monthly balancing account revenue (surplus or shortfall). Each month, the
calculated monthly balancing account revenue (surplus/shortfall) is added to the prior months'
balancing account total, bringing the balancing account current. Variations to the above can include
escalating processing costs annually, including, or not including various revenue sharing options to
establish jurisdictional -specific recyclable material composition and per ton revenue prices.
Rate Component Model
This model differs somewhat from the balancing account model; this model would establish two new
components of the MSS customer rates: a Processing Cost Element (which would be an expense item on
the rates) and a Recycling Revenue Element (which would be a credit item on the rates), each of which
would be set initially and then escalated over time as described below:
Set Base Year Processing Costs and Recycling Revenue Based on Actuals
Processing costs and recycling revenues are set at the beginning based on actuals from the prior 12
months. To ensure that the actuals for processing costs and recycling revenues are accurate, R3 would
verify these actuals with the company via a detailed review of processing costs and recycling revenues,
which will include verification of source documentation.
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
Page 8of10
Adjust Base -Year Processing Costs and Recycling Revenue Annually Based on Inflation Factors
As a part of the indexed or detailed rate adjustment processes, base -year processing costs would be
adjusted by a to -be -determined escalation factor that takes into account the main costs of processing
(labor, maintenance, utilities) in basically the same manner that other MSS cost elements are escalated
annually. This would adjust the Processing Cost Element of the MSS rates up or down slightly in
accordance with the change in processing costs based on the indexed adjustment. Recycling revenues,
as in the previous example, would be adjusted by the indexed change in a sales index (e.g., Official
Board Markets — Yellow Sheet), and would adjust the Recycling Revenue Element of the MSS rates up or
down in accordance with the change in Recycling Revenues, based on the changes in the recycling
markets. The net effect in any given year could be a net increase or a net reduction in MSS rates
(resulting from changes in these two rate Elements only), generally depending on the state of recycling
markets.
Task 2 Develop Methodology for Addressing Commercial Migration
Objective
Describe proposed method of addressing commercial service migration, i.e. more recycling and
composting results in a smaller garbage cart and lower price, but not less service or cost.
Methodology
R3 sees two main options for addressing commercial service migration for the Franchisor's Group and
MSS (both of which would also work for residential migration as well):
Establish Collection Rates Based on Cost of Service
Setting rates based on the cost of providing service, meaning that the cost to ratepayers would be in
direct alignment to the cost of providing services to those ratepayers, would effectively make the rates
"migration neutral". Essentially, when rates are set to cover the costs of providing the services for
which MSS is paid, any changes in revenues resulting from changes in service levels would be
proportionate to the actual changes in costs borne by MSS — therefore, eliminating migration as a
concern. At this time, R3 does not anticipate that the Franchisor's Group and MSS is ready to set rates to
the cost of service, but R3 raises the point as we see moving rates to gradually come into alignment with
the cost of service as one of the primary directions for the industry, and one that is worth discussing in
some detail in conjunction with this project.
Make Periodic Rate Adiustments to Account for Changes in Service Levels
For this option, changes in service levels can be tracked and the associated impact on revenues can be
directly calculated. That calculated impact can then be factored directly into the rates, as part of any
indexed or detailed rate review. It is simply a matter of expressing the migration revenue impact as a
percentage of the total annual revenue requirement, and adjusting the rates (up or down) accordingly.
This methodology has been used by R3 in a number of other jurisdictions, most commonly with a
minimum revenue impact threshold, so that the calculation is only made for significant levels of
migration.
Comparison of Rate Impacts Between Current and Proposed Methodology
Once agreement on a selected methodology has been established between the Group and MSS, R3 will
model the effects of rate impacts, including differences between the current methodology and the
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
Page 9 of 10
proposed methodology. This comparison will forecast changes in rates under the same conditions
between the two methodologies, and will estimate variances in rate impacts between the two.
Task 3 Develop Simplified Rate Adjustment Methodology
Objective
Describe proposed approach to simplify and streamline the current rate adjustment methodology,
including the proposed method of addressing changes and challenges in the industry in the coming years
(i.e. where the industry is going and what the Group and MSS should be planning for) as well as the
proposed approach to address potential MSS requested changes to programs and services in non -
detailed rate review years.
Methodology
Streamlining the Rate Adiustment Methodology
As identified during our presentation to the Group and MSS on April 5, 2017, R3 has identified a number
of ways to streamline the current rate adjustment process. These include but are not limited to:
■ Adjusting the timing of indexed vs. detailed reviews, such that detailed reviews can occur on a
less frequent basis, and only if so desired by the Group and MSS;
■ Limiting (or eliminating) true -ups in the current rate adjustment methodology, such as the
annual true -up for processing costs and others; and
■ Reducing the number of indexed review categories.
As stated during our interview, R3 sees that the current rate adjustment methodology can generally be
retained, but with revisions consistent with those suggested above to reduce the amount of Group, MSS
and consultant time that is required to complete annual indexed rate adjustments, as well as periodic
detailed reviews.
Proposed Method of Addressing Changes and Challenges
A common means for addressing unforeseen circumstances that impact a franchisee's revenues and
expenses (positively or negatively) is to establish a process for a Special Rate Adjustment. That process
needs to clearly establish what is and is not allowed to be considered for a Special Rate Adjustment.
Areas that R3 anticipates the Group and MSS should consider may include but are not limited to:
■ Potential increases to processing costs due to rising wages of sorting staff (Bay Area trend to
higher -living wages);
■ Potential increases in processing costs due to greater acceptance of recyclable materials
(accepting a greater amount of less valuable commodities in the recycling stream);
■ Potential increases to programmatic costs for commercial and multi -family customers
specifically (due to increasing legislation and ramped -up implementation of existing AB 341 and
AB 1826 legislation);
■ Potential increases to organics processing costs (due to increasing demand for limited organics
processing capacity as well as increasing regulations on organics processing facilities); and
■ Potential recession and significant drop in recycling revenues (due to potential recession, during
which recyclables may be difficult or impossible to sell).
Mr. Cory Bytof
May 1, 2017
Scope of Work Proposal (SOW) for Marin Franchisors' Group Rate Methodology Review
Page 10 of 10
The above are, of course, only examples that may or may not represent the actual changes or challenges
that could impact the Group and MSS in the future. The point is that when properly constructed,
provisions for a Special Rate Review will provide protection to both the Franchisor's Group and MSS for
unforeseen events. The Special Rate Adjustment process can be undertaken and a special rate
adjustment made at any time, or the calculated rate impact can be factored into the next Indexed or
Detailed Rate Adjustment (with or without a true -up for allowable expenses incurred prior to the rate
adjustment).
Proposed Method to Address Changes in Programs/Services
Addressing the impacts of changes in programs and/or services can be handled by having MSS provide
operational impacts (tons, subscription levels, etc.), and cost projections for the new service/program,
which are reviewed by the Franchisor's Group for general reasonableness. Costs are tracked and actual
expenses and revenues compared to projected expenses and revenues. The net revenue/expense
difference is then expressed as a percentage of the total annual revenue requirement, and the rates will
be adjusted (up or down) accordingly.
Items 8 & 9 Estimate of Hours, Costs & Contingencies
R3 estimates completion of the proposed Tasks described in this SOW utilizing 416 hours of R3 staff
time, for an estimated amount of $80,360. This estimated project cost includes labor, travel time
(including time to and from meetings), and reimbursable project expenses. R3 will invoice on a monthly
basis only for actual work completed in accordance with the schedule of Hourly Billing Rates and Other
Costs included in our Letter of Interest dated March 23, 2017.
A detail of estimated hours and cost by task, as well as 20% project contingency, is shown in Table 2,
below.
Table 2
Estimate of Hours & Contingencies
Task Hours Cost
1 Develop New Methodology for Recycling Revenues Balancing Account 48 $ 8,880
2 Develop Methodology for Addressing Commercial Migration 64 $ 11,680
3 Develop Simplified Rate Adjustment Methodology 106 $ 20,170
Meetings with Franchisor's Group Members, MSS, Councils and Boards 116 $ 23,780
20% Contingency for Extra Meetings / Task Items 82 $ 15,850
Total 416 $ 80,360
Mr. Steve Devine
March 23, 2017
Letter of Interest
Solid Waste Rate -Setting Methodology, Recycling Fund Meet and Confer Assistance, 2018 Rate Review
Page 20 of 22
Hourly Billing Rates & other Costs
R3 CONSULTING GROUP
Category
Principal / Project Director
Senior Project Manager
Project Manager
Senior Project Analyst
Project Analyst
Associate Analyst
Administrative Support
REIMBURSABLE COSTS
Consultants/Subcontractors
Lodging and meals
Travel — Private or company car
Travel — Other
Delivery and other expenses
Hourly Rate
$205 per hour
$185 per hour
$160 per hour
$145 per hour
$135 per hour
$120 per hour
$100 per hour
Cost plus 10%
Direct cost
$0.54 per mile
Direct cost
Direct cost
Payments
Unless otherwise agreed in writing, fees will be billed monthly at the first of each month for the
preceding month and will be payable within 30 days of the date of the invoice.
Escalation
Fees will be escalated annually in accordance with the change in the Consumer Price Index.
E>'C I
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CONTRACT ROUTING FORM
INSTRUCTIONS: Use this cover sheet to circulate all contracts for review and approval in the order shown below.
TO BE COMPLETED BY INITIATING DEPARTMENT PROJECT MANAGER:
Contracting Department: City Manager
Project Manager: Cory Bytof
Extension: 3407
Contractor Name: R3 Consulting Group, Inc.
Contractor's Contact: Garth Shultz
Contact's Email: gschultz@r3cgi.com
❑ FPPC: Check if Contractor/Consultant must file Form 700
Step
RESPONSIBLE
DESCRIPTION
COMPLETED
REVIEWER
DEPARTMENT
DATE
Check/Initial
1
Project Manager
a. Email PINS Introductory Notice to Contractor
5/2/2017
5/2/2017
b. Email contract (in Word) & attachments to City
Atty c/o Laraine.Gittens@cityofsanrafael.org
2
City Attorney
a. Review, revise, and comment on draft agreement
5/9/2017
® LAG
and return to Project Manager
5/8/2017
® LAG
b. Confirm insurance requirements, create Job on
PINS, send PINS insurance notice to contractor
3
Project Manager
Forward three (3) originals of final agreement to
Click here to
contractor for their signature
enter a date.
4
Project Manager
When necessary, * contractor-siened agreement
❑ N/A
agendized for Council approval
*PSA > $20,000; or Purchase > $35,000; or
Or
Public Works Contract > $125,000
5/15/2017
Date of Council approval
PRINT
CONTINUE ROUTING PROCESS WITH HARD COPY
5
Project Manager
Forward signed original agreements to City
5/18/17
CB
Attorney with printed copy of this routing form
6
City Attorney
Review and approve hard copy of signed
6-11
1 qh-7
agreement
//''
7
City Attorney
Review and approve insurance in PINS, and bonds
-/%I,7
Q�
(for Public Works Contracts)
L5)
/ `/
8
City Manager / Mayor
Agreement executed by Council authorized official^
9
City Clerk
Attest signatures, retains original agreement and
forwards copies to Project Manager
y _17
SOLID WASTE RATE -SETTING METHODOLOGY
RECYCLING FUND MEET AND CONFER ASSISTANCE
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PURPOSE OF RFI
The Franchisors' Group seeks the services of a consultant to
1. Review the existing rate setting methodology and provide alternative methods for rate setting for refuse
services provided by a franchised garbage hauler
2. Review and provide assistance with a remedy for recycling losses related to our current rate setting
methodology, vis-a-vis the recycling revenue fund currently in place
3. Assist with the meet -and -confer process with Marin Sanitary Service related to this Recycling Revenue
Fund
4. As an optional task perform the 2018 rate application review using this new or revised rate setting
methodology
This Request for Information is a means of understanding the services offered and approach a consultant might
take to assist the Franchisors' Group in addressing its core concerns. It is meant to be an iterative process that
would allow the Franchisors' Group to determine a scope of work appropriate to the project through exploratory
interviews. This process will also allow the Franchisors' Group to determine which consultant or consultants might
be invited to submit a scope of work to be considered for a contract.
The City of San Rafael will manage the contract on behalf of the Franchisors' Group. However, the work provided
by the consultant will be used by the full Franchisors' Group.
CURRENT RATE METHODOLOGY AND TIMING
In 1995, the Franchisors Group adopted a new methodology to set MSS' refuse collection and disposal rates. The
current rate methodology is based on the contractor's costs of operations for wages and benefits, disposal, fuel,
equipment and lease expenses and certain allowable miscellaneous expenses. The franchise agreements provide
for a detailed review of MSS' operations every three years. In the interim two-year period, annual summary
reviews are conducted based on the last detailed analysis. However, summary reviews also incorporate the use
of indices, analyze key expense components such as disposal costs, and make sure revenue requirements are
satisfied, requiring a significant analysis as well.
The rate methodology was revised in 2012 for the 2013 rate year, and the current rate methodology also includes
a recycling revenue fund, which was meant to smooth fluctuations in the recycling commodities market. In good
years when the recycling markets were strong, MSS would deposit 50% of the net recycling revenues into the
fund. In down years when the markets lost money, MSS would take a loss on the first 50% and then make up the
difference through a withdrawal from the fund. The Franchisors' Group and MSS have agreed to a meet -and -
confer once the fund drops below $250,000. The last few years have seen regular withdrawals and now the fund
sits at well below $250,000, triggering the meet -and -confer process.
Rate applications are due August 1 each year. The most recent detailed review was in 2015 and the next one will
occur in 2018 for the 2019 rate year. The Franchisors Group desires to implement a new rate setting for the 2018
rate year.
GOALS & OBJECTIVES
The Franchisors' Group desires to review our current rate setting methodology in order to address several key
goals. These goals include addressing our main concern, which is the fluctuation in costs and revenues related to
recycling, and how to include this in a fair and equitable way in the rates. In addition, the Franchisors' Group
seeks to: 1) simplify the methodology and process, requiring less staff and consultant time to adopt, 2) maintain
good value for the rate payer, and 3) demonstrate the value of recycling services to rate payers. Finally, the
Franchisors' Group wishes to maintain the emphasis on zero waste and transparency with regard to services and
finances.
OBJECTIVE 1
Assist the Franchisors' Group in determining how to best address the losses MSS has suffered related to recycling
revenue through a holistic, long-term strategy related to the rate setting methodology.
Tasks may include:
■ Catalogue methods of addressing fluctuations in recycling markets and value to rate payers in use in
other jurisdictions.
■ Provide a review of methods of including recycling processing and commodities costs and revenues in the
rate setting methodology with particular emphasis on those that seek to reduce the burden on rate-
payers and limit the fluctuations from year to year.
■ Analyze pros and cons of addressing fluctuations in the current methodology, and provide comparison to
a few other methods.
■ Provide an analysis of a revenue sharing account vs. balancing account.
■ Explore a model in which recyclable commodity sales are assumed to be zero and any net revenues are
then available for other purposes (rate stabilization, education and outreach programs, etc.).
■ Provide an analysis of processing costs at other dual stream or comparable recycling facilities in the
greater Bay Area.
■ Conduct meetings with Franchisors' Group members and MSS staff.
■ Provide written materials and presentations.
OBJECTIVE 2
Assist the Franchisors' Group in determining how best to revise the rate setting methodology to address our key
goals. The rate setting methodology should include or attempt the following:
■ Fairly stable and predictable rates year to year.
■ Fairly simple and easy for staff, governing boards and the public to understand.
■ Fairly streamlined, and not requiring a lot of staff or consultant time annually to conduct the reviews
■ Spreads capital costs over time.
■ Recognizes the value of recycling and composting.
■ Takes into account a shrinking customer base and customers migrating to smaller receptacles
■ Transparency of recycling revenues and costs, while maintaining a stable rate structure.
■ Provides incentives to the hauler to keep the costs down while providing quality service.
■ Rewards the hauler for meeting JPA zero waste goals.
■ Analysis of different rate setting methodologies and their impact and potential changes necessary to the
overall rate structure and billing practices.
2
Tasks may include:
■ Provide a review of a variety of rate models that could help us achieve our overall goals with pros and
cons of each, including addressing fluctuations in recycling costs and revenues.
■ Consider revisions to our methodology vs. a new methodology.
■ Analyze the inclusion of the recycling center in the current rate setting methodology (Exhibit B) as well as
with other methodologies identified during the process.
■ Provide an analysis of the pros and cons of annual detailed reviews vs. index reviews, CPI adjustments,
and other annual rate adjustment methods.
■ Provide some examples of methods / best practices of considering new programs in rate reviews
■ Analyze and document necessary changes to franchise agreements and city and county codes to support
new methodology, including local recycling mandates.
■ Provide an analysis of a local mandatory recycling/composting ordinances' impact on rates
■ Conduct meetings with Franchisors' Group representatives and MSS staff.
■ Provide written materials and presentations.
OBJECTIVE 3
Advise the Franchisors' Group through the meet -and -confer process, and assist in writing and delivering the final
methodology and reports.
Tasks may include:
■ Help Franchisors' Group identify and develop/write methodology changes that support our goals.
■ Assist with meet and confer negotiation with MSS by providing information and advice to the Franchisors'
Group.
■ Provide staff report language and assistance for adoption of rate setting methodology by the multiple
agencies in the Franchisor's Group.
■ Provide background materials for governing board actions, including presenting to them.
■ Document rationale for decisions for easy reference in future revisions and negotiations.
■ Meeting with community members.
■ Presenting at governing board meetings, including special study sessions or community gatherings.
OBJECTIVE 4 — OPTIONAL TASK
Provide an estimate of costs to conduct the 2018 rate review utilizing new or current rate setting methodology.
The Franchisors' Group hopes the new or revised rate setting methodology, including the results of the meet -and -
confer, will be utilized for the 2018 rate year. However, should this not be possible, the Franchisors' Group may
decide to utilize a temporary solution to the recycling losses and continue the rate methodology work for use in
the 2019 rate review. The firm that is chosen to develop the rate methodology may be invited to submit a scope
of work for the annual rate work. This optional task is to submit a separate proposal for conducting the rate
review.
3
GUIDING PRINCIPLES
The Franchisors' Group and Marin Sanitary Service developed the following Guiding Principles to guide the
methodology and recycling loss remedy work:
■ Acknowledge the team relationship between MSS and Franchisors' Group entities
■ Acknowledge the value of recycling services
■ Maintain good customer service and value to the rate payer
■ Simplify the methodology so it is easier to review and communicate
■ Streamline the rate setting process (less time, cost)
■ Develop a means of addressing revenue and cost sharing for recyclable materials
■ Maintain transparency
■ Maintain emphasis on zero waste
■ Strategic planning for capital improvements and new programs
■ Be aware of and plan for potential unintended consequences
IIn
ROUTING SLIP / APPROVAL FORM
INSTRUCTIONS: Use this cover sheet with each submittal of a staff report before approval
by the City Council. Save staff report (including this cover sheet) along
with all related attachments in the Team Drive (T:) --> CITY COUNCIL
AGENDA ITEMS 4 AGENDA ITEM APPROVAL PROCESS 4 [DEPT -
AGENDA TOPIC]
Agenda Item #
Date of Meeting: 5/15/2017
From: Cory Bytof
Department: City Manager
Date: Click here to enter a date.
Topic: MARIN SANITARY SERVICE RATE SETTING METHODOLOGY CONTRACT
Subject: RESOLUTION AUTHORIZING CITY MANAGER TO ENTER INTO A CONTRACT
WITH R3 CONSULTING GROUP, INC. IN AN AMOUNT NOT TO EXCEED $80,360 FOR
REVIEW OF MARIN SANITARY SERVICE REFUSE RATE METHODOLOGY AND RECYCLING
REVENUE FUND, AND TO ASSIST WITH MEET -AND -CONFER FOR THE CITIES OF SAN
RAFAEL & LARKSPUR, TOWN OF ROSS, LAS GALLINAS SANITARY DISTRICT, AND THE
COUNTY OF MARIN
Type: ® Resolution ❑ Ordinance
® Professional Services Agreement ❑ Other:
APPROVALS
® Finance Director
Remarks: MM - approved 5/8
® City Attorney
Remarks: LG -Approved 5/8/17 with minor revisions.
® Author, review and accept City Attorney / Finance changes
Remarks: Revisions accepted and saved
M City Manager
Remarks:
FOR CITY CLERK ONLY
File No.:
Council Meeting:
Disposition: