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HomeMy WebLinkAboutCC Resolution 13288 (MSS Rates 2012)RESOLUTION NO. 13288 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL ESTABLISHING MAXIMUM RATES COLLECTED BY MARIN SANITARY SERVICE FOR REFUSE AND RECYCLABLE MATERIAL COLLECTION AND DISPOSAL SERVICES, TO BE EFFECTIVE RETROACTIVELY TO JANUARY 1, 2012. WHEREAS, the City of San Rafael and Marin Sanitary Service have entered into a written Amendment and Restatement Agreement dated September 4, 2001; and WHEREAS, Section 3(B) of the Amendment and Restatement Agreement provides for maximum rates allowed to be collected by Marin Sanitary Service to be amended from time to time by the City Council; and; WHEREAS, Exhibit "C" of the Amendment and Restatement Agreement provides for approved rate setting tables, as amended, to be included as part of this Agreement; and; WHEREAS, Marin Sanitary Service has submitted a rate application request using the methodology outlined under Section 3(A) of the Amendment and Restatement Agreement; and WHEREAS, the City of San Rafael has conducted a review of said rate application and produced a report recommending some rate and fee adjustments, and WHEREAS, the City of San Rafael has determined that such rate and fee adjustments are proper, in the best interest of all citizens, and will promote public health, safety and welfare. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SAN RAFAEL DOES RESOLVE, DETERMINE AND ORDER AS FOLLOWS: The following schedule of maximum rates and fees, attached hereto as "Exhibit C" is hereby approved to be collected by Marin Sanitary Service for refuse and recyclable material collection and disposal services, to be effective, retroactive to January 1, 2012. Said "Exhibit C" shall be incorporated as the revised Exhibit "C" and shall be included as part of the Amended and Restated Agreement dated September 4, 2001. 1, 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 the City of San Rafael, held on Tuesday, January 17, 2012, by the following vote, to wit: AYES: Councilmembers: Connolly, Heller, Levine, McCullough & Mayor Phillips NOES: Councilmembers: None ABSENT: Councilmembers: None ESTHER C. BEIRNE, City Clerk This document is printed on 100% post consumer content recycled paper EEKM ' 201 N. Civic Drive, Suite 230 Walnut Creek, California 94596 Telephone: 925/977-6950 Fax: 925/977-6955 www.hfh-consultants.com December 20, 2011 Ms. Nancy Mackie City Manager City of San Rafael 1400 Fifth Avenue, Room 203 P.O. Box 151560 San Rafael, CA 94915-1560 Ms. Patricia Thompson Interim Town Manager Town of Ross 31 Sir Francis Drake Boulevard Ross, CA 94957 Mr. Michael Frost Deputy Director of Public Works County of Marin 65 Mitchell Blvd., Suite 200-B San Rafael, CA 94903-4155 Reference Number: S3809 Managing Tomorrow's Resources Today Robert D. Hilton, CMC John W. Farnkopf, PE Laith B. Ezzet, CMC Richard J. Simonson, CMC Marva M. Sheehan, CPA Mr. Daniel Schwarz City Manager City of Larkspur 400 Magnolia Avenue Larkspur, CA 94939 Mr. Mark Williams District Manager Las Gallinas Valley Sanitary District 300 Smith Ranch Road San Rafael, CA 94903 Subject:Review of Marin Sanitary Service's 2012 Rate Application Dear Mses. Mackie, Thompson and Messrs. Frost, Schwarz, and Williams: This report documents HF&H Consultants, LLC's (HF&H) findings and recommendations from our review of Marin Sanitary Service's (MSS) application for a 5.32% increase to its solid waste rates, effective January 1, 2012 (Application), submitted to the Cities of San Rafael and Larkspur, the Town of Ross, the County of Marin, and the Las Gallinas Valley Sanitary District (LGVSD) collectively referred to as the "Franchisors". (Refer to Attachment 1) Based on our review of the Application performed in accordance with procedures agreed upon by MSS and the Franchisors, we determined that a total increase of 4.84% to MSS's total compensation is necessary to compensate MSS for its expenses and provide it the agreed-upon level of profit for its current operations. We believe this 4.84% increase is reasonable based on the following: ¢4 Managing Tomorrow's Resources Today Marin Franchisors Group December 20, 2011 Page 2 of 4 • It is arrived at through an independent analysis conducted in accordance with the procedures agreed upon by the Franchisor's Group and MSS; and, • The resulting rates appear reasonable when compared with rates in other Marin County jurisdictions. Independent Review This lower -than -applied -for recommended increase is based on several adjustments to MSS' rate calculation (agreed upon by MSS management) as described in Section IV of the report and reflected in Attachments 2 and 3. The 4.84% recommended rate increase is primarily due to the increase in operating costs and franchise fees partially offset by a reduction in disposal expense (3.24%) and a decline in revenues (1.60%). The following table summarizes the recommended rate increase: Rate Increase Components Current Services Workers Compensation Insurance 0.45% Fuel 2.96% Disposal -1.14% Other Operating Costs* 0.43% 2.70% Franchise Fees 0.54% Subtotal 3.24% Projected 2012 Revenue Shortfall 1.60% Total 4.84% * Includes wages, depreciation, other vehicle -related costs, general & administrative costs (e.g., public education, customer service, etcs.) . Survey of Comparable Rates Attachment 4 shows the results of HF&H's survey of solid waste rates as of September 2011 for jurisdictions located throughout the Bay Area. We have applied the increase for current services (4.84%) to the Franchisors existing rates for purposes of comparing the Franchisors' rates to other jurisdictions. Agencies noted with an asterisk (*) will be considering rate adjustments to be effective Managing Tomorrow's Resources Today Marin Franchisors Group December 20, 2011 Page 3 of 4 January 1, 2012. The percentage changes for these agencies are not known at this time. Consequently, their rates have not been adjusted. The Franchisors' residential rates for a 32 -gallon container (the most frequent residential service level) range from $25.77 (LGVSD) to $30.56 (County). The survey shows the Franchisors' average residential rate for 32 -gallon service ($28.81) is in the low range compared to the other Marin County jurisdictions. Of the ten Marin County jurisdictions, eight of the jurisdictions 32 -gallon container rates are higher than the Franchisors' average and two jurisdictions are lower. The rates for Fairfax and San Anselmo do not reflect an increase for 2012. Attachment 5 graphically compares the Franchisors' residential rates for a 32 -gallon container to one another as well as to the average of Marin County rates for similar service. The Franchisors' commercial rates for a 3 cubic yard bin serviced one time per week (the most requested commercial service level) range from $358.35 (San Rafael) to $402.45 (County). The average rate for the Franchisors is $378.17 which is in the lower range compared to the other four Marin County jurisdictions that have this level of service. Four jurisdictions have higher rates and two jurisdictions have lower rates. The rates for Fairfax and San Anselmo do not reflect an increase for 2012. Attachment 6 compares the Franchisors' commercial rates for a 3 cubic yard bin serviced one time per week to the average Marin County rate and all other jurisdictions' average rate for similar service levels. While the recommended rates compare favorably to those surveyed, we caution the Franchisors that this survey is presented as an indication of the reasonableness of the resulting rates. They should not draw conclusions from this information because rate comparisons are intrinsically difficult and often misleading. This difficulty results from differences in issues such as: 1. The services provided; 2. The terrain in which the service is performed; 3. Disposal costs; 4. Rate structures; and, 5. Governmental fees (e.g., franchise fees, vehicle impact fees, etc). Managing Tomorrow's Resources Today Marin Franchisors Group December 20, 2011 Page 4 of 4 We would like to express our appreciation to the MSS management and staff for their assistance. In addition, we express our appreciation to each of you for assistance and guidance during the course of the review. Should you have any questions, please call me at 925-977-6952. Very truly yours, HF&H CONSULTANTS, LLC Robert D. Hilton, CMC President cc: Mr. Joseph Garbarino, Marin Sanitary Service Mr. Joseph J. Garbarino, Marin Sanitary Service Ms. Patricia Garbarino, Marin Sanitary Service Mr. Neil Roscoe, Marin Sanitary Service HF&H Client Files Marva M. Sheehan, CPA Vice President Franchisors ofMarin Sanitary Service Table ofContents Review ofMarin Sanitary Service's 2O12Rate Application TABLE OF CONTENTS SECTION 1. BACKGROUND ......................................................................................... 1 Description'OfCurReO1Services---------------------------1 RateAdiUstmuentM8thodO|ogy ---------------'2 HF&HScope OfReview ----....... .......... 2 Limitations. ........... —....... ... —....... ----........... 7 Revenues .... ........ —...... .--------. —'-----4 ExpeDsBs--... ---............ .................... —...... ......... 4 Profit...... '---------------........... -----------'-----5 Adjustments kJ2012 Projected Revenues .... ......... ---------.......... 7 Adjustments tO2012Projected Expenses ... --...... ----...... ---------'7 Allocation of MSS' Compensation— .... '---- .......................... ......... ......... ........ 8 SECTION V. RATE ADJUSTMENT ............................................................................... 9 Rate Adjustment .... ---........... ------'-----...... 9 ATTACHMENTS Attachment 1—Marin Sanitary Service Rate Application Summary Attachment 2 — HF&H Consultants Adjustment 5ummury Attachment 3—Adjusted Rate Application Summary Attachment 4—Rate Survey Attachment 5—Chart ofResidential 32'GaUonRates Attachment 6—Chart ofCommercial 3Cubic Yard Rates HF&H Consultants, LLC December 20, 2011 This Page Intentionally Left Blank Franchisors of Marin Sanitary Service Section I. Background Review of Marin Sanitary Service's 2012 Rate Application ! +' of cu'rrent'se'vices Marin Sanitary Service (MSS) provides franchised refuse, recyclable materials, and yard waste collection and processing services to the residents and businesses of the Cities of San Rafael and Larkspur, the Town of Ross, the County of Marin, and the Las Gallinas Valley Sanitary District (LGVSD) collectively referred to as "Franchisors". In addition, MSS and its non -franchised related entities (Marin Resource and Recovery (MRR) ,the Marin Resource Recovery Center (MRRC), and Northern Recycling Compost — Zamora (Zamora)), provide solid waste, recyclable materials, and yard waste collection and processing services to the residents and businesses of San Anselmo, the north area of the Ross Valley Sanitary District (RVSD), Fairfax, and San Quentin prison. MSS also provides non -franchised debris box, street sweeping, and document shredding services to residents and businesses throughout the County of Marin that contract for their services. MSS delivers refuse collected from waste generators within the Franchisors' service area to the MSS transfer station and then transports it to the Redwood Sanitary Landfill (Redwood) an unrelated party. MSS delivers recyclable materials to the non -franchised MRR, where materials are processed and marketed. MSS delivers recyclable -rich loads of refuse (typically commercial) and separated yard waste loads (collected from residents), along with public self -haul loads to the non -franchised MRRC where recyclable materials are extracted from the waste stream, processed, and marketed. The MRRC delivers residual waste, the materials remaining after the recyclable materials are extracted, to the MSS transfer station. This residual waste is transferred to Redwood. Through a third party, MSS delivers yard waste to Zamora, located in Yolo County, for composting. 3..x4 ti - g� In early 2010, the Franchisors approved a pilot food waste collection program allowing some residential customers to include food waste with their yard waste. The pilot was well received and with the approval of the Franchisors, MSS extended this service to its remaining customers beginning in March 2011. State regulations mandate that this comingled material (food waste and yard waste) is collected every week, therefore MSS expanded its yard waste service from bi-weekly to weekly collection from residential customers for the all of the Franchisors. This comingled material is collected in the same way as yard waste and delivered to Zamora for composting. Based on the first 10 months of the food waste program, residential refuse is projected to decline by 1,557 tons from 2010 while the yard waste volumes are projected to increase by 2,255. While there are many factors impacting the change in tonnage collected, it appears the food waste program is helping the Franchisors in reaching their diversion goals. HF&H Consultants, LLC 1 December 20, 2011 Franchisors of Marin Sanitary Service Section II. Rate Review Approach Review of Marin Sanitary Service's 2012 Rate Application W" dology The Rate Index Methodology was developed in cooperation with MSS and approved by the Franchisors Group in 2001. This method was used to determine 2012 recommended rates. The results from the 2011 rate review are adjusted by changes in certain indices (e.g., CPI, employment cost index and the transportation index). Also, new projections of certain costs (e.g., disposal expense, fuel expense, workers' compensation expense, depreciation, interest expense, and fees imposed by the Marin County Hazardous and Solid Waste Management Joint Powers Authority (JPA)) and revenues (e.g., collection rate revenues) are made to adjust the results from the 2011 review to determine the 2012 rates. (Section III describes the methodology in more detail and findings from the application of the methodology to MSS' Application.) H,9�zSFI-1 Scope cf Review The Franchisors engaged HF&H in September 2011 to perform a limited review of the Application in accordance with the Rate Index Methodology. The scope of this review is described in our engagement letter dated August 9, 2011. These procedures included the following activities: • Reviewing MSS' Application to determine completeness, mathematical accuracy, and reasonableness and logical consistency of the assumptions supporting the projected revenues and expenses; • Reviewing and testing projected revenues to ensure that they are consistent with past trends and anticipated conditions; • Reviewing MSS' calculation of rate year 2012 indexed expenses by comparing them to the calculated expenses for 2011 which were established in HF&H's prior report, and the calculated changes to the applicable indices; • Reviewing other projected expenses including depreciation, fuel, interest, disposal and recyclables/yard waste processing expenses by evaluating the reasonableness of MSS' estimates for these expenses based on historical trends and MSS management's plans; • Reviewing MSS' calculation of projected profit for compliance with the procedures and mathematical accuracy; • Reviewing the appropriateness of MSS' allocation of revenues and expenses among the Franchisors and other service areas; • Reviewing our recalculation of MSS' projected results of operations and our recommendations with MSS and the Franchisors representatives; and, • Preparing a written report that documents our findings and recommendations. Our review was substantially different in scope than an examination in accordance with Generally Accepted Auditing Standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. However, Chiao HF&H Consultants, LLC 2 December 20, 2011 Franchisors of Marin Sanitary Service Section II. Rate Review Approach Review of Marin Sanitary Service's 2012 Rate Application Smith McMullin + McGuire, An Accountancy Corporation, has issued an unqualified opinion of MSS' 2010 financial statements. There are related party transactions included in MSS' 2012 projections at rates that have been discussed and allowed by the Franchisors in previous reviews and therefore we did not review the underlying basis for such rates. Examples of these rates are the recyclable materials processing fee, the transfer/transport fee for materials collected outside the Franchisors' area and credited back to the Franchisors and Zamora composting fee. Our conclusions are based in part on the review of MSS' projections of its financial results of operations. Actual results of operations will usually differ from projections because events and circumstances frequently do not occur as expected and the difference may be significant. HF&H Consultants, LLC 3 December 20, 2011 Franchisors of Marin Sanitary Service Section III. MSS' Projection Methodology Review of Marin Sanitary Service's 2012 Rate Application On September 1, 2011, MSS submitted the Application to the Franchisors requesting that solid waste collection rates be increased by 3.70%, effective January 1, 2012 (Application). Subsequently, MSS revised its application to include adjustments for fuel costs and workers compensation, based upon more current information. The revised increase requested by MSS is 5.32% (refer to Attachment 3). The following describes MSS' methodology for projecting 2012 revenues and expenses. Route Revenues MSS projected its 2012 route revenues of $25,590,000 by annualizing the revenues received for the six months ending June 2011. Due to the June 2011 effective date of the rate increases in Ross Valley Sanitary District —South (RVSD-S) and the County of Marin, MSS adjusted the projected 2012 revenue to reflect a full year of the anticipated increase. Under the accrual method of revenue accounting, bad debt is recorded when it has been determined an account is uncollectible. MSS has collection procedures in place to attempt to collect the past due accounts. MSS projected a reduction of $55,746 (0.44% as a percent of revenue) to the accrued route revenues for bad debts from uncollectible accounts. This amount was determined by annualizing the actual write-off of uncollectible accounts for the six months ending June 2011. Non -Regulated Revenues MSS projected 2012 non-regulated revenues of $9,698 by annualizing revenues received for the six months ending June 2011. The non-regulated revenues are disposal fees received at the transfer station for the transfer, transport, and disposal of solid waste from the MRRC, MRR and Household Hazardous Waste facility. The decline in non-regulated revenues over the last few years is due to a local hauler taking the residue from recycling facility for further processing. MSS projected its 2012 expenses for each expense category by: • Wages. Multiplying 2011's allowed wages and salaries expense by 1 plus the 2.9% change in the San Francisco -Oakland -San Jose Metropolitan Consumer Price Index (Urban Wage Earners) from June 2010 to June 2011. • Benefits. Multiplying 2011's allowed benefits expense by 1 plus the 3.9% change in the Employment Cost Index -Benefits (Private Industry Workers) from June 2010 to June 2011. Additionally, MSS calculated its workers compensation for 2012 based on its current premiums and the wages determined in the last detailed review inflated by the applicable index. This adjustment is consistent with the methodology used in prior years. • Disposal Fees. Annualizing the June 2011 YTD disposal expense. MSS does not anticipate a change in disposal tonnage. However, it has included a 1.1% increase in its per -ton disposal fee at Redwood in accordance with the agreement between MSS and Redwood, effective January 1, 2012, HF&H Consultants, LLC 4 December 2.0, 2011 Franchisors of Marin Sanitary Service Section III. MSS' Projection Methodology Review of Marin Sanitary Service's 2012 Rate Application • Consistent with our methodology used in prior years, an adjustment is made to the 2010 disposal expense to reflect the difference between the projected and actual disposal expense for 2010 and the difference between the 2011 projections done in 2010 and the revised 2011 projections done as part of the current rate application process. HF&H has recommended these adjustments in prior years. For the 2012 Application, MSS calculated the adjustments and included them in their initial Application. MSS included an increase of $26,838 to adjust the 2010 disposal expense to actual and a decrease of $88,009 to update its projection of 2011 disposal expense. • Fuel. Multiplying 2011's allowed fuel expense by 1 plus the 35.6% increase in the Consumer Price Transportation Index — Motor Fuel (All Urban Consumers) from July 2010 to June 2011. Consistent with the methodology used in prior years, fuel costs are recalculated using actual prices per gallon paid by MSS. The adjustment calculated using the index is reversed and a new cost for fuel is calculated. The calculation, based on an average price per gallon of fuel for 2010 and 2011, is then compared to the projected average price per gallon determined during the prior year rate setting. For 2010 and 2011, the actual average price per gallon exceeded the projected price per gallon. An adjustment to fuel costs of $322,208, including profit, was included by MSS. • Maintenance. Multiplying 2011's allowed maintenance expense by 1 plus the 2.0% change in the Consumer Price Transportation Index — Motor Vehicle Maintenance and Repair (All Urban Wage Earners) from July 2010 to July 2011. • Depreciation/Lease. Adding to the projected 2012 depreciation from MSS's fixed asset system for assets purchased through June 2011, depreciation for actual and planned capital expenditures for the last six months of 2011 and planned capital expenditures for 2012. MSS included the amortization of financing fees associated with the California Pollution Control Financing Bonds issued in 2006. MSS adjusted the truck depreciation for the non -franchised use of vehicles based upon the trucks actual route hours spent in non -franchised areas. Also included was the lease expense on existing equipment and an adjustment for G&A and shop. • Other Operating/G&A. Multiplying 2011's allowed other operating/G&A expense (e.g. office expense, utilities, lock box, accounting expense, and property insurance and damages expense) by 1 plus the 2.4% change in the San Francisco -Oakland -San Jose Metropolitan Consumer Price Index (All Urban Consumers) from June 2010 to June 2011. • Interest. Interest expense was calculated using amortization tables to calculate the actual interest portion of existing debt (loan and bond) payments. MSS included the interest on its working capital line of credit. MSS calculated its 2012 profit of $2,248,242 by applying a 90.5% pre-tax operating ratio to its 2012 total projected expenses that are eligible for profit. HF&H Consultants, LLC 5 December 20, 2011 Franchisors of Marin Sanitary Service Section IV. Proposed Adjustments Review of Marin Sanitary Service's 2012 Rate Application The following is a summary of HF&H's proposed adjustments to MSS' projected 2012 revenues, expenses, and profit. Marin Sanitary Service - Rate Adjustment Calculation As Adjusted By HF&H ($000's Unless Otherwise Indicated) REVENUES 1. Route Revenue at Current Rates Projected By MSS 2. Route Revenue Adjustment 3. Adjusted Gross Route Revenues 4. Less: Franchise Fees Projected By MSS (at current route revenue) 5. Recalculation of Franchise Fees Based on Revenue Adj. Above 6. Adjusted Franchise Fees 7. Less: Street Sweeping 8. Less: Vehicle Impact Fees Projected by MSS 9. Adjusted Net Route Revenue (Line 3+Line 6+Line ?+ Line 8) 10. Plus: Non -Regulated Revenues Projected by MSS 11. Total Projected Net Revenues (Line 9 + Line 10) EXPENSES 12. Operating Expenses Eligible for Profit Projected by MSS 13. HF&H Operating Expense Adjustments 14. wages Expense 15. Benefits Expense 16. Disposal Fees 17. Fuel Expense 18. Maintenance Expense 19. Depreciation Expense 20. Other Operating / G&A Expenses 21. Adjusted Operating Expenses 22. Profit at 90.51 Operating Ratio Projected by MSS 23. Recalculation of Profit Based on 90.5% Operating Ratio 24. Adjusted Profit 25. Interest Expense Projected by MSS 26. HF&H Interest Expense Adjustment 27. Adjusted Interest Expense 28. Total Revenue Requirement (Lines 21+ Li ne 24 + Li ne 27) 29. Surplus / (Deficit) (Line 11 - Line 28) 30. Rate Adjustment Exhibit 1 Projected YE 12/31/2012 25,590 25,590 (2,531) (2,531) (67) (260) 22,732 10 22,742 21,417 (160) (123) 6 (105) (59) 355 21,331 2,248 (9) 2,239 286 (15) 271 23,841 (1,099) 4.84% HF&H Consultants, LLC 6 December 20, 2011 Franchisors of Marin Sanitary Service Section IV. Proposed Adjustments Review of Marin Sanitary Service's 2012 Rate Application `---nenti to 2012 Projected Revenues Route Revenue Adjustments (Line 2): HF&H recommends no adjustment to the projected route revenues or to the MSS' projection methodology of annualizing June 2011 YTD route revenues. Historically, MSS assumes the risk of both positive and negative fluctuations in the revenue projections. Rates are set for 2012 assuming the current year's (2011) level of subscription remains consistent. In recent years the economic downturn has prompted customers to downsize subscription levels in an effort to reduce their expenses thereby producing less -than -anticipated revenue to cover MSS's compensation for providing service. Conversely should the economy strengthen and growth occurs, then revenue and compensation to MSS would be greater than projected for the rate year. In addition, HF&H tested rates after the 2011 rate increase for each member agency to verify that MSS implemented the correct rate adjustment. The rate adjustments for the franchised jurisdictions were effective January 1, 2011 with the exception of the County and the County RVSD-S accounts which were effective June 1, 2011. HF&H tested selected accounts at random from each member agency from the August 31, 2011 billing information provided by MSS, to verify the correct rates were billed. HF&H found no exceptions for the tested accounts. Franchise Fee Adjustment (Line 5): HF&H recommends no adjustment to the Franchise Fees as there were no changes to the projected route revenues included in the Application or to the calculation of the Franchise Fees. Food Waste (Program Expense (Lines 14, 15, 18, 19 and 20): Because the residential food waste program costs were not part of the base costs from the last detailed review, MSS appropriately added the food waste program costs to the base costs before applying the applicable indices. Since the program began in March 2011, the costs included in the prior rate setting process were for 10 months of the program. For 2012, the program will be operating for a full 12 months. MSS needed to annualize the costs included in the 2011 rate setting process in its 2012 rate application. However, MSS used the costs for 12 months to annualize thereby overstating the projected 2012 costs. HF&H recommends a $139,614 adjustment as shown below: • Line 14 - A $49,159 decrease to wages; • Line 15 — A $37,968 decrease to benefits; • Line 18 - $32,110 decrease to maintenance expense; and, • Line 20 — A $20,378 decrease to other operating/G&A. Fuel and depreciation were properly adjusted in MSS's rate application. Additionally, MSS found it only needed to add three routes for the food waste program. In its rate application, MSS decreased the projected costs for 2012 by 25% (four routes reduced to three routes). MSS also included a decrease to expenses for 25% of the projected costs from 2011. The decrease in costs for the route reduction was included in one expense category (Other Operating / G&A) rather than by the appropriate expense category. Since the indices are different for the different expense category, HF&H recommends the following adjustment: • Line 14 - A decrease of $111,213 to wages; • Line 15 — A decrease of $85,526 to benefits; HF&H Consultants, LLC 7 December 20, 2011 Franchisors of Marin Sanitary Service Section IV. Proposed Adjustments Review of Marin Sanitary Service's 2012 (tate Application • Line 18 — A decrease of $72,929 to maintenance expense; • Line 19 — A decrease of $30,564 to depreciation for 2011; and, • Line 20 — An increase of $375,335 to other operating/G&A. Fuel and the depreciation for 2012 was properly adjusted in MSS's rate application. The net adjustment amount recommended by HF&H for the food waste program expense is an overall decrease of $64,512 to the projected 2012 expenses. Disposal Expense (Line 16): HF&H recommends a $6,196 increase in the 2012 projected disposal expense. The per ton disposal fee for the 2011 projected MRRC-Residential Yard Waste rate was $52.50, but was incorrectly stated as $52.00 for the 2011 projected fee. The incorrect rate resulted in an increase of $6,429 for projected 2011 expense. The adjustment for 2012's projected disposal expense is a decrease of $233. This is due to a misclassification of 16 tons of residue from MRR and HHW at $56.25 per ton instead of $43.02 per ton. Depreciation/Lease (Line 19): HF&H recommends a decrease in depreciation expense of $59,006. $30,564 relates to the food waste program error mentioned above and the remaining $28,442 decrease in depreciation expense is due to the following: • A $13,577 decrease to reflect the adjustment to the roll -off truck depreciation for the portion of time the equipment is used in the Non -franchised area; A $8,823 decrease to reflect the adjustment to residential and commercial truck depreciation for the portion of time the equipment is used in the Non -franchised area; • A $6,041 decrease for shop vehicle depreciation attributed to operations in the Non -franchised areas. Profit (Line 23): Due to the adjustments recommended above, HF&H recommends decreasing MSS' profit by $9,107 based on a 90.5% operating ratio. Interest (Line 25): HF&H recommends a $14,974 decrease to interest expense, due to the following: • A $13,722 decrease to account for the Non -Franchised portion of the interest calculation of cart and bin collection vehicles; • A $3,139 increase for the change to the Franchised portion of the interest calculation for Debris Box vehicles, based upon HF&H's adjusted Franchised portion of the (NBV) of vehicles; and, A $4,391 decrease to the MSS projection of interest to be paid on new vehicle capital purchases that will be financed during the remainder of 2011. Consistent with the agreed upon rate adjustment methodology, MSS's compensation is allocated to each jurisdiction based on its proportionate share of the total revenues generated from the ratepayers. This simple methodology allows for each jurisdiction to receive the same rate adjustment for the basic level of service. A more complex cost accounting methodology and related administrative costs would be required to determine the true cost of providing service in each jurisdiction which the Franchisor's Group decided was not necessary. HF&H Consultants, LLC 8 December 20, 2011 Franchisors of Marin Sanitary Service Section V. Rate Adjustment Review of Marin Sanitary Service's 2012 Rate Application Based on a revenue requirement of $23,841,000 and projected revenues of $22,742,000 for the calendar year 2012, resulting from our recommended adjustments to MSS' application, we recommend a rate increase of 4.84%, effective January 1, 2012. This rate increase of 4.84% results primarily from: • An overall net increase in operating costs, primarily from: benefits increase due to increased workers compensation rates; fuel price increases; increase in JPA fees, offset slightly by a decreased disposal costs resulting from a decline in disposal tonnage (3.24%). • A decrease in projected revenue due to a decrease in actual subscription revenues vs. projected 2011 revenues (1.60%). The following table shows the components of the rate increase: Rate Increase Components Current Services Workers Compensation Insurance 0.45% Fuel 2.96% Disposal -1.14% Other Operating Costs* 0.43% 2.70 Franchise Fees 0.54% Subtotal 3.24% Projected 2012 Revenue Shortfall 1.60% Total 4.84% * Includes wages, depreciation, other vehicle -related costs, general & administrative costs (e.g., public education, customer service, etcs.) . HF&H Consultants, LLC 9 December 20, 2011 This page intentionally left blank EXHIBIT C W1ARIN SANITARY SERVICE CITY OF SAN RAFAEL RATE SCHEDULE Rates Effective: 01/01/2012 Rate Increase: 4.84% 2012 2011 2012 2012 Rates are Per month unless otherwise specified.. Proposed RATE INCREASE % INCR. Rate Commercial (cont.) RO 18ydbox per pickup $ 391.23 $ 373.17 $ 18.06 4.84% R0 18 yd box 1 xJwoek 1.661.04 1.585.22 76.72 4.84% RO 18ydbox 2xJwaek 3.401.83 3.244.59 157.04 4.84% R0 18ydbox 3xhwook 5.219.01 4.978.87 240.04 4.84% RO 18ydbox 4x1wo*k 7.114.12 8.785.08 328.43 4.84% RO 18ydbox 5xJweek 9.086.95 8.867.45 419.50 4.84% RO 18ydbox 8x1woek 11.137.52 10.623.35 514.17 4.84% RO 2Oydbox per pickup $ 434.69 $ 414.62 $ 20.07 4.84% RD 2Oydbox 1 x/waek 1.846.62 1.781.37 8525 4.84% RO 2Oydbox 2x/waok 3.770.59 3.605.10 174.48 4.84% RO 2Oydbox 3x(weok 5.798.90 5.531.10 207.71 4.84% RO 20ydbox 4xhwoek 7.904.58 7.538.64 304.92 4.84% RD 2Oydbox 5x1week 10.096.02 9.830.50 460.12 4.8496 RO 2Oydbox 8x1wo*k 12.375.00 11.803.70 571.30 4.84% RO 25ydbox per pickup $ 543.35 $ 518.27 $ 25.08 4.84% RO 25ydbox 1 x(wemk 2.583.16 2.483.01 119.25 4.84% RO 25ydbox 2xJweok 5.287.21 5.043.12 244.09 4.84% RO 25ydbox 3xhyeok 7.704.33 7.434.50 359.83 4.84% RO 25ydbox 4x1week 10.624.41 10.133.03 400.48 4.84% RD 25ydbox 5xhweok 13.570.73 12.94423 626.50 4.84% RO 25ydbox 6x1wook 10.033.17 15.885.29 767.88 4.84% RO Compacted Rate Per Yard $ 60.08 $ 05.87 $ 3.10 4.84% LookChargau-ninglepiokup $ 4.20 $ 4.01 $ 0.10 4.74% Lock Charges ' weekly pickup 19.13 18.25 0.88 4.82% Compacted refuse w/o neoyclab|on 69.06 per yard 05.87 3.19 4.84% Compacted refuse with reoyo|ab|ou 58.90 per yard 54.27 2.63 4.85% Rofueeperyard-perpiokup 2688 25.45 1.23 4.83% BoxRento|- 1 yard 50.49 53.88 2.61 4.84% BoxRaniol- 2 yard 63.59 60.05 2.94 4.8596 BoxRemte!- 3-5 yard 70.33 87.08 3.25 4.84% Box Rental -8yard 70.47 75.80 3.67 4.84% Box Rental -18yard 93.77 80.44 4.33 4.84% Box Rental - 18 yard 187.90 170.23 8.87 4.84% Box Rental -2Oyard 190.67 181.87 8.80 4.84Y6 Box Rental -25yard 198.67 189.50 9.17 4.84% Return Trip Charge 41.35 30.44 1.91 4.84% Steam Clean Bin Charge 82.86 70.03 3.83 4.85% Overweight Charge Per Ton*** 135.78 148.59 7.19 4.8496 ~~cumm'/boxes exceeding ommn/y^m 12/15/2011 5 of 5 San Rafael - Exhibit C Rate Sheet -2012 E Marin Independent Journal 150 Alameda del Prado PO Box 6150 Novato, California 94948-1535 (415) 382-7335 legals@marinij.com SAN RAFAEL,CITY OF PO BOX 151560/CITY CLERK, DEPT OF PUBLIC WORKS, 1400 FIFTH AVE SAN RAFAEL CA 94915-1560 PROOF OF PUBLICATION (2015.5 C.C.P.) STATE OF CALIFORNIA County of Marin FILE NO. 0004284215 I am a citizen of the United States and a resident of the County aforesaid: I am over the age of eighteen years, and not a party to or interested in the above matter. I am the principal clerk of the printer of the MARIN INDEPENDENT JOURNAL, a newspaper of general circulation, printed and published daily in the County of Marin, and which newspaper has been adjudged a newspaper of general circulation by the Superior Court of the County of Marin, State of California, under date of FEBRUARY 7, 1955, CASE NUMBER 25566, that the notice, of which the annexed is a printed copy (set in type not smaller than nonpareil), has been published in each regular and entire issue of said newspaper and not in any supplement thereof on the following dates, to -wit: 112/2012, 1/9/2012 i certify for declare; under the peraity of perjury that the foregoing s true and correct. Dated this 9th day of January, 2012. Signature • • "0211:111i Legal No. 0004284215 CITY OF SAN RAFAEL NOTICE OF PUBLIC HEARING The City Council of the City of San Rafael will hold a public hearing: PublicPHearing: To consider a request b Marin Sanitary Seryice for a rate increase for refuse col- iection and recycling services and adoption of Resolution amending agreement setting maximum rates for the year 2012. DATEMME✓PLArCE: p City Haali Cou cil Chamber,14000FFifth Avenue, San Rafael WHAT WILL HAPPEN: You may Comment on the proposedResolution. The City Council will consider ali public testimony and wifl then decide whether to approve the Res- olution. IF YOU CANNOT ATTEND: You may send a letter to Esther C. Beime, City Clerk, City of San Rafael, P.O. Box 151560, San Rafael, CA 94915-1560. You may also hand deliver a letter to the City Clerk prior to the meeting. FOR MORE NFORMATNN : You may contact Ste anie Lovette, Economic De, velopmerrt Coordin or, at (415) 485-33a3. Office hours are Monday through Friday, 830 am. to 5:00 p� SAN RAFAEL CITY COUNCIL /$/ ESTHER C. BEIRNE ESTHER C. BEIRNE, City Clerk NO.2028 Jan. 2, 9, 2012 01-17-2012 To: City of San Rafael — City Council From: Randy Dodd 190 Park St, San Rafael Re: Agenda Item 4A — Marin Sanitary Service I would like to ask that the City Council and Marin Sanitary Service consider two service improvements: 1. The addition of paperless billing, so that a customer can receive bills electronically as a printable PDF file by email, and discontinue paper mailings. 2. Online account management, so that customers can review their bills online, review bill history, change their payment methods, setup automatic payments, and other account management by use of a web browser by a computer or mobile phone. These types of services are now very common in most utilities, service providers and organizations. Thank you. CITY OF SAN RAFAEL INSTRUCTIONS: USE THIS FORM WITH EACH SUBMITTAL OF A CONTRACT, AGREEMENT, ORDINANCE OR RESOLUTION BEFORE APPROVAL BY COUNCIL / AGENCY. SRRA / SRCC AGENDA ITEM NO. DATE OF MEETING: 1/17/2012 FROM: Stephanie Lovette, ED DEPARTMENT: for Manaaement Services DATE: 1 /11 /12 TITLE OF DOCUMENT: ACCEPT RATE RECOMMENDATIONS AND ADOPT RESOLUTION ESTABLISHING MAXIMUM RATES COLLECTED BY AND SERVICES PROVIDED BY MARIN SANITARY SERVICE EFFECTIVE RETROACTIVELY TO JANUARY 1, 2012. Depart m-ent Head (signature) (LOWER HALF OF FORM FOR APPROVALS ONLY) APPROVED AS COUNCIL / AGENCY AGENDA ITEM-. City Manager , (signature) M10-11111012400,191TA0 REMARKS: APPROVED AS TO FORM: A City Attorney (signature),"J