HomeMy WebLinkAboutCC Resolution 11892 (MSS Rates 2006)RESOLUTION 11892
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL
TO SET MAXIMUM RATES AND FEES FOR MARIN SANITARY SERVICE
REFUSE AND RECYCLABLE MATERIAL COLLECTION AND DISPOSAL
SERVICES, TO BE EFFECTIVE RETROACTIVELY TO JANUARY 1,
2006.
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
rates 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 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, as identified as "Exhibit C", are hereby
approved for Marin Sanitary Service refuse and recyclable material collection and disposal
services, to be effective, retroactive to January 1, 2006. 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.
I, Jeanne M. Leoncini, 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 Monday, the 6t' of February, 2006, by the following
vote, to wit:
AYES: Councilmembers: Cohen, Heller, Miller, Phillips & Mayor Boro
NOES: Councilmembers: None
ABSENT: Councilmembers: None
J n�n,.
Leoncini, City Clerk
WAManagement Services- WorkFile\Finance- WorkFile\Council Material\Resolutions\2006\City\MSS Refuse Rates reso 06.doc
Exhibit A
San Rafael Report
CITY OF SAN RAFAEL
REVIEW OF MARIN SANITARY SERVICE'S
2006 RATE APPLICATION
HILTON FARNKOPF & HOBSON, LLC
November 30, 2005
FINAL REPORT
HILTON FARNKOPF & HOBSON, LLC
�• Advisory Services to
_ Municipal Management
2175 N. California Boulevard, Suite 990
Walnut Creek, California 94596
Telephone: 925/977-6950
Fax: 925/977-6955
www.hfh-consultants.com
November 30, 2005
Mr. Kenneth Nordhoff
Interim City Manager
City of San Rafael
1400 Fifth Avenue
San Rafael, CA 94915-1560
Northern California
Southern California
Central California
Robert D. Hilton, CMC
John W. Farnkopf, PE
Laith B. Ezzet, CMC
Subject: Review of Marin Sanitary Service's 2006 Rate Application - Special City of
San Rafael Rate Adjustment
Dear Mr. Nordhoff:
This report documents Hilton Farnkopf & Hobson, LLC's (HF&H) findings and
recommendations from our review of Marin Sanitary Service's (MSS) application for a 10.8%
increase to the City of San Rafael (City) solid waste rates, effective January 1, 2006 (Application).
This represents an additional 6.9% increase over the base 3.8% increase requested for the City of
Larkspur, the Town of Ross, the County of Marin, and the Las Gallinas and Ross Valley
Sanitary Districts. The additional increase was requested to compensate for the shortfall of
revenues, compared to the revenue requirement, resulting from the transition of customers
residing within the City limits north of Puerto Suelo Hill, from the Las Gallinas Sanitary District
to the City of San Rafael. The revenue shortfall was created primarily due to the higher
franchise fees charged MSS by the City compared to the District. See the separate HF&H report
dated December 6, 2005 for the findings of our review of the MSS application for the base 3.8%
increase.
Findings
Based on our review of the Application, performed in accordance with the Rate Index
Methodology and the additional procedures performed as a result of the transition of customers
from the Las Gallinas Sanitary District rates to the City of San Rafael rates, we determined that
an increase to current revenues of 6.0%, in addition to the 2.3% found as part of our base
review, is necessary to compensate MSS for its expenses and meet the contractually defined
operating ratio (90.5%). This lower increase is based on several adjustments to MSS' rate
calculation (agreed-upon by MSS Management and HF&H) as described in Section IV of our
report dated December 6, 2005 and additional adjustments reflected in Exhibit 1 of this report.
HILTON FARNKOPF & HOBSON, LLC
Mr. Kenneth Nordhoff
November 30, 2005
Page 3
We would like to express our appreciation to Company 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,
HILTON FARNKOPF & HOBSON, LLC
R(lert D. Hilton, CMC
President
cc: Ms. Marva Sheehan, Hilton Farnkopf & Hobson, LLC
Mr. Joseph Garbarino, Marin Sanitary Service
Mr. Joseph J. Garbarino, Marin Sanitary Service
Ms. Patricia Garbarino, Marin Sanitary Service
Mr. Ray Holmes, Marin Sanitary Service
City of San Rafael Table of Contents
Review of Marin Sanitary Service's 2006 Rate Application —Final Report
TABLE OF CONTENTS
SECTION I. BACKGROUND........................................................................................................................1
DESCRIPTION OF SERVICES...................................................................................................................1
CHANGE IN SERVICE AREA FOR SAN RAFAEL.....................................................................................1
NEW RECYCLING SERVICES..................................................................................................................1
SECTION II. RATE REVIEW APPROACH................................................................................................... 3
SCOPEOF WORK.................................................................................................................................... 3
LIMITATIONS.......................................................................................................................................... 3
SECTION III. MARIN SANITARY SERVICE'S PROJECTION METHODOLOGY ........................................ 4
APPROACH............................................................................................................................................. 4
REVENUES.............................................................................................................................................. 4
FRANCHISEFEES.................................................................................................................................... 4
SECTION IV. ADDITIONAL ADJUSTMENTS............................................................................................. 6
RECALCULATION 2005 REVENUE SHORTFALL.................................................................................... 6
2006 FRANCHISE FEES........................................................................................................................... 6
RATEADJUSTMENT............................................................................................................................... 8
ATTACHMENTS
Attachment 1- MSS 2006 Rate Application
Attachment 2 - Calculation of the 2005 Revenue Shortfall
City of San Rafael Background
Review of Marin Sanitary Service's 2006 Rate Application Final Report
SECTION I. BACKGROUND
Description of Services
Marin Sanitary Service (MSS) provides solid waste, 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 and Ross Valley
Sanitary Districts (collectively referred to as "Franchisors"). In addition, MSS and its related
entities (Marin Resource and Recovery (MRR) and Marin Resource Recovery Center (MRRC)),
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,
Fairfax, and San Quentin prison. MSS also provides non -franchised debris box 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
MSS' transfer station (Marin Sanitary Service Transfer Station) then transports it to the
Redwood Sanitary Landfill. MSS delivers recyclable materials to the 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 MRRC facility where recyclable materials are extracted from the waste stream, processed,
and marketed. MRRC delivers residual waste, remaining after the recyclable materials are
extracted, to the transfer station. This residual waste is transferred to Redwood Sanitary
Landfill or Potrero Hills Landfill.
Chanqe in Service Area for San Rafael
In 2004, the City pursued a legal resolution'to the question of local authority over the provision
of refuse collection and recycling services within the City limits. In February 2005, the Superior
Court of the State of California, County of Marin, ruled in favor of the City of San Rafael.
Effective March 1, 2005 customers with service areas within the LGSD and also within the city
limits of San Rafael (customers residing north of Puerto Suelo Hill) were charged the existing
City of San Rafael refuse rates. (These were the rates adopted by the City Council in January of
2005). Customers of MSS in north San Rafael experienced changes that increased the average
residential rate by approximately 16%, decreased the average commercial rate by approximately
5% and decreased the average roll -off and compactor rate by approximately 13%. LGSD did not
implement the recommended 3.4% increase on January 1, 2005 so the percentage changes solely
as a result of the change in north San Rafael service areas were 12% increase for residential, 8%
decrease for commercial and 16% decrease for roll -off and compactor rates. At the same time,
MSS became subject to the higher franchise fees charged by the City than those charged by
LGSD. While revenues increased, they did not increase sufficiently to equal MSS' costs
including the higher franchise fees.
New Recvclinq Services
Marin Sanitary Service (MSS) proposes to change the method of residential recycling collection
from a three -stream to a dual -stream process, in response to customer demand for a more
convenient method of recycling. The dual -stream recycling program will be phased in over
several years and will enhance customer satisfaction through the use of a wheeled cart, while
still ensuring the highest quality of finished product.
November 30, 2005
City of San Rafael Rate Review Approach
Review of Marin Sanitanj Service's 2006 Rate Application —Final Report
SECTION II. PATE REVIEW APPROACH
Scope of Work
Rate Adjustment Methodology
The Rate Index Methodology was developed and approved in 1995. This method was used to
determine 2006 rates, based on the projected results of operations from the 2005 rate review
adjusted by change in certain indices (e.g., consumer price index, employment cost index and
the transportation index) and 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) and
revenues (e.g., collection rate revenues).
The Franchisors engaged HF&H in August 2005 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 July S, 2005.
The results of the HF&H review are documented in the report to the Franchisors Group dated
December 6, 2005.
Review of 2005 Revenue
The City of San Rafael also engaged HF&H to review the 2005 revenue projections for the City
to determine the effect of the conversion of customers residing within the city limits of San
Rafael, north of Puerto Suelo Hill (Las Gallinas "City") from LGSD rates to the City of San
Rafael rates.
Limitations
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 Smith and Associates has issued an unqualified opinion of MSS' 2004
financial statements.
Our conclusions are based 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.
November 30, 2005
Cit/ of San Rafael MSS Projection Methodology
Review of Marin Sanitary Service's 2006 Rate Application — Final Report
calculated by taking the estimated ten months of revenue received at the City rates times the
10% City of San Rafael franchise fee.
2005 Franchise Fees
Franchise fees for the Las Gallinas "City" area were not included in the calculation of the base
rate application submitted for the Franchisors Group. They have been shown as a separate
adjustment. MSS calculated the franchise fees based upon the projected net revenues by 10 %
(approximately).
November 30, 2005
04/ of San Rafael Additional Adjustments
Review of Marin Sanitanj Service's 2006 Rate Application - Final Report
Marin Sanitary Service - Rate Adjustment Calculation
As Adjusted By HF&H
City of San Rafael
($000's Unless Otherwise Indicated)
Exhibit
Projected YE 2006
REVENUES
1.
Route Revenue Projected By MSS
12,953
2.
Route Revenue Adjustment
273
3.
Adjusted Gross Route Revenues
13,227
4.
Less: Franchise Fees Projected By MSS
(901)
5.
Recalculation of Franchise Fees Based on Revenue Adj. Above
(28)
6.
Adjusted Franchise Fees
(929)
7.
Less: Vehicle Impact Fees Projected by MSS
(196)
8.
Adjusted Net Route Revenue (Line 3 + Line 6 + Line 7)
12,101
9.
Non -Regulated Revenues Projected by MSS
32
11.
Total Projected Net Revenues (Line 8 + Line 9)
12,134
EXPENSES
12.
Operating Expenses Eligible for Profit Projected by MSS
11,043
13.
HF&H Operating Expense Adjustments
14.
Fuel Expenses
87
15.
Depreciation
(18)
16.
Workers Compensation
(146)
17.
Disposal Fees
(15)
18.
Adjusted Operating Expenses
10,950
19.
Profit at 90.5% Operating Ratio Projected by MSS
1,159
20.
Recalculation of Profit Based on 90.5% Op Ratio
(10)
21.
Adjusted Profit
1,149
22.
Interest Expense Projected by MSS
331
23.
HF&H Interest Expense Adjustment
(14)
24.
Adjusted Interest Expense
317
25.
Total Revenue Requirement (Lines 18 + Line 21 + Line 24)
12,416
26.
Surplus/ (Deficit) (Line 11 - Line 25)
(283)
27.
Rate Adjustment per 12/06/05 Franchisors Group Report( -Line 25 / Line 8)
2.3'
28.
Additional San Rafael Adjustments
29.
Las Gallinas - San Rafael Franchise Fee - 2006
394
30.
2005 Revenue Shortfall resulting from transition of Las Gallinas Accounts
262
31.
656
32.
Gross -up of additional revenue adjustments for franchise fees
73
33.
Total Additional San Rafael Adjustments
729
34.
Rate Adjustment from Additional Adjustments (Line 33 / Line 8)
6.0%
35. Total Rate Adjustment (Line 27 + Line 34) 8.3%
Note: Lines 1 - 27 are from the December 6, 2005 Franchisors Group Report
7 November 30, 2005
Cih/ of San Rafael Rate Adjustment
Review of Marin Sanitanj Service's 2006 Rate Application - Final Report
Historically, San Rafael's commercial rates have been lower than the Marin County
communities and other communities in the Bay Area. See Exhibit 3 for a table listing rates for
communities throughout the Bay Area.
In an effort to move towards a rational relationship of rates and volume of service received (i.e.
uniform rate structure) for all service levels throughout the City of San Rafael (including the
prior LGSD area), staff proposes that rates be adjusted by various percentages to arrive at an
overall increase of 8.3%. Examples of various service levels showing the existing rates and
proposed rates are included in the table below.
Examples of Most -Frequent Service Levels
Residential
64 Gal - Flat
2,894
$39.80
$41.52
$1.72
4.30%
Apartments
32 Gal - Flat
1,089
$19.90
$20.76
$0.86
4.30%
Apartments
96 Gal - Flat
1,164
$59.70
$62.28
$2.58
4.30%
Commercial
96 Gal
405
$57.35
$61.89
$4.54
8.00%
Commercial
3 Yd -1X/Wk
167
$244.25
$256.46
$12.21
5.00%
Commercial
3 Yd - 2X/Wk
76
$441.80
$477.56
$35.76
8.09%
Commercial
3 Yd - 3X/Wk
51
$639.30
$727.92
$88.62
13.86%
Apartments
3 Yd -1X/Wk
19
$244.25
$256.46
$12.21
5.00%
Apartments
3 Yd - 2X/Wk
44
$441.80
$470.00
$28.20
6.38%
Apartments
3 Yd - 3X/ Wk
36
$639.30
$714.28
$74.98
11.73%
Roll -off
10 Yd -1X/Wk
4
$630.65
$662.18
$31.53
5.00%
Roll -off
18 Yd -1X/Wk
3
$1,009.00
$1,189.38
$180.38
17.88%
Roll -off *
10 Yd -1X/Wk
14
$145.45
$155.54
$10.09
6.94%
Roll -off *
18 Yd -1X/ Wk
18
$232.80
$279.98
$47.18
20.27%
Compactors
15 Yd -1X/Wk
2
$2,817.75
$3,212.24
$394.49
14.00%
Compactors
20 Yd -1X/Wk
4
$3,757.00
$4,282.98
$525.98
14.00%
Compactors*
20 Yd - 2X/ Mo
8
$1,734.00
$1,976.80
$242.80
14.00%
* On call service
9 November 30, 2005
Attachment 2
Marin Sanitary Service
City of San Rafael
Calculation of 2005 MSS Revenue Shortfall
2005 Revenue Requirement for Las Gallinas - San Rafael $ 3,935,859 A
( from 2004 HF&H Report and includes a portion of $6,000 LGSD Franchise Fee)
Residential
Apartments
Commercial
Gross Revenues including "extras"
Franchise Fee *
Net Revenue to MSS
Actual YTD Revenue through 09/30/05 with Q4 Projection
Jan - Feb
Mar - Dec
Total
$ 115,088 $
1,132,513 $
1,247,601
152,744
766,992
919,736
330,810
1,539,520
1,870,330
598,642
3,439,025
4,037,667 B
(730)
(343,902)
(344,632)
$ 597,912 $
3,095,122 $
3,693,034
Calculation of MSS Shortfall
Effect of total "new" billings
10 months of higher billings (A -B) (101,808)
Franchise Fee payments not included @ 10% 343,902
3.4% rate increase on LGSD (not in Jan & Feb actuals) 20,354
Net MSS Shortfall $ 262,449
* Franchise fees for January and February represent 2 months of pro -rated LGSD Franchise Fees.
7&4'0i " Saa�tazry Senoeee
" IWL"er:ruy %a .Sane fort Reaaeviee4„
Mum ReaW,&Ngy
535 iy -50-a
Scut R44d, e,4 94901
;Nd": (415) 453-1404
Sax: (415) 453-6565
December 6, 2005
Mr. Kenneth Nordhoff
Finance Director
City of San Rafael
1400 Fifth Avenue Blvd.
San Rafael, CA 94915-1560
Mr. Barry K. Hogue
District Manager
Ross Valley Sanitary District
2000 Larkspur Landing Circle
Larkspur, CA 94939
Dear Madam and Sirs:
Mr. Alan H. Petrie
District Manager
Las Gallinas Sanitary District
300 Smith Ranch Road
San Rafael, CA 94903
Mr. Jeff Rawles
Exhibit B
% mat RW44n" Reaaue q,
565 P-4 SOzeer
Scut Rqad, e,4 94901
;D&uee: (415) 495-5648
lax: (415) 495-1509
Mr. Gary Broad
Administrator
Town of Ross
31 Sir Francis Drake
Ross, CA 94957
Ms. Jean Bonander
Manager, Special Projects City Manager
County of Marin City of Larkspur
3501 Civic Center Drive, Rm. 404 420 Magnolia Avenue
San Rafael, CA 94903-4155 Larkspur, CA 94939
We want to inform you of changes to our service well in advance of their implementation.
Marin Sanitary Service (MSS) will be converting its recycling collection from 3 -sort source
separation to dual sort collection, in order to provide increased convenience to our customers,
promote route efficiency, and.still sustain our high level of waste diversion, The following
information below details this change and also addresses the need to convert our hauling fleet
to a cleaner fuel technology. -
Dual Stream Recvclinjz
Marin Sanitary Service (MSS) 19 changing the method of residential recycling collection from a
three stream to a dual stream process. The change will provide customers with a more
convenient method of recycling and allow the company to replace recycling vehicles which are
over 20 years old, ensuring compliance with clean -air regulations.
With the new dual stream service, customers will receive 1-64 gallon cart in place of the 5
gallon buckets. The cart is similar in size to the current green waste cans. The cart will have a
divider down the middle. One side of the cart will be used for cans, plastic, and glass. The
other side will be used for paper products.
The carts will be collected by a new, side -loading compaction truck that has two internal
compartments that keep the two streams segregated. The material will be delivered to Marin
Recycling (an affiliate of MSS) for sorting, processing, and delivery to end markets.
1050 Andersen Drive, P.O. Box 10067, San Rafael, CA 94912 (415) 456-2601 (415) 456-7595 Fax
www.marinsanitary.com
Three recycling routes will be converted to dual, stream in the 15t quarter of 2006. The routes
will be spread throughout the service area including the Terra Linda area of San Rafael, the
Marinwood/Lucas Valley area of the Las Gallinas Sanitary District, and one route that cdllects
in Larkspur, Kentfield, and Ross. After these routes have been converted, 3 additional routes
will be converted in the 3`d quarter of 2006. The exact location of these routes has not been
determined yet.
Approximately 14,000 carts and 6 new recycling trucks are projected to be placed into service
in 2006. The recycling trucks would have been purchased regardless of the dual stream
conversion. They are necessary for compliance with the clean -diesel regulations and because
the existing fleet is old and must be replaced in the next few years. MSS believes that dual
stream collection will prove to be a customer -friendly and environmentally sound program.
Since we were needing to purchase replacement trucks anyway, we have the opportunity to
further make our recycling collection program more convenient with a lower impact on rates.
The new carts and the incremental cost of the new trucks will increase rates by approximately
0.6% in 2006. This equates to a $0.10 - $0.12 per month increase in the 32 -gallon can
residential rate.
Clean -Diesel Conversion
MSS has a total of 68 waste collection trucks subject to the landmark California Air Resources
Board (CARB) Solid Waste Collection Vehicle regulation that requires the company to
transition to cleaner technology by 2010. After evaluating our fleet, we retrofitted 27 trucks
with CARB-approved equipment that reduced diesel particulate matter by up to 50%. The
retrofitting covered 50% of the first group of trucks eligible for this procedure. This far
exceeded the 10% requirement established by the CARB.
Retrofitting the remainder of the fleet may not be possible due to their age, so new trucks must
be purchased. (Many of the engines in the fleet do not have CARB-approved devices to reduce
emissions, so 26 trucks will require replacement over the next several years to comply with the
clean -air regulations.) Included in this number are the recycling truck replacements discussed
above.
As was mentioned earlier, we want to give as much advance notice of these changes as
possible. Please let us know if you have any suggestions that would make these changes
happen more smoothly for our customers or if you would like to suggest any changes to our
implementation.
Thank you for your on-going support of our programs and service. We remain at your disposal.
Sinc
Patty Garbaro
President
s 5"Vece
7a s,w d= Raza� „
5.35 Aly 50-a
5" Raaael. e.14 94901
;D"w: (415) 453-1404
57ax: (415) 453-6565
Dual Sort Recycling Program Fact Sheet -Talking Pdints
January 2006
565 P-4 5&,&
5" Raod, 64 94901
p0904M. (415) 485-5648
';7a*. (415) 485-1509
• Provides for increased convenience to the customer while continuing our record setting waste
diversion numbers.
• Can expect increased material volume due to additional capacity and ease of use.
• Newspaper no longer needs to be bagged or bundled; paper remains dry with less
contamination.
• Large amounts of cardboard set out at the curb can be collected without the need to bag or
bundle the material.
• Curbside thievery of recyclables should significantly decrease.
• Mm :; Sa;.itacy Sc:°icc�'s D�,twl Sots Cart will be a Brown 64 gallon cars with 1 Blue lid
covering the paper compartment, and 1 Brown lid coveting the compartment for bottles, cans,
• The Marin Sanitary Service Operations Department has observed dual sort carts and trucks
i,:.i31A f IIYt'?i3i1;: f�.�ei i�, ^..siti3 �;�p 1'rasiri.rc� �i�r3��; train :arae �;ln ;Situ
• Split Carts for Dual Sort Recycling are widely used in Canada.
■ Possibility of route efficiencies gained after full implementation of the program.
1050 Andersen Drive, P.O. Box 10067, San Rafael, CA 94912 (415) 456-2601 (415) 456-7595 Fax
www. ma rinsanitary. corn
i I W
Lid
Split
Cart
�Ilows for two types of recycling
® 64 gallon with two compartments
Fully automated
brought to you by
Marin Sanitanj
I ■
Siv° we and
"Recycling Saves Resources" Otto Environmental Systems
Butterfly Lid Split Cart
Consolidate your recycling needs
into one cart!
Permanent
compartment divider
prevents
contamination.
Lids are different colors to easily identify compartments
Large hot stamp areas on front and side of body
- Lids can also be hot stamped to instruct recycling requirements
side back
When cart is inverted,
the lid design helps
divert the recyclables
into the proper truck
compartment.
For more information, call:
Marin Sanitary Service
Travis Dowell, Area Manager
Steve Rosa Otto Environmental Systems
(415) 456-2601 (650) 363-0780
EXHIBIT C
MARIN SANITARY SERVICE
CITY OF SAN RAFAEL RATE SCHEDULE
Rates Effective: 01/01/2006
Rate Increase: Various
2006 2005 2006
Proposed RATE INCREASE
Rate
Residential
$ 41.52
$ 39.80 $
1.72
Standard Base Rates
83.04
79.60
3.44
32 gallon can - flat
$ 20.76
$ 19.90
$ 0.86
64 gallon can - flat
41.52
39.80
1.72
96 gallon can - flat
62.28
59.70
2.58
32 gallon can - hill
23.52
22.55
0.97
64 gallon can - hill
47.04
45.10
1.94
96 gallon can - hill
70.56
67.65
2.91
Low Income Residential Rates*
Low Income - 32 gallon can - flat
$ 16.58
15.90
$ 0.68
Low Income - 64 gallon can - flat
33.16
31.80
1.36
Low Income - 96 gallon can - flat
49.74
47.70
2.04
Low Income - 32 gallon can - hill
18.83
18.05
0.78
Low Income - 64 gallon can - hill
37.66
36.10
1.56
Low Income - 96 gallon can - hill
56.49
54.15
2.34
*Must meet Federal HUD Voucher Standards.
47.04
45.10
1.94
Residential customers only
70.56
67.65
2.91
Other Services
Compacted 32 gallon
$ 41.52
$ 39.80 $
1.72
Compacted 64 gallon
83.04
79.60
3.44
Distance 5'-50'
2.71
2.60
0.11
Distance over 50' (per 50' each can)
5.47
5.25
0.22
Discontinued Rates**
Senior rate - flat** (Bi -weekly service)
$ 14.65
$ 14.05 $
0.60
Senior rate - hill** (Bi -weekly service)
18.67
17.90
0.77
**Customers with these rates prior to 2005 will keep
existing rate type. No new customers will be added
with this rate type.
Apartments
32 gallon can - flat
$ 20.76
$ 19.90 $
0.86
64 gallon can - flat
41.52
39.80
1.72
96 gallon can - flat
62.28
59.70
2.58
32 gallon can - hill
23.52
22.55
0.97
64 gallon can - hill
47.04
45.10
1.94
96 gallon can - hill
70.56
67.65
2.91
***Minimum of one can per unit
1/24/2006 1 of 6 San Rafael - Exhibit C Rate Sheet 2006
EXHIBIT C
MARIN SANITARY SERVICE
CITY OF SAN RAFAEL RATE SCHEDULE
Rates Effective:
01/01/2006
Rate Increase:
Various
2006
2005
2006
Proposed
RATE
INCREASE
Rate
Apartments (cont)
FL
2 yd bin
1 x/week
$
197.03
$
187.65
$
9.38
FL
2 yd bin
2 x/week
451.63
426.20
25.43
FL
2 yd bin
3 x/week
683.63
639.30
44.33
FL
2 yd bin
4 x/week
919.74
852.40
67.34
FL
2 yd bin
5 x/week
1,159.98
1,065.50
94.48
FL
2 yd bin
6 x/week
1,404.33
1,278.60
125.73
FL
3 yd bin
1 x/week
$
256.46
$
244.25
$
12.21
FL
3 yd bin
2 x/week
470.00
441.80
28.20
FL
3 yd bin
3 x/week
714.28
639.30
74.98
FL
3 yd bin
4 x/week
964.73
836.80
127.93
FL
3 yd bin
5 x/week
1,221.36
1,034.15
187.21
FL
3 yd bin
6 x/week
1,484.17
1,231.70
252.47
FL
4 yd bin
1 x/week
$
365.87
$
348.45
$
17.42
FL
4 yd bin
2 x/week
674.26
634.30
39.96
FL
4 yd bin
3 x/week
1,023.69
951.40
72.29
FL
4 yd bin
4 x/week
1,381.42
1,268.55
112.87
FL
4 yd bin
5 x/week
1,715.36
1,555.20
160.16
FL
4 yd bin
6 x/week
2,121.59
1,902.85
218.74
FL
5 yd bin
1 x/week
$
395.75
$
376.90
$
18.85
FL
5 yd bin
2 x/week
783.34
702.10
81.24
FL
5 yd bin
3 x/week
1,190.46
1,027.35
163.11
FL
5 yd bin
4 x/week
1,607.88
1,352.60
255.28
FL
5 yd bin
5 x/week
2,035.60
1,677.80
357.80
FL
5 yd bin
6 x/week
2,473.62
2,003.10
470.52
FL
6 yd bin
1 x/week
$
463.82
$
411.40
$
52.42
FL
6 yd bin
2 x/week
940.01
822.80
117.21
FL
6 yd bin
3 x/week
1,428.55
1,234.20
194.35
FL
6 yd bin
4 x/week
1,929.46
1,645.65
283.81
FL
6 yd bin
5 x/week
2,442.72
2,057.00
385.72
FL
6 yd bin
6 x/week
2,968.34
2,468.45
499.89
RL
1 yd bin
1 x/week
$
129.13
$
121.70
$
7.43
RL
1 yd bin
2 x/week
260.32
243.75
16.57
RL
1 yd bin
3 x/week
393.57
365.45
28.12
RL
1 yd bin
4 x/week
528.88
487.50
41.38
RL
1 yd bin
5 x/week
666.25
609.25
57.00
RL
1 yd bin
6 x/week
805.68
730.85
74.83
(No longer offered to new customers)
1/24/2006
2 of 6
San Rafael - Exhibit
C Rate Sheet 2006
EXHIBIT C
MARIN SANITARY SERVICE
CITY OF SAN RAFAEL RATE SCHEDULE
Rates Effective: 01/01/2006
Rate Increase: Various
2006
2005
2006
Proposed
RATE
INCREASE
Rate
Apartments (cont.)
RL
2 yd bin
1 x/week
$ 197.56
$ 188.15
$ 9.41
RL
2 yd bin
2 x/week
395.25
338.65
56.60
RL
2 yd bin
3 x/week
599.06
489.55
109.51
RL
2 yd bin
4 x/week
806.99
640.50
166.49
RL
2 yd bin
5 x/week
1,159.98
1,065.50
94.48
RL
2 yd bin
6 x/week
1,404.33
1,278.60
125.73
FL
Compacted Rate Per Yard
$ 49.42 per yard
$ 43.35
$ 6.07
1/24/2006
3 of 6
San Rafael - Exhibit
C Rate Sheet 2006
EXHIBIT C
MARIN SANITARY SERVICE
CITY OF SAN RAFAEL RATE SCHEDULE
Rates Effective: 01/01/2006
Rate Increase: Various
Commercial
32 gallon can
64 gallon can
96 gallon can
Rate
Compacted 32 gallon
Compacted 64 gallon
Bags (32 gallon)
FL
2 yd bin
FL
2 yd bin
FL
2 yd bin
FL
2 yd bin
FL
2 yd bin
FL
2 yd bin
FL
2 yd bin
FL
3 yd bin
FL
3 yd bin
FL
3 yd bin
FL
3 yd bin
FL
3 yd bin
FL
3 yd bin
FL
3 yd bin
FL
4 yd bin
FL
4 yd bin
FL
4 yd bin
FL
4 yd bin
FL
4 yd bin
FL
4 yd bin
FL
4 yd bin
FL
5 yd bin
FL
5 yd bin
FL
5 yd bin
FL
5 yd bin
FL
5 yd bin
FL
5 yd bin
FL
5 yd bin
2005 2006
RATE INCREASE
$ 19.10 $
38.25
57.35
38.20
76.50
19.10
$ 45.45 $
187.65
426.20
639.30
852.40
1,065.50
1,278.60
$ 55.80 $
244.25
441.80
639.30
836.80
1,034.15
1,231.70
$ 81.65 $
348.45
634.30
951.40
1,268.55
1,555.20
1,902.85
$ 87.05 $
376.90
702.10
1,027.35
1,352.60
1,677.80
2,003.10
1.53
3.01
4.54
3.06
6.02
1.53
4.55
9.38
26.46
47.42
73.52
104.78
141.18
5.58
12.21
35.76
88.62
149.21
217.68
293.67
8.17
17.42
42.02
78.47
125.23
113.91
249.64
8.71
18.85
93.83
185.86
290.76
408.58
539.19
1/24/2006 4 of 6 San Rafael - Exhibit C Rate Sheet 2006
2006
Proposed
Rate
$
20.63
41.26
61.89
41.26
82.52
20.63
per pickup
$
50.00
1 x/week
197.03
2 x/week
452.66
3 x/week
686.72
4 x/week
925.92
5 x/week
1,170.28
6 x/week
1,419.78
per pickup
$
61.38
1 x/week
256.46
2 x/week
477.56
3 x/week
727.92
4 x/week
986.01
5 x/week
1,251.83
6 x/week
1,525.37
per pickup
$
89.82
1 x/week
365.87
2 x/week
676.32
3 x/week
1,029.87
4 x/week
1,393.78
5 x/week
1,669.11
6 x/week
2,152.49
per pickup
$
95.76
1 x/week
395.75
2 x/week
795.93
3 x/week
1,213.21
4 x/week
1,643.36
5 x/week
2,086.38
6 x/week
2,542.29
2005 2006
RATE INCREASE
$ 19.10 $
38.25
57.35
38.20
76.50
19.10
$ 45.45 $
187.65
426.20
639.30
852.40
1,065.50
1,278.60
$ 55.80 $
244.25
441.80
639.30
836.80
1,034.15
1,231.70
$ 81.65 $
348.45
634.30
951.40
1,268.55
1,555.20
1,902.85
$ 87.05 $
376.90
702.10
1,027.35
1,352.60
1,677.80
2,003.10
1.53
3.01
4.54
3.06
6.02
1.53
4.55
9.38
26.46
47.42
73.52
104.78
141.18
5.58
12.21
35.76
88.62
149.21
217.68
293.67
8.17
17.42
42.02
78.47
125.23
113.91
249.64
8.71
18.85
93.83
185.86
290.76
408.58
539.19
1/24/2006 4 of 6 San Rafael - Exhibit C Rate Sheet 2006
EXHIBIT C
MARIN SANITARY SERVICE
CITY OF SAN RAFAEL RATE SCHEDULE
Rates Effective: 01/01/2006
Rate Increase: Various
1/24/2006 5 of 6 San Rafael - Exhibit C Rate Sheet 2006
2006
2005
2006
Proposed
RATE
INCREASE
Rate
Commercial (cont.)
FL
6 yd bin
per pickup
$
109.18
$
99.25
$
9.93
FL
6 yd bin
1 x/week
469.83
411.40
58.43
FL
6 yd bin
2 x/week
955.11
822.80
132.31
FL
6 yd bin
3 x/week
1,455.85
1,234.20
221.65
FL
6 yd bin
4 x/week
1,972.03
1,645.65
326.38
FL
6 yd bin
5 x/week
2,503.66
2,057.00
446.66
FL
6 yd bin
6 x/week
3,050.74
2,468.45
582.29
RL
1 yd bin
1 x/week
$
134.00
$
121.70
$
12.30
RL
1 yd bin
2 x/week
270.58
243.75
26.83
RL
1 yd bin
3 x/week
409.73
365.45
44.28
RL
1 yd bin
4 x/week
551.46
487.50
63.96
RL
1 yd bin
5 x/week
695.76
609.25
86.51
RL
1 yd bin
6 x/week
842.64
730.85
111.79
(No longer offered to new customers)
RL
2 yd bin
1 x/week
$
202.95
$
188.15
$
14.80
RL
2 yd bin
2 x/week
411.04
338.65
72.39
RL
2 yd bin
3 x/week
624.29
489.55
134.74
RL
2 yd bin
4 x/week
842.69
640.50
202.19
RL
2 yd bin
5 x/week
1,170.28
1,065.50
104.78
RL
2 yd bin
6 x/week
1,419.78
1,278.60
141.18
FL
Compacted Rate Per Yard
$
49.42 per yard
$
43.35
$
6.07
RO
10 yd box
per pickup
155.54
$
145.45
$
10.09
RO
10 yd box
1 x/week
662.18
630.65
31.53
RO
10 yd box
2 x/week
1,355.11
1,261.15
93.96
RO
10 yd box
3 x/week
2,079.67
1,892.35
187.32
RO
10 yd box
4 x/week
2,834.71
2,523.15
311.56
RO
10 yd box
5 x/week
3,620.65
3,153.95
466.70
RO
10 yd box
6 x/week
4,437.49
3,784.75
652.74
RO
12 yd box
per pickup
$
186.65
$
174.60
$
12.05
1/24/2006 5 of 6 San Rafael - Exhibit C Rate Sheet 2006
EXHIBIT C
MARIN SANITARY SERVICE
CITY OF SAN RAFAEL RATE SCHEDULE
Rates Effective: 01/01/2006
Rate Increase: Various
2006
2005
2006
Proposed
RATE
INCREASE
Rate
Commercial (cont.)
RO 18 yd box
per pickup
$
279.98
$ 232.80
$
47.18
RO 18 yd box
1 x/week
1,189.38
1,009.00
180.38
RO 18 yd box
2 x/week
2,434.39
2,017.25
417.14
RO 18 yd box
3 x/week
3,735.01
3,026.95
708.06
RO 18 yd box
4 x/week
5,091.26
4,035.90
1,055.36
RO 18 yd box
5 x/week
6,503.12
5,044.85
1,458.27
RO 18 yd box
6 x/week
7,970.61
6,053.85
1,916.76
RO 20 yd box
per pickup
$
311.09
$ 258.70
$
52.39
RO 20 yd box
1 x/week
1,321.54
1,121.05
200.49
RO 20 yd box
2 x/week
2,704.88
2,242.10
462.78
RO 20 yd box
3 x/week
4,150.01
3,500.25
649.76
RO 20 yd box
4 x/week
5,656.95
4,667.05
989.90
RO 20 yd box
5 x/week
7,225.69
5,833.80
1,391.89
RO 20 yd box
6 x/week
8,856.23
7,000.55
1,855.68
RO 25 yd box
per pickup
$
388.86
$ 361.90
$
26.96
RO 25 yd box
1 x/week
1,848.66
1,568.20
280.46
RO 25 yd box
2 x/week
3,783.83
3,136.45
647.38
RO 25 yd box
3 x/week
5,578.05
4,704.70
873.35
RO 25 yd box
4 x/week
7,603.41
6,272.90
1,330.51
RO 25 yd box
5 x/week
9,711.97
7,841.15
1,870.82
RO 25 yd box
6 x/week
11,903.61
9,409.40
2,494.21
RO Compacted Rate
Per Yard
$
49.42
$ 43.35
$
6.07
Lock Charges - single pickup
$
3.02
$ 2.75
$
0.27
Lock Charges - weekly pickup
13.70
12.45
1.25
Compacted refuse w/o recyclables
49.42
43.35
6.07
Compacted refuse with recyclables
40.72
34.65
6.07
Refuse per yard - per pickup
19.09
17.35
1.74
Box Rental - 1 yard
40.43
36.75
3.68
Box Rental - 2 yard
45.49
41.35
4.14
Box Rental - 3-5 yard
50.33
45.75
4.58
Box Rental - 6 yard
56.87
51.70
5.17
Box Rental - 10 yard
67.10
61.00
6.10
Box Rental - 18 yard
134.48
122.25
12.23
Box Rental - 20 yard
136.46
124.05
12.41
Box Rental - 25 yard
142.18
129.25
12.93
Return Trip Charge
29.59
26.90
2.69
Steam Clean Bin Charge
59.29
53.90
5.39
Overweight Charge Per Ton'
111.49
101.35
10.14
***Comm'I boxes exceeding 300lbs/yard
1/24/2006 6 of 6 San Rafael - Exhibit C Rate Sheet 2006
Exhibit D
Other Franchisors
Report
FRANCHISORS OF MARIN SANITARY SERVICE
REVIEW OF MARIN SANITARY SERVICE'S
2006 RATE APPLICATION
HILTON FARNKOPF & HOBSON, LLC
a
.H
December 6, 2005
HILTON FARNKOPF & HOBSON, LLC
Advisory Services to
Municipal Management
2175 N. California Boulevard, Suite 990
Walnut Creek, California 94596
Telephone: 925/977-6950
Fax: 925/977-6955
www.hfh-consultants.com
December 6, 2005
Mr. Kenneth Nordhoff
Finance Director
City of San Rafael
1400 Fifth Avenue
San Rafael, CA 94915-1560
Mr. Alan H. Petrie
District Manager
Las Gallinas Sanitary District
300 Smith Ranch Road
San Rafael, CA 94903
Northern California
Southern California
Central California
Robert D. Hilton, CMC
John W. Farnkopf, PE
Laith B. Ezzet, CMC
Mr. Gary Broad
Administrator
Town of Ross
31 Sir Francis Drake Blvd.
Ross, CA 94957
Mr. Barry K. Hogue
Mr. Jeff Rawles
Ms. Jean Bonander
District Manager
Manager, Special Projects
City Manager
Ross Valley Sanitary District
County of Marin
City of Larkspur
2000 Larkspur Landing Circle
3501 Civic Center Drive, Rm. 404
420 Magnolia Avenue
Larkspur, CA 94939
San Rafael, CA 94903-4155
Larkspur, CA 94939
Subject: Review of Marin Sanitary Service's 2006 Rate Application
Dear Ms. Bonander and Messrs. Nordhoff, Hogue, Petrie, Rawles, and Broad:
This report documents I Elton Farnkopf & Hobson, LLC's (HF&H) findings and
recommendations from our review of Marin Sanitary Service's (MSS) application for a 3.8%
increase to its solid waste rates, effective January 1, 2006 (Application), submitted to the Cities
of San Rafael and Larkspur, the Town of Ross, the County of Marin, and the Las Gallinas and
Ross Valley Sanitary Districts (collectively referred to as "Franchisors").' MSS also requested
an additional 6.9% increase to the City of San Rafael solid waste rates to compensate for the
revenue shortfall resulting from the transition of customers from the Las Gallinas Sanitary
District rates to the City of San Rafael rates. The revenue shortfall was created primarily due
to the increase in franchise fees. We will provide, under separate cover, to the City of San
Rafael, our analysis used in determining an additional rate increase to compensate MSS.
Findings
Based on our review of the Application, performed in accordance with the Rate Index
Methodology, we determined that a total increase of 2.3% to current rate revenues is necessary
to compensate MSS for its expenses and provide it the agreed-upon level of profit. This lower
increase is based on several adjustments to MSS' rate calculation (agreed-upon by MSS
Management and HF&H) as described in Section IV of the report and reflected in Attachment
9
1 Refer to Attachment 1.
MHILTON FARNKOPF & HOBSON, LLC
Marin Franchisors Group
December 6, 2005
Page 2
Survey of Comparable Rates
Attachment 4 includes HF&H's survey of solid waste rates at various residential and
commercial service levels for jurisdictions located throughout the Bay Area. The survey
shows the Franchisors' average residential rate for 32 gallon service is slightly lower
($0.21/month) than the average of the Bay Area jurisdictions included in the survey
(Attachment 5). The Franchisors' residential rates are 22% lower ($4.16/ month) than the other
Bay Area jurisdictions with similar services. The Franchisors' commercial rates for a 3 -yard
bin serviced one time per week range from $218.10 (RVSD) to $256.00 (Larkspur). The average
rate for the Franchisors' is $241.31 which is 11.2% less than the other Bay Area jurisdictions
with similar services and 3.3% less than all Bay Area jurisdictions included in the survey
(Attachment 6).
We caution the Franchisors that this survey is presented for information only. They should
not draw conclusions from this information, because rate comparisons are intrinsically
difficult. This difficulty results from differences in items 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).
We would like to express our appreciation to Company 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,
HILTON FARNKOPF & HOBSON, LLC
Robert D. Hilton, CMC
President
cc: Ms. Marva Sheehan, Hilton Farnkopf & Hobson, LLC
Mr. Joseph Garbarino, Marin Sanitary Service
Mr. Joseph J. Garbarino, Marin Sanitary Service
Ms. Patricia Garbarino, Marin Sanitary Service
Mr. Ray Holmes, Marin Sanitary Service
S: \ Clients � S \ Saii Rafael \ 2005 - SW\ 53710 - Rate Review \ Report \ Draft Report _11-30-05.doc
Franchisors of Marin Sanitan/ Service Table of Contents
Review of Maritr Sattitanj Service's 2006 Rate Application — Draft Report
TABLE OF CONTENTS
SECTIONI. BACKGROUND........................................................................................................................1
DESCRIPTION OF SERVICES...................................................................................................................1
SECTION II. RATE REVIEW APPROACH................................................................................................... 2
SCOPEOF WORK.................................................................................................................................... 2
LIMITATIONS.......................................................................................................................................... 2
SECTION III. MARIN SANITARY SERVICE'S PROJECTION METHODOLOGY ........................................ 3
REVENUES.............................................................................................................................................. 3
EXPENSES............................................................................................................................................... 3
PROFIT.................................................................................................................................................... 4
SECTION IV. PROPOSED ADJUSTMENTS................................................................................................. 5
ADJUSTMENTS TO 2005 PROJECTED REVENUES................................................................................... 6
ADJUSTMENTS TO 2005 PROJECTED EXPENSES.................................................................................... 6
SECTIONV. RATE ADJUSTMENT.............................................................................................................. 9
ATTACHMENTS
Attachment 1 - Marin Sanitary Service Rate Application Summary
Attachment 2 -Hilton Farnkopf & Hobson Adjustment Summary
Attachment 3 - Adjusted Rate Application Summary
Attachment 4 - Rate Survey
Attachment 5 - Chart of Residential 32 -Gallon Rates
Attachment 6 - Chart of Commercial 3-CY Rates
December 6, 2005
Franchisors of Matin Sanitanl Service Background
Review of Marirt Sanitaiij Service's 2006 Rate Application — Draft Report
SECTION I. BACKGROUND
Description of Services
Marin Sanitary Service (MSS) provides solid waste, 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 and Ross Valley
Sanitary Districts (collectively referred to as "Franchisors"). In addition, MSS and its related
entities (Marin Resource and Recovery (MRR) and Marin Resource Recovery Center (MRRC)),
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,
Fairfax, and San Quentin prison. MSS also provides non -franchised debris box 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
MSS' transfer station (Marin Sanitary Service Transfer Station) then transports it to the
Redwood Sanitary Landfill. MSS delivers recyclable materials to the 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 MRRC facility where recyclable materials are extracted from the waste stream, processed,
and marketed. MRRC delivers residual waste, remaining after the recyclable materials are
extracted, to the transfer station. This residual waste is transferred to Redwood Sanitary
Landfill or Potrero Hills Landfill.
New Recvclina Services
Marin Sanitary Service (MSS) proposes to change the method of residential recycling collection
from a three -stream to a dual -stream process, in response to customer demand for a more
convenient method of recycling. The dual -stream recycling program will be phased in over
several years and will enhance customer satisfaction through the use of a wheeled cart, while
still ensuring the highest quality of finished product.
MSS plans to convert six routes of the 9.5 recycling routes during 2006, distributing 14,000 carts
to customers. Each route will be serviced by new dual -stream trucks. The new trucks will meet
all of the State of California clean air diesel regulations and will replace the oldest vehicles of
the truck fleet. The conversion of the Franchisors' Group routes will continue through 2007
with the purchasing of new trucks and carts as needed.
Decetrtber 6, 2005
Franchisors of Marin Sanitan/ Service Rate Review Approach
Review of Maritt Sanitanj Service's 2006 Rate Application — Draft Report
SECTION II. RATE REVIEW APPROACH
Scope of Work
Rate Adjustment Methodology
The Rate Index Methodology was developed and approved in 1995. This method was used to
determine 2006 rates, based on the projected results of operations from the 2005 rate review
adjusted by change in certain indices (e.g., consumer price index, employment cost index and
the transportation index) and 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) and
revenues (e.g., collection rate revenues).
The Franchisors engaged HF&H in August 2005 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 July 8, 2005.
Limitations
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 Smith and Associates has issued an unqualified opinion of MSS' 2004
financial statements.
Our conclusions are based 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.
December 6, 2005
Franchisors of Marin Sanitanl Service Marin Sanitanl Service's Projection Methodology
Review of Marin Sanitary Service's 2006 Rate Application — Draft Report
SECTION III. MARIN SANITARY SERVICE'S PROJECTION
METHODOLOGY
On September 8, 2005, MSS submitted a rate application to the Franchisors requesting that solid
waste collection rates be increased by 3.8%, effective January 1, 2006. They also requested an
additional 6.9% increase to the City of San Rafael's solid waste collection rates to compensate
for additional expenses, predominantly additional franchise fees due to the City of San Rafael,
as the result of the transition of Las Gallinas "City" accounts to the City of San Rafael. (A
summary of MSS' rate application is included as Appendix A). The following describes MSS'
methodology in projecting 2006 revenues and expenses.
Revenues
Route Revenues
MSS projected its net 2006 rate revenues ($19,525,974) by annualizing the revenues received
through July 2005 and calculating franchise fees payable to each jurisdiction in accordance with
the franchise agreements.
Non -Regulated Revenues
MSS projected 2006 non-regulated revenues of $48,090 by annualizing revenues received
through June 2005. The non-regulated revenues are disposal fees received at the transfer station
for the transfer, transport, and disposal of solid waste from MSS' recycling facility (MRR) and
Household Hazardous Waste.
Expenses
MSS projected its 2006 expenses by:
• Wages. Multiplying 2005's estimated wages and salaries expense by 1 plus the 1.1 %
percentage change in the San Francisco -Oakland -San Jose Metropolitan Consumer
Price Index (Urban Wage Earners) from June 2004 to June 2005.
• Benefits. Multiplying 2005's estimated benefits expense by 1 plus the 4.9%
percentage change in the Employment Cost Index -Benefits (Private Industry
Workers) from June 2004 to June 2005.
• Disposal Fees. Multiplying 2005's estimated disposal expense by 1. MSS does not
anticipate a change in its per -ton tip fee at Redwood Landfill. MSS proposed an
adjustment of $247,937 to adjust the 2004 disposal expense to actual and to project
the 2006 disposal expense by annualizing disposal costs through June 2005.
• Fuel. Multiplying 2005's estimated fuel expense by 1 plus the 19.6% change in the
Consumer Price Transportation Index - Motor Fuel (All Urban Consumers) from
July 2004 to July 2005. MSS proposed an additional adjustment of $63,331 to reflect
the current trend in fuel prices.
December 6, 2005
Franchisors of Marin Sanitan/ Service Marin Sanitan/ Service's Projection Methodology
Review of Marin Sanitanj Service's 2006 Rate Application — Draft Report
• Maintenance. Multiplying 2005's estimated maintenance expense by 1 plus the 3.2%
percentage change in the Consumer Price Transportation Index - Motor Vehicle
Maintenance and Repair (All Urban Wage Earners) from July 2004 to July 2005.
• Depreciation/Lease. Adding current asset values to the values of replacement
vehicles, replacement containers, and computer equipment MSS is planning to
acquire, and capital expenses related to retrofitting vehicles to be in compliance with
California's new CARB regulations.
• Other Operating/G&A. Multiplying 2004's estimated other operating/G&A
expense by 1 plus the 1.1 % percentage change in the San Francisco -Oakland -San Jose
Metropolitan Consumer Price Index (All Urban Consumers) from July 2004 to July
2005. MSS proposed an adjustment of $84,020 to reflect the current JPA fees per ton.
• Interest. Interest expense was calculated using amortization tables to calculate the
actual interest portion of future debt payments.
Profit
MSS calculated its 2005 profit of $1,735,489, applying a 90.5% pre-tax operating ratio, to its 2006
total projected expenses eligible for profit.
December 6, 2005
Franchisors of Matin Sanitan/ Service Proposed Adjustments
Reviezv of Marin Sanitan,/ Service's 2006 Rate Application — Draft Report
SECTION IV. PROPOSED ADJUSTMENTS
The following is a summary of I iF&H's proposed adjustments to MSS' projected 2006 revenues,
expenses, and profit.
8. Adjusted Net Route Revenue (Line 3 + Line 6 + Line 7) 18,118
9. Non -Regulated Revenues Projected by MSS 48
11. Total Projected Net Revenues (Line 8 + Line 9) 18,166
EXPENSES
12.
Operating Expenses Eligible for Profit Projected by MSS
Exhibit 1
13.
Marin Sanitary Service - Rate Adjustment Calculation
14.
As Adjusted By HF&H
130
15.
($000's Unless Otherwise Indicated)
(27)
16.
Workers Compensation
Projected
17.
Disposal Fees
YE 2006
REVENUES
Adjusted Operating Expenses
16,394
1.
Route Revenue Projected By MSS
19,526
2.
Route Revenue Adjustment
102
3.
Adjusted Gross Route Revenues
19,628
4.
Less: Franchise Fees Projected By MSS
(1,304)
5.
Recalculation of Franchise Fees Based on Revenue Adj. Above
(10)
6.
Adjusted Franchise Fees
(1,314)
7.
Less: Vehicle Impact Fees Projected by MSS
(196)
8. Adjusted Net Route Revenue (Line 3 + Line 6 + Line 7) 18,118
9. Non -Regulated Revenues Projected by MSS 48
11. Total Projected Net Revenues (Line 8 + Line 9) 18,166
EXPENSES
12.
Operating Expenses Eligible for Profit Projected by MSS
16,533
13.
HF&H Operating Expense Adjustments
14.
Fuel Expenses
130
15.
Depreciation
(27)
16.
Workers Compensation
(219)
17.
Disposal Fees
(22)
18.
Adjusted Operating Expenses
16,394
19.
Profit at 90.5%, Operating Ratio Projected by MSS
1,735
20.
Recalculation of Profit Based on 90.5% Op Ratio
(15)
21.
Adjusted Profit
1,721
22-
Interest Expense Projected by MSS
496
23.
HF&H Interest Expense Adjustment
(21)
24.
Adjusted Interest Expense
474
25. Total Revenue Requirement (Lines 18 + Line 21 + Line 24) 18,589
26. Surplus/ (Deficit) (Line 11 - Line 25) (423)
27. Rate Adjustment (-Line 25 / Line 8) 2.3 " "'
5 Deceniber 6, 2005
Franchisors of Morin Sanitanl Service Proposed Adjustments
Review of Marin Sanitanj Service's 2006 Rate Application — Draft Report
Adiustments to 2006 Proiected Revenues
Route Revenue Adjustments (Line 2): HF&H recommends a $111,898 net increase in projected
route revenues. MSS' projection methodology of annualizing July 2005 YTD route revenues
resulted in 2005 estimated revenues being approximately 0.2% less than expected based on the
rate increases effective January 1, 2005. HF&H found November and December 2004 revenues
were uncharacteristically high while January and February 2005 revenues were
uncharacteristically low. To calculate an accurate estimate of 2006 revenues based on current
subscription levels and current rates, HF&H and MSS agreed on restating projected revenues by
using actual revenue through September 2005 and projecting October, November, and
December 2005 by multiplying October, November, and December 2004 actual revenues by the
percentage change in actual revenue from January through September 2005 compared to
January through September 2004.
Effective March 1, 2005, customers in the Las Gallinas Sanitary District that reside within the
City of San Rafael were converted to the City of San Rafael approved refuse rates. This
conversion caused an increase in revenue collected by MSS. FIF&H recommends a $10,073
reduction to the Las Gallinas - City revenue in order for the Franchisors Group to not be
affected by the conversion. After this adjustment, the Las Gallinas - City revenue will equal the
2005 revenue projected during last year's rate review. There are additional expenses,
predominately franchise fees, incurred by MSS as a result of the account conversion. These
expenses and the additional revenues collected beyond the projected 2005 revenue are included
in the separate report for the City of San Rafael.
In addition, HF&H tested rates before and after the rate increase for each member agency to
verify MSS implemented the correct rate adjustment. The rate adjustments were made between
January 2005 and July 2005 and were effective January 1, 2005; therefore, MSS applied a one-
time retroactive adjustment to each account as necessary. HF&H also tested accounts from each
member agency to verify the correct calculation of the retroactive adjustment and to verify the
retroactive adjustment was billed. HF&H found only minor immaterial discrepancies, which
are not systematic, and is confident MSS correctly implemented the required rate increase and
retroactive adjustments.
Franchise Fee Adjustment (Line 5): HF&H recommends a $9,789 net increase in projected
franchise fees as the result of the revenue adjustment described above.
Adiustments to 2006 Proiected Expenses
Fuel Expenses: HF&H recommends a $129,579 increase in fuel expenses. Based on the
following:
• A $10,063 increase due to an adjustment for the difference between actual 2004 fuel
expenses and projected 2004 fuel expenses, determined from the 2005 rate review.
The 2004 rate adjustment made as a result of the 2005 rate review was calculated
based on a projected 23.5% increase in fuel expense. The actual percentage increase
in the price per gallon of fuel was 25.9%.
December 6, 2005
Franchisors of Marin Sanitan/ Seruice Proposed Adjushnents
Review of Marin Sanitanj Service's 2006 Rate Application — Draft Report
An $83,414 increase due to a 30.1% increase in 2005 fuel expenses over 2004 actual
fuel expenses. The Franchisors and MSS agreed to make an adjustment in the 2006
review to reimburse MSS for greater -than -projected fuel expenses if the price -per -
gallon increased greater than the 16.5% CPI used to project 2005 fuel expenses from
last year's 2004 base. As described above, HF&H reconciled the base calculated in
last year's review and has increased the 2004 base by $10,683. 1 IF&H's review of the
fuel pricing concluded the current 2005 price per gallon is 30.1% greater than the
adjusted 2004 base (based on 8 months of fuel expenses). Again, due to the volatility
of diesel fuel prices, the 30.1% projected increase may over- or under -project actual
fuel expenses for 2005. MSS and Franchisors may agree to make a one-time
adjustment in the 2007 detail review for the difference between projected 2005 fuel
expenses and actual 2005 fuel expenses based on 12 months of fuel expenses
incurred by MSS.
A $36,102 increase in projected 2006 fuel expense due to the difference between MSS'
calculations and HF&H's calculations. For the rate application, MSS calculated
projected 2006 fuel expense based on the 2004 base fuel expense calculated in last
year's review and multiplied the base amount by 1 plus the percentage change in the
fuel index from August 2003 to August 2004 (16.5%) to calculate the 2005 expense,
and then multiplied the 2005 base by 1 plus the percentage change in actual fuel
expense between 2005 fuel expenses and actual 2004 fuel expenses (30.1%). As
described above, HF&H increased the 2004 base by $10,683 (from $517,735 to
$527,798), and increased the 2005 base by $83,414 (from $603,161 to $686,575). HF&H
applied the percentage change in the fuel index (19.6%) to the new base in projecting
2006 fuel expenses. Again, due to the volatility of diesel fuel prices, the 19.6%
projected increase may over- or under -project actual fuel expenses. MSS and
Franchisors may agree to make a one-time adjustment in the 2007 detail review for
the difference between projected 2006 fuel expenses and actual 2006 fuel expenses.
Depreciation/Lease (Line 15): HF&H recommends a $33,000 decrease in depreciation expense,
due to the following:
A $7,000 decrease to remove 6 months of depreciation for assets budgeted for
replacement in July 2006 for which MSS mistakenly included 12 months of
depreciation in its rate application;
• A $2,257 decrease to remove depreciation expense related to non-regulated operations
mistakenly included in the regulated operations rate application.
An $18,158 decrease to adjust depreciation to reflect the expected cost of 2006
purchases and accurately reflect the anticipated roll-out date of the dual stream
recycling program.
Workers Compensation (Line 16): IIF&H recommends decreasing workers compensation by
$218,746 due to the following:
• A $218,746 decrease to reflect a decrease in workers compensation Mod rate from 81 to
73 and a decrease in its premiums.
December 6, 2005
Franchisors of Marin Sanitan/ Service Proposed Adjttshnents
Review of Marin Sanitanj Service's 2006 Rate Application — Draft Report
Disposal Fees/Yard Waste Processing (Line 17): HF&H recommends decreasing solid waste
disposal expense and yard waste processing fees by $22,042, due to the following:
A $16,435 decrease in disposal expense based upon HF&H's recalculation of the 2004
disposal expense based upon tonnage reports provided by MSS.
A $5,607 decrease in disposal expense for 2005. HF&H projected solid waste disposal
and yard waste processing costs by annualizing the actual June YTD disposal and
processing tonnage and excluded all non-regulated (i.e., San Anselmo, Fairfax, and
RVSD-North) tonnage.
Profit (Line 20): HF&H recommends decreasing MSS' profit by $14,555 due to the adjustments
recommended above.
Interest Expense (Line 23): HF&H recommends decreasing interest expenses by $21,431 to
exclude interest expense relating to non -franchised operations that were included in error, to
adjust the financing of the 2006 expected purchases, to accurately reflect the roll-out date of the
dual stream recycling program, and to exclude interest expense included twice in error.
December 6, 2005
Franchisors of Marin Sanitan/ Service Rate Adiushnent
Reviezv of Marin Sanitanj Service's 2006 Rate Application — Draft Report
SECTION V. RATE ADJUSTMENT
Rate Adiustment
Based on a revenue requirement of $18,589,455 for the calendar year 2006 resulting from our
recommended adjustments to MSS' projected revenues, expenses, and profit (calculated based
on a 90.5% operating ratio) and the inclusion of the City of San Rafael's vehicle impact fee, we
recommend a rate increase of 2.3 %, effective January 1, 2006.
December 6, 2005