Press Alt + R to read the document text or Alt + P to download or print.

No preview available

The URL can be used to link to this page

Home My WebLink AboutCM Refuse Rate Review; HF&H 2015C1rY OF� Agenda Item No: 3. k Meeting Date: August 3, 2015 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: CITY MANAGER Prepared by: Cory Bytof City Manager Approval: Sustainability & Volunteer Program Coordinator TOPIC: CONTRACT FOR ANNUAL REFUSE RATE REVIEW SUBJECT: RESOLUTION AUTHORIZING CITY MANAGER TO ENTER INTO A CONTRACT WITH HF AND H CONSULTANTS, LLC IN AN AMOUNT NOT TO EXCEED $83,495 FOR WORK ON REFUSE RATE REVIEW FOR THE CITIES OF SAN RAFAEL & LARKSPUR, TOWN OF ROSS, LAS GALLINAS VALLEY SANITARY DISTRICT AND ROSS VALLEY -SOUTH RECOMMENDATION: Adopt Resolution. EXECUTIVE SUMMARY: Council is required to set refuse rates annually for residents and businesses within City boundaries. This contract provides for HF&H Consultants, LLC, to conduct the annual rate review for refuse and recycling services by Marin Sanitary Service (MSS) on behalf of the City as well as several other local agencies that also utilize MSS for similar services. This review is an in-depth Detailed Review, which happens once every three years, as opposed to Indexed Reviews, which happen in the two -years in between. The review provides information as to MSS's current and projected expenses and revenues, and allows Council to set rates based on the most accurate information possible. BACKGROUND: A number of local agencies within Marin County have franchise agreements with Marin Sanitary Service (MSS) to provide refuse collection and recycling services to residential and commercial customers. The agencies with similar contracts with MSS are the cities of San Rafael and Larkspur, the Town of Ross, Ross Valley South (Marin County), and the Las Gallinas Valley Sanitary District. Due to common interests and common contracts, these agencies have formed a Franchisors' Group. MSS also has contracts with San Anselmo and Fairfax but these contracts are somewhat different so those towns are not included in the formal FOR CITY CLERK ONLY File No.: t -F -3-3ob Council Meeting: Disposition: eC_-_0 Lb f t c,,u L_" 5? 4 SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 Franchisors' Group. For a number of years, the Franchisors' Group has worked together to make certain that the ratepayers (citizens and businesses) are being properly charged for the various levels of service provided. In order to substantiate the rate schedules, the Franchisors' Group developed a jointly sponsored program designed to conduct routine reviews of Marin Sanitary Service's operating efficiencies and expenses contained in the annual rate application. In 2012, City staff conducted a consultant selection process for the annual rate application review. A committee consisting of Mayor Phillips and Councilmember Connolly (as the initial Sustainability Subcommittee), Nancy Mackle, Jim Schutz, Stephanie Lovette, Steve Devine from the County Waste JPA, and Sustainable San Rafael's President Bill Carney conducted the interviews. The Council's Sustainability Subcommittee voted to recommend HF&H Consultants, LLC ("HF&H") for the 2013 review. The Franchisors' Group members have been pleased with the work HF&H has done with the rate reviews and have elected to contract with them again this year. ANALYSIS: In 1995, the Franchisors' Group adopted a methodology to set MSS' refuse collection and disposal rates. The methodology was designed to provide a detailed review of MSS' franchised operations every three years. In the interim two-year period, annual summary or indexed reviews would be conducted. In a detailed review year, all categories are compared to actual costs and revenues, a new three-year projection is set, and rates are compared to other Bay Area communities. The 2013 review was the first detailed review to include additional analyses pursuant to 2012 amendments to the Franchise Agreement. This additional work included analysis on the new commercial food scrap program, the creation of a recycling revenue stabilization fund for diversion programs, and revenue projections. Results from the 2013 detailed review were used to establish 2013 refuse and recycling rates for the Franchisors' Group and included a three-year Operational Improvement Plan. This year's review will be a detailed review, will include all the elements listed above and will provide an analysis of the outcomes of the Operational Improvement Plan. HF&H submitted a proposal dated July 21, 2015 setting forth a scope of services for the 2016 rate review for the Franchisors' Group, and a fee estimate for that work for an amount not to exceed $83,495. The proposal includes a survey of rates in other similar jurisdictions, a presentation to the Franchisors' Group for input and revisions, and one presentation to the governing body of each member agency. The attached Resolution would authorize the City Manager to execute an agreement with HF&H on the terms set forth in HF&H's proposal dated July 21, 2015, in a form to be approved by the City Attorney. FISCAL IMPACT: The proposal from HF&H for the summary review is a not to exceed amount of $83,495, which will be apportioned to each jurisdiction based on number of accounts SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3 in their service area. Last year the amount apportioned to San Rafael was $37,403.60. Any additional meetings beyond the one to the governing body of each member agency would be charged to the individual agencies on a time and materials basis. The cost for this contract is passed through to MSS and is not an expenditure of either the City of San Rafael or the other members of the Franchisors' Group. However, the contract payments are absorbed into MSS operating expenses which are the basis for the annual refuse collection rates. All participating agencies have received a copy of this agreement and are aware of the scope of work and project costs. ACTION REQUIRED: Adopt the resolution as presented. ATTACHMENTS: Resolution with Exhibit `A`, HF&H Proposal dated July 21, 2015 RESOLUTION NO. 13984 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL AUTHORIZING THE CITY MANAGER TO ENTER INTO A CONTRACT WITH HF AND H CONSULTANTS, LLC IN AN AMOUNT NOT TO EXCEED $831495 FOR WORK ON REFUSE RATE REVIEW FOR THE CITIES OF SAN RAFAEL & LARKSPUR, TOWN OF ROSS, LAS GALLINAS VALLEY SANITARY DISTRICT AND ROSS VALLEY -SOUTH THE CITY COUNCIL OF THE CITY OF SAN RAFAEL RESOLVES AS FOLLOWS: The CITY MANAGER and CITY CLERK are authorized to execute, on behalf of the City of San Rafael, an agreement with HF&H Consultants for Refuse Rate Review of Marin Sanitary Service's Rate Application for the 2016 calendar year, in a form to be approved by the City Attorney. The agreement shall be for an amount not to exceed $83,495, the terms described in the July 21, 2015 HF&H Consultants, LLC Proposal attached hereto as Exhibit A and incorporated herein by reference. I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of said City held on Monday the third day of August 2015, by the following vote, to wit: AYES: COUNCILMEMBERS: Bushey, Colin, Gamblin, McCullough & Mayor Phillips NOES: COUNCIL,MEMBERS: None ABSENT: COUNCILMEMBERS: None 1_581 - Qa" R." . ESTHER C. BEIRNE, City Clerk AGREEMENT FOR PROFESSIONAL SERVICES FOR REVIEW OF MARIN SANITARY SERVICES 2016 RATE APPLICATION This Agreement is made and entered into this SPA day of Q ul vsL- , 2015, by and between the CITY OF SAN RAFAEL (hereinafter "CITY"), and HF&H Consultants, LLC (hereinafter "CONTRACTOR"). RECITALS WHEREAS, the City of Larkspur, the City of San Rafael, the Town of Ross, the County of Marin and the Las Gallinas Sanitary District (hereinafter "FRANCHISORS' GROUP") have similar franchise agreements with Marin Sanitary Services; and WHEREAS, the FRANCHISORS' GROUP utilizes jointly sponsored programs to achieve financial and staff time savings through collaborative analyses such as the annual reviews of Marin Sanitary Services operations and expenses pursuant to the Franchise Agreements; and WHEREAS, the FRANCHISORS' GROUP desires to utilize the services of the CONTRACTOR to conduct this review; and WHEREAS, the CITY has in the past acted as the contracting agency on behalf of the FRANCHISORS' GROUP, and has agreed to do so in this instance as well; and WHEREAS, the FRANCHISORS' GROUP entities (each a "Participating Entity" and collectively, "the Participating Entities") agree to share equally in the cost of the analysis, to be paid for by Marin Sanitary Service and allocated through each city/town's annual rate setting review as set forth below; AGREEMENT NOW, THEREFORE, the parties hereby agree as follows: PROJECT COORDINATION A. CITY. The City Manager shall be the representative of the CITY for all purposes Rev. Date: 1/30/14 under this Agreement. Sustainability and Volunteer Program Coordinator Corgi ttoof is hereby designated the PROJECT MANAGER for the CITY, and said PROJECT MANAGER shall supervise all aspects of the progress and execution of this Agreement. B. CONTRACTOR. CONTRACTOR shall assign a single PROJECT DIRECTOR to have overall responsibility for the progress and execution of this Agreement for CONTRACTOR. Marva Sheehan is hereby designated as the PROJECT DIRECTOR for CONTRACTOR. Should circumstances or conditions subsequent to the execution of this Agreement require a substitute PROJECT DIRECTOR for any reason; the CONTRACTOR shall notify the CITY within ten (10) business days of the substitution. 2. DUTIES OF CONTRACTOR CONTRACTOR shall perform the duties and/or provide services as described in CONTRACTOR's Proposal to Review Marin Sanitary Service's Application for 2016 Rates, dated July 21, 2015, attached hereto as Exhibit " A " attached and incorporated herein. 3. DUTIES OF CITY CITY shall cooperate with CONTRACTOR in his performance under this agreement and shall compensate CONTRACTOR as provided herein. 4. COMPENSATION. For the full performance of the services described herein by CONTRACTOR, CONTRACTOR shall be compensated as described in Exhibit" A " in a total contract amount not to exceed $83,495.00. It is understood and agreed by the parties that payment of compensation hereunder shall be made as follows: CONTRACTOR shall submit monthly invoices to CITY for review and approval, then CITY shall forward CONTRACTOR's approved invoices to Marin Sanitary Services, which shall remit payment on each invoice directly to CONTRACTOR within thirty (30) of receipt thereof. By separate agreements, Marin Sanitary Services and the Participating Entities have agreed that Marin Sanitary Services shall pass on the costs paid to CONTRACTOR hereunder by allocation of a proportionate share thereof, in accordance with the agreed upon rate setting methodology set forth in that Participating Entity's individual franchise agreement with Marin Sanitary Service, not to exceed $55,000 to CITY. 5. TERM OF AGREEMENT. The term of this Agreement shall commence upon the date of execution of this agreement and shall end on June 30, 2016. 6. TERMINATION. A. Discretionary. Either party may terminate this Agreement without cause upon Rev. date: 1/30/14 2 thirty (30) days written notice mailed or personally delivered to the other party. B. Cause. Either party may tenninate this Agreement for cause upon fifteen (15) days written notice mailed or personally delivered to the other party, and the notified party's failure to cure or correct the cause of the tennination, to the reasonable satisfaction of the party giving such notice, within such fifteen (15) day time period. C. Effect of Termination. Upon receipt of notice of termination, neither party shall incur additional obligations under any provision of this Agreement without the prior written consent of the other. D. Return of Documents. Upon termination, any and all CITY documents or materials provided to CONTRACTOR and any and all of CONTRACTOR's documents and materials prepared for or relating to the performance of its duties under this Agreement, shall be delivered to CITY as soon as possible, but not later than thirty (30) days after termination. 7. OWNERSHIP OF DOCUMENTS. The written documents and materials prepared by the CONTRACTOR in connection with the performance of its duties under this Agreement, shall be the sole property of CITY. CITY may use said property for any purpose, including projects not contemplated by this Agreement. INSPECTION AND AUDIT. Upon reasonable notice, CONTRACTOR shall make available to CITY, or its agent, for inspection and audit, all documents and materials maintained by CONTRACTOR in connection with its performance of its duties under this Agreement. CONTRACTOR shall fully cooperate with CITY or its agent in any such audit or inspection. 9. ASSIGNABILITY. The parties agree that they shall not assign or transfer any interest in this Agreement nor the performance of any of their respective obligations hereunder, without the prior written consent of the other party, and any attempt to so assign this Agreement or any rights, duties or obligations arising hereunder shall be void and of no effect. 10. INSURANCE. A. Scope of Coverage. During the term of this Agreement, CONTRACTOR shall maintain, at no expense to CITY, the following insurance policies: 1. A commercial general liability insurance policy in the minimum amount of one million dollars ($1,000,000) per occurrence/two million dollars ($2,000,000) aggregate, for death, bodily injury, personal injury, or property damage. 2. An automobile liability (owned, non -owned, and hired vehicles) insurance Rev. date: 1/30/14 policy in the minimum amount of one million dollars ($1,000,000) dollars per occurrence. 3. If any licensed professional performs any of the services required to be performed under this Agreement, a professional liability insurance policy in the minimum amount of one million dollars ($1,000,000) per occurrence/two million dollars ($2,000,000) aggregate, to cover any claims arising out of the CONTRACTOR's performance of services under this Agreement. Where CONTRACTOR is a professional not required to have a professional license, CITY reserves the right to require CONTRACTOR to provide professional liability insurance pursuant to this section. 4. If it employs any person, CONTRACTOR shall maintain worker's compensation and employer's liability insurance, as required by the State Labor Code and other applicable laws and regulations, and as necessary to protect both CONTRACTOR and CITY against all liability for injuries to CONTRACTOR's officers and employees. CONTRACTOR'S worker's compensation insurance shall be specifically endorsed to waive any right of subrogation against CITY. B. Other Insurance Requirements. The insurance coverage required of the CONTRACTOR in subparagraph A of this section above shall also meet the following requirements: 1. Except for professional liability insurance, the insurance policies shall be specifically endorsed to include the CITY, its officers, agents, employees, and volunteers, as additionally named insureds under the policies. 2. The additional insured coverage under CONTRACTOR'S insurance policies shall be primary with respect to any insurance or coverage maintained by CITY and shall not call upon CITY's insurance or self-insurance coverage for any contribution. The "primary and noncontributory" coverage in CONTRACTOR'S policies shall be at least as broad as ISO form CG20 01 04 13. 3. Except for professional liability insurance, the insurance policies shall include, in their text or by endorsement, coverage for contractual liability and personal injury. 4. CONTRACTOR will provide the PROJECT MANAGER with thirty (30) days written notice prior to any planned cancellation or planned non-payment of premium, or planned modifications of the terms and conditions of said insurance policies. In addition, immediately upon CONTRACTOR's receipt during the term of this Agreement of any notice of cancellation or of intent to cancel any policy of insurance required herein issued by CONTRACTOR's insurance carrier for any reason, CONTRACTOR shall provide PROJECT MANAGER with a copy of said notice by personal delivery or overnight mail. 5. If the insurance is written on a Claims Made Form, then, following termination of this Agreement, said insurance coverage shall survive for a period of not less than five years. Rev. date: 1/30/14 4 6. The insurance policies shall provide for a retroactive date of placement coinciding with the effective date of this Agreement. 7. The limits of insurance required in this Agreement may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and noncontributory basis for the benefit of CITY (if agreed to in a written contract or agreement) before CITY'S own insurance or self-insurance shall be called upon to protect it as a named insured. 8. It shall be a requirement under this Agreement that any available insurance proceeds broader than or in excess of the specified minimum insurance coverage requirements and/or limits shall be available to CITY or any other additional insured party. Furthennore, the requirements for coverage and limits shall be: (1) the minimum coverage and limits specified in this Agreement; or (2) the broader coverage and maximum limits of coverage of any insurance policy or proceeds available to the named insured; whichever is greater. C. Deductibles and SIR'S. Any deductibles or self-insured retentions in CONTRACTOR's insurance policies must be declared to and approved by the PROJECT MANAGER and City Attorney, and shall not reduce the limits of liability. Policies containing any self-insured retention (SIR) provision shall provide or be endorsed to provide that the SIR may be satisfied by either the named insured or CITY or other additional insured party. At CITY's option, the deductibles or self-insured retentions with respect to CITY shall be reduced or eliminated to CITY's satisfaction, or CONTRACTOR shall procure a bond guaranteeing payment of losses and related investigations, claims administration, attorney's fees and defense expenses. D. Proof of Insurance. CONTRACTOR shall provide to the PROJECT MANAGER or CITY'S City Attorney all of the following: (1) Certificates of Insurance evidencing the insurance coverage required in this Agreement; (2) a copy of the policy declaration page and/or endorsement page listing all policy endorsements for the commercial general liability policy, and (3) excerpts of policy lan$!ua$!e or specific endorsements evidencin14 the other insurance requirements set forth in this A14reement. CITY reserves the right to obtain a full certified copy of any insurance policy and endorsements from CONTRACTOR. Failure to exercise this right shall not constitute a waiver of the right to exercise it later. The insurance shall be approved as to form and sufficiency by PROJECT MANAGER and the City Attorney. 11. INDEMNIFICATION. A. Except as otherwise provided in Paragraph B., CONTRACTOR shall, to the fullest extent permitted by law, indemnify, release, defend with counsel approved by CITY, and hold harmless CITY, its officers, agents, employees and volunteers (collectively, the "City Indemnitees"), from and against any claim, demand, suit, judgment, loss, liability or expense of any kind, including but not limited to attorney's fees, expert fees and all other costs and fees of litigation, (collectively "CLAIMS"), arising out of CONTRACTOR'S performance of its obligations or conduct of its operations under this Agreement. The CONTRACTOR's Rev. date: 1/30/14 obligations apply regardless of whether or not a liability is caused or contributed to by the active or passive negligence of the City Indemnitees. However, to the extent that liability is caused by the active negligence or willful misconduct of the City Indemnitees, the CONTRACTOR's indemnification obligation shall be reduced in proportion to the City Indemnitees' share of liability for the active negligence or willful misconduct. In addition, the acceptance or approval of the CONTRACTOR's work or work product by the CITY or any of its directors, officers or employees shall not relieve or reduce the CONTRACTOR's indemnification obligations. In the event the City Indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from CONTRACTOR'S performance of or operations under this Agreement, CONTRACTOR shall provide a defense to the City Indemnitees or at CITY'S option reimburse the City Indemnitees their costs of defense, including reasonable attorneys' fees, incurred in defense of such claims. B. Where the services to be provided by CONTRACTOR under this Agreement are design professional services to be performed by a design professional as that term is defined under Civil Code Section 2782.8, CONTRACTOR shall, to the fullest extent permitted by law, indemnify, release, defend and hold harmless the City Indemnitees from and against any CLAIMS that arise out of, pertain to, or relate to the negligence, recklessness, or willful misconduct of CONTRACTOR in the performance of its duties and obligations under this Agreement or its failure to comply with any of its obligations contained in this Agreement, except such CLAIM which is caused by the sole negligence or willful misconduct of CITY. C. The defense and indemnification obligations of this Agreement are undertaken in addition to, and shall not in any way be limited by, the insurance obligations contained in this Agreement, and shall survive the termination or completion of this Agreement for the frill period of time allowed by law. 12. NONDISCRIMINATION. CONTRACTOR shall not discriminate, in any way, against any person on the basis of age, sex, race, color, religion, ancestry, national origin or disability in connection with or related to the performance of its duties and obligations under this Agreement. 13. COMPLIANCE WITH ALL LAWS. CONTRACTOR shall observe and comply with all applicable federal, state and local laws, ordinances, codes and regulations, in the performance of its duties and obligations under this Agreement. CONTRACTOR shall perform all services under this Agreement in accordance with these laws, ordinances, codes and regulations. CONTRACTOR shall release, defend, indemnify and hold harmless CITY, its officers, agents and employees from any and all damages, liabilities, penalties, fines and all other consequences from any noncompliance or violation of any laws, ordinances, codes or regulations. 14. NO THIRD PARTY BENEFICIARIES. CITY and CONTRACTOR do not intend, by any provision of this Agreement, to create in Rev. date: 1/30/14 6 any third party, any benefit or right owed by one party, under the terms and conditions of this Agreement, to the other party. 15. NOTICES. All notices and other communications required or permitted to be given under this Agreement, including any notice of change of address, shall be in writing and given by personal delivery, or deposited with the United States Postal Service, postage prepaid, addressed to the parties intended to be notified. Notice shall be deemed given as of the date of personal delivery, or if mailed, upon the date of deposit with the United States Postal Service. Notice shall be given as follows: TO CITY: Cory Bytof Sustainability & Volunteer Program Coordinator City of San Rafael 1400 Fifth Avenue P.O. Box 151560 San Rafael, CA 94915-1560 TO CONTRACTOR: Marva Sheehan, CPA Vice President HF&H Consultants, LLC 201 North Civic Drive, Suite 230 Walnut Creek, CA 94596 16. INDEPENDENT CONTRACTOR. For the purposes, and for the duration, of this Agreement, CONTRACTOR, its officers, agents and employees shall act in the capacity of an hldependent Contractor, and not as employees of the CITY. CONTRACTOR and CITY expressly intend and agree that the status of CONTRACTOR, its officers, agents and employees be that of an Independent Contractor and not that of an employee of CITY. 17. ENTIRE AGREEMENT— AMENDMENTS. A. The terns and conditions of this Agreement, all exhibits attached, and all documents expressly incorporated by reference, represent the entire Agreement of the parties with respect to the subject matter of this Agreement. B. This written Agreement shall supersede any and all prior agreements, oral or written, regarding the subject matter between the CONTRACTOR and the CITY. C. No other agreement, promise or statement, written or oral, relating to the subject matter of this Agreement, shall be valid or binding, except by way of a written amendment to this Agreement. Rev. date: 1/30/14 D. The terms and conditions of this Agreement shall not be altered or modified except by a written amendment to this Agreement signed by the CONTRACTOR and the CITY. E. If any conflicts arise between the terms and conditions of this Agreement, and the terms and conditions of the attached exhibits or the documents expressly incorporated by reference, the terms and conditions of this Agreement shall control. 18. SET-OFF AGAINST DEBTS. CONTRACTOR agrees that CITY may deduct from any payment due to CONTRACTOR under this Agreement, any monies which CONTRACTOR owes CITY under any ordinance, agreement, contract or resolution for any unpaid taxes, fees, licenses, assessments, unpaid checks or other amounts. 19. WAIVERS. The waiver by either party of any breach or violation of any term, covenant or condition of this Agreement, or of any ordinance, law or regulation, shall not be deemed to be a waiver of any other term, covenant, condition, ordinance, law or regulation, or of any subsequent breach or violation of the same or other term, covenant, condition, ordinance, law or regulation. The subsequent acceptance by either party of any fee, performance, or other consideration which may become due or owing under this Agreement, shall not be deemed to be a waiver of any preceding breach or violation by the other party of any term, condition, covenant of this Agreement or any applicable law, ordinance or regulation. 20. COSTS AND ATTORNEY'S FEES. The prevailing party in any action brought to enforce the terms and conditions of this Agreement, or arising out of the performance of this Agreement, may recover its reasonable costs (including claims administration) and attorney's fees expended in connection with such action. 21. CITY BUSINESS LICENSE / OTHER TAXES. CONTRACTOR shall obtain and maintain during the duration of this Agreement, a CITY business license as required by the San Rafael Municipal Code CONTRACTOR shall pay any and all state and federal taxes and any other applicable taxes. CITY shall not be required to pay for any work performed under this Agreement, until CONTRACTOR has provided CITY with a completed Internal Revenue Service Form W-9 (Request for Taxpayer Identification Number and Certification). 22. APPLICABLE LAW. The laws of the State of California shall govern this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day, month Rev. date: 1/30/14 and year first above written. CITY OF SAN RAFAEL 4M S HUTZ, Cityag r ATTEST: ESTHER C. BEIRNE, City Cleric APPROVED AS TO FORM: L: ROBERT F. EPSTEIN, City A otney Rev. date: 1/30/14 CONTRACTOR t By: Name,MARVAM. SHEEHAN Title: Vice President 201 N. Civic Drive, Suite 230 Walnut Creek, California 94596 Telephone: 925/977-6950 Fax: 925/977-6955 www.hfh-consultants.com July 21, 2015 Sent via email Mr. Daniel Schwarz City Manager City of Larkspur 400 Magnolia Avenue Larkspur, CA 94939 Mr. Saaid Fakharzadeh Assistant Director of Public Works County of Marin 3501 Civic Center Drive, Room 304 San Rafael, CA 94903-4155 Ms. Susan McGuire Administrative Services Manager Las Gallinas Valley Sanitary District 300 Smith Ranch Road San Rafael, CA 94903 Tomorrow's Resources Today Mr. Jim Schutz Assistant City Manager City of San Rafael 1400 Fifth Avenue, Room 203 P.O. Box 151560 San Rafael, CA 94915-1560 Mr. Joe Chinn Town Manager Town of Ross 31 Sir Francis Drake Boulevard Ross, CA 94957 Robert D. Hilton, CMC John W. Farnkopf, PE Laith B. Ezzet, CMC Richard J. Simonson, CMC Marva M. Sheehan, CPA Subject: Proposal to Review Marin Sanitary Service's Application for 2016 Rates Dear Messrs. Schutz, Schwarz, Fakharzadeh, and Chinn, and Ms. McGuire: HF&H Consultants, LLC (HF&H) is pleased to present this proposal to perform a review of Marin Sanitary Service's (MSS) application for rates to be effective January 1, 2016. BACKGROUND In 1995, the Cities of San Rafael and Larkspur, the Town of Ross, the Ross Valley and Las Gallinas Valley Sanitary Districts, and the County of Marin (the Franchisors') adopted a new methodology that would be used to set MSS' rates for refuse collection and disposal as well as recyclable and yard waste collection and processing. The methodology is based on a detailed review (performed every three years) with summary reviews (based largely on the detailed review, the use of indices, and the review of a few key matters such as revenues and disposal costs) during the intervening years. In 2002, MSS was awarded the franchise to provide services to the Town of San Anselmo. Also in 2002, MSS was awarded the franchise to provide services to the north area of the Ross Valley Sanitary District. In 2004, MSS acquired the Fairfax franchise. These expansions of service, and the need to allocate MSS' costs among the Franchisors' and these new jurisdictions, make even more important the proper HF&H Consultants, LLC Page 1 of 12 Marin Franchisors' July 21, 2015 Page 2 of 12 g Tomorrow's Resources Today allocation of MSS' costs among the jurisdictions to ensure that the Franchisors' are not paying a share of the costs to service San Anselmo, Fairfax, and the north area of the Ross Valley Sanitary District. In 2005, customers that were in the Las Gallinas Valley Sanitary District franchise area were integrated into the customer base of the City of San Rafael. In 2012, the Franchisors' engaged HF&H to assist in the negotiations with MSS to revise the Contractor's Revenue Requirement and Rate Adjustment methodology. Significant revisions included documentation of: 1) procedures that had been agreed to by MSS and the Franchisors' over the years but not documented; 2) related -party fees and how they will be adjusted in the future; 3) additional reporting to be submitted with the rate adjustment applications; and, 4) procedures to develop a reserve for diversion programs by sharing in Marin Resource Recovery Association's net revenues (net recyclables processing revenues). The last detailed review was performed in 2012 for rates to be effective in 2013. Rates for 2014 and 2015 were set using the indexed method. For a review of rates to be effective in 2016, we have been asked to: • Perform a detailed review; and, • Perform a survey of similar rates from cities in the Bay Area receiving comparable services. SCOPE OF SERVICES Our scope of services is comprised of the following tasks: , 1a Kick-off Meeting with Franchisors'. HF&H will meet with the Franchisors' to confirm our understanding of the engagement, timing and identify issues from the Franchisors' perspective. 1b Kick -Off Meeting with MSS. HF&H will meet with MSS to receive MSS' Application and a presentation by MSS of the major matters leading to any rate adjustments. 1c Completeness and Compliance Review. Upon receipt of the Application, HF&H staff will test the current Application for compliance with the current procedures. We will seek explanations for any unusual findings and we will inform MSS of any matters that come to our attention leading us to believe the Application is either not in compliance or is inconsistent. 1d Mathematical Accuracy and Logical Consistency Review. HF&H staff will test the mathematical accuracy of all of the tables contained in the Application. We will verify that the Application is internally consistent and that any summary schedules agree to the supporting schedules or worksheets. We will seek explanations for any unusual findings and we will inform MSS in writing of any matters that may come to our attention that lead us to believe that the Application is not mathematically correct or logically consistent. HF&H Consultants, LLC Page 2 of 12 Marin Franchisors' July 21, 2015 Page 3 of 12 T. Tomorrow's Resources Today 1e Reconciliation to Financial Statements. HF&H staff will reconcile the Application to MSS' most recent financial statements. We will seek explanations for any unusual findings and we will inform MSS in writing of any adjustments that may come to our attention that may be necessary to reconcile the Application to the financial statements. 2a Review of Expenses. We will test the following expenses for reasonableness based on historical trends, consistency with operating data, and consistency with management's plans: Wages and Salaries; Benefits Expense; Workers Compensation Expense, Transfer, Transport, Disposal, and Processing Expense; Fuel and Oil Expense; Equipment and Vehicle Maintenance Expense; Depreciation/Lease Expense; JPA Fees, Interest Expense; and, Miscellaneous Expenses. HF&H will test individual transactions to ensure non -allowable costs, including non -allowable related party transactions, have been excluded from the 2016 forecasted annual cost of operations. We will seek explanations for any unusual findings and we will inform MSS of any adjustments that we believe are necessary to these estimated and projected expenses. 2b Review of Commercial Mixed Materials Processing Rate and Organic Materials Processing Rate. HF&H will review the rate used by MSS in its application to determine it was calculated in accordance with the rate setting methodology. 2c Review of Non -Franchisors' Affiliate Transfer and Transport Adjustment. HF&H will review MSS' calculation of the rate based on the results of our review in other areas. 2d Review Allocation Methodology. HF&H will review the methodology used by MSS to allocate operating expenses to the individual jurisdictions to ensure consistency with the compensation methodology. We will seek explanations for any unusual findings and will inform MSS of any adjustments that may come to our attention that we may believe are necessary to the estimated and projected expenses. 2e Review Management Salaries. HF&H will review the management salaries to determine the allocation to the Franchisors' operations is reasonable based on a time study provided by MSS and that overall compensation is reasonable based on similar positions in the industry. 2f Variance Analysis. HF&H staff will review MSS' reported actual 2014, estimated 2015, and forecasted 2016 annual cost of operations by developing a variance analysis and will investigate significant variances between periods. 2g Review Profit Calculation. HF&H staff will calculate a reasonable profit using a 90.5% operating ratio applied to the forecasted annual cost of operations, as those forecasted annual cost of operations submitted in the Application may be adjusted. HF&H Consultants, LLC Page 3 of 12 Marin Franchisors' July 21, 2015 Page 4 of 12 ig Tomorrow's Resources Today The Rate Adjustment Factor is determined using the projected contractor compensation based on the projected costs of operations and profit, projected pass-through costs and projected revenues. 3a Review Revenue Projection. HF&H will review and verify the accuracy of MSS projected rate revenue at current rates. We will verify the calculation has been done in accordance with the methodology outlined in the agreement. 3b Review Non -Rate Revenue. HF&H staff will review non -rate revenue for consistency and reasonableness. We will seek explanations for any unusual findings and inform MSS of any adjustments that may come to our attention that we may believe are necessary to these estimated and projected revenues. 3c Review Calculation of Rate Adjustment Factor. HF&H staff will recalculate a Rate Adjustment Factor as the forecasted annual cost of operations and projected revenues submitted in the Application may be adjusted based on our review. 17 1 IM131? "51 a -•. r:� HF&H staff will review MSS' cost projections and anticipated rate impact for any anticipated new programs in the coming rate year. We will compile rates currently in effect in other municipalities in Marin County, as well as neighboring jurisdictions in other counties. When possible, we will draw data from our existing project files. If necessary, we will contact cities to obtain or clarify information. We will work with the Franchisors'to identify which communities to include in the survey. We will prepare a table and graphs summarizing the results. Task 6: Review of the Calculation '"`' Reserve for Future Programs 6a HF&H will review MSS' calculation of the increase or decrease to the reserve for future diversion programs in accordance with the procedures developed in 2012. 6b We will summarize the findings of Task 6a. HF&H Consultants, LLC Page 4 of 12 Marin Franchisors' July 21, 2015 Page 5 of 12 Tomorrow's Resources Today 7a HF&H staff will meet once with MSS management to discuss the preliminary findings from our review and receive additional information from the Company that may revise our findings. 7b HF&H staff will draft an initial report based on the results from the above meeting and will provide it to MSS management for review. Thereafter, we will confer with MSS management to discuss its comments regarding our initial draft report. 7c Based on the above meeting, HF&H will make any appropriate revisions to our initial draft report and present a preliminary draft to the Franchisors'. Thereafter, we will confer with the Franchisors' to discuss its comments regarding our preliminary draft report. 7d HF&H staff will prepare for and attend up to three informational meetings as requested by members of the Franchisors'. 7e Based on the comments from the Franchisors', we will amend the preliminary draft report and issue the final report. 7f HF&H will present our findings at one meeting for each of the members of the Franchisors'. SCHEDULE Recognizing that we are reliant upon the Company for the timely preparation of documents and response to our questions, we plan to perform this engagement in accordance with the following schedule: Activity MSS Submits Application Completion Date August 3, 2015 Kick -Off Meetings with Franchisors'/ MSS August 5, 2015 HF&H Commences Field Work August 6, 2015 HF&H Completes Field Work September 15, 2015 HF&H Reviews Results with MSS September 16, 2015 HF&H Provides MSS Draft Report September 25, 2015 MSS Provides Comments on Draft Report September 30, 2015 HF&H Presents Draft Report to Franchisors' for Comment October 6, 2015 HF&H Delivers Final Report October 20, 2015 Boards/Councils Receive Report and Adopt Revised Rates October 2015 — January 2016 Rates Effective January 1, 2016 HF&H Consultants, LLC Page 5 of 12 Marin Franchisors' July 21, 2015 Page 6 of 12 LIMITATIONS Tomorrow's Resources Today Every approach to an engagement is limited in its scope. The major limitations regarding our proposed scope of work are: • The scope of work described above is different from an audit of financial statements performed in accordance with Generally Accepted Auditing Standards, which is performed by MSS' auditor. • We will perform the tasks presented above in a manner that will allow us to achieve the objectives of the review in a cost-effective manner. We will rely on MSS' auditor with regard to matters related to MSS' internal controls. Our testing of MSS' Application (using judgmental samples of transactions and analytical procedures) will only be for the purpose of providing evidence that allows us to reach conclusions and recommendations regarding MSS' Application. • We will conduct our review in accordance with the Contractor's Compensation and Rate Adjustment Methodology recently adopted by the Franchisors'. This methodology includes the review of MSS management's projection of the future results of operations. We will review these projections for reasonableness and propose adjustments, as appropriate. We accept no responsibility to update these adjusted projected results after the date of our report. Additionally, the projections result from assumptions regarding future events and management's planned response to them. Frequently, future events do not occur as anticipated and the difference can be material. Further, we have neither included in the scope of our work modifications to any of the individual Franchisor's rates nor rate structures. If any of the Franchisors' would like us to perform modifications to their rate structures, we would be pleased to do so based on arrangements made with the requesting Franchisor. Finally, we have included in our scope of work one presentation to the Franchisors' governing bodies. If additional meetings are requested, we would be pleased to do so based on arrangements made with the requesting Franchisor. FIRM AND PROPOSED ENGAGEMENT TEAM QUALIFICATIONS Since its founding over 25 years ago, HF&H Consultants, LLC has been providing independent solid waste rate review services to municipalities throughout California and the West Coast. Of particular relevance to this engagement, HF&H has been the Franchisors' consultant in this area for more than 15 years. During that period, we have helped the Franchisors' to substantially reduce the cost of the review through changes in methodology, while ensuring that both the customers' rates and MSS' level of profit are reasonable. Marva Sheehan, Vice President, will serve as Engagement Director and will be responsible for directing the project and for your satisfaction with the engagement. Ms. Sheehan has been the Engagement Director or Manager for the MSS reviews since 2006. She is a Certified Public Accountant with over 35 years of accounting and auditing experience; 23 of which have been in the solid waste industry. She will HF&H Consultants, LLC Page 6 of 12 Marin Franchisors' July 21, 2015 Page 7 of 12 g Tomorrow's Resources Today supervise and review the work performed by the staff assigned to the project to ensure that it is performed in accordance with the proposed scope of work, our detailed work plans, and the Franchisor's objectives. She will also make presentations of our findings to the various councils and boards. Scott Holt, an accountant with more than 18 years of industry controller experience, will serve as Engagement Manager. Mr. Holt was the Engagement Manager for the 2015 rate setting process for the Franchisors' and for the Town of Fairfax. Additionally, he has performed rate adjustment reviews for the Cities of Sunnyvale and Union City, and contract compliance reviews for the Cities of Dana Point, Lawndale, Bellflower and Long Beach. Ms. Sheehan and Mr. Holt will be assisted by less senior, experienced staff at lower billing rates, who will perform certain tasks under their direct supervision FEES Based on the tasks performed during our last detailed review and consideration to review new programs if required, and the level of effort necessary to address them, 1 estimate our professional fees and out-of- pocket expenses for the scope of work described above to be $83,495, as shown in Attachment A. As in the past, we will bill you in accordance with our standard rates and practices (as described in Attachment B) up to the $83,495. It is possible that the level of effort to perform the review and address the additional matters may exceed our estimate and, if so, we will contact you before proceeding to obtain your approval or direction. Also, it is possible that our level of effort will be less and if so we will, of course, bill you the lesser amount. We sincerely appreciate the continued confidence you have expressed in HF&H and we are committed to do our best to fulfill your objectives. Should you have any questions, please call me at (925) 977-6961. Sincerely, HF&H CONSULTANTS, LLC Marva M. Sheehan, CPA Vice President HF&H Consultants, LLC Page 7 of 12 Marin Franchisors' July 21, 2015 Page 8 of 12 Attachments: A) Fee Estimate — Franchisors' B) Standard Hourly Rates and Billing Arrangements cc: Mr. Joe Garbarino, Jr., Marin Sanitary Service Ms. Patty Garbarino, Marin Sanitary Service Mr. Neil Roscoe, Marin Sanitary Service Mr. Cory Bytof, City of San Rafael Ms. Kim Erwin, HF&H ng Tomorrow's Resources Today HF&H Consultants, LLC Page 8 of 12 ATTACHMENT A: FEE ESTIMATE HF&H Consultants, LLC Page 9 of 12 ATTACHMENT B: H F&H Consultants, LLC Standard Hourly Rates and Billing Arrangements (Effective January 1, 2015)1 Hourly rates for professional and administrative personnel are as follows: Position President Senior Vice President & Vice President Senior Project Manager Senior Associate/Project Manager Associate Analyst Assistant Analyst Administrative Staff Standard charges for common direct expenses are as follows: Automobile Travel Document Reproduction Facsimile Telephone Public Conveyances Postage Overnight Mail and Couriers iiia f�I9" Rate $265 $240-$265 $219-$230 $185-$219 $140-$150 $100-$130 $100 Prevailing IRS mileage rate 15 cents per page (black & white) 75 cents per page (color) No charge No charge Actual Actual Actual Our policy is to bill for our services and direct expenses based on the standard hourly rates of the staff member assigned, multiplied by the time required to perform the client -related tasks, plus the subcontractor services as described above. In implementing this policy we adhere to the following practices: 1 Litigation Support and Expert Witness Services are not covered by this schedule of fees and expenses. HF&H Consultants, LLC Page 10 of 12 ATTACHMENT B (CONT): HF&H Consultants, LLC Standard Hourly Rates and Billing Arrangements • It is our standard practice to e-mail invoices to our clients, although hard copies of invoices can be sent to clients on request. • We round to the nearest one-half hour (e.g., if two hours and 50 minutes are spent on a task, it is recorded as three hours, if two hours and 10 minutes are spent on a task, it is recorded as two hours). A minimum charge of one-half hour is charged for any client work performed in a day. • We attempt to schedule travel time before and after normal work hours and we do not bill for this time. If travel occurs during normal work hours and we can use public conveyances, we attempt to use the time productively for the benefit of the client or for another client and this time is billed to the appropriate client. If we must travel during business hours and cannot use the time productively or use a public conveyance, we bill the time to the client on whose behalf we are traveling. • Because public meetings (e.g., Board of Supervisors, City Council, and Board of Directors meetings) generally occur after business hours and are not conducted in accordance with strict schedules, our standard policy is to bill a minimum two-hour charge. • We do not mark up out-of-pocket expenses, however, we may charge administrative or professional time related to the provision of the goods and services associated with these charges. Costs for outside consultants and subcontractors are billed at actual cost plus a 15 percent administrative fee. • Mileage fees are based on the round-trip distance from the point of origin. • If a client's change to a previously scheduled meeting results in penalties being assessed by a third party (e.g., airline cancellation fee), then the client will bear the cost of these penalties. While no minimum fee for a consulting engagement has been established, it is unlikely (given the nature of our services) that we can gain an understanding of a client's particular requirement, identify alternatives, and recommend a solution in less than twenty-four hours. We maintain the following policies of insurance with carriers doing business in California: • Comprehensive General Liability Insurance ($2,000,000) • Workers' Compensation ($1,000,000) • Professional Liability Insurance ($2,000,000) • Hired and Non -Owned Auto Liability ($2,000,000) HF&H Consultants, LLC Page 11 of 12 ATTACHMENT B (CONT): H F&H Consultants, LLC Standard Hourly Rates and Billing Arrangements All costs incurred in complying with special insurance, licensing, or permit requirements, including but not limited to naming client as an additional insured and waiver of subrogation, become the responsibility of the client and are not included in the fees for services or direct charges but are billed in addition to the contract at cost, plus any professional or administrative fees. Our time reporting and billing system has certain standard formats that are designed to provide our clients with a detailed invoice of the time and charges associated with their engagement. (We typically discuss these with our clients at our kick-off meeting.) We are also pleased to provide our clients with a custom invoice format but we will have to bill the client for any additional costs associated with their unique requirements. Billings for professional services and charges are submitted every month, in order that our clients can more closely monitor our services. A late fee of one and one-half percent per month is applied to balances unpaid after thirty (30) days. HF&H Consultants, LLC Page 12 of 12 August 1, 2015 Patty Garbarino Marin Sanitary Service, Marin Resource Recovery Center 565 Jacoby Street San Rafael, CA 94901 MAYOR GARY O. PHILLIPS VICE MAYOR DAMON CONNOLLY COUNCILMEMBER MARIBETH BUSHEY COUNCILMEMBER KATE COLIN COUNCILMENIBER ANDREW CUYUGAN MCCULLOUGH CITY MANAGER'S OFFICE SUSTAINABILITY PROGRAM PHONE: (415) 485-3407 Re: Payment for agreement with HF&H Consultants on behalf of Franchisors' Group Dear Patty, This letter is to memorialize our mutual discussions and understanding of the terms under which the City of San Rafael has agreed to enter into a professional services agreement with HF&H Consultants (draft attached) on behalf of the Franchisors' Group of entities (the City of San Rafael, the Town of Larkspur, the Town of Ross, the County of Marin including within the Ross Valley Sanitary District boundaries, and the Las Gallinas Valley Sanitary District) for the purpose of preparing the annual rate review for the Franchisors' Group. The City of San Rafael and Marin Sanitary Service have agreed that Marin Sanitary Service will assume the obligation of the City under the professional services agreement to pay HF&H Consultants its fees for service, not to exceed $83,495.00, in accordance with the terms of the scope of work and agreement. We have further agreed that Marin Sanitary Service may subsequently allocate these fees equally among the five entities through the annual rate application, and that these fees shall not exceed $55,000 for San Rafael. In the case of the Franchisors' Group entities, this allocation will be in accordance with the provisions of the Franchise Agreement, Exhibit B.1, Contractor's Revenue Requirement and Rate Adjustment, dated October 1, 2012. Please sign below to indicate your agreement to finance this project in the manner described above. For ari ary Service Vatty Garb rino, -esident 1400 FIFTH AVENUE • PO Boy: 151560 • SAN RAFAEL, CA 94915-1560 WW W.CITYOFSANRAFAEL.ORG 201 N. Civic Drive, Suite 230 Walnut Creek, California 94596 Telephone: 925/977-6950 Fax: 925/977-6955 www.hfh-consultants.com July 21, 2015 Sent via email Mr. Daniel Schwarz City Manager City of Larkspur 400 Magnolia Avenue Larkspur, CA 94939 Mr. Saaid Fakharzadeh Assistant Director of Public Works County of Marin 3501 Civic Center Drive, Room 304 San Rafael, CA 94903-4155 Ms. Susan McGuire Administrative Services Manager Las Gallinas Valley Sanitary District 300 Smith Ranch Road San Rafael, CA 94903 EXHIBIT A caging 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. Jim Schutz Assistant City Manager City of San Rafael 1400 Fifth Avenue, Room 203 P.O. Box 151560 San Rafael, CA 94915-1560 Mr. Joe Chinn Town Manager Town of Ross 31 Sir Francis Drake Boulevard Ross, CA 94957 Subject: Proposal to Review Marin Sanitary Service's Application for 2016 Rates Dear Messrs. Schutz, Schwarz, Fakharzadeh, and Chinn, and Ms. McGuire: HF&H Consultants, LLC (HF&H) is pleased to present this proposal to perform a review of Marin Sanitary Service's (MSS) application for rates to be effective January 1, 2016. BACKGROUND In 1995, the Cities of San Rafael and Larkspur, the Town of Ross, the Ross Valley and Las Gallinas Valley Sanitary Districts, and the County of Marin (the Franchisors') adopted a new methodology that would be used to set MSS' rates for refuse collection and disposal as well as recyclable and yard waste collection and processing. The methodology is based on a detailed review (performed every three years) with summary reviews (based largely on the detailed review, the use of indices, and the review of a few key matters such as revenues and disposal costs) during the intervening years. In 2002, MSS was awarded the franchise to provide services to the Town of San Anselmo. Also in 2002, MSS was awarded the franchise to provide services to the north area of the Ross Valley Sanitary District. In 2004, MSS acquired the Fairfax franchise. These expansions of service, and the need to allocate MSS' costs among the Franchisors' and these new jurisdictions, make even more important the proper HF&H Consultants, LLC Page 1 of 12 Marin Franchisors' July 21, 2015 Page 2 of 12 naging Tomorrow's Resources Today allocation of MSS' costs among the jurisdictions to ensure that the Franchisors' are not paying a share of the costs to service San Anselmo, Fairfax, and the north area of the Ross Valley Sanitary District. In 2005, customers that were in the Las Gallinas Valley Sanitary District franchise area were integrated into the customer base of the City of San Rafael. In 2012, the Franchisors' engaged HF&H to assist in the negotiations with MSS to revise the Contractor's Revenue Requirement and Rate Adjustment methodology. Significant revisions included documentation of: 1) procedures that had been agreed to by MSS and the Franchisors' over the years but not documented; 2) related -party fees and how they will be adjusted in the future; 3) additional reporting to be submitted with the rate adjustment applications; and, 4) procedures to develop a reserve for diversion programs by sharing in Marin Resource Recovery Association's net revenues (net recyclables processing revenues). The last detailed review was performed in 2012 for rates to be effective in 2013. Rates for 2014 and 2015 were set using the indexed method. For a review of rates to be effective in 2016, we have been asked to: • Perform a detailed review; and, • Perform a survey of similar rates from cities in the Bay Area receiving comparable services. SCOPE OF SERVICES Our scope of services is comprised of the following tasks: 1a Kick-off Meeting with Franchisors'. HF&H will meet with the Franchisors' to confirm our understanding of the engagement, timing and identify issues from the Franchisors' perspective. 1b Kick -Off Meeting with MSS. HF&H will meet with MSS to receive MSS' Application and a presentation by MSS of the major matters leading to any rate adjustments. is Completeness and Compliance Review. Upon receipt of the Application, HF&H staff will test the current Application for compliance with the current procedures. We will seek explanations for any unusual findings and we will inform MSS of any matters that come to our attention leading us to believe the Application is either not in compliance or is inconsistent. 1d Mathematical Accuracy and Logical Consistency Review. HF&H staff will test the mathematical accuracy of all of the tables contained in the Application. We will verify that the Application is internally consistent and that any summary schedules agree to the supporting schedules or worksheets. We will seek explanations for any unusual findings and we will inform MSS in writing of any matters that may come to our attention that lead us to believe that the Application is not mathematically correct or logically consistent. HF&H Consultants, LLC Page 2 of 12 Marin Franchisors' July 21, 2015 Page 3 of 12 aging Tomorrow's Resources Today 1e Reconciliation to Financial Statements. HF&H staff will reconcile the Application to MSS' most recent financial statements. We will seek explanations for any unusual findings and we will inform MSS in writing of any adjustments that may come to our attention that may be necessary to reconcile the Application to the financial statements. 2a Review of Expenses. We will test the following expenses for reasonableness based on historical trends, consistency with operating data, and consistency with management's plans: Wages and Salaries; Benefits Expense; Workers Compensation Expense, Transfer, Transport, Disposal, and Processing Expense; Fuel and Oil Expense; Equipment and Vehicle Maintenance Expense; Depreciation/Lease Expense; JPA Fees, Interest Expense; and, Miscellaneous Expenses. HF&H will test individual transactions to ensure non -allowable costs, including non -allowable related party transactions, have been excluded from the 2016 forecasted annual cost of operations. We will seek explanations for any unusual findings and we will inform MSS of any adjustments that we believe are necessary to these estimated and projected expenses. 2b Review of Commercial Mixed Materials Processing Rate and Organic Materials Processing Rate. HF&H will review the rate used by MSS in its application to determine it was calculated in accordance with the rate setting methodology. 2c Review of Non -Franchisors' Affiliate Transfer and Transport Adjustment. HF&H will review MSS' calculation of the rate based on the results of our review in other areas. 2d Review Allocation Methodology. HF&H will review the methodology used by MSS to allocate operating expenses to the individual jurisdictions to ensure consistency with the compensation methodology. We will seek explanations for any unusual findings and will inform MSS of any adjustments that may come to our attention that we may believe are necessary to the estimated and projected expenses. 2e Review Management Salaries. HF&H will review the management salaries to determine the allocation to the Franchisors' operations is reasonable based on a time study provided by MSS and that overall compensation is reasonable based on similar positions in the industry. 2f Variance Analysis. HF&H staff will review MSS' reported actual 2014, estimated 2015, and forecasted 2016 annual cost of operations by developing a variance analysis and will investigate significant variances between periods. 2g Review Profit Calculation. HF&H staff will calculate a reasonable profit using a 90.5% operating ratio applied to the forecasted annual cost of operations, as those forecasted annual cost of operations submitted in the Application may be adjusted. HF&H Consultants, LLC Page 3 of 12 Marin Franchisors' July 21, 2015 Page 4 of 12 k"MMMM". us aging Tomorrow's Resources Today The Rate Adjustment Factor is determined using the projected contractor compensation based on the projected costs of operations and profit, projected pass-through costs and projected revenues. 3a Review Revenue Projection. HF&H will review and verify the accuracy of MSS projected rate revenue at current rates. We will verify the calculation has been done in accordance with the methodology outlined in the agreement. 3b Review Non -Rate Revenue. HF&H staff will review non -rate revenue for consistency and reasonableness. We will seek explanations for any unusual findings and inform MSS of any adjustments that may come to our attention that we may believe are necessary to these estimated and projected revenues. 3c Review Calculation of Rate Adjustment Factor. HF&H staff will recalculate a Rate Adjustment Factor as the forecasted annual cost of operations and projected revenues submitted in the Application may be adjusted based on our review. HF&H staff will review MSS' cost projections and anticipated rate impact for any anticipated new programs in the coming rate year. F , � � rs .. �� rte, .� � •: .� We will compile rates currently in effect in other municipalities in Marin County, as well as neighboring jurisdictions in other counties. When possible, we will draw data from our existing project files. If necessary, we will contact cities to obtain or clarify information. We will work with the Franchisors' to identify which communities to include in the survey. We will prepare a table and graphs summarizing the results. Task 6: Review of the Calculation of the Reserve for Future Diversion Programs 6a HF&H will review MSS' calculation of the increase or decrease to the reserve for future diversion programs in accordance with the procedures developed in 2012. 6b We will summarize the findings of Task 6a. HF&H Consultants, LLC Page 4 of 12 Managing Tomorrow's Resources Today Marin Franchisors' July 21, 2015 Page 5 of 12 7a HF&H staff will meet once with MSS management to discuss the preliminary findings from our review and receive additional information from the Company that may revise our findings. 7b HF&H staff will draft an initial report based on the results from the above meeting and will provide it to MSS management for review. Thereafter, we will confer with MSS management to discuss its comments regarding our initial draft report. 7c Based on the above meeting, HF&H will make any appropriate revisions to our initial draft report and present a preliminary draft to the Franchisors'. Thereafter, we will confer with the Franchisors' to discuss its comments regarding our preliminary draft report. 7d HF&H staff will prepare for and attend up to three informational meetings as requested by members of the Franchisors'. 7e Based on the comments from the Franchisors', we will amend the preliminary draft report and issue the final report. 7f HF&H will present our findings at one meeting for each of the members of the Franchisors'. SCHEDULE Recognizing that we are reliant upon the Company forthe timely preparation of documents and response to our questions, we plan to perform this engagement in accordance with the following schedule: Activity Completion Date MSS Submits Application August 3, 2015 Kick -Off Meetings with Franchisors' / MSS August 5, 2015 HF&H Commences Field Work August 6, 2015 HF&H Completes Field Work September 15, 2015 HF&H Reviews Results with MSS September 16, 2015 HF&H Provides MSS Draft Report September 25, 2015 MSS Provides Comments on Draft Report September 30, 2015 HF&H Presents Draft Report to Franchisors' for Comment October 6, 2015 HF&H Delivers Final Report October 20, 2015 Boards/Councils Receive Report and Adopt Revised Rates October 2015 —January 2016 Rates Effective January 1, 2016 HF&H Consultants, LLC Page 5 of. 12 Marin Franchisors' July 21, 2015 Page 6 of 12 LIMITATIONS inaging Tomorrow's Resources Today Every approach to an engagement is limited in its scope. The major limitations regarding our proposed scope of work are: • The scope of work described above is different from an audit of financial statements performed in accordance with Generally Accepted Auditing Standards, which is performed by MSS' auditor. • We will perform the tasks presented above in a manner that will allow us to achieve the objectives of the review in a cost-effective manner. We will rely on MSS' auditor with regard to matters related to MSS' internal controls. Our testing of MSS' Application (using judgmental samples of transactions and analytical procedures) will only be for the purpose of providing evidence that allows us to reach conclusions and recommendations regarding MSS' Application. • We will conduct our review in accordance with the Contractor's Compensation and Rate Adjustment Methodology recently adopted by the Franchisors'. This methodology includes the review of MSS management's projection of the future results of operations. We will review these projections for reasonableness and propose adjustments, as appropriate. We accept no responsibility to update these adjusted projected results after the date of our report. Additionally, the projections result from assumptions regarding future events and management's planned response to them. Frequently, future events do not occur as anticipated and the difference can be material. Further, we have neither included in the scope of our work modifications to any of the individual Franchisor's rates nor rate structures. If any of the Franchisors' would like us to perform modifications to their rate structures, we would be pleased to do so based on arrangements made with the requesting Franchisor. Finally, we have included in our scope of work one presentation to the Franchisors' governing bodies. If additional meetings are requested, we would be pleased to do so based on arrangements made with the requesting Franchisor. FIRM AND PROPOSED ENGAGEMENT TEAM QUALIFICATIONS Since its founding over 25 years ago, HF&H Consultants, LLC has been providing independent solid waste rate review services to municipalities throughout California and the West Coast. Of particular relevance to this engagement, HF&H has been the Franchisors' consultant in this area for more than 15 years. During that period, we have helped the Franchisors' to substantially reduce the cost of the review through changes in methodology, while ensuring that both the customers' rates and MSS' level of profit are reasonable. Marva Sheehan, Vice President, will serve as Engagement Director and will be responsible for directing the project and for your satisfaction with the engagement. Ms. Sheehan has been the Engagement Director or Manager for the MSS reviews since 2006. She is a Certified Public Accountant with over 35 years of accounting and auditing experience; 23 of which have been in the solid waste industry. She will HF&H Consultants, LLC Page 6 of 12 Marin Franchisors' July 21, 2015 Page 7of12 caging Tomorrow's Resources Today supervise and review the work performed by the staff assigned to the project to ensure that it is performed in accordance with the proposed scope of work, our detailed work plans, and the Franchisor's objectives. She will also make presentations of our findings to the various councils and boards. Scott Holt, an accountant with more than 18 years of industry controller experience, will serve as Engagement Manager. Mr. Holt was the Engagement Manager for the 2015 rate setting process for the Franchisors' and for the Town of Fairfax. Additionally, he has performed rate adjustment reviews for the Cities of Sunnyvale and Union City, and contract compliance reviews for the Cities of Dana Point, Lawndale, Bellflower and Long Beach. Ms. Sheehan and Mr. Holt will be assisted by less senior, experienced staff at lower billing rates, who will perform certain tasks under their direct supervision FEES Based on the tasks performed during our last detailed review and consideration to review new programs if required, and the level of effort necessary to address them, I estimate our professional fees and out-of- pocket expenses for the scope of work described above to be $83,495, as shown in Attachment A. As in the past, we will bill you in accordance with our standard rates and practices (as described in Attachment B) up to the $83,495. It is possible that the level of effort to perform the review and address the additional matters may exceed our estimate and, if so, we will contact you before proceeding to obtain your approval or direction. Also, it is possible that our level of effort will be less and if so we will, of course, bill you the lesser amount. We sincerely appreciate the continued confidence you have expressed in HF&H and we are committed to do our best to fulfill your objectives. Should you have any questions, please call me at (925) 977-6961. Sincerely, HF&H CONSULTANTS, LLC Marva M. Sheehan, CPA Vice President HF&H Consultants, LLC Page 7 of 12 Marin Franchisors' July 21, 2015 Page 8of12 Attachments: A) Fee Estimate — Franchisors' B) Standard Hourly Rates and Billing Arrangements cc: Mr. Joe Garbarino, Jr., Marin Sanitary Service Ms. Patty Garbarino, Marin Sanitary Service Mr. Neil Roscoe, Marin Sanitary Service Mr. Cory Bytof, City of San Rafael Ms. Kim Erwin, HF&H anaging Tomorrow's Resources Today HF&H Consultants, LLC Page 8 of 12 ATTACHMENT A: FEE ESTIMATE HF&H Consultants, LLC Page 9 of 12 ATTACHMENT B: HF&H Consultants, LLC Standard Hourly Rates and Billing Arrangements (Effective January 1, 2015)1 ouF Hourly rates for professional and administrative personnel are as follows: Position President Senior Vice President & Vice President Senior Project Manager Senior Associate/Project Manager Associate Analyst Assistant Analyst Administrative Staff Standard charges for common direct expenses are as follows: Automobile Travel Document Reproduction Facsimile Telephone Public Conveyances Postage Overnight Mail and Couriers Rate $265 $240-$265 $219-$230 $185-$219 $140-$150 $100-$130 $100 Prevailing IRS mileage rate 15 cents per page (black & white) 75 cents per page (color) No charge No charge Actual Actual Actual Our policy is to bill for our services and direct expenses based on the standard hourly rates of the staff member assigned, multiplied by the time required to perform the client -related tasks, plus the subcontractor services as described above. In implementing this policy we adhere to the following practices: 1 Litigation Support and Expert Witness Services are not covered by this schedule of fees and expenses. HF&H Consultants, LLC Page 10 of 12 ATTACHMENT B (CONT): HF&H Consultants, LLC Standard Hourly Rates and Billing Arrangements It is our standard practice to e-mail invoices to our clients, although hard copies of invoices can be sent to clients on request. We round to the nearest one-half hour (e.g., if two hours and 50 minutes are spent on a task, it is recorded as three hours, if two hours and 10 minutes are spent on a task, it is recorded as two hours). A minimum charge of one-half hour is charged for any client work performed in a day. We attempt to schedule travel time before and after normal work hours and we do not bill for this time. If travel occurs during normal work hours and we can use public conveyances, we attempt to use the time productively for the benefit of the client or for another client and this time is billed to the appropriate client. If we must travel during business hours and cannot use the time productively or use a public conveyance, we bill the time to the client on whose behalf we are traveling. • Because public meetings (e.g., Board of Supervisors, City Council, and Board of Directors meetings) generally occur after business hours and are not conducted in accordance with strict schedules, our standard policy is to bill a minimum two-hour charge. • We do not mark up out-of-pocket expenses, however, we may charge administrative or professional time related to the provision of the goods and services associated with these charges. Costs for outside consultants and subcontractors are billed at actual cost plus a 15 percent administrative fee. • Mileage fees are based on the round-trip distance from the point of origin. • If a client's change to a previously scheduled meeting results in penalties being assessed by a third party (e.g., airline cancellation fee), then the client will bear the cost of these penalties. While no minimum fee for a consulting engagement has been established, it is unlikely (given the nature of our services) that we can gain an understanding of a client's particular requirement, identify alternatives, and recommend a solution in less than twenty-four hours. We maintain the following policies of insurance with carriers doing business in California: • Comprehensive General Liability Insurance ($2,000,000) • Workers' Compensation ($1,000,000) • Professional Liability Insurance ($2,000,000) • Hired and Non -Owned Auto Liability ($2,000,000) HF&H Consultants, LLC Page 11 of 12 ATTACHMENT B (CONT): HF&H Consultants, LLC Standard Hourly Rates and Billing Arrangements All costs incurred in complying with special insurance, licensing, or permit requirements, including but not limited to naming client as an additional insured and waiver of subrogation, become the responsibility of the client and are not included in the fees for services or direct charges but are billed in addition to the contract at cost, plus any professional or administrative fees. Ourtime reporting and billing system has certain standard formats that are designed to provide our clients with a detailed invoice of the time and charges associated with their engagement. (We typically discuss these with our clients at our kick-off meeting.) We are also pleased to provide our clients with a custom invoice format but we will have to bill the client for any additional costs associated with their unique requirements. Billings for professional services and charges are submitted every month, in order that our clients can more closely monitor our services. A late fee of one and one-half percent per month is applied to balances unpaid after thirty (30) days. HF&H Consultants, LLC Page 12 of 12 INSTRUCTIONS: Use this cover sheet with each submittal of a staff report before approval by the City Council. Save staff report (including this cover sheet) along with all related attachments in the Team Drive (T:) 4 CITY COUNCIL AGENDA ITEMS —> YEAR --> MEETING DATE 4 TOPIC Agenda Item # 3 V Date of Meeting: 8/3/2015 From: Cory Bytof Department: Management Services Date: 7/27/2015 Topic: CONTRACT FOR ANNUAL REFUSE RATE REVIEW Subject: RESOLUTION AUTHORIZING CITY MANAGER TO ENTER INTO A CONTRACT WITH HF&H CONSULTANTS, LLC IN AN AMOUNT NOT TO EXCEED $83,495 FOR WORK ON REFUSE RATE REVIEW FOR THE CITIES OF SAN RAFAEL AND LARKSPUR, TOWN OF ROSS, LAS GALLINAS VALLEY SANITARY DISTRICT AND ROSS VALLEY -SOUTH Type: ® Resolution ❑ Ordinance ® Professional Services Agreement ❑ Other: APPROVALS ❑ Department Director Remarks: ® Finance Director Remarks: ® City Attorney Remarks: LG approved 7/27/15- See minor changes to resolution. F71 City Manager Remarks: FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: PROFESSIONAL SERVICES AGREEMENT/CONTRACT COMPLETION CHECKLIST AND ROUTING SLIP Below is the process for getting your professional services agreements/contracts finalized and executed. Please attach this "Completion Checklist and Routing Slip" to the fiont of your contract as you circulate it for review and signatures. Please use this form for all professional services agreements/contracts (not just those requiring City Council approval). This process should occur in the order presented below. Step Responsible Description Completion Department Date 1 City Attorney Review, revise, and comment on draft agreement. See comments on agreement. 7/27/15 2 Contracting Department Forward final agreement to contractor for -' their signature. Obtain at least two signed originals from contractor. 3 Contracting Department Agendize contractor -signed agreement for Council approval, if Council approval necessary (as defined by City Attorney/City Ordinance*). 4 City Attorney Review and approve form of agreement;` bonds, and insurance certificates and } �, endorsements. ( 5 City Manager / Mayor / or Agreement executed by Council authorized Department Head official. /0 6 City Cleric City Cleric attests signatures, retains original�� agreement and forwards copies to thei contracting department. To be completed by Contracting Department: Project Manager: Cory Bytof Project Name: HF&H Agreement Agendized for City Council Meeting of (if necessary): August 3, 2015 If you have questions on this process, please contact the City Attorney's Office at 485-3080. * Council approval is required if contract is over $20,000 on a cumulative basis.