HomeMy WebLinkAboutCC Resolution 12599 (HF&H Refuse Rate Review)RESOLUTION NO. 12599
RESOLUTION AUTHORIZING THE CITY MANAGER TO ENTER INTO
AN AGREEMENT WITH HF &H CONSULTANTS, LLC TO PERFORM A
REVIEW OF MARIN SANITARY SERVICE'S 2009 RATE APPLICATION
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 2009 calendar year, a copy of which is hereby attached and by
this reference made a part hereof.
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 6h day of October, 2008, by the following vote, to wit:
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
Brockbank, Connolly, Heller, Miller & Mayor Boro
None
None
ESTHER C. BEIRNE, City Clerk
Ask
so I ON Aft"Waii Not 11,11 ow m4w"MAW&WIM,
Advisory Services to Municipal Management
2175 N. California Boulevard, Suite 990
Walnut Creek, California 94596
Telephone: 925/977-6950
Fax: 925/977-6955
7V7V7v.hJh-considtants.com
Sent via e -snail and First Class Mail
July 29, 2008
Ms. jean Bonander
City Manager
City of Larkspur
400 Magnolia Avenue
Larkspur, CA 94939
Mr. Michael Frost
Deputy Director of Public Works
County of Marin
65 Mitchell Blvd., Suite 200-B
San Rafael, CA 94903-4155
Mr. Mark Williams
District Manager
Las Gallinas Valley Sanitary District
300 Smith Ranch Road
San Rafael, CA 94903
J Robert D. Hilton, CMC
E C E I VIFED John W. Farnkopf, PE
Laith B. Ezzet, CMC
Richard J. Simonson
J U L 31 2008
City of San Rafael
Cltv Manager's office
Mr. Kenneth A. Nordhoff
City Manager
City of San Rafael
1400 Fifth Avenue, Room 203
P.O. Box 151560
San Rafael, CA 94915-1560
Mr. Gary Broad
Town Manager
Town of Ross
31 Sir Francis Drake Boulevard
Ross, CA 94957
Subject: Proposal to Perform a Review of Marin Sanitary Service's Application for 2009 Rates
Dear Ms. Bonander and Messrs. Nordhoff, Frost, Broad, and Williams:
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, 2009.
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's rates for refuse collection and disposal as well as
recyclable and yardwaste 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.
ATTACHMENT A
Adak
Advisory Services to Municipal Management
Marin Sanitary Service's Franchisors' Group
July 29, 2008
Page 2 of 8
In 2002, MSS was awarded the franchise to provide services to the City of San Anselmo. Also in
2002, MSS was awarded the franchise to provide services to the north area of the Ross Valley
Sanitary District (RVSD). In 2004, MSS acquired the Fairfax franchise. These expansions of
service, and the need to allocate MSS's costs among the Franchisors and these new jurisdictions,
make even more important the proper allocation of MSS's costs among the jurisdictions it
services to ensure that the Franchisors are not paying a share of the costs to service San
Anselmo, Fairfax, and the north area of the RVSD. 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 2006, the RSVD requested the County of Marin (County) accept and
approve the transfer of the RSVD's solid waste franchise agreements, both North and South
areas, with MSS. The South area was part of the Franchisors group. On July 11, 2006, the Board
of Supervisors accepted the transfer of the RSVD South Franchise Agreement and executed a
new agreement with MSS effective immediately.
The last detailed review was performed in 2006, for rates effective in 2007. Last year, we
performed a review of the rate adjustment using the index (summary) method. For a review of
rates to be effective 2009, we have been asked to:
• Perform the review using the index (summary) method; and,
• Perform a survey of similar rates from cities in the Bay Area receiving comparable services.
Scope of Work and Schedule
We will perform the following tasks related to the review of MSS's Application.
Task 1: Pre -Fieldwork
1.1 We will meet once with MSS management to receive the application and discuss the
review schedule.
1.2 Thereafter, we will review the application to ensure that it is complete and in
compliance with the methodology.
Task 2: Review of Revenues
HF&H will review MSS management's projection of collection and non -collection revenues for
the 12 -month periods ending December 31, 2008, and 2009. We will compare the results to
MSS's audited financial statements for rate year 2007 and year-to-date revenues for 2008 and
request explanations for variances.
Marin Sanitary Service's Franchisors' Group
July 29, 2008
Page 3 of 8
Task 3: Review of Expenses
Avisory Services to Municipal Management
3.1 HF&H will review the appropriateness of MSS management's classification of expenses
into the various expense categories.
3.2 We will review MSS management's calculation of rate year 2009 indexed expenses and
compare them to the calculated expenses for 2008, established in our prior report, and the
calculated changes to the indices determined in Task 1.
3.3 We will review the joint program with CalRecovery to research the combination of
foodwaste and ground yardwaste to produce compost in a "bio -cell" vessel. MSS is expected to
include a report on this program as part of its 2009 rate application. We will review its report
and analyze its proposal for program implementation, if necessary.
3.4 We will review MSS management's projection of other expenses including:
•
Depreciation/ Lease Expense, Interest Expense, Fuel and Insurance Expense projections
will be reviewed by evaluating the reasonableness of MSS management's estimates for
these expenses based on historical trends and MSS management's plans.
• Disposal and Recyclables/Yardwaste Processing Expense will be reviewed by evaluating
the reasonableness of MSS management's estimates for these expenses based on historical
trends, management's plans, and adjustments to disposal and processing rates.
Task 4: Review of Projected Profit
HF&H will review MSS management's calculation of projected profit for compliance with the
procedures and mathematical accuracy.
Task 5: Review of Revenue and Expense Allocations
HF&H will review the appropriateness of MSS management's allocation of revenues and
expenses among the Franchisors and the new service areas, in accordance with the procedures
developed in 2003.
Task 6: Review of Adjustments
6.1 We will meet once with MSS management to review our adjustments to their calculated
and projected revenues and expenses and their allocation among the Franchisors based on the
recommended implementation method developed in Task 5, obtain management's comments,
review any additional material, and amend our adjustments.
Advisory Services to Municipal Management
Marin Sanitary Service's Franchisors' Group
July 29, 2008
Page 4 of 8
6.2 Thereafter, we will meet once with the Franchisors Group to present our adjustments to
MSS's calculated revenues and expenses and its allocation among the Franchisors based on the
recommended implementation method developed in Task 5.
Task 7: Communicate Findings
7.1 HF&H will distribute a copy of our initial draft report documenting our findings and
recommendations for review by MSS management. Thereafter, we will meet once with MSS
management to present and obtain its comments regarding our initial draft report.
7.2 We will make any appropriate adjustments to our initial draft report and present a
preliminary draft to the Franchisors.
7.3 Based on comments from the Franchisors, we will amend the preliminary draft report
and issue the final report.
Task 8: Survey of Comparable Rates
We will survey solid waste rates in the San Francisco Bay Area. We will identify communities
with comparable services and contact them to solicit their participation and determine whether
certain data is available. That data includes, but is not limited to, matters such as governmental
fees, whether a transfer station is used, landfill disposal rates, whether employees are
organized, and customer subscription data. As part of the survey, we will attempt to compare
not only the absolute rates but also the rate structures so that we may identify differences in
pricing (vs. cost).
Task 9: Engagement Management
We will prepare and amend detailed work plans, monitor engagement progress, and provide
sufficient resources to ensure timely completion of the engagement, review analytical results
and interim findings, review the draft and final reports, and respond to questions regarding the
progress of the engagement and other issues.
Limitations
Every approach to an engagement is limited in its scope. The major limitations regarding our
proposed scope of work are:
61PI6 my.-ILI 711
Advisory Services to Municipal Management
Marin Sanitary Service's Franchisors' Group
July 29, 2008
Page 5 of 8
• 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's 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's auditor with
regard to matters related to MSS's internal controls. Our testing of MSS's 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's application.
• We will conduct our review in accordance with the Rate Index Methodology adopted by
the Franchisors Group. 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.
We have not anticipated meeting with representatives of San Anselmo, Fairfax, or the County to
discuss the impact of MSS serving the service areas outside of the Franchisors' service area. We
would be pleased to meet with them on a time -and -materials basis.
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 not included in the scope of our work presentations to the Franchisors'
governing bodies. However, we would be pleased to do so, based on arrangements made with
the requesting Franchisor.
Firm and Proposed Enciaciement Team Qualifications,
Since its founding nearly 19 years ago, HF&H 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 10 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's level of profit are reasonable.
Marin Sanitary Service's Franchisors' Group
July 29, 2008
Page 6 of 8
Advisory Services to Municipal Management
I will be responsible for directing the project and will perform all sub -tasks related to the project
management task described above, as well as attend all meetings with the Franchisors and key
meetings with MSS management. I have been the Engagement Director and substantially
involved in each of these annual reviews since 1995, and I am well known to both the
Franchisors and MSS management. During the past 20 years, I have assisted more than 100
municipalities with nearly 400 solid waste consulting engagements, most of which have
involved the cost of solid waste services.
I will be assisted by less senior, experienced staff at lower billing rates, who will perform certain
tasks under my direction (Through such delegation we have incorporated the review of MSS'
foodwaste/yardwaste proposal while keeping our fees to approximately a 4% increase from last
year).
Marva Sheehan will serve as Engagement Manager under my close supervision. Ms. Sheehan
was the Engagement Manager during the 2006 and 2008 index reviews and 2007 detail review.
She is a Certified Public Accountant with over 25 years of accounting and auditing experience;
14 of which have been in the solid waste industry. She will 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 meets the Franchisor's objectives.
Other staff will be assigned to perform specific tasks for which they are well qualified under the
supervision of Mr. Hilton or Ms. Sheehan.
Fees
Based on our last Rate Index Methodology, my current understanding of the additional matters
to be considered during this review, 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
$50,000, as shown on 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 $50,000. 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.
Proposed Schedule
We have prepared the following proposed preliminary schedule:
• MSS Submits Application September 15
Marin Sanitary Service's Franchisors' Group
July 29, 2008
Page 7 of 8
• HF&H Commences Field Work
• HF&H Completes Field Work
• HF&H Reviews Results with MSS
• HF&H Reviews Results with Franchisors
• HF&H Provides MSS Draft Report
MSS Provides Comments on Draft Report
advisory Services to Municipal Management
HF&H Presents Recommendations to Franchisors for Comment
• HF&H Delivers Final Report
• Boards/Councils Receive Report and Adopt Revised Rates
• Rates Effective
September 16
October 10
October 15
October 20
October 27
November 3
November 10
November 17
November/
December
January 1, 2009
The performance of our review, in accordance with the schedule described above, is dependent
on:
• The ability of MSS management to prepare its application and respond to questions in a
timely manner; and
• The ability of the Franchisors to provide necessary direction and comments to draft work
products in a timely manner.
We anticipate that neither MSS management nor the Franchisors will have difficulty performing
in the manner we have assumed.
Thank you for this opportunity to again be of service to you. If you have any questions, please
call me at 925/977-6952.
Very truly yours,
HF&H CONSULTANTS, LLC
CJ r
V
Robert D. Hilton, CMC
President
Attachments: A) Fee Estimate
B) Standard Hourly Rates and Billing Arrangements
AML
.............. .............. ....... ..........
law
Advisory Services to Municipal Management
Marin Sanitary Service's Franchisors' Group
July 29, 2008
Page 8 of 8
cc: Mr. Joe Garbarino, Jr., Marin, Sanitary Service
Mr. Joe Garbarino, Sr., Marin Sanitary Service
Ms. Patty Garbarino, Marin Sanitary Service
Mr. Ray Holmes, Marin Sanitary Service
Ms. Marva Sheehan, HF&H
Ms. Kim Erwin, HF&H
Attachment A
HFBH Consultants, LLC
July 29, 2008
Marin Franchisor's Group
Review of MSS Application
for
2009 Rates
Hours by
Task and Staff Member
Task I Description
Hilton
SheehanJones
I
I
Associate
Erwin
Total
Hourly Ratej $
240
$ 200
$
165
I $ 1101$
80
n/a
1
Pre -Field Work
1.1 Receive Application from Company
4
4
1.2 Review Application for Compliance
2
2
Task Subtotal
12
2
Review of Revenues
1
4
20
8
Task Subtotal
33
3
Review of Expenses
3.1 Classification of Expense
1
8
2
3.2 Calculation of Indexed Expenses
2
3
4
3.3 Review of New Program Expenses
8
16
6
3.4 Review of Other Expenses
8
32
24
Task Subtotal
114
4
Review of Projected Profit
1
1
1
Task Subtotal
3
5
Review of Allocations
2
6
Task Subtotal
8
6
Review of Adjustments
6.1 Review with MSS Management
4
8
4
6.2 Review with Franchisors
4
6
Task Subtotal
26
7
Communicate Findings
7.1 Prepare Initial Draft and Meet with MSS Management
4
6
8
6
7.2 Prepare Preliminary Draft and Meet with Franchisors
2
2
2
1
7.3 Prepare and Distribute Final Report
4
2
2
1
Task Subtotal
40
8
Rate Comparison
8.1 Survey and Document Comparable Rates
1
2
6
12
Task Subtotal
21
9
Engagement Management
8
8
14
2
Task Subtotal
32
Total Hours
33
66
124
44 22
289
Fees $
7,920
$ 13,200 $ 20,460
$ 4,840 $ 1,760
$ 48,180
Out
of Pocket Expense
$ 1,820
Total Budget
$ 50,000
HFBH Consultants, LLC
July 29, 2008
Attachment B
HF&H CONSULTANTS, LLC
STANDARD HOURLY RATES AND BILLING ARRANGEMENTS'
(Effective January 1, 2008)
Professional Fees
Hourly rates for professional and administrative personnel are as follows:
Position Rate
President
$240
Senior Vice President & Vice President
$210-$235
Senior Manager/Senior Project Manager
$195-$200
Senior Associate
$165-$195
Associate Analyst
$110-$165
Assistant Analyst
$95-$105
Administrative Staff
$S0
Direct Expenses
Standard charges for common direct expenses are as follows:
Automobile Travel
Document Reproduction
Facsimile
Telephone
Public Conveyances
Postage
Overnight Mail and Couriers
Billing Policies
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:
' Litigation Support and Expert Witness Services are not covered by this schedule of fees and expenses.
HF&H CONSULTANTS. LLC
STANDARD HOURLY RATES AND BILLING ARRANGEMENTS'
(Effective January 1, 2008)
• 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.
Insurance
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)
HF&H Considtants, LLC Page 2 of 3
HF&H CONSULTANTS, LLC
STANDARD HOURLY RATES AND BILLING ARRANGEMENTS'
(Effective January 1, 2008)
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.
Invoices and Payment for Services
Otir time reporting and billing system has certain standard formats that are designed to
w our clients with a detailed invoice of the time and charges associated with their
gement. (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
cli f can more closely monitor our services. A late fee of one and one-half percent per month
is od to balances unpaid after thirty (30) days.
HF&H Consultants, LLC Page 3 of 3