CITY COUNCIL AGENDA ITEM
Meeting Date: March 9, 2004
Subject/Title: Consideration of a Resolution amending the Master Fee
Schedule for the Solid Waste Enterprise Rates for Fiscal Years 2005-2009 and
accepting the Solid Waste Rate Study as prepared by R.W. Beck dated March 1,
Prepared by: Jon Carlson, Solid Waste Manager
Submitted by: Paul Zolfarelli, Director of Public Works / Pam Ehler,
Director of Finance & Information Systems
Consideration of a Resolution amending the Master Fee Schedule for the Solid
Waste Enterprise Rates for Fiscal Years 2005-2009 and accepting the Solid
Waste Rate Study as prepared by R.W. Beck dated March 1, 2004. New rate
schedule to be effective July 1, 2004.
Council approved Resolution No. 2551 on May 28, 2002 authorizing the City
Manager to execute an agreement with R.W. Beck for conducting a collection
efficiency study, a rate study and a master plan for the Solid Waste
The City has been operating the solid waste collection service for nearly
ten (10) years. Initially, to get the operation off the ground, all new
trucks were purchased, along with new carts and bins for the customers. In
1998, the City built a small volume transfer station to ensure the
The transfer station has made a significant contribution to reducing our
trucking costs. It allows us to consolidate up to four (4) collection truck
loads into one (1) transfer trailer. This operational savings has helped the
City keep rates stable for the last ten (10) years.
When the facility was built in 1998, it was designed to handle up to 200
tons per day. At the time the City was handling about 50 tons per day. The
City now handles up to 120 tons per day and within five (5) years the City
could be at the maximum daily throughput. With the City’s ultimate build-out
estimate (70,000 residents by 2020), staff projects our facility will
eventually process over 300 tons per day.
Due to the continued growth of the City, staff recommends the Solid Waste
Enterprise build a larger, permanent transfer facility - one that could meet
the City’s needs through its ultimate build-out of 70,000 residents and that
could eventually handle some direct public drop-off.
With the current operation’s small footprint of land, staff feels now is the
best time to coordinate the construction of a new transfer station on-site,
while simultaneously operating the existing transfer station. Logistically
it makes sense to begin construction before the work load is too great at
this site. Financially, if the City can avoid closing the site to our trucks
while under construction for up to a year, it can benefit from not having to
direct haul our trucks to another facility and pay increased payroll and
This issue necessitated staff to examine the rate structure needed to fund a
new facility in the coming fiscal years.
Rate studies are critical to ensure that proper funds are collected to
operate the various City of Brentwood enterprises. In 1994, staff utilized
much of the rate structure the previous hauler employed to develop the
City’s rate structure. Overall, the rate structure covered the required
expenses sufficiently for 10 years without the need for an increase. The
current rate structure generates enough revenue to cover its core
operational expenses such as new equipment, personnel, disposal costs etc.
while fully funding its vehicle replacement program. Our solid waste
operating reserve is currently at approximately 10% of our operating budget.
Our City’s required target cash reserve is 30%. Therefore, our rates
currently do not generate sufficient cash to meet our required 30% target
reserves or to make substantive capital improvements to our transfer
City staff contracted with R.W. Beck for a comprehensive assessment of our
Solid Waste Enterprise. Included in this assessment was an analysis of our
operation’s efficiency, along with conceptual drawings and cost estimates of
a new facility and finally, preparation of a rate study to examine revenue
requirements for five (5) fiscal years that would be required to cover a new
In R.W. Beck’s final analysis, they concluded that we would need a new
facility to keep up with the anticipated growth. We were provided with
conceptual drawings and cost estimates. They estimated $4.8 million would be
required to build a new facility that could process the City’s ultimate
build-out figures (estimated at approximately 300 tons per day) and provide
for public drop-off.
The proposed facility includes construction of new, full-grade separation
loading pits to increase loading efficiency. Average loading times would be
reduced from thirty (30) minutes to five (5) minutes. The building itself
would be constructed with concrete floors and loading bays and would be
covered to minimize litter migration. Our current uncovered facility’s
asphalt pad requires regular patching. The open design unnecessarily exposes
the materials to wind and rain, exacerbating the litter migration while
increasing the processing costs.
Public Works and Finance staff has reviewed the final analysis from R.W.
Beck. Their analysis has determined percentage increases as follows and will
be necessary to generate adequate funding for a transfer station improvement
4% in FY 2004/05
3% in FY 2005/06
3% in FY 2006/07
3% in FY 2007/08
2% in FY 2008/09
The Solid Waste Enterprise residential and commercial rates for Fiscal Year
2004/05 are as follows:
Furthermore, with the intent of reaching our required 30% reserve, staff is
recommending Council authorize rate increases of an additional 0.5% each
fiscal year beginning in Fiscal Year 2009/10 and continuing until the 30%
reserve requirement is met.
Below is a comparison of our current rates and projected rates for Fiscal
Year 2004/05 with the current rates of the three other Contra Costa County
solid waste hauling operations. City of Brentwood rates remain extremely
competitive as compared to the other companies. Our rates are structured in
a variable rate format to encourage the use of our recycling/yard waste
carts. This method, now widely used throughout the state, discourages high
volume refuse service levels and encourages, through lower rates, diversion
of material from the landfills with the use of the recycling programs.
Not all haulers utilize a variable rate structure to encourage use of their
recycling programs. Additionally, many companies only provide their
customers with only 14-gallon crates for recycling. The City of Brentwood
offers up to two (2) 95-gallon carts for recycling.
Our subscription levels, shown on the first row of Table 1 below, reflect
the effectiveness of our rate structure, as do our recycling rates. Our
latest recycling rate as reported to the State of California for the year
2002, demonstrates a 62% recycling rate. The statewide average is
approximately 42% and the goal is 50%. A full comparison of both residential
and commercial rates of some standard sized containers can be found on
RESIDENTIAL RATE COMPARISON
Hauler Cart Size
32 gallon 64 gallon 96 gallon
City of Brentwood
Estimated Percentage of Customers 60% 30% 10%
CURRENT RATE FY 2003/04 $ 19.32 $ 28.72 $ 34.47
PROPOSED RATE-FY 2004/05 $ 20.09 $ 29.87 $ 35.85
Garaventa Enterprises(1)-2003 (average of areas below)
CURRENT RATE FY 2003/04 $ 22.64 N/A $ 25.64
Allied Waste Systems(2)-2003(average of areas below)
CURRENT RATE FY 2003/04 $ 21.27 $ 29.20 $ 42.29
Republic Services(3)-2003 (average of areas below)
CURRENT RATE FY 2003/04 $ 22.57 $ 43.09 $ 63.62
TOTAL AVERAGE OF ALL AREAS - 2003 $ 22.16 $ 36.15 $ 43.85
(1) Garaventa Enterprises service areas surveyed include: Unincorporated
Brentwood, Oakley, Discovery Bay, Byron and Pittsburg
(2) Allied Waste Systems service areas surveyed include: Antioch, Pleasant
Hill, Martinez, Walnut Creek and Orinda
(3) Republic Services service areas surveyed include: Richmond, Pinole, El
Sobrante, Tara Hills and North Richmond
Attachment A1 contains R.W. Beck’s Financial Planning Model for the five (5)
year starting in Fiscal Year 2004/05 to Fiscal Year 2008/09.
Attachment A2 contains all the detailed assumptions and estimates used in
developing the Financial Planning Model on Attachment A1.
The majority of the adjustments to the Fee Schedule were made on the
percentage discussed. Staff has been aware of some additional fees that need
to be added, as well as some miscellaneous fees that need to be amended to
address various issues not foreseen 10 years ago. Since most of these
changes affected such a small percentage of our overall customers, staff
decided to wait until a requested rate increase to overhaul some of the
items. These specific items are discussed below:
• Third Blue/Green Cart – Most companies limit recycling/yard waste
containers to one (1) per customer. To promote aggressive recycling, we have
always provided a second cart upon request, at no charge. We want to
continue this practice, but when a 3rd cart is requested, staff feels this
is well beyond what a typical single-family home would generate and might
resemble the recycling levels generated by at-home businesses and thus
should not receive more than 2 free carts, which is the limit we place on
commercial businesses. We currently have less than 30 customers with three
(3) blue carts. The cost would be $10/mth.
• Cart Exchanges – We would place a limit on the number of free cart
exchanges a customer could receive. Currently, residents can swap their cart
sizes, up or down, every few days, weeks or months if they choose, at no
charge. Each time they get a clean, washed cart. If this practice is allowed
to continue, it is too easy to circumvent the fee we charge for a cart wash.
We recommend all new residents get one free cart exchange on each cart
within the first year of service. Then, any additional exchanges will be
charged to cover our costs to wash a cart, drive to the home, perform the
exchange and place the cart back into inventory. We currently perform an
average of 150 exchanges per month for no charge. The cost would be
• Front-load Compactor Service - This fee is not new, but we would like to
formally adopt this rate. Front-load compactors did not exist in Brentwood
ten (10) years ago. So when we began having customers purchase these
compactor units, we exercised the clause “additional time/materials” to
calculate our additional costs and charged accordingly. If a customer buys a
compactor unit, one that can typically triple or quadruple the capacity of
their container, we then have doubled our regular non-compacted rate. This
covers our costs, while still giving the customer a cost savings. We
currently have 5 customers with this service level. The cost would be twice
(2x) the regular non-compacted rate.
• Roll-off Compactor Service – For roll-off service, a special handling fee
will be charged on all compactor built with the door on the hook-up side of
the unit. Many compactors are designed to be handled just like any other
roll-off box. But some units, due to their design, require the unit to be
dropped back down and re-hooked in order to dump the compactor. This process
must then be completed again after it is dumped. This takes additional time
to execute and should have a different per haul fee than regular roll-off
boxes or compactors. We currently have about 4 customers with this service
level. The cost would be the regular hauling fee plus $25.
• Commercial Carts – The current fee schedule has a skewed tiered structure.
For example, 1-95 gallon cart, serviced 1x/week costs $40.73, but the cost
for 2x/week is merely $47.00, only a 15% increase for twice the level of
service! A schedule was developed to more accurately reflect the cost to
provide on Commercial carts requiring 2 or 3 times per week service. We
currently have about 6 customers with this service level.
• Apartment Carts – This rate schedule for multi-family dwelling units has
unbalanced, or consistent tiers as well. For instance, the 64- and 95-gallon
cart rates are 10-15% lower than the residential rates. But the 32-gallon
rate is 14% higher than the comparable residential rate. Staff proposes we
adjust the apartment schedule to be consistent with the standard residential
rates. The service level matches single-family service in that we provide
recycling and yard waste service at no additional charge. There are
currently about 50 customers that subscribe to apartments rates.
• Frontload Bin Hard-to-Service – For commercial front-load bin customers
with bins that must be consistently moved by more than one person due to
their weight or uneven or poor rolling surface shall pay a 10% surcharge on
top of their regular service charge. There are currently 10-15 customers
that could be categorized as “hard-to-service”.
• Vacation Hold – For residential customers who would like to discontinue
their collection service while they are on vacation, a fee would be charged
to process their request. This is requested by 40-50 residents per year.
This fee would be $30.
This new rate structure will insure that revenues generated meet our needs
by providing funding for the necessary improvements to our transfer station
and to meet our required 30% cash reserve target. Failure to implement the
proposed rate structure will have a negative impact on our solid waste
operation. Ratepayers will be burdened with significant costs in future
years that exceed the proposed rate adjustments.
• Attachment A1 – Solid Waste Division Financial Planning Model
• Attachment A2 – Financial Planning Model Assumptions and Projections
• Attachment B – Summary of Refuse Rates by Contra Costa County Haulers
Attachment A2 – Page 1 of 2
Solid Waste Division
Financial Planning Model
Assumptions and Projections
The projected revenue and expense amounts for 2005 have been adjusted from
the 2005 budget amounts to reflect actual activity that has occurred since
the preparation of the budget.
1. Franchise fees in 2005 and 2006 will be $3,500 and eliminated in 2007.
The City receives a royalty of 5% of revenue for approximately 150
customers, including 20 commercial customers that are not serviced by the
2. Investment income projections for 2005 through 2009 remain constant at
$30,900 per year.
3. Late charges were estimated at $51,500 in 2005 and escalated at 5% per
year beginning in 2006.
4. Reimbursement for services income for 2005 through 2009 remains constant
at $6,000 per year.
5. Solid waste customer growth was estimated at 11.7% for 2005, 8.8% for
2006, 6.4% for 2007, 5.3% for 2008 and 3.9% for 2009.
6. Solid waste rate increases were estimated at 4% for 2005, 3% for 2006
through 2008, and 2% for 2009.
7. Application fees were estimated at $52,900 for 2005 and escalated at 7%
for growth beginning in 2006.
8. Solid waste compost bins revenue will remain constant at $1,100 from 2005
9. Public disposal of cardboard revenue will remain constant at $30,000 from
2005 through 2009.
10. Dumpster income is estimated at $461,504 for 2005 and is escalated 12%
for 2006 and 5% for 2007. Dumpster income remains flat for 2008 and 2009.
1. Personnel costs were estimated at $1,785,878 for 2005. Costs were
projected to increase 18% in 2006, 10% in 2007, 14% in 2008 and 10% in 2009.
Costs are increasing because of the planned addition of one new driver and
one supervisor in 2005, and one new driver in 2006 and 2008. Costs also
reflect the staffing of the transfer station on Saturday and Sunday
beginning in 2006.
2. Equipment/vehicle maintenance cost is estimated at $121, 825 for 2005 and
escalated at 5% per year beginning in 2006.
Attachment A2 – Page 2 of 2
3. Disposal costs are escalated to reflect the increased tonnage caused by
the additional customers and by the financial terms of the contract that the
City has with the landfill operator.
4. Interfund services or administrative costs are estimated to increase at
5% per year beginning in 2005.
5. Contractual services are estimated at $147,304 in 2005 and increasing to
$240,144 in 2009.
6. Interest expense for existing debt declines from $36,907 in 2005 to $0 in
7. Supplies costs are estimated at $354,672 for 2005 and escalated at 3%
beginning in 2006.
8. Depreciation is estimated at $31,548 in 2005, increasing to $60,952 in
9. Fleet maintenance internal service costs are estimated at $409,824 in
20005 and escalated at 7% beginning in 2006.
10. Vehicle maintenance internal service costs are estimated at $476,403 in
2005 and escalated at 7% beginning in 2007.
11. Information services and other internal service costs are both escalated
at 3% beginning in 2006.
12. Initial debt service payments for the $4.8 million transfer station
begin in 2006. Interest is estimated at 6% for 30 years.
13. Loan principal expense on existing debt is paid off in 2007.
14. New trucks costing $210,000 are purchased in 2005, 2006 and 2008.
15. Container purchases remain flat at $200,632 for the five years.
16. Funding of a facility reserve begins in 2005 at $50,000. In 2009,
funding is at $100,000 per year.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD AMENDING THE
MASTER FEE SCHEDULE FOR THE SOLID WASTE ENTERPRISE RATES FOR FISCAL YEARS
2005-2009 AND ACCEPTING THE SOLID WASTE RATE STUDY AS PREPARED BY R.W. BECK
DATED MARCH 1, 2004.
WHEREAS, the Solid Waste Enterprise Rate Study provides a financial vehicle
to provide the City with dependable, fiscally responsible solid waste
collection services; and
WHEREAS, a resolution of the City Council is required to modify the Fee
Schedule for solid waste services; and
WHEREAS, the Solid Waste Enterprise Rate Study prepared by R.W. Beck
proposes increases in the Fee Schedule to fund improvements to the City’s
transfer station and to meet the City’s target cash reserves; and
WHEREAS, R.W. Beck’s analysis recommends increases of 4% in Fiscal Year
2004/05, 3% in Fiscal Year 2005/06, 3% in Fiscal Year 2006/07, 3% in Fiscal
Year 2007/08 and 2% in Fiscal Year 2008/09, plus the miscellaneous
adjustments noted in the staff report and reflected in the Fee Schedule; and
WHEREAS, the City has studied the proposed charge per parcel and has
concluded that they do not exceed the reasonable cost of providing service
and facilities to consumers and is proportionately representative of the
costs incurred by the City. The charges reflect the burdens placed on the
Solid Waste Enterprise by users and are not in excess of the benefits the
users receive from the system; and
WHEREAS, with the intent of reaching a recommended 30% reserve, an
additional 0.5% increase beginning in Fiscal Year 2009/10 and continuing
until reserve recommendations are met.
NOW, THEREFORE, the City Council of the City of Brentwood does resolve as
1. The City Council accepts the Study attached hereto as Exhibit A;
2. The City Council adopts the rate adjustments recommended in the Study for
the years from Fiscal Year 2004/05 through Fiscal Year 2008/09;
3. The City Council adopts the Solid Waste Fee Schedule for Fiscal Year
2004/05 set forth in the study, which shall be effective and applied to all
users July 1, 2004;
4. The City Council authorizes an annual automatic adjustment to the rates
effective each July 1st based upon the most current San Francisco Consumer
Price Indexes (CPI) for the preceding twelve (12) months;
5. The rates, as may be adjusted, shall be effective July 1, 2004 through
and including the Fiscal Year 2008/09 unless otherwise modified by virtue of
future Council action. If no such Council action occurs relative to the
fiscal years following 2008/09 the rates then charged for the Fiscal Year
2008/09 shall continue to apply to subsequent fiscal years;
6. Until the July 1, 2004 effective date specified in Section 1 of this
resolution, all solid waste fees as established under previous action by
Council shall remain in full force and effect;
7. Notwithstanding any other provision hereof, in the event that any
installment sale or purchase agreement, loan, bond or other indebtedness
lawfully entered into by the City requires the City to increase the rates
and charges to comply with any covenant regarding rates and charges for the
City’s solid waste collection, the fees and charges herein provided for may
be increased by this Council by resolution; and
8. All resolutions and ordinances, or portions thereof, in conflict herewith
are hereby repealed. The City Clerk is directed to publish this resolution
in any manner consistent with Government Code Section 36933.
9. The following rates shall apply for refuse collected within the City of
Brentwood service area effective July 1, 2004:
PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at
a regular meeting held on the 9th day of March, 2004 by the following vote:
• Exhibit A – Solid Waste Rate Study prepared by R.W. Beck
March 1, 2004
Mr. Jon Carlson
Solid Waste Manager
City of Brentwood
2300 Elkins Way
Brentwood, CA 94513
R. W. Beck was retained by the City of Brentwood (City) to develop a
spreadsheet based model that incorporates the anticipated capital projects,
equipment replacement needs, and operating expenses of the Solid Waste
Division over a five year planning period. In addition, revenues over the
same five year period were to be forecasted and included in the model.
R. W. Beck was also retained to help develop proposed rates to cover any
cash shortfall projected in the five year planning period.
To provide for the continued operation of the Solid Waste utility on a sound
financial basis, revenue must be sufficient to meet the cash requirements of
operation and maintenance expenses, administrative and debt service
expenses, and routine equipment replacements as well as any necessary
non-operation expenses or capital costs. In addition, cash reserves should
be sufficient to provide needed funds in the event of emergencies and
fluctuations in revenue. The sum of these cost or expense components is
referred to as a utility’s “revenue requirement.” Projections of the City’s
revenues and revenue requirement for the study period, fiscal years
2005-2009, are described in the following paragraphs.
There are two common methodologies used in determining the revenue
requirement of a utility. The first method, the “cash-needs approach,” is
based on the projected cash needs of a utility. The components analyzed
include operations and maintenance expense, debt service expense, debt
service reserves (where applicable) and cash-financed capital improvements.
In this method, depreciation (as a non-cash item) is not included in the
analysis. The second method, the “utility approach,” involves the
calculation of a rate of return on the utility’s rate base or assets and
includes depreciation as part of the analysis. For the most part, operations
and maintenance expense under both methodologies are the same. Another
method used by some utilities is a combination of the two above discussed
Most government-owned utilities use the cash-needs or combination approach
in determining the revenue requirement. These approaches are used by
government-owned utilities because they are not required to make a profit or
earn a return on rate base, but are more concerned with having the necessary
cash on hand to pay the expenses to operate the utility.
The following is a summary of the key assumptions used to develop the
revenue and revenue requirement projections for the study period:
The City will continue to experience rapid customer growth. Growth
projections are 11.7% in 2005, 8.8% in 2006, 6.4% in 2007, 5.3% in 2008, and
3.9% in 2009.
A targeted cash reserve goal that is equal to 30% of the Solid Waste
Division’s total costs has been established but is not forecasted to be
reached by the end of the study period.
Rate increases will be needed to provide a positive cash flow for each of
the forecasted years. The rate increases are projected at 4% in 2005, 3% in
2006 through 2008, and 2% in 2009.
A $4.8 million transfer station will be built in 2006. The transfer
station will be financed over a 30-year period.
Expense Projection - Operating Expenses
Projected operating expenses were based on an analysis of historical
operating results, adopted FY 2004 budget, and discussions with City staff
regarding expectations of future expenditure levels. Operating expenses are
categorized into three categories. They are personnel services, supplies and
services, and internal service costs. Salaries and disposal costs show the
largest increases over the forecasted period. This is because of the rapid
growth in the number of customers results in the need for additional solid
waste drivers/employees. Also, the additional customers cause an increase in
the amount of waste disposed, thereby causing increased payments to the
To meet the needs of the Division, the forecasted plan includes $3.8 million
in capital outlay costs over the next five years. These costs include debt
service on the planned transfer station, payments for existing debt, and
purchases of new trucks and containers.
The utility’s main source of revenue is derived from monthly solid waste
charges and fees. In 2009, solid waste charges and fees are projected to
comprise 90% of the Division’s total revenue. The remaining revenue is
forecasted to come from:
Reimbursement for Services
Public Disposal of Cardboard
See Attachment A1, Financial Planning Model and Attachment A2, the
Assumptions and Projections used in developing the Financial Planning Model
for more detailed information.
It is projected, based on the assumptions used in the Financial Planning
Model, the City will need to increase its solid waste charges and fees from
2% to 4% over the next five years. These increases are needed to help fund
the proposed transfer station and assist the City in establishing a cash
reserve that is 30% of the costs to operate the Solid Waste Division. Since
the actual results could differ from the projections, the City should, at a
minimum, update the model on a yearly basis to ensure that the cash flow
requirements of the Division are being met.
Thank you giving R. W. Beck the opportunity to work on this project. If you
have any questions, please call me at (858) 485-4663.
R. W. BECK, INC.
C: Robert Craggs