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CITY COUNCIL AGENDA ITEM NO. 18

Meeting Date: February 26, 2008

Subject/Title: Adopt a Resolution approving and authorizing the City Manager or designee to execute an Agreement with the Keller Canyon Landfill Company for Solid Waste, Green Waste and Recyclable Materials Transport, Processing and Disposal Services and a Guaranty Agreement with Allied Waste Services of North America, LLC.

Prepared by: Paul R. Eldredge, Assistant Director of Public Works/Assistant City Engineer

Submitted by: Bailey Grewal, Director of Public Works/City Engineer

RECOMMENDATION
Adopt a Resolution approving and authorizing the City Manager or designee to execute an Agreement with the Keller Canyon Landfill Company for Solid Waste, Green Waste and Recyclable Materials Transport, Processing and Disposal Services and a Guaranty Agreement with Allied Waste Services of North America, LLC.

PREVIOUS ACTION
On March 13, 2001, by Resolution No. 2254, City Council approved a Solid Waste Disposal/Processing Pricing proposal by Allied Waste Systems of North America, LLC, operator of the Keller Canyon Landfill Company.

BACKGROUND
In 1998, the City of Brentwood (“City”) opened its own Solid Waste Transfer Station. Initially the City contracted with Vasco Road Landfill to provide service from our facility to their Livermore disposal site. Due to an increase in their rates and an “out of county” tax burden the Vasco Road Landfill was no longer cost effective for the City. The City solicited bids in 2001 and entered into an agreement with Keller Canyon Landfill Company (“Contractor”) owned and operated by Allied Waste Services of North America, LLC (“Allied”).

The existing contract for these services is set to expire in March of 2008; thus, staff and the Contractor began negotiations for a new agreement in mid 2006. The City did not solicit proposals from other landfill operators as there were no other landfills within a reasonable proximity to the City. This distance would affect the level of service as well as the overall rate structure, due to increased haul lengths and increased disposal/processing rates (both from the landfill operator as well as regulatory fees).

Initially, the City requested a contract ranging between 10 to 15 years to secure rate stability and provide protection from environmental liabilities over the long term while the Contractor was not interested in an agreement that extended beyond 5 to 7 years. Additionally, a variable inflation rate linked to the CPI was initially contemplated; however, all parties agreed that an annual fixed inflation factor would simplify the calculation of rates and the budgeting process as well as removing a degree of uncertainty associated with variable inflation factors. The following represents a summary of the most notable terms of this agreement:

1. The agreement term is for 10 years.
2. Guaranteed fixed annual inflation factor of 3.95%.
3. Fuel adjustment factor for the transportation rates are reviewed and adjusted accordingly every two years.
4. The agreement provides a sliding scale for recycling, providing the City the opportunity to either reduce the amount paid or to receive revenue for the recycling material as the level of residue decreases.
5. Increases in transfer and disposal/processing costs were anticipated in the current rate study and operations budget; thus, it is not anticipated that there will be any user rate increases associated with these proposed rate increases.

The agreement clarifies and memorializes the obligations of both the City and the Contractor including but not limited to indemnification, insurance, records retention and maintenance, dispute resolution, definition of terms, determination of recyclable material residue and the survival of certain terms beyond the life of this agreement.

The Keller Canyon Landfill Company is a wholly owned subsidiary of Allied Waste Services of North America, LLC. Under the Guaranty Agreement (“Guaranty”) Allied unconditionally, irrevocably and absolutely guaranties that the Keller Canyon Landfill Company will fulfill all of its obligations to the City under the agreement. This Guaranty includes but is not limited to, terms regarding payment of all moneys, timely and full performance, governing law and consent to jurisdiction, assignment and reimbursement of all City enforcement costs in case of default by Allied on all or part of this Guaranty.

The following represents the City’s proposed disposal/processing rates for solid waste and green waste compared to other service providers in the area. Although the proposed rates have increased they are still very competitive with the rates being charged to other providers. It is also important to note that many of the landfills shown below are facing capacity problems that will have an effect on the service providers the next time they negotiate their disposal contracts. The Keller Canyon Landfill is currently not experiencing any capacity issues and is expected to have sufficient capacity well beyond the term of this proposed agreement.

Comparison rates for mixed recyclables and transportation are not shown above as that information was not readily available or the rates depend on a multitude of factors that would not provide an accurate representation.

FISCAL IMPACT
The approval of this agreement will increase the transfer and disposal/processing costs of the Solid Waste Enterprise by increasing the disposal/processing and transport rates for solid waste, green waste, mixed recyclables and transport rates for cardboard. These proposed rates have been compared to the City’s existing rate structure in the following:

This proposed contract only provides for the transportation rates for cardboard as the City has a contract for the handling and processing of this material with a separate entity. On average the recycling of this cardboard generates approximately $150,000 in revenue to the City annually.

The following represents the initial charge/(payment) schedule for the mixed recycling based upon the residual percentage, or in other words, the amount of garbage contained within the mixed recyclables. The residual percentage will be determined pursuant to the applicable portions of the agreement and verified by City representatives.

Residual Percentage Recyclable Materials Processing Rate
Charge/(Payment) to City
>25% $25.68
23% - 25% $23.95
17% - 22% $21.95
15% - 16% $17.50
12% - 14% $10.00
10% - 11% ($5.00)
<10% ($15.00)

The annual operational cost increase due to these proposed rates is approximately $202,000 for 2008, for both the transfer and disposal/processing categories. This increased cost assumes the City is paying the maximum amount for mixed recyclables. Increases in transfer and disposal/processing costs were anticipated in the current rate study as well as the 07/08 and 08/09 Operational Budget. Thus, it is not anticipated that this increase in operational cost will necessitate any increase in user rates or any modifications to the operational budgets.

Attachments:
Resolution
Agreement
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BRENTWOOD APPROVING AND AUTHORIZING THE CITY MANAGER OR DESINGEE TO EXECUTE AN AGREEMENT WITH THE KELLER CANYON LANDFILL COMPANY FOR SOLID WASTE, GREEN WASTE AND RECYCLABLE MATERIALS TRANSPORT, PROCESSING AND DISPOSAL SERVICES AND A GUARANTY AGREEMENT WITH ALLIED WASTE SERVICES OF NORTH AMERICA, LLC.

WHEREAS, on March 13, 2001, by Resolution No. 2254, City Council approved a Solid Waste Disposal/Processing Pricing proposal by Allied Waste Systems of North America, LLC (“Allied”), operator of the Keller Canyon Landfill Company (“Contractor”); and

WHEREAS, the current contract expires on March 1, 2008, and City of Brentwood (“City”) staff has been working with the Contractor to prepare a new 10-year term agreement for transport, processing and disposal services (the “Agreement”); and

WHEREAS, the following represents a summary of the most notable terms of the Agreement:

1. The term is for 10 years.
2. Guaranteed fixed annual inflation factor of 3.95%.
3. Fuel adjustment factor for the transportation rates are reviewed and adjusted accordingly every two years.
4. The Agreement provides a sliding scale for recycling, providing the City the opportunity to either reduce the amount paid or to receive revenue for the recycling material as the level of residue decreases.
5. Increases in transfer and disposal/processing costs were anticipated in the current rate study and operations budget; thus, it is not anticipated that there will be any user rate increases associated with these proposed rate increases; and

WHEREAS, the Agreement clarifies and memorializes the obligations of both the City and the Contractor including but not limited to indemnification, insurance, records retention and maintenance, dispute resolution, definition of terms, determination of recyclable material residue and the survival of certain terms beyond the life of this agreement; and

WHEREAS, the Keller Canyon Landfill Company is a wholly owned subsidiary of Allied Waste Services of North America, LLC; and

WHEREAS, under the Guaranty Agreement (“Guaranty”), Allied unconditionally, irrevocably and absolutely guaranties that the Contractor will fulfill all of its obligations to the City under the Agreement; and

WHEREAS, this Guaranty includes but is not limited to, terms regarding payment of all moneys, timely and full performance, governing law and consent to jurisdiction, assignment and reimbursement of all City enforcement costs in case of default by Allied on all or part of this Guaranty.

NOW, THEREFORE BE IT RESOLVED that the City Council of the City of Brentwood does hereby approve and authorize the City Manager or designee to execute an Agreement with the Keller Canyon Landfill Company for Solid Waste, Green Waste and Recyclable Materials Transport, Processing and Disposal Services and a Guaranty Agreement with Allied Waste Services of North America, LLC.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 26th day of February 2008 by the following vote:
 
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