Agendas and Minutes

City Council (View All)

Study Session

Monday, September 16, 2013

Monday, September 16, 2013
Siskiyou Room, 51 Winburn Way

Mayor Stromberg called the meeting to order at 5:32 p.m. in the Siskiyou Room. 
Councilor Slattery, Rosenthal, Voisin, Morris, and Marsh were present.  Councilor Lemhouse arrived at 5:34 p.m.
1.     Look Ahead review
City Administrator Dave Kanner reviewed items on the Look Ahead.
2.     Discussion regarding the solid waste franchise agreement
City Administrator Dave Kanner explained there were four actions Council would take.  One was adopt the franchise ordinance stating how the City awarded contracts.  The second was a service standards resolution, the third was the rates resolution and the fourth resolution would award the contract to Recology.  Mr. Kanner introduced Recology General Manager Steve DiFabion, Vice President/Assistant Group Manager Ed Farewell, and Recology Group Rate Analyst Tom Norris.
Management Analyst Adam Hanks summarized key elements of the Solid Waste & Management Collection Franchise Agreement Ordinance:
Section 2 – Purpose
The Conservation Commission inserted goals and targets in the purpose statement that added direction to the policy.  City Attorney Dave Lohman clarified it was not customary to add targets in a purpose statement but could be done.  Mr. Hanks further explained the purpose statement was broad and adding targets established goals the franchisee would ultimately meet.  Mayor Stromberg thought targets should be policy actions by the Council and not necessarily established by the service provider.  Mr. Hanks agreed and thought it might be better placed in the Standards Agreement or even the Sustainability Plan.
Section 4 - Definitions
Key definitions included Allowable Expenses that dictated rate modeling.  Cost Allocation calculated expenses for services that crossed jurisdictions to ensure allowable expenses related to service and activities within city limits.  The Operating Margin definition created a prearranged profit margin to ensure rate of return and was foundational to annual rate adjustment process and other terms during the life of the contract.  The Unallowable Expenses definition detailed expenses not part of the operating margin calculation and subsequently not factored into the rate making process.
Section 5 – Franchise Agreement
The initial term was set at 10-years with seven-year terms renewing annually to allow time for Recology to amortize investments and reasonable long-term revenue stream in the event the City terminated the contract.  Mr. Lohman explained one of the goals in the ordinance and resolution was having robust reporting that occurred quarterly. Mr. Kanner added Section 8.5 Termination of Franchise for Default provided circumstances where the City could terminate the franchise prior to the seven-year term.  Councilor Slattery commented audit errors would apply to Section 8.5
Mr. Hanks further explained Allowable Expenses in Section 4 Definitions of the ordinance addressed management overhead with a detailed list of what the franchisee cannot count.
The 10% Operating Margin of Franchise-wide Gross Revenues was a standard percent with the intent to build ratemaking to meet that 10%.  The 8% and 12% would not allow the range to get too low or far in advance of the 10% target.  If the operating margin fell below 8%, Recology could come to Council and request a rate increase in excess of CPI (Consumer Price Index).  If their operating margin exceeded 12%, Council had the right to either deny the CPI increase or lower their rates.  The idea was to produce an operating margin of 10%, the City would not always hit 10% exactly, but that was the goal and ensured long-term rate stability.
Subcontracting services addressed services that fell under the scope of the franchise and allowed a franchisee to decline and the City to subcontract for that service.  Recology could not provide services outside of the Franchise Agreement. Transfer of Franchise was like Ashland Sanitary moving to Recology, what triggered the transfer, and addressed if it was a majority sale or partial.
Reporting would occur quarterly with a fuller report annually.  The City would conduct periodic audits but not necessarily annually.  The annual report met DEQ (Department of Environmental Quality) annual reporting requirements for the local jurisdiction with information provided by Recology and the Jackson County Recycling partnership.  
Section 8 Enforcement of Standards
City Attorney Dave Lohman explained the franchise was subject to penalties and could incur a fine up to $500 per day.
Mr. Kanner noted there were three main issues Council needed to discuss.  The first was the Yellow Bag and Sticker Programs that allowed customer controlled deliveries.  Residential customers heavily subsidized the Yellow Bag program.  Additionally the program received curbside recycling but did not pay for the service. One recommendation would eliminate the service and replace it with the Sticker Program, another on call service using a roll cart instead.  The cost was higher but the gain in capacity canceled the increase.
Staff explained the group considered offering 20-gallon containers as an incentive to reduce trash and did not incorporate the option due to operational difficulties.
The second issue was automation and roll carts.  Mr. Kanner explained if the City ever mandated automation collection staff would calculate upfront costs into the rate structure over a period of years.  Mr. DiFabion commented Recology would avoid potential lay-offs through attrition if the City automated services.  Mr. Kanner added full automation would work in specific neighborhoods but partial automation would work in every neighborhood.
Mr. Hanks addressed a possible recycle only fee and explained recycling charges were imbedded in solid waste rates with the exception of the Yellow Bag program.
Council and staff went on to discuss the Recycling Center.  Mr. Hanks explained the draft franchise ordinance did not allow the Recycling Center as an allowed expense and Council could develop another way to fund that operation.  One Council suggestion would remove costs from solid waste charges and have people pay to use the Recycling Center.
Mr. Kanner explained an option was leaving the Recycle Center open for 6-12 months and adding a 4% surcharge to garbage rates dedicated to funding the Recycling Center.  During that time, Council and staff could determine whether to keep the Recycling Center open or look at alternative funding.  If the City closed the Recycling Center, the surcharge would end and not remain imbedded as part of the rates.  Charging at the gate would effectively kill the Recycling Center since very few people would pay to recycle and no one knew how many people used the Recycling Center.  Additionally, charging a fee might not cover the cost of running the Center.  Councilor Slattery thought the discussion needed to occur outside of the Franchise Agreement to allow public discussion and determine whether people recycle because it was free or ecologically sound.
Mr. DiFabion confirmed Recology hauled out 50-yards of cardboard and 25-yards of co-mingled recycling from the Recycling Center daily, six days a week.  He clarified an error in the Bell Associates Report noting the total was actually 16% instead of 9%.
Councilor Voisin liked Mr. Kanner’s suggestion of the surcharge for the Recycling Center for 6-12 months. She suggested involving the Conservation Commission to review the Recycling Center and come back with suggestions and alternatives for a detailed in depth discussion with public input and options.
Councilor Morris thought the surcharge should go on the electric bill to capture all households for the 6-12 month period.  Mr. Kanner responded adding the surcharge to the electric bill would end up costing almost the same as adding it to the residential and commercial solid waste bills resulting in a .80-cent monthly increase.
Councilor Lemhouse agreed the discussion on the Recycling Center needed to be separate from the Franchise Agreement.  He supported involving the Conservation Commission and wanted to know how the City would deal with people outside of city limits using the Recycling Center.
Mr. DiFabion noted another error in the Bell and Associate report regarding recycling costs.  The report divided Recycle Center costs by 6,000 Ashland residents when all jurisdictions in Jackson County using Recology services paid for the Recycling Center through solid waste rates.  
Councilor Marsh thought the issue was broader than the Recycle Center.  There was a technical document and franchise agreement but no specific recycling or waste management goals.  The City could use the surcharge in a different way beyond the Recycling Center.  Council generally supported involving the Conservation Commission in the task of resolving the Recycling Center. 
Mr. DiFabion addressed administrative costs as allowable expenses explaining they needed to be reasonable, and consistent with the market.  Scale was an issue as well.  He went on to explain currently there were no financial incentives to increase recycling with the exception of San Francisco and would forward information pertaining to that program to Council.
3.         Discussion regarding Job Council proposal
Item delayed due to time constraints.  
Meeting adjourned at 7:19 p.m.
Respectfully submitted,                                
Dana Smith
Assistant to the City Recorder

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