>> welcome to the special meeting for lafco, april 18, 2011. supervisor campos: i am david campos, commissioner. we're joined by ross mirkarimi and commissioners pimental and commissioner avalos. madame clerk, please call item no. two. >> approval of the minutes from

previous meeting. supervisor campos: you have the minutes before you from the march meeting. we have a motion to except. is there any public comment on those minutes? c. non, public comment is closed. we have a motion from supervisor mirkarimi. we will take that without objection. call the next item. >> item # 3 is the study for a refugse collection in the greatr bay area. >> this is an item we have been working on for a few weeks. the board of supervisors is considering an item to issue a contract -- a landfill contract considered at the budget and finance meeting a few weeks ago.

we have been conducting a study of how other jurisdictions deal with the issue of refuse collection, transportation, and disposal. to present on the item is our executive officer, nancy miller. >> we commissioned a study approximately a month ago. the scope was fairly limited in looking at the selection process other agencies enter into for the selection of a provider for refuse. there was a competitive bid process. the report was made public on april 14. it is available before you today. the consultant met with the san

francisco department of the environment. port authority, and members. they conducted an oral and written survey of 106 jurisdictions to assess the findings of the report. there was a resolution in your pocket if you decide to accept and forward to the board of supervisors. to give a presentation from members from the consulting team. they are richard hutcheson and melete passenger -- lasseter. i will turn it over to rich for the presentation. you have additional information provided to us after the report was in the final stages of preparation. one is a letter from the city of oakland.

the other it is figures on estimated benefits the city receives from the contract. supervisor campos: i have a quick question about process. if there are additional questions or additional information that the commission would want, we can ask them to come back to us in the near future. >> that is correct. the consultant is available to you for any additional services you would like for them to provide. supervisor campos: great. thank you. is the microphone working? >> i am richard hutcheson. melody worked on the project with me. we're going to provide results of our study to examine the practices of procuring services

for solid waste. supervisor campos: does your company have any relationship or employment agreement with any companies that could have any involvement in the industry we are discussing? >> no, sir. we do not. power company only works for public agencies. -- our company only works for public agencies. please feel free to interrupt with questions as recover various areas of the study. we were hired few weeks ago to look at the process for selecting haulers at various jurisdictions in the greater bay area. it is a fairly quick process. just a few weeks ago, we were in

these chambers when it approved the contract. about three weeks later, we will now provide you with the report. the caveat is we tried to gather as much information as we could in a short time. everything we were able to gather is in the report. if we had six months, we might have been able to get more information. we looked at a lot of background information. the 1932 ordinance is key to this. that governs how you procurer services. we talked to various members of the port, the city, waste management, ecology. we read your disposal agreements and virtually anything else we could get hold of in the timeframe to gain an understanding of how the process works and what was going in with

in the process. we looked at the recycling websites. we did internet research. we used a lot of information we have in our own files from working with jurisdictions in the greater bay area. we did a fairly extensive survey of those jurisdictions. we have summarized the results of that in the report. so that you can get a feel for who we talked to, we were able to communicate with 95 jurisdictions and seven counties in the greater bay area. we have listed them on the chart. i will not go through them. of those 97 jurisdictions -- 95. i am sorry. three haulers serve the majority

of them. the remaining jurisdictions are serviced by 19 other independent companies. some are jointly owned. there is one other national company. of the companies that we surveyed, they are international, independent, or owned by the employees themselves. what we found with the first question of how they procure the services, we found 55% of the jurisdictions we talked to use a competitive procurement process. we found 45% of them do not use a competitive procurement process. the reason in most of the 45% is because it one time back in

history, they awarded a franchise to either a single hauler or multiple haulers without going through competitive procurement. that is the best we can tell. some of it goes pretty far back. as time went on, those contracts were purchased for the companies were merged -- or the companies were merged. since that time, they have extended contracts without going through a procurement process. san francisco is similar to that but you use the permit in license process. -- permit and license process. you have had initial haulers merge and have not gone through a competitive process. the real difference in san francisco and everybody else we talked to is that they all have some type of formal agreement, a

franchise agreement or contract, the documents the terms and conditions of the service that has a finite term attached to it. in virtually every case but one, the term can be extended and has been extended over and over again. we did find one municipality that by city code cannot contract for more than 10 years without going through a competitive procurement. supervisor campos: a quick clarifying point. is there any other jurisdiction besides san francisco that does the service only by the permitting process? >> some cities use a permit process for a non-competitive commercial service or industrial service. no one else we are aware of

uses it for residential and commercial together. supervisor campos: the ones that selected vendors three non- competitive process, how many jurisdictions do not have a franchise agreement? >> we're not aware of any that do not have some type of franchise agreement. supervisor campos: san francisco is the only one. ok. >> when we look at the length of the term of the agreements, we found the average agreement term was 11 years. most or a majority of the jurisdictions are 1 to 10 years. seven is about the shortest juicy. -- 7 is about the shortest that you see. the run-up to 30-year agreements. seven jurisdictions have an evergreen contract. the contract extends by a year

at the end of each year unless the jurisdiction elects not to extend it. those just go on. if it starts a seven years, it is always a seven-year contract until the jurisdictions as they do not want to extend it anymore. san francisco is the only one in our survey that does not have some type of term limitation that can be extended but does not have been there. -- does not have it in there. we also looked at disposal agreements. this is considerably different. we did find some jurisdictions competitively procure their agreements. the majority even have negotiated -- i have negotiated a separate agreement or the collection hauler is the person in charge of disposal.

i would tell recology to take it to the land go where they can get the most economic benefit for their contract. -- to the landfill where they can get the most economic benefit for their contract. you have just gone through a competitive negotiation. you have done both. the rate setting methodologies, there are a variety of ways to set them. the most common are in indexed approach using the consumer price index or a multiple index approache. the refuse rate index is related to the hauler's cost. it is important that they be able to adjust rates by fuel.

a lot of municipalities use a detailed break review process such as what you do. several combine them as you do and have a detailed review process every certain number of years with an indexed adjustment in the off years. we are going to talk about service rates. i have to do this. comparing service rates is virtually impossible without one of two things. the first thing is detailed knowledge of the services of the jurisdictions you are comparing. we have a list of some of the more important variables. you cannot compare rates if one jurisdiction requires them to collect schools for free and the other does not. you cannot compare rates if one

jurisdiction has a 5% franchise fee and another has a 20% franchise fee. the rates are affected by this. we want to make sure as we looked at rates that everyone understands that. you have got to have knowledge of -- detailed knowledge of what the services are or you have to have a crystal ball. if you do not have one of those, you are wasting time. let's look at the rates. we got quite a bit of information from the jurisdictions that responded to our survey regarding their services. on the residential side, 48 offered food waste service as part of the process for residential. that affects those rates. on the commercial side, 46 out

of 59 jurisdictions offer food waste selection. quite a few charge for that separately. there is no telling if it is actually used, but at least it is offered. on the version -- diversion that can drastically affect rates, we looked at seven counties. san francisco had the highest diversion rate, something you can be proud of. we also looked at a public agency fees. different cities called them different things. oakland has a city fee. san francisco has an impound account fee. the amount of those fees affects the rates also. here is the first set of rates. we looked at the customer rates. i understand it may be hard to

see on the small monitors. we tried to color code them. the san francisco residential rates are not the lowest but they are also not a highest. they are right around the average. they're just a little higher than average. keep in mind when we say that, you have very good services. we would expect your rates would not be the lowest because you do not have the least amount of services provided. on the commercial side, you are a commercial structure is very different. it is unique. it has been used as a good example for the last few years in various other jurisdictions. if we'd looked at your commercial base rate, you appear to be high.

but your rate structure is set up so that commercial accounts get a discount the more capacity they provide for diversion. it appears a 50% capacity is about average. when we look at 50% of the rates, you are right in there, a little below the average. you can get up to -- supervisor campos: a question about that. how does the discount kick in? is there an agreement with merck is that local law? how does that work? >> as a businessman, you go in and determine what size or capacity you want for waste and recycling. the calculator discounts of the

price. that is an agreement that the city and recology worked out. both worked out the tables used by the calculator. supervisor campos: is it possible one party could unilaterally change the agreement? >> i cannot answer. i do not know. supervisor campos: ok. >> that is the portion of this report that relates to the rates. are there any questions on the? -- that? supervisor mirkarimi: on the question of diversion rates, and was looking for the nexus of those with the fees that customers pay. i did not quite see that.

could you go over that a little bit? >> we do not have a direct correlation. the more diversion they either provide or are required to, the war effort the probe into its -- the more effort they put into it, and more cost they incur. whether that is translated into the rates depends on how your rate structure is set up and even negotiated or bid. supervisor mirkarimi: you have evaluated separately areas with the version rates and customer rates independent of each other. who has high diversion rates and comparable or lower or higher? i am curious about who comes close. >> i would have to look back in the appendices. i do not know of the top of my

head. supervisor mirkarimi: with its potentially preclude that for cities or counties looking for the solution of diversion, would that add to the necessity of a higher rate or comparable rate to achieve higher a diversion? >> i agree and would expect to see higher cost and probably higher rates in any city looking to increase diversion. programs used in previous diversions cost more money. we were also announced to look at a couple of situations regarding barging. supervisor avalos: there seems

to be some discrepancy between an assertion that we have some of the lowest rates. let me read this out loud. those in chart 14 appear to be the highest in the area. a spokesperson is quoted as saying that the average discount for commercial customers is 50%. the data shows the san francisco rate is the highest. on page 31, you assert that virtually all businesses pay less than the base rates. the most common discount received by commercial customers is 50%. the discount of 50% was applied to the base rates for comparison purposes. did you apply this to any other jurisdictions in the survey? >> we did not.

no one else to our knowledge provides that kind of a discount situation. >> do you know why they do not provide such a discount? >> the rate or fee process that san francisco set up a couple of years ago is unique. no one has done in before. a lot of people are looking at it and are interested in it. it does seem to allow each individual business to tailor their service to exactly what they need and get benefit from it. other municipalities have done things such as say that recycling will be no more than 75% of refuse or that green waste will be no more than 50%. some have built a certain capacity into the great -- rate.

i get up to two yards of recyclables for no additional charge. if i am a businessman who cannot use two cubic yards of recycling because of the nature of my business, it is still built into the rate. what has been interesting in san francisco is the ability to order based on what i need. that combination discount rate. -- that combination discounts my rate. supervisor mirkarimi: who has the final say on the rates in san francisco? >> my understanding is that the commercial rates are set between the hauler and bu