timeline, costs, and considerations. we are moving our entire waste infrastructure. it would need solid waste facilities permit, army corps of engineer approval, among others. both the port and the department of environment concluded this would take about seven years to 10 years in order to see this type of facility. the cost is projected to be anywhere from $200 million to $400 million. this is from recology and a consultant we looked at. although this is of interest and something we will be looking at long-term, there's no short- term option identified for moving our integrated waste facility to the porct today.

another option we reviewed was using the port as a transfer facility for refuse. the facility that would need to be created is only for the transfer of waste. it would not be an integrated facility. the considerations for this option are -- it would require double handling of waste. it was identified immediately as potentially inefficient. it would also require many of the permits required for the integrated waste facility. those two considerations left the port and department of environment to conclude it's about a five-year to seven year process. it could cost from $100 million to $200 million. it was concluded that this was not a short-term option to be considered as we are considering the landfill contract today.

the third option seems like it might be a short-term option. that is, and barging recyclables from the pier 96 facility. this is a pilot that could happen at any time. recology said they are willing and interested to try it when there is interest. we asked one of our consultants, htr, to put together a memo of the cost of barging from various points in san francisco, the port being one. it was concluded that barging is more than twice as expensive as trucking. the numbers we received was $21 per ton versus $8 per ton for trucking. as an infrastructure perspective, we could consider this in the short term, but the costs and economics are not there.

the department did look at other regional barging options, including barging to oakland or sacramento and from there to landfill by rail. according to art consultant, it would add $123 million to $343 million to the price of the contract over 10 years. additional considerations make it less desirable. no landfill is directly bars accessible today. for environmental reasons, leakage as well as littere -- they are all located away from waterways. it does require double or triple handling of waste, which has a significant impact. the conclusion, following are

two months of work, talking to the port, and working with the consultant, no options are cost- efficient and viable. the chairwoman mentioned two of the studies that are in the process. one of them is the lafco study. some of you may have been at the meeting on monday where an initial study was presented regarding waste management systems in the bay area and comparing the san francisco system to other systems. what the study found was that our system is effective and we have the highest diversion rate of many counties. it is comprehensive. we of many different materials that are handled in our system. it's also cost-effective. for ratepayers, our rates are slightly below or at comparable rates. we did get confirmation from the study that the system that we

have now is currently working. what we heard from the meeting on monday is that there is interest in looking at and considering franchise fees, open bidding, and contractual agreements with recology and integrating any of those elements into our current system. the lafco study was continued and the consultant is looking back to look at those elements. this is important for the collection portion of our refuse system, which relates to the 1932 ordinance. on the first slide, there are four components of our waste system. the department of the environment and the port commission a study that looks at the port as a long-term option for an integrated waste facility. that's the first slide i showed you. this is something that we commissioned. the study is currently in process.

we are working closely with the court to make sure we have all the information to determine if it is a long-term option. one thing i did want to mention, from our perspective, neither study directly informs the landfill contract that before you today. we've received a lot of questions. why act now? as you know, the contracts we currently have with waste management is slated to expire around 2015 with our current rate of disposal. we see that there are four reasons why we think it is important for this committee, as well as the board of supervisors, to consider acting now. the first is that recology has an agreement with union pacific for the rail portion of this. our concern is the cost to rate payers may increase if the

agreement is not maintained. the second reason is this city does not currently have landfill capacity to deal with a natural disaster or unforeseen event that produces large amounts of debris. we're in a situation where if one of those events occurs in our city, the current landfill capacity that we have could be quickly filled up in a day. we do not have a contingency plan. we need a long-term plan for our waste and what it would cost the city in the possibility of an event. the third reason is -- as of november 2010, the city is now out of compliance with the state law that requires a 15-year disposal plan. this is the california public resources code that asks all cities and counties of california to have a 15-year disposal plan for its waste. that's a concern, as well. finally, there's not adequate

time to redo the process before we reach a contracted capacity at altamont. when we started this process in 2003, we do not see a way to restart this process and complete it in the next couple of years considering how long it has taken us to execute the process at the department to date. i will touch briefly on this. the facilitation agreement language that we have drafted and has been approved by the port of san francisco, the city attorney, and recology will do a few different things. the addendum, if it is adopted as part of the facilitation agreement, will commit the city to investigate new port and transportation options, including barges. it would commit to recology. recology it recology and the port to consider development of new port

infrastructure and set a time certain to report on these considerations in five years and no later than that. they have all agreed to this language, as i said. the reason we went down this path in the facilitation agreement is we wanted to codify and formalize the discussions we are having with the port and ensure this is not an exercise we do today and when it is in place, no more discussions will happen three we want to make sure this is a way to formalize the discussions that we know are important to this committee and to the board. our recommendation is that the committee very carefully consider and move forward with approving this landfill contract and facilitation improvement today. we are sensitive to the fact that there are other things that play. as i mentioned, possible

franchise fee agreements, possible agreements. in our view, our work has been done in ensuring this is a good deal for san francisco, both environmentally and economically. we want to make sure san francisco has a contingency plan for our waste. thank you very much for your time. i would appreciate any questions you have for me or other staff. supervisors chu: thank you very much did i know there are a number of questions from my colleagues. i do want to ask two technical ones. you laid out the three different transportation options, which included the integrated process, the transfer facility, and the barging. for options 1 and two, you identified the cost roughly. second option, $100 million to $200 million. with the last one, $21 compared

to $8. who would pay for that? >> ratepayers. supervisors chu: meaning households, commercial. >> households, commercial, residential. one of these avenues was selected, in the next rate review process, we expect the cost to be passed on to ratepayers in some way. supervisors chu: if we did not pursue any of these options, we would not incur the additional cost. >> that is right. we would not incur any of those costs. supervisors chu: you talk about possible amendments, which i believe is the sheet all of us were given to really talk about the commitment to exploring different transportation

opsins, good faith negotiations and what infrastructure, etc. it is not necessarily something we would do it here. it would have to be done to the underlying facilitation agreement. is that correct? >> if i could ask the city attorney to answer that. >> tom owens, a city attorney's office. the new language would be inserted in the facilitation agreement. the resolution authorizes the director to make amendments. supervisors chu: if we were to decide to take that, would we have to take any action at this committee, or simply the action at the department of environment? >> in your approval of the resolution, you might want to make specific it was inclusion of that language, but that would be the only action. supervisors chu: thank you. supervisors mirkarimi. supervisors mirkarimi: thank

you, madam chair. thank you for the presentation. over the last two months, when this initially came before us in the budget committee and then it was postponed, it has been over that period of time where i have been meeting with the department of environment, port authority, office of economic were forced development, and recology, among others, to discuss the process of what it would look like to reanimate our port. how san francisco city and county could get this. when this was brought before us in the way that it is now of renewing this contract with recology, the issues came up

that were really not well advanced before our deliberations in february, which is why, to put it in context, this was put on hold. i know there might be a number of approaches among our colleagues as to how they want to approach this discussion about renewing recology. overall, it's safe to say a great many members of the board of supervisors are very satisfied with the service recology provides. they are in excellent company. it is community-owned, employee- owned, which makes it unique, and where san francisco ranks in its ability to divert from the landfill. from a long-term environmentalists like myself, there'that is not something to e at. it presents an opportunity to try to evaluate -- are we able

to exact a great number of dividend, more dollars, back into the city? that gets to the bottom of this discussion today. would that be through the vehicle of us considering how we might be able to insert a port role in this? maybe not. in february, that had not even been considered in the way it is now presented today. in the last two months, and i know it has probably given some shudder to employees at recology and others that are here to advocate for them, but understand that due diligence needs to be done. it would be a disservice to the people of san francisco that while we've been working extremely hard to bring business into san francisco, we are also looking for a way to really come to the defense of our port and create job creation without subverting the business model of recology.

when we learned in the process in february that recology is on the cusp of expanding the brisbane, that business we potentially view as departing from san francisco. when we learned that the city of brisbane is now contemplating a tax, that's also considered a potential source of revenue that does not benefit the people of san francisco. in the direction of the last couple of months, i have to say that more due diligence has been done. we have been able to determine that the port may not be the right step at this particular juncture, but i think it is worthy of the spirit of this amendment. however we decide to insert it in the final agreement, the city and recology commit to that investigation of what it means to see if there is the financial wherewithal, if it can economically make sense.

there are too many other variables to go into in this discussion. i think that's the mind-set that helps set the stage as to why this discussion is taking place. the model that was presented was a well vetted model by recology. it would be a dereliction of our duty to know that the city immediately south of us might be able to benefit from a financial gain that we would not be able to benefit from by ourselves if we would not at least address that first. i feel some of that diligence has now been done on this question. i think now sets in motion a commitment that we look to the future in making sure it interests in san francisco are taken care of. i realize that others on the board may have questions about the franchise.

there's not one that exists. people want to get creative and how they might be able to enhance the dollar fund into san francisco. that's a healthy discussion that will take place. i know supervisor campos and others will want to weigh in. that only creates and fosters greater partnership between recology and the people of san francisco. i think that is where the deliberations from here on now ensue. the questions on the port and the barging, i think it has been a decent and i think it satisfies the early discussion. i'm happy with that. supervisors chu: thank you, supervisors mirkarimi. we have opened up the overflow room in room 263 across the hall parity would be able to -- across the hall. you would be able to hear and also provide public comment.

i know that a supervisor campos has a question. supervisor campos: thank you, madam chair. first of all, i want to thank this committee for giving me an opportunity to weigh in on this by trying to provide more information to the city and county as we make these decisions. as was noted by mr. nutter, a report was commissioned by lafco. it took some time to have that initial report finalized. we had to go through a competitive bid process. once that happens, the vendor had two or three weeks to do a very quick survey on where we are all relative to other jurisdictions. we believe and i certainly believe it is important for us

as we're making these decisions that we have a context for what is happening in the region and what we're doing in san francisco and how that compares to other cities. as was noted, there are some things, a number of things that came out in the report. one of them, which i think is an accurate statement is that indeed it verifies that there is a survey provided by recology. in terms of the extensive list of the service, and the results for the ratepayers of san francisco. that something that three comforting. -- that is something that's very comforting. recology and department of environment have been very helpful in working with lafco to make sure we have the

information needed for this assessment. there are a number of things that came out in the report that are important for us to take into consideration. the first point i would make, while i understand the the focus of the hearing is on the facilitation agreement and the landfill contract, we have to look at the whole service provided to the ratepayer. each one of those components does not occur in a vacuum. if you move forward approving the facilitation agreement and approving the landfill agreement without taking into consideration what happens with the other two components, the collection and the transport, it does have implications for the ratepayer. it does have implications for the people of san francisco. it's important for us to understand that every one of those services described by ms. nutter, there's an

interconnection. we're talking about what was noted in the report by the budget analyst, a process that is expended -- $206 million per year. before we move forward with a landfill agreement, we need to have some resolution about the other pieces of this process. there are some questions that the lafco report points to. first of all, of the 95 jurisdictions that we looked at, 55 of those jurisdictions go through a competitive bid process in selecting the company that collects garbage in those jurisdictions. 45% do not. they go through -- they simply do a sole service contract. all of those jurisdictions, 45% of those jurisdictions, do

something that we do not do. they have franchise agreement that codifies the relationship between the jurisdiction and the vendor. those franchise agreements have a franchise fee that, according to this report, ranges from about 2% to 20%. san francisco is the only jurisdiction in all the 95 jurisdictions that we looked at that actually handles garbage or refuse collection through this process. the only one that does not have a franchise agreement of those jurisdictions that did not go through a competitive bid. something else that was pointed out is that even though we have the 1932 ordinance in place, in fact, there is no legal document that legally blind recologinds o provide a service that they

provide. we have a great process in place. some of the parties, certainly recology, see that rate process as the equivalent of a contract. there's no contract that actually outlines those services. in terms of the revenue that goes into the city, we were presented for the first time with a document that was given to us by the department of environment. it's a brief document that outlines what they believe is provided by recology to the city. based on those numbers, the revenue recology has is about $274 million and the benefits or services given to the city by recology amounts to $29 billion, which constitutes 10.6% of total revenues that recology has. the first time we hear of those

numbers, it's not clear how that compares to other jurisdictions. that's one of the reasons the lafco consultants were asked to come back and provide additional information. in oakland, by the way, we saw a memo from the interim administrator of the city of oakland. oakland receives the same total amount from their venture, which is significant. we are talking about a smaller jurisdiction. a significant portion of that amount, about $5 million goes to the general fund. again, we're the only ones that do not have a franchise agreement. those questions remain. i would ask that you take your time to make sure that we handle these two matters that are before you correctly. again, the facilitation

agreement and the landfill agreement. we believe additional information needs to be obtained about how the rate of return we are getting compares to other jurisdictions. we are talking about jurisdictions where the rates are pretty comparable to san francisco. you have a situation where the vendor is not only providing reasonable rates, but on top of those rates, paying a franchise fee. it is not a situation where what ever franchise fee would automatically come from the ratepayers. that is something we need to explore. the information that was given to us by the department of environment points to the need for further investigation. i think it would be helpful to have the budget analyst look at the numbers that were given to us to make sure we have as much verification of the information as possible.

i think it is also important for us to continue to have a discussion with all of the parties that are involved, including the department of environment, including recology, including our labor partners. with that, i would simply ask that you continue the item that is before you. i know it is totally up to this committee to decide how to approach this. i think we owe it to the ratepayers and the citizens of san francisco to take our time and make sure we do this right. i think that doing this right is something that will ultimately benefit ratepayers, but will be to the benefit of this company, and that's the last thing i want to emphasize. i have been very impressed with recology. i have visited their facilities and dime. impressed with the way they have provided services and the way in which they deal with their employees and the level of respect. i think that's all something we

should be proud of. this is not about recology and the substance of the benefits provided. this is about the process, to make sure we have in place a system that protects the people of san francisco and has as many protections legally as possible. from my estimation, at this point, we do not have. supervisors chu: thank you, supervisor campos. you had spoken a little bit about the timeline and the concerns you had with the continuance. i just want to explore that a bit. i'm understanding some of the points you made last time, including concern -- if we were to deal with disasters. stuck in people's heads is the disaster in japan, the seismic activity. that is one concern that was brought up last night.

you talked about the compliance issue last time. you talked about the time frame. it looks like from 2003, we started the process for this current contract to come before us and we are now in 2011. about a seven-year process to get to where we are at this moment. meanwhile, we know that our current landfill contract is likely to reach capacity around 2014. >> 2015. supervisors chu: can you tell me about the union pacific expiration and what that really means? >> that is a contract recology has entered into to guarantee the rail as a transportation method to the landfill. it has also locked in a rate that has been effective in the current contract through the facilitation agreement. i would like to defer that to recology