details. i could address a couple issues that have come up. i just want to mention, supervisor campos, i respect the discussion about franchise fees and looking at ways to bring more funds to san francisco. i want to make sure everyone knows this is not a zero sum gain. if the committee or the board decided to move forward on trying to put together a franchise fee agreement with recology, fees would be passed on to the ratepayers, either through the rate process or the existing process. my concern is that if the current process is open up and the rates we have evaluated through the rfp process, that could put us back at square one. i'm concerned about how that will affect the process, as well as the fact that it would be passed on to ratepayers. that may not be the best deal for the ratepayers in san francisco. i do respect the discussion. secondly, as supervisor campos mentioned, we did pass out at

the lafco hearing, some numbers about the fact that we do essentially and effectively have a franchise fee that anywhere between 10% to 30% in san francisco. that comes from a number of the fees and free services provided to the city of san francisco through recology. it equals about $29 million. although we do not have a formal franchise fee agreement through the rate process, we have set up many programs and many incentives for recology to provide either free services or additional programming. in terms of the timing, we have concerns for all the reasons. regarding union pacific --

>> hon. supervisors, i'm chief operating officer of recology. the current agreement expires may 31, instead of april 31. at this point in time, we would have to go back to the union pacific. there's a union pacific representative in the audience that would be capable of responding to this. we would have to go to them to request an extension. at that point, depending on their ability to extend would determine our ability to provide

that extension through the facilitation agreement. supervisors chu: it sounds to me that there is an agreement currently in place until the end of may. should there not be action taken at this point, you would have to request an extension of those rates? >> correct. supervisors chu: let me ask another question to the department. with regards to the franchise agreement, i understand the distinction between the landfill contract and the distinction between transportation, which i think is important. just speaking a little bit about the conversation about franchise agreements, can you talk a little bit about -- i know this is more the subject of what the lafco study was about, but what was in other agreements? when i read the lafco report, some things that jump out to me with regards to the findings and

recommendations, first, one thing i was surprised to see from the lafco study was that in a comparison of rates, they indicated the rates were fairly typical and fairly standard and similar to other rates that we found across the bay area. i think that was a good fighting from the lafco study. one thing that was a benefit to us, we have the best version rate -- the best diversion rate. we were able to accomplish these goals while remaining on par in terms of costs. an interesting report finding was that though we do not have a formal franchise agreement, which i think is something people do not dispute here, we are not the only organization board jurisdiction that does not competitively bid out collection either. we may not have a formal franchise agreement, but we are not the only ones that do not to

a competitive bid process. other ones do enter into a formal franchise agreement. the question is, compared to other jurisdictions, i did receive a memo on how we compare with the benefits that you talked about that are similar to franchise agreements. can you speak about what other jurisdictions have included in their franchise agreement? how does our system compare? for example, the franchise agreements generally talk about running recycling benefits, etc., and how do we compare to that? >> from the study and what the consultants spoke about on monday at the hearing -- typically, cities get anywhere from 5% to 15%. that seems to be the range for franchise fee agreements in terms of benefits, services, and additional fees paid to a city or county. typically, franchise fee agreements often do include transportation and landfill

cost. because we do not have one, that's why we have the facilitation agreement as well as the contract. in terms of the range, we were right in the middle of the range of what cities typically get from a franchise agreement, and possibly on the high end. supervisors chu: within the franchise agreement, the bawhats typically been in them? if you do not have the answer, that's ok. >> i do not have any more details on that decides what i have mentioned but i'd be happy to get more detail. supervisors chu: if you could provide that information with the benefits we receive, which you say it's in the middle to high range. with regards to the oakland example, i think they have indicated that they received roughly $29 million worth of funding. however, only $4.8 million is

free and clear directed to the general fund in oakland. the rest of that, the vast majority, goes to -- what types of activities? is it recycling? >> it is recycling and composting and also two grant programs. i do not have any more detail on the oakland fees beyond that. supervisors chu: from the $29 million, we get about $24 million that goes through recycling programs, composting programs, and perhaps some community grants. in comparison to our process, we also have a composting plan with recology, a recycling plan, and community grants. >> yes. we have many other things. we have many more comprehensive services than many other cities.

everything from hazardous waste disposal to taking back electronics. recology has started a styrofoam recycling program. there are about 19 different programs recology runs in the city and county of san francisco. we get a comprehensive service in the city through recology. supervisors chu: ok. supervisors kim. supervisors kim: thank you. if you follow up questions. i'm curious to your comments that you made in response to supervisor campos in terms of franchise fees increasing rate here rates. if it is a case of oakland, where the have the comparable rates, and they have a franchise fee, why would it necessarily increase our rates? >> right now, those fees are not included in our rate process or in the current contract.

that would be something recology would have to absorb or pass on to ratepayers. supervisors kim: potentially, recology could absorb this? >> going back to the fact that we have comprehensive service, my understanding is oakland has a much more simple recycling and composting program and a lot of the services recology provides to us are very costly. that's something that also came up at lafco. recology has invested in quite a bit of recycling and composting infrastructure. some of the special programs cost money. there was a lot of talk about apples to apples and if oakland was a fair comparison. supervisors kim: that was a little frustrating in the lafco

report. it was hard to discern what the cost of all these programs were. i think there's probably a general consensus here to continue this item. i would like to see what the cost of these additional services are that, for example, other jurisdictions do not have. according to the report, many other jurisdictions have community clean-up days and compost giveaways and many of the things recology provides, which i think is great. i love that recology provides these services to our city. just to get a sense of what the benefits are. we have a sense of whether the residential rates are comparable and whether the fees are comparable compared to the services that other jurisdictions are getting. it would be good to get that. could you also talk a little bit more -- we are out of compliance

with state law. are the penalties associated with >> that> there are no penalties. it is a concern that we do not have 15 years as part of our plan. it is mandated, but there are no penalties. supervisors kim: i know we have the impact on the county, which i think many other jurisdictions do not have. that is something we have with recology and the department of environment. can you talk about what we use those fees for? >> many of the impound account fees go to different departments. department of environment get some portion. the department of public works gets some portion. and the department of public health. from the perspective of the department of environment, most, if not all of the impound fees are focused on ares erased

program and are toxic program. they're also the smaller portions that cover environmental justice. those go into staff costs, education, outreach, implementation, and on zero waste, implementing the mandatory composting and recycling law is very cumbersome, but cost-effective. our composting rates have doubled. apartment buildings have gone from a 20% of two greuptick rat. from the perspective of department of environment's they do help us. supervisors kim: it would be great to get the budget for that and the outcome on how we spend that money. exactly what you outlined.

can you talk about whether we can segregate the residential and commercial? and why we are not able to do that now? >> can you say the question again? supervisors kim: my understanding is that we currently cannot segregate the profits brought in and we see it as one lump-sum. is there any reason for that? >> i will have to look into that question. i do not know. supervisors kim: i think those are my questions for now. thank you. supervisors chu: supervisor campos. supervisor campos: thank you, madam chair. a couple of things about what was said in terms of the

competitive bid process and the concern of what would happen. one of the things that was noted is that you never really know whether or not going through a competitive bid will result in higher or lower rates in the sense that it depends on the case. it is a case by case basis analysis 3 on the 95 jurisdictions that they looked at. on average, residential customer rates were actually lower after the competitive bid process was followed. that is not a guarantee, but again, the whole point of the competitive bid process is for us to outline the services that we want. the competitive bid, the request, can be structured in such a way and then you let the

market decide and the company that can provide that service that you want at the lowest price, with other considerations, labor considerations and other allies, would get the contract. i do not necessarily think that we should be so afraid of having to go through that process. it is a process that could end up benefiting the city. the second thing, in terms of the impact on rates by the imposition of a franchise fee, again, jurisdictions that have franchise fees have rates comparable to ours. it is not this is rarely the case that the franchise fee would automatically lead to higher rates for the ratepayers. i would hope that if we go down the road, that is not the defacto position taken by the

city. we should make sure that whatever happens, rates are kept as low as possible and to the extent that there is an impact, the impact should not be on the ratepayer. maybe it will mean that the bottom line for the vendor is not as high as it presently is. obviously, we want to be fair. there's nothing wrong with that being the result. we cannot assume that the higher rates will necessarily happen. with respect to the amount that is paid, ms. nutter, you referenced 10.6%. i think there was a mention of 13% of revenue. that's the first time i've heard from department of environment that it is 13% and i have certainly not seen any numbers that point the 13%. 10.6% is what we have. interestingly enough, in the

10.6%, they include things that other jurisdictions have come in addition to a franchise fee. vehicle license fee, business tax. i do not know that those things are included in the franchise fee calculations that other jurisdictions have. that's why it is important for us to have the budget analyst review these numbers. interestingly enough, when recology itself made its presentation, they pointed out that they serve 110 jurisdictions. they have franchise agreements with many of the jurisdictions. the fee that they pay goes up to as high as 15%. 15% for san francisco would be an additional $14 million based on the calculations given by the department of environment.

in this budget crisis we are facing, we have an obligation to ensure that we pursue every option and that we get our fair rate of return. that's why i think that taking the time to get to a solution that is the right solution for the city, the ratepayers, the workers, and the company, is worthwhile. i look forward, if that continues to happen, to working with you. supervisors chu: thank you. supervisors mirkarimi. supervisors mirkarimi: some of the data that we have, either from the lafco discussion and some of the numbers before us, it's a little incomplete. that seems to be the emerging cognizance. we are looking for a little more data. to the point that was just made, i think that we could possibly invite problems with the competitive bidding process. in other words, there's no question that in the

conventional wisdom, that this benefits the ratepayer by having companies compete for the best rates and the cheapest rate for the best service. i think that's an obvious one. the question that needs to be attached, the service of excellence that is maintained based on the standards that we are already used to in san francisco. that's why i prefaced my remarks that san francisco stand out in its level of comprehensive diversion and its sensitivity towards its landfill capacity and its environmental goals. these are all trophy points that have to be maintained with the primary pursuit of trying to deliver great rates for residents. keep in mind, some of those people may not care about the environmental goals overall that we are way out on a limb on

nationally. there has to be some kind of a convergence on all of this that, i think, speaks to why this discussion is an important one. should have been had months ago. now that it is taking place, we are in the thick of it. a number of colleagues have said these are the points we want to see. do they line up in a way that there is a win-win? my forecast is that there may potentially be. supervisors chu: thank you very much. i know there might not be any questions at this time, but perhaps later there will be. there's a large number of people in this room. i would like to open it up for public comment. i will call names from cards i received. if you hear your name, please come up to the center aisle and we will do two minutes each. bob gregory, richard neal,

marina, david, ken, irene, adr ienne. go ahead. >> my name is robert gregory. i'm a regional operations manager for a company in san for cisco bay. -- for a company in san francisco bay. i do not know all the history of this issue, but i do know that we were not contacted to explore any of the possibilities of barging the garbage in san

francisco bay. as one of the larger tug and barge companies in the bay, i think we can at least offer some information. i cannot argue it would prove to be the -- proved to make economic sense, but i would like to be involved in the studies. i do not know of any other barge companies that were contacted either. barging has a tremendous environmental advantage over trucking, including taking trucks and rail off the road. our company has done a lot to put the latest engines in our vessels and introduction of hybrid technology in tugboats. there could be a tremendous opportunity to create maritime jobs, something that has been

-- something the port has been trying to build three in conjunction with the marine highway, maybe there's a -- maybe this can be worked into a similar path with. and make further use of the marine highway. i guess that is my two minutes. there are other tug and barge cos. i ask that we be involved. supervisors chu: thank you. thank you. next speaker, please. i believe there's an individual from recology who would like to speak. i would like to call you out of order aafter the speaker. >> i frequently use san francisco's political phrase

"this city family." here's an example of city family dysfunction. on page 7 of the report, it mentions that the department of environment's staff indicated that recology that -- indicated that "recology and the city are long-term partners and it's an appropriate alternative to a competitive procurement process." lines are critically flawed between the regulator and the regulated. a rate structure and procurement process needs to be independent, not a sole source, and not cost plus contract. 57%, or 7.7 million of department of environment's annual budget of $13.5 million is funded by the city's rate peers through recology -- cities

ratepayers through recology. this is -- if you care about good government, fairness to ratepayers, you will take leadership to correct this and honor your fiscal and fiduciary duties. you must insure community choice, competition, by monopolies. there are three consulting groups. overall, the actual analysis needs to continue. you are elected supervisors. you need to be a voice for the ratepayers, not intent on expanding the monopoly to hire lawyers and lobbyists to continue the item. supervisors chu: thank you very much.

if i can call out of order mr. legnitto. >> supervisors, in the group manager for all the san francisco operations of recology. based on the testimony we have heard today, i have over 100 speakers here today to speak on our behalf with respect to this agreement. based on the city fathers and the things they feel that are important, i'm going to ask them to stand down today in an effort to fully vet this process. with that said, i would like to make this comment that we feel very strongly that the agreement before you is a good agreement for the city. it has been competitively bid. it saves a significant amount of money. i believe it will be sustainable and more environmentally conscious than any of the other proposals at this time. thank you very much.

supervisors chu: thank you, mr. legnitto. i will call the remainder of the cards. i do want you to know that we are aware of the large turnout that we see. i will be calling the rest of the names. if you are inclined to speak today, please line up in the center aisle. daniel, andrew, cliff, ryan, brent, jim lazarus, douglas gibbs, debra monk, ashley roads, al norman, rev. arnold townshend. thank you. next picture, please. supervisors mirkarimi: before

that, in following normal protocol, i want to acknowledge that judge copp, former supervisor, is in the audience. supervisors chu: thank you very much. >> my name is richard mead. i'm here to ask, again, that a full, clear look be taken at the maritime option. yesterday or the day before, there was a hearing. an individual pointed out that san francisco is surrounded on three sides by water. that does not mean that you should stick out the airport. the maritime option is feasible. it is a good option. there was nothing in the report about the marine highway and the federal funds that are available.

no one has talked to us about our barge supplement and how we make it work in the press of the northwest. right next door at pier 96, we have an aggregate auction. we sat down with them and made the numbers work so that could come together. there was a lot of talk about the 75% recycled percentage that recology is currently doing. that number will not go down if you ship by barge. you can access five landfills within 10 miles of the bay. the one thing that the current plan has in common is recology from the start to the finish. i do not blame recology