commissioner campos: again, we have not had our consultant look at that. ok, anything else? >> if i may just make a brief statement. thank you. on behalf of the department of the environment, we appreciate the information and analysis that was compiled, especially given the short time frame, and largely agree with the content that was included in the presentation today. the report confirms that san francisco's residential refuse rates are close to bay area averages, that commercial rates are at or below bay area averages, and the san francisco has one of the most comprehensive refuse collection systems in the bay area. no major service voids have occurred, and as you have heard, the system is working actively. just as important, the study does confirm that our average rates are higher than any in the bay area. although we agree with the

overall content of the report, we do have concerns with the report's recommendations. while representative use rates are low and average when compared to bay area counties and the program does perform at an exceptionally high level, as you heard, the report recommends that the policies governing our current system be repealed. this unfortunately does not add up. based on the performance and level of service that recology provides to send a cisco, we expect that the recommendation would be just the opposite, which is that other cities and counties could do well to perform -- conform their system to the way the san francisco is operating. to touch on a couple of points, san francisco's permit system for refuse collection may be unusual, but that does not make it undesirable. san francisco, as you heard, is not alone in choosing its refuse collection through a non- competitive bidding process, and shows that 45% of jurisdictions

do not competitively bid their refuse service. also, our current system provides the greatest flexibility in the event of any unforeseen circumstances that were referenced in the report. our current system has a level of flexibility already built into it that allows for ongoing improvements to service not possible under a bit and contract system. as i'm sure you are well aware, once a city accepts a bid, then that particular level of service as well as the particular cost is locked in here with our current system, service adjustments can be made at any time, and we can set rates at any time as well, so we do not need to wait for any contractual changes. a couple points i wanted to raise -- the report also states that it is unclear whether recology could sell or reassign its licenses and permits to a different company. we did get confirmation from the city attorney's office that

confirms permits are not transferable to other entities, so wanted to make sure that the commissioners were aware of that. on the other hand, contracts can be transferred, and if recology were planning to transfer service, the city could quickly reach to new permits, and the permit system ensures that the permit will not stop here finally, without an extended long-term arrangement, recology will have no incentive to invest in long-term recycling structure, which we are concerned could bring our push to zero waste to a halt. san francisco, as you know, has the best diversion rate of any city in the country because the rate process allowed recology to invest in amortize state of the art recycling facilities over time. finally, just wanted to mention without the flexibility, security, long-term planning, and cooperative partnership of the current system, the city's 0 with goals, which are set by the board of supervisors, could be

severely compromised. we urge the lafco commissioners to support the current refuse system that works for san francisco. thank you very much for your time today. commissioner campos: thank you. i have a quick follow-up -- one of the things that stood out to me was the abatement report. i wonder whether or not you agree or disagree with what they are saying. this is what it says -- "while no apparent service lapses or voids have occurred, it does not appear that recology is contractually obligated to negotiate with san francisco or continue providing services." >> it is true we do not currently have a contract in place. that is true. but again, from our experience, we have not seen any lapses in services for any reason to be concerned about the service that recology is providing. if there was a lapse in service,

we could quickly reassigned those permits to another entity to enter the service does not stop in san francisco. commissioner mirkarimi: thank you. i agree with the overture with regard to recology. it does provide an excellent service, and it is a hallmark that it is employee-owned, and it is something that is unique to san francisco. in your remarks, i want to make sure we are clear about the uniqueness about recology and investing in san francisco and us and them. it is known that recology is looking into brisbane. with that on the horizon, but they could continue with their continuous operation to expand to about a 70-plus acre land, that would mean moving not into san francisco, but moving

actually into brisbane. the city council there is contemplating a tax that would then benefit the city of brisbane, not the city of san francisco. isn't that correct? >> that is what they are currently looking at. commissioner mirkarimi: this is something i have shared with the office of economic and workforce development. to me, that is a mess. i thought that there was some opportunity or prospects for san francisco to be able to buy four that were to be part of the expansion process, it would have been, i think, more to our advantage -- and actually, we are going to try to advocate for san francisco -- to have that opportunity afforded to city hall so that we would have been able to be more competitive in that process. i have to tell you, when we came in to the knowledge of that happening, and based on all our research, city hall was not on the front burner of trying to

stymie that expansion into a city away from san francisco. >> as you know, we have initiated discussions with the port of san francisco to see if there is an alternative to keep recology in the city and county of san francisco and consolidate their facilities long term at the port. we have been working actively to make sure that we are exploring all options and insuring that as recology does expand service and a facility, that san francisco will get the best deal. on the measure that is potentially being proposed for brisbane, that is being negotiated as we speak. that is not a done deal. we certainly do need to and would recommend that we engage with the city of brisbane to look at what the terms of that measure would be and have been in touch with city hall about that. commissioner mirkarimi: and we get that, but i know through a lot of the meetings, which i do appreciate, the feedback we have

been getting from your department as well as recology itself, and that recology has got to do what recology has got to do. but in the conversation you just had with share -- chair campos, i want to make sure it is clear that for us to benefit from their growth and expansion is the question that we are trying to prime, and that is -- how does san francisco and san franciscans benefit from this as well? that goes to the purpose of what is being discussed here, based on past practice and future, i think, observation. is exactly what i think is driving some of this discussion. when i and others tried to insert ourselves in the discussion, it was only on the knowledge towards the tail end of us discovering that there had been plans set in motion to drive expansion away from san francisco, when we said,

"weight, is there not an opportunity for san francisco also to get a piece of the pie?" so we could be a limit our for or be able to afford business back within the municipality itself, while at the same time supporting, i think, the business plan that recology may have geared our way to make sure that the presentation you would forward with is also attached to the notion that we're trying to look at the future and where the dollars are going to come from. >> i agree with you and we have been sympathetic to the interest in ensuring that the city and county of san francisco gets the best deal. i know that you will be hearing from recology soon, but looking at this in the big picture, even if the facility is consolidated and there may be a tax cut on the ballot, the reality is with the upgrade in service and the upgrade in

facility, how will that still benefit our ratepayers and long- term service in san francisco? so i think it is a macro picture, and recology is best to speak to that, but i want to make sure that we are looking at even if the facility does expand, it stands to have some pretty strong benefits for our service. commissioner mirkarimi: thank you. commissioner campos: let me say that one of the things that i have seen through this process in learning more about how the process works and the work that recology does is that i have been very impressed by the operation that recology runs and the fact that it is an employee- owned company, and having visited the facility, it is very impressive. this discussion is not about the ecology not doing the job that is supposed to be doing, nor is it about the quality of the work.

to the contrary, i do not think anybody is disputing that. the question here is what is the city getting -- is the city getting the best deal possible for itself and ratepayers'? that is the central point. looking at what happened in brisbane, i do not fault the city council or city government to try to get its fair share. in these tough economic times, every government has to figure out a way of injecting revenue into its system, and that is why we are going through this process. i'm trying to understand from your perspective, is there a benefit to us further exploring whether or not we should have a codified franchise fee agreement for a codified agreement -- is there a benefit to us exploring

whether or not the percentage of what the city gets from recology should be modified? is there a benefit to us deciding whether or not we should benefit to a rate that is comparable to other jurisdictions? >> from our opinion, those are absolutely appropriate questions to be asking from this body as well as the board of supervisors. we obviously have to make sure that all of those bases are covered, while we are renegotiating as well as having additional discussions. i will say that our concern is that there will be -- it depends on the process of how some of those items may be addressed. that is the question for us because there are some processes that may very severely disrupt the work of the

department of environment. if certain facts are taken to address those questions. i will say we absolutely respect those questions being asked, and this is a very worthwhile discussion to be had. we have concerns about the different ways that that may take shape and how that will ultimately affect our department goals. commissioner campos: thank you very much. why don't we hear from recology? again, i want to thank recology and their cooperation with the city and county throughout the process and for being very open and sharing information with us. one of the things, by the way, that really impressed me was the respect that is accorded to your employees who ultimately are the owners of the company. >> thank you. we want to thank you for the opportunity to comment on the work that r3 did in the report.

we were very pleased by the comments that they made about how we conduct our business and the things we do for the city. everything has already been said a few times already, but i would like to comment on a couple of things. i guess we just see the world from a different point of view. there is no contract, as you know, with the city, but -- we have -- the mentioned 23 communities in the bay area that we have contracts with. around the state, would probably have about 100 contracts. i do not think any ~ well are alike. -- i do not think any two are alike. we began providing service in

san the tail on january 1 of this year. those 12 agencies have a standard form agreement that provides all the legal terms about what we are obligated to do. every city has decided they want some slightly different little services. they all want a different franchise fee. they have others that are added on to that. in that area, where branded state of the art agreements, if you can call of that, no two are alike. sadly, you can look for comparability anywhere you wanted. we look at the arrangement we have with san francisco a lot differently from others here today do. we apply occasionally, and we have tried to make it a fairly regular process for changes in rates that are designed to cover

our costs of business and give us what the city percy's -- perceives as a fair profit. that is a very intensive, long process altogether, including public hearings before we ever file a rate application. members of the public are invited to comment upon the services that we provide, what they might like to see done differently. many open public meetings. we work with a couple of city departments to adjust that, put that into the thought behind a rate request. we work closely with department of public works, with department of the environment to develop the specific programs that we are going to provide. in san francisco, just on our recycling programs, there is 19 of them. in the other 99 or so contracts

we have, nothing comes close to that. we are trying to develop things that accomplish what it is the city tells us they want. we provide that information, and then again go through hearings in front of a hearing officer that is usually the director of public works, the person assigned to that. we get through -- we provide testimony under oath. witnesses can be examined, cross-examine. we can be asked to submit additional information. the city then reviews all that, puts on their take on what is all about. after about roughly a five-month process, we end up with a very detailed rate order. i actually provided a copy of it so they could see in great detail what we are expected to do. in our mind, that is our contract. it is telling us, "you have to

provide these kinds of services. you can use this many trucks of this nature, this many employees. you will be incentive -- incented if you accomplish specific requirements. sometimes there are penalties if you do not achieve them." it is very specific about what we have to do, how we get compensated for what we do. that might not be a contract, but it comes awfully close to one, and is reviewed typically every five years. if you do not have that, we are more than happy to make that available to you. i'm sure the department of the environment could do that as well. also, talk about our facilities. they happen to be in brisbane. they are in brisbane because they were built there beginning in 1952 after about 17 years of

using that property as a dump site. the location in brisbane -- i will tell you over the years, brisbane has taken a lot of abuse from san francisco's garbage. in 1965 or 1966, they got an injunction to prevent us from dumping their any more. as a result of that injunction in 1965, 1966, we build a transfer station. it opened in november 1970. it still sits there, and it is still a model that people from all around the world come to see almost every day. that facility is in san francisco. we have added some other processing capacity. it is in san francisco with one minor exception, and that is we had at one end of the transfer station that have been too sick -- and add-on building that happens to sit in the city of

brisbane. we got their permission a few years ago as we were expanding the food waste compost program to utilize that building to transload organic materials and to transfer trucks to take it to our compost sites. that has been a real issue for us. because now, they are talking about taxing us -- a significant tax. we have a problem with that. we expect they are entitled to something for having our facilities there. we think the amount they are asking for is a little exorbitant for the impact that we have. i have instructed our management team at that location to figure out how we are going to handle that material in a portion of the transfer station so we can get it out of brisbane and the nexus for the tax is not there.

yes, we have been talking to them for years about the need to expand our facility. a couple of years ago, your board of supervisors adopted a mandatory composting and mandatory recycling ordinance. they have been extremely effective in allowing the amount of material that is collected for recycling for composting to be increased rather substantially. we also now have the challenge, as we like to call it, from the city, to help it achieve zero ways to landfills, and we are determined that we're going to do everything we can to get there. to do that, we need more modern facilities, more processing capacity than we currently have. we have looked at the possibility of building those facilities on our property, which is approximately today, about 49 acres. about half in san francisco and

half in brisbane. we have always done of processing, again, except for that little bit of food waste removed a -- reloading. we have been talking about putting that capacity in brisbane because we have no more room to build in san francisco. based on their desire to tax the heck out of that, we have been worrying that we should try to find some other alternative site. board of san francisco is absolutely of interest to us. -- port of san francisco is absolutely of interest to us. pier 96 is not. the reason is when we got the permission to use pier 96 for the purpose of recycling our traditional recyclables -- paper, bottles, cans -- we committed to the citizens of the bayview that this was going to be recycling only.

we told them, we committed that we would not bring garbage into the bayview district. that was important to them an important to us. our facility, pier 96 sits right below the hunters point housing project. while we did not have to do it, we committed and have been voluntarily for the last -- i guess it has been eight or nine years now that pier 96 has been there and processing the city's recyclables -- we voluntarily offered, long before anybody was talking about local hire ordinances in the city -- we voluntarily offered all new jobs to people who live in two zip codes that are impacted in the bayview, and we have hired somewhere around 175 people who come from that zip code -- those two zip codes to work for us. what we heard a week or two ago from the port that was of real interest to us was the

possibility of using peer 84 long-term replacement facilities. that is of interest to us. because it is not in the bayview. it is in dog patch. this difference it could. it is not below public housing. it is not going to create the same environmental justice issues. it is easier access from to the wheel of freeways, so we would have -- easier access from two freeways, so we would have better access, and it is closer to the central, so if it makes sense to the city to utilize pier 84 the replacement -- long- term replacement of existing facilities, we are open to discussing that. we do not know what it would cost. we do have some idea of what it would cost to build facilities at the property we currently

own. we would have to do an analysis with before, and we are more than happy and willing to do that. commissioner campos: i think that commissioner pimentel wanted to ask a question if you do not mind. commissioner pimentel: if you decided to move to appear 80, would you continue hire from bayview, or with a go into a different zip code -- if he decided to move to peer 80, would you continue to hire from bayview, or would it go into a difference of code? >> we committed that if we build anything, even though some of those facilities might be in brisbane, we are going to consider those san francisco, and we will continue to hire from the bayview there. we have not discussed here 80 -- we have not discussed pier 80.

there may be other people who would like to have a say in that, and we owe it to all of them to have that discussion before we make any commitments, but we will certainly look at that. we will make them, for sure, the first offer to san franciscans for a new position. commissioner campos: thank you for being here. just had a couple of follow-up questions -- how many jurisdictions does recology serve? >> last count i remember was approximately 110. commissioner campos: do you pay actual franchise fees, or do you have franchise agreements with any of those jurisdictions? >> we have franchise agreements with the vast majority of them. almost all of them provide a variety of fees, and the percentages are all over creation, and the services that we provide under those agreements vary extremely

greatly. commissioner campos: do you have a sense of what the range of the fee is that you pay? in the study, it said that the franchise fee agreement shrank from 2% to about 20%. >> a tighter range in our experience is more like five to 15. i would just like to comment on the schedule that was presented before. i think came this summer around 10% or 10.5% of revenues. that number is calculated based on our -- and again, this is totally transparent. all this information is provided to the city on an annual basis. that number was -- that percentage was calculated based on our total revenues. although there are some non- collection revenues. franchise fees typically are in our experience calculated on collection of revenues. there are some non-collection revenues in those numbers.

that is an open market, and we actually pay rebox fees that are not included. i would say that number calculated the way i was thinking it should be is more like 13%. commissioner campos: i guess, for me, the final point i would make, and this is why it is important for us to get our consultants to get more information about this -- according to the department of the environment, the amount that recology case constitutes about 10 1/6%. if we are at 10%, and the report shows that jurisdictions pay a range from 2% to 20%, and you yourself know did you actually have some cases or your range

goes to 15%, if you are paying 15% to the city and county of san francisco, that is about $15 million more that would come into san francisco. i'm not saying that is what the amount should be, but if we are getting only 10.6% and some other jurisdiction is getting 15%, we have to ask what is the right amount for san francisco? that is the exercise we're going to. >> the difference, if it is 10%, that difference is 5, and i would argue we think the calculation is more like 13, and maybe the difference is two, and maybe revenues are not to 75, because that includes things that are not covered. the number may be is more like 210. again, the issue for us is not whether we are going