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 to give you any more 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 a much more simple recycling and composting program and a lot of