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 business.

we have letters that indicate that unofficially the commercial rates are tied to the residential rate percentage. there is nothing that legally makes that happen. >> legally, it is the hauler? >> i believe the ordinance says the hauler and business negotiate their rates. >> recology would set the rates in this case. >> according to the documents we have. >> in other jurisdictions, who has the final say over the rates? >> it varies. in many, the commercial rates are controlled by the jurisdiction board.

until recently, san jose had a free market. there was no control over them. you had multiple callers -- haulers competing with each other. mentio>> who sets the final rats on oakland? >> i will have to look at that. i believe the commercial rates -- i am not sure. >> it is if the city council? >> i do not know. >> ok. continue. >> on the barging, we were asked to take a look at what is going on with the possibility of doing some margin. we found there were three ideas that had been discussed. one was to barge recyclables from the port of san francisco to the port of oakland.

one was to barge composed of material to other facilities. the third was to use the program related to the california marine highway to barge materials and possibly people between oakland, sacramento, stockton, and san francisco. i believe the discussion on combustibles -- compostables is still going on with other agencies. we found other jurisdictions barging have agreements in place to barge and rail. new york has been doing it. honolulu has tried to but are being tried in court. there were going to barge

material to washington state. supervisor mirkarimi: commissioner avalos. supervisor avalos: you mentioned honolulu and new york. where do they barge to? i am not sure if it is a myth, but new york used to barge out and dump in the ocean. what are the conditions in honolulu? >> honolulu was going to ship to washington state. that has been tied up in court. it has not happened. new york used to go to the fresh kills landfill. they are now in an agreement with new jersey to barge to a new jersey planned build.

i do not have that in my notes. we have that in the file in the office. the agreement is to go into place in 2012. it is between two ports. supervisor avalos: honolulu to washington state, it does not seem like we're talking about a barge. it will be more like a container ship. >> that is right. we were trying to find anything with a ship. supervisor avalos: one of the ideas the port brought up was that currently we have the bay bridge under construction. there are a great deal of barges used to bring construction material to the bay bridge. that might be available in future years. you have certain conditions that could be optimized for future

use of the same vessels. in new york, are we talking about containerships or something comparable to what is done in the bay area for a bridge construction? >> it is not containerships in new york. it is barges. i do not know how they compare in size to what you have here. supervisor avalos: were you able to explore environmental conditions about barging at all? what risks there may be to the bay? anyway the environmental conditions could be optimized if the barging options were to be utilized? >> it does have risks for contamination in the bay. it would reduce truck traffic and the carbon footprint. it would reduce wear and tear on the roads. other than that, we have not. supervisor avalos: are there any

barging catastrophes we know of in any jurisdictions? >> none that we looked at. we also looked to gat what was g on with rail haul. los angeles is looking to have that put in place by 2013. new york and new jersey barge to rail agreement is in the works and should be in place by 2012 or 2013. those are the main ones. there are others going on. those are the three major ones. >> can you say more about los angeles? what exactly are they doing? >> i can if i pull the report out.

it is the los angeles county sanitation district. they are working on building a facility near the point to hills -- puento hills landfill to the mesquite landfill. i do not know more about it other than the basics. they are putting the facility in. it is under construction now. expect to have it ready by 2012. -- they expect to have it ready by 2012. to summarize, we found san francisco has a high diversion rate. san francisco has good commercial and residential rates. san francisco has very good services. unlike the other jurisdictions

in the greater bay area, you have no formal documentation of the terms and conditions of the services. you do not have the ability if you wish to go out to competitive procurement some time in the future. we believe both of those are important. we believe there should be documentation of what the service standards are, the rate setting process, so that is available in written documents. we believe it would be important to you to have the flexibility to bid if you would like to do so. we do not believe you have to. you have good rates. we believe it is important to have that flexibility. supervisor mirkarimi: one of the things that stood out for me in the report was the issue of the franchise agreement.

that is one area where i think more information is perhaps needed. can you talk about what a franchise agreement is? how does it work in jurisdictions with an agreement? >> the franchise agreement documents what is paid to the jurisdiction you do not have to have the franchise agreement to have phones or contributions paid to you. the franchise agreement formally documents what your services are, how you will provide them, what the terms of the services are, whether it can be extended and for how long. it sets forth the insurance requirements.

it says what is in a dignified and what is not in the case of problems. -- what is indemnified and what is not in the case of problems. it provides information on specific services. what should a residential customer expect? i expect to have collection one time a week. or i do not. it tells the commercial customers what they get. it formalizes what is going on in the service, how the service is to be provided. many franchise agreements provide for penalties or administrative charges in the event things are not done as required. they give you the ability. it is a legal contract.

>> in terms of the franchise agreement, what is the range paid? >> it varies considerably. in most cases, the franchise agreement is what we would term as pass through costs. is built into the rates. the lowest when i know of is less than 1%. that is a unique situation in an old contract. the highest i am aware of in an actual franchise agreement is close to 20%. there are all kinds of other fees also paid. it's as franchise fee payments range from 2% to 21%. >> the one i am thinking of that is less than 1% is really a dollar value. it is $1.50 per household. >> do you know what that would mean for san francisco in terms of the amounts?

you have an idea of what the amount would be for other jurisdictions? >> i believe you are somewhere in the middle to low on the range. if it is passed through, it will affect your rates. you could probably come in and ouask for a 50% fee. i am sure recology would be happy to provide that, but the new rates would go up. >> something else that caught my eye is on page 29 of the report, it says that the study found that average residential customer rates that selected competitively were slightly lower than the jurisdictions that used in non-competitive process to select service providers. >> correct.

we made it that as a factual statement based on the results of the survey. that is what we found. we cannot say that going out to bid will get you lower rates. we have examples we're going out to bid has resulted in higher rates. we have examples where negotiating has resulted in lower rates. it is very much a case by case situation. the real factor that happens is in most cases when and jurisdiction goes out to bid or negotiate, they almost always ask for additional services or fees. in that case, the rates will go up. supervisor mirkarimi: regarding the franchise fee question that supervisor campos was asking

about, what about jurisdictions that have a combination of fees? they may have other fees that are bundled. do you have a delineation of what those look like exactly customer >> in our appendices -- of exactly what those look like? >> in our appendices, we did list the fees we found. many jurisdictions are unwilling to tell us what their fee structure is because they do not want that to be public. we know from being involved in a lot of franchisees that a variety of jurisdictions have direct payments for administrative costs. they have fee's for road repair. they have fee's for recycling. we know oakland has a franchise fee.

i think it is 4.8 million. they have a recycling fee of around $7 million that pays for recycling services. then they have a city fee that pays for graffiti, keep oakland beautiful, all types of recycling oriented programs. i believe those fees total about $29 million. that is pretty substantial percentage considering the size of the contract. it is also just one example of the types of fees. santa rosa gets' a three and a thousand dollars a year contribution to a trust fund to be used for a variety of things from public grants to the boys' club. everythinbody negotiates differt

types of things. -- santa rosa gets' a $300,000 contribution to a trust fund. supervisor mirkarimi: is there anything that speaks to more of a comparison? >> i cannot think there's anybody that really compares to you. san jose does not charge residential franchise fees. however, they have a variety of the ministry if these -- administrative fees. that is not public. they pay for a lot of it through those. supervisor mirkarimi: can you give me a sense of what fees residents pay and how it compares to other jurisdictions that have a franchise fee or not in addition to other fees

they pay? i am looking for where we ranked. >> i am not sure i can. we have details in the appendices. franchise fees are only one of many factors that come into play. supervisor mirkarimi: you were referencing this earlier. is it your understanding that the franchise fees go directly into the municipality general fund in addition to other a signed peace -- assigned fees or those that set aside for other services that have already been delineated? >> it is my understanding that there are jurisdictions that do it both ways. normally that decision is made by the jurisdictions legal counsel. we've talked to legal counsel

that think it is appropriate for the general fund. we've talked to legal counsel that think it is not appropriate for the general fund. supervisor mirkarimi: you have used oakland as an example. can you walk me through the pros and cons of what oakland does or how the customer's benefit as compared to san francisco customers? that is in terms of the fees they pay and what they get. >> i am not sure how it applies to the pro and con. the ft structure -- their fee structure is fairly average. it is close to yours. we know is $29 million that comes in. $7 million of that is used to pay their recycling collector.

you have to take that into account. they provide a variety of services to the residents that seem happy. the rates are equivalent to what is going on in the average of the jurisdictions. in my experience, they get a fairly good benefit. supervisor mirkarimi: apples to apples, do they get exactly what we get or vice versa? i am looking for some heft to this analysis. >> we did not try to get into that death. it really is not apples to apples. -- we did not really get into that depth. a lot of your city services are paid for provided by recol ogy. a lot of fears are by cws or

waste management. we've not compared the details of what you eat it. i would love to answer but i do not have the information. supervisor mirkarimi: what about examples so i can walk away with more than anecdotal? i have looked at the appendices. give me something that oakland does that we do not, residential or commercial. >> i do not know the details of what both of you do down to that level. supervisor mirkarimi: what about what we do versus what oakland does not? what about compost, for example? >> the only thing i can tell you that is in your rates that is not in oakland's is that recology takes care of some of

the costs on tons. i do not believe oakland has disposal costs taken care of. it's still flows through the rates. i cannot give a detailed comparison of the two service structures. supervisor mirkarimi: thank you. appreciate it. supervisor campos: the one area that stands out as an area that i feel like to have more information on is the area of what actually is paid to or received by san francisco in terms of a fee or benefit as it compares to what other jurisdictions get from these vendors. you talk about oakland receiving $29 million. a chunk of that goes to the general fund. how does that compare to what we receive?

everyone knows we are facing a substantial budget deficit. we have to figure out ways to make sure that we leverage every asset the city has. i want to make sure the san francisco is getting its fair share. that is where i feel more information could be obtained. commissioner avalos? supervisor avalos: what kind of assets as the current vendor gain by the work they do in the city? is it possible those assets could also be city assets as well? are the only in the hands of recology? is there a way that could be considered part of the public domain as well?