Let’s be honest, no one wants a rate increase. I know I don’t, however, that being said, the City Council made the difficult decision last night of approving by a 4-1 vote the increase Oakley Disposal sought after. In looking at the big picture, we don’t have to like it, but this was the correct decision.
Yes, scream and send me nasty emails all you want, but sometimes difficult decisions are the best decisions made for a positive future. For example, last night’s discussion brought forward many ideas for the next time around such as an annual review of the garbage rates, a potential senior discount rate, future discussions on other creative service models and even electronic billing. This will lead to better discussions in the future to limit high increases such as a potential Evergreen Contract.
Still, even with all the back and forth discussion, a basic cost of doing business must be covered. We have a quality vendor doing quality work and I am happy with them—in a way, they earned this increase to cover their cost of doing business. Remember, a business is not in business to lose money; they are in business to earn money.
While some people are upset over this 16.6% increase, over a two year period the rates were not increased last year meaning this is basically a 8.3% increase each year. With customers opting for small trash cans, revenue has decreased to Oakley Disposal while the cost of doing business has increased which means they had no choice. Part of the problem which went ignored last night is Oakley does not have enough commercial business which is added revenue for the vendor which can keep residential rates lower.
To be completely honest, it’s actually quite amazing to me that many folks want to complain about the rate hike for garbage which will range from $4.15 to $6.55 per month (16.6%), but remain silent on the abuse going on at Ironhouse Sanitary District which has had a 250% increase over the past ten years.
Speaking of Ironhouse, their Board is partially to blame for this increase due to lost revenue they caused on the Garaventa Enterprises as the transfer from Ironhouse to Oakley took four years. While the final agreement to transfer service was well intended from their perspective, the reckless behavior of that board has now caused problems today.
But let’s look at the big picture which is the rates in Contra Costa County to highlight why this increase is not that big of deal when compared to other cities. The average rate in Contra Costa County is $25.74 (32-gal), $40.52 (64-gal) and $57.24 (96-gal) according to the staff report. Oakley Disposal is asking for an increase to $29.10 (32-gal), $40.70 (64-gal) and $46.15 (96-gal) which puts us right in the middle of the Contra Costa average—I can live with that because we are not in the top half.
Finally, I want to get to Councilman Randy Pope who last night continued with his “par for the course” by pandering to the audience by suggesting the burden be put on Oakley and Oakley Disposal. This shows the thinking of someone who has never run a business nor thinks like a business person—these were reckless comments that feeds a mob mentality which were not needed (as you will read below in the recap).
Had he researched a little bit better, he would realize State Law prevents some of the items he suggested. Had he asked the question as opposed to suggest it, I might give him a pass. Instead, it highlights just how unqualified he is to serve on the council with such ignorant statements of actually proposing a change to the City Code for garbage pick-up every two weeks while finding ways to save residents money while putting the burden completely on the Franchise. The world doesn’t work that way, Oakley would likely get sued by Garaventa Enterprises or the State would step in with fines.
This is the second time Councilman Pope has taken a shot at Oakley Disposal/ Garaventa Enterprises as a few months ago he urged Chip-IT to remain in business even though their Franchise Agreement is a franchise agreement in place.
It’s a shame that instead of trying to provide information to the public during the meeting, he is more interested in becoming popular for his own gain while it leads to more out cry from the public—it’s counterproductive if you ask me. I would urge Mr. Pope to pick his battles more carefully in the future.
On a side note, the Contra Costa Times did something interesting in their recap today about the garbage rate increase as they provided just one side of the issue. They failed to mention the support of the increase from Oakley Disposal, Oakley Resident Paul Flores, Bryan Montgomery’s explanation, and failed to use any quotes from the council, or information from the Staff Report. It’s a shame their readers will only get one side of the issue if the article stands as it is now on their website.
(Note: Times have updated their story at with a time stamp of 11/14/2012 11:34:47 AM PST)
I don’t have to like this increase, but I do support it because the facts can’t be ignored which highlights just how fair and appropriate the request is. If you remove the emotions from the debate, I think you would agree with me.
Paul Flores: stated he backed the increase because a business has hard costs that are met with fee increases. He also urged others to not forget that the profits are shared with the community such as schools and roads and other activities. He urged the council to support the increase.
Meanwhile, many residents opposed the increase blaming the increase in moving from a 90-day billing cycle to monthly. One resident blamed this on greed and Oakley Disposal simply only wanting the profits while urging the company to go back and look at how it operates. Others encouraged service options from a senior fee or an option to a bi-weekly pickup since they rarely have enough trash each week. Others simply asked for help since they are on a fixed income. Other suggested implement a single can because Oakley Disposal should sort trash, not residents with three cans.
Dave Adler from Oakley Disposal addressed some of the issues by stating that no local company provides by monthly service and that Oakley requires weekly pick up as part of their agreement. Stated they have moved to e-Billing as an option based off feedback from customers (If you sign up by Nov. 30, $2 is donated to CoCo Food Bank). Regardless of billing options, stated they still need the increase. Explained that due to AB 939, Oakley will have to comply anyway and we are protecting compliance for the city which by 2020 gets stricter in the state mandate.
As for Councilman Randy Pope, he showed once again showed his ignorance to a difficult topic and cost of doing business by instead taking on the topic, pandered to the audience and the residents voting against the increase. He ultimately suggested garbage pickup every other week. This may work for some people, but not all. He stated at one point, “I don’t think garbage pickup every other week is going to be a nuisance.” While stating, “This rate increase is pushing people for downgrading and we should be rewarding them to recycle. This is a real bad time to raise rates when everyone else has had a pay cut, hours reduced, or laid off. We need to find ways to help them save money.”
City Manager Bryan Montgomery chimed in stating that the overall cost has to be covered regardless of the council’s action. Cost is still the same for every week pickup or bi-monthly, it’s the same for a large can vs. small can due to gas, driver, and benefits have all gone up. Explained that it doesn’t matter how the pie is sliced, the cost has to be covered and staff believes this is fair.
I’d also like to piggyback on Montgomery’s statement by asking Mr. Pope to name any time that is considered a good time to raise increase? Ultimately, a good economy or a bad one, people do not want their rates increase ever!
Councilwoman Pat Anderson would like the council to take up the rate increase every year instead of over two or three years so the increases can be much smaller and easier to accept. She stated she is pleased with the recycling and with the increase being average when looking at the rest of Contra Costa County. She stated she hoped people can see the big picture and that the 3-can system is working and believes the fee increase is fair.
Councilman Jim Frazier stated that he was on the committee that brought Oakley disposal from ironhouse to the city and that it was a long and drawn out process where Oakley Disposal was limited on prior increases. Being in business himself, he stated he was hit with many of the same cost increases and understand where they are coming from but also understands the concerns of residents. Stated thanks to State Legislation, we dodged a bullet as this could have been a higher increase as Oakley Disposal would have had to dump the trash further away. Urged residents to understand that Oakley Disposal has been a good partner in the community and the fees come back into the city for roads—would like to see an “ever green policy” implemented to limit future increases each year.
Mayor Kevin Romick understands the concerns with stagnate pay and costs go up. Suggested he is in favor of reviewing this yearly.
Vice Mayor Carol Rios understands residents don’t want an increase, but that the city needs to continue to move forward in meeting future needs. She prefers annual increases so that it’s not “sticker shock”. Urged residents to understand anything with transportation has been affected due to gas and other variables. Stated there is a history of how we got from 90-day billing to monthly.
Councilman Frazier stated that CARB and Cap & Trade can really affect the industry in the future and we need to be aware of this going forward. The cost of business may be increased.
Councilman Pope suggested the city transition everyone to a 2-week schedule to cut cost while stating he had no problem adjusting the municipal code to do this.
Councilman Jim Frazier announced if this occurred, “my seafood consumption will immediately go down”. He stated that this is a state law more than our municipal code. He also urged if this occurred, Code Enforcement will be impacted. Explained he fills up all three of his cans each week and is happy with the service.
Council Voted 4-1 (Pope no) to approve the increase.
Background and Analysis
Garbage and recycling services are provided to Oakley residents and businesses through a franchise agreement with Oakley Disposal Services (ODS), a private, family-owned business. In the City’s last mail survey in 2012, 76% of respondents recognized garbage service as either good or excellent, the highest rating for any City service.
The City’s Franchise Agreement allows the Franchisee, Oakley Disposal Service, to request a rate adjustment once each year to account for changes in the costs of providing solid waste collection services in the City. This is the first application ODS has made to adjust the rates adopted with the Agreement. ODS has provided an application and analysis supporting a rate increase of 16.6% from the rates established in May 2010. The rate methodology follows a widely accepted base year model starting with the use of a Refuse Rate Index (RRI) (a cost index focusing on refuse collection costs), a consideration of service model impacts, and an accounting for additional changes. Note that the new rates are to balance future revenues against costs; they are not to recover past revenue shortfalls. A full copy of Rate Application Summary Report is attached; and Staff believes the data is sufficient to support the proposed increase.
Rate Driving Factors: The major driving factors for the rate change are: 1) the cumulative effect of two years of changes in the RRI, and 2) the migration of customers to smaller bins. The cumulative effect of the changes in the RRI accounts for approximately 51% of the proposed rate increase. The success of the three-cart system and change in the mix of subscribers between the three service offerings (32, 64 and 96 gallon services) have resulted in both changes to the service model and less projected revenues than would result from the mix used to establish the rates adopted in 2010. In particular, ODS has had to add the cost of a route supervisor/dispatcher and a full-time utility driver into the model, and estimate lower future revenues at current rates to reflect fewer subscribers at the 96 gallon rate, and more at the 32 and 64 gallon rates. The combination of these two migration related changes account for approximately 47% of the proposed rate increase.
Comprehensive Analysis; While the City only governs residential rates, it reviews all of
ODS’s solid waste collection related revenues, costs and profits as part of the review.
The City approves a rate structure for the residential sector based on the revenue requirements to cover allowable costs and allow a reasonable profit to the provider. The City does not regulate commercial rates (which also apply to apartment complexes of four or more units), or industrial rates. Because the City’s analysis considers all ODS solid waste collection related revenues and costs when it sets residential rates, the review can indirectly influence or be influenced by commercial and industrial rates. In Oakley, residential rates have historically been subsidized to a small extent by commercial rates. ODS sets its Commercial rates on the open market and they were last increased in October 2011.
ODS is a subsidiary of Garaventa Enterprises and utilizes the services of other related companies. Internal pricing for these services is comparable to other third party providers or rates charged the general public and as regulated by other governing jurisdictions, where applicable. Most of these other company charges are similar to those charged by comparable outside contractors, with no guaranteed business return, and thus have been included in the section of the rate calculation that provides an operating profit. The related party trucking and equipment charges already include a stated profit. Therefore, they are treated as pass-through costs, and no additional profit is requested in the rate adjustment proposal.
Residential rate increases since the City began administering the Franchise in 2010 are shown in Table 1.
Historical Residential Rate Increases Year
- 2011 Increase – 0.0%
- 2012 (proposed) – 16.6%
To be clear, the proposed residential rate increase of 16.6% would only affect residential customers, who have not experienced a rate increase since May 2010, and the rate increase would become effective January 1, 2013.
The new rate schedule is summarized below, along with a chart showing comparable rates for other Contra Costa cities.
|Residential Rates||32 gal||64 gal||96 gal|
|CC County (Allied)||$21.00||$40.00||$60.00|
|CC County (GE)||$32.08||$37.22||$44.26|
- Average rate (32 gal) – $25.74
- Average rate (64 gal) – $40.52
- Average rate (96 gal) – $57.24
The Impact of Franchise fees: Franchise fees are collected to compensate cities for expenses in administering the franchise agreement and for the ongoing impact to the roads, curbs, sidewalks, storm drains and other parts of the City’s infrastructure during the process of providing solid waste services. Franchise fees among local jurisdictions in the County area range from 7% to 14%, with the most common currently being 11% to 12%. With the adoption of the Franchise Agreement in May 2010, Oakley adopted an 8% franchise fee and it increases of 0.5% each year until the rate reaches 12% in 2018. The current franchise fee is 9% and is included in the rates charged by ODS. The Franchise fees are included in the RRI.
Public Outreach: Because this proposed action would increase fees paid by the residents (albeit to a private company), in addition to inclusion on the current agenda that is broadly distributed, Staff also published a Public Hearing Notice, included announcements of the hearing in Oakley Outreach and FYI email blasts, and included a notice in the News and Events section of City’s website to make the public aware of the proposal and this Public Hearing.
The main impact is on residential refuse collection customers, who would pay an additional $4.15 to $6.55 per month in collection fees, depending on the size garbage can they select. An increase in fees is necessary to comply with the Franchise Agreement allowing ODS to recover its costs and earn a reasonable return on regulated activities. The application includes an allowable annual comprehensive operating profit of $579,000 on estimated total annual expenditures of $5,780,000 – a return of approximately 10%. The proposal would increase City franchise fee revenues by approximately $54,000 in 2013.
Staff recognizes that existing rates have not been adjusted for two and a half years, and as a result, the increase proposed by ODS is more significant than if the rates had been adjusted annually. While requiring comprehensive reviews more frequently might reduce individual future adjustments, it might also be unnecessarily costly. The benefits of more frequent review might be achieved, however, by combining annual index driven adjustments with less periodic comprehensive reviews. Concord, for example, has established parameters for an RRI including date of indices, development of weightings and specific published indices; and caps an annual adjustment at 7% per year with a 0% floor. (If in any year a negative number results, no cost adjustment would occur-however, the negative factor would be incorporated into the following year’s adjustment.) They then conduct less frequent, comprehensive Base-Year Reviews every six (6) years. The Council might also agree that annual RRI based adjustments below a certain threshold could be approved administratively.
Staff recommends the City Council adopt the attached Resolution approving the application for rate adjustment, as submitted. Staff also recommends the Council direct Staff to work with the Franchisee to develop a Franchise Agreement modification that provides a more effective, cost effective rate smoothing mechanism.
By Michael Burkholder