ACTIONS RELATED TO THE RECYCLE PLUS RATES FOR SINGLE-FAMILY AND MULTI-FAMILY SERVICES

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1 COUNCIL AGENDA: 06/06/17 ITEM: 7.2. CITY OF SAN JOSE CAPITAL OF SILICON VALLEY TO: HONORABLE MAYOR AND CITY COUNCIL Memorandum FROM: Kerrie Romanow SUBJECT: SEE BELOW DATE: Approved Date 1 SUBJECT: ACTIONS RELATED TO THE RECYCLE PLUS RATES FOR SINGLE-FAMILY AND MULTI-FAMILY SERVICES RECOMMENDATION (a) Conduct a Public Hearing on proposed Recycle Plus rates and proposed maximum possible rate increases for and (b) Adopt a resolution to amend the current Recycle Plus rate resolution effective July 1, 2017, as follows: (1) Increase rates for single-family households by 3.5 percent; and (2) Increase rates for multi-family households by 4.5 percent. OUTCOME increases of 3.5 percent for Single-Family Dwelling (SFD) and 4.5 percent for Multi- Family Dwelling (MFD) households would maintain the Recycle Plus Program at cost-recovery, meet contractual obligations, and sustain a prudent fund balance in the Integrated Waste Management (IWM) Fund. BACKGROUND Recycle Plus rates are set to cover the expenses of providing residential solid waste services. Staff regularly reviews IWM Fund revenues and expenditures and forecasts the rates necessary to implement and maintain City Council-approved services, programs, and activities. The recommendations of this memorandum are based on the results of this analysis. As required by Proposition 218, a notice was posted on the City's website and mailed to all property owners on April 21, 2017 that are subject to these rates:

2 Subject: Recycle Plus s Page 2 (www, si environment, org/ratenotices). For , the notice specified a rate increase not to exceed 5.0 percent for SFD and MFD collection. The notice also covered possible rate increases of up to 5.0 percent in and up to 5.0 percent in Recycle Plus rates for SFDs were last increased in by 4.0 percent. Since then, the City's payments to the haulers have risen, although the IWM Fund was able to absorb the increase in SFD costs in without an SFD rate increase. Recycle Plus rates for MFDs were last increased in by 2.5 percent due to higher contractual expenditures resulting from contractual inflationary increases, growth, and service level increases. ANALYSIS Increasing Contractual Costs Contractual costs for the Recycle Plus collection and disposal agreements comprise approximately 89 percent of total expenditures in the IWM Fund and are expected to increase by approximately $6.2 million in These agreements provide the following services: garbage, recycling and yard trimming weekly collection (or more frequent for MFDs); MFD and SFD junk pickup services (or large item collection); SFD motor oil and oil filter on-demand collection; periodic collection and recycling of neighborhood waste; and the household hazardous waste drop-off program. The City's agreements with the residential haulers provide for annual inflationary adjustments in compensation to cover increases or decreases in contractual costs. Growth in SFD and MFD housing units also contributes to increased contractual expenditures. The Proposed Operating Budget includes ongoing funding to expand garbage processing service generated from SFDs in the remaining portion of the City. This service enables further recovery of recyclable materials and compostable organics (such as food scraps and food-soiled paper) prior to landfill disposal. The City has been gradually implementing the service to greater numbers of SFDs across the City since The final phase of this effort will include the remaining 30 percent of SFDs in the eastern and southern portions of the City, with overall Residential waste diversion estimated to grow from 53 percent, as it was prior to garbage processing, to approximately 84 percent by the end of Overall, contractual expenditures are expected to increase by 5.54 percent in , and SFD and MFD rates are proposed to increase in order to achieve cost recovery. Proposed Recycle Plus contractual appropriations are shown in Table 1 on the following page.

3 Subject: Recycle Plus s Page 3 TABLE 1 - Recycle Plus Contractual Appropriations (IWM Fund) Appn Contractual Budget Adopted Proposed $ Change % Change 0763 Single-Family Service 53,763,311 55,795,940 2,032, % 3318 Single-Family Processing 9,376,279 14,257,241 4,880, % 0764 Multi-Family Service & Processing 20,107,292 21,150,399 1,043, % 0766 Yard Trimmings Service 23,000,870* 23,444,786* 443, % 2059 Landfill Disposal 5,745,353 3,545,353** (2,200,000) (38.29%) Total 111,993, ,193,719 6,200, % These amounts only include the Recycle Plus rate-payer funded portion of the contract. **This amount includes the recommended change in the Integrated Waste Management Fund Update Manager's Budget Addendum (#19) to reduce $600,000 from the Landfill Disposal appropriation. Strategy and Recommended Increases The Administration maintains an Operations and Maintenance Reserve in the IWM Fund equal to approximately one month's operating expenditures. This reserve, in addition to the Unrestricted Ending Fund Balance, enables the fund to absorb unforeseen costs from year to year and provides a contingency in the event of service disruptions or emergencies. An SFD increase of 3.5% to the 32-gallon garbage cart (used by 90 percent of SFD customers) would result in a monthly increase of $ 1.12, from $32.07 to $ The proposed SFD rates are slightly higher than the current countywide average of $ The proposed MFD rate of $ for a 3-cubic yard bin serviced once per week (one of the most common service levels) remains far lower than the current countywide average rate of $ San Jose's services are robust, including unlimited recycling, unlimited loose in the street yard trimmings collection (with optional cart subscription), on-demand junk pickups, used oil collection, and processing of all waste. This combination of services results in San Jose having one of the highest residential recycling rates in the area. The recommended Resolution includes complete listings of proposed MFD and SFD rates. Information on other jurisdictions' current rates and available proposed rates are presented in the Attachment, "Other Jurisdiction Comparison". Junk pickup is an on-call service available to all SFD and MFD customers. The current Recycle Plus service rates include funding for two junk pickups per SFD household at no additional cost to residents. Junk pickup services are proposed to be expanded to unlimited pickups for SFD customers in MFD rates already include unlimited junk pickup.

4 Subject: Recycle Plus s Page 4 EVALUATION AND FOLLOW-UP Once approved, the Recycle Plus rates will be billed to rate payers for services effective July 1, 2017 for SFD and MFD customers. PUBLIC OUTREACH This memo will be posted on the City's website for the Council Agenda of June 6, As required by Proposition 218, notices for proposed maximum rate increases for were mailed to property owners with a 45-day protest period (beginning April 2017). As of May 18, 2017, 28 days into the protest period, the City has received 457 official protests. Thus far, this represents less than 1 percent of San Jose property owners, which is less than the 50 percent needed to reject the proposed rate increases per State of California regulation. The City Clerk counts all protests received as valid; this is the most conservative method for tabulating votes. A final count of official protests will be provided at the City Council meeting on June 6, The City's Customer Contact Center is also tracking inquiries and responding to resident concerns. COORDINATION This memorandum was coordinated with the City Manager's Budget Office and the City Attorney's Office. COMMISSION RECOMMENDATION/INPUT No commission recommendation or input associated with this action. FISCAL/POLICY ALIGNMENT The additional revenue generated by the recommended rate increases, along with a sufficient fund balance, aligns with City Council Policy that programs be self-supporting whenever possible.

5 Subject: Recycle Plus s Page 5 COST SUMMARY/IMPLICATIONS It is estimated the SFD and MFD increases will generate approximately $4.39 million ($3.27 million from SFD and $1.12 from MFD) in additional revenue in the IWM Fund in This additional revenue has been assumed in the Proposed Operating Budget (IWM Fund Statement of Source and Use of Funds) and the subsequent Integrated Waste Management Fund Update Manager's Budget Addendum (#19). CEOA Not a Project, File No. PP (a), Increase or Adjustment to Fees, s & Fares. /s/ KERRIE ROMANOW Director, Environmental Services For questions, please contact Jo Zientek, Deputy Director, Environmental Service Department, at (408) Attachment: Other Jurisdiction Comparison

6 ATTACHMENT OTHER JURISDICTION RATE COMPARISON Single-family dwelling (SFD) and multi-family dwelling (MFD) garbage and recycling customer rates of Santa Clara County cities are shown in the tables below. Services included with these rates vary from city to city, and San Jose's services are more robust, including unlimited recycling and yard trimmings collection, periodic collection and recycling of neighborhood waste, used oil collection, and backend processing of waste. SFD Garbage and Recycling Program 32-Gallon Comparisons Santa Clara County Cities 16/17 Monthly Proposed 17/18 Adjustment Effective Date Palo Alto $47.69 $50.07 July 1,2017 Sunnyvale $38.23 $39.38 July 1,2017 Los Altos Hills $37.41 N/A A July 1,2017 County District West $35.12 $37.89** July 1,2017 Milpitas $33.89 $35.02 January 1, 2018 Countywide Weighted Average $32.55 N/A A - Los Altos $32.34 N/A A July 1,2017 San Jose $32.07 $33.19 July 1,2017 County District East $31.38 $33.70** July 1,2017 Gilroy $31.00 $31.79 July 1,2017 Morgan Hill 30.17* $30.95 July 1,2017 County District South $30.05 $32.11** July 1,2017 Santa Clara $29.73 $32.17 July 1,2017 Monte Sereno $29.43 $31.12 July 1,2017 Mountain View $29.30 $32.25 July 1,2017 Saratoga $28.13 $29.54 July 1,2017 Campbell $25.80 $27.15 July 1,2017 Los Gatos $25.45 $27.47 July 1, 2017 Cupertino $24.71 N/A A November 1, 2017 San Francisco $35.18 $40.88 July 1, 2017 Oakland $40.68 N/A A N/A * Flat rate for all cart sizes ** is tentative and to be finalized by effective date. A 17/18 s are not available as of date of this memorandum

7 MFD Garbage and Recycling Program 3-Cubic Yard Bin Comparison San Jose's proposed rate for a 3-cubic yard bin serviced once per week (a common multi-family service level) is $227.74, which is lower than the current countywide average of $ per month (average based on 13 cities in Santa Clara County that offer multi-family bin service). San Jose's multi-family rates also include recycling and yard trimmings collection. These services are not always provided in other jurisdictions, particularly when multi-family service is provided by a commercial collection company. Santa Clara County Cities 16/17 Monthly Proposed 17/18 Monthly Adjustment Effective Date Palo Alto $ No Change 7/1/2017 Sunnyvale $ $ /1/2017 Los Altos $ N/A* N/A Saratoga $ $ /1/2017 Morgan Hill $ $ /1/2017 Mountain View $ $ /1/2017 Countywide Average $ N/A - Gilroy $ $ /1/2017 Los Gatos $ $ /1/2017 Campbell $ $ /1/2017 Cupertino $ N/A* N/A San Jose $ $ /1/2017 Santa Clara $ $ /1/2017 Milpitas $ $ /1/2017 *17/18 s are not available as of date of this memorandum