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HomeMy WebLinkAboutAgenda Statement 1985/03/05 Item 6 COUNCIL AGENDA STATEMENT Item .7-- 6 3-s- &sue Meeting Date -212.6/85 ITEM TITLE: Public Hearing: Ordinance —1 ( 0 51 Amending Ordinance No. 1993 extending Chula Vista Sanitary Service's Franchise to collect and dispose of refuse within the City of Chula Vista SECOND READING AND ADOPTION SUBMITTED BY: City Manager 3-4.4.11P (4/5ths Vote: Yes No x ) On September 21 , 1982, a five-year extension to the long-standing existing franchise with Chula Vista Sanitary Service (CVSS) went into effect. On November 29, 1984, a letter was received from Bud Chase, CVSS Manager, requesting a five-year extension to the current five-year franchise term, plus two five year options contingent upon satisfactory performance of the franchise agreement. On February 5, 1985, the City Council adopted a Resolution of Intention to grant a five-year extension to the franchise for refuse collection and disposal to CVSS, with a public hearing to consider this Resolution of Intention scheduled on February 26, 1985 in accordance with the City Charter. The Resolution specifically identifies for discussion at the public hearing the requested five year extension to the current franchise, two additional five year options if the franchisee has performed in a satisfactory manner, and any other terms of the franchise which may be considered at the time of the proposed extension. RECOMMENDATION: It is recommended that the proposed ordinance be introduced. BOARDS/COMMISSIONS RECOMMENDATION: N.A. DISCUSSION: Even though this franchise ordinance was reviewed by you less than three years ago, there is a desire by Chula Vista Sanitary Service to build a modern operating service facility in order to maintain satisfactory service to Chula Vista residents and businesses. In order to justify the commitment of funds to such a facility, they are asking for a longer franchise agreement term. As a result of this proposal , the following changes are recommended in the franchise ordinance: 1. That the term of the agreement be extended five years, with two additional five-year options if service is performed satisfactorily by the franchisee. In effect, this will extend the agreement, assuming proper performance, to the year 2002. 2. The franchisee will guarantee construction of a new operating service facility within the City of Chula Vista within 15 months. It is estimated that this facility, including land and improvements, would cost approximately $1 .5 million. Page 2, Item 1— Meeting Date 3- 5'. 3. In terms of rates, no increases in rates are requested or proposed at this time since a rate review process has just been completed by the City Council . In terms of future rates, however, it is proposed that the City's rate review process be modified to provide annual rate increases, not exceeding the San Diego Area Consumer Price Index, up to a limit of 6% annually. Such a rate increase could be activated upon filing a notice of intention by CVSS 45 days in advance of said increase with the City Manager. Any proposed rate increase above the CPI, or above 6% if the CPI equals or exceeds that percentage, would have a public hearing review by the City Council as is provided in the current ordinance. An exception to this process would be increases in the cost of landfill charges, which would be passed through on the rates. There would be a notice of such a change to the City Council , who would have the option to require a public hearing on these increases at their discretion. 4. Chula Vista Sanitary Service agrees to a graduated increase in the franchise fee over a period of the new franchise term. The City' s current fee was adjusted in 1982 from 2.0% to 4.5%, which probably placed that rate as the highest in the County at that time. It no longer is. The cities of Vista and San Marcos now have a fee of 5%. Late last year, the City of Imperial Beach awarded a rubbish collection franchise specifying a fee of approximately $92,000 annually without relating it to a percent of gross revenues. As it turns out, this franchise fee would calculate out at approximately 10%+ for that city. This is consistent with trends elsewhere in the State, where cities of comparable size to Chula Vista have been as high as 10% in their franchise fees for several years, for example, the cities of Alameda and Fremont in the San Francisco Bay area. The point is that while the present franchise fee currently is reasonable, over the life of the proposed agreement it undoubtedly will become out of date. So it is recommended that during the life of this proposed extended contract that a gradual increase in the franchise fee be programmed. Also, staff has recommended previously, and it is probably still valid, that there is a need for a reasonable increase in the franchise fee based on the increased cost for street maintenance necessitated to some extent by deterioration caused by the refuse collection operation. Finally, it should be kept in mind that with what appears to be an increasing likelihood that Federal support for local government operations will be sharply reduced, there is a need to look at ways to increase local revenues to support City services over the long term, even though the City's current fiscal position is healthy. It is therefore proposed that, beginning April 1 , 1986, the franchise fee be increased by 1/2% and that each year thereafter it be increased by 1/2% until it reaches a franchise fee of 10%. This would be achieved in 1996. Page 3, Item 6 Meeting Date 5. The agreement provides that CVSS will cooperate with the City on special cleanup projects that are mutually agreed to by the two parties. This reflects a practice of Chula Vista Sanitary Service and this language basically formalizes that practice. In all other respects, the ordinance would remain the same, including protecting the City against the cost of litigation in connection with this franchise and any other proceedings which may involve CVSS and the City. It also maintains the mandatory garbage provision as well as the senior citizen discount. FISCAL IMPACT: A 1/2% increase in the franchise fee will produce additional revenue of $15,700 for calendar year 1986. Based on 1985 revenue, a 10% franchise fee would equate to $293,000 in franchise revenue in 1996, an increase of $160,000 over the current fees generated by the 4 1/2% rate. JDG:mab WPC 0613A y'' F 1f