HomeMy WebLinkAboutAgenda Statement 1980/06/24 Item 13
COUNCIL AGENDA STATEMENT
Item ~ 13
6/24/80
Meeting Date ~i`=1~f~ _
Public Hearing__ Consideration of Sanitary Service Rate Increase Request
ITEM TITLE: _ -'~--- ~-i~-~- -_ ^---
SUBMITTE~ Y:i Director of Finance (4/5ths Vote: Yes_ No X )
Chula Vista Sanitary Service, Inc., has requested a 25% rate increase to
residents and commercial or industrial users effective July 1, 1980 for
the collection and disposal of garbage, trash, rubbish, and disposable
material. Based on the attached rate study, it is my
RECOMMENDATION:
That Council conduct public hear-ing and give staff direction to bring back
implementing resolution in accordance-with their findings.
BOARDS AND COMMISSIONS RECOMMENDATION: Not Npplicable
DISCUSSION
Chula Vista Sanitary Service, Inc., developed the proposed new rates to meet
operating cost increases of approximately 17.5% since the last rate increase
was approved October 1, 1978 and to "pass through" the 36°k increase in land-
fill fees authorized by the County Board of Supervisors effective July 1, 1980.
The Finance Department's review of the Company's audited financial statements
and supporting material revealed the following:
1. Income is not keeping pace with expenditures. Fiscal year 1980 showed
a 48.6% decline in pre-tax profit as compared to fiscal year 1979.
2. The proposed rates when applied to fiscal year 1981 will not exceed the
9% - 10% rate-of-return on investment considered appropriate in previous
rate reviews.
3. Approximately 7.5% of the rate increase is a "pass through" cost to meet
the landfill fee increase effective July 1, 1980. The remaining 17.5%
increase is to meet rising general operating costs.
FINANCIAL IMPACT: Not Applicable
C!-iuia `i+si3,/:aiiicrnia
Dated ~~oz yl-~~-
1 ~~~J)
.~2rr-~.a0ct ~~
by the C„~ C anci! of
Chula Vista, California
Dated /- / 7= ~"d
form A-113 (Rev. 11/79)
EXHIBITS _
Agreement_ Resolution X Orclinance_ Plat_ Notification List
Other Rate Study ENVIRONMENTAL DOCUMENT: Attached Submitted on
.~ .
,4
CIiULA 'VISTA SANITARY SERVICE RATE SCIIEDULI: - EfACJD PIC}:UPS
Proposed Present
T~~c~e of Service Rates Rates
Family Residential Properties 5.00 4.00
The second and for each additional residential
unit in multiple dwelling which do not exceed
four units 3.30
2.55
For Conurercial, Industrial and large multiple
users the following:
RUIIIIISII ONLY: Conm~ercial or Industrial F.stablishrnents
Up to (2) 40 gal. containers one time weekly 5.00
4.00
Up to (2) 40 gal, containers two times weekly 9.20 7
35
Up to (2) 40 gal. containers three times weekly 13.50 .
10
75
Up to (2) 40 gal. containers four times weekly 19.75 .
15.$5
Up to (2) 40 gal. containers daily (6 days) 27,65 22 10
*These services are generally not utilized
Additional or unusual accumulation of rubbish 2.70 2.00
cu yd cu yd
Trailer Parks ar.d Ptotel.s (Central Location)
Minimum per month 8.55 6
80
Two times weekly
' 3.00/unit .
2,25/unit
three times wee};l}' 3.75/unit 2.85/unit
Daily pickup (6 times a week.) 5.30/unit 4.U0/unit
'hailer Parks (Individual Can Service)
One collection weekly 3.25/unit 2.55/unii,
Two collections weekly 4.35/unit 3.40/un'it
Apartment Houses (t~lultinle Dwelling over 4 Units)
-
-
wit
'
fi central Iocati.on
Une collection weekly 3.30/unit 2.55/uni%
't'wo collections we~:rk].Y 4.30/unit 3.40/unit
Commercial Garbage Rates:
Up to (1) 30 gal. container two collections wee}:1y 9.90 7.95
Up to (1) 30 gal.. container three collections weekly 14.20 11.35
Up to (1) 30 ya1. container daily (6 days) 41.60 34.00
Up to (2) 30 gal. containers three collections weekly 34.50 2$.35
Up to 30 gal. containers daily (6 days) 02.50 68.00
~~~51
EX BIT
DIN SERVICE RATE>~
WEEKLY YARDS NEW MINIMUM OLD MINIMUM NEW. MAX. OLD MAX.
DINS PICKUP MONTIiLY PRICE PRICE PRICE PRICE
1 1 13 27.75 23.00 33.50 27.75
1 2 26 47.50 39.00 55.00 45.50
1 3 39 66.00 54,25 77.25 63.75
1 4 52 86.00 70,75 100.50 83.00
1 5 65 106.00 87,25 124.00 102.50
1 6 78 130,00 106,75 149.75 123.75
1 7 91 150,00 122.50 174.00 143.75
2 1 26 51,00 41.25 58,50 48.25
2 2 52 93.00 77.75 102.00 84.25
2 3 78 120.00 97.25 135.00 111.50
2 4 104 151.00 122,50 173.50 143.25
2 5 130 182.00 148.00 210.50• 174.00
2 6 156 224.00 182,75 256.75 212.25
2 7 182 262.00 211.50 300.00 248.00
3 1 39 72.00 59.50 84.00 69.25
3 2 ~ 78 122.00 98.50 138.25 114.25
3 3 117 166.00 135.25 206.50 170.75
3 4 156 210.00 170.00 240,75 199.00
3 5 195 256.00 208.75 295.25 244.00
3 6 233 315.00 257.25 :?44.50 284.75
3 7 273 360.00 293.00 !;18.00 345.50
4 1 52 93.50 77.25 109.50 90.50
4 2 104 154.00 124.50 174.25 144.00
4 3 156 212.50 171.75 243.25 201.00
4 4 208 270.00 217.75 307.00 253.75
9 5 260 330.00 267.00 376.00 310.75
4 6 312 410.00 335.00 475.25 392.75
4 7 364 960.00 374.25 527.25 435,75
5 1 65 114.00 94,25 133.75 110.50
5 2 130 190.00 151.75 214,00 176.75
5 3 195 260.00 208,75 276.75 228.75
5 4 `?60 330.00 265.00 374.00 309.00
5 5 325 410.00 352.50 495.25 409.25
5 6 409 515,00 420.00 596.50 494.50
5 7 455 565.00 458,75 650.50 537.50
6 1 78 136.00 111.75 158.25 130.75
6 2 156 220.00 178.50 251,50 207.75
6 3 234 302.00 2~~5.00 344.50 284.75
6 4 312 385,00 311.50 450.00 361.75
6 5 398 500.00 403.25 573.50 47400
6 6 488 620.00 502.50 711.00 587.50
6 7 568 680.00 538.50 825.00 629.25
_~-
EXi~~~
A
~~ts)
DEPARTMENTAL CORRESPONDENCE
DATE: June 11, 1980
TO; Lane F. Cole, City Manager
VIA: Eugene R. Asmus, Assistant City Manager
FROM: Gordon K. Grant
SUBJECT: Rate Study - Chula Vista Sanitary Service
The Finance Office has completed a rate study based on an examination of the
audited financial statements of Chula Vista Sanitary Service, Inc., for the
fiscal years ended March 31, 1979, March 31, 1980, and supporting schedules
provided by the Company on May 13, 1980. Projections for 1981 were also
reviewed. The following exhibits have been prepared to support the adoption
of the proposed new rates on July 1, 1980:
Exhibit I - Comparative Summary Income Statement
The comparison between fiscal year 1979 and 1980 shows that expenses have
increased substantially in the following areas:
1. 42.1% increase in depreciation expenses resulting from the purchase in
fiscal year 1980 of four trash trucks for $236,729; one service vehicle
for $15,625; and miscellaneous equipment for $1,388 for a total of
$253,742.
2. Landfill fees increased by 39.9.% due to landfill fee increases approved
by the County Board of Supervisors affecting six months in fiscal year
1979 and the full 1980 fiscal year.
3. A 26.6% increase in miscellaneous outlays primarily due to increases
in vehicle related expenses.
The result is an overall decrease in pre-tax profit from fiscal year 1979
to fiscal year 1980 of 48.6%.
Exhibit II - Chula Vista Sanitary Service Analysis of Miscellaneous Exoense
Fuel, oil, tires, vehicle expenses, repair and maintenance are the major areas
of increase in the miscellaneous category. The total increase in these
categories between fiscal year 1979 and fiscal year 1980 is $95,921, or 34.5%.
~.~/ C~..ty o6 Chuka V~,h.ta, Cak~.bann~.a
A~~~ loi
Rate Study - Chula Vista Sanitary Service Page Two
Exhibit III - Comparison of Actual and Projected Income Statements
The accuracy of Chula Vista Sanitary Service, Inc., fiscal year 1981
projections was relied upon based on a comparison of actual and projected
income statements for fiscal years 1979 and 1980. The comparison shows
that actual amounts in most categories are close to the projections, especially
the after tax profit and the rate of return on investments.
Exhibit IV - Income-Expense Analysis
The proposed new rates to realize the projected income for commercial or
industrial were used based on a comparative review made with other sanitation.
companies in the surrounding area and found to be competitive. The only unde-
termined rate to yield a 9% - 10% return on investment considered appropriate
in previous rate reviews is for single family residences. Residential rates
for fiscal year 1981 would have to be $5.11 per month for a 9% return and
$5.20 per month for a 10% return. Either rate is higher than the $5 per month
requested by Chula Vista Sanitary Service, Inc.
Exhibit V - Calculation of Return-on-Investment
Calculating the actual return-on-investment for fiscal year 1979, fiscal year
1980, and the projected for fiscal year 1981 given the actual and oroposed
rates reveals an average 8% return-on-investment for the three fiscal. years.
Exhibit VI - Calculation of Residential and Bin Service "Pass Through" Costs
The residential "pass through" cost as $0.30 of the total $1.00 proposed rate
increase. It represents a 7.5% increase to the current $4 per month rate.
Commercial bin service is affected approximately the same. The total "pass-
through" is $1.35, but since the capacity of a bin is about five times 'that
of a family unit, the relative increase is calculated as $1,35 5, or $0.27.
This represents about a 7% increase to the current $4 per month rate.
Exhibit VII - Comparative Analysis of Residential Service Rates
All cities surveyed have received rate increases since the City of Chula
Vista's increase October 1, 1978.. The proposed rate increase for Chula '
Vista effective July 1, 1980 will be 21 months from the last adjustment.
Our $5 per month residential rate will be in line with other cities an'd I
suspect, after talking. with .one city, that the rates shown for the others
reflect only the "pass through" cost. I expect that general operating cost
increases will be forthcoming for the cities surveyed which will increase
their rates further.
Exhibit VIII - Salaries and Fringe Benefits Paid Company Offici~al~s
This exhibit is for information purposes only.
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CHULA VISTA SANITARY SERVICE; INC.
Comparative Summary Income Statement
Fiscal Years Ended 3/31/79; 3/31/80; 3/31/81
Income
Commercial
Residential
Contract Hauling
Total Income
Expenses
Salaries & Wages
Payroll Taxes &
Employee Benefits
Landfill Fees
Depreciation
Equipment Leases
Insurance
Miscellaneous
Total Expenses
Pre-Tax Profit (Loss)
Income Taxes
Profit (Loss) After
Taxes
1978-1979 1979-1980 ~o of Increase
Actual)_ Actual. Over Prior Year
EXHIBIT I
1980-1981 ~o of Increase
Projected Over Prior Year
$ 780,708 $ 873,889 11.9 51,042,300 19.3
696,580 ~ 752,528 8.0 901,500 19.8
44,'158 103.,074 133.4 151,650 47.1
$1,521,446 ~ $1,729,491 13,7 $2,095,450 21.2
$ 532,836. $ 553,466 3.9 $ 624,000 12.7
101,547 99,277 (2,2), 116,500 17.3
198,039 277.,037 39.9 366,200 32.2
76,127 1'08,202 42,1 132,000 22.0
5,182 4,910 (5.2) 4,800 (2.2)
53,532. 55,638 3.9 68,000 22.2
_
460,209 582',657 26.6 704,100 20.8
$1'427,472 $1,681,187 17.8 $2,015,600 19.9
$ 93,974 $ 48,304 (48,,6) $ 79,850. 65.3
37,400 5,355 25,877
$ 56,574 $ 42,949 $ 53,973
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Rate Study - Chula Vista Sanitary Service Page Three
Also included are the proposed new rate schedules.
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Fue1,~0i1 & Tires.
Vehicle & Route Expenses
Repairs & Maintenance
Building, Utilities &
Maintenance
~Buil'ding Rent
Interest
Advertising
Telephone ~ Office Expense
Dues & Subscriptions
Data Processing
Accountin4 Fees
Legal Fees
Research & Development
Franchise Fees
Corporate Fees
Interest & Sundry Income
Total Miscellaneous
Expenses
EXHIBIT II
CHULA.VI$TA SANITARY SERVICE, TNC,
Analysis of Miscellaneous Expense
Fiscal Years Ended 3/31/79; 3/31/80; 3/3i/81
Fiscal Year
1978-.79
(Actual
$123,019
13,144
142,037
Fiscal Year
1979-80
(Actual)
3152,667
24,877
196,577
of Increase
Over Prior Year
24.1
89.3
38.4
Fiscal Year
1980-81 % of Increase
(Projected) Over Prior Year
$200,000 31.0
32,900 32.3
229,000 16.5
23,094 26,810 16.1 35,000 30.5
22,239 2Z ,908 3,0 22,800 -
28,191 35,196 24.8 48,000 36.4
4,016 4,983 24.1 3,'200 (35.8;
24,989 27,459 9.9 30,000 9.3
3,501 3,677 5.0 4,000 8.8
14,197 15,017 5.8 15,800 5.2
6,050 7,470 23.5 7,000 (6.3,
230 - - 1,500 -
12,000 12,000 - 12;000 -
29,520 32,507 10.1 38,900 19.7
24,000 24,000 - 26,000 8.3
(10~ 018) . ( 3 491 ) - ( 2,000) -
$460,209 $582,657 26.6 $704,100 20.8
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EXHIBIT III
CHUL'A VISTA.SANITARY'SERVICE, INC.
Comparison of Actual and Projected Income Statements
'Fiscal Years Ended 3/31/79 and 3/31/80
Fiscal Years 1978-1979 'Fiscal 'Years 1979-1980
Income Actual Projected Actual Projected
Commercial $ 780,708 $ 756,460 $ 873,889 $ 804,170
Residential 696,580 699,640 752,528 739,920
Contract Hauling 44,158 41,770 103,074 41,770
Total Income $1,52,1,4',46 $1,497,870 $1,729,491 $1,585,860
Expenses
Salaries and Wages $ 532,836 $ 538,480 $ 553:;466 $ 570,550
Payroll Taxes & Employee
Benefits 101,547 101,640 99,277 106,110
Landfill Fees 198,039 195,990 277,037 251,990
Depreciation 76,127 65,760 108,202 65,760
Equipment Leases 5,180 4,950 4,910 4,950
Insurance 53,532 67,180 55,638 71,130
Miscellaneous 460,209 434,580 582,657 449,500
Total Expenses $1,42J,470 $1,408,580 $1,681,187 $1,519,990
Pre-Tax Profit $ 93,970 $ 89,290 $ 48,304 $ 65,870
Income Taxes (37,400) (37,390) (5,355) (24,046)
After Tax Profit $ 56,570 $ 51,900 $ 42,949 $ 41,824
Return on Investment
~~, s~
9.5% 8.8% 6.7% 6.6%
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CHULA VISTA SANITARY SERVICE, INC.
Income-Expense Analysis
Fiscal Year Ended 3/31/81
Expenses:
Salaries and 6Jages ~•
Payrol] Taxes and Employee
_ Benefits
~._~' Landfi 11 Fees
Depreciation
Equipment Leases
Insurance
Misce]laneous
Total Expenses
Income Tax Due
Total Expected Return
Plus Expenses
Fiscal Year 1980-81
(Projected)
Expected Return
@ 9% after-taxes
$ 62,489 ~ __
624,000
116,500
366,200
132,000
4,800
68,000
704,100
$?_,015,600
34,058
$2,112,147
EXHIBIT IV
Fiscal Year 1980-81
(Projected)
Expected Return
!~ 40%°'after[:taxes
_ ~'$• ' 69 , 432 - _ _
624,000
116,500
366,200
132,000
4,800
68,000
704,100
$2,015,600
40,729
$2,125,761
Income:
Rubbish Collection-Commercial 1,042,300 1,042,300
Contract Hauling _ 151>650 151,650
1,193,950 1,193,950
Required Income from Single 1
Family Residences 729,197 1 742,811
Average Number of Single Family
Residences ~ 15,867 15,867
Annual Income per Single Family
Residence $45.96 $46.81
Divided by Number of Months 9 9
Rate for Single Family Residence $ 5.11 $ 5.20
1 Reduced by $T89,000 to reflect nine months at the new rate effective
July 1, 1980.
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EXHIBIT V
CHULA VISTA SANITARY SERVICE, INC.
Calculation of Return-on-Investment
Fiscal Years Ended 3/31/79; 3/31/80; 3/31/81
Actual Actual Projected
1978-79 1979-80 1980-81
Pre Tax Profit $93,974 _ 348,304 $79,850
Income Taxes (37,400) (5,355) (25,877)
After Tax Profit 356,574 $42,949 553,973
Total Capital Beginning of
Period
Add: After Tax Profit
Total Capital End
of Period
Long-Term Debt
Basis for Calculation of
Return-on-Investment
Return-on-Investment
Percent of Return-on-
Investment
Three-Year Average: 8°L
$290,821 $347,395 $390,344
56,574 42,949 53,973
$347,395 $390,344 $444,317
250,000 250,000 250,000
$59.7,395 $640,344 5694,317
$ 56,574 5 42,949 5 53,973
9.5" 6.736 7.8%
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CHULA VISTA SANITARY SERVICE, INC.
Calculation of Residential and Bin
Service "Pass-Through" Increases
EXHIBIT VI
Actual "Pass Proposed "Pass
Residential Through" Cost Through" Cost
Increase in Landfill fees for
Each 35 Cubic Yard Truck $12.25
Average Number of Units per Truck :"L00.00 ,
$ .061
Average Number of Weeks per Month x4 1/3
"Pass-Through" Cost $26.4¢ 30.0¢*
Commercial-Bins
Increase in Landfill for each
35 Cubic Yard Truck $12.25
Average Number of Bins per Truck 40.00
$ .306
Average Number of Weeks per Month x4 1/3
"Pass-Through" Cost $:1.326 $1.35*
* The additional requested is to provide for non-paying customers based
on the company's past experience.
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EXHIBIT VII
CHULA VISTA SANITARY SERVICE, INC.
Comparative Analysis of Residential Service Rates
Date of
Last Rate Presently I
Cjty Frequency Increase Present Rate Under Consideration 'i
National City,
1/Week
10/1/79
$4.75/Mo. t
$5.10
La Mesa 1/Week 1/1/80 $4,55/Mo. $4.40 ~
El Cajon
1/Week
1/1/80
$4.75/Mo. I
$5.10
Lemon Grove 1/Week 12/1/79 $4.55/Mo. $4:gp
Chula Vista 1/Week 10/1/78 $4.00/Mo, $5.00 !
Poway 1/Week 12/1/79 $5.50/Mo,
* Still in the process of estimating the rate increase.
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EXHIBIT VIII
CHULA VISTA SANITARY SERVICE, INC.
Salaries and Fringe Benefits Paid Company Officials
Fiscal Year Ended 3/31%81
Dick F. Chase, Sr. - President $24,000.00
Company Car Furnished
Expenses only as related to business promotion
and public relations on behalf of the Company
Dick F. Chase, Jr. = Vice President/Treasurer -0-
Expenses only as related to business promotion
and public relations on behalf of the Company
Edward Caliri - Manager $19,500.00
Two weeks vacation (included in salary)
Group Insurance 1,500.00
Gerald/Fry - Shop Supervisor $19,000.00
Two weeks vacation (included in salary)
Group Insurance 1,500.00
Madge S. McKenna - Secretary $11,960.00
Two weeks vacation (included in salary)
Group Insurance 1,500.00
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