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Home My WebLink AboutAgenda Statement 1977/08/16 Item 05, 05a~, = - CITY OF CHULA VISTA COUNCIL AGENDA STATEMENT Item No. 5, 5a For meeting of 8/16/77 ITEM TITLE Public Hearing -- Consideration of Rate Increase for Chula Vista Sanitary Service Resolution 87g1 - Revising the Chula Vista Sanitary Service's Collection Rates and Establishing a New Schedule SUBMITTED BY Director of Finance ~~,~,~ ITEM EXPLANATION (4/5TH'S VOTE REQUIRED YES NO,~) Resolution No. 8755 set August 16, 1977 as the date for consideration of Chula Vista Sanitary Service's request fora rate increase. Staff has concluded its rate study and our findings are contained in the attached report. Chula Vista Sanitary Service requested a 20% increase in rates based on the County of San Diego's announced 150% increase in landfill fees, an increase in operating costs of 11% since the last rate increase in February, 1975, and finally, a 20% increase in the consumer price index from 149.9 in August, 1974, to 180.6 in May, 1977. The Finance Office has examined the audited financial statements; the projections for the fiscal years ending March 31, 1978, and March 31, 1979; and supporting material presented by Chula Vista Sanitary Service July 27, 1977: Based on this review, this office completed a rate study which indicates that the requested 20% increase is justified. tXN1tS1IJ Agreement Resolution X Ordinance Plat Notification List~~ Other Report ENVIRONMENTAL DOCUMENT: Attached Submitted on FINANCIAL IMPACT N/A STAFF RECOMMENDATION Approve Resolution BOARD/COMMISSION RECOMMENDATION N/A AppROVED COUNCIL ACTION by the City Council of Chula Vista, C~.lifornia Dat sd ..' .............' Form A-113 (Rev. 5/77) D~PARTM~NTAL CORR6SPONDENC~ DATE: August 12, 1977 T0: Lane F. Cole, City Manager VIA: Eugene R. Asmus, Assistant City Manager FROM ~ordon K. Grant, Director of Finance SUBJECT: Rate Study - Chula Vista Sanitary Service Chula Vista Sanitary Service has requested a 20% rate increase based primarily on the County of San Diego`s announced 150% increase in landfill fees, effec- tive September 1, 1977; an increase in operating costs of 11% since the last rate increase in February, 1975; and finally, a '311% increase in the consumer price index from 149.9 in August, 1974, to 180.6 in May, 1977. The Finance Office has examined the audited financial statements, the pro- jections for the fiscal years ending March 31, 1978 and March 31, 1979, and supporting material presented by Chula Vista Sanitary Service on July 27, 1977. Based on this review, this office completed a rate study which indicates that the requested 20% increase is justified. The following guidelines were utilized in performing the study. 1. Rate increases requested by Mr. Dick Chase for all commercial and industrial firms were used based on a comparative analysis made with other sanitation companies in the surrounding area and found to be competitive. 2. Income-expense analysis to determine residential rates based on a 9~ and 10°o return on investment, after income taxes which produced an average monthly rate of $3.74 and $3.84 respectively, considered fair by Mr. Wayne Carroll, Certified Public Accountant and City Auditor, (Exhibit I) 3. Comparative review of residential rates offered by other firms in the sanitation field. (Exhibit II) Included for informational purposes is a comparative income statement for the fiscal years 1977-78 and 1978-79, and the proposed new.rate schedules. (Exhibits, IIIa, IIIb, IV, V, VI) We have also prepared a schedule of salaries and fringe benefits paid company officers. (Exhibit VII. GKG:RPF:jh C~,.ty o~ Chu.~a V~.~6~a, Ca.C~.sonn~,a A 111 • • ' • ~ EXHIBIT I INCOME-EXPENSE ANALYSIS For Fiscal Years 1976-77, 1977-78, 1978-79 Expected Return on Investment @ 9,o after taxes Expected Return on Investment @10% after taxes Expenses Salaries and Wages Landfill Fees Depreciation and Amortization Equipment Lease Insurance Payroll Taxes and Employee Benefits Miscellaneous Income Taxes Due @ 9°~ Return @10% Return Total Expected Return plus Expenses @ 9% @10% Income Rubbish Collections-Commercial Contract Hauling Total Income Required Income from Single Family Residences @ 9% @10% Average Number of Single Family Residences Annual Income Per Single Family Residence @ 9% @10°0 Divided by Number of Months Rates for Single Family Residences @ 9% @10% Average Rate @ 9% @10% Actual Projected 1976-77 1977-78 1978-79 47,954 51,140 55,307 53,282 56,822 61,452 430,319 465,400 496,000 50,274 94,300 126,000 82,978 91,100 85,000 5,719 5,700 5,700 48,609 64,700 67,000 77,759 86,500 92,300 389,088 382,600 398 100 ,084,746 1,190,300 1,270,10.0_ 32,172 36,395 41,919 39,234 __43,927 50,064 1,164,872 1,277,835 1,367,326 1,177,262 1,291,049 1,381,616 519,127 613,400 6,62,500' 39,739 35,700 %35,700 558,866 649,100 ~ 698,200 606,006 359,725* 669,126 618,396 372,939* 683,416 14,482 14,945 15,008 41.85 24,07 44,58 42.70 24,95 45,54 12 6 12 3,49 4.0.1 3,72 3,56 4,16 3,80 3,74 3,84 * Reduced by $269,010 to reflect the first 6 months at old rate. .-~ t- m x yC w Z O U O CJ W ~--~ Z Q N Z W 1-- d w U w N J Q F- Z w 0 N w 1L O N H N Y ._.f Q z w ~_ H U a +- 'L7 a. C •r- 3 U O 'r' ~ N O ~ ~ S ~ ~ • r" L_J I 1 • 0 W 0 ~a w a a z = cr •o v v o > > ~- > ~ ~ F-O L z •-~ a rz a W F-- cL ~ a w~ Q Q d ~w t ~ i a o ~ ~-. o o r~ o o to ~ ~ 0 0 0 0 W N 01 l0 lp Ql Lf> Ct ^ ~ M 01 Ql Ql I"- Z O M M M M ~ M M M M M M M a U tfi H Z W W L!') O O O O in L!') to O to O O W Q .- N O 01 N O CO N N M N CY ct ~ [Y_ M M N M ~f N M M M M M M d. ,~ b4 N Q J W w vi ct- mot- ~ ~~ ~ ~ Ln ~ O ¢ to ~ r~ t~ t~ ~ r~ r~ ~o r~ r~ r~ w r\ r~ \ \ \ r~ \ \ r\ \ \ \ w~ \ \ r r r \ r r \ r r r F-- U i- r \ \ \ +--' \ \ r \ \ \ r Z \ \ O O O \ r r \ O O O ~ ~--~ r r r r r r r r f~ r r r >- U Y Y Y Y Y Y Y Y Y Y Y Y Z O (U N G! N O Q! N v N O O W N O N N N N O ~ N N N Qf ~ 3 3 3 3 3 3 3 3 3 3 3 3 ~ x x x x x x x x x x x x tL r r r r r r r r r r r r .--. ~ ~ Rf O •r ~.. +' > U to N N Y O O Q •p •r C to O i r ~ U t[S ~ O i-~ O ~ C3 rtf S. .L] •~ •r i. N f~ •N (CS t/1 of ~ C ~ d C O C ~- ~ r r U r r ~ O •r ~ ~ ~ .-.t F- L 3 U r ~ +~ Ql 3 C N ~--~ rt3 L r- C ~ RS O tCS U O r6 •r U U U W W l.t_ J J Z O ~ (n ~ • • • ~ . EXHIBIT IIIa CHULA VISTA SANITARY SERVICE, INC. Comparative Summary Income Statement Fiscal Years Ended 3/3178 and 3/31/79 At Proposed $3.60 Residential Rate Income Rubbish Collections Contract Hauling Total Income 1977-78 197879 1,205,222* 1,310,846 35,700 35,700 1,240,922 1,346,546 Expenses Salaries Landfill Fees Depreciation Equipment Lease Insurance Payroll Taxes and Employee Benefits Miscellaneous 465,400 496,000 94,300 126,000 91,100 85,000 5,700 5,700 - 64,700 67,000 86,500 92,300 382,600 398,100 Total Expenses Net Profit (Loss) before Application of Income Taxes Income Taxes Net Profit after Taxes Return on Investment Average Rate of Return 6.85% 1,190,300 1,270,100 50,622 76-,446 15,355 30;074 35,267 46,372 6 , 2 ,°0 7.5 % • • EXHIBIT IIIb CHULA VISTA SANITARY SERVICE, INC. Comparative Summary Tncome Statement Fiscal Years Ended 3/31/78 and 3/31/79 At Calculated $3,74 Residential Rate Income 1977-78 1978-79 Rubbish Collections 1,217,776* 1,336,059 Contract Hauling 35,700 35,700 Total Income 1,253,476 1,371,759 Expenses Salaries 465,400 496,000 Landfill Fees 94,300 126,000 Depreciation 91,100 85,000 Equipment Lease 5,700 5,700 Insurance 64,700 67,000 Payroll Taxes and Employee Benefits 86,500 92,300 Miscellaneous 382,600 398,100 Total Expenses 1,190,300 1,270,100 Net Profit (Loss) before application of Income Taxes 63,176 101,659 Income Taxes 22,510 44,445 Net Profit after Taxes 40,666 57,214 Return on Investment 7,20 9,3% Average Rate of Return 8,25°0 * Six months at old rate . . ~ ~~ . • ~ EXHIBIT VII Salaries and Fringe Benefits Paid Company Officials Fiscal Year Ending 3/31/77 r Dick F. Chase, Sr. - President Company Car Furnished Expenses only as related to business Promotion and Public Relations on Behalf of the Company Harvey Erickson - Vice President '(Retired August, 1976) Jim Reid - Manager (beginning August 1976} Two ti~;Leks vacation (included in salary) Group Insurance Generoso Jansuy - Shop Supervisor Two weeks vacation (included in salary) Group Insurance ~^adge S, t~1ekenna - Secretary Two :~~eeks vacation (included in salary) Group Insurance X24,000.00 7,020,00 10,400.00 1,089,00 15,492.00 828.00 7,802.00 1,809,00