HomeMy WebLinkAboutStaff Report 245-07TO:
ATTN:
City of Palo Alto
Clty Manager’s Report
............................................BUDGET
HONORABLE CITY COUNCIL
FINANCE COMMITTEE ~ ’07 - ~09
FROM:CITY MANAGER DEPARTMENT: PUBLIC WORKS
DATE:MAY 15, 2007 CMR:245:07
SUBJECT:APPROVAL OF ADDITIONAL COMPENSATION TO THE PALO ALTO
SANITATION COMPANY IN THE AMOUNT OF $814,832 FOR COST
INCREASES PERTAINING TO SERVICES IN 2007-08
RECOMMENDATION
Staff requests that the Finance Committee recommend that the Council approve additional
compensation of $814,832 to Palo Alto Sanitation Company (PASCO) for cost increases
pertaining to services in 2007-08 and authorize the City Manager to execute a contract
amendment f-or the additional compensation and services for 2007-08. This recommendation has
also been discussed with the City Attorney’s Office and the City Auditor’s Office in order to
ensure compliance with the PASCO contract and the recent PASCO contract audit.
BACKGROUND
The current refuse and recycling contract with PASCO allows staff to perform a good-faith
review of PASCO’s compensation and recommend adjustments when PASCO goes outside the
target operating ratio range set in the contract. Due to significant ongoing cost increases incurred
by PASCO, staff recommends a prospective adjustment to PASCO’s compensation for 2007-08
and going forward. These cost increases are bas6d on the results of operations as detailed in
PASCO’s 2005-06 audited financial statements and the notion that the cost increases are
continuing in nature.
DISCUSSION
PASCO has experienced considerable cost increases in its operations. Upon review of PASCO’s
financial statements and meeting with PASCO representatives, staff recommends an additional
adjustment to PASCO’s compensation of $814,832, which is based on the following cost
increases:
Operating Expenses
Disposal to landfill- $5,000
Construction and demolition processing fees- $40,000
Labor- wages (including merit increases)- $210,000
Labor- supplemental (sick pay, bonuses, and overtime)- $45,000
Labor- benefits (insurance, vacation, 401K, medica!)- $80,000
Labor- payroll taxes- $10,000
Fuel costs (increased fuel costs and increased consumption due to C&D routes
and redirection of debris boxes to SMART Station)- $300,000
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o Operating costs for tracks (including parts and exhaust system filters for
equipment)- $10,000
o Truck repairs (transmission, tires, lubes, third-party services)- $30,000
o Safety program expense (protective equipment, monthly safety meetings, safety
incentives)- $5,000
General and Administrative Expenses
o Wages and benefits- $34,832
o General liability insurance (including insurance premium increases for vehicles
and equipment)- $40,000
o Travel to required training courses due to increased regulation requirements-
$5,0O0
RESOURCE INIIPACT
If the Finance Committee recommends that Council approve this additional compensation of
$814,832 to PASCO in 2007-08, this adjustment will appear as an amendment to the City
Manager’s 2007-09 Proposed Budget in Exhibit B of 2007-09 Budget Adoption CMR.
Combining this additional compensation with the amount of $9,248,298 alread~r included in the
2007-08 proposed budget would yield a total compensation amount of $10,063,130 for 2007-08.
The recently proposed thirteen percent increase to the refuse rates are estimated to net an
additional $2.9 million to the Refuse Fund annually (CMR:208:07, April 17, 2007) starting in
2007-08. This thirteen percent proposed rate increase would cover this additional expense.
ENVI[NON1V~NTAL IN[PACT
This report is not a project under the California Environmental Quality Act (CEQA) and an
environmental review is not necessary.
PREPARED BY:
DEPARTMENT HEAD:
CITY MANAGER APPROVAL:
OTO
Executive Assis
GLENN S. ROBERTS
Director of Public Works
~keA~ctorY~ofAAT~3dmini . r~ati~e Services
Assist~t Ci~ M~ager
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