HomeMy WebLinkAboutStaff Report 348-06City of Palo Alto
City Manager’s Report
TO:HONORABLE CITY COUNCIL
FROM:CITY MANAGER DEPARTMENT: PUBLIC WORKS
DATE:SEPTEMBER 11, 2006 CMR:348:06
SUBJECT:ADJUSTMENT TO RECYCLING COMPENSATION TO THE PALO
ALTO SANITATION COMPANY IN THE AMOUNT OF $91,581 FOR
DEFICIT OF RECYCLING REVENUES
This is an informational report and no Council action is required.
BACKGROUND
The current agreement with the Palo Alto Sanitation Company/Waste Management (PASCO) to
provide refuse and recycling services within the City of Palo Alto was extended until June 30,
2009.
The agreement stipulates that the collector shall retain all revenues collected from the sale of
recyclable material, as part of its compensation, and allows for the compensation of recycling
services to be adjusted annually. Contract Section 4.3.4., Recycling Services, requires the
"baseline revenue" to be adjusted each year on a rolling three year average. Section 4.7.2.,
Adjustment to Recycling Compensation, requires the collector to submit to the City an annual
report describing its recycling income received for the contract year under review. This section
specifies that "if collector’s gross recycling revenues for the preceding contract year were less
than 15 percent under the baseline revenue, City shall pay to collector the amount of Such deficit
between the actual recycling revenues received by collector and the baseline revenue less 15
percent."
For FY 2005-06, the rolling three-year average recycling revenues were established at
$1,145,949 (Attachment A).
DISCUSSION
As required by the agreement, PASCO submitted a report detailing its gross recycling revenues
(Attachment B) for FY 2005-06. The report shows the total recycling revenue to be $882,476.
This is a shortfall of $91,581 from the allowed 15 percent less than the baseline revenues, as
calculated below:
1. $1,145,949 (baseline recycling revenues) - (15%X $1,145,949)= $974,057
2.$974,057 - $882,476 (actual recycling revenues) = $91,581 (amount the City will
compensate PASCO for its deficit in recycling revenues).
This is the first time the City has compensated PASCO for a deficit in recycling revenues. This
shortfall is a result of the recycling materials being processed as single stream at the Davis Street
CMR:348:06 Page 1 of 2
Material Recovery Facility in San Leandro. The recycling revenues are being used to cover the
recycling processing cost.’ The baseline deficit for PASCO recycling revenues was much less
than originally anticipated from the single stream program. Staff had originally estimated the
deficit could reach $740,000 mad was later revised and budgeted at $668,057.
RESOURCE IMPACT
The adjustment to the PASCO recycling compensation of $91,581 for FY 2005-06 will not
require additional funding. The Refuse Fund operating budget included $668,057 for the deficit
in the recycling revenues, consequently a Budget Amendment Ordinance was not required.
POLICY IMPLICATIONS
This report does not represent changes to existing City policies.
ENVIRONMENTAL IMPACT
This report is not a projeet under the California Environmental Quality Act (CEQA) and an
environmental review is not necessary.
ATTACHMENTS
Attachment A: PASCO FY 2005-2006 Compensation
Attachment B: PASCO’s report on recycling revenues for FY 05-06
PREPARED BY:
DEPARTMENT HEAD:
GLENN S. ROBERTS
EMILY HARRISON
Assistant City Manager
C1VA~348:06 Page 2 of 2
Attachment A
2005-06 Proposed Budget using the Operating Ratio (OR) Formula:
Expenses subject to OR
Less: Recycling Center labor savings
Less: CNG fuel savings
New Services
Total Expenses
Operating Margin
Pass-through expenses
Total
8,108,464
(93,000)
(21,840)
52,678
8,046,302
1,097,223
164,006
9,307,531
PASCO Direct Revenues:
Less: Recycling Revenues
Less: Other Revenues
Less: Fees to the City for revenue sharing
Total
1,145,949
1,067,508
(704,167)
1,509,290
Payments to PASCO
Total Compensation based on OR - Full year
7,798,241.00
9,307,531.00
Monthly Payments to PASCO (July 2005 - June 2006)649,853.42
8/24/2006
Attachment B
PASCO RECYCLING SALES vs. ALLOWABLES 2005-2006:
07/01/05 to 12/31/05 Total Revenue:
January 2006 Revenue
February 2006 Revenue
March 2006 Revenue
April 2006 Revenue
May 2006 Revenue
June 2006 Revenue
Total Recy Sales: 07105-06106
Annual AIIow.(Baseline less 15%)
514,020.83
38,875.45
119,441.83
47,363.53
36,219.55
55,485.49
71,069.40
882,476.08
974,056.65 ($1,145,949 X .85)
Total Recycling Deficit 91,580.57