Title
Adopt a Resolution to Approve and Authorize the City Manager to Execute Amendment No. 1 to the Franchise Agreement between the City and Alameda County Industries, Inc. (ACI) for Recyclables, Organics, and Solid Waste Collection Services
Staffreport
COUNCIL PRIORITY
• Quality of Life
• Infrastructure
SUMMARY
The purpose of the first amendment to the Franchise Agreement with Alameda County Industries, Inc. (ACI) is to include a Rate Stabilization Reserve that will allow the City to smooth annual rate adjustments for the term of the agreement in a manner that complies with applicable law.
RECOMMENDATIONS
Staff recommend that the City Council approve and authorize the City Manager to execute Amendment No. 1 to the Franchise Agreement with ACI for Recyclables, Organics and Solid Waste Collection Services.
BACKGROUND
The City executed its original agreement with ACI in 2000. To address the complex requirements of California Senate Bill 1383, which was passed in 2016 and effective January 2022, the Franchise Agreement with ACI was redesigned to meet State requirements and was executed on July 24, 2024. The new Agreement included myriad enhancements to the services provided by ACI to the City’s sanitary district area that serves 60% of San Leandro waste collection customers.
Separately, Oro Loma Sanitary District serves 40% of the City of San Leandro, and that collection agreement is provided by Waste Management.
The ten-year, five-month term of the ACI Agreement (link to download <https://www.sanleandro.org/DocumentCenter/View/8163/Alameda-County-Industries-Franchise-Agreement-> 5.8MB) began on February 1, 2025, and will conclude on July 1, 2035, with an option to extend the Agreement for an additional five years.
Analysis
Staff identified that shifting ACI’s existing reimbursement schedule to replace the Vehicle Impact reimbursement with a Rate Stabilization Reserve is advantageous to the City to support future rate stability. The Rate Stabilization Reserve Fund is a financial mechanism that would allow the City to smooth the annual rate adjustment every July 1 to benefit San Leandro ratepayers, in anticipation of years where the rate adjustment is steep because of external economic impacts.
While most annual rate adjustments for ACI are determined by an index-based adjustment, twice during the Agreement term ACI may submit other costs of operations, route needs, and economic challenges toward the rate adjustment, called a “cost-based” adjustment. These rate adjustment factors have potential to sharply increase the rate and may be negatively felt by the average ratepayer. In this case, the City would apply available Rate Stabilization Reserve funds toward this increase to lower the adjusted rate. The cost-based adjustments are expected in Rate Periods four (July 1, 2028) and eight (July 1, 2032) per the Agreement.
The Rate Stabilization Reserve Fund:
• Will be held in an ACI account and not paid directly to the City
• ACI will make quarterly deposits into the reserve fund
• Reports regarding this fund will be delivered by ACI quarterly to the City
The City will have flexible use of the reserve fund to reduce rate impact during any rate adjustment, and any remaining balance in the fund at the end of the contract term will be paid to the City. The Vehicle Impact reimbursement ACI currently contributes to the City is $600,000 annually (adjusted annually by average annualized index from beginning of agreement), and the dollar amount will not change when applied to the Rate Stabilization Reserve Fund. At any time, the City may choose to revert the Rate Stabilization Reserve Fund payments back to a Vehicle Impact reimbursement and may utilize those funds in accordance with applicable law.
Previous Actions
• On July 15, 2024, by Resolution No. 2024-103, the City Council approved a Franchise Agreement between the City and ACI for Recyclables, Organics and Solid Waste Collection Services (which was executed on July 24, 2024)
Legal Analysis
The City Attorney’s Office worked together with Staff and the City’s consultant, HF&H, to analyze and prepare the relevant amendment language. The recommendation also addresses recent changes in the law regarding collection and use of Vehicle Impact Fees, including the Zolly v. City of Oakland decision.
Financial Impacts
This Council action will not impact fund balance.
ATTACHMENTS
A - Draft Resolution ACI Franchise Agreement Amdt No. 1
PREPARED BY: Kerry Parker, Environmental Services Manager, Public Works Department