HomeMy WebLinkAbout03 - Terminating a Non-Exclusive Franchise Agreement for Commercial Solid WasteQ �EwPpRT
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FROM
CITY OF
NEWPORT BEACH
City Council Staff Report
June 11, 2024
Agenda Item No. 3
HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
David A. Webb, Public Works Director - 949-644-3311,
dawebb@newportbeachca.gov
PREPARED BY: Charles Springer, Senior Management Analyst - 949-718-3466,
cspringer@newportbeachca.gov
TITLE: Ordinance No. 2024-14: Terminating a Non -Exclusive Franchise
Agreement for Commercial Solid Waste
ABSTRACT:
The City of Newport Beach worked to gain compliance with the terms of the
Non -Exclusive Commercial Solid Waste Franchise Agreement with Key Disposal &
Recycling, Inc. (Key Disposal) since its execution in August 2023. The City issued a
Notice of Default of the Franchise Agreement in February 2024 to resolve the violations
and then a Notice of Intent to Terminate its Franchise Agreement on March 8, 2024, when
the violations were not resolved. Following additional opportunities to comply that were
not met and an option to relinquish a portion of the franchise that was not taken, the City
Council approved an ordinance to terminate Key Disposal's City Non -Exclusive Franchise
Agreement for Commercial Solid Waste on May 28, 2024. Before the City Council is the
second reading of this ordinance.
RECOMMENDATIONS:
a) Determine this action is exempt from the California Environmental Quality Act (CEQA)
pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because
this action will not result in a physical change to the environment, directly or indirectly;
and
b) Conduct second reading and adopt Ordinance No. 2024-14, An Ordinance of the City
Council of the City of Newport Beach, California, Terminating a Non -Exclusive
Franchise Agreement for Commercial Solid Waste in its entirety.
DISCUSSION:
The City utilizes a Franchise Agreement (2020 version) to allow waste haulers to collect
municipal solid waste, recyclables, organic waste, and construction and demolition debris
at non-residential properties throughout the city. With regard to the City Non -Exclusive
Commercial Solid Waste Franchise Agreement with Key Disposal, and as noted in detail
within the May 28, 2024 staff report to the City Council that introduced this ordinance to
terminate Key Disposal's City Non -Exclusive Franchise Agreement for Commercial Solid
Waste, the City has been working with the hauler to gain compliance with the terms of its
City Franchise Agreement since its execution in August 2023.
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Ordinance No. 2024-14: Terminating a Non -Exclusive
Franchise Agreement for Commercial Solid Waste
June 11, 2024
Page 2
The City issued a Notice of Default of the Franchise Agreement in February 2024 in hopes
that Key Disposal would resolve its outstanding violations. After much effort and since the
violations were still not resolved, the City issued Key Disposal a Notice of Intent to
Terminate its Franchise Agreement on March 8, 2024, pursuant to Newport Beach
Municipal Code (NBMC) Section 12.63.140, with a hearing to be held on March 26, 2024.
At the March 26, 2024 meeting, the City Council granted a time extension, providing
Key Disposal until April 9, 2024, to comply. The City and Key Disposal believed additional
time was still needed for compliance and on April 9, 2024, City staff asked to instead
return to the Council on May 14, 2024. The request was approved by the City Council.
Key Disposal did not fulfill all of the outstanding requirements in the additional time allotted
by staff, so at the May 14, 2024, City Council meeting staff again recommended
termination of Key Disposal's Franchise Agreement. After further discussion with staff and
representatives from Key Disposal at the hearing, City Council presented Key Disposal
with two options:
1) Key Disposal could voluntarily relinquish the Tier 1 (fixed route) component of its
franchise, or
2) Key Disposal's franchise agreement could continue with the formal termination
process.
Staff provided Key Disposal with a deadline of 12 p.m. on May 16, 2024, and allowed for
voluntarily relinquishment of the entire franchise with the option of amending its current
franchise to only a Tier 2 hauler. Key Disposal did not provide its selection within the
timeline allotted. After the deadline, on May 17, 2024, City staff again reached out to
Key Disposal and provided a copy of the amended franchise agreement permitting only
Tier 2 service in the city and requested two fully executed copies to be submitted by the
end of business on Monday, May 20, 2024. Key Disposal was also provided an alternative
to fully relinquishing the entire existing franchise agreement. As of the end of day May 20,
2024, Key Disposal still had not provided written confirmation to voluntarily relinquish
Tier 1 status, nor provided a signed amendment to only allow Tier 2 service.
At the May 28, 2024, meeting, staff re -introduced the ordinance to terminate and provided
the Council with a progress update indicating Key Disposal had not supplied the City with
a decision pertaining to the options presented. Key Disposal presented that it had
complied with the outstanding tasks as of the hearing date. Section 12.60.140 of the
NBMC authorizes a franchise to be terminated if the City Council finds the franchisee has
failed to comply with, or to do anything required of the franchisee. Staff recommended
pursuit of termination due to Key Disposal's history of non-compliance, the extraordinary
efforts required to gain compliance, and the likely recurrence of non-compliance. Based
on the compliance issues and Key Disposal's failure to sign the amended franchise
agreement to allow Tier 2 service, the City Council approved staff's recommendation to
introduce the ordinance to terminate Key Disposal's franchise agreement in its entirety.
Therefore, staff requests that the City Council conduct a second reading and adopt
Ordinance No. 2024-14, terminating Key Disposal's City Non -Exclusive Franchise
Agreement for Commercial Solid Waste in its entirety.
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Ordinance No. 2024-14: Terminating a Non -Exclusive
Franchise Agreement for Commercial Solid Waste
June 11, 2024
Page 3
FISCAL IMPACT:
This franchise hauler currently represents a single account, which will most likely be
picked up by one of the other franchise commercial haulers. Nominal revenue loss is
anticipated.
ENVIRONMENTAL REVIEW:
Staff recommends the City Council find this action is not subject to the California
Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) (the activity will not
result in a direct or reasonably foreseeable indirect physical change in the environment)
and 15060(c)(3) (the activity is not a project as defined in Section 15378) of the CEQA
Guidelines, California Code of Regulations, Title 14, Chapter 3, because it has no
potential for resulting in physical change to the environment, directly or indirectly.
NOTICING:
The agenda item has been noticed according to the Brown Act (72 hours in advance of
the meeting at which the City Council considers the item).
ATTACHMENTS:
Attachment A
— Ordinance No. 2024-14
Attachment B
— Notice of Intent to Terminate
Attachment C
— Franchise Agreement
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ATTACHMENT A
ORDINANCE NO. 2024-14
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY
OF NEWPORT BEACH, CALIFORNIA, TERMINATING A
NON-EXCLUSIVE FRANCHISE AGREEMENT FOR
COMMERCIAL SOLID WASTE
WHEREAS, the City Council of the City of Newport Beach ("City") finds and
determines that the collection of municipal solid waste and divertible materials, including
recyclable materials, food scraps, green waste, wood waste, construction and
demolition debris, and all other materials that can be diverted from landfill disposal
(collectively "Commercial Solid Waste") generated within the City is a vital public
service;
WHEREAS, the City Council further finds and determines that the collection,
transportation, storage and disposal of municipal solid waste and the collection,
transportation, processing and diversion of processable municipal solid waste and
divertible materials ("Commercial Franchise Services") is a matter of great public
concern because improper control of such matters subjects the City to potential liability,
damages and penalties and may create a public nuisance, air pollution, fire hazard,
infestation and other problems affecting the public health, safety and welfare;
WHEREAS, the non-exclusive franchises for the use of public streets to provide
Commercial Franchise Services promotes the public health, safety and welfare by
providing permanence and stability among those businesses wishing to provide such
service and accountability to the City for compliance with current and future state
mandates;
WHEREAS, on October 22, 2019, the City Council approved a new model
franchise agreement in compliance with state law ("2020 Franchise Agreement"), that
expires in the year 2027;
WHEREAS, the City has identified violations of the 2020 Franchise Agreement
related to subcontracting, delayed diversion reporting, diversion deficiencies and/or
failing to retain required insurance from franchisee Key Disposal & Recycling, Inc.
("Franchisee");
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Ordinance No. 2024-14
Page 2 of 4
WHEREAS, pursuant to Article XIII (Franchises) of the City Charter, Chapter
12.63 (Solid Waste Management) of the Newport Beach Municipal Code ("NBMC") and
California Public Resources Code Sections 40059, 49300 and 49500 through 49523, or
any successor statutes, the City is authorized to enter and/or terminate non-exclusive
franchise agreements for Commercial Franchise Services with private solid waste
haulers;
WHEREAS, pursuant to Section 12.63.140 (Termination) of the NBMC, the City
transmitted a notice of intent to terminate the non-exclusive franchise to the Franchisee
that stated the City Council's intent to hold a hearing, along with the time, date and
place of hearing to be held within fifteen (15) days and sixty (60) days of the date of
notice;
WHEREAS, the City Council held a hearing on March 26, 2024, in the City
Council Chambers located at 100 Civic Center Drive, Newport Beach, California. A
notice of time, place and purpose of the hearing was given in accordance with California
Government Code Section 54950 et seq. ("Ralph M. Brown Act") and Section 1301 of
the City Charter. Evidence, both written and oral, was presented to, and considered by,
the City Council at this hearing;
WHEREAS, at the hearing, the City Council granted an extension to April 9,
2024, for Franchisee to resolve violations of the 2020 Franchise Agreement;
WHEREAS, the City requested an additional continuance to May 14, 2024, for
Franchisee to resolve outstanding violations of the 2020 Franchise Agreement;
WHEREAS, the City worked with Franchisee from March 26, 2024 to April 29,
2024, to gain compliance however, Franchisee was unable to resolve all of the
outstanding violations of the 2020 Franchise Agreement;
WHEREAS, the City Council held a hearing on May 14, 2024, in the City Council
Chambers located at 100 Civic Center Drive, Newport Beach, California. A notice of
time, place and purpose of the hearing was given in accordance with the Ralph M.
Brown Act and Section 1301 of the City Charter. Evidence, both written and oral, was
presented to, and considered by, the City Council at this hearing;
WHEREAS, at the hearing, the City Council granted an extension to May 28,
2024 to allow the Franchisee to relinquish its "Tier 1" services;
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Ordinance No. 2024-14
Page 3 of 4
WHEREAS, pursuant to Section 12.63.140 (Termination) of the NBMC, the City
Council finds, on the basis of the hearing, information, materials and testimony
submitted that Franchisee has failed to comply with supplying records as requested,
including a diversion plan and implementing a three -container source separation
program; and
WHEREAS, having considered all oral and documentary evidence presented at
the hearing, the City Council determines that the termination of the 2020 Franchise
Agreement with Key Disposal & Recycling, Inc. is in the public interest.
NOW THEREFORE, the City Council of the City of Newport Beach ordains as
follows:
Section 1: The 2020 Franchise Agreement with Key Disposal & Recycling, Inc.
is hereby terminated.
Section 2: The recitals provided in this ordinance are true and correct and are
incorporated into the substantive portion of this ordinance.
Section 3: If any section, subsection, sentence, clause or phrase of this
ordinance is for any reason held to be invalid or unconstitutional, such decision shall not
affect the validity or constitutionality of the remaining portions of this ordinance. The
City Council hereby declares that it would have passed this ordinance and each section,
subsection, sentence, clause or phrase hereof, irrespective of the fact that any one or
more sections, subsections, sentences, clauses or phrases be declared invalid or
unconstitutional.
Section 4: The City Council finds the introduction and adoption of this
ordinance is not subject to the California Environmental Quality Act ("CEQA") pursuant
to Sections 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable
indirect physical change in the environment) and 15060(c)(3) (the activity is not a
project as defined in Section 15378) of the CEQA Guidelines, California Code of
Regulations, Title 14, Division 6, Chapter 3, because it has no potential for resulting in
physical change to the environment, directly or indirectly.
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Ordinance No. 2024-14
Page 4 of 4
Section 5: The Mayor shall sign and the City Clerk shall attest to the passage
of this ordinance. The City Clerk shall cause the ordinance, or a summary thereof, to be
published pursuant to City Charter Section 414. This ordinance shall be effective thirty
(30) calendar days after its adoption.
This ordinance was introduced at a regular meeting of the City Council of the City
of Newport Beach held on the 28th day of May, 2024, and adopted on the 11th day of
June, 2024, by the following vote, to -wit:
AYES:
NAYS:
ABSENT:
WILL O'NEILL, MAYOR
/_1i1*16
LEILANI I. BROWN, CITY CLERK
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
-A� t__
AAR C. HARP, CI ATTORNEY
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Attachment B
CITY OF NEWPORT BEACH
FOR,'%
John Katangian, President
Key Disposal & Recycling, Inc.
5202 Industry Avenue
Pico Rivera, CA 90660
592 Superior Avenue
Newport Beach, California 92663
949 644-3055 1 949 650-0747 FAX
newportheachca.gov/municipaloperations
March 8, 2024
RE: Notice of Intent to Terminate Non -Exclusive Franchise Agreement for
Commercial Solid Waste between the City of Newport Beach and Key Disposal &
Recycling, Inc.
Dear Mr. Katangian:
You are hereby notified pursuant to Section 12.63.140(A) (Termination) of the Newport
Beach Municipal Code (NBMC) and Section 23 (Termination) of the Non -Exclusive
Franchise Agreement between the City of Newport Beach and Key Disposal & Recycling,
Inc. for Commercial Solid Waste Handling Services (Agreement), effective since August
3, 2023, that on March 26, 2024 at 5:00 p.m. in the Newport Beach City Council
Chambers located at 100 Civic Center Drive, Newport Beach, CA 92660, the Newport
Beach City Council will consider termination of the Agreement for the 10 deficiencies
pursuant to the Agreement and outlined in the Notice of Default rendered to Key Disposal
& Recycling, Inc. on February 26, 2024, as well as the firm's failure to correct and/or show
progress on these deficiencies:
1. Pursuant to Sections 6.A, 12.A & C and 13.A & C, Key Disposal & Recycling, Inc.
failed to demonstrate significant progress on State -mandated waste diversion
requirements pertaining to organic and recyclable waste, which was brought to the
firm's attention in September 2023 and given a CalRecycle-issued deadline of
December 31, 2023 in accordance with our Corrective Action Plan (CAP). Moreover,
the City also issued a corrective deadline of showing Exhibit E progress by October 31,
2023.
2. Pursuant to Sections 8.B&D, 12.A&C, 13.A&C and 18.C.4, Key Disposal &
Recycling, Inc, failed to provide the City with requested quarterly dcliverables,
specifically details related to trucks that were to collect organic material. This
information was requested January 10, 2024, and given a corrective deadline of January
31, 2024.
3. Pursuant to Section 16.C, Key Disposal & Recycling, Inc. failed to furnish required
monthly Tier 1 and Tier 2 reporting in a timely manner for the months of January,
March, April, May and October 2023.
4. Pursuant to Section 16.A, Key Disposal & Recycling, Inc. failed to submit accurate
monthly reporting, as hauler did not log information for all of its disposal locations in
its July 2023 monthly report submission per verification of City records. The City
notified the hauler of this discrepancy on September 22, 2023, and requested a revised
report submission that has not been received.
5. Pursuant to Section 16.A, Key Disposal & Recycling, Inc. again failed to submit
accurate monthly reporting for December 2023, as hauler did not completely log
reportable information. During the January quarterly meeting, hauler indicated that two
65-gallon organics carts were implemented; however, the account list and service
volume were incorrect and disposal location was omitted from the December report.
6. Pursuant to Exhibit D, Key Disposal & Recycling, Inc. has failed to furnish the City
with complete and compliant insurance information following January 2024. Insurance
compliance was maintained between July 2023 and January 2024. The City had
previously worked with hauler to gain compliance between March 2022 and July 2023.
Moreover, upon receipt of the Notice of Termination
Section 23(B) of the Agreement authorizes termination by the City if the franchisee has
defaulted in the performance of any obligation of the agreement. Additionally, NBMC
Section 12.63.140(D) authorizes the City Council to terminate the Agreement, after
providing notice and a hearing to the franchisee, if the City Council finds, in pertinent part
that, " jt]he franchisee has failed to comply with, or to do anything required of the
franchisee by this chapter, ... including, but without limitation, ... file required reports or
has violated any provision of the franchise agreement ... "
Thus, Key Disposal & Recycling, Inc. is hereby notified that the City Council will consider
termination of the Agreement at the time and location indicated above. You or a
representative may appear at the hearing and present any evidence as to why the Agreement
should not be terminated. Per NBMC Section 12.63.140, a decision will be rendered no
later than 60 days after the City Council hearing and you will receive written notice of the
decision.
Please be advised that if the Agreement is terminated, operating within the City without a
valid franchise is a violation of the NBMC.
Sincerely,.>
/Jahn Salazar
Acting Deputy Public Works Director
Municipal Operations Division
Attachment A: Notice of Default - February 26, 2024
ATTACHMENT C
Franchise Agreement - Key Disposal & Recycling, Inc.
Available separately due to bulk at:
https://ecros.newportbeachca.gov/WEB/DocView.aspx?id=2900401 &dbid =0&repo=CNB
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