HomeMy WebLinkAbout08 - Amendment /esidential Solid Waste Collection & Recycling Contract (Contract No. 8823-1)Q �EwPpRT
CITY OF
s NEWPORT BEACH
`q44:09 City Council Staff Report
January 28, 2025
Agenda Item No. 8
TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL
FROM: 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: Approval of Amendment No. One to Residential Solid Waste
Collection & Recycling Contract (Contract No. 8823-1) with CR&R
Inc. — Addition of 5% De -Escalation Maximum
ABSTRACT -
Staff recommends approval of Amendment No. One to the agreement with CR&R
Incorporated (CR&R) for residential refuse collection, which would limit potential annual
rate decreases to mirror the current agreement's limit on potential annual rate increases.
The agreement with CR&R includes a multi -factor annual rate adjustment formula and
limits total annual increases to 5%, but it has no language limiting potential decreases.
This historically presented no issues, and the City of Newport Beach benefitted
significantly from the escalation cap the previous two years. An unusual combination of
factors during the previous year, however, would result in a prescribed 7% rate decrease
for Fiscal Year 2024-25. In the interest of maintaining a fair relationship with its contractual
partner, staff proposes a reciprocal 5% limit on annual decreases, with retroactive
application to July 1, 2024.
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) Approval of Amendment No. One to the Residential Solid Waste Collection &
Recycling Agreement with CR&R Inc. to add a 5% rate de-escalation maximum.
DISCUSSION:
The proposed amendment would limit potential annual rate decreases to 5% to mirror the
contract's language limiting maximum annual rate increases. No other changes would be
made. This decrease would be applied retroactively to the beginning of FY 2024-25,
July 1, 2024.
The rate adjustment formula in the contract is calculated based on changes to a weighted
combination of fuel costs, disposal costs, and all other costs over the previous year.
8-1
Approval of Amendment No. One to Residential Solid Waste Collection
and Recycling Contract (Contract No. 8823-1) with CR&R Inc.
January 28, 2025
Page 2
Each cost category is tied to a particular market index, and total annual rate increases
are capped at 5%. This provided significant benefits to the City during the first two years
of the agreement as the Consumer Price Index was high due to the recent period of
inflation. Without this limit, the annual contract rate paid by the City would have increased
by 9.4% in FY 2022-23, and 10.1 % in FY 2023-24.
However, an unusual combination of factors, primarily associated with fuel costs, during
the previous year resulted in a prescribed 7% annual rate decrease for FY 2024-25.
Concerned about the rate decrease, CR&R provided data and requested that the formula
fuel component be removed, or for the rate to be frozen to equal last year's rate. Working
with the contractor, and understanding that it has a lot of fixed costs and that it would be
atypical for a contract to markedly decrease, staff agreed to look into a potential remedy.
After much discussion, staff responded that it would be inappropriate to provide the
contractual relief CR&R requested as the prescribed rate formula should also allow the
City to share in any associated cost savings, such as lower fuel costs. However, staff did
feel that since the City caps cost increases, it would be fair to consider including the same
cap on decreases.
FISCAL IMPACT:
The adopted operating budget includes sufficient funding for this amendment. Costs for
this agreement are expensed to the General Fund in the Public Works Department,
0108051-851006. If this Amendment No. One is approved, the 5% decrease for this billing
year will lower costs to the City by approximately $436,000 for FY 2024-25 relative to last
year's FY 2023-24 cost.
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).
ATTACHMENT:
Attachment A — Amendment No. One to Residential Solid Waste Collection & Recycling
Contract
8-2
ATTACHMENT A
AMENDMENT NO. ONE TO
AGREEMENT FOR THE COLLECTION, TRANSPORTATION, PROCESSING AND
DIVERSION OF RESIDENTIAL RECYCLABLE MATERIALS, FOOD SCRAPS,
GREEN WASTE AND COLLECTION, TRANSPORTATION AND DISPOSAL OF
MUNICIPAL SOLID WASTE BETWEEN THE CITY OF NEWPORT BEACH AND
CR&R, INCORPORATED
THIS AMENDMENT NO. ONE TO AGREEMENT FOR THE COLLECTION,
TRANSPORTATION, PROCESSING AND DIVERSION OF RESIDENTIAL
RECYCLABLE MATERIALS, FOOD SCRAPS, GREEN WASTE AND OTHER
MATERIALS AND FOR THE COLLECTION, TRANSPORTATION AND DISPOSAL OF
RESIDENTIAL MUNICIPAL SOLID WASTE ("Amendment No. One") is made and
entered into as of this 28th day of January, 2025 ("Effective Date"), by and between the
CITY OF NEWPORT BEACH, a California municipal corporation and charter city ("City"),
and CR&R, INCORPORATED, a California corporation ("Contractor"), whose address is
11292 Western Avenue, Stanton, California 90680, and is made with reference to the
following:
RECITALS
A. On January 11, 2022, City and Contractor entered into an Agreement
("Agreement") for the Collection, Transportation, Processing and Diversion of
Residential Recyclable Materials, Food Scraps, Green Waste and Other Materials
and for the Collection, Transportation and Disposal of Residential Municipal Solid
Waste ("Project").
B. The parties desire to enter into this Amendment No. One to amend Attachment J
to add de-escalation language related to Contractor compensation and update the
Notices section.
NOW, THEREFORE, it is mutually agreed by and between the undersigned parties
as follows:
1. ANNUAL CONTRACTOR COMPENSATION ADJUSTMENTS
Attachment J to the Agreement shall be deleted in its entirety and replaced with
Attachment J, attached hereto and incorporated herein by reference. Any reference to
Attachment J in the Agreement shall hereafter refer to Attachment J attached hereto.
2. NOTICE
Section 14.06 of the Agreement is amended in its entirety and replaced with the
following:
All notices, demands, requests, proposals, approvals, consents and other
communications which this Agreement requires, authorizes or contemplates shall, except
as provided in Section 13.02, be in writing and shall either be personally delivered to a
representative of the parties at the address below or be deposited in the United States
CR&R, Incorporated Page 1 8.3
mail, first class postage prepaid (certified mail, return receipt requested), addressed as
follows:
If to City: Public Works Director
City of Newport Beach
100 Civic Center Drive
Newport Beach, California 92660
with a copy to the Newport Beach City Attorney at the
same address
If to Contractor: Clifford Ronnenberg
Chief Executive Officer
CR&R Incorporated
11292 Western Avenue
Stanton, California 90680
3. INTEGRATED CONTRACT
Except as expressly modified herein, all other provisions, terms, and covenants
set forth in the Agreement shall remain unchanged and shall be in full force and effect.
[SIGNATURES ON NEXT PAGE]
CR&R, Incorporated Page 2 8.4
IN WITNESS WHEREOF, the parties have caused this Amendment No. One to be
executed on the dates written below.
APPROVED AS TO FORM:
CITY ATTORNEY'S OFFICE
Date: Q 1 1 r!5 1 2:
By:
Aaro . Harp
City Attorney
ATTEST:
Date:
By:
Leilani 1. Brown
City Clerk
CITY OF NEWPORT BEACH,
a California municipal corporation
Date:
By:
Joe Stapleton
Mayor
CONTRACTOR: CR&R,
California corporation
Date:
By:
Clifford Ronnenberg
Chief Executive Officer
Date:
BY:
David Ronnenberg
Secretary
[END OF SIGNATURES]
Attachment: Attachment J — Annual Compensation Adjustments
Incorporated, a
CR&R, Incorporated Page 3 8_5
ATTACHMENT J
Annual Contractor Compensation Adjustments
The annual adjustments to Contractor's compensation shall be completed as
described in this Attachment J. The costs in Attachment D-1 shall be effective from
January 15, 2022 through June 30, 2022. The first annual adjustment shall be
performed to calculate Contractor's costs for the period July 1, 2022 through June
30, 2023. The costs in Attachment D-1 shall be adjusted annually each July 1
throughout the Term of the Agreement.
1. General Calculation Procedures
A. Rounding Protocol
The following rounding protocol shall be used in the calculations described
herein: For the calculation of the percentage change in all indexes described in
this Attachment J, the calculations shall be rounded to one decimal place.
(Example: 2.3% or 0.2%). For calculation of all costs and cost components
described in this Attachment J, the calculations shall be rounded to two decimal
places. (Example: $2.39).
The numbers 1,2,3, and 4 in all calculations shall be rounded down. (Example: If
the result of the calculation were 7.344, the final figure would be 7.3.) The numbers
5, 6, 7, 8 and 9 in all calculations shall be rounded up. (Example: If the result of
the calculation were $3.468, the final figure would be $3.47).
B. Changes to Indices Used
In the event that the standard reference base period for any index used herein is
revised, the calculations shall be performed using the officially released data
published by the Bureau of Labor Statistics.
If an index used herein is discontinued, the successor index with -which it is
replaced, shall be used for subsequent calculations. If no successor index is
identified by the Bureau of Labor Statistics, the government index which is most
comparable shall be used.
C. Use of Final CPI Index and "Preliminary" PPI Index Issued by Bureau of
Labor Statistics
The annual adjustments will be made in late spring of each year of the Term. The
Consumer Price Index ("CPI") listed in Subpart 2 below is made available by the
Bureau of Labor Statistics within 15 days after the close of each month. Therefore,
the CPI for the twelve (12) month period described herein, will be available in time
to complete the annual adjustment calculation prior to the July 1 start date for the
adjusted compensation amounts. (Note: for the CPI there is no "Preliminary"
version, only the "final" version issued by the Bureau of Labor Statistics.)
Attachment J Page 9 of 9
ATTACHMENT J
Annual Contractor Compensation Adjustments
The Producer Price Index ("PPI") referred to herein, is made available by the
Bureau of Labor Statistics on a more lagging basis. The "Final" version of the PPI
Index for the period through December of any year, will not be available in time for
the annual adjustment calculation to be completed prior to the July 1 start date for
the adjusted compensation amounts. Therefore, the parties agree the
"Preliminary" version of the PPI Index listed below shall be used in the calculation
each year.
2. Annual Adjustment Method Including Disposal Cost
Adjustment Method for Contractor Compensation in
Attachment D-1
A. Cost Components for Compensation Adjustment Indices
Each of the Contractor's line item costs listed in Attachment D-1 consist of the
following cost component categories and are weighted as shown in the table
below. Each cost component shall be adjusted by the change in the corresponding
index below.
percent of Cost
Cost Category
(Weighting)
Notes
Actual tip fee at the Orange County Landfill
Disposal
28%
System as of the effective date of the adjustment.
Producer Price Index WPU 0531, Not Seasonally
Fuel
5%
Adjusted, Fuels and related products and power,
natural gas*.
Consumer Price Index for All items less food and
energy in Los Angeles -Long Beach -Anaheim, CA,
All Other Costs
67%
all urban consumers, not seasonally adjusted
(CUURS49ASAOLIE), or 2.5%, whichever is
lower**
Total
100%
Total adjustment not to exceed 5% increase or
decrease*** in any year
*If an index is discontinued, an alternate index (as described above) must be
approved by City.
**This index may be accessed here: hftps://data.bis.gov/timeseries/CUURS49ASAO
***Effective as of July 1, 2024, in the event Contractor's annual adjustment
calculation is negative, the total adjustment to Contractor's compensation shall
not exceed a 5% decrease for that year.
Attachment J
Page 2 of 9
8-7
ATTACHMENT J
Annual Contractor Compensation Adjustments
B. Calculation Methodology.
Contractor's compensation in Attachment D-1 will be adjusted using the
component weightings identified in "A" above. The adjustment shall be calculated
as follows:
Step One. Calculate the percentage increase or decrease in each index listed
above. The increase or decrease in the published index for fuel (PPI), and all other
(CPI) will be the change in the average annual published index between the
calendar year ended the December prior to the July 1 compensation adjustment
date and the prior twelve (12) month period (see calculation example below),
unless the change in the CPI exceeds a two and one-half percent (2.5%) increase.
In such event, the costs labeled "All Other Costs" in the table above shall be
adjusted by two and one-half percent (2.5%). The increase or decrease in the
Disposal component shall be the change in the actual Disposal tip fee charged by
the County of Orange as of July 1 of the year of the adjustment (pursuant to the
City's landfill contract with the County in Attachment "I").
Step Two. Cost components as a percentage of total costs for the first
compensation adjustment are provided in the table above. The percentage of each
Cost Component for each subsequent annual adjustment (beginning with the
adjustment to become effective July 1, 2023) shall be as calculated in Step Four
described herein. For Step Two of each subsequent annual adjustment, use the
percentage for each Cost Component recalculated in Step Four during the prior
year's compensation adjustment.
Multiply the percentage changes for each compensation adjustment component
by that component's weighting and add these resulting percentages together to
obtain the total weighted change to the compensation.
Step Three. Multiply the total weighted percent change from Step Two by the
existing compensation to calculate the increase or decrease to the maximum
compensation. Add the compensation increase or decrease to the existing
compensation to arrive at the newly adjusted compensation.
Step Four. Recalculate the weightings for the following year based upon these
changes so that the sum of the three values equals 100%. To do so, divide the
adjusted cost component weightings by the total sum of the three cost component
weighting values so that the cost components are reweighed to equal 100%.
Attachment J Page 3 of 9
S
ATTACHMENT J
Annual Contractor Compensation Adjustments
Sample Calculations
Note: The costs and numbers in the sample calculations in this Attachment J are
for example only and do not reflect the actual costs or adjustments that will be
made.
Step 1: Calculate Percentage Change in Indices
A
B
C
Adjustment
Percent Change in Index (Column
Index
Old Index Value
New Index Value
B/Column A = "X"). X/Column A =
Row
Factor
% change (round to 1 decimal)
1
Disposal
(1)
$36.09
$37.00
2.5%
2
Fuel
(2)
67.00
70.00
4.5%
3
All Other
(3)
282.388
286.680
1.5%
Step 2: Determine Components
D
E
F
Cost Factor
Total
Category
Percent
Weighted
Adjustment Factor
Index
Weighted as a %
Change in
Change
of Component
Index from
(Columns D x
Row
Total (4)
Column (C)
E)
4
Disposal
(1)
28%
2.5%
0.7%
5
Fuel
(2)
6%
4.5%
0.3%
6
All Other
(3)
66%
1.5%
1.0%
7
Total (See Footnote 5)
100%
2.094.
Attachment J
Page 4 of 9
.,
ATTACHMENT
Annual Contractor Compensation Adjustments
Step Three: Apply Percentage Change to Costs
G
H
I
J
Cost
Total
Increase
Adjusted
Weighted
or
Cost
Row
Cost Categories
Current
Percentage
Decrease
(Column
Cost (5)
Change
(Column
G +
(from
G x
Column I)
Column F)
Column
H)
8
Customer collection - City
$333,846
2.0%
$6,677
$340,523
9
Bulky Item Collection/month
$549
2.0%
$11
$560
10
Sharps Collection/month
$2,285
2.0%
$46
$2 331
11
HHW Door-to-Door/month
$11,431
2.0%
$229
$11,660
12
Emergency Collection Cost/hour
$138
2.0%
$3
$141
13
Customer collection -- Newport Coast
$63,416
2.0%
$1,268
$64,684
14
Enhanced SB 1383-mandated programs
$239,557
2.0%
$4,791
$244,348
15
40-yd Load of Bulk Compost provided by contractor
$175.00
2.0%
$3.50
$178.50
16
1 pallet (48 bags) of compost provided by Contractor
$98.05
2.0%
$1.96
$100.01
24 pallet load of bagged compost provided by Contractor (48
$2353.26
2.0%
$47.07
$2,400.33
17
bags/pallet)
18
Hourly Cost Per Additional Temporary Customer Service Representative
$35.00
2.0%
$0.70
$35.70
Collection of Non -containerized Materials During Grace Period per
$2.47
°
2.0 /o
$0.05
$2.52
19
incident
Extra MSW Cart Charge paid by City during Extra Service Charge Delay
$6.09
2.0/o °
$0.12
$6.21
20
Period
Extra Recycling Cart Charge paid by City during Extra Service Charge
$3.41
2.0%
$0.07
$3.48
21
Delay Period
Extra Food Scrap/Green Waste Cart Charge paid by City during Extra
$4.11
2.0%
$0.08
$4.19
22
Service Charge Delay Period
Standard Valet Cart Service Charge paid by City during Extra Service
$8.30
°
2.0 /o
$0.17
$8.47
23
Charge Delay Period
Premium Valet Cart Service Charge paid by City during Extra Service
$27.68
°
2.0 /°
$0.55
$28.23
24
Charge Delay Period
Attachment J
Page 5 of 9
L-
ATTACHMENT J
Annual Contractor Compensation Adjustments
atep Four: K
-weight Gost
Components
L
M
N
O
K
Adjusted
Change In
Cost
Cost Components
Cost
Percentage
Cost
Component
Reweighed to
Adjustment
Index
Component
Change in
Components
Weightings
Equal 100%
Factor
(Column D)
Index
(Column K x
{Column K
{Column N Row
{Column E)
Column L)
f Column
divided by Column
Row
M)
N Total)
25
Disposal
(1)
28.0%
2.5%
0.7%
28.7%
28.1%
26
Fuel
(2)
6.0%
4.5%
0.3%
6.3%
6.2%
27
All Other
(3)
66.0%
1.5%
1.0%
67.0%
65.7%
28
Total
100.0%
102.0%
100.0%
(1) Disposal charge at the Orange County Landfill system per agreement in Attachment 1
(2) Producer Price Index WPU0531, not seasonally adjusted, Fuels and related products and power, natural
gas -average annual change
(3) Consumer Price Index for All items less food and energy in Los Angeles -Long Beach -Anaheim, CA, all
urban consumers, not seasonally adjusted (CUURS49ASAOLIE) average annual change limited to 2.5% per
year.
(4) First year based on Attachment D-1. After the first adjustment, this column comes from Column 1 of the
previous year's cost adjustment
(5) Example shown. Adjustment applies to all applicable compensation categories.
Attachment J
Page 6 of 9
8-11
ATTACHMENT J
Annual Contractor Compensation Adjustments
3. Example Cost Adjustment Formula — Calculation for
Average Annual Change in Published Price Indices
Cost adjustment indices for fuel (PPI), and "all other" are calculated using the
average annual change in the published index (with " all other" subject .to a 2.5%
per year increase cap) as demonstrated in the example below, measured for the
twelve (12) months ended the December before each compensation adjustment,
as compared to the twelve months ended the prior December. The Bureau of Labor
Statistics publishes these monthly indices.
The following example is for the Consumer Price Index for All items less food and
energy in Los Angeles -Long Beach -Anaheim, CA, all urban consumers, not
seasonally adjusted (CUURS49ASAOL1 E) that is used to adjust the "all other" cost
components. if a cost adjustment based on this CPI index were to be implemented
as of July 1, 2021, the twelve (12) month average annual index for the period
ended December 2020 of 282.388 would have been the "New Index Value" to be
used in Column B of the example cost adjustment formulas in this Attachment J,
and the twelve (12) month average annual index for the period .ended December
2019 of 277.102 would have been the " Old Index Value" in Column A. This would
have resulted in a 1.9% increase to the "all other" cost components in Column C.
All items less food and energy in Los Angeles -Long Beach -Anaheim, CA,
all urban consumers, not seasonally adjusted (CUURS49ASAOL1 E)
Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual
2019 273.579 273.716 274.954 276,185 276.421 277.384 277.590 278.131 278.935 279.732 279.781 278.812 277.102
2020 281.022 282.124 280.815 280,885 281.340 282.329 283.839 283.752 282.712 283.055 283.873 282.907 282.388
Attachment J
Page 7 of 9
8-12
ATTACHMENT J
Annual Contractor Compensation Adjustments
4. Annual Adjustment Method For Prices Contractor Direct -
Bills to Customers for Extra Services in Attachment D-2
A. Timing of Adjustment of Prices in Attachment D-2.
The prices in Attachment D-2 shall be in effect from January 15, 2022 through June
30, 2022. Each of the prices listed in Attachment D-2 shall be adjusted to become
effective July 1, 2022 and shall also be adjusted each July 1 thereafter, for the
duration of the Term of the Agreement as follows.
B. Calculation Methodology.
Multiply each price in Attachment D-2 by the total weighted average change
calculated in Step Two of Section 1 above. (See Table titled "Step Two —
Determine Components" Row 7 of Column "F".
Sample Calculation:
Premium Valet Service — Initial Price as of January 15, 2022:
$27.68 per month
$27.68 x 2.0% = $0.55 + $27.68 = $28.23 per month (new Price)
5. Adjustment Method For Monthly Cost Per Residence (Only
Used For Calculation in Attachment Z and Only if Directed
by City)
The parties have determined and agreed that the monthly cost per residence to
receive the basic level of Residential service from Contractor is $24.08 as of the
Effective Date. For purposes of the calculations described in Attachment Z, the
annual adjustment is applied to the Monthly Cost per Residence as follows:
A. Timing of Adjustment of Per Residence Collection Cost
The "Monthly Cost Per Residence" of $24.08 (shown in Attachment Z) shall be in
effect from January 15, 2022 through June 30, 2022. This cost shall be adjusted
to become effective July 1, 2022 and shall also be adjusted each July 1 thereafter,
for the duration of the Term of the Agreement as follows. This adjusted cost is MI
used for City -directed addition of specific groups of Residences and/or a
cumulative increase of 40 or more Certificates of Occupancy issued by the City for
a newly developed parcel pursuant to Section 12.07 and Attachment Z of the
Agreement, and for no other purpose.
Attachment J Page S of 9
8-13
ATTACHMENT J
Annual Contractor Compensation Adjustments
B. Calculation Methodology.
Multiply the "Monthly Cost Per Residence" in Attachment Z by the total weighted
average change calculated in Step Two of Section 1 above.
Sample Calculation:
"Monthly Cost Per Residence" — Initial amount as of the Effective Date of the
Agreement: $24.08/month
$24.08 x 2.0% = $0.48 + $24.08 = $24.56 per month (new Monthly Cost Per
Residence)
Attachment J
Page 9 of 9