The City's current contract with CWD has a term from June 1, 2014, through May 31, 2019.  In accordance with the conditions in the current contract, CWD proposed to renew the contract within one year of its expiration. CWD provided two letters concerning contract extension that are attached to this agenda form as Attachments 1 and 2.

 
CWD's Residential Proposal 

The following is a summary of CWD's extension proposal as it affects residential rates and services. This assumes a contract extension date of November 1, 2018 with a duration through May 31, 2024. 

• Current payments to CWD for residential services that were effective in our most recent Waste Services Rate Resolution dated June 1, 2018, remain in effect upon contract extension.
• The current provisions for residential Consumer Price Index (CPI) cost adjustments considered annually by the City will continue in effect.  Allen's annual Waste Services Rate Resolution that includes the CPI increase becomes effective on June 1^st annually and this will continue. As part of the contract extension, CWD will be limited to no more than a five percent annual increase in residential CPI. 
• CWD offered to begin a cost-free program to wash residential trash and recycle carts once per year on an as-requested basis by customers.  In lieu of this, CWD offered to decrease their residential rate by $0.25 per home per month effective June 1, 2019, in their second proposal letter.  This would be an annual savings of $84,000 to the expenses of the Waste Services Fund.  The $0.25 rate decrease is the option that is incorporated into the contract rather than the cart wash program. 
• CWD will increase its support for City clean up campaigns by increasing its number of open top containers made available free of charge from 24 to 27 per year; and increase the total of free hauls for these containers from 70 to 76 per year.  
• CWD will provide the enhanced bulk waste services for the two neighborhoods where they currently provide this service under Contract Amendment No. 2 at no charge for the duration of the extended contract.  The annual cost avoidance of this provision is about $24,000 per year. 
• CWD offers to begin weekly residential recycle collections for a monthly cost of $1.71 per home.  This is an increased annual contract cost of about $574,000.  The $1.71 cost will increase by the annual CPI cost adjustments in the same way CWD's basic residential rates are adjusted.  The City may begin weekly recycling at any time during the contract period by providing 8-months advance notice in order for CWD to obtain new equipment.

Residential Rate Comparison

The competitiveness of our customer charges is always a concern to the City.  Due to large variations in landfill fees, municipal franchise fees, and waste system operational characteristics; it is difficult to compare customer charges except between similarly situated cities.  For our purposes, comparing the five North Texas Municipal Water District solid waste member cities (Allen, McKinney, Frisco, Plano, and Richardson) allows a fair comparison because we operate with the same landfill disposal fees, use the same transfer stations, have the same landfill location, and operate in the same transportation environment.

Table 1 below presents a rate comparison between the five NTMWD solid waste member cities. 

Frisco, McKinney, and Richardson presently collect recycling weekly.  Frisco and McKinney recycle using 95-gallon poly carts.  However, Richardson's program is a "blue bag" program whereby the resident sets out blue plastic bags of recycling materials.  Allen and Plano recycle using 95-gallon poly carts collected every other week.

Under the column titled "Adjust Frisco Jan 2019" the Table includes an anticipated residential cost increase in the City of Frisco.

The column titled "Adjust Allen - Alleys and Litter" subtracts from Allen's total monthly cost of supporting alley maintenance and Citywide litter collection on public property.  In FY19, these two programs represent a $2.21 cost per household per month.

Table 1- NTMWD Solid Waste Member City Residential Cost Comparison

Residential Cost Comparison Summary 

Both now and after Frisco's anticipated January 2019 rate increase, Allen residential costs are in the middle of the five cities.   Adjustment of costs based on two programs our Solid Waste Fund supports, litter collection and alley repairs, shows that Allen's residential rates are very competitive.

CWD's Commercial Proposal

• In May 2013, the CWD contract was amended to provide for a Variable Fuel Adjustment Fee, or VFAF.   The VFAF was introduced to maintain fair compensation to CWD despite the then ongoing dramatic rise in diesel fuel prices.  The contract in 2013 included a VFAF, but not any commercial CPI increase factor.  In their commercial extension proposal, CWD requests to drop the VFAF provisions of the contract based upon stabilization of fuel costs and the fact that CWD has converted their collection trucks to an all compressed natural gas fleet and are thus not sensitive to the changes in diesel fuel prices.
• In light of cancellation of VFAF, CWD has requested the implementation of a commercial CPI increase similar to the current residential contract provision.  The first CPI increase under their proposal would be on June 1, 2020.  CPI increases are accepted provisions in waste services contracts.  However, as part of the contract extension, CWD will be limited to no more than a five percent annual increase in commercial CPI.
• CWD has offered to help encourage commercial recycling by supporting the expansion of commercial recycling information appearing in the Waste Services Rate Resolution.  Attachment 3 to this agenda form shows the current and proposed narratives concerning commercial recycling.  The proposed narrative clearly shows the savings per month that may be achieved by recycling over disposing of recyclables as trash.
• CWD has agreed to document in the contract extension their "Customer Product Payment" worksheet that is used to calculate large volume commercial customer rebates for sorted recycling.  Attachment 4 to this agenda form shows the sample Customer Product Payment worksheet.  The worksheet shows that the large commercial recycling customers will receive from 40 to 85 percent of the current value of recycled commodities as a rebate for recycling program participation.
• CWD has offered to implement a 4 percent reduction in charges related to temporary open top construction containers in order to make their current rates for this service more competitive.

Commercial Comparison

To assure the payments made to CWD are competitive as part of contract extension, staff again compared our commercial rates to those of the other four NTMWD solid waste system member cities.  One key factor is normalizing commercial rate comparisons based on the variance in City franchise fee payments between NTMWD solid waste system member cities.  The table below compares franchise fees between the five member cities.  In the commercial rate comparisons provided below, the franchise fees are removed to allow an appropriate rate comparison.

 Table 2 - Franchise Fee Comparison Between NTMWD Solid Waste System Member Cities

The most prevalent type of commercial containers serviced in Allen are eight cubic yard (8CY) front load containers.  Allen has about 404 commercial accounts using 8CY front load containers.  Charges for this type of container account for about 58 percent of CWD's billed commercial charges.  For comparison purposes, staff elected to use 8CY front loads that CWD collects three times a week in Allen to the same services in the other four cities.  This is a typical collection frequency for these containers.  The following table presents the outcome of the analysis.  The cost difference shown between the "Billed Amount" column and the "Adjust Cost for City's Franchise Fee" column reflects an adjustment in cost due to the additional charges the City's franchise fees cause in Allen, Plano, and McKinney.  Allen ranks as second lowest City and we are considerably below the cost of the two highest cost cities.

Since the rate tables for all sizes of front load containers are developed using the same methodology, Allen's charges should be competitive across all front load container sizes and collection intervals.

Table 3 - 8CY Front Load Cost Comparison

Commercial compactor containers like those used at big box stores, grocery stores, and some multi-family complexes account for 32% of CWD's commercial billings. There are currently 38 commercial accounts using 35 cubic yard (35CY) compactors. For comparison purposes, staff elected to compare the cost of service for one collection of a 35CY compactor container. You can see in Table 4 below that for this particular billed container and collection frequency, after the franchise fee adjustment, Allen's charge is the lowest of the five NTMWD member cities.

Table 4 - 35CY Compactor Containers

The final type of commercial account selected for comparison is thirty cubic yard (30CY) temporary open top containers that are typically used at construction sites.  These containers make up about ten percent of CWD's commercial billings.  These are temporary accounts with the quantity of accounts varying depending on the current construction activity in Allen.  For comparison purposes, staff elected to compare the cost of one collection of a 30CY open top.  These containers are challenging to manage, as they are temporary accounts at construction sites where contractors are trying to minimize all costs for construction and are frequently overloaded by being filled with dense materials like concrete, brick, and dirt.  The cost for this service shows Allen's charges as second highest when adjusted for franchise fees.  Because of this, CWD offered to decrease 30CY open top charges by four percent on November 1, 2018 as part of contract extension.  The "Adjust - 4% in Allen" column reflects this cost reduction.

Table 5 - 30CY Open Top Roll Off Containers

Cost Comparison Summary

• The comparison of residential rates reflects the fact that Allen currently provides residential waste services at a reasonable cost compared to other NTMWD solid waste member cities.  Our contractor is not "over-earning" on the payments they receive for providing residential services.
• The comparison of commercial rates reflects the fact that our charges for long-term commercial accounts are very competitive.  These accounts generate 90 percent of commercial billings when adjusted for franchise fees.  The City's charges for temporary open top construction containers are higher than the five city average.  However, these are temporary accounts that present considerably more management challenges than permanent commercial accounts; the higher cost is perhaps justified from this perspective.  In any case, our contractor overall is not "over-earning" on the payments they receive for providing commercial services.

CWD Offer Summary Analysis

• Over the years, the City and CWD have developed a very strong and professional partnership.  The contractor is very responsive to issues and handles situations in a rapid and professional manner.  Contract extension assures that the very effective existing complaint management process that CWD and the City manage remains in place.

• CWD consistently supports City cleanup and neighborhood integrity initiatives, Keep Allen Beautiful (Great American Cleanup, Texas Recycles Day, and Materials Recovery Facility (MRF) Tours), the United Way Campaign, contributes $35,000 annually to fund environmental education and supports Allen USA.    
• Contract extension avoids the change out of over 60,000 trash and recycling poly carts.
• Contract extension precludes potential collection route and collection day changes that would be extremely disruptive to residents.
• Contract extension obviates the need to spend the $50,000 currently allocated in the FY19 Waste Services budget to secure professional services to assist in conducting a waste services selection process.

New Contract

Attached is the CWD contract extension for waste services. The contact takes effect on November 1, 2018. It is a five-year extension of the current contract that ends May 31, 2019, to run through May 31, 2024.   The contract amendment was prepared consistent with the provisions of CWD's extension proposal with the exception that the City has elected to accept a $0.25 residential rate reduction on June 1, 2019 instead of accepting a cart wash program.

The Solid Waste Fund is an enterprise fund that operates without General Fund support. Staff projects the fund to end FY18 with $3.5 million in fund reserves that provide about 188 days of operating reserve. Maintenance of a healthy fund balance within the guideline 90 to 120 day range should not be affected by the waste services contract extension.

Staff recommends that City Council authorize the City Manager to extend the current contract term for Solid Waste Collection, Disposal and Recycling Services with Community Waste Disposal for five years.

I make a motion to authorize the City Manager to extend the current contract term for Solid Waste Collection, Disposal and Recycling Services with Community Waste Disposal for five years.