Butte County

R3 was recently engaged by Butte County (County) to assist with solid waste planning efforts for the County’s Enterprise Fund and Neal Road Recycling and Waste Facility (NRRWF). R3 is providing a variety of services including:

  • Reviewing and confirming the Interim Year Rate Applications for the County’s three haulers: Waste Management, Recology, and Northern Waste and Recycling;
  • Assisting the County with SB 1383 Capacity Planning by projecting organic waste tons disposed by the County and its incorporated jurisdictions as well as projecting the required additional edible food recovery capacity;
  • Providing the County with draft franchise agreement language for all three haulers to incorporate compliance with AB 1826 & SB 1383, and assisting in contract negotiations with the haulers;
  • Conducting Base Year (Detailed) Rate Reviews for each of the County’s three haulers;
  • Performing a rate study and creating a rate model for the County’s Enterprise Fund; projecting different rate adjustment scenarios over 20 years to ensure revenues can accommodate required expenses;
  • Creating draft ordinance language for the County to comply with SB 1383; and
  • Performing on-call work, as needed, including CalRecycle regulatory assistance, community engagement assistance, grant preparation assistance, and local task force assistance.
Siskiyou County

R3 was engaged by Siskiyou County (County) Department of Solid Waste (Department) to assist with an Evaluation of the County’s existing solid waste system and the development of a Solid Waste Management Plan (Plan) in support of determining future disposal and recycling contracting methods that increase efficiencies and reduce costs.

R3’s objectives for this engagement involved conducting the following primary three tasks:

  • Formulating a specific strategy to extend the County’s existing contracts, and/or to conduct the competitive procurement of the County’s operation services;
  • Conducting a rate comparison and creating a Rate Model to develop a 10-year Rate Adjustment Plan that supports the long-term financial strength of the County’s Sanitation Enterprise Fund; and
  • Reviewing and providing actionable recommendations to enhance the efficiency and effectiveness of the County’s current collection, transfer and disposal systems.

Specifically, R3 reviewed and compared the County’s Transfer Station gate rate to those in similar rural counties, and providing a comparison of the County’s solid waste parcel fee to solid waste parcel fees in other counties in the State (Calaveras, El Dorado, Glenn, Kern, Modoc, Mono, Sierra and Trinity Counties).

R3 assessed the County’s overall solid waste management system to support the identification and realization of opportunities to increase the efficiency and reduce the cost of the Sanitation Enterprise Fund. R3 conducted a SWOT analysis to identify internal Strengths and Weaknesses, and external Opportunities and Threats to the County’s solid waste management system. To accomplish this, R3 worked with County staff on site, touring its facilities and observing its operations in order to comprehensively review the efficiency and effectiveness of the current collection, transfer and disposal systems, and develop meaningful recommendations for improvement.

To support the ongoing management of the Department’s finances, R3 also developed a recommended 10-year Rate Adjustment Plan to enable the County to maintain a positive annual net cash flow for the Sanitation Enterprise Fund, retire its current $6 million debt within a targeted time frame, and fund a new transfer station in Yreka. To do this, R3 created a simple Excel-based Rate Model which can be used to model various gate rate and/or parcel fee adjustments.

San Francisco

Detailed Rate Application Review

R3 assisted the City of San Francisco Public Works Department (SFPWD) with a high-level review of Recology San Francisco’s (Recology) Rate Year 2017 Rate Application. R3’s role included a detailed examination and analysis of the rate adjustment application to determine if Recology’s calculated costs, revenues, and assumptions were reasonable, appropriate and accurate. As part of the review, R3 also evaluated Recology’s proposed changes to the single-family and multi-family rate structure – specifically, changes to the fixed and variable portions of the single-family and multi-family rates, and the associated impact on ratepayers. To assist the SFPWD in determining whether to accept the changes, R3 assessed how the fixed/variable rate structure compared to Recology’s fixed/variable expenses, and developed comparative scenarios for consideration by the SFPWD.

Over the course of this engagement, R3 provided the SFPWD with recommended programmatic changes to achieve higher levels of material diversion from landfill in support of SFPWD’s zero waste goal, and recommended adjustments to operating costs, revenues, and projection assumptions to better represent service area conditions and balance Recology’s needs with the interests of the SFPWD and its ratepayers. Additionally, R3 evaluated a complex change in collection services, which resulted in an increase of 23 collection routes throughout the SFPWD’s service areas and a net increase in the capacity for the collection of diversion waste streams.

Following R3’s verification of the application, the SFPWD successfully adopted Recology’s requested rate adjustment.

Currently, R3 is conducting a review of the reporting requirements outlined in the City and County of San Francisco’s 2017 Director’s report and Recommended Orders on Recology’s 2017 Rate Application. The review consists of comparing assumptions in the 2017 Rate Application to actual performance, reviewing the standardized format for the rate application, proposing changes in the rate-setting methodology and quarterly and annual reports, and assisting staff with developing changes to the application and supporting schedules. R3 has conducted an in-depth analysis of the hauler’s operating ratio, cost of living adjustments, and a variance analysis of projected to actual expenses and revenue to provide future recommendations to staff.

C&D Third-Party Verifications

R3 is currently an approved Third-Party Verifier for the City of San Francisco (City) Department of the Environment, conducting third-party verifications of facilities seeking to receive and process construction and demolitions (C&D) debris generated in the City as required under the Department of the Environment’s C&D Debris Recovery Ordinance. R3’s primary role as a Third-Party Verifier is to conduct on-site facility evaluations of facility recovery rates and verify the operational effectiveness of facilities to meet the City’s minimum 65% recovery rate.

R3‘s Third-Party Verification process typically includes these steps:

  • Engagement letter of third-party verification with the facility;
  • Review of validity of facility’s solid waste facility permits and certifications;
  • Receiving and reviewing 12 months of facility data including summaries, by material type, of facility input and outbound tonnage data (incl. marketed materials, residuals, and materials used as Alternative Daily Cover at landfill);
  • Scheduling site visit to review scales and verify best practices of facility;
  • Preparing agenda and preparing facility for site visit, which may include one or more phone calls;
  • Conducting site visit;
  • Resolving any discrepancies and conducting any follow-up data requests and/or site visits, as necessary; and
  • Preparation of electronic final letter report of facility certification, including recommendation for approval or denial.

R3 was selected by the City of Santa Clara (City) in 2017 via a competitive procurement process to conduct an audit of the City’s 10 Non-Exclusive Franchised (NEF) haulers. The NEF haulers provide garbage, recycling, organics, and construction and demolition (C&D) debris collection services within the industrial-zoned areas of the City.

The objectives of this original engagement were to review the period of July 2016 to June 2017 and verify the following:

  1. The accuracy of the haulers’ quarterly reports;
  2. The accuracy of the haulers’ franchise fee payments; and
  3. The haulers’ compliance with the requirement not to provide garbage service to commercial customers that generate 4+ cubic yards per week and are in violation of the City’s mandatory recycling and organics requirements.

R3’s review identified significant underpayments of franchise fees by the haulers, ultimately amounting in a net total of $102,000 owed to the City. R3 communicated the results of the recalculations to the NEF haulers, and all agreed to the mathematical accuracy of franchise fee amounts owed to/from the City.

R3 also provided the City with the following:

  • Identification of haulers that were non-compliant with the commercial recycling and organics subscription reporting requirements specified by their Agreements;
  • Consolidated list of customer listings from each hauler, with updated status of customers’ commercial recycling and organics compliance or exemption status; and
  • Revisions to the NEF Hauler Agreements to include the following:
    • Simplification of the tiered franchise fee calculation by switching to a flat franchise fee on all gross billings;
    • Promotion of diversion through alternative mechanisms, including:
      • Universal bundled services for garbage, recycling, and organics; and
      • Specifications involving minimum diversion rates for facilities that process collected materials;
    • Clarification of the language pertinent to gross billings; and
    • Incorporation of language to facilitate compliance with state legislative requirements.

As a result of the initial audit, R3 was retained by the City to conduct two more NEF hauler audit cycles, as well as to support the implementation of our recommendation to revise the NEF Agreements to facilitate future compliance with state legislation. Our most recent audit for the period of July 2017-2018 identified an additional net total of more than $160,500 in underpayments owed to the City. R3 will conduct the next audit for the City between July 2019 and December 2021.

City of Merced

R3 was recently engaged by the City of Merced (City) to assist with the preparation of an amended solid waste and revenue Rate Study and 5-Year Financial Plan to meet the projected future expenses and obligations for municipally-operated hauling division over the coming five years. This study served as an amendment to the rate model R3 developed for the City in 2014, providing calculated rate adjustments following the City’s recently adjusted January 2019 rates and five scenarios with recommended rate adjustments to set forthcoming rates through January 2023.

Project tasks R3 conducted for this engagement included the following:

  • Reviewing the City’s current utility policies, procedures, and regulatory requirements as they relate to the City’s solid waste collection operations, capital projects, revenue program requirements;
  • Updating R3’s previous Rate Model and determining whether additional revenues were needed to meet projected expenses costs associated with residential, commercial, and/or development growth, and the possible expansion of collection programs, including commercial recycling and organics services;
  • Developing alternative scenarios for adjusting rates to meet expense and revenue requirements over the planning period, and providing recommended rate adjustments for each scenario;
  • Reviewing the City’s Municipal Code as related to the collection of solid waste and recyclables within the City; and
  • Conducting a residential and commercial rate and service survey to establish benchmarks and analysis of how similar jurisdictions are setting rates and allocating services and expenses based on Proposition 218.

As a result of our work, the City gained the following benefits:

  • Ability to project capital and operational revenues and expenses on a cost-of-service basis over an extended planning period, and analyze and set appropriate rates;
  • Excel-based five-year Financial Plan and rate model; and
  • Assessment of expenses related to implementation of new programmatic requirements in response to new legislation including AB 341, AB 1826 and SB 1383, as well as the requirements of Proposition 218.

R3 was recently engaged by the City of Santa Monica (City) to conduct an Operational Analysis, Rate Study, and Zero Waste Plan Update for the Resource Recovery and Recycling Division (RRR Division)’s municipally operated solid waste collection and recycling operations. The primary objective of this project is to determine how to continue achieving the City’s long-term sustainability goals and initiatives while preserving the health of the RRR Enterprise Fund. R3 is leading a multi-consultant team (Sloan Vazquez McAfee, HDR and Abbe & Associates) in conducting the following six primary tasks for this engagement:

  • Staffing, Routing and Vehicle Efficiency Analysis;
  • Billing Audit;
  • Technology & Systems Review;
  • Zero Waste Strategic Operations Plan Review & Update;
  • Rate Study & Financial Analysis; and
  • Community Engagement Plan Development.

By working closely with the City and engaging its ratepayers through a robust community outreach process, the R3 Team will provide recommendations for improving the efficiency and effectiveness of its solid waste operations and determine rate adjustments that may be necessary to sustain the RRR Division’s activities for the next 10 years while supporting the City’s Zero Waste goals.

This engagement includes the following components:

Staffing, Routing and Vehicle Efficiency Analysis: The R3 Team is assessing the efficiency of the RRR Division’s operational aspects by reviewing staffing, routing, and vehicle information and reports, and conducting onsite visits and interviews of City staff and customers. This comprehensive review will include but is not limited to: analyzing the RRR Division’s organizational structure, management system, staffing practices and safety procedures; evaluating routing and schedule efficiency; and reviewing collection vehicle maintenance practices and procedures. R3 will develop recommendations for the City to improve the long-term functionality, productivity, and safety of the RRR Division’s operations and management structure based on solid waste industry practices.

Billing Audit: The R3 Team is determining if the City has been accurately billing all of its residential and commercial customers based on a paper review of billing records in the NorthStar customer billing system as compared to the City’s routing records. The RRR Division currently shares the NorthStar customer billing system, which was designed for the City’s Water Resources Department and provides combined bimonthly billing of water, sewer, and solid waste services. Since the technology was not specifically designed for the solid waste industry, it does not allow for routing solutions, route sheets, or expanded solid waste customer service information, and runs the inherent risk of producing customer billing errors.

Technology and Systems Review: The R3 Team is evaluating the current technology system(s) in use by the City to identify and evaluate the costs, efficiency, and effectiveness of several operations systems enhancements, and to provide recommendations on whether the systems would be cost-effective and beneficial to the City. This review will include a comparison of the capabilities of the NorthStar systems to other billing and routing technology systems.

Zero Waste Strategic Operations Plan Review and Update: The R3 Team is assisting the City in updating its 2014 Zero Waste Plan and recommending additional strategies to further the City’s progress towards its goal of achieving 95% diversion by 2030 in the event that current strategies are not sufficient, or if the Zero Waste goal is determined to no longer be realistic for the City.

For this task, R3 is taking a data-driven approach to assessing the City’s progress toward achieving its Zero Waste goals by using multiple metrics including, but not limited to: tonnage of waste disposed and diverted; the diversion rate; total pounds per person per day (PPD) and CalRecycle diversion rate equivalent; estimated greenhouse gas emission reductions; customer participation; and AB 341 and 1826 commercial recycling compliance. Based on these metrics, the R3 Team will project Citywide disposal through 2030 to determine if the City is on track to meet its 95% diversion goal and recommend strategies to enhance the effectiveness of current programs or implement new programs that will increase diversion in a cost-effective manner. For each Zero Waste strategy recommendation, the R3 Team will provide the City with an analysis of estimated additional diversion and implementation costs.

Rate Study and Rate Model: The R3 Team is determining the sustainability of the City’s current rate structure to continue supporting solid waste operations without depleting the City’s RRR Enterprise Fund, which receives 90% of its revenue from solid waste operations. The R3 Team is conducting a comprehensive analysis of the Fund’s financial forecast, revenues, and expenditures for solid waste and recycling operations over a 10-year planning period and assisting the City in transitioning from line-item to program-based budgeting.

For this task, the R3 Team is developing an Excel-based Rate Model for use by the City to project revenues and expenses, and evaluate current and future rate-adjustment options, including cost-of-service rate options, over an extended planning period. R3 is also conducting a Benchmarking Survey of solid waste rates and service of (a minimum of five) comparable communities, including analysis of how other municipalities have managed the financial impact of Proposition 218.

Community Engagement Plan: As part of this engagement, the R3 Team is also developing a Community Engagement Plan and outreach materials for the Zero Waste Plan and Rate Study Model. The objective is to provide opportunities for residents and businesses to learn about and provide meaningful feedback on changes to the City’s Zero Waste Plan and rate structure to ensure that both meet the needs of the City and its ratepayers.

The anticipated benefits of this engagement include:

  • Recommendations for improving the long-term functionality, productivity, and safety of the RRR Division’s operations and management structure;
  • Verification of the accuracy of residential and commercial customer billing;
  • Recommendations for improving costs, efficiency, and effectiveness of the City’s current technology systems, including billing and routing;
  • Analysis of the City’s current efforts towards achieving its Zero Waste goal of 95% diversion by 2030, and recommended strategies to further the City’s progress towards that goal;
  • Determination of the current rate structure’s ability to support ongoing solid waste operations in the City;
  • Development of an Excel-based Rate Model to project revenues/expenses and evaluate rate-adjustment options over an extended planning period; and

Community engagement process for residents and businesses to learn about and provide feedback on changes to the City’s Zero Waste Plan and rate structure.

In 2017, R3 was engaged to conduct a comprehensive Rate Methodology Review on behalf of the Marin Franchisors’ Group (Group), which is made up of the cities of San Rafael and Larkspur, the Town of Ross, the County of Marin, and the Las Gallinas Valley Sanitary District.

R3’s primary objectives were to streamline and simplify the Group’s rate-setting methodology in order to address recycling commodities fluctuations and complete a meet-and-confer negotiation process to resolve $1.15 million in accumulated losses from the processing and sale of recyclable materials since the recycling market crash.  R3 worked with the Group and franchised hauler, Marin Sanitary Service (MSS), to revise the existing rate methodology to meet the following primary goals:

  1. Establish a resolution for over $1 million in losses in the Recycling Reserve Fund carried by the company since the recycling market crash;
  2. Develop a new model for handling recycling costs and revenues to replace the Recycling Reserve Fund that would add greater certainty for rate-setting in the future; and
  3. Revise the overall methodology for setting rates to achieve goals of streamlining, simplification, rate stability and recognition of the value of recycling and composting.
  4. Establish performance metrics and tracking to better understand qualitative outcomes of MSS’ operations and outreach; and
  5. Revise and institute formal succession planning and assignment language and documentation.

In parallel with the Rate Methodology Review, R3 also conducted a rate survey of the surrounding jurisdictions, and was engaged by the Group to review MSS’s 2018 Rate Application and 2019 Cost-Based Rate Application.

Due to the anticipated new methodology, the Group and MSS had planned to complete a complex cost-based rate adjustment for 2018 rates so that the new streamlined rate setting methodology could take effect for 2019 rates. However, it was determined that results of the review would not be available in time, so the Group and MSS agreed to revert to the index-based rate adjustment process for 2018 rates in order to stay on schedule for the 2018 rate adoption process. The Group retained R3 to conduct a detailed review of MSS’s 2018 rate application to review the basis of MSS’s projections, and to recommend adjustments in keeping with the terms and conditions of the Agreements. Based on the detailed rate review, R3 determined that a rate increase of 5.57% was appropriate to compensate MSS for its projected 2018 expenses – a significant decrease to MSS’ proposed rate increase.

In 2018, R3 reviewed MSS’s cost-based rate application for a 2019 rate adjustment, and determined that an overall rate increase of 9.56% was appropriate to compensate MSS for its projected 2019 expenses including the treatment of prior recycling losses or future recyclables processing costs and consideration of negotiated outcomes of the meet and confer process, with varying increases for each Group Agency, which vary slightly depending on the amounts and types of franchise and other fees set by each agency.

As a result of our assistance, the Group gained the following benefits:

  • Stable and predictable rates for the next 5 years, and a firm basis for rate control in future years;
  • Significant saving on consultant costs and staff time to conduct the of the annual rate adjustment process (anticipated annual 70-80% reduction in time and costs);
  • Improved accuracy and transparency of the rate adjustment process;
  • New performance metrics for outreach and education as well as regular operations, billing, and customer service; and
  • A revised rate-setting methodology designed to address rate fluctuations, while maintaining an emphasis on responsible solid waste management, good value to customers, and reduction of waste to landfill, including: