1990-0904_SOLAG DISPOSAL_Amendatory AgrCity Copy
AMENDATORY AGREEMENT
THIS AMENDATORY AGREEMENT is made this 3rd day of September, 1991 by and
between THE CITY OF SAN JUAN CAPISTRANO, hereinafter referred to as City, and
SOLAG DISPOSAL, INC., hereinafter referred to as Contractor.
WHEREAS, the City and Contractor have entered into a Recycling Agreement
dated September 4, 1990 providing for residential curbside collection of recyclable
material services by the Contractor; and,
WHEREAS, Contractor and City desire to amend portions of said agreement
relating to the terms of the Recycling Agreement,
NOW, THEREFORE, BE IT MUTUALLY AGREED between City and Contractor
that the following sections and subsections of the Recycling Agreement are hereby
amended to read as follows:
SECTION I.
Page 6, Section A.I, the first sentence of the second paragraph is hereby amended
to "The collection of recyclable material by CONTRACTOR will not commence before
7:00 A.M., unless otherwise authorized by CITY."
Page 13, Section B., the last sentence of the paragraph at the top of the page is
hereby amended to "The term of Phase I Program shall continue in full force and effect
through June 30, 1992, unless mutually approved for extension by both parties."
Page 14, Section C.2., entitled "Ongoing Evaluation" is hereby deleted in its
entirety.
Page 16, Section E.7., regarding participation rates is hereby deleted in its
entirety.
Page 17, Section E.12., regarding daily participation reports is hereby deleted in its
entirety.
SECTION XIII.
This agreement contains the entire agreement of the parties, and any agreement or
representations affecting the obligations under this agreement, or the duties of the City
and Contractor under the underlying franchise agreement in relation thereto, not
expressly set forth herein, is null and void. Each party also, in addition to acknowledges
that they have thoroughly read and understood each of the provisions contained herein
prior to signing this document.
CITY OF SAN JUAN CAPISTRANO
ATTEST
B r ✓rn—
Ke neth E. Friess, Mayr City Cle> c
SOLAG DISPOSAL, INC. APPROVED AS TO FORM
0 0 city copy
RECYCLING
BETWEEN
THE CITY OF SAN JUAN CAPISTRANO
�; l b7
SOLAG DISPOSAL, INC.
Attachment A
0
Table of Contents
Page 1
Page
SECTION I SCOPE OF SERVICES . . . . . . . . . . . . .
. (6)
(A)
Curbside Recycling . . . . . . . . . .
. (6)
1. Collection . . . . . . . . . . .
. ( 6 )
2. Labor and Costs . . . . . . . . .
. (7)
2. Missed Pick-ups . . . . . . . . .
. (7)
4. Material to be Recycled . . . . .
. (7)
5. Notices . . . . . . . . . . . . .
. (8)
6. Container Purchase . . . . . . .
. (8)
7. Container Distribution . . . . .
. (9)
8. Replacement of Containers . . . .
. (9)
9. Container Type . . . . . . . . .
(10)
10. Standards of Service . . . . . .
(10)
11. Transportation of Materials . . .
(11)
12. Sale of Recyclable Materials . .
(11)
(B)
Phase I Location and Term of Program .
(12)
(C)
Evaluation . . . . . . . . . . . . . .
(13)
1. Audit
2. Ongoing Evaluation
3. Contractor's Records
(D)
Citizen Participation . . . . . . . .
(14)
(E)
Monthly Reports . . . . . . . . . . .
(15)
(F)
Semi -Annual Reports . . . . . . . . .
(17)
Page 1
0 0
SECTION
II
COMPENSATION AND INVOICING . . . . . . . .
(A) Compensation for Services . . . . . .
(B) Salvage Revenue . . . . . . . . . . .
(C) Market Factors . . . . . . . . . . . .
(D) Diversion Credit . . . . . . . . . . .
(E) Invoicing . . . . . . . . . . . . . .
SECTION
III
PUBLIC AWARENESS PROGRAM . . . . . . . . .
SECTION
IV
EXPANSION OF PROGRAM . . . . . . . . . . .
SECTION
V
PROTECTION OF MATERIALS . . . . . . . . . .
SECTION
VI
INDEPENDENT CONTRACTOR . . . . . . . . . .
SECTION VII NON -ASSIGNMENT . . . . . . . . . . . . . .
SECTION VIII INDEMNIFICATION AND HOLD HARMLESS . . . . .
SECTION IX STANDARDS OF PERFORMANCE . . . . . . . . .
SECTION X TERMINATION . . . . . . . . . . . . . . . .
SECTION XI MODIFICATION AND/OR EXPANSION OF PROGRAM
SECTION XII AGREEMENT . . . . . . . . . . . . . . . .
SECTION XIII ENTIRETY . . . . . . . . . . . . . . . .
Page 2
(18)
(18)
(19)
(19)
(19)
(20)
(20)
(21)
(22)
(22)
(23)
(23)
(24)
(25)
(29)
(30)
(30)
0 0
TO AGREEMENT
FOR SOLID WASTE COLLECTION AND DISPOSAL
THIS AGREEMENT for Solid Waste Collection and Disposal (here-
inafter "AGREEMENT"), is made and entered into this September 4, 1990
day of 1990, by and between the CITY OF SAN JUAN CAPISTRANO, a
municipal corporation (hereinafter "CITY") and SOLAG DISPOSAL,
INC., a California corporation (hereinafter "CONTRACTOR").
RECITALS
WHEREAS, the CITY and CONTRACTOR entered into an Agreement for
Solid Waste Collection and Disposal Services, dated March 18, 1986,
and,
WHEREAS, the reduction of the amount of solid waste collected,
transported and deposited in landfills and the conservation of
recyclable materials is an important public concern by reason of
the growing problem of solid waste disposal and its impact upon the
environment; and
WHEREAS, recycling conserves valuable material resources and
energy, promotes greater efficiency in the local economy; and
Page 4
Ll
•
WHEREAS, recycling will reduce the overall amount of solid
waste presently generated, and thus reduce storage, collection,
transportation, and disposal costs; and
WHEREAS, State 1989, C. 1095 requires that cities and counties
institute recycling programs to reduce the volume of solid waste
disposed of in landfills by 25% by 1995 and 50% by 2000; and
WHEREAS, CITY desires to institute a curbside recycling
program for certain residential areas within the CITY to conserve
valuable material resources and energy and promote greater
efficiency in the local economy to be performed by CONTRACTOR in
conjunction with the collection of solid wastes in the CITY
pursuant to this AGREEMENT; and
WHEREAS, CONTRACTOR desires to provide such curbside recycling
services in the CITY in conjunction with its present contract for
collection of solid wastes in the CITY pursuant to the AGREEMENT;
and
WHEREAS, the parties agree to implement a pilot (hereinafter
"PHASE I") curbside recycling program to serve 1,000 residents
pursuant to the goals established by the CITY.
Page 5
0 0
NOW, THEREFORE, CITY and CONTRACTOR do hereby agree as
follows:
SECTION I. SCOPE OF SERVICES
A. Curbside Recycling
CONTRACTOR shall perform curbside recycling services in
the CITY as follows:
1. Collection
Commencing on October 3, 1990, CONTRACTOR shall collect
and remove all recyclable materials which are segregated
and placed in or near the recycling containers at the
curbside on public streets. The collection of materials
will be scheduled on the same day as refuse collection
service performed pursuant with weekly pick up on
existing regularly scheduled refuse collection service
days.
Collection of recyclable materials by CONTRACTOR will
not commence before 8:00 A.M., and will be completed
before sunset each day, unless otherwise authorized by
CITY. This schedule will be publicized, and residents
will be requested to not put recyclables out until the
morning of the pick-up day to reduce scavenging.
Page 6
2. Labor and Costs
CONTRACTOR shall furnish all labor and equipment re-
quired (not independent of, but in conjunction with
CONTRACTOR'S existing operation), to perform curbside
recycling collection pursuant to this AGREEMENT.
3. Missed Pick-ups
In case of a missed pick-up called in by a resident,
CONTRACTOR shall collect the recyclable materials from
such resident, no later than the next working day
following the day of the call.
4. Materials to be Recycled
Materials deemed to be recycled and required to be
recycled pursuant to this AGREEMENT are as follows:
newspapers, glass containers, metal (aluminum and
steel/tin) cans, and plastics (all PET soft drink
bottles, and one-half gallon and larger HDPE milk and
water containers). Collection of used motor oil and
other materials may be added as agreed to in writing by
all parties to this AGREEMENT.
Page 7
0 0
5. Notices
CONTRACTOR may refuse to collect recyclable materials
of, and shall not be obligated to continue to provide
any recycling receptacle or container to, any partici-
pant who after reasonable notice, fails to sort recycla-
ble materials properly.
6. Container Purchase
CONTRACTOR shall initially purchase 1,000 sets of
containers, or 3,000 individual containers, plus an
additional five percent (5%) as a reserve for replace-
ment (as described in Section I.A.S.) for the PHASE I
program. CONTRACTOR shall, at all times during Phase I,
have a sufficient supply of extra containers on hand to
provide not less than 25 full sets of replacement
containers for residents. The initial distribution of
containers shall be provided to each residential unit at
no cost in addition to the monthly rate charged to each
unit.
Page 8
0 0
7. Container Distribution
CONTRACTOR shall distribute containers and an informa-
tional packet of promotional materials (as described in
Section III.A.3). These items shall be placed on the
door step of each designated residence to be serviced.
Distribution shall occur on the same day that service
will be provided to that residence, one (1) week prior
to the beginning day for the program.
8. Replacement of Containers
The parties acknowledge that from time -to -time recycling
containers supplied by CONTRACTOR may be damaged, de-
stroyed, lost or stolen. CONTRACTOR shall replace
containers within 72 hours from time CONTRACTOR is so
notified by resident or CITY. Following distribution of
the initial container purchase (as described in Section
I.A.6.) CONTRACTOR shall charge residents at current
market cost per bin for replacement containers. CON-
TRACTOR shall replace at no cost to resident any con-
tainer damaged or destroyed by CONTRACTOR. In the event
of a dispute between CONTRACTOR and resident regarding
charges for replacement of containers, the decision of
the CITY Manager or designee shall be final and
conclusive.
Page 9
9. Container Type
Containers shall be of the "nesting" type in a set of
three (3) and shall be stable when stacked. The con-
tainers in the set shall include a blue bin for cans and
plastic beverage containers, a gray bin for glass
containers, and a tan bin for newspapers. Containers
shall be labeled to identify CITY, the CONTRACTOR'S
recycling customer service telephone number, the afore-
mentioned materials to be place said containers in the
bin, and the order by which they should be stacked.
10. Standards of Service
a) After the recycling containers have been emptied
into a collection truck, the CONTRACTOR shall place
said containers in an upright, stacked position at
a uniform location behind the curb within the
parkway.
b) Contractor shall not throw containers to the ground,
but placed on the ground in a manner that will
prevent damage to the containers.
Page 10
11. Transportation of Materials
During Phase I, the CONTRACTOR shall transport the
collected recyclable materials from the curbside, or
designated collection location, to the markets at the
end of each day. There the materials will be weighed,
and the driver will obtain receipts for the weights for
each material from each section of the truck. During
the PHASE I Program, no stockpiling of materials by
CONTRACTOR will be allowed, to insure that each juris-
diction served will be able to accurately assess the
amount of materials diverted from their waste stream as
+ required by AB 939.
It is anticipated that if and when there is an expansion
of the PHASE I Program, a more efficient processing
arrangement may be implemented.
12. Sale of Recyclable Materials
During PHASE I, the CONTRACTOR shall sell all recyclable
materials collected from curbside or designated collec-
tion locations by CONTRACTOR pursuant to this AGREEMENT
at the highest market value available within the County,
and at a location accessible at the end of the route
within a normal working day. The purchaser of these
Page 11
materials will make payment to CITY as designated in
Section II.B.
If PHASE I program is expanded by agreement of CITY and
CONTRACTOR, CONTRACTOR will be expected to sell the
recovered recyclable materials at fair market value.
The fair market value of the recyclable materials shall
be the highest responsible price quoted to CONTRACTOR
(verbally or in writing), FOB CONTRACTOR'S yard, at the
time of the intended sale, by purchasers of such materi-
als. If there is any dispute as to which market pro-
vides the highest responsible price, the determination
of CITY shall rule.
B. PRASE I Location and Term of Program
The CITY and CONTRACTOR shall mutually agree upon the
service area for the PHASE I Curbside Recycling Program.
CONTRACTOR shall provide route maps (showing the general
sequence in which the route will be served), addresses
and schedules to CITY. Any changes to these areas shall
require prior written approval of the CITY Solid Waste
Management Coordinator.
Page 12
The term of the PHASE I program shall be up to one year
unless mutually approved for extension by both parties.
C. Evaluation
1. Audit
CONTRACTOR shall submit to an audit of all expenses,
expenditures and revenues for the first six (6) month
period pertaining to the provisions of this service, and
at any point thereafter as requested by CITY. CONTRAC-
TOR must maintain all records relating to this program
in a manner to facilitate the audit. The audit will be
performed by private outside firm selected by CITY.
This audit will be conducted at CITY'S cost to determine
the actual costs of providing curbside recycling servic-
es.
Because of the improved economies of an expanded pro-
gram, the evaluation of PHASE I will also include the
cost of additional collection and processing equipment,
the higher market value which may be achieved by market-
ing of larger volumes of processed materials, the
efficiencies of larger routes, with operations and
maintenance costs being spread over a larger servine
area, and other relevant factors.
Page 13
z. Ongoing Evaluation
During PHASE I the address of each residence from which
recyclable materials are collected shall be recorded on
a route sheet by the collector/driver. The driver shall
also note which materials were set out at that location.
This information will be evaluated by the CITY at the
end of each month. This will help determine citizen
participation.
3. ContractorIs Records
CONTRACTOR shall maintain, or provide to CITY, any and
all ledgers, books of account, invoices, vouchers and
canceled checks, as well as all other records or docu-
ments evidencing or relating to charges for services,
expenditures or disbursements borne by the CONTRACTOR
for a period of not less than three years from the
termination of this AGREEMENT.
D. Citizen Participation
The goal is to maximize the citizen participation rate
within a six-month period following commencement of
PHASE I curbside recycling services by CONTRACTOR
Page 14
0 0
pursuant to this AGREEMENT. If by the sixth month the
participation rate does not reach an acceptable level,
as determined by CITY, CITY shall have the right to
terminate this AGREEMENT or negotiate with CONTRACTOR in
good faith towards a mutually acceptable modification
thereof. A participation rate of 100% is defined as one
or more set -outs (that is the placement of containers at
curbside containing Recyclable Materials as described),
per each one (1) month period per each single-family
residence in the PHASE I service area.
E. Monthly Reports
During the term of this AGREEMENT, CONTRACTOR shall
submit to CITY's Solid Waste Management Coordinator, or
designated person, monthly reports on the following
information within fifteen (15) working days after the
last day of each month. CONTRACTOR shall submit at
least all of the following on forms approved by CITY:
1. Summaries of tonnages of all recyclable materials
collected, by material type.
2. Summaries of tonnages of all recyclable materials
sold, by material type.
3. Summaries of tonnages of all recyclable materials
Page 15
0 0
not
yet sold
at the end of the month
(not applica-
ble
in PHASE
I).
4. Summaries of tonnages of residue which is not
saleable, or required disposal by either the CON-
TRACTOR or the purchaser of the recyclable materi-
als.
5. Summaries of tonnages of materials which are not
listed as recyclable materials, but which were
collected, processed and sold (i.e., cardboard).
6. Market prices for all recyclable materials collect-
ed from curbside and sold by CONTRACTOR and the
basis for such determination.
7. Participation rates in terms of weekly set -outs (as
described in Section I.D.).
8. A summary of missed pick ups by routes, with expla-
nation of why, and a summary of telephone calls
received by category, (pros/cons) including inqui-
ries about the program, missed pick ups, and con-
tainer replacement.
9. A summary of program highlights, special events,
milestones, or other noteworthy occurrences.
10. A listing of all reports of scavenging of materials
or containers.
11. A report of all revenues and expenses relating to
this AGREEMENT.
Page 16
0 0
12. Copies of CONTRACTOR'S daily reports showing the
amount of recyclable materials collected on each
route, the total number of set -outs on each route,
the number of truck loads for each route, the number
of hours per route per day to complete the route,and
the total work time of the driver and helper for the
day.
F. Semi -Annual Reports
On or before fifteen (15) days after the completion of
each six (6) month period for which service is provided,
CONTRACTOR shall submit to the CITY's Solid Waste
Management Coordinator, or designated person, a Semi -
Annual Report, to include at least the following:
1. A collated summary of the information contained in
the monthly reports, and a summary of the partici-
pation rates and tonnages of collected materials.
2. A discussion of public awareness activities and
their impact on participation and collected ton-
nages.
3. A discussion of highlights and other noteworthy
experiences, measures taken to resolve problems,
Page 17
9 0
increased efficiency and household participation
levels.
4. A Semi -Annual salvage revenue statement of all sales
of recyclable materials.
SECTION II COMPENSATION AND INVOICING
A. Compensation for Services
CONTRACTOR shall be compensated a monthly per unit
amount of $2.48 for any and all subscribers for refuse
collection in the PHASE I collection area. CONTRACTOR
agrees to no increase in said monthly unit amount for
twelve (12) months from the commencement of the PHASE I
program, for service to the 1,000 households designated
in Section I.B. of this AGREEMENT unless the program is
modified or expanded. Compensation to CONTRACTOR will
be rescinded immediately, should the recycling program
be discontinued. The monthly per unit amount of $2.48
shall be subject to change due to modification or
expansion of PHASE I.
The franchise fee required to be paid to the CITY under
the AGREEMENT for Solid Waste Collection and Disposal
shall not be applicable to revenues of CONTRACTOR
Page 18
0 0
collected for the Phase I curbside recycling program
pursuant to this AGREEMENT.
B. Salvage Revenue
During PHASE I of the AGREEMENT, CONTRACTOR shall direct
the purchaser of the recyclable materials to deposit all
revenues from the sale of recyclable materials collected
by CONTRACTOR into a special account of CITY.
C. Market Factors
The CITY may renegotiate or terminate this AGREEMENT in
the event that factors beyond the reasonable control of
the parties involved materially change the market for
the sale of any of the recyclable materials.
D. Diversion Credit
CONTRACTOR shall pay to CITY, on a quarterly basis, an
amount equal to the per ton tipping fee at the County
landfill at the time of the collection, multiplied by
the number of tons of recyclable materials sold by
CONTRACTOR during that period.
Page 19
9 0
E. invoiaina
CONTRACTOR shall invoice each regular subscriber for
refuse colletction for curbside recycling services in
conjunction with its regular invoicing practice and
procedures for refuse collection services. The amount
charged and format of the invoice shall be subject to
approval of the CITY MANAGER. Any regular subscriber to
CONTRACTOR for refuse collection shall be charged for
recycling services regardless of whether subscriber
elects to participate in the recycling program.
SECTION III. PUBLIC AWARENESS PROGRA1[
A. CONTRACTOR will assist the CITY in the preparation of an
introductory packet of information regarding the PHASE
I curbside recycling program. The information will be
prepared at CITY'S expense, provided that CITY not be
labor expenses involved in this preparation, and shall
include a letter from the CITY urging the residents to
participate in the program, and specific information
regarding collection day, non -collection holidays,
preparation of materials, and other appropriate matters.
CONTRACTOR shall deliver a similar informational packet
Page 20
prepared by CITY with the containers upon initial
distribution of containers (See Section I.A.4.).
CITY shall, at CITY'S sole expense, prepare and distrib-
ute all additional public awareness materials, to
encourage ongoing citizen participation and citizen
compliance.
CONTRACTOR shall, at CONTRACTOR'S sole expense, prepare
and distribute all applicable public notices required to
notify residents of violations, non-compliance, and
other issues relating to the curbside recycling program
procedures and practices.
SECTION IV. EXPANSION OF PROGRAM
It is the intent of CITY and CONTRACTOR that an expanded city-
wide recycling program be provided to CITY following evaluation of
the PHASE I program. Factors which will be used to arrive at a
decision regarding an expanded program will include the following:
PHASE I evaluations, including CONTRACTOR'S performance and
capability to handle an expanded program, consultant research, and
data gained from the waste characterization study to be performed
by CITY and COUNTY, all of which will enhance methodology needed
to meet the AB 939 mandate. Notwithstanding any other provision
of thi.s AGREEMENT to the contrary, CITY does not warrant or
Page 21
represent that it will enter into an agreement with CONTRACTOR for
an expanded program.
SECTION V. PROTECTION OF MATERIALS
CITY agrees to take such steps as CITY may determine to be
necessary and appropriate to protect CITY'S ownership of all
recyclable materials placed at the curbside for collection by
CONTRACTOR under the terms of this AGREEMENT and to discourage
scavenging activities, provided, however, that CITY shall not be
held liable to CONTRACTOR for any scavenging that does occur.
SECTION VI. INDEPENDENT CONTRACTOR
CONTRACTOR shall perform all work and services described
herein as an independent contractor and not as an officer, agent,
servant or employee of CITY. CONTRACTOR shall have exclusive
control of and the exclusive right to control the details of the
services and work performed hereunder and all persons performing
the same and CONTRACTOR shall be solely responsible for the acts
and omissions of its officers, agents, employees, contractors and
subcontractors, if any. Nothing herein shall be construed as
creating a partnership or joint venture between CITY and CONTRAC-
TOR. No person performing any of the work or services described
hereunder shall be considered an officer, agent, servant or
employee of CITY, nor shall any such person be entitled to any
Page 22
•
0
benefits available or granted to employees of CITY.
SECTION VII. NON -ASSIGNMENT
CONTRACTOR shall not assign, transfer, convey, or otherwise
hypothecate this AGREEMENT or CONTRACTOR's rights, duties or
obligations hereunder or any part thereof without the prior written
consent of CITY and the written concurrence of CONTRACTOR's surety.
In the event CONTRACTOR attempts to assign, transfer, convey or
otherwise hypothecate this AGREEMENT or CONTRACTORRIs rights, duties
or obligations hereunder or any part thereof without the prior
written consent of CITY, CITY may, at its option, terminate this
AGREEMENT immediately.
CITY reserves the right to assign this AGREEMENT to a Joint
Powers Authority, if one is formed, for the purposes of providing
among other Integrated Waste Management services, curbside
recycling services.
SECTION VIII. INDEMNIFICATION AND HOLD HARMLESS
The CONTRACTOR shall indemnify and save harmless the CITY, its
officers, agents, employees, and servants, from all claims suits
or actions of every name, kind and description brought for or on
account of injuries to or death of any person or damage to property
Page 23
0 0
resulting from the performance of any work required by this
AGREEMENT by the CONTRACTOR, its officers, agents, employees, or
servants. The duty of the CONTRACTOR to indemnify and save
harmless as set forth herein shall include the duty to defend as
set forth in Section 2778 of the California Civil Code.
SECTION I%. STANDARDS OF PERFORMANCE
A. MISSED PICKUPS
With respect to the curbside recycling program, the
CONTRACTOR shall accomplish the following:
1. Records of the addresses of all missed pickups shall
be maintained by CONTRACTOR and reported to CITY.
If the number of missed pickups exceeds 1% per
collection day more than one time per month, a fine
of $1 per miss for the entire month shall be
assessed CONTRACTOR.
2. If more than three missed pickups each month are
not collected within 24 hours of the resident or
City report of said miss to CONTRACTOR a fine of
$10 each missed pickup will be assessed.
3. If CONTRACTOR can demonstrate a pattern of ongoing
Page 24
0 0
late set outs by a resident, those missed pickups
shall not be counted as missed pickups.
B. REPORTS
a. If
more than one
report as required in
Sections E
and
F is late in
any six month period,
for every
working day beyond the due date that the most recent
report due is late, a $100 fine will be assessed
CONTRACTOR.
SECTION X. TERMINATION
This agreement may be terminated at any time as follows:
A. By mutual agreement of the parties hereto, evidenced by
an appropriate written instrument; or
B. Where the CITY determines that the CONTRACTOR'S perfor-
mance has not been in conformity with the provisions of
this AGREEMENT or any applicable law. In such case, the
City Manager shall, in writing, advise CONTRACTOR of
such deficiencies, and set in such written instrument,
a reasonable time within which correction of all such
deficiencies is to be made; unless otherwise specified,
a reasonable time for correction shall be deemed to be
Page 25
fourteen (14) days from the receipt by the CONTRACTOR of
such written notice. If within said fourteen (14) day
period of time (or other period of time, as may be
specified by the CITY Manager), the CONTRACTOR does not
correct such deficiencies to the reasonable satisfaction
of the City Manager, the City Manager shall advise the
City Council of such circumstances; the City Council, in
such case, shall, as soon as is possible, set the matter
for hearing. The City Council shall give CONTRACTOR,
and any other person requesting the same, ten (10) days
written notice at the time and place of such hearing.
At the time of such hearing, the City Council shall
consider the report of the City Manager indicating the
deficiencies, and shall give the CONTRACTOR, or its
representatives and any other interested person, reason-
able opportunity to be heard in conjunction therewith.
If the City Council, at the conclusion of such hearing,
determines, based upon reliable evidentiary material,
that performance of the CONTRACTOR is not in conformity
with this AGREEMENT, as alleged by the City Manager, the
City Council shall terminate, forthwith, the agreement.
The decision of the City Council shall be final and
conclusive. CONTRACTOR'S performance under this AGREE-
MENT is not excused during the period of time prior to
the City Council's final determination as to whether
such performance is deficient; or
Page 26
0 0
C. In the event that factors beyond the reasonable control
of the parties materially changed the market for the
sale of recyclable material.
D. Except upon termination for cause or by choice of
CONTRACTOR, in the event of termination of this AMEND-
MENT, CITY agrees to reimburse CONTRACTOR for the net
capital investment of CONTRACTOR associated with the
establishment of the curbside recycling program. The
net capital investment, at termination of the AMENDMENT,
shall be defined as the total cost of the CONTRACTOR in
purchasing containers, new trucks and special equipment
and vehicle preparation costs as supported by acceptable
documentation less the accumulated depreciation of such
containers, trucks and special equipment and the market
salvage value of the containers, trucks and special
equipment. If new trucks are purchased, the market
salvage value of said trucks shall be the retail blue-
book value of the cab and chassis plus market salvage
value of appurtenant equipment. However, if used trucks
from CONTRACTOR'S fleet are retrofitted, there will be
n allowance in the net capital investment for the pur-
chase of already depreciated value of the trucks. Upon
termination by CONTRACTOR, CITY shall not be bound or
required to pay damages of any sort to the CONTRACTOR.
Page 27
If the CITY and CONTRACTOR are unable to agree on the
market salvage value of such containers, trucks and
special equipment, the market salvage value shall be
determined by an independent appraiser mutually agree-
able to CITY and CONTRACTOR with cost of the appraiser
shared equally.
Since the curbside recycling program was predicated on
a 5,200 unit program with participation by the Cities of
Dana Point, San Juan Capistrano and San Clemente,
together with the County of Orange, each city's share of
CONTRACTOR'S net capital investment at termination shall
be established on a prorated basis using the total
number of units served in each City in comparison to the
total units served in all four agencies.
In the event that one or more of the foregoing named
agencies terminate the PHASE I program, but CITY does
not, this AGREEMENT shall be renegotiated.
E. If the CITY terminates this AGREEMENT for non-perfor-
mance as specified in Section X.B., and CITY wishes to
continue the operation of the PHASE I curbside recycling
program, CITY may take over use of the curbside collec-
tion vehicle from CONTRACTOR immediately to avoid
disruption in service, pending resolution of any other
Page 28
0
9
dispute including any dispute regarding CITY'S obliga-
tion for payment, if any under Section X.D.
SECTION XI MODIFICATION AND/OR EXPANSION OF PROGRAM
CITY and CONTRACTOR agree to negotiate in good faith any terms
or conditions in the modification and/or expansion of the Phase I
program. In undertaking these negotiations, the results of audits
undertaken by CITY to determine CONTRACTOR's costs and profits in
providing the curbside recycling program during PHASE I shall be
considered to establish CONTRACTOR's compensation. If CONTRACTOR'S
after tax profit exceeds ten percent (10%) during PHASE I, any
excess shall be deducted in establishing the compensation to
CONTRACTOR for the modified and/or expanded program so that
CONTRACTOR'S average yearly after tax profit over the term of the
AGREEMENT and any extension or modification thereof does not exceed
ten percent (10%). If CITY and CONTRACTOR fail to reach agreement
with respect to the terms and conditions for modification and/or
expansion of the Phase I recycling program within sixty (60) days
of the date of the proposed program changes, CONTRACTOR will agree
to continue to perform changes, CONTRACTOR will agree to continue
to perform recycling as originally specified in this Agreement for
the remaining term hereof, subject to the provisions of Sections
VII and X.
Page 29
0 0
If at the time that the program is expanded to include all
residential units receiving curbside service, it is intended that
amended contract agreement provide for the term of these services
to coincide with the term of CONTRACTOR's franchise agreement with
the CITY.
Nothing contained in this AGREEMENT shall limit the right of
CITY to solicit proposals from any other entity for curbside
recycling services.
SECTION SII AGREEMENT
This AGREEMENT may be modified or amended only by a written
agreement duly executed by the parties hereto or their representa-
tives.
SECTION XIII ENTIRETY
This AGREEMENT and the AGREEMENT for Solid Waste Collecting
and Disposal Services dated March 18, 1986 contains the
entire AGREEMENT between the parties as to the matters contained
herein. Any oral representations or modifications concerning this
AGREEMENT shall be of no force and effect.
Page 30
0 0
IN WITNESS THEREOF, we, the authorized agents of the contract-
ing parties, by our duly authorized agents, do hereby affix our
signatures and seals this
September
4th
, 1990.
CITY OF SAN JUAN CAPIST O
G ry Hausdorfer, ayor
ATTEST:
Cheryl J%6hmon, City Clerk
APPROVED AS TO
John R. Shaw,itf A
dg/AF071790
day of
SOLAG DISPOSAL, INC.
Title
Page 31
ADMINISTRATIVE ITEMS
CITY MANAGER
2.
0
Report dat d S ptember 3, 1991, fr m the Assistant C ty
Manager, f ar ing a Resolution ss' ning to the Coun - ity
Hazardous at ial Emergency R po se Authority th Ci y's
interest n t e collection of co s from those p rso s or
entities esp nsible for a ha r us materials mi hap which
has resu ted in an emergency es onse service.
Douglas u art, Management s istant I, presen ed he staff
report.
It wased by Counc
Jones, hat the foil
O U O O.
T
T OR C
CITY COUNCIL OF
CALIFORNIA
HAZARDOUS MAT 1
AND ASSIGN
UT
AUTHORITY
motion
AYES:
/ usdorfer, second d y Councilman
esolution be ad t d:
C" N ^T R
S MATERIAL EMERd CY RESPONSE
ORANGE - A RE XJTION OF THE
CITY OF SAN CAPISTRANO,
NG THE O E COUNTY -CITY
EMERGENCY PONSE AUTHORITY
LIN RECOVEI RIGHTS TO SAID
the
ilmen Jory4s,
ez, and/kayc
ABSENT: Councilman Buchheim
iess
0
--� 3. EXTENSION OF CONTRACT - CURBSIDE RECYCLING SERVICES (SOLAG
DISPOSAL. INC.) (6000..301
Written Communication:
Report dated September 3, 1991, from the Management Assistant
I, recommending that the contract between the City and Solag
Disposal be extended through June 30, 1992, for the residen-
tial curbside collection of recyclable materials. Costs for
this service will be absorbed through the garbage collection
bill, and user fees will not be increased.
-11-
9/3/91
4.
5.
0
0
Douglas Dumhart, Management Assistant I, presented the staff
report and noted the success with the Phase I pilot area.
Final adoption of Phase II is scheduled for November 1991,
with implementation expected between April and June 1992.
Joan Scarantino, 27441 Ortega Highway, inquired about the
revenues and expenses generated by the program. Mr. Dumhart
explained that although the City obtains rebates from Solag
Disposal, the program essentially operates at a loss to the
City.
Approval of Contract Extension:
It was moved by Councilman Hausdorfer, seconded by Councilman
Jones, and unanimously carried that the Recycling Agreement
between the City and Solag Disposal be extended to June 30,
1992. The Mayor and City Clerk were authorized to execute
the agreement on behalf of the City.
Report ed September 3, 1 1,/o�wned
e ss' taut City
Manager forwarding an ag eemee t City and
Marbel Development Co a whics t City with a
cash yment in the
a u of $9co r grading and
co ction of the a ess road ateau area of
i opter Hill by city.
Mr. Scarborough ted the modito the proposed
Ag eement, at th request of the r, clarifying that
th developer not required tothe City with any
of er access r m any of the grope by the developer.
It w�ds�moved y Councilman Hau rfer, seconded by Councilman
Jones, and nanimously carr' d that the Agreement Regarding
Access to Helicopter Hil be ween the City and Marbella
Developme Company be prove , as modified, providing the
City wit a cash paym t in t e amount of $95,100 to cover
grading #nd const ru ion of t e access road to the plateau
area of elicopte ill by the City.
Written Communications:
(1) Report dated September 3, 1991, from the Assistant City
Manager, recommending that an agreement between the City
-12-
9/3/91
AGENDA ITEM
0 0
September 3, 1991
TO: Stephen B. Julian, City Manager
FROM: Douglas Dumhart, Management Assistant I
SUBJECT: Contract Extension - Curbside Recycling Service
with Solag Disposal, Inc.
SITUATION:
The Recycling Agreement between the City of San Juan Capistrano and
Solag Disposal, Inc. to provide residential curbside recycling service is
scheduled to expire October 3, 1991. The Recycling Agreement has been
provided as attachment "A". The expansion of city-wide curbside recycling
is scheduled to be implemented in the second quarter of 1992. It is the
City's desire to continue the pilot program area known as "Phase I" until
city-wide expansion can be achieved.
The program has received great reviews from many of the participants and
to discontinue service from the Recycling Agreement termination date
until city-wide expansion could have ill effects on participation and
acceptance. For that reason, we are requesting an extension of this
contract until June 30, 1992.
Additional Information
During the course of Phase I we have been carefully monitoring the
program so as to evaluate the criteria necessary for city-wide expansion.
The City has surveyed all participants in the Phase I program with a return
mail questionnaire. This enabled us to evaluate the effectiveness and
success of the residential curbside recycling program selected. The results
of the survey are provided as an Attachment "B".
The City also had a limited procedure review performed on the records of
the recycling program. A limited procedure review is like a small scale
accounting audit. This limited review suggests that the Phase I program as
currently structured, costs Solag Disposal more to operate the program
than the negotiated rate. The limited procedure review has been provided
as Attachment "C".
With some minor modifications to the program structure as outlined by the
Recycling Agreement, we will be able to continue the service for the same
negotiated rate. Items which have been targeted for amendment in the
agreement are the start time permitted, the amount of record keeping
required and the terms of the contract.
FOR CITY COUNCIL AGEND
k Ic
0 9
Agenda Item -2- September 3, 1991
Originally the thinking was that the City would hold the contractor to an
8:00 a.m. start time allowing homeowners time to set out recyclables for
collection on the morning of pick up. Setting recyclables out the morning
of pick up was thought to reduce theft and scavenging. It has been
discovered that homeowners put their recyclables out at their convenience
and are not overly concerned with scavenging. It has also been found that
starting one hour later than the normal garbage collection time causes the
recycling truck to hit afternoon traffic on the I-5 freeway to and from the
recycling center.
Starting the collection of recyclables at 7:00 a.m. should help to miss rush
hour traffic and decrease overtime costs. Additionally, since homeowners
are putting their recyclables out for pick up with their garbage the night
before, as opposed to the morning of collection, preventing scavenging will
be more effective if the recyclables are collected as soon as possible the
next day.
Another area of change involves participation record keeping. For staff to
effectively analyze and evaluate this type of recycling program, provisions
were incorporated into the Recycling Agreement to have the contractor
keep detailed participation records. Keeping track of the participation
rates meant having two persons on the truck for the program. One person
to drive and mark the route sheets, the other to empty the recycling
container. Now that the program has been evaluated the need for this
additional record keeping is not necessary. Deleting this requirement from
the agreement will enable Solag Disposal to run the program with one
person on the truck thereby reducing labor costs by half.
Finally, the last amendment to the agreement is in regards to the terms
extending the length of the agreement to June 30, 1992. An amendatory
agreement has been drafted for your approval and is provided as
Attachment "D". The details and selection of expanded city-wide
residential curbside program should come before the City Council early
next year.
COMMISSION/BOARD REVIEW & RECOMMENDATIONS:
Not applicable.
FINANCIAL CONSIDERATIONS:
The cost of this service is already covered in the garbage collection bill,
thus the proposed extension will not increase user fees. All billings and
accountings are provided by the contractor, Solag Disposal, Inc.
NOTIFICATION:
Solag Disposal, Inc.
0
Agenda Item -3- September 3, 1991
ALTERNATE ACTIONS:
1. By motion, approve the requested contract extension to the Recycling
Agreement with Solag Disposal to be effective through June 30, 1992.
2. Do not approve the contract extension.
3. Refer back to staff for additional information.
-----------------------------------------------------------------
------------------------------------------------------------------
RECOMMENDATION:
By motion, approve the requested contract extension to the Recycling
Agreement with Solag Disposal to be effective through June 30, 1992.
------------------------------------------------------------------
------------------------------------------------------------------
Respectfully submitted,
44441-441*?4
Douglas Dumhart
DD:dh
Attachments: All attachments are on file with the City Clerk with the
exception of Attachment "C". Due to its proprietary
information, it is found in Council Packets only.
—� 5.
0 0
Councilman Friess felt that the gang problems within the
City, although on a relatively small scale, should not be
ignored. He stated concern regarding budget impacts but
alternative program were unknown at this time. He cited
support for the program only on the basis of a one-year
evaluation. The Council voiced concerns regarding budget
impacts and the potential for additional fees and costs to
be added by the County after the program is implemented.
Approval of Intent+on to Participate in Program:
It was moved by Councilman Friess, seconded by Councilman
Bland, and unanimously carried that the City Council state
its intention to participate in the proposed Gang Prevention
and Suppression Team Program for one year, after which time
the program will be evaluated by the City. The City's
participation is also to be based on the amount of $27,400,
representing the City's share of costs for the program for
the first year, and the requirement that San Clemente be part
of the program.
The City Manager was directed to draft a letter to the Board
of Supervisors for the Mayor's signature requesting an
indication of their commitment to the program.
Written Communication:
Report dated September 4, 1990, from the Assistant City
Manager, summarizing the three components necessary to
implement the state -mandated proposed curbside recycling
program in conjunction with the Cities of Dana Point and San
Clemente. Phase I of the program is anticipated to begin
October 3, 1990, in two selected neighborhoods, at a cost of
$2.48 per residence. The program will be re-evaluated after
a six-month period to determine its effectiveness.
Mr. Scarborough made an oral presentation, noting that the
$2.48 cost per residence is guaranteed for a one-year period.
James Routroulis of Solag Disposal suggested that the costs
be shared by both residential and commercial property owners
because of the program's general benefits to the City. He
noted that one of the mobile home parks on Alipaz Street may
be included in Phase I and that the bins would be picked up
at individual mobile homes.
Approval of Agreement:
It was moved by Councilman Friess, seconded by Councilman
Buchheim, and unanimously carried that the Recycling
Agreement between the City and Solag Disposal, Inc. be
-9-
9/4/90
AGENDA ITEM
TO:
FROM:
SUBJECT:
SITI IATION
0
1-1
September 4, 1990
Stephen B. Julian, City Manager
George Scarborough, Assistant City Manager
Approval of Amendment to Agreement Between Solag Disposal, Inc. and
City of San Juan Capistrano
At the City Council meeting of June 19, 1990, Council gave approval in concept to the
proposed curbside recycling program.
The City, in conjunction with the Cities of Dana Point and San Clemente, has been
working to develop a recycling program to meet the State mandated requirements of AB
939. The recycling program consists of three components:
1. Phase I curbside recycling;
2. Compliance with AB 939 to develop a mandated source reduction and recycling
element;
3. The proposed establishment of a JPA to provide regional coordination of
efforts to comply with the State mandates.
Curbside Recycling
An agreement has been finalized and approved by Solag Disposal, Inc. that provides for
implementation of curbside recycling conforming to the major elements outlined below.
The agreement with Solag Disposal, Inc. was approved and executed by the City of Dana
Point on August 14, 1990. Based upon the approval of this agreement with Solag
Disposal, Inc. by the City of San Juan Capistrano and upon the approval of the agreement
with San Clemente Commercial by San Clemente on September 5, 1990, the proposed
start date for Solag to begin providing curbside recycling collection services in the Phase
I service area in San Juan Capistrano is October 3, 1990.
The agreement with Solag for Phase I of curbside recycling is composed of the following
elements:
1. The Phase I area to be served will be composed of 1,000 residential units in the
area of Harbor Lane Homes and Troy Homes as shown on map included as an
attachment.
2. The pickup of recyclable materials will be scheduled on the same day as the
existing regularly scheduled refuse collection service day.
3. The materials to be collected and transported by Solag to the market places will
be: newspapers, glass containers, metal (aluminum and steel/tin) cans and plastics
(all PET soft drink bottles and half gallon and larger HDPE milk and water
containers).
FOR CITY COUNCIL AGEND 91
AGENDA ITEM •
September 4, 1990
Page 2
0
4. The three -bin method of separation and collection is the method proposed by
Solag Disposal, Inc. and supported by the three Cities' staff. The containers will be
of the nesting type in a set of three. The containers will include a gray bin for cans
and plastic bottles, a blue bin for glass bottles and a tan bin for newspapers.
5. The bins for the recyclables will be distributed by Solag to the individual homes
a week prior to the start of the program. Instructions and encouragement for
participation will be included with the bins. A hotline telephone number will be
noted on the bins and publicized.
6. Solag will purchase sufficient bins to be furnished to the 1,000 residents plus a 5
percent reserve for replacements. The residents will receive the initial allocation
of bins at no cost. Replacements for damaged, lost or stolen bins will be at the
cost of the resident, excepting containers damaged by contractor. The City
Manager or designee will be responsible to resolve any dispute regarding charges
for container replacement.
7. Collection of the recycled materials by Solag will not commence before 8:00
a.m. This schedule will be publicized, and all residents will be requested to not put
recyclables out until the morning of the scheduled pickup day to reduce scavenging.
8. Solag will sell all recyclable material at fair market value at a reasonably
accessible location at the end of a normal working day. The purchaser of these
materials will make payment directly to the City.
9. At the conclusion of a six-month period following commencement of the Phase I
curbside recycling services, the data collected from information provided by the
contractor and by City staff will be evaluated to assess the effectiveness of the
program. In addition, Solag's records will be audited to determine the actual costs
of providing the curbside recycling program services. This information will be used
to make a decision as to whether to modify the program and/or expand to include
other areas of the City or continue with the same area for an extended period of
evaluation.
10. Since there will be a diversion of solid waste from the landfill and a
corresponding reduction in the amount of waste material to be hauled by Solag
under the basic solid waste contract with the City, Solag will pay to the City on a
quarterly basis a diversion credit amount equal to the per ton gate fee at the
County landfill at the time of the collection, multiplied by the number of tons of
recyclable materials sold by Solag during that period. Subsequently, that diversion
credit will be passed on to the rate payers in the form of lower rates.
11. Solag will invoice each subscribing residential customer for curbside recycling
services. However, as noted earlier, all revenue from the sale of recyclable
materials will be paid directly to the Cities.
12. The cost proposal from Solag Disposal for the Phase I program is $2.48 per
residence per month with the price guaranteed for a one-year period from the date
of implementation of the program unless the Cities modify and/or expand the
program before the end of the one-year period. However, Solag's records will be
audited at the Cities' cost at the end of six months following implementation of the
program to determine the actual cost and profits in providing the services. This
AGENDA ITEM • •
September 4, 1990
Page 3
cost information will be considered in the extension, expansion or modification of
the recycling program and the negotiation of any contract amendments.
A public education and outreach program will be initiated in advance of the start-
up of the curbside program. The program will include:
o A mailer to all residents in the Phase I area with instructions and
encouragement for participation in the program. This will occur approximately
two weeks before the start-up date.
o Further instructions and encouragement for participation will be included with
the delivery of the bins by Solag Disposal, Inc. A hotline telephone number will
be publicized to answer questions about the program.
o The recycling program will be publicized extensively in the media serving the
City of San Juan Capistrano, including local newspapers and CATV.
Information will also be sent to all homeowners associations and civic groups to
promote the Phase I curbside recycling program as well as the concept of source
reduction and recycling of materials.
o Public awareness and education will also be undertaken with various civic
groups, schools and other organizations following the start-up of the initial
curbside recycling program.
13. At the conclusion of Phase I of the curbside recycling program, City reserves
the right to solicit requests for proposals from any other entity for curbside
recycling services.
Each City will enter into a separate and similar agreement/amendment with Solag
Disposal, Inc. for recycling services. Dana Point approved their amendment with
Solag on August 14, 1990, and San Clemente should take action on September 5,
1990. While providing for the unique situational agreements with each City an
Solag, economics of scale will be allowed by working together.
Revenue
As part of the overall recycling program, the City will receive revenue from two
sources. One source will be from the sale of recyclable materials collected by Solag and
delivered directly to a buyer on the open market. The amount of revenue the City will
realize from the sale of the materials will depend on residence participation rates and
fluctuation in the marketplace prices for the material.
The other source of revenue to the City will be from quarterly payments made by Solag
Disposal as a diversion credit amount. This payment is derived from the fact that there
will be a diversion of solid waste from the County landfill and a corresponding reduction
in the amount of waste material to be hauled by Solag under the basic solid waste
contract with the City. The quarterly payments will be equal to the per -ton gate fee at
the County landfill at the time of collection multiplied by the number of tons of
recyclable materials sold by Solag during that period. The revenue from these two
sources will be fully utilized to partially underwrite the cost of the recycling program.
AGENDA ITEM • •
September 4, 1990
Page 4
State Mandated AB 939
AB 939 requires all Cities and Counties to prepare, adopt and implement a Source
Reduction and Recycling Element which identifies how the jurisdiction will divert,
through source reduction, recycling and composting, 25% of solid waste from landfill or
incinerator by 1995, and 50% or the maximum amount feasible by 2000. The element
must be submitted to the County by July 1, 1991, then approved by the California
Integrated Waste Management Board. The Board may impose administrative civil
penalties on the City or County of up to $10,000 per day for failure to develop an
adequate Element or Plan.
JPA for Solid Waste Management
It is anticipated that, within approximately three months, the Staffs of three Cities, San
Juan Capistrano, Dana Point and San Clemente, will propose to establish a Joint Powers
Authority to deal with all existing and future integrated waste management matters.
The purpose of a JPA would be to provide reliable, economical, integrated and
environmentally sound waste management services to all of the residents of the tri -City
area. Attached are the estimated costs associated with this JPA. It must be realized
that these budget projections are extremely preliminary. More accurate numbers will be
generated during the preparation of the Source Reduction and Recycling Element which
will be prepared early in 1991.
Costs of Recycling Program and State Mandates
The costs of the first-year operations of a recycling program include those costs
associated with the Solag Agreement, the costs of meeting AB939 mandates, including
consulting costs, and the costs associated with a JPA. All of these costs are necessary
and appropriate costs of providing solid waste services and should be recovered from user
fees.
A. The costs associated with the Phase I, identified in the Solag Agreement, would
be $2.48/month per household for 1,000 households or $2,480.00 per month,
$29,760.00 per year.
B. AB 939 Compliance Costs - The costs involved with meeting the AB939 include
supplies and contractual services. The total cost for AB939 compliance is
$83,160.00.
C. JPA Costs - These costs would include all costs associated with the
development and implementation of a JPA for 9 months beginning January 1,
1991. The total JPA cost would be $45,170.00.
Instituting the recycling program and meeting State mandates will require that our
garbage collection fees be increased. It is Staff's intention to request City Council
approval of a user fee increase at the next City Council meeting.
Negative Declaration
A negative declaration has been prepared for the curbside recycling program and
approved by the Environmental Review Board on Tuesday, August 14, 1990.
AGENDA ITEM • .
September 4, 1990
Page 5
NOTIFICATION
Solag Disposal, Inc.
City of Dana Point
City of San Clemente
COMMISSION/BOARD REVIEW, RECOMMENDATIONS
N/A
FINANCIAL CONSIDERATIONS
The costs for the collection of recyclable materials under the proposed agreement has
been set by Staff and Solag at $2.48/month per household for a total Phase I cost of
$29,760 in the first year.
Additional costs of the recycling program include:
A. AB 939 compliance costs which will be approximately $83,160.00;
B. JPA costs which will be approximately $45,170.00.
User fees will be used to offset costs of the mandated recycling program.
ALTERNATE ACTIONS
1. Approve and execute the agreement with Solag Disposal, Inc, for the performance of
curbside recycling services at the cost of $2.48/month per household.
2. Do not approve the agreement with Solag Disposal, Inc. for curbside recycling
services.
3. Refer back to Staff for additional information.
RECOMMENDATION
Approve and execute the agreement with Solag Disposal, Inc. for the performance of
curbside recycling services at the cost of $2.48/month per household.
Respectfully submitted,
City Manager
GS/JAZ:cl
Attachments
0 0
1990-1991 BUDGET SOLID WASTE MANAGEMENT - RECYCLING
3 Months 9 Months TOTAL
10-3-90 to 1-1-91 to
12-31-90 9-31-91
REVENUES
Recycling Salvage (Based
on $.0375 per lb. x 48
lbs per month per household
x 40% participation rate) $2,160 $6,480
Landfill Diversion (Based
on $17.75 per ton) $ 510 $1,530
Solag Cost Savings $ 50 $ 150
TOTAL REVENUE $2,720 $8,160 $10,880
EXPENDITURES
3 Months 9 Months TOTAL
10-3-90 to 1-1-91 to
12-31-90 9-31-91
SOLAG RECYCLING SERVICES
($2.48 x 1000 households
per month) $7,440 $22,320 $29,760
TOTAL SOLAG COSTS $7,440 $22,320 $29,760
0
COMPLIANCE COSTS AS 939
3 Months 9 Months
10-3-90 to 1-1-91 to
12-31-90 9-31-91
SUPPLIES
Maps and Blueprints (Route
Maps for curbside
recycling areas) $ 200 $ 130
TOTAL
Postage
$2,500
$
600
$ 0
TOTAL SUPPLIES
$2,700
$
730 $3,430
CONTRACTUAL SERVICES
Advertising (newspapers
TV ads)
Printing and Binding
(public information)
Accounting and Auditing
(bi-annual audit)
$ 650
$2,500
$ 0
Other Professional Services
(consulting services) $19,000
$2,500
$1,500
$3,330
$51,000
Other
Contractual
Services
$ 500
$ 0
TOTAL
CONTRACTUAL
SERVICES
$22,650
$57,080
$79,730
TOTAL COMPLIANCE COSTS
AB939 $25,350 $57,810 $83,160
0 0
JPA COSTS
3 Months 9 Months TOTAL
10-3-90 to 1-1-91 to
12-31-90 9-31-91
PERSONAL SERVICES
Salaries Permanent Solid
Waste Mgmt. Coordinator
$
0
$11,250
Salaries Part time - 20 hrs
Books, Codes, Supplements
$
0
per week (typist clerk)
$
0
$ 5,250
Premium Overtime
$
0
$ 255
Auto Allowance
$
0
$ 1,200
Employee Benefits
$
0
$ 5,640
TOTAL PERSONAL SERVICES
$
0
$23,605 $23,605
SUPPLIES
Office Supplies
$
0
$
750
Books, Codes, Supplements
$
0
$
170
Other Operating Supplies
$
0
$
800
TOTAL SUPPLIES
$
0
$
1,720 $ 1,720
CONTRACTUAL SERVICES
Travel and Training
$
0
$
500
General Liability Insurance
$
0
$
5,000
Telephone and Telegraph
$
0
$
600
Maintenence of Office
Equipment
$
0
$
375
Other Legal Services
(JPA legal assistance)
$
0
$
1,000
Rental of Buildings
$
0
$
3,750
TOTAL CONTRACTUAL SERVICES
$
0
$11,225 $11,225
3 Month 9 Month
10-3-90 to 1-1-91 to
12-31-90 9-31-91
TOTAL
OTHER CHARGES
Dues and Subscriptions $ 0 $ 130
(magazines/associations)
TOTAL OTHER CHARGES $ 0 $ 130 $ 130
CAPITAL OUTLAY
Office Furniture &
Equipment (computer
printer, software)
$
0
$
2,670
Chair
$
0
$
150
Telephone (confrence)
$
0
$
100
Calculator
$
0
$
20
Desk
$
0
$
700
File Cabinet
$
0
$
350
Fax
$
0
$
670
Copier
$
0
$
3,330
Car Phone
$
0
$
500
TOTAL CAPITAL OUTLAY
$
0
$
8,490
8,490
TOTAL JPA COSTS $ 0 $45,170 $45,170
$147,210.00
3 MONTH
6 MONTH
TOTAL
TOTAL
SOLAG COSTS
$
7,440
$ 22,320
$
29,760
TOTAL
COMPLIANCE COSTS
$
25,350
$ 57,810
$
83,160
TOTAL
JPA COSTS
$
0
$ 45,170
$
45,170
TOTAL
EXPENDITURES
$
32,790
$125,300
TOTAL
REVENUE
$
-2,720
$ -8,160
NET EXPENDITURES
$
30,070
$117,140
$147,210.00
CITY OF SAN JUAN CAPISTRANO
PHASE I CURBSIDE RECYCLING PROGRAM AREAS
•
!!�■A!a Peat M:a rwi c k
U,
E
t
•
•
f
r7
S
•
Certified Public Accountants
REPORT ON FINANCIAL AND MANAGEMENT REVIEW
of
SOLAG Disposal, Inc.
December 1991
SOLAG DISPOSAL, INC.
Report on Financial and Management Practices
December 1991
Table of Contents
2
0
4W
A
7-
Billings and Collections..........................................................................................
2
General and Administrative Costs...........................................................................
5
LaborCosts.............................................................................................................
6
LandFill Gate Fees.................................................................................................
7
Methods for Allocating Expenses to Individual Cities ...............................................
S
Franchise Fee Calculation and Payment....................................................................
9
Equipment Replacement Reserve..............................................................................
10
ContractProfitability.............................................................................................
10
Compliance with Significant Contractual Requirements ..........................................
12
Management Practices and Procedures.....................................................................
13
Accounting Practices...............................................................................................
13
AccountingRecords.................................................................................................
14
Equipment Maintenance and Condition....................................................................
14
Collection Routes - Procedures and Practices...........................................................
15
2
0
4W
A
7-
s
AREPPW Peat Marwick
0
Certified Public Accountants
Orange County Office
Center Tower
650 Town Center Drive
Costa Mesa, CA 92626
4P December 17,1991
Mr. Stephen Julian
S City Manager
City of San Juan Capistrano, California
Dear Mr. Julian:
1
Member Firm of
Kynveld Peat Marwick Goerdeler
We have applied certain agreed-upon procedures, as discussed below, to the various records and
.
practices of SOLAG Disposal, Inc. for the eighteen month period ended June 30, 1991. This letter sets
forth procedures and findings resulting from that review. In conducting our work we performed the
procedures described below.
Reviewed financial policies, practices and transactions in the following areas:
Costs associated with the billing and collection of fees, including bad debt experience and
resulting write-offs;
• General and administrative costs;
• Level of direct and indirect labor costs, including benefits;
• Land fill gate fees;
Method of allocating expenses to individual cities;
• Franchise fee payments to each participating city;
• Practices relating to the establishment of equipment replacement reserves;
• Profitability of the contract with each participating city based on the allocation methods
developed.
.
Reviewed management policies and procedures in the following areas:
• Compliance with the individual Cities' significant contractual requirements;
• General management practices and procedures;
• Records management and accounting practices;
• Maintenance practices and condition of equipment;
Collection routes, procedures and practices.
Our review was performed at the request of the cities of Dana Point, Laguna Niguel and San Juan
Capistrano (the "Cities"). Our findings as set forth in the remainder of the report relate to all Cities
unless specifically identified as only relating to one particular City.
1
Member Firm of
Kynveld Peat Marwick Goerdeler
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 2
BILLINGS AND COLLECTIONS
r Procedure - Reviewed the costs associated with the billing and collection of fees, including bad debt
experience and resulting write-offs.
The Company bills and collects charges for all customer accounts. Billing is performed quarterly for
residential units and monthly for commercial customers. The majority of customers are residential
(about 22,800) and are processed on a computerized data base which is updated monthly. Billings are
prepared in advance of the service period. Approximately three days before mailing the bills (on the
25th of the month before the beginning of the quarter), the administrative staff begins updating the
customer data base to ensure all the customers receiving service will be billed. The Company uses
postcards which are preprinted with all items except customers name and address. The postcards are
two part with one kept by the customer as a receipt while the other is forwarded with payment as the
remittance advice. The postcards are sorted by zip -code and batched into stacks of 250 for preferred
mailing rate prior to being mailed. No envelopes are provided.
In October 1990, the Company established a bank lock -box to which customers send payments directly.
The lock -box service costs approximately $22,000 per quarter. For residential accounts, the bank
deposits funds as received and posts payments to the Company accounts receivable files which are
updated daily, via modem, at the Company. The bank then mails the remittance advices. For
46 commercial accounts, the bank only deposits the funds and forwards the remittance advices to the
Company which posts to the accounts receivable subledger. By contracting this work at the bank,
management believes there are cost savings in the staff reduction. Additionally, this allows the bank
to keep records of these activities, which provides off-site storage for these Company transactions.
If payment has not been received 45 days after billing, a reminder notice is sent to the customer. This
S notice indicates that service will by stopped if payment is not received within an established number of
days which varies by city. If payment has still not been received at the end of this period the customer
is placed on the "stop list" This list is updated daily and given to all drivers before leaving for their
routes. This stop list acts as the Company's control over its service population. Any newly developed
areas are automatically placed on this list and service will not commence until a customer request is
received. The Company employs an individual to "audit" the routes and verify that all customers
receiving service are properly billed. Documentation of the routes audited is retained for future
reference.
The majority of customers pay within the first 45 days of billing (many within the first 20 days), hence,
are not sent reminder notices. If a reminder notice is sent and no response is received, non-paying
customers are first telephoned with a follow up person-to-person visit. Occasionally, the Company
will refer a non-paying customer account to a collection agency, however, this is not common according to
management. We noted that bad debts amounted to less than $5,000 per year which is less than 1% of
revenue.
0
L",
E
0
i
0
C]
L1
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 3
Currently, the number of residential units serviced by the Company, including homeowner association
residential units, for the three Cities is as follows:
Residential units not provided
refuse service or not billed
2_,163 22 4L
There are various factors which could cause a difference between the number of residential units billed
by the Company and the City's records, including:
1) Refuse collection is not mandatory making participation fully voluntary;
2) Some curbside customers are billed as commercial as they have contracted to have the
commercial bins.
3) Not all residential dwellings in a City are occupied at any one point in time; and
4) Not all units receiving service are being billed.
The residential disposal fees vary by City and are summarized as follows:
Dana Point San Tuan Capistrano �Laguna Niguel
Base rate $ 6.53 6.14 6.50
Recycling fee - 1.01 -
Landfill gate fee 4_43 4.43 4_43
Total $10.96 11.58 10.93
The Company includes homeowners associations in its commercial billings cycle because the homeowner
r associations are billed, not the individual residence. For these monthly billings, the Company obtains
the number of occupied dwellings from the associations and bills accordingly. If the Company believes
there is an inaccurate count of occupied units they will send a Company employee to "audit " the number
of occupied dwellings prior to the billing.
F]
9
Dana Point
San Tuan Capistrano
Laguna Niguel
Residential units billed quarterly
7,344
4,904
10,566
Association units billed monthly
2.315
2.006
2-553
Total residential units billed
91659
66 10
1119
Number of residential units
per Cary records
11 822
9
17,172
Residential units not provided
refuse service or not billed
2_,163 22 4L
There are various factors which could cause a difference between the number of residential units billed
by the Company and the City's records, including:
1) Refuse collection is not mandatory making participation fully voluntary;
2) Some curbside customers are billed as commercial as they have contracted to have the
commercial bins.
3) Not all residential dwellings in a City are occupied at any one point in time; and
4) Not all units receiving service are being billed.
The residential disposal fees vary by City and are summarized as follows:
Dana Point San Tuan Capistrano �Laguna Niguel
Base rate $ 6.53 6.14 6.50
Recycling fee - 1.01 -
Landfill gate fee 4_43 4.43 4_43
Total $10.96 11.58 10.93
The Company includes homeowners associations in its commercial billings cycle because the homeowner
r associations are billed, not the individual residence. For these monthly billings, the Company obtains
the number of occupied dwellings from the associations and bills accordingly. If the Company believes
there is an inaccurate count of occupied units they will send a Company employee to "audit " the number
of occupied dwellings prior to the billing.
F]
9
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 4
Result - Considering the staff time required to audit and update the customer base and process bills, we
suggest alternative billing options be considered. These may include:
i
• Billing on a cyclical basis, with one-third of the bills processed each month. Because
only one-third of the bills would be processed, fewer staff would be required for the task.
• Utilizing a data center for the preparation of bills.
Processing the refuse bills with water bills.
• Include the refuse bills on the County property tax bills with the appropriate
arrangements and payment of a processing fee.
We recommend these suggestions be considered to improve cash flow and reduce operating costs.
Further, we believe that 45 days is an excessive amount of time to allow for payment of customer bills.
A payment cycle allowing 20 days for payment of the bill is more typical. Further, it appears that,
while staff is quite busy during the quarterly billing cycle, these employees may be underutilized
during the remaining two months of each quarter.
We also recommend field audits be performed on a systematic cyclical basis and the results be
documented and reviewed for propriety. These field audits should include the homeowner associations.
0
f
r
0
If the billing and collections function for the approximately 22800 residential units were handled
outside the Company, either by mandatory refuse service and inclusion on the property tax bills or by
processing with the water billings, significant cost savings to the Company could result from cost
reductions in areas such as:
Estimated
Potential
qavingr.
Bank lock box (residential only) $ 64AN
Postage 13AW
Invoices (postcards) 2,000
Staffing _34DW
Total $113,000
Additionally, revenues could be expected to increase if disposal service were mandatory.
i
0
E
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 5
GENERAL AND ADMINISTRATIVE COSTS
Procedure - Reviewed the general and administrative costs.
General and administrative expenses were 11% of the Company's total expenses for the eighteen
months -ended June 30, 1991. General and administrative expenses consisted of: Insurance (9%), office
expense (9%), professional fees (12%), office salaries, not including management (20%), and
management salaries (19%) and other (31%). Insurance consists of the cost of the Company's HMO plan
for which all employees and their families are provided coverage. Office expense is made up of non-
capitalizable costs relating to the operation of the business. Professional fees consists of accounting,
(the yearly review), legal, and software consulting fees. Office salaries expense relate to the salaries
paid to all office administrative staff. Management salaries consist of the President's, Vice
President's, and General Managers salaries. We compared the Company's expense ratios to the other
refuse haulers below: Ratios are expressed as a percentage of revenue:
Result - General and administrative costs appear reasonable, however, with the modifications in the
billing and collection processes discussed above, some labor costs savings could be realized. Further, we
recommend that the Company include the president's and the general manager's salaries in general and
administrative expenses to more accurately present the financial statements and parallel industry
practices.
i
0
Other
Ratios: Refuse
SOLAG Haulers
Collection Costs (including dump fee) 90% 73%
Selling, general and administrative 11i% 19%
i
106% 92%
The industry percentage of 92 indicates that expenses are 92% of revenues, thus providing an 8% margin.
The SOLAG percentage of 106 indicates that expenses are 106% of revenues, thus reflecting a loss
situation. Because the refuse industry is comprised of many conglomerate and integrated companies, the
general and administrative costs are frequently allocated from a parent company and may include
marketing and other dissimilar costs, resulting in industry statistics on general and administrative costs
as a percentage of expense not being meaningful. However, our contacts of other refuse haulers provided
the percentages cited above.
noted that the Company includes the president's salary and a portion of the general manager's
1P
salary in the collection costs rather than being included in general and administrative expenses. For
salary
the table above, these amounts have been included in general and administrative expenses. (See
further discussion below in Labor Costs).
Result - General and administrative costs appear reasonable, however, with the modifications in the
billing and collection processes discussed above, some labor costs savings could be realized. Further, we
recommend that the Company include the president's and the general manager's salaries in general and
administrative expenses to more accurately present the financial statements and parallel industry
practices.
i
0
s
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 6
LABOR COSTS
Procedure - Reviewed the level of direct and indirect labor costs, including benefits.
•
We reviewed the Company's organizational structure noting a typical hierarchical structure. The
Company is privately owned and the three top members of management are related.
Management has stated that the current level of staffing is sufficient for the customer service required
in the refuse business. Additionally, the Billing and Collection and General and Administrative
• sections of this report address support staffing levels.
Our analysis of direct labor, which includes the drivers, foremen, swampers (second man on residential
trucks), mechanics, welders, and associated benefits, indicated that the Company expended 28% of
total expenses on direct labor for the eighteen months ended June 30, 1991. Employees included in direct
labor typically work fifty hour weeks.
Included in the Company's collection costs is an account entitled "contract sweeper" (see Attachment 1).
In discussions with management we noted this account is the result of contract services performed by a
related company and includes amounts billed for the following : president's salary, approximately
one-half of general manager salary and all of the mechanics' and welders' salaries. The reason for
subcontracting mechanic labor is that it allows for a significant savings on workers' compensation
• insurance premiums as the modification factor (adjustment for nature of business) is lower than it would
be with a refuse disposal company. This company, Capistrano Sweeper Co., is owned by SOLAG's
General Manager and was formed specifically to perform street sweeping and mechanical services for
SOLAG. The Capistrano Sweeper Company pays their personnel and then bills SOLAG . For the
eighteen months ended June 30, 1991 the total amount billed to SOLAG by Capistrano Sweeper Co. was
$798,703 which is included in the contract sweeper account in Attachment 1 and is comprised
approximately of the following salary amounts:
President
$ 36,000
General Manager
90,000
r Operations manager
30.000
Subtotal
156,000
Less: Total Capistrano Sweeper Co.
(798,703
Mechanic's and welder's salaries
642,703
• Divided by number of mechanics and
and welders
+ 14
Average eighteen month salary
per mechanic and welder
$ 45,900
• This eighteen months of salary represents an annualized salary of $30,600 including overtime and
suggests that billings for subcontracted mechanics and welders labor are not unreasonable.
0
i
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 7
Of the fourteen employees, three are full time welders who repair and paint bins. The remaining
eleven are full time mechanics assigned to a fleet of 52 vehicles for a ratio of approximately 1 mechanic
per 5 vehicles. Discussions with other organizations responsible for maintenance of large vehicles
• (refuse trucks, buses, etc.) revealed that a ratio of 1 mechanic for 4 to 6 vehicles is not unusual.
Management indicated that a typical workload per day for vehicle repairs is as follows:
1) One to two major vehicle repairs - one to three day projects.
• 2) Three to four minor vehicle repairs - One to four hour projects.
3) Three to four vehicles receiving preventive maintenance - oil changes, brake
inspections, tune ups, etc.
Results - The structure and level of staffing for direct labor in operations appears appropriate. The
level of staffing constituting indirect labor for administrative support appears excessive, as eight
administrative staff are available to handle customer calls, billing, cash collections (walk-in receipts)
and accounts payable. A review of staffing assignments and workloads coupled with modification of
the billing process as previously discussed may result in opportunities to reduce administrative support
costs.
•
LAND FILL GATE FEES
Procedure - Reviewed the Company's land fill gate fees.
The Company bases residential billings on an estimate of 390 pounds of rubbish collected per month.
Included in the 390 pound factor is an administrative allowance of 4.4% or 17 pounds and a 373 pound
factor for refuse collected. The Company's records indicate that the actual average pounds of
residential rubbish collected per month is 273 pounds for the three Cities combined. The difference
between the 373 pounds factor billed and the actual refuse collected of 273 pounds may be caused by
fluctuations in refuse weight such as an unusually dry period, recycling or changes in customer habits. It
should be noted that the administrative allowance is considered by the Company to be part of the
landfill gate fee and thus the franchise fees paid to the Cities are not applied to this portion of
customer billings. Had the administrative allowance been included in the base rate, franchise fees for
1991 would have been increased by approximately $48,000 for the Cities combined.
Results - The current landfill fee structure which includes the administrative allowance factor is
confusing and results in an inaccurate base rate fee. The base rate fee is, in effect, understated as it does
• not include these administrative allowances which appropriately should be included in the base rate
fee and subject to franchise fees.
We recommend the Company restructure the landfill fees by removing the administrative allowances
in landfill gate fee formula and reflect these costs in the base rate fee. Additionally, we recommend
the Company monitor, on an individual city basis, the average annual or monthly pounds of refuse per
customer and adjust the landfill billing to the customer to reflect the actual. The Company should
maintain and monitor accurate landfill fee records including tons disposed and amount billed.
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 8
METHODS FOR ALLOCATING EXPENSES TO INDIVIDUAL CITIES
Procedure - Reviewed the method of allocating expenses to the individual cities.
•
We noted that currently the Company does not have a method to allocate expenses to each city served.
Many factors are involved in effectively allocating expenses to the individual cities - topography,
demographics, mileage, number of accounts, type of accounts, customer requests, etc.
One possible allocation method would be an allocation by weight (tons of refuse collected) for each of
• the cities. This method would appropriately assign the city with the heaviest loads the costs
associated with that additional weight. This information is readily available through the
examination of the County dump ticket receipts. However, given the current route structure, this
method may not be accurate as the commercial routes often span more than one city while residential
routes are typically within only one city.
• A second possible allocation method would be allocation by the number of miles serviced within a city.
This method would appropriately distribute the costs associated with vehicle wear and distance from
pick-up to the dump. This method would not incorporate the expenses caused by weight. Currently,
the Company does not have records on the number of miles served. To incorporate this method the
Company would need to measure distance and topography for all routes served. Once measured and
implemented, continual additions to the records should be made for variations in routes or for special
• pick-ups.
A third possible allocation method would be based on the revenue received by City. This method is
simple and easy to apply. However, it does not recognize or mitigate the effects of any distortions
caused by inequitable rates and, in fact, tends to promote the continuation of such inequities (if any), if
future rate adjustments are based on costs incurred and allocated.
A fourth possible method would be to allocate costs based on the number of residential and commercial
customers served within each City. The Company maintains records of the number of residential units
and the number of commercial bins collected each month in all Cities. This method assumes that all
customers are of equal distance from the Company's operations.
• Results - We believe that a revenue based allocation is the most practical method to allocate expenses
as this method is simple and captures the specific number of residential and commercial customers
served (see Attachment 1). This method also weights to some extent the allocation according to the
number of miles traversed, as is currently the situation whereby Laguna Niguel customers are charged
slightly more than San Juan Capistrano because of their greater distance to the dump. We used this
method to allocate the Company's costs below under Contract Profitability. We also allocate the
Company's expenses based on the number of customers served (residential units and commercial bins)
within each City (see Attachment 2). The result of this method was comparable to the results obtained
using the revenue based allocation.
0
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 9
•
FRANCHISE FEE CALCULATION AND PAYMENT
• Procedure - Reviewed franchise fee payments made to the City.
We reviewed the source data supporting the components of the calculation and recalculated the City's
franchise fee for the year ended June 30,1991.
Residential fees are based on a fixed base rate plus a landfill charge or dump fee (see schedule of
current rates charged to the three Cities under Billings and Collections). Franchise fees are calculated
• as a percentage of base rate charges, excluding dump fees. The Company calculates and remits the City
franchise fee on a monthly basis for Dana Point and on a quarterly basis for both San Juan Capistrano
and Laguna Niguel. The residential franchise fee is calculated on the number of customers paying
(units), not actual cash receipts, during the previous month or quarter multiplied by the base rate in
effect during the period. This total is then multiplied by the franchise fee percentage. For example, if
1,000 customers paid during the month or quarter, with a base rate of $5.00 and a franchise fee
percentage of 5%; the franchise fee to be remitted to the City would be as follows: (1,000*$5.00)*5% _
$250.00.
The commercial franchise fee is based on actual base rate cash receipts which are then multiplied by
the franchise fee percentage. For both the residential and commercial franchise fee calculations, the
land fill fees billed and collected do not enter into the calculation.
I
Results - The Company's calculation of franchise fee payments is not in accordance with the franchise
fee agreements for all three Cities. The Laguna Niguel and Dana Point franchise agreements state
that the franchise fee is to be calculated based on "gross annual receipts." The San Juan Capistrano
agreement stipulate that the franchise fee is to be calculated using "annual gross revenues." The
Company is not calculating the franchise fee in accordance with either methodology. Rather, as
• discussed above, the Company calculates the franchise fee based on the number of units paying in the
preceding period. However, we recalculated the franchise fee based on actual cash receipts and the
results approximated the amount computed by the Company. It should be noted that the recycling
revenue remitted to the Cities is included in the Company's revenue and expense records.
We recalculated the franchise fees for the three Cities, based on the method used by the Company, and
r determined that this method had been incorrectly applied for the City of Dana Point. The Company
calculated the franchise fee based on number of units paying in the preceding month as described above
and dividing the result by three in order to derive a monthly (rather than quarterly) remittance
amount. However, the remaining two-thirds of the franchise fee was not consistently remitted in
subsequent months. This practice would be expected to result in a major underpayment to the City of
Dana Point. However, the underpayment was offset by the Company erroneously applying the
• franchise rate to billings made prior to the effective date of the franchise agreement and by a computer
software error causing the calculations to be overstated. When informed of the error in calculation
methodology, the Company recalculated the franchise fee for the period of January 1990 through
September 1991. Based on the results of the recalculations, the Company submitted to the City $8586
in additional franchise fees. We reviewed these recalculations and agreed with the result.
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 10
EQUIPMENT REPLACEMENT RESERVE
Procedure - Reviewed the Company's practices relating to the establishment of equipment replacement
reserves.
Currently, the Company does not set aside reserve funds for equipment replacement, nor is the Company
billing the customer for an equipment reserve. Instead, the Company has an available line of credit at
a bank which is used to fund new purchases.
• The line of credit is $700,000 of which approximately $350,000 is available. During the past two years
the Company has halted new vehicle purchases pending the local cities' decisions regarding recycling
programs and the related vehicle requirements. Many of the refuse vehicles presently in use do not
have the features necessary for recycling programs. Accordingly, it appears that the Company has
been prudent to defer additional vehicle purchases. If a large capital outlay expenditure becomes
necessary, the Company plans to fund the cost through new lines of credit. Additional credit lines could
• be established through extending the existing contracts with participating Cities.
Results - While it appears that the Company has acted in a prudent manner in deferring major capital
replacement expenditures, the Company is not in compliance with the vehicle requirement as required
by the Cities of Dana Point and Laguna Niguel. The Agreement specifies that no primary or
replacement vehicle shall be in excess of 10 years old at any time after January 1, 1991. We noted two
primary vehicles which were in their eleventh year (i.e.. 1981 vehicles) and twenty-six replacement
vehicles greater than 10 years old. Additional vehicles could be financed through additional bank
borrowings or lease purchase agreements with a manufacturer.
• CONTRACT PROFITABILITY
Procedure - We analyzed the profitability of the Company's contract with the City.
We based our analysis on revenue generated by the City because the Company maintains records of
revenue by City, however it does not maintain separate expense records by City.
Results - The Company's total revenue can be allocated for the eighteen months ended June 30,1991 as
follows: the City of Dana Point 25.56%, San Juan Capistrano 19.24%, Laguna Niguel 31.36%, Other
23.83%. Our allocation of expenses is based on the percentage of total revenue generated from service
within each City as detailed in Attachment 1. Based on the Company's internally generated
(unaudited) financial statements, revenues and expenses for the eighteen months ending June 30, 1991
were as follows:
•
•
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 11
Costs associated with the Company's recycling programs were detailed in a report dated June 3, 1991.
This report indicates that there were approximately $140,000 of costs incurred by the Company to
operate the recycling program for the six month period reviewed. These costs are not broken out
separately in the Company's internally generated financial statements and, thus, are not separately
displayed in Attachments 1 and 2.
0
17
San Juan
Other
Dana Point
Capistrano
Laguna Niguel
Entities
Total
Revenue:
41
Residential $1,179,000
803,000
1,346,000
612,000
3,940,000
Commercial 1,650,000
1,327,000
2,123,000
776,000
5,876,000
Drop off boxes 1 376,000
283,000
460,000
184,000
1,303,000
Brown bins 2 53,000
40,000
66,000
26,000
185,000
Other 3 -
-
1.439"000
1.439.000
41
Total revenue 3258.000
2.453.00093.
95.000
3.037.000
12.743.000
Expenses:
Collection costs 1,907,000
1,532,000
2,322,000
1,702,000
7,463,000
Dump fees 1,024,000
771,000
1,256,000
955,000
4,006,000
Selling 151,000
114,000
185,000
140,000
590,000
0
General and administrative73 9.000
285.000
464,000
353.000
1.481,000
Total expenses43. 61.000
2,702,000
4,227,000
3.150.000
13.540,000
Net loss $ 203,000
249,000
232,000
113,000
797,000
I. Drop-off boxes consist of large bins typically used by contractors. These costs
have been
allocated based on revenue as no other detail is available.
2. Brown bins consist of medium size bins used mostly in temporary construction.
These costs
have been allocated based on revenue as no other detail is available.
3. Other revenue is comprised of
revenue generated from: Leisure World, storage rental,
Capistrano Unified School District and other miscellaneous income.
0
Number of customers per month:
Residential (units)
9,658
6,910
13,119
Commercial (bins collected)
7,790
6,088
10,535
Tons (for year ending
40
June 30,1991)
23,955
20,394
40,572
Costs associated with the Company's recycling programs were detailed in a report dated June 3, 1991.
This report indicates that there were approximately $140,000 of costs incurred by the Company to
operate the recycling program for the six month period reviewed. These costs are not broken out
separately in the Company's internally generated financial statements and, thus, are not separately
displayed in Attachments 1 and 2.
0
17
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 12
•
COMPLIANCE WITH SIGNIFICANT CONTRACTUAL REQUIREMENTS
Procedure - We reviewed the compliance with the City's Franchise Agreement for Solid Waste
• Collection and Disposal.
The Cities franchise agreements had several significant contractual requirements. The following is a
listing of these significant requirements which we reviewed for compliance: franchise fee calculation,
insurance requirements, performance bond requirement, vehicle age requirement and customer complaint
log requirement.
•
We reviewed and discussed our results of the Company's franchise fee calculation in the Franchise Fee
Calculation and Payment section of this report.
The insurance requirements are established in the individual City franchise agreements for various
insurance coverages required to be maintained by the Company. The franchise agreements for the Cities
• of Dana Point and Laguna Niguel state that the Company is required to carry the following insurance
coverage per accident: general liability - $1,000,000; automobile liability - $1,000,000; workers'
compensation - $1,000,000. The franchise agreement for the City of San Juan Capistrano states that the
Company is required to carry general liability insurance of $1,000,000 combined single limit and a
workers' compensation policy that "fulfills all the requirements of the Workers' Compensation Act of
said State."
•
The performance bond requirement is the same for all of the three Cities and requires the Company to
post a performance bond in the amount of $10,000 which shall be maintained throughout the duration of
each City's franchise agreement.
The vehicle age requirement for Dana Point and Laguna Niguel stipulates that no primary or
• replacement vehicles shall be in excess of 10 years old at any time after January 1, 1991.
The customer complaint log requirement is the same for all three Cities which specifies the Company
maintain a customer complaint log and have it available for City review.
Results: - The Company's calculation of the franchise fee was not in accordance with the agreements as
• discussed previously.
The Company was in compliance with all general liability, vehicle, workers' compensation and other
insurance minimum coverages. Further, we noted that the Company has an umbrella insurance policy
covering general liability and automobile insurance of $5,000,000 per occurrence or in total which is
additional coverage and exceeds required minimums.
•
The Company is in compliance with the performance bond requirement for each City.
The Company was not in compliance with the vehicle age requirement for Dana Point and Laguna
Niguel. The Company has a number of vehicles exceeding the 10 year maximum age requirement,
• specifically, 2 primary vehicles and 26 secondary vehicles (7 of which have disposal routes within the
two Cities).
0
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 13
•
The Company was in compliance with the requirement to maintain a customer complaint log which is
available for City review.
MANAGEMENT PRACTICES AND PROCEDURES
Procedure - We reviewed the Company's management practices and procedures.
In reviewing cash management we noted that the Company has a non-interest bearing checking account
• and line of credit at the same bank. The checking account is linked to the line of credit and any
checking account balance over $50,000 is posted by the bank to pay down the outstanding line of credit
amount. Conversely, the checking account will draw upon the line of credit on an as needed basis to
cover Company disbursements. In the event the entire outstanding line of credit is repaid, the funds
will be invested in a short-term interest bearing account. As noted under Billing and Collection of Fees,
the Company has all cash receipts sent to a lock -box to maximize its cash balance and minimize its
• interest expense.
The Company issues checks weekly. All invoices pertaining to County dump fees and equipment or parts
purchases are reviewed by the General Manager both upon receipt and after the related check is
printed. All other invoices are reviewed upon receipt and payment by the Vice President. Company
policy stipulates that checks require only one signature of either the General Manager or the Vice
• President, as both have signing authority. After a check run is complete and before the checks are
signed, the Vice President files away any "non-critical" checks (payment not required immediately per
invoice terms). This file is reviewed weekly at the time of each check -run. The Company believes
that it pays its bills at an average of sixty days from invoice date.
The Company has a related party transaction with one affiliated company which affects the financial
• status of the Company. The significance of this is disclosed under Labor Costs section of this report.
Currently, the Company does not prepare regular employee performance evaluations
Results - We agree the Company should not pay their bills until at or near their due date. However, we
recommend that the payment date of an invoice be input into the accounts payable listing at the point
• the invoice is received. This would ensure that each week's check run would include only checks
relating to invoices which are due at that time. This would eliminate the current practice of having
completed checks remaining in the office and the likelihood of not mailing a check when it is due.
Further, we recommend the Company establish a policy for performing employee evaluations. These
evaluations should be performed periodically or at a minimum, once a year.
•
ACCOUNTING PRACTICES
Procedure - We reviewed the Company s accounting practices.
We noted that computer files are backed -up nightly and maintained on site, but not in a fireproof
• cabinet. Monthly, a back-up is made which is stored off-site. Internal financial statements are
prepared monthly and reviewed by management quarterly. We reviewed the organization of the office
staff and duties of each noting that there is minimal segregation of duties and a possibility for
9
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 14
•
management override. Additionally, we noted that monthly "book -to -bank" cash reconciliations are
not documented. The Company does review the information provided by the bank for outstanding
checks and deposits and an actual reconciliation of bank -to -book cash is performed.
•
Results - We recommend that the Company store the daily back-up tapes in a fireproof cabinet to help
prevent the tapes from being destroyed. Additionally, we recommend that job responsibilities be
reviewed in order to provide for appropriate segregation of duties, specifically separating the functions
of handling cash and liquid assets from the functions of billing and accounting for assets. Finally, we
recommend that the Company perform monthly "book -to -bank" cash reconciliations in a timely manner
• so that an accurate amount of cash can be determined.
ACCOUNTING RECORDS
• Procedure - We reviewed the Company's accounting records.
We noted that the Company maintains monthly cash receipts and accounts receivable listings which
are segregated by both City and type of customer. Both of these reports are maintained on a quarterly
basis for residential accounts. The Company maintains about one year of historical data on site and the
remainder is stored off site. The Company uses an outside payroll service to perform its payroll
function. Annually, the Company's accountants update the fixed asset records for the past year of fixed
asset activity.
Results - The Company's accounting records appear to be complete and retention practices appear to be
adequate.
• EQUIPMENT MAINTENANCE AND CONDITION
Procedure - We reviewed the Company's maintenance practices and condition of the equipment.
We noted that the Company's drivers inspect their vehicles and complete a pre -route inspection
checklist each morning for critical items, which is signed and dated.
•
.7
The Company employs a full time California Highway Patrol certified vehicle inspector who monthly
inspects each vehicle and completes the comprehensive critical item checklist certified by the
California Highway Patrol. This checklist is detailed by tested vehicle components, such as brakes or
steering linkage and the inspector specifies a pass or fail for each component tested on the critical item
checklist.
Currently, all vehicle maintenance work orders are prepared manually. However, the Company is in
the process of implementing a maintenance and inventory system for their vehicles which will provide
computerized work orders along with up-to-date information on each vehicle's maintenance history,
next scheduled maintenance and other related information.
• Files for employees who work on the trucks are kept at the yard. These files contain personnel
information as well as information required to be communicated to the drivers. Monthly, the Company
requests Department of Motor Vehicle ("DMV") information on all drivers. This DMV information
0
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
• Page 15
details any traffic citations, accidents or other items reported to the DMV. The information received is
reviewed and reported items are discussed with individual driver and defined disciplining action
taken, for example, minor traffic citations will result in a warning and a drunk driving citation will
result in immediate termination.
We reviewed the Critical Item Checklists of ten vehicles for proper completion and follow-up of failed
items. We also reviewed the Company's truck files.
Result - We noted that critical item checklists are properly completed and, in most instances, if a test
item failed inspection one month it passed the following month indicating correction of the problem.
We noted that the truck files tested included the critical item checklist and a maintenance log of all
the work performed on the vehicle for every year since its purchase. We noted that the yard is secured
nightly by a locked gate. The Company's files appeared neat and orderly. Since there is only one
original of many items we recommend the Company keep duplicate records of maintenance and vehicle
• registrations at an off-site location.
COLLECTION ROUTES - PROCEDURES AND PRACTICES
Procedure - We reviewed the Company's residential and commercial collection routes, procedures and
• practices.
We noted that most of the Company collections were in areas of close proximity. There are, however, a
limited number of isolated areas for which collections appeared to be well off the principal route. The
daily commercial collection routes were more disbursed than the residential routes.
We were informed by Company personnel that the few areas in the residential collection routes which
appear out of the way are due to customer request or other contractual requirements. Also, one of the
Company's major goals with regards to residential routes is to minimize the route changes. In the
future, the Company expects to service each City one day a week.
In reviewing the Company's fourteen residential collection routes per day we noted that the average
• number of units collected per route is 519, which calculates to 52 pickups per truck per hour, based on 10
hour days.
Industry statistics are not available in this area due to the impact of such factors as type of vehicle
(front load or back load), recycling activities, demographics, and level of service (curbside, front step,
back of house, etc.).
Result - Overall, we observed that the Company is collecting the City's waste in a reasonably efficient
manner. Residential routes and commercial routes are efficiently designed. We recommend the
Company account for the miles served, and the number of pick-ups per truck, which will assist in
monitoring efficiency and establishing future rate adjustments resulting from increased service area.
0
•
Mr. Stephen Julian
City Manager
City of San Juan Capistrano
December 17,1991
Page 16
Because the above procedures do not constitute an examination made in accordance with generally
accepted auditing standards, we express no opinion on any of the aforementioned financial data. In
connection with the procedures referred to above, no matters came to our attention, other than those set
forth above, that caused us to believe that the franchise fee remittances to the City of Dana Point
should be adjusted. Had we performed additional procedures or had we performed an audit of the
Company in accordance with generally accepted auditing standards, matters might have come to our
attention that would have been reported to you. This report relates only to the franchise fee data
specified above and does not extend to any financial statements of the Company taken as a whole.
Very truly yours,
KPMG Peat Marwick
Margaret J. McBride, Partner
0
0
0
0
0
LI
£
S
E.E
•
�
x
�
s� �s
e$�- ➢o
E'E
EG
9$n �$ ��
ig�L,3 E$
•
-
E ^
E
ae;=�;;
ii3sg�'
RFs
�Z
.drgs9E8E
Fs3 €$$
i
� F
g E o ... g
F� r
•
t
� iSivf
�S:Si E
LLE
S
35
e
S6_2
eggs e •
U 8 8I 8
Rxk#R k` Lk^`e: eba'#!"•
7
►
#�ftf•
e*Ae gee
Fr
Rte^
_"g
8
8
.�&
08
8
RAN'^8
^^^
_^ _ 'RS
8
:5
c
R,mm•
Sm
8�n
8
- 'eoe8nswwe_wm„
_
R-:
::X9:9v2
e
e
gaa
.
e
11
1
1
6C
s`
`�
F C
e E 3
o
S
•
€g3L
21
•
�
zzam
oEi
E E
�� �y E -eF E��FycF�
_
`e
:R2 w E
3Fo^
6E� n$s�_$owlfn
a. N LL �`'.3•adi>•>•>•3`i a•2
_-E•
e_e g��
F�9` •�'� 8
.0
mao $tl �t4
2
wc_ o
eio=gt4o<
O
N
V
LI
•
:888
8
F388e�
•
i
R
•I f
• �� � So
d
—
•
AR...........___._..aR
•y
_' __
e.
... S..::
_SS
....
I
rd^^
:1
�
�aaelN
q: 1s
al . ..� _._ ... _ .=•��
:__� 1�
_ .�se1"
al
1.
1
II
I
II
-
—
�dddd;:
R
8
:w--V�r1
.
R
a
_gti
...=tl::e_11
1a...._1
s
n e
a
w$
3 E:aC n Bag �
_ •—�
_:=-`�
USE -
0
•
ry� ip[p AIOAAIIO
Y�
mauueio 1961
1776
September 9, 1991
Mr. James Koutroulis
Solag Disposal, Inc.
33161 Camino Capistrano, Suite G
San Juan Capistrano, California 92675
Re: Curbside Curbside Recycling Services Agreement Agreement
Dear Mr. Koutroulis:
MEMBERS OF THE CITY COUNCIL
LAWRENCE F SUC H H EIM
KENNETH E FRIESS
GARY L HAUSDORFER
GIL JONES
JEFF VASQUEZ
CITY MANAGER
STEPHEN 8 JULIAN
At their regular meeting held September 3, 1991, the City Council of the City of
San Juan Capistrano approved amendments to the September 4, 1990, Recycling
Agreement. The amendments, including an extension of the agreement to
June 30, 1992, are set forth in the enclosed Amendatory Agreement.
A fully -executed copy of the Amendatory Agreement is enclosed for your files. If
you have any questions, please let us know.
Very truly yours,
Cheryl Johnson /���Wr
City Clerk L
Enclosure
cc: Douglas Dumhart
32400 PASEO ADELANTO, SAN JUAN CAPISTRANO, CALIFORNIA 92675 0 (714) 493-1171
September 11, 1990
Solag Disposal, Inc.
P. O.Box 1100
San Juan Capistrano, California
Re: Regyclina Agreement
Gentlemen:
s
92693
At their meeting of September 4, 1990, the City Council of the City
of San Juan Capistrano approved the Recycling Agreement to
implement Phase I of the City's curbside recycling program. The
program is scheduled to begin October 3, 1990. A fully -executed
copy of the agreement is enclosed for your files.
An item setting the fee for the recycling program has been
tentatively scheduled for the meeting of September 18, 1990. A
copy of the agenda and staff report for that item will be forwarded
to you.
If you have any questions, please do not hesitate to call.
Very truly yours,
Cheryl oh son
City Clerk
Enclosure
cc: Assistant City Manager
32400 PASEO ADELANTO, SAN JUAN CAPISTRANO, CALIFORNIA 92675 0 (714) 493.1171
MEMBERS OF THE CITY COUNCIL
Q E�
ANTHONY L. BLAND
■ ry
LAWRENCE F. BUC HHEIM
nlOAIORR4
KENNETH E. FRIESS
1961
GARY L. HAUSDORFER
P HILLIP R. SCHWARTZE
•
CITY MANAGER
STEPHEN B JULIAN
92693
At their meeting of September 4, 1990, the City Council of the City
of San Juan Capistrano approved the Recycling Agreement to
implement Phase I of the City's curbside recycling program. The
program is scheduled to begin October 3, 1990. A fully -executed
copy of the agreement is enclosed for your files.
An item setting the fee for the recycling program has been
tentatively scheduled for the meeting of September 18, 1990. A
copy of the agenda and staff report for that item will be forwarded
to you.
If you have any questions, please do not hesitate to call.
Very truly yours,
Cheryl oh son
City Clerk
Enclosure
cc: Assistant City Manager
32400 PASEO ADELANTO, SAN JUAN CAPISTRANO, CALIFORNIA 92675 0 (714) 493.1171