Elements of Best Practices Solid Waste Franchise Agreements PRESENTATION TO: California Resource Recovery Association (CRRA) August 10, 2016

What is a “Best Practices” Franchise Agreement? Goals: Specify services to be provided by hauler, outline key hauler performance requirements and expectations Allow for easy monitoring of hauler performance, and effective management of contract Balance hauler cost of service issues while protecting rate payers Facilitate compliance with current and future State requirements (AB 341, AB 1826, AB 1594, etc.) Provide procedures for adjusting to any changes in law, or any changes in services Support clear communication between the jurisdiction and hauler

Best Practices Definitions Term Length and Extensions Scope of Services / Collection Programs Diversion Requirements Customer Rates and Rate Adjustments Franchise Fees and Other Fees Vehicle and Container Requirements Contractor Staff and Office Customer Service Public Education

Best Practices (continued) Processing and Disposal Facilities Recordkeeping and Reporting Periodic Performance Reviews Liquidated Damages Insurance and Performance Bond Indemnity Default and Termination Transition to Next Contractor

Definitions The franchise agreement should define key terms, examples include: Organics / Food Waste – Define exactly what types of food and green waste material are accepted. Recyclable Materials – Define exactly what material types are included in the program. Franchise Fees – Define how the fee is calculated (e.g., as % of gross revenues incl. franchise fees) Diversion Rate – Define how the rate is calculated (e.g., total recyclable and organic material processed, less any disposed residue from processing, divided by total tons of material collected under scope of the franchise agreement)

Term Length and Extensions Specify start date and end date of “base term” Extensions Specify length and quantity of possible term extensions At jurisdiction’s sole option Require positive contractor performance review prior to granting extension Recommendation: Avoid “evergreen” agreements (i.e., agreements that automatically renew their term length every year)

Scope of Services / Programs Single Family Residential Garbage, Recyclables, and Organics (Cans) Commercial and Multi Family Residential Garbage, Recyclables, and Organics (Cans and Bins) Separate food waste collection, if necessary Construction & Demolition (C&D) Roll-off boxes / debris boxes “Temporary” vs. “permanent” accounts Public Facilities No charge collection from schools, parks, city offices, public receptacles, etc. Street Sweeping

Scope of Services / Programs Additional Services: Curbside bulky items, E- and U-Waste, HHW, sharps and pharms, oil and oil filter Christmas trees Special events Public education Lay out procedures for implementing new programs How customer rates will be adjusted How the program will be rolled out

Diversion Requirements Diversion Rate – Common to require the hauler to calculate their diversion specific to the franchise (separate from CalRecycle reporting) Typically 50% minimum requirement or greater (overall, by weight) Agreement should define specifics of calculation Reporting – Diversion rate calculation should be submitted each year (or more frequently), with a detailed breakdown of diverted and disposed tonnages by sector, as part of an annual report to the jurisdiction

Customer Rates and Adjustments Attach complete customer rate schedule to the franchise agreement as an exhibit Include all contractor charges and fees Breakdown by rate “components,” if any Rate adjustments Annual – Consumer Price Index (CPI) or Refuse Rate Index (RRI) adjustment Be very specific with calculation method, give an example Periodic – Detailed rate reviews Define allowable, non-allowable, pass through costs, and allowable profit / operating ratio Adjustments due to change in law, or new programs

Franchise Fees and Other Fees Franchise Fee – Commonly calculated as % of gross revenue Vehicle Impact Fee – Amount designed to offset cost of road maintenance attributed to refuse vehicles AB 939 Fees / Administrative Fees One-Time Procurement Reimbursement Fee Performance Review Fee – Cost of periodic performance reviews to be covered by the hauler, as they occur

Vehicle Requirements Maximum vehicle lifetime (~7 or 10 years) Monitor and report overweight vehicles Use of alternative fuel Vehicle signage and markings Pre- and post-trip inspections On-board GPS and link to customer service / dispatch systems Cleaning / washing schedule Preventative maintenance schedule and recordkeeping Vehicle replacement schedule

Container Requirements Maximum container lifetime Cart and bin standard sizes and colors Markings, labels, instructions to customers Labels, hot-stamping, in-molding Contractor name and phone number Graffiti removal Cleaning/washing schedule Exchanges/replacements to occur on next scheduled service day Container replacement schedule

Contractor Staff and Office Office hours and availability Dedicated route supervisors, public education coordinator Driver uniforms New-hire training and refresher training requirements for drivers and customer service representatives Contractor emergency contact info Customer service Hours, phone system capabilities, service response times, customer billing timing

Public Education AB 341 and AB 1826 outreach Require the hauler to keep an ongoing list of commercial customers with notes on service levels and status of outreach efforts Full time dedicated recycling / public education coordinator School presentations, special events Bill inserts, recycling newsletters, etc.

Processing and Disposal Facilities Hauler to ensure facilities continue to be fully licensed and permitted throughout term Hauler to notify jurisdiction in event of need for any backup facilities Typically contractor proposes facilities to be used, with approval by jurisdiction

Recordkeeping and Reporting Common to require submission of quarterly and annual reports, which may include: Detailed breakdown of tons of material diverted and disposed by sector Diversion rate calculation Gross revenue and fees paid Summary of public education activities and special events Customer service statistics Instances of overweight vehicles Proactive reporting of other performance issues

Periodic Performance Reviews Schedule performance reviews every ~5 years At a minimum, have reviews prior to approving any term extensions Hauler pays the cost of reviews Reviews cover objective performance requirements set forth in the agreement

Liquidated Damages The most effective liquidated damages are ones that can be proactively self-reported by the hauler Examples include: Failure to meet minimum diversion rate Instances of overweight vehicles Failure to respond to customer service requests in required timeframe Property damage

Other Provisions Insurance and Performance Bond Indemnity Default and Termination Transition to Next Contractor

Notes Regarding Procurement / RFP Developing an effective agreement often begins with a competitive procurement process Include draft agreement in RFP package Recommendation: Require haulers to lay out the following during the proposal / negotiation process, and then append these documents to the final franchise agreement as exhibits: Complete customer rate schedule Transition Plan, Diversion Plan, and Public Education Plan Vehicle and Container Replacement Schedule List of facilities, and list of subcontractors, if any

Recap – Goals Goals: Specify services to be provided by hauler, outline key hauler performance requirements and expectations Allow for easy monitoring of hauler performance, and effective management of contract Balance hauler cost of service issues while protecting rate payers Facilitate compliance with current and future State requirements (AB 341, AB 1826, AB 1594, etc.) Provide procedures for adjusting to any changes in law, or any changes in services Support clear communication between the jurisdiction and hauler

David Pinter | Senior Project Analyst Thank you! For additional information, contact: David Pinter | Senior Project Analyst R3 Consulting Group, Inc. (916) 782-7821 dpinter@r3cgi.com