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HomeMy WebLinkAboutItem 11a - Accept Amendment and Solid Waste Service RatesPUBLIC WORKS SERVICES DEPARTMENT STAFF REPORT DATE: April 21, 2026 TO: Honorable Mayor and City Council FROM: Paul Cranmer, Public Works Services Director By: Briget Arndell, Environmental Services Manager SUBJECT: ACCEPT AMENDMENT TO THE RESIDENTIAL REFUSE AND RECYCLING AGREEMENT WITH WASTE MANAGEMENT AND THE PROPOSED REFUSE RATES FOR FISCAL YEAR 2026-27 THROUGH 2030-31, DIRECT THE PUBLIC WORKS SERVICES DEPARTMENT TO FOLLOW PROPOSITION 218 BALLOTING PROCEDURES TO ESTABLISH REFUSE RATES, AND SET A PUBLIC HEARING FOR THE JUNE 16, 2026, CITY COUNCIL MEETING CEQA: Not a Project Recommendation: Approve SUMMARY Waste Management Inc., (“WM”) has been the City’s exclusive residential and multi- family refuse and recycling hauler since 1999. The current Residential Refuse and Recycling Agreement (“Agreement”) was executed in March 2009 for a seven-year term. In October 2013, the City Council executed the First Amendment to the Agreement for an additional five years. On June 15, 2021, the City Council approved the Second Amendment to the Agreement with WM and approved a five-year rate adjustment schedule. The City is proposing to amend WM’s contract a third time to adjust the solid waste service rates for Fiscal Year 2026-27 through 2030-31, in compliance with Proposition 218 requirements. The proposed rate adjustment is in accordance with the Agreement with WM, which takes effect on July 1 of each year. With the proposed increases, Arcadia’s waste hauling rates would remain among the lowest in the San Gabriel Valley while offering some of the highest levels of service. It is recommended that the City Council accept the amendment to the Residential Refuse and Recycling Agreement with WM and the proposed refuse rates for FY 2026- Accept WM Amendment and Solid Waste Service Rates and set Proposition 218 Public Hearing April 21, 2026 Page 2 of 8 27 through 2030-31, direct the Public Works Services Department (“PWSD”) to follow Proposition 218 Balloting Procedures to establish refuse rates, and set a public hearing for the June 16, 2026, City Council meeting. BACKGROUND WM has been the City’s exclusive residential and multi-family refuse and recycling hauler since 1999 and has consistently provided excellent service. The current Agreement with WM was executed in March 2009 and included a seven-year term, which expired on June 30, 2016. In October 2013, the City Council executed the First Amendment to the Agreement for an additional five years through June 2021. On June 15, 2021, the City Council approved the Second Amendment to the Agreement with WM and approved a five-year rate adjustment schedule in accordance with Proposition 218 requirements. The new agreement included an Administrative Fee; new enhanced services, which included a community mulch giveaway event, two community document shredding events, bins for tree trimming, sharps, and household hazardous waste disposal; fall leaf collection program; miscellaneous debris removal at City-designated sites; trash and recycling collection for five non- City events; and compliance with new laws and regulations. The agreement also included a 10-year term, which expires on June 30, 2031; however, the rates for the final five years of the agreement could not be set at that time due to state limitations. At the April 7, 2026, City Council Study Session, the PWSD presented a proposed third amendment to the WM Agreement. The new agreement includes the following: • Amendment to the WM contract to reflect a 5-year rate adjustment schedule for FY 2026-27 through 2030-31, in compliance with Proposition 218 requirements; • Phased two-year labor fee adjustment for FY 2026-27 and FY 2027-28, divided between Single-Family rates (50%) and Multi-Family rates (50%); • Annual Inflationary Adjustment based on the consumer price index and disposal/diversion fee; • Contamination rates that follow the regional average; and • An additional community mulch giveaway event provided each fiscal year. Accept WM Amendment and Solid Waste Service Rates and set Proposition 218 Public Hearing April 21, 2026 Page 3 of 8 DISCUSSION On March 11, 2026, WM submitted a request for a service rate adjustment, which includes an increase in labor fees. The labor fees would be phased in over two years for FY 2026-27 and 2027-28 and would be divided evenly, with 50% in Single-Family rates and 50% in Multi-Family rates. Furthermore, the service rates will include an annual rate Adjustment Methodology Formula that includes two indices: a Disposal/Diversion Component and a Service Component. The Disposal/Diversion Component consists of costs for tipping fees charged at landfills for trash, tipping fees charged at composting facilities for green waste/food waste, and recycling fees at processing/recycling facilities. Under the Rate Adjustment Methodology, the Disposal/Diversion Component is given a 40% weight in the calculation of the new rate. The Service Component is based on monthly percent changes in the Consumer Price Index (“CPI”) for Los Angeles-Long Beach-Anaheim, between the current year and the prior year, and is given a 60% weight in the calculation of the new rate. Table 1 shows the percentage breakdown and weighted amount that is accounted for in each index that makes up the rate adjustment for FY 2026-27: Table 1: Rate Adjustment Formula Rate Component Weight of Rate Adjustment due to Change in Indices Weighted Rate Adjustment Percentage Disposal/ Diversion 40% 3.35% 1.34% Service 60% 3.21% 1.93% TOTAL 3.27% The proposed labor fees account for increased operational collection labor costs of municipal solid waste/trash, totaling $154,019.79. Table 2 shows the labor fee total divided 50% into Single-Family rates and 50% Multi-Family rates, over two years. Table 2: Labor Fees Split 50/50 Single Family Increase per home per month $ 0.28 Multi-Family Increase per yard per month $ 0.09 Accept WM Amendment and Solid Waste Service Rates and set Proposition 218 Public Hearing April 21, 2026 Page 4 of 8 Starting July 1, 2026, there will be an additional $0.28 reflected in the Single-Family rates for standard services (one 96 gallon municipal solid waste/trash cart, one 64 gallon recycling cart, and one 96 gallon organics cart), an additional $1.17 will be reflected in Multi-Family rates for standard services (one 3-yard municipal solid waste/trash dumpster, one 3-yard recycling dumpster, and one 96 gallon organics cart), and an additional $0.58 will be reflected in Multi-Family rates for 3-yard split bin services (half municipal solid waste/trash and half dry recycling). The labor fees are only allocated to municipal solid waste/trash (non-recycled waste). A split bin has half municipal solid waste/trash and half dry recycling. As such, only one-half of the split bin is impacted by the labor fee. Single-Family standard service rates will reflect the 3.27% annual rate adjustment plus the $0.28 labor fee. The rate will increase by $1.53 (3.94% total) and will be $40.36 per month. Multi-Family standard service rates will reflect the 3.27% annual rate adjustment plus the $1.17 labor fee ($.09 x 3-yard bin x the monthly collection frequency, which is about 4.33 monthly collections). The rate will increase by $9.17 (3.73% total) and will be $254.57 per month. Multi-Family 3-yard split bin service rates will reflect the 3.27% annual rate adjustment plus the $0.58 labor fee (half the $1.17 labor fee). The rate will increase by $7.19 (3.54% total) and will be $210.12 per month. Tables 3-5 show the breakdown of proposed service rates for FY 2026-27. Table 3: Single-Family Rates – Standard Services for FY 2026-27 Accept WM Amendment and Solid Waste Service Rates and set Proposition 218 Public Hearing April 21, 2026 Page 5 of 8 Table 4: Multi-Family Rates – Standard Services for FY 2026-27 Table 5: Multi-Family Rates – Split Bin Services for FY 2026-27 Effective July 1, 2027, the labor fees will be consistent with FY 2026-27. Single-Family rates would be raised by the annual rate adjustment + the $0.28 labor fee for standard services. Multi-Family rates would be raised by the annual rate adjustment + $0.09 per yard per pickup labor fee for standard services . Split bin rate would be raised by the annual rate adjustment + the $0.58 labor fee. While the exact rate adjustment for FY 2027-28 cannot be determined at this time, it will follow the annual rate adjustment formula which is calculated based on the following data: The current (2026) and prior (2025) year’s costs for: • Landfill and organic gate rates (disposal); Accept WM Amendment and Solid Waste Service Rates and set Proposition 218 Public Hearing April 21, 2026 Page 6 of 8 • Recycling gate rates (disposal); • Change in combined disposal costs (disposal); and • 12-month year-over-year average percentage change in the Consumer Price Index for all urban consumers (“CPI-U”) in the garbage and trash index (service). In FY 2028-29 through FY 2030-31, there will be no labor fees, and the rate adjustment formula will go back to using the two indices included in the rate adjustment formula: 60% of the Consumer Price Index and 40% of the Disposal/Diversion rate adjustment factor. To adhere to the City of Arcadia’s Residential Refuse and Recycling Agreement with Waste Management, an annual rate adjustment is required each Fiscal Year. The proposed rate increase includes labor fees to account for increased operational collection labor costs. The chart below presents the City of Arcadia’s residential refuse rates in comparison to those of neighboring jurisdictions. Not all cities shown in the rate comparison table below are WM customers, nor do they provide the same level of service and programs included in the City’s current contract. Almost every city listed higher than Arcadia (proposed) is served by the hauler, Athens, and their rate adjustment methodology is CPI + 1%. Therefore, they will all see an increase of 6.27% for FY 2026-27. Accept WM Amendment and Solid Waste Service Rates and set Proposition 218 Public Hearing April 21, 2026 Page 7 of 8 IMPLEMENTATION OF NEW RATES In accordance with Proposition 218, the City must engage in a proper voter approval process when increasing refuse rates. These requirements include mailing a written notice detailing the proposed rate increases to all Single-Family and Multi-Family residential properties. At least 45 days before the proposed June 16, 2026, Public Hearing, the PWSD will mail a notice to all Single-Family and Multi-Family properties detailing the proposed refuse rates increases, in accordance with Proposition 218 requirements. The notice will be approved by the City Attorney’s Office to ensure that the City is following regulations. Following the closure of the Public Hearing, if there is no majority protest, the City Council can adopt the proposed solid waste rate adjustment schedule for Fiscal Years 2026-27 through 2030-31. The new refuse rates would then be effective on July 1st of each year. ENVIRONMENTAL ANALYSIS The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”) under Section 15061(b)(3) of the CEQA Guidelines, as it can be seen with certainty that it will have no impact on the environment. FISCAL IMPACT Residential refuse and recycling collection service rates are considered a fee-for- service that is paid directly to the contractor by the residential customer. The City directly receives various fees from WM, which are impacted by the rate adjustment . Those fees include an Administration Fee for annual street pavement maintenance in the amount of $100,000, plus an annual adjustment consistent with the Consumer Price Index (CPI). WM also provides the City with funds to offset the cost of household hazardous waste and sharps collection. The estimated total for all the fees for FY 2026-27 is $208,714. These fees will be deposited into the City’s Solid Waste Fund. RECOMMENDATION It is recommended the City Council determine that this action does not constitute a project under the California Environmental Quality Act (“CEQA”); and accept the Accept WM Amendment and Solid Waste Service Rates and set Proposition 218 Public Hearing April 21, 2026 Page 8 of 8 amendment to the Residential Refuse and Recycling Agreement with Waste Management and the proposed refuse rates for Fiscal Year 2026-27 through 2030- 31, direct the Public Works Services Department to follow Proposition 218 Balloting Procedures to establish refuse rates, and set a public hearing for the June 16, 2026, City Council meeting.