The City of Sparks holds a Franchise Agreement with Waste Management (attached to this staff report) that was negotiated over a period of more than 18 months in 2007/2008 and became effective in July of 2008.  The term of the existing franchise is for 10 years with 2 (each) mutually agreeable options to extend the agreement for additional 5-year terms.  The scope of the franchise agreement is for the exclusive right to haul commercial and residential “garbage” (as legally defined in the agreement and the Washoe County Health Department) as well as the materials generated from the residential curbside recycling program.

The hauling of commercial solid waste that is not classified as “garbage” is not included in the scope of the current franchise.  Those materials may include construction/demolition wastes, trash, yard wastes and commercially generated recyclable materials.  Historically, the City Council has maintained a position that the City should strive to leave an open-market for competition wherever possible and has left this segment to be serviced by multiple non-franchised haulers.

In November of 2012, the City of Reno executed 4 new franchise agreements that changed the scope of their agreement from a similar “garbage only” model to a more fully inclusive scope while also installing a new residential “single-stream” recycling program.  This program removed the existing crate system for sorting and placement of recyclables at the curb and replaced it with the installation of a 2^nd rolling toter to be used for recyclable materials.  This additional 96-gallon bin allows for the comingling of all recyclable materials in one container that is later sorted at the hauler’s facility. 

Pursuant to the direction of the Sparks City Council at a workshop in January of 2013, staff from the City of Sparks monitored the adoption and rollout of the new agreements in Reno in order to gain insight for an expected similar program in Sparks.  At a City Council Workshop in September of 2013, City staff were directed to pursue a program “like Reno” that specifically addressed the residential recycling program.  In the intervening period, staff has met with representatives from Waste Management for the exchange of general concepts and concerns in an effort to create a program that will be best suited to the City of Sparks.  While the end result of replacing multiple containers for one large container is the same as in Reno, many of the details of the plan come from the lessons learned in that rollout and should make the proposed program successful for the City of Sparks.

At the City Council Meeting on August 10, 2015, the City Council reviewed and discussed a “Residential Collection Proposal” (Attached) that outlined operational and contractual items that would be considered to move to a “single-stream” residential recycling program.  The City Council provided direction to City staff to negotiate contract amendment language reflecting the majority of items in the proposal from Waste Management for consideration at a future meeting.  The amendment to the franchise agreement is the subject of this item.  The issue of extending the term of the current franchise agreement remains an item for discussion and final determination. 

The proposed changes have no effect on the scope of the franchise document.  There are no changes to the scope that might affect the ability of existing commercial haulers to continue to compete for the same segments of business they do today.  The proposed amendment is almost entirely about changes to residential services with a few minor clean-up items and changes to rates charged on franchised commercial businesses (mostly reductions).

Negotiating teams and legal counsel for the City of Sparks and Waste Management have worked diligently to incorporate the concepts presented in the “Residential Collection Proposal” in to the existing Franchise Agreement.  Two versions of the proposed amendment are attached to this staff report for review.  The document titled “Franchise Amendment Proposal-Redline” shows the edits proposed for the existing franchise agreement in a strike-through format where the reader can note all changes that are proposed.  The document titled “Franchise Amendment Proposal-Final” is a “clean” version, assuming all proposed language changes are accepted.

In addition to these documents, other attachments to this staff report include items that are referenced in the proposed Franchise Agreement:

Exhibit A (Rates) – This document reflects the published rates charged for services under the Franchise Agreement.  Multiple versions (3 options) of this document are provided as the City Council’s determination of the term of the amended agreement will directly affect the rates charged for residential collection services.  This subject is offered in more detail later in this staff report.  Exhibit A may be adjusted on an annual basis through a calculation of changes to the CPI, as allowed in Section 5.02 of the Franchise Agreement.

Exhibit B (Recyclable Materials) – This document provides a current list of the materials that may be recycled under the expanded curbside recycling program contemplated under this amendment.

Exhibit C (Recycling Contamination Notice) – This is a mock-up of the notice that will be used by Waste Management to notify residential customers of circumstances that may be causing issues with the correct disposal of materials.

Exhibits A, B and C are referenced in the proposed amendment to the Franchise Agreement and should be considered as a component piece of the franchise agreement.

Franchise Term/Rates
The “Residential Collection Proposal” discussed by the City Council on August 10, 2015, included the proposal by Waste Management to extend the base term of the existing Franchise Agreement by an additional 10 years, moving the expiration from June of 2018 to June of 2028.  The base term includes mutually agreeable options for extension of 2 (ea.) additional 5-year periods.  The City Council expressed concern over a base term of that length and asked for options to be considered in the final amendment under consideration today.

As the primary change in operations under the proposed amendment is specific to residential recycling, the length of term adopted by the City Council would directly affect these rates.  Therefore, as a baseline, it is simplest to compare the Residential Collection rate and how it may adjust, depending on the term of the agreement.  Commercial rates are unaffected in this case.  The relative differences are summarized in an attachment to this staff report titled “Rate Comparisons of Term Options.”

Option A (10-year Extension – Expires June 30, 2028)
The rate impact to residential customers (as originally proposed) would include the cost of the removal of the traditional commercial subsidy to residential services as well as the increased costs associated with the installation and use of the new single-stream recycling program.  Under the proposed amendment, the total cost of residential services would increase by $.98/month.  Current baseline residential rates would move from $19.37/month ($58.11/quarter-billing) to $20.35/month ($61.05/billing-quarter).  New rates would become effective at the quarterly billing following the delivery and servicing of the new recycling container.

Option B (7-year Extension – Expires June 30, 2025)
Operationally, Option B is the same as Option A.  With respect to rates, the total cost of residential services would increase by $1.09/month.  Current baseline residential rates would move from $19.37/month ($58.11/quarter-billing) to $20.46/month ($61.38/billing-quarter). 

Option C (5-year Extension – Expires June 30, 2023)
Operationally, Option C is the same as Option A.  With respect to rates, the total cost of residential services would increase by $1.27/month.  Current baseline residential rates would move from $19.37/month ($58.11/quarter-billing) to $20.64/month ($61.92/billing-quarter). 

As noted in the discussion on August 10, 2015, rates for commercial services covered under the franchise agreement would be reduced by 2% under the proposed amendment, as the residential subsidy that has historically been paid by commercial customers is removed.

Should the City Council approve the amendment under consideration, it should be noted that the annual rate increase allowed under the agreement that is tied to a CPI adjustment may occur at the same time as the increase contemplated under this item.

1. The City Council may direct the City Manager to negotiate changes to the language proposed in the amendment.
    
2. The City Council may choose to direct the City Manager to proceed no further in negotiating an amendment in order to wait until the conclusion of the current term of the Franchise Agreement.

I move to approve the “Amended and Restated Garbage and Recycling Exclusive Franchise Agreement” and associated attachments between the City of Sparks and Sparks Sanitation for a base term to expire on:
June 30, 2028 (Option A), or

June 30, 2025 (Option B), or

June 30, 2023 (Option C)