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City of Los Angeles plan to franchise pickup of multifamily and commercial trash

City of Los Angeles plan to franchise pickup of multifamily and commercial trash

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The city of Los Angeles has a plan to divide the city into 11 zones, with an exclusive contractor in each to pick up waste -- both trash and recycled material -- for multi-family and commercial buildings.
The city of Los Angeles has a plan to divide the city into 11 zones, with an exclusive contractor in each to pick up waste -- both trash and recycled material -- for multi-family and commercial buildings.

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Published by: Los Angeles Daily News on Apr 01, 2014
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02/20/2015

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3.2.1 Franchise Fee Level

Sanitation is recommending that proposals include a gross receipts franchise fee paid quarterly, as well as an
upfront payment submitted through the Request For Proposals (RFP) process. The minimum franchise fees will be
set to meet the fiscal needs of the City. As shown in the data gather by CH2M Hill and HFH, franchise fees for
other jurisdictions range from 2% to 27%. Sanitation expects a reasonable minimum franchise fee to be in the
range of 10%.
CH2MHILL’s survey of other jurisdictions indicates that all
have some form of fee included in collection rates that

provides funding to the local jurisdiction’s General Fund.

Jurisdictions in Florida and California have franchise systems
fee rates ranging from a few percentage points to over 20%.In
Seattle and Vancouver, rates include a Utility Business and

Occupation Tax, with proceeds going to each city’s General
Fund. Seattle’s rate is 15.54%, while Vancouver’s is 20%.
Stockton required its franchisees to pay an upfront amount, at
the beginning of the terms of the two franchises, which is paid
over the first four years of each contract for a purchase of
street sweeping equipment, a service that the City chose to
outsource to its contractors. Portland dedicates a portion of
its 8% franchise fee to support solid waste programs. The
cities in California that CH2M HILL surveyed also included
AB939 fees in customer rates (except Norwalk).
Current AB939 hauler fees are paid quarterly, and are based
on 10% of gross receipts. Basing the additional franchise fee
on gross receipts creates a revenue source that is, to a large extent, stable even during tough economic times.
Creating either a flat fee, or a fee based on some other factor, such as disposal tonnage, would not guarantee a
stable revenue each year and may not properly adjust to reflect adjustments in contract terms throughout the
franchise. In addition, many jurisdictions have taken advantage of the competitive process by allowing proposers
to submit up-front payments, in addition to ongoing franchise fees, to be considered in the evaluation of
proposals. These upfront payments can be considerable.
Sanitation recommends that a minimum franchise fee be specified in the RFP. Proposers may also include an
additional value for the franchise, either as an additional percentage franchise fee, or an upfront payment, or
both. Proposers should consider that it is the City’s intent to normalize rates across the City during the
negotiation stage of the process.

Recommendations:
Establish a minimum annual franchise fee in the RFP.
Existing AB939 Fee to continue in place

3.2.2 Staffing Plan

In its original report to Council in February 2012 Sanitation requested the unfreeze approval of six (6) staff
positions to provide adequate staffing for the Franchise Initiative thru its early stages of development. Council
approved the unfreeze of these positions and just recently, in March 2013, the City’s Managed Hiring committee
approved the position for hiring. Sanitation believes that this level of staffing is adequate to support the Initiative
up to the point of drafting the RFP. A subsequent assessment will be made once it is better known the extent of

Sanitation’s enforcement needs and contract responsibilities.

Fees range from a few % to over
20%
Fee revenues usually dedicate to

the jurisdiction’s general fund

Fees are included in franchise
agreement
Jurisdictions often build an
additional fee into rates to cover
solid waste program costs
(including AB939 fee)

IMPLEMENTATION PLAN FOR EXCLUSIVE FRANCHISE HAULING SYSTEM

APRIL 12, 2013

3-10

Advantages of Uniform, City-Wide
Rate Schedule

Fairness all businesses,
institutions, and multifamily
customers pay the same rate for
the same service.

Simplicity and Transparency

rates and choices are clear; less
confusion and fewer disputes
about billing
Predictability easier for
customers to budget for the cost
of collection services

Driver for Waste Diversion

Sanitation will set the rate to
ensure that businesses have an
incentive to divert waste from
landfill.

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