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DISCUSSION OF CITY OF STOCKTON’S FRANCHISE AGREEMENTS AND COMMERCIAL SOLID WASTE COLLECTION SERVICES (CITYWIDE)
recommended action
RECOMMENDATION
Receive information regarding the City’s Franchise Agreements and recent requests to allow a third company to provide commercial solid waste collection services and provide direction from the City Council as to desired next steps, if any.
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Summary
Commercial solid waste collection services are currently provided by Republic Services and Waste Management via two City Council-granted Franchise Agreements. Staff seeks direction from the City Council as to whether they would like to consider adding a third service provider for non-exclusive commercial solid waste collection services.
1. City Council can direct staff to engage with its current franchisees and the requesting party, California Waste Recovery Systems (Cal-Waste), to discuss the addition of a third company to provide commercial solid waste collection on a non-exclusive basis.
2. City Council can decide to take no action. The current franchise agreements expire on December 31, 2029. Staff would return to the City Council at a future date to request issuance of a Request for Proposal (RFP) to procure future solid waste services.
DISCUSSION
Background
On March 11, 2003, the City Council issued Resolution No. 03-0119 which authorized the City Manager to notify, in writing, the three City permitted commercial and industrial solid waste collectors, Sunrise Sanitation, Stockton Scavengers, and Cal-Waste, of the City's intent to grant an exclusive solid waste collection franchise pursuant to Sections 40059 and 49520 of the Public Resources Code and Article XI of the City Charter. This resolution also issued notice that new commercial and industrial solid waste collection permits would not be accepted in anticipation of granting an exclusive solid waste collection franchise.
Resolution 03-0119 states “the City Manager is hereby authorized and directed to notify, in writing, all City-permitted commercial and industrial solid waste collectors of the City’s intent to grant an exclusive solid waste collection franchise…”.
On April 29, 2003, the City Council approved three ordinances. Ordinance Nos. 014-03 and 013-03 granted exclusive 15-year residential and commercial solid waste, recycling, green waste, food waste, and street sweeping agreements to Sunrise Sanitation, Inc. (dba Republic Services) and USA Waste of California, Inc. (dba Waste Management).
The effective start date was June 1, 2004, with the base term expiring on May 31, 2019. Ordinance 015-03 amended Stockton Municipal Code Section 7-059 allowing the existing permittees to continue to collect industrial waste through May 30, 2009. The amendment also provided up to two additional renewal terms with a final permit expiration date of May 30, 2019.
At the same meeting, City Council also approved a solid waste service rate schedule which standardized service rates for both residential and commercial services. Standardized commercial service rates mean that regardless of the chosen service provider, the cost of service remains the same. By removing the monetary aspect, both franchisees compete for customers based on quality of service and customer service experience.
In 2018, staff began looking to procure solid waste collection services past 2019. Since City Charter Article XX, Section 2000 requires the City to “provide for a competitive method of awarding contracts for public works…”, staff began preparations to issue a competitive RFP.
On September 7, 2018, the City exercised its right to extend the two solid waste franchise agreements and issued an extension letter to Republic Services and Waste Management. The new franchise expiration date was December 31, 2021. Section II, subsection B of Ordinances Nos. 014-03 (Sunrise Sanitation, dba Republic Services) and 013-03 (USA Waste of California, Inc. dba Waste Management) states “The City Council of the City of Stockton hereby grants to [Company Name], an exclusive franchise to collect those certain solid wastes and other materials, within the City of Stockton as specified in the Agreement.”
At the September 18, 2018, City Council meeting, staff recommended the City procure solid waste services through a competitive RFP process. At this meeting, City Council instead directed staff to first negotiate with its long-standing franchisees, Republic Services and Waste Management. The City Council also directed staff to report back on whether negotiations were successful. If negotiations failed, the City Council would then approve the issuance of the RFP.
Negotiations were successful and, on November 5, 2019, the City Council approved new 10-year franchise agreements with Republic Services and Waste Management (Attachment A). The current franchise terms are consistent with the prior franchise agreement while also providing additional programs and services which support current and future State policies. The effective start date was January 1, 2020, with the base term expiring on December 31, 2029.
Residential services are based on a defined (“exclusive”) service area for each franchisee (Attachment B). Commercial waste collection services are based on an open market (“non-exclusive”) which means businesses are allowed to choose waste collection services from either Republic Services or Waste Management. Residential and commercial service areas, as defined, have remained unchanged since approved in 2004.
Present Situation
Cal-Waste approached the City to request consideration of adding a third commercial service provider. Cal-Waste is based in Galt, CA, and is a long-standing business providing residential, commercial, and industrial waste collection services in various California communities. In Stockton, Cal-Waste, along with Republic Services and Waste Management, provides industrial waste collection services under City Council-issued Industrial Waste Collector permits authorized by Resolution 2024-11-12-1216.
Given the history detailed above, staff considers the current agreements exclusive Franchise Agreements as addressed below.
• The agreements reference an “exclusive right” to provide solid waste collection services in Stockton and require the parties to enforce the exclusive nature of the franchise.
• The City Council’s stated desire during the September 18, 2018, City Council meeting to continue working with its two long-standing community partners, Republic Services and Waste Management, rather than issue an RFP.
• The lack of substantial changes between the previous and current franchise agreements.
o All services remain intact between the two agreements. The only significant changes are the addition of services and programs to ensure SB 1383 compliance, and the transfer of residential garbage service billing from the City of Stockton to each service provider.
o Residential service areas remained defined (“exclusive”) while commercial service areas remained open market (“non-exclusive”).
• Lastly, the agreements were approached as a continuation of the previous Franchise Agreements, with program additions and improvements, as no alternative direction was provided by the City Council.
In light of this new request and given the history and contractual obligations with its current haulers, staff now comes to the City Council seeking guidance on its desired next steps.
1. City Council can direct staff to engage with its current franchisees and the requesting party, Cal-Waste, to discuss the addition of a third company to provide commercial solid waste collection on a non-exclusive basis.
2. City Council can decide to take no action. The current franchise agreements expire on December 31, 2029. Staff would return to the City Council at a future date to request issuance of an RFP to procure future solid waste services.
FINANCIAL SUMMARY
There is no financial impact associated with the presentation of this report or any Council-directed discussions. Any future solicitations or contracts and the associated financial impacts of resulting agreements will be returned to City Council.
Attachment A - Republic Services and Waste Management Franchise Agreements
Attachment B - Exhibit M (Map of Residential Service Districts)