TITLE
Recommendation to receive supporting documentation into the record; receive public comment pursuant to Proposition 218; direct City Clerk to tabulate the written protests and report the results of the tabulation to the Mayor and City Council during the June 20, 2023 hearing; and, if a “majority protest” is not established, conclude the public hearing and adopt resolution establishing Solid Waste Service Rates under a two-step rate adjustment. (Citywide)
DISCUSSION
The City of Long Beach (City) last raised solid waste collection rates for cost of service on September 1, 2022. That increase was the first part of a proposed two-step rate adjustment proposed during a Proposition 218 hearing on August 23, 2022. As directed by the City Council on August 23, 2022, City staff are returning to the City Council with a recommendation to phase-in a second rate adjustment in two parts. The first part is proposed to be effective July 1, 2023, and the second part is proposed to be effective October 1, 2023. As discussed during the hearing on August 23, 2022, costs associated with solid waste collection continue to increase. Solid waste disposal costs have increased since the September 1, 2022 rate adjustment and City staff anticipates continued cost increases in the coming years. Costs of acquiring collection vehicles and maintaining a fleet are also continuing to increase. The City is adding eight refuse collection trucks this fiscal year to provide citywide commercial organics collection.
Additionally, over the past few years, the State has enacted legislation increasing each city’s requirement to recycle and provide waste diversion programs. In response to these and other requirements, the Public Works Department is currently working towards implementing a plan that will satisfy all of the State’s requirements. This plan will develop a path for the City’s compliance with current and upcoming legislation including, but not limited to, Assembly Bill (AB) 341 (mandatory commercial and multi-family recycling and sets a statewide 70 percent diversion target), AB 2176 (large venue and special event recycling), AB 1826 (commercial organics recycling), and SB 1383 (short-lived climate pollutants: organics methane emissions reductions).
After the hearing on August 23, 2022, Public Works Department retained Hilton, Farnkopf, and Hobson Consultants, LLC (HF&H), to modify the previously submitted Cost of Service Study (Study) for refuse, recycling and commercial organics collection services (Attachment A) to modify the rate adjustment’s second step to be split into two phases. The objective of the Study was to develop recommendations for an updated rate structure that reflect current costs of service, and include costs for administering programs to meet requirements, ensure compliance of State mandated programs, and reflect commercial organics collection scheduled for implementation in 2023.
The Study concluded that rate increases for solid waste services are necessary for several reasons including: (1) solid waste collection costs have increased; (2) the City’s rates have not generated sufficient revenue to cover the costs for service; and, (3) compliance with and implementation of new State-mandated (SB 1383) diversion programs require additional funding. The Study was issued and made available for review on May 5, 2023, on the LB Recycles website (www.longbeach.gov/lbrecycles).
The updated rate structure is designed for each rate class to ensure customers are paying their proportionate share of costs. The proposed rate adjustment is recommended for implementation in two phases with the first adjustment taking effect on July 1, 2023, increasing the typical single family home customer’s account by $3.90 per month. The proposed second phase will go into effect on October 1, 2023, adding $4.34 per month.
Public Works intends to perform another Study to determine the necessary rate increases for Fiscal Year 2024 (FY 24) to account for unanticipated commercial organic program costs and new residential organics program costs, as these are not included in the proposed rates discussed and requested herein.
These proposed solid waste rates are used solely for the purpose of defraying costs incurred in providing efficient services and to ensure continued compliance with State law. Long Beach rates will still be lower than many comparable California cities’ current rates after the proposed rates go into effect (see chart below).
Since the rates are based on actual cost of service, not all residential and commercial rates will be adjusted equally. Further, commercial accounts will see their rates increase at a higher rate than residential accounts due to the implementation of commercial organics collection. The following charts summarize the rates subject to this majority protest process.
Cart Rates:
Bin Rates:
Proposition 218 Requirements
The substantive provisions of Article XIII D appear in section 6, subdivisions (b)(1)-(5), which require a property-related fee to satisfy these standards:
1. Revenues derived from the fee or charge must not exceed the funds required to provide the property-related service;
2. Revenues derived from the fee or charge must not be used for any purpose other than that for which the fee is imposed;
3. The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership must not exceed the proportional cost of the service attributable to the parcel;
4. The fee or charge may not be imposed for a service unless the service is actually used by, or immediately available to, the owner of the property subject to the fee or charge; fees or charges based on potential or future use of a service are not permitted, and stand-by charges must be classified as assessments subject to the ballot protest and proportionality requirements for assessments; and,
5. No fee or charge may be imposed for general governmental services, such as police, fire, ambulance, or libraries, where the service is available to the public in substantially the same manner as it is to property owners.
Procedurally, Proposition 218 requires that notices of a proposed rate increase be mailed to all property owners in the affected area, and that a public hearing be held not less than 45 days after the mailing. On May 5, 2023, 118,512 notices of the proposed rate increase were mailed to all property owners and refuse customers in Long Beach. The notices informed customers of the proposed increases and of their opportunity to submit a written protest. The protest period will close at the public hearing. Absent a majority protest (i.e., 50 percent + 1, or 59,257 protests), the City Council may approve the final adoption of the proposed rates at this hearing. The first rate increase would become effective on July 1, 2023.
City staff recommends that the City Council holds a public hearing, hears all public comments on the proposed rate increases, considers all written material and written protest concerning the establishment and imposition of the proposed rate increases, tabulates the protests received, and if no majority protest exists, adopts the attached Resolution to revise refuse and recycling rates as proposed.
This matter was reviewed by Deputy City Attorney Vanessa Ibarra on June 2, 2023, and by Budget Management Officer Nader Kaamoush on June 5, 2023.
TIMING CONSIDERATIONS
City Council action is requested on June 20, 2023, to implement the solid waste rate changes effective July 1, 2023, and October 1, 2023.
FISCAL IMPACT
The rate increases are proposed to take effect in a two-phase adjustment with the first effective July 1, 2023, which will increase the typical (96-gallon cart) single family home customer’s account by $3.90 per month, or 11 percent. The second adjustment will go into effect on October 1, 2023, adding $4.34 per month, or 11 percent. It is estimated that adjusting rates, for both residential and commercial accounts, will allow for expected acquisition of vehicles and equipment for the State mandated commercial organics collection program. Since 2012, due to increased operational costs, the Refuse/Recycling Fund Group balance has decreased by over $15 million. Without a rate increase, it is estimated that the Refuse/Recycling Fund Group will be exhausted by mid FY 24. The proposed rate adjustment is anticipated to generate an estimated surplus in the Refuse/Recycling Fund Group of $250,000 in FY 23. For FY 24, revenues generated by the rate adjustment was estimated at the time of the study to generate an additional $7.8 million surplus which is necessary to apply towards acquiring equipment required to implement State mandated programs. Staff will be returning to City Council as part of the FY 24 Budget process to appropriate these additional needs to continue the implementation of the State mandated program. This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
ERIC LOPEZ
DIRECTOR OF PUBLIC WORKS
APPROVED:
THOMAS B. MODICA
CITY MANAGER