Council Extends Garbage Contract to 2025 – Big Savings Forecast for City

It's taken a year and a half to produce, but a new long-term contract between the City of El Cerrito and its hometown waste-hauling firm, East Bay Sanitary, won pproval from the City Council Tuesday night.

It won accolades also from city staff and East Bay Sanitary, the small local firm that has been the city's garbage company since 1941.

Terms of the new contract

The new pact goes to the year 2025, revising and extending the current contract, which was set to last to 2018.

It provides for enhanced customer service from East Bay Sanitary, including extended customer service hours and a website that includes online bill payments and direct email contact with the company. 

One element that drew special attention is the addition of a "balancing account" that will allow rates to be adjusted according the company's unanticipated profit or losses. A chief reason for this provision is that the current contract provides a disincentive for the company to encourage customers to swap larger garbage cans for smaller ones.

The city wants residents and businesses to recycle more and reduce the amount of garbage entering landfills, but East Bay Sanitary looses income when customers switch to smaller garbage cans, whose rates are lower. The company has said it's been in a financial pinch because a large number of customers have "migrated" to smaller garbage containers.

"We have a very high portion of our community on the smallest, mini-can size," said city Environmental Analyst Garth Schultz, noting about 30 percent of city residents use the 20-gallon garbage can. "About 65 percent of our residential population uses the the 35-gallon container."

So, the new contract establishes a mutually agreed profit margin – with an operating ratio of 90.5 percent – and also provides that the rates for any given year will be adjusted up or down according to whether East Bay Sanitary fell short or exceeded its promised profit.

Rate increases will be based then on two factors. First is  a standard Refuse Rate Index – based in part on federal indexes – that includes labor costs, fuel, depreciation, interest and pension obligations. Once that rate is calculated, it would be increased if company revenues fell below the target profit or decreased if the revenues exceeded the target. The amount of rate increase or decrease would be set at whatever level would be required to make up the difference. 

The new contract also increases the franchise fee that East Bay Sanitary pays to the city to 12 percent from the current 10 percent, resulting in about $100,000 yearly for the city's general fund revenue, Schultz said in a presentation to the council.

The city will also save an additional $25,000, largely from a new contract provision under which East Bay Sanitary will provide maintenance service for the city trucks that pick up recycling materials at curbside.

The city contracts with East Bay Sanitary to use the company's trucks to collect garbage (in blue containers) and green waste (in green cans), while the city uses its own trucks to pick up recycling materials (in gray cans). The fees for all three services are consolidated into a single bill that East Bay Sanitary sends to customers.

The new contract package was formulated following a review last year of existing rates and operations by an outside consultant, R3 Consulting Group Inc., that identified several opportunities for improved efficiencies, according to the staff report.

No competitive bidding

The city decided it would more advantageous to stay with East Bay Sanitary than to seek competitive bids, according to Schultz and to a staff report presented to the council. The rates charged by East Bay Sanitary are comparable to surrounding jurisdictions, according to the staff report.

Also, the report notes, several other local jurisdictions – Richmond, San Pablo, Pinole and Hercules – have contracts expiring in 2025, meaning that more opportunity for savings through a group competitive bid will exist then than if the city were to go it alone in 2018 when the current contract would have expired, the report said.

Mayor Jones describes reasons for support

Mayor Bill Jones endorsed the agreement in extended remarks, saying, "I am satisfied that the core elements of the service meet the present and future needs of waste collection services, and this exists with the current vendor. They have demonstrated that working with the city they can provide expanded services, comparable rates to other jurisdictions, provide savings for the city, be able to secure the required capital outlay and make a fair profit by extending the contract."

"On a personal note, though, I really believe that it is in our best interests to go forward with a trusted partner that we've had since 1941," Jonesa said. "It provides unique advantages that may not be present in 2018 and/or with a new company. They know the city. We communicate and work in a collaborative manner on many of the issues of mutual interest. Their infrastructure and service systems are in place and will improve almost immediately with this extension. And best of all, they are a small, locally owned, independent business."

Jones asked Mark Figone, the East Bay Sanitary president who was in the audience, if he would like say anything to the council.

Figone thanked the city staff for their hard work in putting the agreement together and offered special thanks to Schultz.

"Garth's been incredible through this process," Figone said. "He's a talented, diligent, and dedicated, and it's a been a pleasure working with him."

"We have been at cross purposes over the past several years as we've implemented new programs and tried to divert more and more waste from the waste stream," Figone continued, referring to the conflict between maintaining company revenue and customers switching to smaller, lower-rate containers.

"I am looking forward personally, and I know my family and my partners are as well, in actually becoming this partner that we have outlined in this presentation and actually starting to work with the city and to be aggressive about waste diversion," he said.

"And on a very personal note," he added, "we've been here since 1941. We had family in the business going back to the turn of the century. We have a great-grandfather who was one of the original founders of the Oakland Scavenger Company way back when, and so we four currently in the business are very proud to be 'fourth-generation garbage men,' as we like to call it."

"I think the city is well-served by having a small, family company like this," Figone said. "When our customers call us, they get a person to answer the phone."

The city staff report, which includes the new contract and the R3 Consulting Group report, is attached to this article. More information can be found in a Patch article published Monday, "Council Asked to Extend Waste-Hauler Contract to 2025."