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Approve Issuance of the Solid Waste Services RFP, One-year Extension of the Solid Waste Services Agreement with Waste Management, and Authorize Prop 218 Process March 3, 2020 Page 3 One -Year Extension The one-year extension with WM, from July 1, 2021, to June 30, 2022, accommodates an expanded RFP process timeline. This timeline will provide four months for proposal preparation, which for a city the size of Santa Ana, is adequate. Proposal evaluation and interviews will be conducted over a six-month period allowing sufficient time considering the intricacies of proposals and the unknown number of proposers. Most importantly, this expanded timeline is recommended due to purchasing impacts in the manufacture and delivery of the new trucks and carts, which are required in the RFP. Markets have seen an extended delivery time, as other municipalities prepare for compliance with new legislation. The extension also addresses the requirements of Assembly Bill 1594 (AB 1594). Effective January 1, 2020, AB 1594 eliminated diversion credit for green waste sent to County landfills as Alternative Daily Cover (ADC). Previously, WM delivered green waste collected from the City's customers to the Tierra Verde Industries green waste processing facility for grinding and transfer to the Orange County Landfill System for use as ADC. WM provided this service at no charge to customers, and the City received diversion credit. Under the new requirements of AB 1594, WM will continue to deliver green waste to Tierra Verde, however the material will be composted, providing the City with diversion credit to maintain compliance with State mandates. WM will provide this service at no cost to ratepayers through June 30, 2020. Upon successful completion of a Proposition 218 process, a rate adjustment of $1.90 per residential unit per month will occur effective July 1, 2020. A second rate adjustment of $1.50 per residential unit per month will occur effective July 1, 2021. The total two-year rate adjustment for this service equals $3.40 per residential unit per month. The City continues to retain the right to choose the location for the delivery of green waste and that the rate paid by the ratepayer will be reduced or increased accordingly, based on transportation and processing costs. Rate Design In recent years, the legal requirements surrounding solid waste service providing agencies rate setting in California have evolved. Namely the courts have made rulings with respect to California Constitution Article XIII C and D (commonly known as Proposition 218) that have created a higher "cost of service" standard for rate setting than has historically been practiced by public agencies. Simply put, the burden of proof is on agencies to demonstrate that all aspects of refuse rates are directly proportionate to the cost of providing service. This means aligning fixed revenue (fixed charges) with fixed costs. The proposed refuse rate increases for curbside cart service are structured to directly align with the refuse utility's (WM) increased cost for composting green waste. Refuse rates for cart customers are proposed to be fixed for all curbside customers. This cost increase is a direct pass - through to ratepayers. The proposed rate revenue adjustments outlined below support the cost of composting green waste to maintain compliance with State mandates: