Item 16 - Agreement for the Waste Infrastructure System Enterprise

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Waste Infrastructure System Enterprise Agreement with the County of Orange April 21, 2026 Page 5 5 7 0 0 adequate reserves to offset this cost for one fiscal year without affecting essential solid waste operations. The Solid Waste Enterprise fund balance has been strategically accumulated to provide a fiscal buffer against emergencies, including unforeseen rate increases and the potential cancellation of revenue-sharing programs. Consistent with enterprise fund accounting standards, all balances held in this fund must maintain a direct nexus to solid waste operations. The Solid Waste Enterprise fund balance is also utilized to ensure compliance with evolving state mandates including new regulatory requirements and programming, improving public building’s waste storage and disposal facilities, rigorous auditing standards, and comprehensive reporting obligations. Approval of the MOU formalizes the City’s strategy to stabilize refuse rates for residents and businesses during FY 2026-27 while the City evaluates long-term rate adjustments. The purpose of a MOU is to memorialize the agreement between the City of Santa Ana and Republic Services regarding the refuse rate structure for Fiscal Year (FY) 2026-27. The MOU will establish how the City will plan to mitigate the impact of the WISE rate increase on residents and businesses by using rate reserves to offset most of the increases in disposal costs in the initial year. Reserves contained in the City’s Refuse Enterprise Fund would be used to cover the increased landfill tipping fees associated with the WISE Agreement for all customer classes. Under this approach, the City would reimburse Republic Services for the incremental disposal cost increases, thereby shielding customers from these additional charges, during fiscal year 2026-27. The MOU will also establish the methodology of that rate structure including the formal payment process and reporting structure. Staff is seeking City Council to direct staff to proceed with the rate stabilization strategy and to negotiate an MOU with Republic Services acknowledging the rate stabilization structure. Staff will return to Council in the future for approval of such an MOU. Agreement with HF&H To ensure the long-term financial sustainability of the City’s solid waste program, it is critical to recognize that the City cannot indefinitely absorb the added costs imposed by the County’s WISE Agreement. While the use of approximately $6.8 million from the Refuse Collection Service Enterprise Fund provides a necessary "Rate Stabilization Shield" for Fiscal Year 2026-27, these reserves are finite and intended for one-time emergency or stabilization use rather than ongoing operational subsidies. Relying on reserves to offset a permanent 53% increase in landfill tipping fees would lead to the rapid depletion of the fund and insolvency. Consequently, staff will initiate several actions, including a formal Proposition 218 process, to update refuse collection rates to reflect the increased landfill disposal costs associated with the WISE Agreement for consideration by January of 2027.