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10-23-2018 CC Rpt 15-ri COUNCIL AGENDA STAFF REPORT t�il5 til TO: HONORABLE MAYOR AND CITY COUNCIL DATE: OCTOBER 23, 2018 MEMBERS FROM: CITY MANAGER ITEM NO: 15 SUBJECT:AB 1826 - MANDATORY COMMERCIAL ORGANICS RECYCLING RECOMMENDATION: 1. Authorize and direct the City Manager to prepare an amendment to the commercial integrated waste management agreement between the City of Chino Hills and Republic Services to include an Organics Recycling Program. 2. Provide direction on a rate structure for Organics Recycling Program services. BACKGROUND/ANALYSIS: Pursuant to California Assembly Bill 1826 (AB 1826), businesses (including multi -family dwellings with five units or more) are required to participate in a mandatory commercial organics recycling program that diverts organic waste from landfill disposal. Examples of organic waste include food waste, green waste, landscape and pruning waste, nonhazardous wood waste, and food -soiled paper waste that is mixed in with food waste. AB 1826 phases in mandatory commercial organics recycling participation by lowering the minimum threshold of allowable organic waste generation over time, which means an increasingly greater proportion of businesses will be required to comply. Beginning January 1, 2019 the threshold is revised to require businesses that generate 4 cubic yards or more of commercial solid waste per week to comply with organic waste recycling mandates. Businesses can meet the AB 1826 requirement to recycle organic waste by implementing one or more of the following options: recycle organic waste onsite, or self -haul organic waste for organic recycling; sell or donate the generated organic waste; source separate organic waste from other waste, and subscribe to an organic waste collection and recycling service through the commercial waste management provider in their local jurisdiction. Businesses that certify that they do not generate organic waste can opt out of the program. In support of the mandate that qualifying businesses participate in organic waste recycling, AB 1826 also requires local jurisdictions to implement an organic waste collection and recycling program, servicing commercial customers within their jurisdiction. The City Council discussed the AB 1826 requirements at two public City Council meetings in January and May of this year. The focus of these meetings was to educate the community on the requirements of AB 1826 and evaluate compliance options. The City Council also directed City staff to perform additional outreach. In response, staff developed a dedicated mandatory organics page for the City Website, distributed a letter informing all commercial solid waste customers of AB 1826 requirements, and conducted meetings with commercial center operators and individual businesses potentially subject to AB 1826 (with participation from Republic Services). The City's franchise solid waste hauler, Republic Services, has developed an organic waste recycling program that offers organic waste collection and recycling services to the City's 419/454 commercial customers that meets the requirements of AB 1826. Through this program, Republic Services is responsible for collecting organic waste and operating an organic waste processing facility that processes all organic waste using methods that are approved by the California Department of Resources Recycling and Recovery (CalRecycle) for diversion credit. The provision of an organic waste collection and recycling program is not covered in the City's franchise agreement for commercial integrated waste management. Therefore, an amendment to the agreement that defines the scope of the program and the cost to customers is required. Republic Services has provided City staff with a draft amendment document (Attachment A) that establishes the scope of services for the recycling program. Republic Services has also provided two organics recycling rate options (Generator -Based and Sector -Wide) for City Council consideration. These rate options use different pricing model approaches to generate revenue that recovers the costs associated with the organic waste recycling program such as labor, collection vehicles, containers, processing equipment, waste disposal, overhead, outreach, and compliance tracking/reporting. The Generator -Based program option recovers costs only from the customers who are subject to AB 1826 requirements and participate in the City's organics program. The Sector -Wide option spreads the cost of the program to all commercial solid waste customers through a 5.17% rate increase to lower the cost of organic waste program participation. Customer rate sheets based on Generator -Based and Sector -Wide rate options have been provided by Republic Services and are provided as Attachment B and Attachment C, respectively. City Staff believes that both rate options would meet AB 1826's requirement for the City to provide an organic waste collection and recycling program to commercial customers. Republic Services has recommended the Sector -Wide rate option. The recommendation is based on the assertion that distributing the cost to all commercial customers will lower the cost for participants and increase compliance. Staff surveyed the neighboring cities of Brea, Chino, Corona, Diamond Bar, Ontario and Pomona to determine if they have implemented an organics recycling program and what rate structure they have implemented. Brea (also a Republic Services customer) has not implemented an organics recycling program. Chino and Ontario have programs with a Generator -Based pricing structure. Staff was unable to secure responses from Corona, Diamond Bar, and Pomona. Staff recommends that the City Council authorize and direct the City Manager to prepare an amendment to the commercial integrated waste management agreement between the City of Chino Hills and Republic Services to include an Organics Recycling Program based on a Generator -Based rate option. Staff believes that this will bring the City into compliance with AB 1826 requirements. Staff also believes an Organics Recycling Program with a Generator -Based rate model will provide an organics recycling compliance option for businesses in the City that generate organic waste without increasing costs for businesses that do not generate organic waste or which have selected an alternative compliance option (self -haul or donate). ENVIRONMENTAL (CEQA) REVIEW: This action is not a project within the meaning of the CEQA Guidelines Section 15378 and is therefore exempt from CEQA as it is an administrative change that will not result in any direct or indirect physical change in the environment. It is therefore exempt from CEQA. FISCAL IMPACT: There will not be a fiscal impact. Costs will be covered by the commercial customers. Respectfully Submitted, Recommended By: 420/454 Konradt Bartlam City Manager Benjamin Montgome Assistant City Manager Attachments ATTACHMENT A DRAFT AMENDMENT ATTACHMENT B GENERATOR -BASED RATES ATTACHMENT C SECTOR WIDE -BASED RATES 421/454 Attachment A AMENDMENT NO.—TO AGREEMENT NO. THIS AMENDMENT NO. 2 TO AGREEMENT NO. _is made and entered into this day of by and between the WHEREAS, on or about City and Company entered into the "Agreement "for ; and OTHER WHEREAS STATEMENTS WHEREAS, the State of California enacted AB 1826, requiring the implementation of mandatory commercial organics recycling beginning in 2016, which services are not currently contemplated in the Agreement; and NOW, THEREFORE, the Agreement is amended as follows: SECTION 1. Section 2. Definitions of the Agreement, is hereby amended to include the following definitions: "AB 1826 "AB 1826" means the Organic Waste and Recycling Act of 2014 (Chapter 27, Statutes of 2014 modifying Division 30 of the California Public Resources Code), also commonly referred to as "AB 1826," as amended, supplemented, superseded, and replaced from time to time." "Food Waste "Food Waste" means all kitchen and table food scraps; animal or vegetable waste that is generated during or results from the storage, preparation, cooking or handling of food stuffs; discarded paper that is contaminated with Food Waste; fruit waste, grain waste, dairy waste, meat, and fish waste, which has been source separated from other Solid Waste. Food Waste is a subset of Organic Waste." "Organic Waste "Organic Waste" means Food Waste, Green Waste, landscape and pruning waste, nonhazardous wood waste, and food -soiled paper that is mixed in with food waste." "Organic Waste Processing Facility "Organic Waste Processing Facility" means a permitted Facility where Organic Waste is sorted, mulched or separated for the purposes of Recycling, reuse or composting." SECTION 2. Section 8.3 of the Agreement is hereby amended to add the following provisions: "8.3.6 Organic Waste Recycling Program for Commercial Premises and Multi -Family Dwelling Refuse Customers (a) Contractor shall be responsible for ensuring that the "City approved" Organic Waste Recycling program meets the requirements of AB 1826. If AB 1826 is subsequently 422/454 amended and if such amendment modifies organics program requirements not anticipated by this Agreement, then City and Contractor shall meet and confer regarding such modifications as provided in Section 8.3.4 of the Agreement. (b) Contractor shall be responsible to ensure that all Organic Waste is processed using methods that are approved by the California Department of Resources, Recycling and Recovery for Diversion credit. (c) Contractor shall offer Organic Waste Recycling services to all Commercial Premises and Multi -Family Dwellings and City Facilities. (d) Contractor shall offer Organic Waste Recycling services based on the Container size and service frequency as contained in the Rate Schedule in Exhibit 1. The services offered shall include a two -cubic yard bin and a 65 -gallon cart, collected one to three times per week. If CalRecycle determines that mandatory commercial organics service shall be provided to customers on or after January 1, 2020 that subscribe to two -cubic yards or more of solid waste service per week, then Contractor will also offer a 35 -gallon cart at the rate identified in Exhibit 1 for customers who generate a small amount of organic waste. (e) The method(s) for contacting customers as described in this Amendment, unless otherwise specified, shall be accomplished through direct mail, email, telephone calls, site visits and/or other methods, provided that such methods meet the regulatory requirements of CalRecycle. (f) In the event Contractor encounters a contaminated Organic Waste Container, Contractor shall document the contaminated container using a driver on -board system, forward the message to Dispatch and retain photos of the incident. Contractor shall advise the Customer that the Contractor will return the following business day to provide Refuse Collection service for the contaminated Container. Contractor shall contact and provide education materials to the Customer on appropriate items to be placed in the Organic Waste Container. For each instance of a contaminated Organic Waste Container, Customer shall be charged the fee authorized in Exhibit 1. (g) Contractor shall identify and target Commercial Premises that create large amounts of Organic Waste, such as hotels, business parks, and Multi -family Dwelling Customers with significant landscaping waste disposed of in trash container(s). Contractor shall also target Commercial Premises Customers that have food service operations such as restaurants, grocery stores, hospitals, corporate cafes, bakeries, etc. If necessary or if requested by CalRecycle, Contractor shall conduct visual waste audits of Commercial Premises and Multi -Family Dwellings to evaluate the Organic Waste service requirements and service level needs. Contractor shall provide access to training materials to train employees such as servers, food preparers, hospitality and maintenance staff, taking into consideration employee turnover, and shift changes. If necessary or if requested by CalRecycle, on an annual basis, Contractor shall conduct Customer surveys and onsite waste assessments of Commercial Premises and Multi -Family Dwelling Customers subject to the requirements of AB 1826 that do not receive Contractor provided Organic Waste Recycling, utilize an in- house program, donate edible foods to a charitable organization or Recycle using a third party vendor. Contractor shall provide copies of waste assessments performed 423/454 each quarter until January 2020 or later if requested by CalRecycle or City and submit copies of all waste assessments as part of the annual report to the City in accordance with Section 3 of this Amendment. In the event a Customer that meets the requirements in AB 1826 refuses Contractor provided Organic Waste Recycling and does not report to the Contractor that they achieve Organic Waste Recycling via in-house, food donations, or through a third party Recycling program that meets the requirement under Applicable Laws, Contractor shall provide to the City information including Customer's name, address and contact information on a City approved template for inclusion with State reporting. (h) Contractor, with City support, shall contact and provide outreach to participating Commercial Premises and Multi -Family Dwelling Customers as follows: (i) Initial Direct Mailing Outreach to be performed by Contractor • Upon approval of an Organics Waste collection program, Contractor will prepare a multi-lingual letter regarding the requirements of AB 1826 for City approval. Upon receipt of City approval the letter is to be printed using the City's electronic letterhead and mailed or delivered by Contractor to all Commercial and Multi -Family Customers, informing Customers of the Contractor -provided Organic Waste Recycling Program and the requirements for compliance with AB 1826. The letter shall note that participation is mandatory under State law for customers that meet the participation thresholds under AB 1826. (ii) Initial Direct Mailing Out of Compliance Outreach to be performed by Contractor • Contractor will prepare a letter for City approval and send to all non- compliant customers detailing their non-compliance and annual reporting requirements to CalRecycle. The letter is to be printed using the City's electronic letterhead. Contractor will contact all non-compliant customers identified using the Contractor's database. Contractor will provide the City a list of all non-compliant customers including but not limited to contact person, service and billing addresses, phone number, email, account notes and any information relating to the previous refusal of organics program services to report to CalRecycle. (iii) Annual Outreach to be performed by Contractor • The Contractor, under the guidance of the City, shall contact all customers that fall under the requirements of AB 1826 (using the methods described in Section 2.e), but do not have a CalRecycle approved program in place, and are not in compliance with the requirements set forth in AB 1826. (iv) Ongoing Outreach to be performed by Contractor Provide Organic Waste Recycling information to all Commercial Premises and Multi -family Dwelling Customers including Step by Step process; guidelines for new employee training; do's and don'ts of separation; signage examples; source reduction suggestions; links to online City programs/resources; Good Samaritan Law definition; information on environmentally preferable purchasing policies; and resource list of sustainability programs and toolkits from trade organizations like the National Restaurant Association and US Composting Council Curb to Compost Toolkit and/or government agencies like the EPA toolkit for 424/454 Reducing Food Waste and Packaging and FTC Guidelines on compostable and degradable claims. • Provide samples of indoor and outdoor Container options and signage. • Contact or provide information to help identify Customer's "startup team" to implement the program and provide long term support. • If necessary or if requested by customers, conduct, comprehensive, in- house, multi-lingual trainings with kitchen and janitorial staff at no additional charge. • Follow-up and monitor to ensure successful participation, which shall include visual audits and additional training when necessary. • Create solutions for the identified challenges and waste stream specifics. • Connect Customers with food donation programs where applicable (Senate Bill 1383 requires recovery of twenty (20) percent of edible food for human consumption that is currently landfilled by 2025). • Contractor shall produce, keep current, and provide information to the public on AB 1826 and identification of Commercial Premises and Multi - Family Dwelling Customers affected by the legislation. • The information for the Contractor provided Organic Waste Recycling program shall be promoted through Contractor's website, mailers, brochures, billing inserts, email content, social media, and online announcements. SECTION 3. Section 23.2 Quarterly Reports of the Agreement is amended by addition of the following to the end of existing language, and all other aspects of Section 23.2 remain unchanged: "Quarterly Commercial Premises and Multi -Family Dwellings Organic Waste Recycling Program Reporting Requirements Contractor shall provide to the City on a quarterly basis (until January 2020), and annually thereafter, in a format approved by the City: The total number of Commercial Premises and Multi -Family Dwelling Customers serviced by the Contractor that meet the thresholds of AB 1826. • The number of these Customers that: o Subscribe to the Contractor provided Organic Waste Recycling program; o Recycle Organic Waste via an in-house program; o Donate edible food to charitable organizations; o Use a third -party vendor for Organic Waste Recycling; and, o Are without a known Organic Waste Recycling program. • A listing of all contact, surveys and onsite waste assessments performed for customers that are required under State law, but that refuse organics service and copies of onsite waste assessments. • Contact information for Commercial Premises and Multi -Family Dwellings Customers (as available in the Contractor's data base) that do not currently have an Organic Waste Recycling program. • All documentation provided shall include detailed support." 425/454 SECTION 4. Section 24 of the Agreement is hereby amended to add the following provisions: "24.9 Organic Waste Recycling Compensation Adjustment (a) In order to fund the Organic Waste Recycling program, Contractor shall receive a rate adjustment to existing Commercial and Industrial Solid Waste rates of 0.0 % to be phased -in with two equal increments of 0.0% each as follows: beginning July 1, 2018, the Contractor is entitled to a one-time rate increase of 0.0% for Commercial and Industrial rates in addition to the annual rate adjustment per Section 24 of the Agreement. Contractor shall also receive an adjustment of 0.0% to Commercial and Industrial rates on January 1, 2019. Contractor shall offer Organic Waste Recycling in accordance with the rates set forth in the "Approved Contractor Rate Schedule" or as may be adjusted under the terms of this Agreement. (b) The parties acknowledge that effective July 1, 2019 and annually thereafter, Commercial and Industrial rates will be adjusted for changes in the Organics Waste disposal/processing fee per ton based on the formula in Exhibit 2 - Organic Waste Processing Component Adjustment, except that such formula will not be applied in any year that the Rate Adjustment Rebalancing Formula is applied in accordance with Section 4.(c) and 4.(d). (c) Effective July 1, 2022, the Organic Waste Collection rate increases previously granted will be adjusted based on the Rate Adjustment Rebalancing Formula in Exhibit 3 to reflect the actual level of participation in the program. Contractor will provide for City review all data and documentation requested by the City supporting the number of units (tons, hours, container count) and related calculations in Exhibit 3. Such data shall include any allocation methods used to allocate tons or hours to the City from shared organics collection routes in other cities. (d) If the actual number of tons for the Organic Waste collected under this program in calendar year 2019 exceeds the tonnage threshold of 4,148 tons, then the rebalancing calculation may be performed effective July 1, 2020 upon Contractor's written request, if received by the City prior to February 1, 2020, and will be performed again effective July 1, 2021 and July 1, 2022. The rebalancing procedure will not be performed again after July 1, 2022. (e) The processing cost per ton to be used in Exhibit 2 and Exhibit 3 is based on the tipping fee at the third party's CORe Organic Waste Processing Facility in the City of Orange. If Contractor develops its own Organic Waste Processing Facility and proposes to use it for processing Organic Waste generated in the City, and provided that Contractor's facility is competitive with market rates, City and Contractor shall meet and attempt to negotiate in good faith an adjustment to the processing cost per ton that reflects the proposed facility's costs, and a method of adjusting the processing cost per ton." SECTION 5. The "Approved Contractor Rate Schedule" in Agreement Exhibit A is amended to include the refuse/organics collection rates shown in Exhibit 1. SECTION 6. Exhibit 2 Organics Waste Processing Component Adjustment is added. SECTION 7. Exhibit 3 Rebalancing Mechanism is added. SECTION 8. Exhibit 4 Documentation of the Rebalancing Adjustment Factor is added. 426/454 SECTION 9. Unaffected Provisions Remain in Full Force. All provisions of the Agreement excepting for those expressly amended by this Second Amendment, shall remain unchanged and in full force and effect. 427/454 Attachement B Generator -Based Pricing Option CITY OF CHINO HILLS- ORGANIC INDIVIDUAL PRICING Monthly Rate based on Collection Organics Container Contamination Fee Container Size 1x 2x 3x per Occurrence 2.0 Cubic Yard Bin - Refuse $292.29 $ 584.57 $ 876.86 $ 100.00 or Organics 64 Gallon Organics Cart $ 73.07 $ 146.14 $219.22 $ 50.00 See footnote #3 below. 35 Gallon Organics Cart Footnotes: Site visit fee of $200 as the above rates do not include any outreach. (If the customer subscribes to organic service this charge will be waived) (3) If Cal Recycle determines that mandatory commercial organics service shall be provided to customers on or after January 1, 2020 that subscribe to two -cubic yards or more of solid waste service per week, then Contractor will also offer a 35 -gallon organics cart, at a rate to be determined, for customers who generate a small amount of organic waste. The above rates are based on assumption of an effective date of 9/1/18. In case the program is started after 9/1/18, the rates are subject to change due to the CBA labor rate increase going into effect on 9/30/18. Initial offering will be limited to either front load container, or cart service, due to the anticipated limited participation. If participation grows into a full load both container types will be offered. 428/454 ATTACHMENT C SECTOR -WIDE RATE OPTION CITY OF CHINO HILLS- ORGANIC SECTOR WIDE PRICING Monthly Rate based on Organics Container Contamination Fee Container Size 1x 2x 3x per Occurrence 2.0 Cubic Yard Bin - Refuse $ 74.08 $129.43 $ 184.64 $ 100.00 or Organics 64 Gallon Organics Cart $ 45.00 $ 90.00 $135.00 $ 50.00 See footnote #3 below. 35 Gallon Organics Cart Footnotes: The above prices includes outreach to be done by Republic Services. The Organic Sector wide price increase of 5.17% can be split. Effective 9/1/18- 60% (3.11%) and effective 7/1/19 40% (2.06%) (3) If Cal Recycle determines that mandatory commercial organics service shall be provided to customers on or after January 1, 2020 that subscribe to two -cubic yards or more of solid waste service per week, then Contractor will also offer a 35 -gallon organics cart, at a rate to be determined, for customers who generate a small amount of organic waste. i ne above rates are based on assumption or an ettective date of y/ul/m in case the program is started after 9/1/18, the rates are subject to change due to the CBA labor rate increase going into effect on 9/30/18 429/454 Assembly Bill 1826 Mandatory Commercial Organics Recycling • Organic Waste Defined • Food waste • Green waste • Landscape and pruning waste • Non -hazardous wood waste • Food -soiled paper waste that is mixed in with food waste • Organic waste is recyclable through composting and mulching, and through anaerobic digestion, which can produce renewable energy and fuel 2 • 2014 — AB 1826 requires businesses to recycle their organic waste by executing one or more of the following options: • self -hauling organic waste for organic recycling • selling or donating the generated organic waste • source separating organic waste and subscribing to an organic waste collection and recycling service • AB 1826 requirements are phased in for businesses based on amount of waste generated • AB 1826 also requires local jurisdictions to implement an organic waste collection and recycling program 3 • City staff partnered with Republic Services to develop an organics program to meet the State's requirements. Activities included: • Identifying businesses that generate organic waste, • Creation of a commercial organics disposal rate options that incorporates the associated costs of organics service (labor, collection capital, processing equipment, waste disposal, outreach, and compliance tracking/reporting), and • Execution of an outreach plan that educates Chino Hills commercial businesses about the law and how to comply. 4 I • Staff needs City Council authorization to develop an amendment to the commercial solid waste agreement with Republic Services to add an Organics Recycling Program • Staff needs direction on a rate structure for the Organics Recycling Program Charges participants only Service fee applies for participants bill Sector-Wid2j Spreads 5.37% cost across all commercial customers Service fee applies for participants Requires significant City outreach Provides for full service from Republic Services Recommended by City staff Recommended by Republic Svcs. Container Size 64 Gallon Org. Cart 2 -Yard Bin — Organics or Refuse Monthly Rate Based on Weekly Collection Frequency 1X 2X 3X $75.39 $150.77 $226.16 $301.54 $603.08 $904.62 I Contamination Fee Per Occurrence $100 $50 Footnotes: • Site visit fee of $200 as the above rates do not include any outreach. Fee waived if customer subscribes to organic service. • Republic Services will provide a 35 -gallon organics cart option if Cal Recycle requires businesses with two -cubic yard or more of solid waste per week 1/1/2020. • Republic Services proposes limiting organic service to 64 gallon cart or 2 -yard bin until participation grows. Container Size 64 Gallon Org. Cart 2 -Yard Bin — Organics or Refuse Monthly Rate Based on Weekly Collection Frequency 1X 2X 3X $46.74 $93.48 $140.22 $76.95 $134.44 $191.78 I Contamination Fee Per Occurrence $100 $50 Footnotes: • Sector -wide pricing includes outreach to be performed by Republic Services. • The sector -wide price increase of 5.37% can be split. Effective 12/1/18- 60% (3.11 %) and effective 7/1/19 40% (2.27%). • Republic Services will provide a 35 -gallon organics cart option if Cal Recycle requires businesses with two -cubic yard or more of solid waste per week. City staff and Republic Services representatives are available for questions.