“We had a number of concerns over the language of the existing contract, which granted Waste Management the ability to request significant increases based on industry costs, while not having adequate control of the City’s Material Waste Stream,” said Mayor R. Rex Parris. “We are pleased with the modified contract, and believe this extension will prove to be fair for our residents, as well as for Waste Management.”
In late 2011, Parris, Council Member Marvin Crist, and city staff began discussions with Waste Management regarding potential modifications to the Agreement. These discussions were primarily necessitated by potentially significant customer rate increases, which would have resulted from the approved rate escalator formula.
The City also needed greater ownership and control of the City’s Material Waste Stream (MWS) to effectively pursue Material Recovery Facility (MRF) opportunities, as well as other revenue and recycling opportunities. Meanwhile, Waste Management, having served Lancaster for 20 years, had a strong desire to continue the service beyond the Agreement termination date of June 30, 2017.
“We are pleased with the outcome of the on-going discussions to extend the contract. We have been a part of this community for forty years, and have a solid customer service record. In good faith, we have waived significant rate adjustments allotted to us in our previous agreement to reach a mutual agreement that best meets the needs of the community and the goals of the city,” said Doug Corcoran, Director of Operations, Waste Management, Southern California. “We look forward to continuing our commitment to the community as well as ‘Keeping Antelope Valley Clean’ through reliable service and sustainable programs to improve the city’s recycling efforts.”
The revised agreement extends the termination date of the contract with Waste Management from June 30, 2017 to June 30, 2027. The modified contract also reduces residential customer rates by 2%, from existing rates, through June 30, 2013, forgoing the rate increases that WM was contractually entitled to impose in July 2011 and July 2012 (a cumulative 9.9% rate increase).
While commercial/industrial customer rates will increase by 3%, from existing rates, through June 30, 2013, Waste Management will also forgo potential July 2011 and July 2012 rate adjustments, which would have resulted in a cumulative rate increase of 13.3%.
In addition, the contract now includes a revised rate adjustment formula, using a 12-month average methodology, based on currently identified indices, and capped at no more than a 4% increase. As a result, if annual justified increases are higher than 4%, the difference may be carried forward to future years where the justified increase would be less than 4%.
“The critically important aspects of this contract modification are the rate decreases for our residents, and the incorporation of the revised rate adjustment formula, which will provide residential and commercial rate stability in the future,” said Council Member Marvin Crist.
The revised agreement will:
- Increase the annual Franchise Fee on gross receipts payable to the City from 8.11% to 17%, commencing on July 1, 2017;
- Ensure City ownership and control of the City’s Material Waste Stream;
- Incorporate an annual Impact Fee payment to the City of $1,000,000, commencing on July 1, 2017; and
- Provide for $6.9 million in one-time fees payable to the City in February 2013.
In addition, the contract now includes annual enhanced sponsorships/services, which will commence on July 1, 2017. These include a community garden sponsorship ($10,000), scholarships for local children ($25,000), portable toilets at City events (valued at up to $80,000), weekly alley sweeps (valued at up to $70,000), up to 300 tons of compost for City facilities (valued at up to $11,000), operation CleanSweep (valued at up to $30,000), and a bicycle redistribution program (valued at up to $5,000).
(Information via press release from the City of Lancaster.)