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1c. Request for Time Extension to Negotiate an Organized Collection ContractCITY OF �e CHANHASSEN 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317 (612) 937 -1900 • FAX (612) 937 -5739 MEMORANDUM TO: Don Ashworth, City Manager i FROM: Bob Generous, Planner H I DATE: 1 SUBJ: October 18, 1994 Action by City Admiaistraw ftme L r .;® f de _ 20 Submhed to CoMMISSW Dale S!r5mitted to Council Requested Time Extension, Organized Collection Contract Negotiation On July 11, 1994, the City Council approved a eta ' negotiations with the existing waste haulers fore a r � several times to come to a consensus on the c© W` �,r to review the haulers' proposed revisions to thii Cori these changes and has provided the haulers With a r meeting is scheduled with the haulers for Friday, a and to review the haulers proposed districts: After i ' that the haulers provide the city with the proposed n authorizing staff to initiate ized collection. The haulers have met language. Staff has met with the haulers act. Staff has incorporated many of used draft contract to be reviewed. A fi ber 28, 1994, to discuss the contract is ;meeting, staff anticipates requesting Staff believes that the haulers are making a good faith r, in a timely manner. Staff is requeshng that the City C for the negotiation time frame t� permit staff and the 1 RECOMMENDATIONS 1 1 1 1 1 It is "The City Council authorises staff to negotiate contracts with collection based on the Chanhasseritvilict[ be presented to City Council for review andpprcu�' Dec to resolve the contract language approve a two month extension to complete contract discussions. 12,1994." br organized contract will If a negotiated contract with existing haulers #bt possible, then staff will recommend that a contract for competitive bid be prepared and the city will prepare a request for proposals. Attachment: 1. Memorandum from Jayne Schifsky to City Managers dated 10/5/94 1 11 COUNTY OF CAQVEQ CARVER COUNTY COURTHOUSE 600 EAST 4th STREET, BOX 3 CHASKA, MINNESOTA 55318 -2186 1 ENVIRONMENTAL SERVICES 1 (612) 361 -1800 (800) 535 -7570 ' FAX (612) 361 -1581 COUNTY OF CAQVEQ CARVER COUNTY COURTHOUSE 600 EAST 4th STREET, BOX 3 CHASKA, MINNESOTA 55318 -2186 1 1 MEMORANDUM DATE: October 5, 1994 TO: City Managers 1 FROM: Jayne Schifsky SUBJECT: Attorney General's Report on Municipal Rubbish Hauling Recent court rulings and legislative changes have made municipal solid waste hauling a topic of a report prepared by the Minnesota Attorney General's Office. Enclosed is a copy of this report to keep you up to date with findings and legislative changes. I hope you find this report helpful as changes in the type of hauling in your community are discussed, or as current contracts for municipal hauling are reviewed. If you have any questions, or would like to discuss issues covered in the report, feel free to give me a call at 361 -1809. Thanks. Affirmative Action /Equal Opportunity Employer Printed on Recycled Paper Contains Minimum 10% Post Consumer Waste it MINNESOTA ATTORNEY GENERAL'S OFFICE REPORT ON MUNICIPAL RUBBISH HAULING The Attorney General works to ensure consumers the benefits of competitive markets by enforcing state and federal antitrust laws and by serving as an advocate for competition in a variety of settings. Competitive markets normally yield lower prices and higher quality goods and services for consumers. Unfortunately, review of the residential rubbish hauling market shows that competition, and the resulting benefits, are sometimes seriously compromised by municipal contracting methods or other restraints imposed by cities attempting to facilitate rubbish removal for their residents. This report discusses the results of a survey conducted by the Attorney General regarding contracting methods for rubbish hauling. The report concludes that competitive contracting methods result in lower prices and better services for consumers than non - competitive methods. The report discusses the legal framework within which cities contract for hauling, documents the experiences of several cities in the survey group, and advocates changes in legislation that will make rubbish removal cheaper and better for the citizens of Minnesota. Legislative change is needed to require local officials to use competitive contracting methods. THE ECONOMICS OF RUBBISH HAULING Rubbish haulers incur a number of costs, including fuel, "tipping fees" (the price landfills charge for dumping), labor, and truck maintenance. The costs per customer are minimized when a hauler serves a densely populated area. Conversely, when customers are dispersed over a wide geographic area, the hauler has greater fuel, labor and truck maintenance costs per customer. Many communities in the survey area rely upon what is known as "open hauling" for rubbish collection. Under open hauling home owners are free to choose their own haulers, and hauling licenses are granted by the city to whatever qualified hauling companies may apply. The advantage of open hauling is that it gives citizen& a choice and promotes price competition among haulers. The downside to open hauling is that it can result in scattered customers for each hauler which: (1) reduces hauling crew productivity and (2) results in a number of trucks passing on the same streets and alleys each week. Open hauling contributes to greater overall fuel consumption, potential safety hazards, and greater traffic on streets and alleys. Haulers in an open system cannot take advantage of customer density without some organizational effort by haulers or by neighborhood groups.. Customer density is the one cost factor over which a rubbish hauler and customers have the most 'control. The price of fuel, the price of dumping and, to an extent, the price of labor are roughly uniform among haulers. So using fuel and labor efficiently (less of them per customer) has a positive cost impact for the haulers and should result in lower prices for consumers. I.� J L 0 1 i I i In a 1981 report entitled Keeping the Waste Out of Waste the Citizen's League identified one neighborhood within the open hauling system of `St. Paul that tried to capture the efficiencies of higher customer densities. The report said: "Recently, a group of residents in the Tangletown neighborhood of St. Paul joined together to contract for refuse collection through a competitive bid process and realized considerable cost savings over what residents had been paying individually." The Citizens League's "data showed costs to be especially low in communities that contracted through a competitive bidding system." A number of communities eliminate the inefficiencies of open hauling on a community -wide basis by allowing only one hauler or assigning one hauler to a specified territory in the community. Designating a neighborhood or city-wide hauler is one form of what is generally called "organized collection." This is a top -down effort to capture efficiencies as opposed to the bottom up effort used by the Tangletown neighborhood. The goal is to allow the hauler to minimize costs through increased customer density. For consumers, however, the important question is whether those savings are passed along to them or pocketed by the hauler. Municipal governments are in a position, by virtue of the way they procure rubbish hauling services for their citizens, to dictate whether consumers or haulers will get the most benefit of customer density efficiencies. The effect of municipal procurement practices on the price and quality of rubbish hauling services is the subject of this report. HOW CITIES CONTRACT FOR RUBBISH HAULING SERVICES As a general matter, cities can proceed in a number of ways to contract or allow for solid waste disposal.I A city can solicit competitive bids for a contract, issue a request for proposals, issue one or more licenses, use the procedures outlined in the organized collection statute, Minn. Stat. § 115A.94 (1992), negotiate directly with a particular hauler, or use a combination of these options. Each of these methods imposes different procedural obligations on a city, as discussed below. ARpliT cability of Competitive Bidding�Requirements In 1976 the Minnesota Supreme ' Court confirmed that the regulation of garbage disposal is among the police powers delegated to Minnesota cities, and allowed a city to contract with a single hauler even though there was no ordinance specifically authorizing such a contract. Troje v. City Council of Hastings 310 Minn. 183, 245 N.W.2d 596 (1976), citing, Minn. Stat. § 412.221. Classification of the securing of rubbish hauling services as part of a city's police powers, and the resulting possibility of exclusive contracts, means that cities do not have to use a competitive bidding process when contracting for rubbish hauling, and can even act in a way that eliminates competition. ' The Uniform Municipal Contracting Law, which establishes dollar thresholds on contracts for which bids must be solicited, does not apply to rubbish hauling.. In its current form the statute covers only the sale or purchase of "supplies, materials, equipment or the ' rental thereof, or the construction, alteration, repair or maintenance of real or personal property." Minn. Stat. § 471.345, subd. 2 (1992). By definition, therefore, the Uniform 1. Minn. Stat. § 115A.941 requires that certain cities, including all cities with a population of 5,000 or more, ensure that every residential household has solid waste collection service or an "environmentally sound alternative." Minn. Stat. § 115A.941 (1993 SuPP ) 1 -2 f Municipal Contracting Law does not apply to services such as rubbish hauling. While the Uniform Municipal Contracting Law contemplates that bidding may well be used for contracts not reaching the current $25,000 threshold for which competitive bidding is mandated, most courts have construed the statutory bidding requirement very narrowly, i.e. only when the , threshold is crossed is bidding required. See. e.g., Hubbard Broadcasting v. Metropolitan Sports Commission 381 N.W.21) 842, 847 (Minn. 1986); R.E. Short Co. v. City of Minneapolis 269 N.W.2d 331, 342 (Minn. 1978). Rubbish hauling services need not be purchased competitively despite a strong general public policy in favor of soliciting bids on public purchases. In Coller v. City of St. Paul 223 ' Minn. 376, 26 N.W.2d 835 (1947), the Minnesota Supreme Court stated: The very purpose of requiring competitive bidding is to divest the officials having the power to let contracts of discretion in some respects and to limit its exercise ' in others. In the area of discretion is precisely where such abuses as fraud, favoritism, extravagance, and improvidence in connection with the letting of contracts are prevalent. Ordinary legal remedies are inadequate to correct r resulting wrongs. The purpose of requirements for competitive bidding are to prevent such abuses by eliminating opportunities for committing them and to promote honesty, economy, and aboveboard dealing in the letting of public ' contracts. The requirements are said to have been born of "distrust" of public officers whose duty it is to make public contracts. ' 26 N.W.2d at 841. Unfortunately this general statement of public policy does little to ensure that competitive methods are used in the procurement of rubbish hauling. Thus, many citizens are vulnerable to the abuses identified by the Supreme Court in the Coller case; they do not ' enjoy the benefits of competition simply because city officials who contract on their behalf are not required to use a competitive process. ' Requests for Proposals Another way cities can procure rubbish hauling services is to issue a request for proposals. Using this process, a city can identify the particular services it desires, and ask the haulers interested in serving the city to propose a system within the ' parameters specified. Each hauler submits a proposal that describes the service to be provided and the price. Using an RFP system, the city benefits from the expertise and creativity of each of the _ responding haulers. This process also allows the city the flexibility to select a hauler that might not have the very lowest price but has a service attribute that makes the hauler particularly attractive. For example, the hauler might propose an expanded recycling program to be included in the rubbish hauling service, a program that might justify a higher price to residents. , Licensure of Haulers Under local ordinances, a city may have no greater involvement in procurement than to license one or a number of haulers to do business in the city. Minn. ' Stat. § 115A.93 (1992) (requiring a license from the jurisdiction where municipal solid waste is collected). The city can impose reasonable conditions for granting a license that it deems 2. The threshold is an arbitrary figure that until recently was set at $15,000. -3- necessary and appropriate for safe operation of the hauling equipment. If a number of haulers are licensed without using the organized collection method described below, there is virtually "open hauling, "'akin to a freely competitive market. The more haulers that are licensed, the ' more competitive the market will be. Organized Collection Organized collection is a method by which territories are allocated to designated haulers to avoid duplicative hauling routes and the higher costs that accompany a lower density of customers and duplication of effort. Minn. Stat. § 115A.94 (1992) sets out a detailed procedure for notice and hearings on establishing an organized ' collection system. There are basically two types of organized collection: one organized by the haulers themselves and approved by the city, and one organized from the start by the city. Under the organized collection statute, a group of haulers can get together and decide among themselves under city supervision who will service which territories in a city. If the hauler - proposed system is adopted by the city, the city must actively supervise the rates charged and the performance of the contract, as discussed below. If the city organizes collection itself, the city has more direct control over the contract ' performance. Negotiated Contracts Rather than use a competitive process, many cities negotiate ' directly with one or more haulers. In some cases cities negotiate with a single hauler who is a member of the community. Single- hauler cities effectively grant a monopoly to the designated hauler. Although there is no prohibition on contracting in this fashion, the city, because it has displaced competition, must actively supervise the contract and rates. California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc. 445 U.S. 97, 105, 100 S. Ct. 937 (1980), ' THE ANTITRUST LAWS The antitrust laws do not dictate how to procure rubbish - hauling services, but they do impose some limits on cities that use non - competitive processes, such as limited licensure, organized collection, or negotiated contracts. Any time competition is displaced by state or local government authorization, the government must actively supervise any private anticompetitive conduct. California Retail Liquor Dealers Assn. v. Midcal Aluminum, Inc. 445 U.S. 97, 105, 100 S. Ct. 937 (1980). For haulers to qualify for the antitrust exemption, active supervision requires that the city or county scrutinize monopolistic or collusive conduct ' by haulers to ensure thaf the results reflect the city's own policy, not that of the hauler(s). Patrick v. Burge , 486 U.S. 94, 100 -01, 108 S. Ct. 1658, 1663 (1988). 324 Liquor Corp. v. Duffy 479 U.S. 335, 344, 107 S. Ct. 720, 725 (1987). A city engaged in active supervision of rubbish hauling could look at a number of factors to determine whether the haulers are providing services at a reasonable Rrice. The city could ' inquire into the rate of return to the hauler(s) at the proposed contract rates, and otherwise scrutinize the haulers' costs of doing business. See F.T.C. v. Ticor Title Insurance _ U.S. _, 112 S'. Ct. 2169 (1992). For example, tipping fees are a significant cost to haulers and should be considered when determining whether rates are reasonable. A city may ' also compare proposed rates with those of communities that have similar attributes including tipping fees, geography, population density, and service requirements, and that have arrived at contract prices through competitive processes. 9 It should be noted, however, that while the active supervision requirement ensures a process for review of hauling contracts, it does not dictate pro - consumer contract terms. More to the point, the antitrust laws do not ensure that municipalities will be effective buyers of goods and services -- even in a competitive market place. Moreover, Congress and the court ' have greatly limited the antitrust liability of municipalities and local officials, giving them even freer reign to displace competition without legal accountability. In 1984 Congress enacted the Local Government Antitrust Immunity Act, which removed the availability of damages against ' cities and city officials for their failure to actively supervise local monopolies. 15 U.S.C. §§ 34 -36 (1992). The possibility of injunctive relief alone does not serve as a major deterrent against cities' failure to actively supervise anticompetitive conduct of local haulers. , In addition, the United States Supreme Court has held that the antitrust laws are not intended to require honest and above -board dealings by local officials as they displace ' competition. City of Columbia v. Omni Outdoor Advertising Inc. _ U.S. _, 111 S. Ct. 1344, 1352 (1991). To do so, according to the Court, would put judges and juries in antitrust cases in the position of second - guessing the actions of local councils. Evidence of dealings ' that are other than honest or above -board must be addressed in other forums. Accordingly, under City of Columbia even a corrupt decision to award a municipal rubbish hauling monopoly does not necessarily violate the antitrust law. ' THE BENEFITS OF COMPETITION IN MUNICIPAL RUBBISH HAULING ' Attached hereto are survey results from an inquiry into rubbish hauling prices and municipal contracting methods. The survey shows that residents in communities that use a non - competitive method pay approximately thirty to forty percent more per month than ' citizens of communities that use a competitive method. This striking result demonstrates that competition results in lower prices for consumers. Differences in service features do not justify the price differentials observed. ' One difficulty in raising the awareness of local officials regarding the benefits of competition is the tendency of these officials to rely on the word of local haulers regarding the ' reasonableness of a proposed rate. A single local hauler often provides to the city, or the city informally obtains, information indicating that the proposed rate compares favorably with those of surrounding communities. This procedure ignores whether or not the comparison data reflect rates arrived at competitively or under the efficiencies generated by high customer ' densities. The survey result show that this method of review does not result in meaningful rate evaluation, and that the results do not approximate those that would be achieved in a competitive market. , THE EXPERIENCES OF SURVEY COMMUNITIES AND OTHERS The communities in the survey, along with other communities of which we have become aware, provide examples of several procedures for securing rubbish hauling services. These ' experiences are instructive in that they reveal the difficulty of achieving rates comparable to those in competitive markets without actually using a competitive method. In -one survey community, the City of Oak Park Heights, city officials did not use a , competitive process, but negotiated a contract with a hauler based in the community. In -5- addition to having to pay prices higher than in a competitive system, citizens are subject to some particularly onerous contract terms. For example, residents cannot suspend service to go ' on vacation unless the residence is vacant for at least eight months. See Exhibit A. In Stillwater, the same hauler has had the rubbish hauling contract under a non- , competitive system for a quarter century. The hauler has had a series of long -term contracts during this period, two six -year contracts and one twelve -year contract, which was just renewed in 1992 for another twelve -year term. The hauler may refuse to pick up a Stillwater resident's garbage for any one of the following reasons: Cart facing wrong direction, lid ' open, packed too tight, objects next to container, container not on curb, garbage on top of container, and too stinky! (See Exhibit B.) ' In Afton, when considering renewal of a monopoly license with a local hauler, the city conducted a survey of residents to determine what factors were important with respect to rubbish hauling. The survey results were interpreted to favor renewal of the single license even though the residents never expressed such a preference. For example, approximately half of the city's survey respondents expressed that minimizing truck traffic and vehicle pollution was important or very important. The city council task force read this to favor a single hauler, which somehow became a recommendation to re- designate the current local hauler. Discussion of the fact that minimal truck traffic and pollution could be achieved under a competitive process was rejected. As another example, approximately half of the survey respondents said that it was not very important to keep local haulers operating in the community. Yet this was interpreted to mean that three quarters bf the respondents wanted to continue with the current local hauler. (See Exhibit C.) ' In this community there was vocal opposition to renewing the contract with the local hauler without a competitive process. The waste management task force report apparently ' considered this input a nuisance. The report states: A small number of residents may perceive such a system as a city- sponsored ' monopoly with a potential for abuse. It also states: The problem of repeated public hearings on the issue of a single licensed hauler can be eliminated by negotiating a contract with the licensed hauler... by extending the license renewal period over the term of the negotiated contract, the city can be spared the need for public hearings to continually reaffirm the ongoing policy to limit its solid waste residential hauling to one licensed hauler . Even in the face of pertinent citizen questioning regarding a non- competitive local hauler contract, Afton chose to redesignate the monopoly hauler under a five -year contract and at the rates previously in effect. ' It appears that cities that use a competitive process for selecting a hauler enjoy better contract terms. In the City of White Bear Lake, an exclusive contract was put out for bids, and the city obtained a contract that allows for price increases only as a fraction of the overall consumer price index. Recycling is included in the hauling rate and half of any proceeds from the sale of recyclables is returned to the City. and $13.59 respectively for the 30, 60 and 90 pay $13.75, $17.75 and $19.75 respectively. White Bear Lake residents pay $11.25, 512.77 gallon service levels while Stillwater residents The City of Bayport made a request for proposals from area waste haulers, specifying the service requirements the city wanted. They received responses from six haulers with the three low quoters giving prices that were within 39 cents, 26 cents and 44 cents of each other respectively for the three volume levels of service. The rates also included recycling service and sales tax and abatement fees. In this way the city was assured it received the most competitive price for its residents. Bayport residents received a low quote of $10.14, $12.05 and $14.72 respectively for the 30, 60 and 90 gallon service levels while Oak Park Heights residents pay $18.00 and $20.00 respectively for the 60 gallon and 90 gallon service levels. (A 30 gallon service level is available only to seniors.) Even well- intentioned local officials seem unable to negotiate contracts that embody terms similar to those in a competitive market. Members of one council, when advised in writing of questionable cost representations by the favored hauler, responded with refusal to make responsive inquiries. Apparently local officials feel that it is not inappropriate to favor local haulers over potentially lower - priced, higher - quality alternatives. The inability of local officials to rise above favoritism of a particular hauler and their reluctance to administer a competitive system harms citizens very directly. Without an opportunity to secure business with a municipality, new haulers cannot enter the marketplace to compete. Such practices give rise to the perception that municipal contracts are based on who the hauler knows on the city council, rather than the price and quality of the service. The effect on the market is that other haulers are discouraged or foreclosed from competing. And the favored haulers have little incentive to deliver inventive service, or to compete in other areas. Recommendation Cities should be required to use a competitive system when arranging for rubbish hauling services for their residents. To accomplish this by statute, Minnesota Statutes Chapter 115A should be amended to require the solicitation of bids or use of requests for proposals, and delete the provision that allows for negotiated contracts. See Minn. Stat. § 115A.94, subd. 3 (1992). The amendment would save citizens a substantial sum over the long -term, promote healthy competition in the market place, and divest local officials of the discretion to favor local haulers. The public trust in the integrity of government contracting requires as much. Conclusions The survey results and experiences of the communities involved demonstrate forcefully the need to reform the municipal rubbish hauling procurement process. Given the limited applicability of the antitrust laws and the unreponsiveness of some city councils, any reform must come in the form of legislative changes that will require the use of a competitive process for selecting and pricing local rubbish hauling services. The same changes may be appropriate for other services purchased by local officials. Gret.CL1 -7- i 1 f ' The purpose of this survey was to determine, among communities that have displaced open markets for residential rubbish hauling services, what, if any, differences in prices and services exist according to the method used to select haulers and determine prices. ' The geographical area surveyed was Ramsey County and that portion of Washington County that lies south of a line that can be drawn as an easterly continuation of the northern Ramsey County line, and coinciding with the northern Grant and Stillwater Township lines. 39 contiguous communities in this area were surveyed. Assuming compliance with trash designation ordinances, all haulers in the area face the same tipping fees. Of the 39 surveyed ' communities, 26 were found to have open hauling with the community government having no input on pricing and with residents free to choose among competing haulers.l The remaining 13 communities had chosen to limit the number of rubbish haulers operating and to have some type of input on pricing through organized collection proceedings, police powers and /or municipal contracting. It is these communities that are of interest in addressing the purpose of the survey. For each communit 2 the city official responsible for or familiar with) rubbish hauling o community ,2 Y. P � g was contacted by telephone. Each official was asked the questions on the attached survey. ' The 13 communities can be divided into two rou s: those that have continued a g P long - standing relationship with a hauler or haulers identified as local, and those that either used a competitive process (bids or RFPs) to determine hauler and price or, in adopting organized collection, began anew by contracting with a consortium of haulers and establishing a rate based at least in part on the increased customer densities afforded by organized ' collection. ' 1. Two of these open hauling communities are actually hybrids that limit the number of haulers to three but otherwise allow operation of market forces. ' 2. Two communities did not need to be contacted because the office was familiar with the prices charged and methods used. 3. For three communities, the hauler, although identified as local, is actually from a neighboring community. FESOTA MINNI ATTORNEY GENERAL'S OFFICE ANTITRUST DIVISION RUBBISH HAULING PRICES ANA MUNICIPAL CONTRACTING *vEETHODS SURVEY RESULTS ' The purpose of this survey was to determine, among communities that have displaced open markets for residential rubbish hauling services, what, if any, differences in prices and services exist according to the method used to select haulers and determine prices. ' The geographical area surveyed was Ramsey County and that portion of Washington County that lies south of a line that can be drawn as an easterly continuation of the northern Ramsey County line, and coinciding with the northern Grant and Stillwater Township lines. 39 contiguous communities in this area were surveyed. Assuming compliance with trash designation ordinances, all haulers in the area face the same tipping fees. Of the 39 surveyed ' communities, 26 were found to have open hauling with the community government having no input on pricing and with residents free to choose among competing haulers.l The remaining 13 communities had chosen to limit the number of rubbish haulers operating and to have some type of input on pricing through organized collection proceedings, police powers and /or municipal contracting. It is these communities that are of interest in addressing the purpose of the survey. For each communit 2 the city official responsible for or familiar with) rubbish hauling o community ,2 Y. P � g was contacted by telephone. Each official was asked the questions on the attached survey. ' The 13 communities can be divided into two rou s: those that have continued a g P long - standing relationship with a hauler or haulers identified as local, and those that either used a competitive process (bids or RFPs) to determine hauler and price or, in adopting organized collection, began anew by contracting with a consortium of haulers and establishing a rate based at least in part on the increased customer densities afforded by organized ' collection. ' 1. Two of these open hauling communities are actually hybrids that limit the number of haulers to three but otherwise allow operation of market forces. ' 2. Two communities did not need to be contacted because the office was familiar with the prices charged and methods used. 3. For three communities, the hauler, although identified as local, is actually from a neighboring community. Survey Results Continuing Long- standing Relationship Between Hauler and Community Hauler Monthly Price by Gals. Local Billin 30/32 60/64 90/96 Unlim. $15.62 $21.49 X Hauler $13.00 $14.00 $16.63 $23.00 X City $14.37 $17.55 $20.03 X Hauler $14.37 $17.55 $20.03 X Hauler $18.00 $20.00 X City $13.75 $17.75 $19.75 X City $13.35 $16.30 $18.60 X Hauler $14.08 $16.86 $18.79 $20.63 (average) Two of these communities set a maximum price and allow two haulers to operate. The ' maximum price is reportedly set at the request of the local hauler and upon approval by the city council. Residents are free to choose between the two haulers. For the annual or semiannual cleanups the hauler supplies equipment and labor. The community pays the ' disposal fees. -2- i Includes City bldgs. ' & parks, white goods brush, semi- , annual cleanup White goods, ' brush, leaves ' City parks, white goods, brush ' City hall and parks, , annual cleanup Two of these communities set a maximum price and allow two haulers to operate. The ' maximum price is reportedly set at the request of the local hauler and upon approval by the city council. Residents are free to choose between the two haulers. For the annual or semiannual cleanups the hauler supplies equipment and labor. The community pays the ' disposal fees. -2- i Survev Results Comaetitive Models 4. This rate is an anomaly. Although it is available to any resident, it is aimed at seniors. It was removed in calculating the average. -3- Hauler Monthly Price by gals. Local Billin Includes 30/32 60/64 90/96 unlim. $10.60 $12.42 $13.78 $17.50 Hauler $ 8.85 $10.77 $12.69 $17.41 Haulers $10.15 $13.50 $15.95 Hauler $10.14 $12.05 $14.72 Hauler City bldgs. & parks, recycling, sales tax & abatement fees $ 7.00 $12.50 $14.50 City $11.25 $12.77 $13.59 City City bldgs.& parks, bundled brush, recycling and semi - annual cleanups $10.20 $12.34 $14.51 $17.46 (average) The last three tabulations are from communities that used bids or RFPs to select haulers and determine prices. 4. This rate is an anomaly. Although it is available to any resident, it is aimed at seniors. It was removed in calculating the average. -3- Analvsis The most striking result of the survey is the approximately four dollar per residence per month average difference between cities with competitive and non - competitive contracting methods. Also note that the highest price per category in the competitive set is rather less than the lowest price per category in the non - competitive set. Some haulers offer an option of supplying a cart type container to residents for an extra fee. In at least two communities all residents are er quired to use the hauler's containers. Because this is presumably done to increase hauler efficiency, which in turn should reduce costs and therefore prices, no adjustment in reported pricing need be made. Some communities have services included that others do not. Pickup of white goods is one of these. White goods are bulky items like appliances. While there is some value to this, one community performed an analysis on historical data and discovered that the value of all additional refuse collections including white goods was 40 cents per household per month. Another service included in the price to two of the communities is recycling. The recycling fees are handled separately from rubbish fees in most communities. One of the survey communities, through a credit, valued the recycling service at $1.10 per residence per month at the 30 gallon level and $2.20 for the unlimited refuse level. Another survey community. reported paying a recycler 75 cents per household per week for weekly collection. Conversely, a city that handles the billing of residents relieves the hauler of that expense. There are no data from this survey showing what the value of billing is but one would expect some price concession from a hauler if the city handles billing. It's worth at least the price of a stamp, stationery, and some overhead quarterly - perhaps a value of 30 cents per month per residence. Finally, there is no great divergence in customer density among the communities surveyed except for one. That one community, in the long- standing relationship set, has lower customer density partly because it is semi -rural and partly because the residents are not required to have rubbish hauling. They can haul it themselves if they wish. Ironically, this is the second lowest priced community in the non - competitive set. Conclusion A. Once price adjustments are made to neutralize differing values of extraneous services (e.g. subtract 40 to 50 cents for additional trash and white goods services, subtract one to three dollars for recycling included in rate, and add 30 cents where the city does the billing) the stark contrast in pricing between the two groups remains. B. For the communities in the non - competitive set the city 'councils' rate reviews were described as either council persons informally checking with a few other haulers to learn their rate or an examination of various rate surveys that were themselves produced by asking rubbish haulers what they charge. Most such surveys are hauler specific rather than community specific and fail to control for any variables. -4- t t 1 !r � FJ Some city councils may sincerely believe that they are minding the store and performing appropriate rate evaluations but they are obviously not successful. Not only are the rates inflated but contracts from non-competitive -- cities tend to contain more onerous terms for the public than those from competitive model cities. -5- I I RUBBISH HAULING SURVEY (via phone with whomever knows the material) Name: 1. Is residential rubbish hauling in your city provided by municipal crews or by private haulers? 2. Does the City restrict the number of rubbish haulers that can operate in the City? Wily? 3, How many currently operate or are licensed? 4. Does the city have open hauling or an organized system? 5. What kind of organized system? (one hauler vs. multiple haulers with each assigned to a territory ?) 6. How is /are the hauler(s) selected? Bids? Requests for Proposals (RFPs)? Other? (specify) 7. How is the price established? Low bid? Low quote? Negotiation? Other? 8. Is there any periodic oversight of the hauler's costs? Any review of tipping fees? Does the hauler have to provide access to his /her books? 9. What prices are charged by the hauler(s)? (answer likely to be volume - based) 10. In that price, is recycling included? Can you separate one price component from the other? 11. At that price, are any other services, like pick -up of white goods, included? 12. Does the city have a contract with the hauler(s)? Please send. 13. If there is one hauler, how long has the hauler had the contract? Is he /she local. How often does it come up for renewal? Do other companies bid on the contract when it comes up for renewal? If not, why not? 14. How is the billing of residents for the service handled? By city periodic billing? Through property tax statements? By the hauler(s)? 15. Are all residences required to subscribe to a rubbish hauling service? 16. How many residences are there? 17. How many square miles in your community? t i I I ■ I I I I I I I I I � I � �M city approved bags as long as the materials are entirely enclosed within the bag or the cart so provided. 5. Residents Selection of Service - Ca=t Size Each resident of the City of Oak Park Heights shall be allowed to select the size container (or in the case of senior citizens, the use of t bags) that they will utilize for their household. Each residential household shall sign for the cart so delivered and shall have the opportunity to alter or change cart size selected once per year 1 providing notice to Junker Sanitation Service no later than March 15th of every calendar year in the event an alteration or charge of cart size is desired. Within 1993 all residents shall be allowed to change cart size up until June 30, 1993. 1 6. Vacations No residential household shall be taken off the City's billing system due to temporary absence from the home • as a result of seasonal vacation. 7. Vacant Residences Residences (owner occupied) within the City may be removed from the City's billing system if they are ' vacant and unoccupied provided that the vacancy has existed for a period of eight (8) consecutive calendar months. 8. New Home Construction /Reoccupied Homes All new homes constructed within the City of Oak Park Heights and all homes reoccupied after they have been vacant for a period of time in excess of eight (8) consecutive calendar months shall be required to reinitiate garbage collection service through the City of Oak Park Heights, by selecting the appropriate cart or container that they desire for their household and executing the appropriate I EXHIBIT A JUNKER SANITATION 439 -7135 Reason for Garbage not picked up: OCart facing wrong direction OLid ope LAP too tight bjects next to container O stainer not on curb , OGa.rbage on top of container ❑Extra garbage bag too heavy OGarbage mixed with grass or leaves OExtia items not on curb OLeaves or grass too heavy CIPlease clean can - TOO STINKY! Fth; ptable items in can, ie. Rocks, Dirt as Et or 0 EXHIBIT B AFTON WASTE MANAGEMENT TASK FORCE REPORT DECEMBER 5, 1991 f. EXHIBIT C 6. Do you currently use the license curb -side pickup for recyclables? Y" = 86.93% 55 no = 13.07% E 7. How important is it to minimize refuse coliectlon truck traffic, wear and tear on streets and vehicle pollution in Afton? 114 Very Important (27.40%) log Somewhat Important (25.96 %) 91 important (21.87 %) 103 Not important (24.75%) WASTE MANAGEMENT TASK FORCE SURVEY 1. How long have you lived In Afton? ANSWER: 18 Less than one year = 4.25% 92 One to five years = 21.70% 52 Five to ten years = 12.26% 256 Ten or more years. = 60.37% TOTAL 424 = 41.85% 2. How many people reside In your household? ANSWER: 2.73 (average) 3. How many 30 gallon trash containers, or 30 gallon plastic bags, of trash does your household generate per week? ANSWER: 1.57 (average) 4. Does your household currently recycle? ANSWER: yes = 398 (95.67%) no = 18 (4.33 %) if yes, what products do you recycle? 396 aluminum cans 364 paper 296 tin cans 214 cardboard 360 glass 194 grass clippings (composting) 272 plastic 165 brush (composting) 5. Do you currently use the license curb -side pickup for trash? 362 yes = 86.19% 58 no = 13.81% 6. Do you currently use the license curb -side pickup for recyclables? Y" = 86.93% 55 no = 13.07% E 7. How important is it to minimize refuse coliectlon truck traffic, wear and tear on streets and vehicle pollution in Afton? 114 Very Important (27.40%) log Somewhat Important (25.96 %) 91 important (21.87 %) 103 Not important (24.75%) 8. How important Is it to consolidate waste and recyclable collection services on the same day of the week? 68 Very important (16.31%) 89 Somewhat important (21.34 %) 75 Important (17.99%) 185 Not important (44.36 %) 9. How important Is it to keep local haulers operating in the community? 124 Very important (29.45%) 92 Somewhat important (21.19%) 91 Important (21.61 %) 114 Not important (27.08 %) 10. How important is It to require every resident to subscribe to a minimal weekly refuse collection service, it it reduces illegal refuse disposal and litter? 146 Very Important (35.70°/x) 55 Somewhat important (13.45 %) 82 important (20.04%) 126 Not Important (30.80 %) 11. How Important Is it to require every resident to subscribe to a minimal weekly refuse collection service, It It reduces the cost of refuse collection service to all residents of Afton? %) 112 Very important (27.32 %) 67 Somewhat important (15.34 82 Important (20.00 %) 149 Not important (36.34%) 12. How important is it to have your refuse collection bill be based on the amount of refuse you set out for collection? 208 Very mportant (50.24%) 64 Somewhat important (15.46 %) 93 Important (22.46 %) 49 Not important (11.84 %) 13. How important is it to require every resident to participate in recycling? 215 Very Important (52.18%) 44 Somewhat Important (10.68 %) 90 Important (21.84 %) 644 Not Important (15.53%) 14. Which three of the following factors do you feel are most Im p ortant In , a licensed hauler for the City of Atton? (check three choices) 152 Cleanliness of operation 356 Reliability of. service ' 92 Responsiveness to complaints 313 Price of service 153 Safety of equipment & drivers 132 Service to community t RECOI - W=ATION That the City of Afton continue to license only one solid waste hauler for the continued benefit of the health, welfare, and safety of the community. Solid waste disposal is governed by Afton City Ordinance #500. The ordinag= provides that the purpose is "to protect the public health, safety, and welfare of the residents of the City of Afton. " In the past the city council has considered through public hearings whether or not to issue more than one license. Public hearings were held in February, 1981, February, 1984, January, 1987, and February, 1991, wherein, the city council determined not to issue more than one license. The basis for its determination was as follows: 1. Public satisfaction with the present and service; 2. Concern over possible affects on rates or service by multiple haulers; 3. Increase in risk to public safety by additional haulers, as well as increased costs of road maintenance. The city council's action was patented upon the case of Troie v City Council of the City Hasting wherein the Minnesota Supreme Court indicated that it was within the inherent police powers of the city to limit access to their roads k�a ;ed upon findings that affected the health, welfare, and safety of the citizens. i Lately, some have indicated that two haulers may be appropriate for the City of Afton, but that three or more licensed haulers would be detrimental to the public health and welfare of the city. However, the city attorney in a written opinion to the mayor and council, indicated "the granting of even one additional license would greatly weaken the arguments in favor of the restriction and possibly eliminate some of them entirely.'' , Concern has been raised as to whether or not the City of Afton can continue to legally license only one hauler. Since the 'Afton City Ordinance 501.102. = Troie v. City of Hastings 245 N.W.2d 596 (1976). 3 Letter of Attorney Paul A. Wolf, City Attorney, January 23, 1991. L� i license is annual, other haulers may apply for a license to haul within the City of Afton, which 'requires `a public hearing annually by the city council. Under the current ordinance, the t current license holder can not be denied renewal of his license except for "cause" which is defined as a violation of the city ordinance. As a result, the city council has to hold a public hearing whenever more than one license application is filed, and is required to make findings to support the public health, welfare, and safety policy it has endorsed for over ten years. The City of Afton can continue to limit trash hauling to one licensed hauler, not only as provided by the Tro a case, but specifically by Minnesota statute- In addition, the same statute affords great latitude to local authorities in their organized collection of solid waste. A local government unit "may organize collection as an municipal service or by ordinance, franchise, license, negotiated or bid contract, or other means, s using one or more collectors or an organization of collectors. " The statute specifically contemplates that a municipality may continue to limit its solid waste collection to only one hauler.. Some have raised the concern that other haulers may claim a right to force a bid under the Uniform Municipal Contracting Law. The Uniform Municipal Contracting Law is not applicable when dealing with contracts for services.' Therefore, the City of Afton is not required to have to conform to the stringent requirements of the Uniform Municipal Contracting Law. The task force, in making its recommendation, has analyzed several factors which include: Afton's history of a single license system; legal consideration of single and multiple hauler systems; aesthetics, environmental, and safety considerations; cost effectiveness, and the coordination of services with the recycling contractor. Advantages of a multiple hauler system are found to be as follows: 1. Freedom of individual choice (but only in a true multiple system). 2. Price and service flexibility through competition. `M.S.S115A.93. N,.S.5115A.94, Subd. 3. 6 M.S.5478.345. 'M.S.5478.345; Schwandt v City of Paynesvill 423 N.W.2d r 59 (App..1988). s 1. A small number of residents may perceive such a system as a ' city sponsored monopoly with a potential for abuse. F 2. A potential for price and service inflexibili 'ty in dealing ' with only one licensed hauler. es of the two and disadvantages ' In weighing the advantages g systems, the residents survey confirms several beliefs: 1. That the community does consider the health, welfare, and safety factors of the city's policy to date is well r I Disadvantages of a multiple system are found to be as follows: 1. Additional noise, pollution, and safety considerations due to increased truck traffic. 2. Less city control with management problems over complaints and coordination of services. 3. opening the city to multiple licenses would result in significant legal problems in returning to a single license system should the multiple system be found to be undesirable. This is the current situation being faced by the cities of Cottage Grove and Woodbury. Advances of a single hauler system were found to be as follows: , 1. There are no widespread complaints about the current system. Any complaints directed towards the current license hauler were found to be personal conflicts rather than service specific problems. 2. Cost savings can be realized by establishing a larger number of participating households through a mandatory trash service for all Afton households. • 3. Service and price options may be'realized if the city were to negotiate a service contract with the licensed hauler. 4. Through a negotiated with a single hauler more direct control, with less management problems, can be achieved over waste handling in the City of Afton and may include a better - coordination between waste and recycling efforts. 5. A single hauler would minimize the amount of heavy road traffic, pollution and the aesthetic impact on our community. , i Disadvantages of a single licensed hauler system were found ' to be as follows: 1. A small number of residents may perceive such a system as a ' city sponsored monopoly with a potential for abuse. F 2. A potential for price and service inflexibili 'ty in dealing ' with only one licensed hauler. es of the two and disadvantages ' In weighing the advantages g systems, the residents survey confirms several beliefs: 1. That the community does consider the health, welfare, and safety factors of the city's policy to date is well r I kJ justified. The response to question #7 in the survey was as follows: How important is it to minimize refuse collection truck traffic, wear and tear on streets and vehicle pollution in Afton? 114 very important (27.40 %) 08 Somewhat important (25.95 %) 91 Important (21.87 %) i 03 Not important (24.75%) 75% of those responding to the question felt that the policy had some degree of in their mind. 2. Quality and reliability of service was the most important factor in a licensed hauler. Question #14 indicated the following: which three of the following factors do you feel are most important in a licensed hauler for the City of Afton? (check three choices) i 92 1 153 Cleanliness of operation Reliability of service Responsiveness to complaints Price of service Safety of equipment & drivers Service to community !. 3. That price continues to remain a.concern for the service. It is apparent to the task force that most residents do not understand the source of escalating refuse removal costs as a result of mandated government controls. 4. That there is no widespread dissatisfaction with the current single hauler system or with the current licensed hauler. Almost three - fourths of the zes condents felt it was at least somewhat important to keep tocal.haulers operating in the community. The response to sn2vey question #9 was a follows: How important is it to keep local haulers operating in the communi 124 Very important (89.45 %) 92 Somewhat important (21.19 %) 1 Important (21.61 %) �,j� Not important (27.08 %) S. Flexibility of pricing and service from a negotiated contract with the licensed hauler could result in more households subscribing to the licensed refuse service. Although 60 -70% of Afton's households currently use the current service, negotiating services such as low volume rates may result in greater participation. In summary,,,perceived' advantages of system (price and sere flexibility ob• competition) can be achieved by a single a r the �auid wi a sadnMtages of the without described abovo. a multiple licensed rained through licensed system that is single licensed hauler multiple licensed system ,1 RFC0__g - ATION A formalized complaint system. ler for That the City of Anon negotiate co ntra ct s condtt�ons of the 4, up to a flue year period subject to the erms and ordinances. for contraciof created by the trash pick up process. by Bel -Aire Sanitation The process of the CityloflAftonedmustlbe the benefit of the residents of the license renewal. It is undertaken well in advance The through its the that the city recommended ed�ly in and current licensed hauler Y management itteewithothe in the last public hears g)• standing waste currentelicensed oco vigorous negotiation in g f want to negotiate the city may g. hauler. Several contract elements are as follows: immediate ac by ustomers 1. A price structure which is volume based to encourage recycling. ' of a single rate Z. Several service options which Purchase services such as pick up of roadside Charges for c ci� containers. (This service has (perhaps through a p repayment pickup s stem, a possible an on -call p P Y designated trash bag), ' trash and recycling pickup (trash to follow coordination of provided cost burden on only those pfton citizenstwhossubscribe recycler). 3. A formalized complaint system. 4, A trash handling system that assures that no litter is (This is the problem created by the trash pick up process. by Bel -Aire Sanitation with mechanical loaders . ns admitted in the last public hears g)• g. A local office maintained the trash hauler to allow and city officials to_ immediate ac by ustomers management. ma nagement. ' 6. services such as pick up of roadside Charges for c ci� containers. (This service has park trash the dumping, and city ha been free of charge to provided cost burden on only those pfton citizenstwhossubscribe the current trash hauling service). 7. rice increase escalators based upon, agreed set Negotiated p the local RDF facility, or some standards. (Tipping fee at other factor). Adequate and appropr iate insurance coverage for the 8. protection of all Afton residents. 9. Trash pick up standards that coordinate with proposed mandatory recycling. (A possible agreement not to collect trash that contains recyclables.) It is anticipated that the city, through its standing waste management committee, can negotiate a reasonable and acceptable contract with the current licensed hauler. It is believed that the parties through good faith negotiation can maximize the benefits of a single hauler system while minimizing the perceived disadvantages. The city's negotiating leverage is the option of amending its ordinances.to call for mandatory trash service for all residents, thereby establishing parameters for a fixed number of household units for competitive bidding. (As indicated elsewhere in this report, mandatory trash service is not recommended at this time). The problem of repeated public hearings on the issue of a single licensed hauler can be eliminated by negotiating a contract with the licensed hauler. The license period could run concurrently ' with the length of the negotiated contract. It is recommended that the term of the contract be negotiated for a period oZ up to five wars. This would lend stability to the service period and i 4d .=e certainty for the licensed hauler to allow for long term planning for capital investments. Under the existing city ordinance, the current licensed hauler can not be terminated except for "cause ". This is the same standard under the statute ..-that applies for any license revocation proceeding. Therefore, since the same standard applies for both revocation and renewal, there is no need to require an annual renewal of the license. By extending the license renewal period over the term of the neqntiatsd contract, the city can be spared the need for public hearings to continually reaffirm the ongoing policy to limit its solid waste residential hauling to one licensed hauler for purposes of health, welfare, and safety of the community. The license can be conditioned upon the payment of the annual license ' fee. l u