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ITEM #35 CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF JULY 13,2006 TO: HONORABLE MAYOR AND CITY COUNCIL FROM: AMER JAKER, P.E.; PW DIRECTOR / CITY ENGINEER SUBJECT: PROPOSED AMENDMENT TO SOLID WASTE FRANCHISE AGREEMENT TO ESTABLISH PROPOSED RATES FOR COMMERCIAL AND RESIDENTIAL COLLECTION OF REFUSE BY REPUBLIC INDUSTRIES OF SOUTHERN CALIFORNIA FOR FISCAL YEAR 2006/2007. DATE: BACKGROUND: Prior to fiscal year 1996 residential municipal solid waste collection and disposal services, as well as 'light' commercial solid waste collection and disposal services were provided by the Refuse division of the Public Works Department. As of July 1996, the City of Colton chose to contract these services out because this choice provided residents a lower rate of $15.96 compared to the rate of $18.40 being charged to residents at the end of fiscal year 1995/1996. Taormina Industries, LLC now known as Republic Industries of Southern California, LLC was the contractor that was able to provide residents with the lower rate of $15.96. The initial agreement with Republic Industries of Southern California was amended in 1999 and 2005 but retains the initial Rate Adjustment Clause which stipulates that rates are determined as a result of two variables: 1) the Tipping Fee Component and 2) the Service Fee Component. The Tipping Fee Component varies as a result of changes in the costs of the tipping fee, the charge of disposing of the collected refuse, which is charged to the hauler by the agreed upon disposal or composting facilities. Increases experienced by the Service Fee Component will result due to an increase in the Consumer Price Index (CPI) in the Orange, Los Angeles and Riverside County Index Prices — this is to account for increases that Republic Industries may incur as a result of increases in labor, equipment and insurance thus increasing their internal costs to providing the contracted service. Although Proposition 218 notice requirements generally apply to discretionary increases in rates for solid waste collection and delivery, these requirements are believed to be inapplicable to rate increases to which a hauler is entitled. However, as a precautionary measure in response to recent litigation in the County of Los Angeles and Ventura County, Republic Industries of Southern California has included language in this amendment indemnifying the City from any expenses or injuries resulting from the adjustment of the solid waste collection rates. ORANGEAMORRIS\28243.4