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Annual Rate Setting Process

Rates are developed to generally cover costs for the following components:  1) Recology’s compensation; 2) tipping (disposal and processing) fees; and 3) agency franchise fees (Franchise fees are levied by the Town on utilities at various rates allowed by law.  Town levies 10% franchise fees on solid waste collection).

Unlike the “cost-plus” contracts with the previous service providers where they were guaranteed a set percentage of profit on top of all expenses, the current contracts with Recology and South Bay Recycling stipulate a fixed compensation each year annually adjusted only by indices like CPI and other industry indices on certain expenses.  The variable components of the rates include the tipping fees based on actual tons collected and the local agency fees computed on actual revenues collected.

Tipping fees are annually set by SBWMA (SBWMA’s annual budget based on a fiscal year basis is typically approved around June of each year).  Revenue from tipping fees is one of the revenues sources in the SBWMA budget.  SBWMA’s budget includes cash reserve balances, capital spending, revenues and expenditures including the SBWMA program budget and the Shoreway operating budget. 

Rates are set annually each year through a detailed review process.  By July 1 of each year, the service providers (Recology and South Bay Recycling) prepare and submit to RethinkWaste and its Member Agencies, their applications for determining their compensation for the next rate year that starts on January 1. RethinkWaste reviews all of the costs and provides a rate report that specifies how much revenue each Agency must raise to cover Recology’s fixed compensation, the disposal and processing costs and the Member Agency local fees.  Tipping fees normally approved in June when the Board approves SBWMA’s annual budget, are adjusted at the November Board meeting if needed, after the South Bay Recycling application for compensation was reviewed and approved.

The rate report is made available in September of each year, and each Member Agency begins their individual rate setting process, usually starting around the beginning of October. This consists of determining rates adjustments, if any, are needed for their specific community.  If rates adjustments are needed, a Proposition 218 Notice of Public Hearing process is initiated.

Through the Proposition 218 notice, residents are notified of the maximum rate adjustment being considered for that community, giving residents the opportunity to review all of the information.  Residents are also provided instructions on how to provide public input and testimony on the rates being considered.  A public hearing date is set during a city council or other governing board meeting to allow the public the opportunity to provide input, and based on the outcome, the governing body will consider adoption of the proposed rate adjustments.  Once approved, the new rates are effective on or after January 1st of each year.

Details of the annual rate applications from the service providers could be found at RethinkWaste’s website through this link:

http://www.rethinkwaste.org/member-agencies/contractor-reports/annual-rate-review


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