9.50.050 Franchise Agreement

A. Franchise Award. No person shall do business in the collection and transport of solid waste generated within the City without a current, valid City franchise. A franchise to provide solid waste management and collection services, including recyclable materials and yard debris in the service area of the City, shall be granted only after a determination of need for the service.

The determination of need is the responsibility of the City Council, which will seek the best balance of the following objectives:

1. To ensure safe, efficient, economical, equitable and comprehensive solid waste service;

2. To avoid duplication of service that will cause inefficiency, excessive use of fuel, increased traffic, and greater wear on streets;

3. To provide service in areas of marginal return;

4. To promote and encourage recycling and resource recovery;

5. To improve the likelihood of the franchise holder making a reasonable profit and thereby encourage investment in modern equipment;

6. To cooperate with other governmental bodies by recognizing their service arrangements; and

7. To otherwise provide for the service in a manner appropriate to the public interest.

1. In granting a franchise renewal, the Council may, in addition to the above, consider the following:

a. Volumes of solid waste collection and disposal;

b. Volumes of recyclable materials and rate of participation in recycling;

c. Customer satisfaction, including but not limited to customer complaints;

d. Analysis of solid waste collection and recycling programs in other cities as compared to those of the City, including but not limited to program costs, funding mechanisms and overall rates of participation in recycling;

e. Franchisee performance of its obligations under the franchise, including a franchisee’s technical and financial capabilities;

f. Franchisee ability to provide evidence of required insurance; and

g. Franchisee responsiveness to customer or City complaints.

2. Franchises granted by the City shall be nonexclusive; however, it is understood that during the term of franchises granted under this chapter, the City shall not grant any other person a franchise for solid waste management services unless there is a showing by the applicant of the need for such additional service in the proposed service area. As to such application(s) the existing franchisee shall have first right of refusal to provide such services.

3. In evaluating whether a need exists for additional service, the City Council may consider, among any other criteria deemed relevant by the City Council, the following items:

a. An increase in the population of the City;

b. An extension of the boundaries of the City;

c. Intensive residential, commercial or industrial development within the boundaries of the City;

d. Changes in solid waste technology and/or recycling collection technology that could substantially improve collection service or reduce collection costs to residents of the City;

e. The effect that an additional franchise would have on each existing franchisee’s ability to meet the City’s service standards and maintain a fair return on its investment;

f. Changes in federal or state laws, rules or regulations that substantially affect solid waste or recycling collection requirements;

g. The franchisee cannot or will not perform or subcontract the proposed service.

This chapter does not prohibit any person from self-hauling solid waste and/or recyclables. A generator may self-haul his or her own material, and a generator’s contractor may haul materials that are generated as a direct result of the service provider’s activity. For example, landscapers, roofers, and remodelers may self-haul materials, but may not contract with third parties other than franchisees for collection and transport.

C. Franchise Terms. A franchise to provide solid waste management and collection services shall be granted for a period of ten (10) years, beginning December 1, 2013, with subsequent seven (7) year terms renewing annually, unless prior notice of request to terminate is submitted by either the City or the franchisee a minimum of ninety (90) days prior to the renewal date.

1. Annual Fee. In consideration of the rights and benefits of the terms of the franchise, franchisee shall pay to the City each year during the life of the franchise beginning November 1, 2013, an annual fee derived from revenue received by that franchisee from solid waste management and collection service boundaries of the City. The franchise fee shall be five percent (5%) of gross revenues.

2. Quarterly Payments. The franchise fee required in subsection D.1 above shall be paid quarterly, and shall be due and payable within thirty (30) days of the end of the calendar quarter. Accompanying the payments described above, franchisee shall file with the City Manager or the City Manager’s designee a statement showing the amount of the gross revenues received by that company within the City for the calendar quarter immediately preceding the calendar quarter in which such statement is filed. There will be a reconciliation of final gross revenues on the quarterly report ending September 30 of each year for the prior fiscal period, which is October 1 through September 30.

3. Review of Records – Annual Audit. Franchisee shall make available for inspection, copying and review by the City Manager or the City Manager’s designee at any time during normal work hours all records in the franchisee’s possession that the City Manager or the City Manager’s designee deems relevant to verifying the accuracy of fees paid to the City, to regulating rates or to carrying out any responsibility that the franchisee or the City has under this chapter. No more often than once during any twelve (12) month period, City may request an audit of the books, records and accounts of franchisee by a certified public accountant or such other professional chosen by the City to verify accuracy of fees paid to the City, subject to the approval of the audited franchisee; provided, however, that such approval shall not be unreasonably withheld. Franchisee agrees to have their books, records and accounts audited and further agrees to pay for such auditing services. The report of the certified public accountant or other professional shall be conclusive and final. In the event such audit report discloses any difference of payment due either to the City or franchisee through error or otherwise, such payment shall be due and payable within thirty (30) days of discovery or determination of the error. If payment is owed by the City to franchisee, the City shall reimburse the franchisee for payment for the portion of the services attributable to the audit of the franchisee receiving such payment from the City. If payment is owed by franchisee to the City, and the difference of payment due is more than the greater of $500.00 or two and one-half percent (2½%) of the franchisee franchise fee, or if the franchisee is found to have violated any other term or condition of the franchise, then, notwithstanding any other provision of this section or the franchise, the City may request an additional audit during the next twelve (12) month period with all expenses of such additional audit paid by such franchisee.

4. Late Payments – Interest. Should franchisee fail or neglect, for thirty (30) days after any quarterly payment shall become due and payable, to make the quarterly payment, the City shall provide written notice of failure of payment to franchisee. Upon notification of failure to pay, franchisee will have thirty (30) days to remit payment to the City. If franchisee fails to pay within said thirty (30) day period, the City may charge interest retroactive to the due date, at a rate of nine percent (9%) per annum, and may at its option either continue the franchise in force and proceed by suit or action to collect the payment, or declare a forfeiture of the franchise because of the failure to make payment, but without waiving its right to collect earned franchise payments and interest.

E. Franchise Administrative Operations Standards and Rules. The solid waste management and collections franchisee will operate within operations standards set by resolution of the City Council. Standards and rules will be developed across all customer classifications including, but not limited to, the following:

1. Service Rates and Fees. Rate and fee schedule for all collection services, programs by customer classification.

a. Regular, holiday and hazardous weather schedules.

b. Procedures for missed, bulky waste, vacation hold, etc., collections.

c. Collection receptacle standards and requirements.

d. Receptacle location requirements for pick-up.

e. Private property access rights and limitations.

f. Responsibilities of the customer.

g. Vehicle minimum equipment, maintenance standards, identification/signage and standards.

a. Billing standards and frequency.

b. Billing/collection procedures for past due/nonpay accounts.

c. Descriptions, objectives and targets for all services provided across all customer classifications.

d. Solid waste related programs, education and event promotion.

e. Complaint/dispute resolution procedures.

f. Community communications and outreach plan coordination with City outlining roles and responsibilities of City and franchisee.

a. Efficiency analysis reports for routes, billing/collections, etc.

b. Revenue and subscription volume reports by solid waste category (trash, recycle, yard waste) for various customer classifications (residential and commercial). Debris box volumes will be measured by dump and return and/or pull activities.

c. Customer counts and trends over time for residential and commercial customer classifications. Debris box load counts will be reported in lieu of debris box customer counts.

F. Subcontracting Services. A franchisee may contract with another person to provide specific components of solid waste management and collection services within the franchisee’s service area with the written approval of the City Manager or the City Manager’s designee; provided, that the subcontract does not amount to a transfer of the collection franchise and the subcontracting party agrees to:

1. Abide by the conditions of this chapter and associated resolutions; and

2. In written application to the City, show how they will meet the criteria applying to the current franchise.

1. A proposed assignment or transfer of a franchise must be requested by the franchisee if the following occur, but shall not be limited to:

a. A sale, exchange or other transfer of fifty percent (50%) or more of franchisee’s assets dedicated to service in the City;

b. A sale, exchange, or other transfer of fifty percent (50%) or more of the outstanding common stock of a franchisee;

c. Any reorganization, consolidation, merger, recapitalization, voting trust, pooling agreement, escrow arrangement, liquidation or other transaction to which franchisee or any of its shareholders is a party which results in a change of ownership or control of fifty percent (50%) or more of the value or voting rights in the stock of the franchisee; and

d. Any combination of the foregoing that has the effect of a transfer or change of ownership and control.

2. The franchisee shall provide no less than ninety (90) days’ advance written notice to the City of any proposed transfer or assignment. Except as specifically authorized by the City, the franchisee shall not assign any of its rights or delegate or otherwise transfer any of its obligations to any other person without the prior consent of the City Council. Any such assignment without the consent of City Council shall be void and any such attempted assignment shall constitute default and grounds for termination of the franchise.

3. If a franchisee requests the City’s consent to transfer the franchise, the City shall act on such request within sixty (60) days of the receipt of the franchisee’s written request together with all information, as set forth below, required for the City’s action on the request. The City and franchisee may consent in writing to additional time for the City to review and approve the consent to transfer the franchise. The City shall not unreasonably refuse to consent to an assignment of the franchise to a proposed assignee that has sufficient knowledge, experience, and financial resources so as to be able to meet, to the satisfaction of the City Council, in its sole discretion, all obligations of the franchisee hereunder. An application to the City to consider a sale or other transfer of a franchise shall include the following:

a. A nonrefundable application fee of $2,000.00 payable at the time of application to the City in advance to defray the City’s anticipated expenses and costs resulting from the franchisee’s request;

b. Financial statements audited or reviewed by a certified public accountant of the proposed assignee’s operations for the three (3) immediately preceding operating years together with any additional evidence of financial ability to perform its franchise obligations; and

c. A showing that the proposed assignee meets all City criteria for the grant of a franchise as enumerated in this chapter.

H. Establishment and Modification of Service Rates and Fees. Except as set forth herein, the City Council may review and set rates on an annual basis by Council resolution that considers the following goals:

1. Rates shall be established to the greatest extent practicable on a cost-of-service basis based on the ordinance-established cost allocation methodology.

2. Rates shall be adjusted annually by Council resolution equal to the percentage change in the January-to-January Consumer Price Index for Pacific Division (CPI – Pacific) but not to exceed the twelve percent (12%) operating margin cap. The City Manager or the City Manager’s designee shall certify the CPI – Pacific rate in writing to franchisee by March 1 of each year to initiate the rate resolution.

3. Rates shall be adequate to provide an operating margin equal to ten percent (10%) of franchise-wide gross revenues; however, the City shall not be required to change rates if the expected operating margin in the next future year falls between eight (8%) and twelve percent (12%) of gross revenues. The ten percent (10%) target return on gross revenues is considered sufficient to reflect the level of business risk assumed by the franchisee, to allow investment in equipment, and to ensure quality collection service.

Accordingly, the City shall have the authority to commission audits, reviews, or analyses of franchisee annual reports to validate submissions. The expected operating margin in a future year would incorporate expected inflation factors, and the effect of known or expected increases or decreases in expenses or revenues. The rates charged by franchisees shall conform to the most current Council resolution. Prior to implementation, the Council must approve any interim rate for services not included in the current resolution. If the franchisee notifies the City in writing that they believe a material change outside the franchisee’s control has occurred, and the change will have an adverse effect on operating margins, such that the next future year operating margins will be less than eight percent (8%), a material change will be deemed to have occurred. At that time, the City may undertake any type of review it finds necessary to validate the existence of the material change and estimate its effect on the operating margin. If the results of the review are such that no rate adjustment is warranted, persons requesting the review shall reimburse the City for reasonable costs incurred during the investigation at the time the next payment of franchise fees is due.

If the City believes that a material change has occurred that will result in next future year operating margins falling under eight percent (8%) or over twelve percent (12%), the City may undertake an abbreviated rate review at its own expense. (Ord. 3192 § 86, amended, 11/17/2020; Ord. 3172 § 5, added, 02/05/2019)