Staff recommends that the City Council adopt resolutions authorizing the City Manager to execute an Amended and Restated Franchise Agreement for Landfill, Compost, and Recycle Collection Services with Republic Services, and an Amended and Restated Franchise Agreement with Tri-CED, both for additional ten-year terms commencing July 1, 2025 through June 30, 2035 (New Agreements). The New Agreements establish the rates charged to the City’s ratepayers commencing in FY 2025-2026 on July 1, 2025 and the methodology for future annual changes to the compensation paid to Republic Services and Tri-CED and the rates charged to fund the cost for services provided.

This report is in alignment with the following City Council priority:

Goal D: Environmental Sustainability and Infrastructure

Strategy 12: Coordinate with City departments, commercial and residential customers to implement the requirements of state organics and food recovery legislation.

The City executed an eight (8) year extension to the Franchise Agreement for Landfill, Compost and Recycle Collection Services with Republic Services in 2017, and concurrently a ten (10) year extension to the Franchise Agreement for Recycling Collection and Processing Services with Tri-CED. The term of the Franchise Agreements with both Republic Services and Tri-CED expire on June 30, 2025. On June 13, 2023, the City Council provided staff direction to proceed with implementing a one-year extension to the Franchise Agreements and to negotiate a ten-year extension. On March 26, 2024, the City Council provided staff direction to continue negotiating a ten-year extension to the Franchise Agreements and to explore additional cost savings. The New Agreements establish the compensation paid to the companies and the rates charged to ratepayers for service commencing FY 2025-2026 on July 1, 2025.

The City and its franchise collection services partners, Republic Services and Tri-CED, commenced ten (10) year contract extension discussions in October 2023 and concluded these negotiations recently. The City received cost proposals from the companies that address several program and service needs that were deficient in the current contracts. These needs include providing new residential carts to customers and repainting the commercial bins to ensure color-coding compliance with SB 1383. For example, SB 1383 requires recycling containers to be blue, therefore the City’s prior gray residential containers and white commercial containers were considered non-compliant. Similarly, SB 1383 requires landfill containers to be gray or black; however, the City’s landfill containers were blue.

As part of the New Agreements, both companies are requiring significant cost increases in current services provided, such as compost processing (Republic Services - 107.0% increase, but spread over two-years (FY 2024-2025 and FY 2025-2026) to reduce the rate impact) and recycling processing (Tri-CED, 117.9% increase commencing FY 2024-2025), as well as ample compensation to provide other new programs and services. These cost increases for both Republic Services and Tri-CED commenced in FY 2024-2025 with a 7.29% increase from Republic Services and a 24.95% increase from Tri-CED. The additional cost increase commencing in FY 2025-26 will be 11.43% increase for Republic Services and a 5.87% increase for Tri-CED.

New Programs, Services and Contract Terms

The New Agreements include a variety of changes and improvements to services and contract terms compared with the prior Agreements. These changes improve the services provided to residents and businesses, ensure the City’s compliance with State mandates, and mitigate the potential for high rate increases for the ten-year term of the New Agreements.

Below is a list of the key programs and service enhancements that are included in the New Agreements:

• Blue residential recycling carts (Tri-CED)
• Green residential compost carts (Republic Services/Tri-CED)
• Gray residential landfill carts (Republic Services)
• Blue commercial bins (repainted) (Republic Services)
•  Gray commercial bins (repainted) (Republic Services)
• Additional public education and outreach staffing (Tri-CED)
• Ensuring capacity of compost processing capacity (Republic Services)
• Recycling processing facility equipment improvements (Tri-CED)
• Providing compost carts and service to parcelized residential customers (Republic Services/Tri-CED)
• Providing residential customers direct billing Services (Republic Services – will commence in June 2025 for FY 2025-2026 services beginning on July 1, 2025; replacing billing for these services through the property tax assessment)
• Providing 400 tons of compost material to the City for use at the Community Compost Hub or for spreading on City turf fields (Republic Services)
• SB 1383 Compliance Route Audits (Republic Services and Tri-CED)
• Providing a 15.0% discount to eligible senior and low-income households

New Compensation and Rate Setting Methodology

The New Agreements prescribe a substantively different and improved approach to adjusting both Republic Services and Tri-CED’s compensation and the rates charged to residents and businesses commencing in FY 2026-2027, compared to the process included in the prior Agreements. The prior Agreements allowed for an annual increase in the company’s compensation and rates charged to ratepayers based on changes in several indices (index-based) and a second process whereby the changes in indices were also coupled with a true-up of the company’s revenue and expenses (cost-based). The cost-based approach included a 6.0% cap and was applied every third year of the term and the index-based also included a 6.0% cap and was applied the two years in between the cost-based.

The New Agreements greatly simplify the compensation and rate setting methodology commencing in FY 2026-2027 by relying on the annual change in a single index or CPI, the Bay Area Sewer-Water-Trash Index, in lieu of using several indices to adjust labor, fuel, medical benefits, etc. In addition, there is an annual 5.0% cap on the compensation and rate increase that will be considered for approval, with any percentage above 5.0% rolled over to the next fiscal year.

The compensation and rate adjustment for FY 2025-2026 primarily relies on the cost-based adjustment methodology prescribed in the prior Franchise Agreements due to the one-year extension to the Agreements granted by the City Council. This is because the last cost-based adjustment was employed three-years ago for FY 2022-2023 and the one-year extension resulted in allowing the companies to submit another “true-up” cost-based compensation application for FY 2025-2026. Therefore, the compensation adjustment applications submitted by both companies included an adjustment to expenses not associated with new negotiated items per the cost-based methodology and it also includes the new negotiated costs.

FY 2025-26 Compensation and Rates

The proposed compensation increase for Republic Services and Tri-CED and the associated proposed rate increases are included in the New Agreements. The compensation details are provided as Exhibit 11.1.A in the Republic Services Franchise Agreement and in Exhibit G in the Tri-CED Franchise Agreement. The proposed rates are provided as Exhibit 16 in the Republic Services Franchise Agreement, and in Exhibit P in the Tri-CED Franchise Agreement.

Both Republic Services and Tri-CED submitted compensation (and rate) adjustment applications in April, 2025, as required in the Franchise Agreements. Both applications followed the cost-based adjustment methodology prescribed in the current Franchise Agreements, and included costs associated with the recently negotiated programs and services in the New Agreements. The City’s review of the applications conducted with support from R3 Consulting, Inc. resulted in substantive decreases in the proposed compensation and rate increases. The following provides the results of the City’s review which both Republic Services and Tri-CED have agreed to:

Proposed Compensation Increases for FY 2025-2026

• 11.43% for Republic Services ($17,788,653 Total Compensation)
• 5.87% for Tri-CED ($3,652,173 Total Compensation)

Due to the change from billing residential customers via the property tax assessment to direct billing by Republic Services, and potentially continuing the City’s preferred practice to collect its existing Stormwater Compliance Fee through the property tax roll, the effective rate increase for Residential customers is different than the actual compensation increase for Republic Services. The rates charged by Republic Services will no longer include the City’s existing Stormwater Compliance Fee and the City Council will consider continuing to collect this Fee ($80.31 per property per year) through the property tax roll at a later date. Since the City’s existing Stormwater Compliance Fee will no longer be collected through the landfill, compost and recycle collection rates charged by Republic Services, the effective rate increase for FY 2025-2026 will be as follows:

Proposed Rate Increases for FY 2025-2026

• 4.92% Combined for Single-Family Customers
• 35.50% for Parcelized Multi-Family Customers (now receiving compost collection service)
• 4.48% for Multi-family and Commercial Customers

Therefore, the current rates will be adjusted based on these effective rate increases in order to generate adequate compensation for Republic Services, Tri-CED and the City Fees pursuant to the New Agreements.

Table 1 below provides a comparison of the approved FY 2023-2024, FY 2024-25 and the proposed FY 2025-2026 compensation and rate increases. It is important to note that the Combined Single-Family rate increase of 5.92% does not include the City’s existing Stormwater Compliance Fee which will no longer be collected through the landfill, compost and recycle rates. In addition, the Combined Parcelized Multi-Family rate increase of 35.50% is the result of providing these customers weekly compost collection service which has not been provided prior to FY 2025-2026.

Residential Collection Service Rates

Union City homeowners currently pay for curbside collection of landfill, compost, and recycle collection services by way of special assessments applied to annual property tax statements issued by the Alameda Tax Collector. Commencing in FY 2025-2026, the cost for landfill, compost, and recycle collection services will no longer be included in the property tax assessment and Republic Services will bill customers directly. The new bills will be issued quarterly and will commence in June 2025 for service provided beginning July 1, 2025.

The fees for basic service are based on weekly servicing of a 35-gallon landfill cart, a 96-gallon organics cart, and a 64-gallon recycling cart.

The proposed annual rates for FY 2025-2026 for single-family households with 3-cart weekly service is $564.94 for landfill and compost collection, and $264.12 for recycle collection, for a total of $829.07, or an increase of $38.87 (4.92%) per year compared to the annual combined rate for FY 2024-2025. The City’s existing Stormwater Compliance Fee of $80.31 annually will be collected separately. Table 2 provides the annual rates that were approved for FY 2024-2025 and the proposed rates for FY 2025-2026 for Single-Family customers.

The proposed combined monthly expense for FY 2025-2026 for single-family households with standard 3-cart weekly service is $69.09 per month, or an increase of $3.24 per month compared to the monthly combined rate for FY 2024-2025. Table 2.A below provides the monthly rates that were approved FY 2024-2025 and the proposed rates for FY 2025-2026 for Single-Family customers.

SB 1383, the Alameda County Organics Recycling Ordinance and the City’s Organics Recycling Ordinance (Union City Municipal Code Chapter 7.24) require that all customers are provided compost collection service in addition to the landfill and recycle collection services. While single-family residential customers already have this 3-cart service, most townhome and condominium properties (“Parcelized Multi-Family” properties) do not. Commencing July 1, 2025, these previously underserved properties will be provided compost collection service. New Compost carts will be delivered during the last week of June, 2025, for collection service beginning on July 1, 2025.

For these parcelized parcels, the proposed annual rate for FY 2025-2026 is $564.94 for landfill and compost collection and $264.12 for recycle collection. This is the same rate charged to Single-Family customers. Table 3 below provides the annual rates that were approved FY 2024-2025 and the proposed rates for FY 2025-2026 for Parcelized Multi-Family customers.

The proposed monthly expense for FY 2025-2026 for Parcelized Multi-Family parcels with 3-cart weekly collection service (i.e., landfill, recycle and new compost) is $69.09 per month, or an increase of $18.10 per month compared to the monthly combined rate for FY 2024-2025, which did not include compost service. Table 3.A below provides the monthly rates that were approved for FY 2024-2025 and the proposed rates for FY 2025-2026 for Parcelized Multi-Family customers.

Commercial Collection Service Rates

An increase of 4.48% in commercial rates for landfill (solid waste), compost (organics waste), and recycle collection services is proposed for FY 2025-2026. For a standard three cubic yard landfill bin serviced one time per week, the increase amounts to $21.98 per month. The City encourages commercial customers to reduce waste by offering recycle and compost collection services with rates that are 40% less than comparable landfill rates. For example, the proposed monthly rate for weekly collection of a three-cubic yard landfill bin is $512.54 per month, whereas the rate is $307.51 a month for either recycle or compost collection service.

Businesses can realize additional savings by downsizing their landfill service levels through increased recycling and composting. Commercial customers are currently already billed directly on a monthly basis by Republic Services. Table 4 below provides examples of the monthly rates that were approved FY 2024-2025 and the proposed FY 2025-2026 rates for Commercial customers.

The adjustment to Republic Services and Tri-CED’s compensation prescribed in the Franchise Agreement and the results of negotiations to extend both Franchise Agreements for an additional ten-year term contributes to the generation of City fees totaling $7,077,666 in FY 2025-2026. Approximately $6,230.770 through Republic Services and $846,896 from Tri-CED will be accrued under the proposed rate schedules. It is important to note that these are unaudited, preliminary revenue figures based on comparisons of proposed past revenues and are therefore subject to change and City Council approval of the final rates to become effective July 1, 2025.

Staff recommends that the City Council proceed as follows:

1.      Adopt a resolution approving and authorizing the City Manager to execute an Amended and Restated Franchise Agreement for Landfill, Compost, and Recycle collection services with Republic Services for an additional ten-year term from July 1, 2025 through June 30, 2035 and approve the proposed fees and rates for landfill, compost, and recycle collection services.

2.      Adopt a resolution approving and authorizing the City Manager to execute an Amended and Restated Franchise Agreement for Recycle Collection and Processing Services with Tri-City Community Economic Development Corporation (Tri-CED) for an additional ten-year term from July 1, 2025 through June 30, 2035 and approve the proposed fees and rates for recycle collection and processing services.

Cliff Feldman, Recycling and Solid Waste Program Manager