The City of Cypress City Council on Monday awarded their waste hauler with rate hikes worth millions and a franchise extension until 2037 to provide the company with investment capital needed to implement the city’s organic waste program.
City officials will now inform residents and businesses that they must now pick up the tab in the way of rate increases for Valley Vista Services, the city’s waste hauler.
In a briefing from Public Works Director Douglas Dancs, the Council was told the revenue enhancement is necessary to ensure that VVS has the financial wherewithal to comply with a long-imposed state mandate for organic waste recycling and disposal.
The new state regulation goes into effect in 2022 so the Council has now approved rate increases for VVS and a franchise extension until 2037, which they say will provide the company with the financial resources and collateral necessary for VVS to comply with the new organic waste regulations.
In a memo to the Council, Dancs said “the state’s recently approved Short-Lived Climate Pollutant Reduction Strategy requires residential and commercial organic waste recycling start in 2022.”
“To comply with the state’s strategy, the City Council directed the city’s waste hauler, Valley Vista Services (VVS), to develop an organic waste recycling program that meets the new state mandates,” wrote Dancs in the memo.
“Along with the organic waste recycling program, VVS proposed two modifications to its franchise with the city: (1) adjust the recycling program to account for the collapse of the global market for recyclables; and (2) adjust the Consumer Price Index (CPI) calculation to account for rising inflation,” claims Dancs’ authorizing memo.
Dancs had notified the Council that the city’s solid waste expert had review VVS’s organics program and proposed franchise amendments. They concluded the VVS recycling program met state requirements and industry standards.
Dancs told the Council Monday the “investment required” is at least $10.6 million, “to ensure the city can implement the organics program.”
He said the money would pay for the VVS upfront costs that include “new bins, 15,000 kitchen caddies, 1,500 commercial 64-gallon organic waste collection carts, 250 larger commercial organic recycling bins, five additional trash trucks, and two new utility vehicles for route and contamination inspection.”
In addition, he said “a large portion of that is constructing a new organic waste facility that will guarantee a place for organic waste to go in the future.”
Dancs said in the memo that VVS will also build its own organics processing facility, enabling it to guarantee organic recycling capacity to its partner public agencies. VVS expects this facility to be operational within five years.
Dancs said the recycling business has changed and that while recycling was once revenue streams for companies, “that is no longer the case,” he said. “Recycling is now a cost.”
“Valley Vista has lost $193,000 each year in the last three years [disposing Cypress recyclables], and that is definitely not sustainable from a business perspective,” said Dancs, and “they are asking for a change in the recycling rate to account for that.”
In addition, he said, the city will have a $100,000 annual compliance cost so they were adding an additional 1.5 percent to the rate increase to cover those costs.
According to the memo, the city is awarding VVS with a cap allowance. With the consumer price index escalating, the city’s new franchise amendments also include an 85 percent provision. The existing VVS contract is limited to a 3.5 percent CPI increase each year.
However, with the 85 percent rule, VVS will now be eligible to charge the 3.5 percent CPI increase, but if it swells to 6 or 7 percent, VVS can now recover 85 percent of the amount over the cap of 3.5 percent.
The entire cost, amortized into the rate increases, means residents will pay an additional $3.67 per month and the businesses rate will be increased from 10 to perhaps 30 percent, depending on various factors.
“Due to the investments this company will have to make,” said Dancs, “it will require a contract extension to 2037.” The city had already awarded it a contract extension to 2027, so the measure gives VVS another decade on its contract.
Even with the increases, said Dancs, Cypress residents will be paying among the lower residential waste hauler rates in the area. According to Dancs, residents in Placentia are paying $29.63 per month, in Garden Grove residents pay $27.18, in Anaheim $24.50, Stanton $23.35 and residents pay $21.84 per month for waste hauling service in Buena Park.
He said the new Cypress rate would be $21.11 per month and, by law, there will be a so-called Proposition 218 hearing in January at which 50 percent plus 1 parcel owners can reject the deal.
The proposition, passed by California voters in 1996, Proposition 218 is a constitutional amendment that limits the methods by which local governments can create or increase taxes, fees and charges without taxpayer consent, according to staff.
Proposition 218 requires voter approval prior to imposing or increasing general taxes, assessments, and certain user fees. The recommended rate adjustments will not go into effect if written protest votes are received from more than 50% of property owners.
If more than half of property owners in the city officially protest the VVS agreement, the city would be forced to scuttle it and either renegotiate or find other solutions, said Dancs.
Council members thanked the city staff for their work on the comprehensive organic waste plan.
“Despite the growth in costs from this state mandated plan, I’m pleased to see that the rate residents in our city will be paying will be among the lowest in Orange County,” said Council member Scott Minikus.
He asked city officials to look into a couple of potential cost reduction ideas and said there are some residents in the city that may have trouble paying the higher rates. “My concern is that some of our residents may need some assistance with the additional costs,” he said.
Minikus asked City Manager Peter Grant to look into the feasibility of utilizing $50,000 from the American Rescue Act into a special fund to potentially provide assistance to very low-income residents. Minikus said he had some “concern” about extending VVS’ contract until 2037.
Council member Ann Hertz, like other members, thanked Dancs and the city staff for the year-long effort to develop a plan to comply with the new state regulations. In addition, Hertz said the rate increases “seem reasonable to me, given the significant changes that are occurring.”
Council member Frances Marquez questioned enforcement mechanisms and also worried about the length of the contract extension. “I have a little bit of concern about the contract extension for so long,” she said.
Mayor Pro-Tem Paulo Morales said he remembered back to the time “when we used to buy our own trash cans. First, we would buy metal ones then we’d get tired of them getting dents in them, so we started buying rubber ones.”
“So, you’re right, Council woman Hertz, there are going to be significant changes,” said Morales. “There are a number of things, but you just have to take action,” he said.
And he also made notice of just how long the city has been working on this program. Morales hinted that the city has generally been unsuccessful in truly connecting with residents on issues.
“I don’t want to bring up or initiate things that sometimes can get ugly, but the city has reached out to residents on a number of things, whether it be park issues or building developments…and a lot of times, sadly, the residents just throw those notices out,” said Morales.
Under the program, the city does have the ultimate responsibility to reach out and educate residents and homeowners about organic waste.
“We will get through this,” he said. “I will tell you that this outreach has already started,” the mayor pro-tem said. “It’s not going to be fun. It’s not going to be easy,” he suggested.
“I get it,” he said, “the idea of adding the 15 years doesn’t always sound palatable, but you look at the amount of the investment they [VVS] have to put forward, and if they don’t have that capital right now,” said Morales, the extension will give them the “collateral” they need with financial institutions.
He said “it was a tough time when Mayor Peat and I” talked about raising rates for Valley Vista four years ago and the reality is, we have had exceptional service throughout. They have never scaled back,” he said.
Valley Vista is doing a good job for the city and has mailed notices to residents for months letting them know that this program was coming, said Morales.
Peat said “I agree with what I’ve heard tonight from [Council] colleagues. “I’m happy that there is an extended period of time before actual compliance becomes enforceable, so education will be critical during that period of time.”
Also, Peat said “I think it’s a good balanced program for the city and the vendor, so I’m pleased with where we are. Thank you for your effort.
Four members of the Council, Peat, Morales, Hertz and Minikus voted to award VVS the franchise and rate modifications while Marquez abstained from voting.
The Proposition 218 hearing has been set for January 24 and all parcel owners are required to get a written notice from the city 45 days before the hearing.
