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HomeMy WebLinkAboutEDCO Disposal Corporation - Modification of Contract Terms - Evergreen - 1997RESOLUTION NO. 97-119 RESOLUTION OF 'ME CITY COUNCIL OF THE CITY OF NATIONAL CITY AUTHORIZING flit; MAYOR TO EXECUTE AN AMENDMENT TO THE AGREEMENT FOR COLLECTION OF RUBBISH AND TRASH IN TJJE CITY OF NATIONAL CITY WHEREAS, on September 25, 1990, the City and Edco Disposal Corporation entered into an agreement entitled "Agreement for Collection of Rubbish and Trash in the City of National City by and between the City of National City and Edco Disposal Corporation for Services Rendered", and WHEREAS, said agreement was amended on June 22, 1993 pursuant to Resolution No. 93-86, and on November 9, 1993 pursuant to Resolution No. 93-176; and WHEREAS, the City and Edco Disposal Corporation now desire to amend Section I of said agreement, concerning the term of the agreement. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of National City that the Mayor is hereby authorized to execute an Amendment to the Agreement for Collection of Rubbish and Trash in the City of National City by and between the City of National City and Edco Disposal Corporation for Services Rendered. Said amendment is on file in the office of the City Clerk. PASSED and ADOPTED this 16th day of September, 1997. Ai EST: is ael R. Dall , City Clerk APPROVED AS TO FORM: George H. Eiser, III City Attorney e.4-y << George H. Waters, Mayor Passed and adopted by the Council of the City of National City, California, on September 16, 1997, by the following vote, to -wit: Ayes: Council Members Beauchamp, Inzunza, Morrison, Zarate, Waters. Nays: None. Absent: None. Abstain: None. AUTHENTICATED BY: GEORGE H. WATERS Mayor of the City of National City, California MICHAEL R. DALLA City Clerk of the City of National City, California By: Deputy I HEREBY CERTIFY that the above and foregoing is a full, true and correct copy of RESOLUTION NO. 97-119 of the City of National City, California, passed and adopted by the Council of said City on September 16, 1997. N wu Ci Clerk of the City o ational City, California By: Deputy AMENDMENT TO AGREEMENT FOR COLLECTION OF RUBBISH AND TRASH IN THE CITY OF NATIONAL CITY This Amendment to Agreement is made and entered into this 16th day of September 1997, by and between the City of National City, hereinafter referred to as "CITY", and Edco Disposal Corporation, hereinafter referred to as "CONTRACTOR". RECITALS A. On September 25, 1990, CITY and CONTRACTOR entered into an agreement entitled "Agreement for Collection of Rubbish and Trash in the City of National City by and between the City of National City and Edco Disposal Corporation for Services Rendered". B. Said agreement was amended on June 22, 1993 pursuant to Resolution No. 93-86. C. Said agreement was amended on November 9, 1993 pursuant to Resolution No. 93-176. D. CITY and CONTRACTOR now desire to amend Section I of said agreement, concerning the term of the agreement. NOW, THEREFORE, the parties hereto mutually agree to amend Section I of the Agreement for Collection of Rubbish and Trash in the City ofNational City by and between the City of National City and Edco Disposal Corporation for Services Rendered, as follows: TERM. The term of this Agreement shall be amended to commence October 1, 1997 and expire June 30, 2003, provided however, that commencing July 1, 1998 and every year thereafter, automatic one year extensions shall be applied to said Agreement so that the term of the Agreement shall remain between five (5) and six (6) years. Should either party desire that said automatic one year renewal and extension provision be terminated, such party may give the other written notice of such termination not less than thirty (30) days prior to July 1 of any year of the Agreement. Such notice will terminate the automatic one year renewal and extension provision, and the Agreement shall remain in effect for the balance of the term then outstanding. This amendment is to remain in force so long as the Company is owned by Ed Burr. If the Company is sold, the contract will revert to a fixed term contract with the fixed term being from the date of sale to the next anniversary date (1 July) plus one year. Except as otherwise provided herein, all of the provisions of the Agreement for Collection of Rubbish and Trash in the City of National City by and between the City of National City and Edco Disposal Corporation for Services Rendered, dated September 25, 1990, and as amended on June 22, 1993, and on November 9, 1993, shall remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have hereunto set their hands on the date first above stated. APPROVED AS TO FORM: /3 L. g George H. Eiser, III City Attorney George 41. Waters, Mayor EDCO DISPOSAL CORPORATION By: By: SUBJECT: Request for Extension of EDCO Contract ISSUE: Should the current contract with EDCO for trash services, which expires 30 June 1999, be renewed. RECOMMENDATION: That the current EDCO CONTRACT be amended to a "5 year EVERGREEN" contract. ADDITIONAL RECOMMENDATIONS: That this "Evergreen" amendment remain in force so long as the Company is owned by Ed Burr. If the Company is sold, the contract will revert to a fixed term in which the term will be from the date of sale to the next anniversary date (30 June) plus 2 years. FISCAL IMPACT: No change in impact on City funds is anticipated as a result of this contract amendment. BACKGROUND: The City has contracted with EDCO for trash services for many years. Some of the provisions have been changed, and the contract itself has been extended in 10 year and 5 year increments, the last being a 5+ year term extension which expires June 1999. The City has in the past approved early extension, primarily to permit amortization of capital equipment costs over a reasonable period. The CALIFORNIA LEGISLATURE, recognizing the special nature of refuse services and the heightened need for stability in the obtaining of those services has provided authority for Refuse services to be obtained or extended by Jurisdictions without the otherwise required bidding process. As indicated, that authority has been used in the past to extend our franchise agreement with EDCO and it is proposed to use that authority again. DISCUSSION: EDCO's current fixed term contract expires in June 1999. EDCO has made significant capital expenditures in the recent past, and anticipates making significantly more in the near future. A contract extension beyond the June 1999 date is required to permit amortization of the portions of those costs directly (and indirectly) related to provision of economical refuse services to National City. Significant portions of this capital investment offer the opportunity of increased flexibility in refuse disposal by the City. Such flexibility will help ensure maximum economies and minimum prices to our citizens in relation to refuse services. The anticipated capital facilities and equipment will offer to the City an enhanced capability of obtaining a higher level of recycling (especially in the multi -family accommodations), which will make it much easier to meet the AB939 goal of reducing refuse going into the landfills by 50% in 2000 over the amount being landfilled in the base year of 1990. In the area of quality of service, EDCO has been providing refuse services for a significant time. A good measure of the quality relates to the complaints received. I receive 3 to 5 per year, not all of which the result of poor quality service. EDCO representatives have been quick to respond, and have gone the extra mile to obtain customers satisfaction. I am unaware of complaints reaching the Mayor/Council level in the recent past. The cost of the service, while not the lowest in the region, is certainly among the lowest. The aggressive effort by EDCO to increase recycling, to increase green waste recycling, to find a reduced cost recipient for processing green wastes, and to make the investment in articulated trash trucks have all servedto enhance the among -the -lowest position with respect to price. As you are aware, EDCO has become a respected member of Our Community. Even though Mr. Burr personally lives elsewhere, and the seat of his business is in Lemon Grove, he has encouraged his staff to become a part of our Community. They have done so with a high level of effort. Their personal involvement in the City and the Company's contributions in terms of money and other support are well-known. With the Legislative provision for awarding and/or extending refuse contracts based upon "best interest" of the City, most refuse contracts in the State were renewed. In the past, 10 year fixed length contract seems to have been standard, with some jurisdictions going for bids and some shortening the term to less than that. Recognizing, in yet another way the capital requirements of the business, the Legislature made it mandatory for Jurisdictions to provide 5 years notice to solid waste enterprises if the Jurisdiction decided to change from an "open" solid waste handling serviced to an "exclusive" franchise solid waste handling service (AB939 (SHER) Public Resources Code). A type of contract has come to forefront recently that provides assurance to both parties of continued refuse service. It is termed an "Evergreen" type contract. In this particular instance, it is proposed that the term of the existing contract be modified as follows: • The Anniversary date will be 30 June (to coincide with our fiscal year). • It will be a 5 year "Evergreen" contract. • On the first anniversary, the contract will run for 5 years. • Either party, within 30 days of an anniversary date, may notify the other party that the "automatic" one year extension will not occur. The contract will then have 5 years to run. • If neither party exercises its authority to not renew, then the term of the contract will be automatically extended by one year. Hence the name EVERGREEN. • The Contract may be terminated at anytime, in accord with its existing provisions, for cause. • This "Evergreen" provision is revised if the Company is sold, to become a fixed term contract with the term being from the date of sale to the next anniversary date plus two years. This type contract is similar in many respects to a fixed term type contract. A fixed term runs for a set number of years, and is subject to termination for cause. If either party determines that the "Evergreen" option is not to be exercised, and so notifies the other party in the 30 days prior to the anniversary date, the contract then becomes essentially a 5 year fixed term. The advantage of the Evergreen type contract is that if both parties are satisfied with the contract at its anniversary, it is automatically renewed, with no action required by either party. The additional provision pertaining to sale of the Company has been included as additional protection for the City. The "Evergreen" type contract is being recommended primarily because of the excellent service and reputation of EDCO. I would not have that same confidence if the Company were sold to some outside group. My recommendation is that if sold (outside of Ed Burr family - since it is a family business) that the new owners have a year plus to show us what kind of a job they can do, and a year to either establish a longer term relationship or go out to bid for the service. ALTERNATIVES: Three alternatives are available: 1. Deny EDCO request to renew the contract early, and deal with the situation at a later date, prior to its expiration June 1999. NOT RECOMMENDED. This approach would not give either EDCO or the City adequate time to effect alternatives to the current refuse service provision. 2. Advise contractor that extension will not be considered, and that contract will be placed for bid in time to commence collection 1 July 1999. NOT RECOMMENDED. I have no confidence that bidding out the contract will have any long term benefits to the City. We have a good contractor who does an outstanding job for a comparable price, who has been amenable to contract changes requested by the City, and who has become a solid member of our Community. I am not sure what the long range impact will be of the larger waste services companies expanding almost exponentially by buying up smaller companies. In some areas, that situation itself has served to reduce competition. 3. Extend contract for 10 year or 5 year fixed term. These are viable options but they are not recommended. Ten years, although many refuse contracts I understand are for such a period, my reading of Council is that this may be too long a commitment for us. A 5 year fixed term could work, but in 3 or 4 years, the Contractor, of necessity, will be back for an extension. And, assuming we are still satisfied with performance, an extension would probably be granted. The net result being that we will have the same contractor without the benefits that accrue to both of us by stability in refuse service. CONCLUSION: There appears to be little probability that long term savings can be realized by bidding out the refuse services. Recent Industry wide consolidations have had the effect of reducing completion, while our present contractor has an -among -the -lowest price at present. There is also concern that the present excellent service being received would certainly degrade initially under another contractor, and might never recover. A contract extension at this time appears warranted for the benefit of both parties in view of the volatile nature of the Refuse situation locally. Although a fixed term contract is a viable alternative, an EVERGREEN type contract, being automatically extended by one year at its anniversary date and running for 5 years if either party determines that it is not in their best interest to renew, would provide the stability in refuse services that both the contractor and the City need in this environment. City of National City, California COUNCIL AGENDA STATEMENT MEETING DATE September 16, 1997 3 f TTEE AGENDA ITEM NO. / ATRMES�LE�UiION AUTHORIZING THE MAYOR TO EXECUTE AN AMENDMENT TO AGREEMENT E WITH EDCO FOR COLLECTION OF RUBtSH AND TRASH IN THE CITY PREPARED BY C.R. Williams, Jr. DEPARTMENT Public Works EXPLANATION - See attached Report. Environmental Review X N/A Financial Statement No direct impact on finances of National City. Account No.Nhq TAFF ENfAaut homing t with EDCO pertaining to Term: ayor to execute a modification to the current Rubbish contract ARD/COMMISSION RECOMMENDATION ATTACHMENTS (Listed Below) Resolution No. 97-119 A-200 (Rev. 9/80)