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HomeMy WebLinkAboutAgenda Report - June 2, 1982 (48)CITY COUNCIL MEETING q JUNE 2, 1962 DIS1'OSAi. SF:RVICF: City Clerk Reimche presented a letter- which had been received PJ,TF.S 9UES,r10NFD from Hill parson's Central Valley Disposal Service, asking that Council compare Central Valley Disposal Service rates to those of Sanitary City and stating that Central Valley Disposal Service believes that they are being dealt with unfarily in their co..1peti- tion with Sanitary City in the County. City Clerk Reimche was directed to forward a copy of this letter to Sanitary City D'sposal Company for their review and comment. CITY COUNCIL FRED M REID. Mayor ROBERT G MURPHY. Mayor Pro Tempore EVELYN M OLSON JAMES W PINKERTON. Jr JOHN R (Randy) SNIDER e► 4 CITY OF LODI CITY HALL. 221 WEST PINE sMEI POST OFFICE BOX 320 LODI. CALIFORNIA 95241 (209)334.5634 June 4, 1982 HENRY A CLAVES. Jr. City M inager ALICE M RE IMCHE City Clerk RONALD M STEIN City Attorney Mr. David Vaccarezza Sanitary City Disposal, Inc. 1102 N. Cluff Avenue Lodi, CA 95240 Dear Mr. Vaccarezza: Attached herewith please: find May 17, 1982 Central Valley Disposal Service letter addressed to the Mayor and City Council of the City of Lodi. This letter was presented t,, the Council at its regular meeting of June 2, 1982; and Council directed that I forward a copy to you for your review and comient. Should you have any questions regarding this matter, please do not hesitate to call this office. Very truly yours, Alice M. Reimche City Clerk AR: dg Ezic. l vnlr�r( 7/�,�lv f Ui�po�af �vrvicrL -I car D ,. P.O. EF•' Z 111rW 20 MI J' 0 7 VICTOR. CALIFORNIAFO NI35253 _ AUCE H. REJxCFIE C! Y CLERK May 17, 1982 CITY OF LODI City of Lodi Mayor and City Council City Nall 221 Nest Pine Street Lodi, California 95240 Dear Mayor and Council Members: I am aware that this is the month of the year when the city council reviews City Sanitary Disposal's need for a cost of living rate increase for its residential and commercial refuse collection customers. This year's rate increasereview takes on a new dimension due to the arrival in the Lodi area of Central Valley Disposal Service as a competitor of City Sanitary in the unincorporated area surrounding the city. Although Centra? Valley As not a competitive threat to Sanitary City for residential and commercial business within city limits because of the city's exclusive franchise arrangement we are butting heads with Sanitary City on commercial account: in the unincorporated area. I believe that it is important for you during your deliberations regarding rate hikes to be aware of the remarkably low commercial rates Sanitary City is charging in certain areas outside the city in an effort to meet the competitive challenge of Central Valley In comparing Sanitary City's rates within city limits to those outside city limits, one must be aware that t1he city of Lodi retains a 15 percent franchise fee from Sanitary City's gross receipts. In return for this 15 percent fee Sanitary City is allowed to dump free of charge at the Harney Lane landfill and the city also provides free billing service. On the other hand Sanitary City must pay a 40 percent franchise fee to San Joaquin county on all of its commercial accounts in the unincorporated area. The 40 percent franchise fee allows Sanitary City to dump free of charge at the Harney Lane lanJf'ill but the county does not provide billing services. It is the margin of difference between the 15 percent and the 40 percent franchise fee which makes the disparity between Sanitary City's in -city rates o:ri its out -of -city rates so dramatic. By way of example, the drug store in Lockefrrd had been paying Sanitary City about $50 a month for a two -yard container emptied once a week. We quoted the owner of the drug store our standard rate of $34 for the same service. - 2 - In order to deny Central Valley this account Sanitary City dropped its mite to $25 a month. Sanitary City's rate in Lodi for the same service is $44.16. To properly compare the two rates ($25 vs. $44.16) one. most first subtract. the franchise fees from the base rates. After subtracting the county's 40 percent fee, the $25 a month rate drops to $15. After subtracting the city's 15 percent fee the $44.16 rate becomes $_37..4. So, the true comparison is $37.54 in the city and $15 in Lockeford where th^ customers are fewer and farther from Sanitary City's transfer station. Hoa do they do it? Are the high city rates subsidizing these low county rates? Another example: The Texaco truck stop at the intersection of 1-5 and Highway 12 was paying Sanitary City approximately $130 a month for two four - yard containers emptied once a week. This price was consistent with the in city rate for the same service. We offered the same service to the owner at $100 a month. A bidding war ensued with the result the:t. Sanitary City obtained the account with the added provision of twice a Week service for a total price of $60 a month. After subtracting the 40 percent county franchise fee the actual amount received by Sanitary City is $36 a month. This $36 amount contrasts markedly with the in -city rate of $189.03 ($222.39 minus the 15 percent franchise fee). Still another example: The Tower Park Resort at Terminous on Highway 12 was having eight five -yard containers emptied once a week by Sanitary City at a cost of $488 a month. Central Valley offered the same service to Tower Park for $375 a month. Sanitary City responded with a rate of $325 a mo,.th. After subtracting a 40 percent franchise fee, S.-rnitary City actually receives $195 a month to provide service more than 20 miles from its transfer station. This $195 figure contrasts sharply with the in-ci'y rate of $500.29 ($588.58 minus the 15 percent franchise fee). It goes without saying that Sanitary City would not he able to offer such incredibly low rates if it weren't for the existence of its safe harbor in Lodi. The high commercial rater Sanitary City enjoys in Lodi provide profitability adequate to allow the company to quote rates that actually lose money in the county area. The three examples I have provided above are extreme cases where Sanitary City reacted in an unbusiness like manner to our challenge. These were customers with which they had been unable to sign a contractual agreement. But there are as many as 30 to 40 commercial customers in the county area which have signed 18 month contracts with Sanitary City. In almost everyone of these contracts the rate is about. the same an it is in the city. We can use as an example the rate for a two -yard container emptied once a week. The in -city rate is $44.16 plus an additional $8 a month rent billed directly by Sanitary City. (The City may or may not b,� aware of this additional rental fee for container service). The out -o: -city rate for the same service is $50.22 with no additional rental charge. After subtracting ..he 40 percent franchise fee, the effective rate in thni county area works out to $30.19. This is in contrast to the effective in -city rate of $45.53 ($44.16 - 15 percent + $8 rental). What this means is that there are hundreds of Sanitary City customers in Lodi who are paying 50 per-ent higher rates than customers in the rural areas of the county. These Lodi c►;st.omers have every right to exF�ct to be paying, less than the more scattered rural customers - - not -ore. - 3 - It is much less expensive to pick up corwner;.ial containers in a densely populated area with a greater number of containers than in thinly populated areas. The economy is apparent to anyone who considers it. The true purpcae of this letter is to point out to you that c -:e believe we ire being dealt with unfairly in our competition with Sanitary City in the county. We believe that Sanitary City is not dealing fairly with its city customers because of the tactics the company has resorted t:; in the county area. Sanitary City has a powerful ulterior motive in attempting to fend off the competitive challenge of Central Valley Disposal because the owners fear that we will be competing for the city franchise when it goes out to bid again in 1989. Well, trey are right. he will be around in 1989 to bid on the city franchise. By then, we will have established our local credentials in the refuse collection business and we will be prepared to provide a highly competitive bid. Meanwhile, there is the problem of Sanitary City's dual rate structure: N high rate in the city and a low rate in the county. Sanitary City wants a cost of living increase in the, city but has frozen th:: rates for 18 months for most of its county customers. It might be in the city's best interests to take a hard look at the existing contract to determine if there is a way to avoid granting Sanitary City's rate hike. Tt. is difficult to understand the need for a rate increase when such low rates are offered on the other side of city limits. Respectfull Bill Parsons BP/bl