TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Erick Lee, Public Works Director
Jeff Page, Utilities Manager
Anna Luke-Jones, Solid Waste Administrator
SUBJECT:Title
Consideration of a Resolution Setting a Date and Time for a Proposition 218 Public Hearing to Consider Increasing Commercial and Residential Solid Waste Hauling Fees and City Recovery Costs for Fiscal Year 2026 - Fiscal Year 2030 and a Resolution Adopting Procedures in Connection with Proposed Solid Waste Hauling Fee Increases (No Budget Impact) (Public Works Director Lee).
(Estimated Time: 15 Mins.)
ADOPT RESOLUTION NOS. 25-0021 AND 25-0022
Body
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RECOMMENDATION:
Staff recommends that City Council adopt:
1. Resolution No. 25-0021 setting May 20, 2025 for a Proposition 218 public hearing under the Proposition 218 protest procedure to consider adopting new residential and commercial solid waste hauling fees and City Recovery Costs, inclusive of annual Consumer Price Index (CPI) escalations over the next five fiscal years; and
2. Resolution No. 25-0022 adopting procedures in connection with the proposed solid waste hauling fee increases.
FISCAL IMPLICATIONS:
There is no fiscal implication with the adoption of resolutions 25-0021 and 25-0022 in this report. However, if the Proposition 218 process is initiated, there will be a fiscal implication at the public hearing on May 20, 2025, if the required threshold of protests is not received and the City Council adopts the proposed rates.
Potential Rate Changes if Proposition 218 Process is Initiated
Residential and commercial solid waste hauling fees (rates) are fully paid by the customers receiving refuse service. The City also receives a City Recovery Cost (CRC) for the administration and oversight of the program and solid waste contractor. There are three factors that determine the rates presented in the Proposition 218 process: the Consumer Price Index increase to base service rates, the special rate adjustment approved by City Council at its December 3, 2025 meeting, and the City Recovery Cost that is calculated annually. The three factors are summarized as follows:
1. CPI increase for FY25-26 is 4.4% for all Waste Management services.
2. Special one-time adjustment includes a 2.51% increase for residential single-family and multi-family cart customers and a 5.4% increase for multi-family bin customers, commercial businesses, and extra services.
3. City Recovery Cost for FY25-26 is 5% applied to Waste Management services except temporary bin rentals and roll-off bins.
Based on the three factors above, the FY2025-2026 rates will increase over current rates by the following:
- 11.91% for single-family and multi-family cart customers (4.4% CPI + 2.51% special increase + 5% CRC)
- 14.8% for multi-family bin customers, commercial customers and extra services (4.4% CPI + 5.4% special increase + 5% CRC)
- 4.4% for temporary bin rentals and roll-off bins (4.4% CPI)
How Billing Sectors are Determined
It is important to clarify how billing sectors are determined to ensure proper communication of exactly how each sector will be impacted by the special adjustment increase.
Single-family billing
Single-family residential accounts are identified by a dedicated water meter for the residence. While a complex of townhomes may appear to be a multi-family complex, if each townhome has its own dedicated water meter, the townhomes are billed as single-family residential accounts. The residential customer rate is based on the size and quantity of their landfill carts. There is no itemized charge for recycling and organics carts. In 2015, City Council adopted citywide organics, and a one-time rate adjustment was added to the landfill rate to compensate for the citywide program. In the current franchise agreement, which became effective July 1, 2020, WM’s proposal built their costs for organics into the landfill rate.
Multi-family billing
Multi-family accounts are identified by a dedicated water meter accommodating more than one residence. In circumstances where two units appear to be single-family units, if the units share one water meter they are identified as multi-family. There is more than one billing structure for multi-family accounts.
The first billing structure a multi-family account may be assigned is a “multi-family cart” customer. Multi-family customers with two through nine units that utilize 100% carts (no cubic yard bins) for all material types (landfill, residential and organics) pay a flat rate based on the number of units.
The second billing structure a multi-family account may be assigned is a “commercial” customer. If a multi-family building has 10 or more units, it is billed as a “commercial” customer because, at that size, it will have cubic yard bin(s) for at least one material type for tenants to use. Also, if a multi-family building of any unit count obtains a commercial cubic yard bin for any of its material types, its billing status changes from a “multi-family cart” customer to a “commercial” customer. The reason for this change relates to its utilization of commercial services. For example, if a multi-family building with four units has landfill, recycling, and organics carts but chooses to replace the landfill carts for a three-cubic-yard commercial bin, that multi-family account changes their billing structure from the “multi-family cart” customer (flat rate based on number of units) to a “commercial” customer. “Commercial” customers are billed based on the size and collection frequency of the containers. Additionally, while residential collection is once per week for all residential accounts, commercial accounts create their own service schedule and can have service more than once per week.
Commercial billing
All business parcels are “commercial” customers. “Commercial” customers are billed based on the size and collection frequency of the landfill and recycling containers. Commercial accounts create their own service schedule and can have service more than once per week. “Commercial” customers can have carts, bins, or a mix of both. The cost of recycling carts and bins is 50% lower than the cost of landfill carts and bins of the same size. There is no itemized charge for commercial organics carts. As mentioned in the single-family billing section, in 2015, City Council adopted citywide organics, and a one-time rate adjustment was added to the landfill rate to compensate for the citywide program. In the current franchise agreement, WM’s proposal included their costs for organics in the landfill rate.
BACKGROUND:
The City has franchised its residential and commercial solid waste services with a private hauler since the early 1980s. The last Request for Proposal (RFP) process for solid waste hauler selection was awarded to WM in 2019, with an effective date of July 1, 2020. The franchise agreement is for seven fiscal years (FY) plus three one-year optional extension years, for a potential of 10 total years (July 1, 2020 through June 30, 2027 + optional FY2028 + optional FY2029 + optional FY2030).
Proposition 218 Background and Process
In November 1996, California voters passed Proposition 218, the “Right to Vote on Taxes Act,” and added Articles XIIIC and XIIID to the California Constitution. Article XIIID imposes substantive and procedural requirements to impose or increase property-related fees, such as the proposed refuse collection service charges. This constitutional amendment protects taxpayers by limiting the methods in which local governments can create or increase taxes, fees, and charges without taxpayer consent. Proposition 218 requires voter approval prior to any imposition or increase of general taxes, assessments, and certain user fees, including charges paid by rate payers for refuse services.
The City last went through the refuse Proposition 218 process in the spring of 2020. This process preceded the start of the franchise agreement with WM. On May 5, 2020, City Council held a Public Hearing to count all the protest votes received and adopted Resolution Nos. 20-0028 and 20-0029. The new rates went into effect July 1, 2020. The Proposition 218 vote is valid for five years. The City is currently in its fifth and final year of the approved solid waste Proposition 218 period. Therefore, the City is pursuing this process again for the next five-year period that commences on July 1, 2025.
December 3, 2024 City Council Meeting
The request for a special rate adjustment was made by WM to City Council at their August 20, 2024 meeting. City Council directed staff to negotiate the terms and return to Council for consideration. At their meeting on December 3, 2024, the City Council adopted Resolution No. 24-0137, approving Amendment No. 2 to the franchise agreement with WM, allowing for a one-time special rate adjustment to be included with this Proposition 218 process.
Sectors where the 2.51% increase will apply:
- Residential single-family customers
- Multi-family cart customers (100% carts - landfill, recycling and organics; no use of commercial cubic yard bins)
Sectors where the 5.4% increase will apply:
- Multi-family customers who utilize commercial cubic yard bin(s)
- Commercial business customers (whether they use carts or cubic yard bins)
- Extra services as outlined in Exhibit 3 of the WM franchise agreement (for example, lock services for bins, commercial business bulky item pick-ups, emergency collection and disposal, etc.)
Sectors where the special adjustment increase does not apply:
- Temporary bin rentals
- Roll-off bins
DISCUSSION:
In order to pass along the proposed FY2026 rate increases to residential and commercial customers, including the proposed annual CPI increase for the following four years and the “special adjustment” approved by the City Council at their December 3, 2024 meeting, the City is required to undertake a Proposition 218 protest ballot process. This includes setting a date for a public hearing to hear protests against the proposed rates and the CRC fee, and, assuming no majority protest, approving the new rates and CRC fee for implementation, effective July 1, 2025.
Process
The Proposition 218 process requires that the City mail a notice to each prospective rate payer identifying the proposed rate increases and conduct a public hearing to consider the rate increases at least forty-five days after the notices are mailed. At the public hearing, the City Council must consider all protests or objections to the proposed refuse collection service charge. At the conclusion of the public hearing, the City Council must receive the protests total from the City Clerk and then tabulate the written protests against the proposed refuse collection service charges and determine whether a majority protest exists. Unless protests are received from a majority of rate payers (50% + 1), the rates may be adopted by a majority vote of City Council at the public hearing. If City Council sets the public hearing and authorizes staff to begin the Proposition 218 notification process, notices will be mailed by March 28, 2025, and a Public Hearing will be held on May 20, 2025, during the regularly scheduled City Council meeting.
A Proposition 218 notice is sent to all rate payers in the City of Manhattan Beach. To ensure transparency, staff also sends the notice to all occupants at the property address (if the owner is not the tenant). Although only the rate payer can submit a protest for the property, the notice is sent to occupants to notify them of potential rate changes.
If the Protest Threshold is Met
If the City receives a majority protest (50% + 1), it will not be able to impose the new rates on residential and commercial customers. Under such a scenario, the City would be required to subsidize the difference between the upcoming, new contractor rate and the previously approved customer rate. Note, however, that there are no time restrictions for when the City could initiate a new Proposition 218 process for the same solid waste hauling fees. Therefore, re-balloting could occur at any time should this procedure fail.
Resolution No. 25-0021
In addition to Resolution No. 25-0021 setting the time and date for the public hearing, staff also recommends that the City Council adopt Resolution No. 25-0021 establishing “Procedures for the Conduct of a Public Hearing Relating to Proposed Increase to Solid Waste Hauling Fees” (the “Procedures”). The Procedures govern the conduct of the public hearing and the submission and tabulation of written protests in connection with the City Council’s consideration of the proposed increase to commercial and residential solid waste hauling fees in compliance with the requirements of Proposition 218.
City Recovery Cost (CRC)
A small portion of each customer’s solid waste hauling rate, as shown in the attachment, includes the City Recovery Cost for the administration and oversight of the refuse program and contractor. The FY25-26 CRC rate has been calculated at 5%. The CRC is calculated annually by the City based on actual cost recovery for administration and oversight of the waste hauling program and contractor. Annual adjustments, if any, will not exceed 5%. The CRC is applied to all Waste Management services except temporary bin rentals and roll-off bins.
Waste Management Rates and Annual Increases
The solid waste hauling rates shown in the attachment represent the base rates for FY25-26, and the rate adjustment calculation method for four additional rate increases to be applied annually on July 1 of each subsequent year (2027 - 2030). As mentioned previously, the last three years of this five-year Proposition 218 term (FY2028, FY2029 and FY2030) are optional extension years that the City Council will determine in future years if they would like to enact.
Waste Management’s annual rate increases will be limited to the Consumer Price Index (CPI) increase for Trash and Garbage Collection (CUUR0000SEHG02), U.S. City average, as published by the United States Department of Labor, Bureau of Labor Statistics, between the calendar year ended the December prior to the Rate Year anniversary date, and the calendar year ended the prior December.
The attached Proposition 218 document provides the total customer rates beginning July 1, 2025. The customer rate for this consideration has three components: WM’s Contractor Rate, the One-Time Special Hauler Adjustment (approved by City Council at their December 3, 2024 meeting) and the City of Manhattan Beach’s City Recovery Cost (CRC).
Hauler Cost + One-Time Special Hauler Adjustment + City Recovery Cost = Customer Rate
Timeline
Upon setting a date for the public hearing, the Proposition 218 Notice of Public Hearing and Proposed Rates will be mailed to each affected property owner in the City. The public hearing must be held upon or after the expiration of a 45-day period from the mailing of these ballot materials. At the public hearing, scheduled for May 20, 2025, City Council will hear public testimony either in support for or against the proposed rate increases, and the mailed protest ballots will be tabulated during the meeting to determine the percentage of property owners in favor of or opposed to the proposed rate increases.
The following timeline represents the current schedule for adopting new solid waste hauling fees, effective July 1, 2025:
March 18, 2025
City Council adopts a resolution to begin Proposition 218 protest ballot process for voters to either approve or reject the five-year schedule of solid waste hauling fee increases.
March 28, 2025
Proposition 218 postmark date for mailing notices to property owners.
April 3, 2025
Community meeting to provide businesses and residents an opportunity to further review the proposed rate increases and ask any questions they may have.
May 20, 2025
City Council conducts a public hearing to count all Proposition 218 protest votes received and considers whether to adopt a resolution approving a five-year schedule of rate increases for refuse services, beginning July 1, 2025.
July 1, 2025
Effective date of new rates.
PUBLIC OUTREACH:
This Proposition 218 process was mentioned in the August 20, 2024 and December 3, 2024 staff reports regarding WM’s request for a special adjustment.
The Public Works Department will also host a public community meeting during the 45-day mailed ballot period to discuss individual assessments with property owners. This hybrid meeting (in-person and on Zoom) is scheduled for Thursday, April 3, 2025, at 6:00 PM in City Council Chambers. During the public meeting, staff will provide businesses and residents an opportunity to further review the proposed rate increases and ask any questions they may have.
In addition to the required Proposition 218 notice to all property owners, the City will print The Beach Reporter ads on March 27th, April 3rd, April 10th, April 17th, April 24th and May 1st. Ads will remind residents to read their notices and submit their Proposition 218 protest ballots, attend the community meeting on April 3rd and attend the Public Hearing taking place May 20th. The City will also place an in-story ad for the Beach Reporter online. The City will also have a webpage dedicated to the Proposition 218 process, which will include a copy of the notice, a link to this report, and a recording of the Thursday, April 3, 2025 community meeting.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the activity is not a “Project” as defined under Section 15378 of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has approved the resolutions as to form.
ATTACHMENTS:
1. Resolution No. 25-0021
2. Resolution No. 25-0021 (Exhibit A)
3. Resolution No. 25-0022
4. PowerPoint Presentation