HomeMy WebLinkAbout13.F.1. Fuel Surcharge-Dick's Sanitation
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CITY OF SHAKOPEE
Memorandum
TO: Mayor and City Council
FROM: Mark McNeill, City Administrator
SUBJECT: Fuel Surcharge-Dick's Sanitation
DATE: August 19, 2008
Comment:
Introduction:
The Council is asked to consider implementation of a fuel surcharge for waste customers
of Dick's Sanitation.
Background:
The City has recently been requested to consider to provide for increases in two areas of
the City's organized garbage/recycling contract:
1. Garbage Processing Contract. The City received notice this week that RRT, the
provider to where garbage is hauled for processing, has asked for a 49% increase
in fees, and be effective October I st. The current contract in place (which was
with RRT's predecessor) allows for a 3% annual increase.
No recommendation is ready at this time, as alternatives are being investigated.
The contract is between RR T and the City.
2. GarbagelRecycling Collection Fuel Surcharge. The City of Shakopee entered into
its most recent contract with Dick's Sanitation in March 2006. That contract is to
run for 5 years, with options for renewal. It provides for annual changes in the
cost of providing garbage and recycling (attached).
One item which was not provided for was the recent increase in diesel fuel prices.
At the time the current contract was negotiated in 2005, according to Dick's diesel
prices averaged $2.00 per gallon, Recently diesel fuel has been at $4.50/gallon,
although that has dropped slightly in recent days. Dick's has asked that they be
allowed to impose a fuel surcharge to offset the added fuel costs.
Their request is to implement a fuel surcharge of 8% on the base garbage service
(assuming a $4.50/gallon diesel price). The impact ofthis is shown on the
attached matrix. For example, a Shakopee resident with a 60 gallon container
($16.70 per month, including tax) would see a line item of an additional $1.22 per
month. (Dick's bills on a quarterly basis). The 8% would not apply to yard waste
or special item pick-ups.
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The surcharge would be indexed to go down 1% for each $.25 that retail diesel
drops; conversely, it would increase 1 % for each $.25 that price of diesel
increases. If approved by Council, it would become effective October 1 st, 2008.
Changes would be monitored monthly.
For comparison purposes, Dick's reports that it has a 16% surcharge for their non-
municipal contract customers. I am aware of other businesses that have had to
impose fuel surcharges.
Discussion:
There is no legal obligation for the City to allow for a fuel surcharge wi~h Dick's
Sanitation; however, Dick's could technically serve notice and cancel the contract, for
which negotiations for a new contract would need to take place (and the City could seek
to obtain RFPs from other providers) Until this request, Dick's has been absorbing fuel
increases, and it continues to provide good service to the City residents which it serves.
Recommendation:
I recommend that Dick's be allowed to impose a fuel surcharge of 8%, based on $4.50
per gallon, effective October 1, 2008.
Relationship to Visioning:
This supports goal D "Vibrant, resilient, and stable"
Action Required:
If the Council concurs, it should direct staff to develop a contract amendment to provide
for a fuel surcharge with Dick's Sanitation, effective October 1, 2008.
'W-~
Mark McNeill
City Administrator
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PD Box 769 lakeville, MN 55D44 952-469-2239 fax: 952-489-1148
July 15, 2008
Mark McNeill, City Administrator
City of Shakopee
129 South Holmes Street
Shakopee,MN 55379
Dear Mark, Mayor and Members of the Council,
Dick1sILakeville Sanitation, Inc. would like to thank you for your business. Our
company takes pride in providing high quality service for a good value. While
maintaining the highest service standards for your Community much of our costs are
driven by labor, disposal and fuel.
As you are aware fuel has become increasingly an unpredictable cost. Over the past three
yeats DSI has absorbed the increase in fuel costs which are currently about 40% more
than the second term of our renegotiated contract with the City of Shakopee. As a result
of these uncontrollable costs, Dick's/Lakeville Sanitation, Inc. is requesting an additional
8% to cover the increase fuel costs we have incurred. .
We appreciate your cooperation in considering our request and would greatly appreciate
your approval to cover our fuel cost overages that we will incur.
Sincerely,
1)Mid1)~
., David Domack
V.P. Sales & Marketing
Dick'slLakeville Sanitation, Inc.
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August 13, 2008
City Of Shakopee Res'il.ry
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Attn: Mark: 'McNeill Tech . '.~~ ,,'Le
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129 Holmes Stre'1t South~' ~.. .
Shakopee,1fN 55379
Fax Copy: 952-233-3801
Original: Mailed To Above Address
Dear Mark,
Resource Recovery Technologies (RRT) is committed to the processing of municipal solid waste
iiltoafueJ sourcethi'lt lstised.to generf1;te electricity~ The CitY0~Shak6pee,along with your
citizens, is an integral supplier of the waste required for RRT to meet its mission.
The combined waste processing at RRT's facilities in Newport (where your waste is delivered
and processed) and Elk River provide enough fuel to generate "green" electricity for the needs of
55,000 Minnesota households. If it weren't for the environmental commitment of Shakopee and
other Twin Cities' communities to the processing of waste into fuel, an additional 655,000 tons
of waste would be sent to landfills each year.
Producing fuel from: municipal solid waste is a highly complicated mechanical process.
Although processing of waste is the preferred option for handling municipal solid waste in the
state of Minnesota, it must be recognized that it is also more expensive than the traditional land-
filling of waste.
Over the past few years RRT, like most companies, has been impacted by the rising costs of
transportation, employee benefits, plant maintenance and insurance. While we strive to be as
cost effective as possible in the environmentally sound practice of processing your waste into
fuel, we must be in a position to cover the increase in our operating expenses. To accomplish
this it is necessary to raise the processing fee to $82.00 per ton effective October 1, 2008. To
provide you with some perspective, the increase translates into roughly $3 per month per
household.
We appreciate your business, and your continued commitment to waste processing. Thank you
again and please feel free to contact me with any questions.
1:~ -
. Erickson
President
952-946-6999
Fax Copy: Dick's Sanitation
Attn: David Domack
952-469-1146
8585 W. 78TH STREET, SUITE 150 BLOOMINGTON, MN 55438
PHONE: 952-946-6999 FAX: 952-946-7975
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City of Shakopee -Contract
Collection, Processing and Disposal of Residential Refuse, Recyclables and Yard Waste
ATTACHEMENT#l-PRICE
Dick's Sanitary Contract Prices 2006 - 2011 **
Hauler Bills, City Processing, No Containers - Year 1
Size Refuse** Recycling Total Yard Waste*
30 gallon $8.33 $3.57 $11.90 $1.00
60 Gallon $10.32 $4.43 $14.75 $1.00
90 Gallon $11.95 $5.00 $16.95 $1.00
Town Home - 30 G & 60 G $6.25 $3.00 $9.25 $1.00
Town Home - 90 Gallon $7.25 $3.11 $10.36 $1.00
Hauler Bills, City Processing, No Containers - Year 2
Size Refuse** Recycling Total Yard Waste*
30 gallon $8.33 $3.57 $11.90 $1.00
60 Gallon $10.32 $4.43 $14.75 $1.00
90 Gallon $11.95 $5.00 $16.95 $1.00
Town Home - 30 G & 60 G $6.25 $3.00 $9.25 $1.00
Town Home - 90 Gallon $7.25 $3.11 $10.36 $1.00
Hauler Bills, City Processing, No Containers - Year 3
Size Refuse** Recycling Total Yard Waste*
30 gallon $8.60 $3.68 $12.28 $1.15
60 Gallon $10.65 $4.57 $15.22 $1.15
90 Gallon $12.24 $5.25 $17.49 $1.15
Town Home - 30 G & 60 G $6.69 $2.87 $9.56 $1.15
Town Home - 90 Gallon $7.50 $3.21 $10.71 $1.15
Hauler Bills, City Processing, No Containers - Year 4
Size Refuse** Recycling Total Yard Waste*
30 gallon $8.60 $3.68 $12.28 $1.15
60 Gallon $10.65 $4.57 $15.22 $1.15
90 Gallon $12.24 $5.25 $17.49 $1.15
Town Home - 30 G & 60 G $6.69 $2.87 $9.56 $1.15
Town Home - 90 Gallon $7.50 $3.21 $10.71 $1.15
Hauler Bills, City Processing, No Containers - Year 5
Size Refuse** Recycling Total Yard Waste*
30 gallon $8.87 $3.80 $12.67 $1.2.5
60 Gallon $10.98 $4.71 $15.69 $1.25
90 Gallon $12.62 $5.41 $18.03 $1.25
Town Home - 30 G & 60 G $7.53 $2.33 $9.86 $1.25
Town Home - 90 Gallon $7.73 $3.31 $11.04 $1.25
* Yard Waste prices are for one 30/40 gallon biodegradable bag or container of yard waste,
which will be billed to the resident directly by the Contractor.
** Prices do not include the 9.75% tax on refuse.
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Disposal Adjustment: 0% If Fuel is at: 8% I
Service Level @QO[f[f@[fi)~ [K$.@~@@ [R]@w ~([l~@~ I
30 Gallon Trash $ 8.60 Trash $ 8.60 IJInt I
Single Family Recycling $ 3.68 Recycling $ 3.54 '," a I
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I' Fuel Adjust 0% $ - Fuel Adjust % $ 0.97 ~ ,'.' ~ I
MNTax9.75% $ 1.20 MNTax9.75% $ 1.28 I
I TOTAL RATE $ 13.48 TOTAL RATE $ 14.39 -t - o.~ I
60 Gallon Trash $ 10.65 Trash $ 10.65
I Single Family Recycling $ 4.57 Recycling $ 4.47 I
I Fuel Adjust 0% $ - Fuel Adjust % $ 1.21 !
MNTax9.75% $ 1.48 MNTax9.75% $ 1.59
TOTAL RATE $ 16.70 TOTAL RATE $ 17.92 $-- 1.22 I
90 Gallon Trash $ 12.24 Trash $ 12.24
Single Family Recycling $ 5.25 Recycling $ 5.20
Fuel Adjust 0% $ - Fuel Adjust % $ 1.40
MNTax9.75% $ 1.71 MNTax9.75% $ 1.84
TOTAL RATE $ 19.20 TOTAL RATE $ 20.67 $' -1.~
60 Gallon Trash $ 6.69 Trash $ 6.69
Townhomes Recycling $ 2.87 Recycling $ 2.65
Fuel Adjust 0% $ - Fuel Adjust % $ 0.75
MN Tax 9.75% $ 0.93 MN Tax 9.75% $ 0.98
TOTAL RATE $ 10.49 TOTAL RATE $ 11.07
90 Gallon Trash $ 7.50 Trash $ 7.50 i
Townhomes Recycling $ 3.21 Recycling $ 3.07 I
Fuel Adjust 0% $ - Fuel Adjust % $ 0.85
MNTax9.75% $ 1.04 MNTax9.75% $ 1.11 I
TOTAL RATE $ 11.75 TOTAL RATE $ 12.53 !_ - O:;..z..J I
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