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Home My WebLink About5.F.7. Fuel Surcharge Contract Amendment-Dick's Sanitation ~f.7 CITY OF SHAKO PEE Memorandum TO: Mayor and City Council CONSENT FROM: Mark McNeill, City Administrator SUBJECT: Fuel Surcharge Contract Amendment DATE: September 2, 2008 Comment: Introduction: The Council has asked to approve an amendment to the Refuse and Recycling Contract between the City and Dick's Sanitation Services, Inc., to allow for a diesel fuel surcharge. Background: At the August 19th City Council meeting, the Council approved a concept of authorizing a fuel surcharge to be implemented to customers utilizing the City's designated contract garbage and recycling hauler, Dick's SanitationofLakeville. The rationale for that is because ofthe significant cost of diesel fuel increases which have been seen in 2008. . Dic~'s request is for a 1 % surcharge to be added to base garbage rates for each $.25 above $2.50per gallon that Dick's pays. For example, an 8% surcharge would be added for each month that the retail price of diesel fuel (as determined by the United States Department of Energy) was at $4.50 per gallon or more. See graph below: If retail diesel is: Below $2.50/ gallon Surcharge is No Surcharge $2.51 to 2.75/gallon 1 % of base rate $2.76 to 3.00/gallon 2% $3.01 to 3.25/gallon 3% $3.26 to 3.50/gallon 4% $3.51 to 3.75/gallon 5% $3.76 to 4.00/gallon 6% $4.01 to 4.25/gallon 7% ,- ~. $4.26 to 4.50/gallon 8% $4.51 to 4.75/gallon 9% etc In response to direction from the City Council, the amount of the fuel surcharge could not increase or decrease more than 1 % each month. The Council directed that this be added as an amendment to the contract, and that it be brought back for approval Sept. 2, 2008. If approved, this would become effective Oct. 1, 2008. It should be noted that Dick's understood the Council's actions at the August 19th . . . '. . r' . ...' meeting as beingfinal approval. Dick's is currently billingfor service beginning Oct.rt. As such, some residents have received bills already reflecting the fuel surcharge as being in place for services to be rendered beginning October 1st. If the Council chooses not to authorize the contract amendment, corrected bills will need to be sent. Recommendation: In fairness to the contractor, which has absorbed diesel fuel increases far above normal rates of inflation for the first two years of the current contract, I recommend that fuel surcharge be approved. Unless otherwise modified, this would be in place for the remainder of the contract, which ends March 19,2001. Relationship to Visioning: This supports Foal D: (Vibrant, Resilient and Stable). Action Required: If the Council concurs, it should, by motion, approve Amendment A to the Refuse and Recycling Contract by and between the City of Shakopee, and Dick's Sanitation Services, Inc., a Minnesota Corporation dba as Lakeville Sanitation Services, Inc. ~~0JL! Mark McNeill City Administrator MM:cn Amendment A Fuel Surchan!e: Dick's Sanitation (CONTRACTOR) is authorized by the City to add a fuel surcharge in recognition of added operational costs unanticipated at the time of the execution of this contract. CONTRACTOR is hereby authorized to identify by individual line item and add to residential customers a fuel surcharge, which will be based on the retail of price of diesel fuel as established by the United States Department of Energy on the 1 st of each month. Said surcharge shall be based upon a retail of$2.50/gallon, and shall rise 1 % for each $.25, or portion thereof, in excess of$2.50/gallon; to wit: If retail diesel is: Below $2.50j gallon Surcharge is: No Surcharge $2.51 to 2.75jgallon 1 % of base rate $2.76 to 3.00jgallon 2% $3.01 to 3.25jgallon 3% $3.26 to 3.50jgallon 4% $3.51 to 3.75jgallon 5% $3.76 to 4.00jgallon 6% $4.01 to 4.25jgallon 7% $4.26 to 4.50jgallon 8% $4,51 to 4.75jgallon 9% etc. Said surcharge shall be added to the base level of refuse as determined by size of container, and shall not be applied to taxes, lawn debris pick up or special item pick up. Said fuel surcharge may not be increased or decreased more than 1 % each month. Said fuel surcharge shall become effective for services rendered beginning October 1, 2008, and shall remain in place for the remainder of this contract, or until otherwise modified by parties to this contract. Approved by the City Council on this _day of , 2008. Lakeville Sanitation, dba Dick's Sanitation John J. Schmitt, Mayor Mark McNeill, City Administrator Judy Cox, City Clerk 5. F, I, Dick's Sanitation I Lakeville Sanitary Page 1 of2 DcJT I~ ". III J DICK~S SANITATIONjlAKEVIllE SANITARY ROME ",l;~;~":l_U;:~:WLi: ,SERV'ICfS IEWstETlERlcClBmAR 'j:_~} CDfiAnI US ;::~:~i,'.:I:.':'-',.~ -~ >,':.-;' ,,-:,- ."::0 , FUEL ADJUSTMENT TABLE Dear Valued Customer: Dick's Sanitation / Lakeville Sanitation are committed providing quality services at the best possible value. Since April of 2000 we have included a fuel adjustment on your monthly billing. The adjustment was designed to balance the cost above our target point of $1.00 per gallon. However the cost of fuel has been rising and is at the highest point in our company's 39 year history. Rising fuel prices are something that we cannot control and currently our fuel adjustment doesn't cover the true impact that the rising fuel costs have had on our business. As a result we are changing the fuel adjust to provide a fair an accurate impact. The changed fuel adjustment will be tied directly to the national average price of diesel fuel as reported by the Energy Information Administration of the U.S. Department of Energy (EIA/DOE) in its weekly retail on-highway diesel price index. The index is objective, publicly available and widely recognized in the trucking industry. Going forward this change will provide all our valued customers an easily calculated and equitable adjustment. Please refer reverse side of this sheet for the schedule that shows what the adjustment percentage will be before taxes and the adjustment will be taxed on tax applicable services and not taxed for tax exempt services. The percentage used will be the last reported EIA/DOE national diesel price index prior to your invoice date. For example if the EIA/DOE national diesel price index immediately preceding your invoice is $2.29 per gallon, your fuel adjustment would be 6.5% of your invoice charges, excluding tax. . EIAjDOE Weekly Retail On Highway DiesellPrices Index We appreciate your business and Thank you for your continued support. We are "The Local Choice" for all your disposal and recycling needs. DOE" DSI/LSI DOE DSI/LSI DOE DSI/LSI DOE DS11 LSl Fuel Fuel Fuel Fuel Weekly Adjustment Weekly Adjustment Weekly Adjustment Weekly Adjustment Avg 010 Avg 0/0 Avg 0/0 Avg 0/0 $2.92 9.65 $3.40 12.05 $3.88 14.45 $4.36 16.85 $2.93 9.70 $3.41 12.10 $3.89 14.50 $4.37 16.90 $2.94 9.75 $3.42 12.15 $3.90 14.55 $4.38 16.95 $2.95 9.80 $3.43 12.20 $3.91 14.60 $4.39 17.00 $2.96 9.85 $3.44 12.25 $3.92 14.65 $4.40 17.05 $2.97 9.90 $3.45 12.30 $3.93 14.70 $4.41 17.10 $2.98 9.95 $3.46 12.35 $3.94 14.75 $4.42 17.15 $2.99 10.00 $3.47 12.40 $3.95 14.80 $4.43 17.20 $3.00 10.05 $3.48 12.45 $3.96 14.85 $4.44 17.25 1_.u..._~('-______ ..1~_1____~_~L_.L~__~ __ ,__ I.r.. _1 _ :1. ~ . 1 1 ,. ",..-.. f_,....,...._ Weekly On-Highway Retail Diesel Prices Page 1 of2 <@!g; En.ergy Information Administration ~ .'. . Oflbil! EJli!rgy SMUtile, jmt!1ll1o u.s. Govummcm Glossary Home> Petroleum. > Weekly Retail On-Highway Diesel Prices Release Schedule Weekly Retail On-Highway Diesel Prices Printer-Friendly Version Sian-uD for email notification 24-hour hotiine: 202-586-6966 Average All Types Low and Ultra-Low Sulfur Reference Prices for Last 53 Weeks (html) (text) Weekly Retail On-Highway Diesel Prices - Average All Types Spreadsheet of Complete (Dollars per gallon, including all taxes) Diesel Historical Data (.xls) Region 08/18/08 08125108 09/01108 Change from Change from Diesel Fuel Taxes week ago year ago Does EIA Calculate Diesel Fuel U.S. 4.207 4.145 4.121 -0.024 1.228 Surcharges? East Coast 4.263 4.199 4.169 -0.030 1.302 States in each Region New England 4.422 4.382 4.359 -0.023 1.444 Data Collection Procedures Central Atlantic 4.414 4.360 4.307 -0.053 1.373 and Statistical Methodology Lower Atlantic 4.184 4.113 4.093 -0.020 1.258 Coefficient of Variation Report Midwest 4.130 4.073 1.156 Related Links 4.066 -0.007 This Week in Petroleum Gulf Coast 4.156 4.098 4.068 -0.030 1.232 Gasoline and Diesel Fuel Rocky Mountain 4.319 4.227 4.184 -0.043 1.245 Update West Coast 4.356 4.286 4.248 -0.038 1.276 A Primer on Diesel Fuel Prices Real Petroleum Prices California 4.422 4.359 4.282 -0.077 1.297 (CPI Adjusted) Petroleum Navigator -. "".....-- ~ Diesel Regulations U.S. Retail Gasoline Prices ".-. Click on a Region to view graph of that Region .U.S. East Coast New England Central Atlantic Lower Atlantic ,. Midwest Gulf Coast Rocky Mountain West Coast California h~.II+__+^ .o.~n A-..o. rr-'Tr/__,.../:'_~_/",,,,,"_1-..,.t_I,.t~.....,..,_1 ....,..._ t'\11"\1'\^I'\O