CRRA 2007 Navigating to Zero Waste Strategies to structure refuse/recycling fees that arguably are...

CRRA 2007Navigating to Zero Waste

Strategies to structure refuse/recycling fees that arguably are not subject to Prop 218, after the CA

Supreme Court's ruling in the "Bighorn" case

Constance Hornig

Law Offices323 934-4601 [email protected]

Monday, July 30, 2007 2:45-4:15

PRESENTATION SUMMARYPRESENTATION SUMMARY

1. Prop 218 procedural and substantive requirements

2. Consequent procurement, policy and program constraints – possible characterizations of variable rates / PAYT (sample contract preambles)

3. Distinguish Bighorn water service fees from refuse/recycling service fees

Constance Hornig, Esq. 323 934-4601


4. Strategy #1: Break the link to property: self-haul & mandatory service / opt-out rights (sample regulation and contract preamble)

5. Strategy #2: Authorize hauler to “set” rates, up to maximum cap/ceiling (sample performance obligation and contract preambles)

6. Strategy #3: Obligate hauler to provide private billing service (sample performance specification)

7. Strategy #4: Treat franchise fee as just another cost of doing service.


Prop 218 (CA Constitution XIII D “ASSESMENT AND PROPERTY-RELATED FEE REFORM / D. Property Related Fees

and Charges : procedural requirements (refuse)

Prop 218 (CA Constitution XIII D “ASSESMENT AND PROPERTY-RELATED FEE REFORM / D. Property Related Fees

and Charges : procedural requirements (refuse)

parcel notice and public hearing, subject to protest by majority of owners of identified parcels (XIII D 6a) - not referendum

[email protected]

Prop 218: substantive requirements (MSW)Prop 218: substantive requirements (MSW)Fees cannot exceed the cost of

service: cannot be used to supplement a city’s general

fund (XIII D 6b(1) and (2)) must be proportional to actual use of service (XIII

D 6b(3)), cannot be standby charges (XIII D 6b(4)), cannot be used for general governmental

services like police, fire, ambulance or libraries

(XIII D 6b(5)). [email protected]

Being subject to Prop 218 places (1) procurement, (2) policy and (3) program

constraints on (a)regulatory and(b) contractual

refuse/recycling infrastructure. [email protected]

Prop 218 constraints:

(1) Procedural compliance:

TIME: extends procurement schedule to mail notices / hold public hearing, and

MONEY: incurs cost to mail notices


(1) Procedural compliance:

TIME: extends procurement schedule to mail notices / hold public hearing, and

MONEY: incurs cost to mail notices

[email protected]

Prop 218 constraints: Prop 218 constraints:

(2) Substantive compliance:

Ratepayer subsidy of general program costs prohibited (no “free” service):*recycling / safe disposal education and outreach*community hazardous waste / e-waste collection events*discount for qualifying elderly*”free” cart roll-out for handicapped/elderly

[email protected]


(3) no VARIABLE RATES?

Marginal cost of service is relatively small for hauler; incremental rate for generator is relatively large to provide economic incentive to divert.


(3) no VARIABLE RATES?

Marginal cost of service is relatively small for hauler; incremental rate for generator is relatively large to provide economic incentive to divert.

[email protected]

VARIABLE RATES /PAYT: not cost-based

http://www.forester.net/mw_0405_legal.html “Variable Can Pricing: Generator Diversion/ Hauler

Generation Incentive”

VARIABLE RATES /PAYT: not cost-based

http://www.forester.net/mw_0405_legal.html “Variable Can Pricing: Generator Diversion/ Hauler

Generation Incentive”

[email protected]

VARIABLE RATES / PAYT: not cost-basedVARIABLE RATES / PAYT: not cost-based

But argue that:

(1) Variable Rate Component of the Rates represents an avoided cost of disposing of those materials (such as potential AB 939 fines and penalties) and is properly reflected in the total rates paid by waste generators.

[email protected]

VARIABLE RATES / PAYT: not cost-basedVARIABLE RATES / PAYT: not cost-based

And argue that:

(2) Variable rates implement a local government’s regulatory solid waste diversion program (by franchise) and comprises an environmental mitigation charge, not a charge imposed as an incident of property ownership.

[email protected]

Variable / PAYT rates: Sample preambles to collection contract:Variable / PAYT rates: Sample preambles to collection contract:“Variable Rate Component of Rates reflect [local

government’s] recycling costs. [The local government], not any waste hauler, is liable to the State under the AB 939 for any fines up to $10,000 each day levied for noncompliance with AB 939. Under this Agreement, residents and businesses that recycle less and dispose more, pay higher rates for their incremental refuse disposal service. This pay-as-you throw rate gives residents and business a monetary incentive to divert, not dispose. Diverting recyclables and yard and wood waste from landfills through recycling and composting saves and reduces landfill disposal costs. Therefore, the [Variable Rate Component of the Rates] represents an avoided cost of disposing of those materials and is properly reflected in the total Rates paid by waste generators.

Furthermore, the [Variable Rate Component] implements the [local government’s] regulatory solid waste diversion program (by franchise) and comprises an environmental mitigation charge, not a charge imposed as an incident of property ownership.”


Bighorn-Desert View Water Agency v. Verjil Bighorn-Desert View Water Agency v. Verjil Holding: Local voters can reduce water

rates by initiative (CA Constitution XIII C

Section 3).

Reasoning: Supreme Court looked to XIII D “ASSESMENT AND PROPERTY-RELATED FEE

REFORM / D. Property Related Fees and Charges”

Section 2(e) to define “fee” or “charge”.

http://www.courtinfo.ca.gov/opinions/

[email protected]

XIIID “ASSESMENT AND PROPERTY-RELATED FEE REFORM / Property Related Fees and Charges”

XIIID “ASSESMENT AND PROPERTY-RELATED FEE REFORM / Property Related Fees and Charges”

“Fee” or “charge” means any levy imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user free or charge for a property-related service (XIII D 2(e)), which includes tenancies (XIII D 2(g)).

[email protected]

Bighorn: ongoing water (and refuse?) service fees are subject to Prop 218


ARGUMENT (1): In the ballot pamphlet for the election at which article XIII D was adopted, the Legislative Analyst stated that ‘[f]ees for water, sewer, and refuse collection service probably meet the measure’s definition of property-related fee.’ (Ballot Pamp., Gen. Elec. (Nov. 5, 1996), analysis of Prop. 218 by Legis. Analyst, p. 73.)


(i) Water is indispensable to most uses of real property

(ii) Water is provided via pipes that are physically connected to property

(iii) Lien can be imposed on property for delinquent fees (CA Government Code 61621, 61621.3)



Bighorn: ongoing water (and refuse?) service fees are subject to Prop 218ARGUMENT (2): Only electrical and

gas fees are explicitly not deemed charges or fees imposed as an incident of property ownership (XIII D section 3(b)) . . . so conversely, exclusion of water [and refuse] is implied.


Bighorn: ongoing water (and refuse) service fees are subject to Prop 218

Bighorn: ongoing water (and refuse) service fees are subject to Prop 218ARGUMENT(3): fees for sewer, water

and refuse collection services are expressly excluded from voter approval requirements (XII D section 6( c)) so, by implication, fees for water, sewer and refuse are subject to other requirements (procedural and substantive)


Bighorn: water connection fees are not imposed “as an incident of property ownership” because property owner voluntarily decides to connect his property to the water system (citing Richmond v. Shasta

Community Services Dist. (2004) 32 Cal.4th 409) . . .but

Bighorn: water connection fees are not imposed “as an incident of property ownership” because property owner voluntarily decides to connect his property to the water system (citing Richmond v. Shasta

Community Services Dist. (2004) 32 Cal.4th 409) . . .but


Bighorn: ongoing water fees [user fees] are imposed “as an incident of property ownership” because they require “nothing other than normal ownership and use of property”. This applies to fees based on consumption.

Bighorn: ongoing water fees [user fees] are imposed “as an incident of property ownership” because they require “nothing other than normal ownership and use of property”. This applies to fees based on consumption.


Distinguishing refuse from water under Bighorn: water service differs from waste collection, which is not necessarily “property related” & subject to Prop 218.

(i) Water is indispensable to most uses of real property; refuse service is not, if owner/occupant can self-haul (including mandatory service opt-out)

(ii) Water is provided via pipes that are physically connected to property; refuse service is provide via mobile trucks that travel on wheels

(iii) Lien can be imposed on property for delinquent fees (CA Government Code 61621, 61621.3); but local governments are not required to impose liens for delinquent refuse service fees


Strategy #1: Break the link to property: self-haul & mandatory service / opt-out rights

Strategy #1: Break the link to property: self-haul & mandatory service / opt-out rightsWarning:

*hauler might raise proposed rates to reflect risk of possible lost revenues;

*local government might realize lower franchise or AB 939 fee revenue that funds programs – especially recycling education / outreach, special waste collection


Strategy #1: Break the link to property: Sample preambles to collection contract (opt-out):

Strategy #1: Break the link to property: Sample preambles to collection contract (opt-out):

“Customers can opt-out of mandatory service and payment of Rates. Residents and businesses in [portions of the Service Area] live in mandatory service areas, but nevertheless they may opt-out of service provided under this Agreement if they document that they are disposing of their refuse at a legally permitted facility and recycling. Their obligation to pay Customer Service Charges under this Agreement does not arise because they own property, but because they generate refuse and do not

exercise their right to self-haul.” Constance Hornig, Esq. 323 934-4601

Strategy #1: Break the link to property: sample opt-out regulation

Strategy #1: Break the link to property: sample opt-out regulation “Self-haul permit applicant must demonstrate that he or she either:

I. (1) collects all refuse generated at his or her premises,

(2) removes and conveys that refuse without littering city streets, and

(3) disposes of that refuse at a solid waste disposal facility permitted in accordance with law, or

II. alternatively, that her or she disposes of refuse at another premise that subscribes to franchised service.”


Strategy #1: Break the link to property: sample opt-out regulation: Self-haul

documentation.

Strategy #1: Break the link to property: sample opt-out regulation: Self-haul

documentation. “Applicant customer must submit the following documentation in form and substance satisfactory to City:

(1) a. Invoice for applicant customer’s serviced premises. A current dated invoice from the City’s franchised refused hauler in the customer’s name, identifying the address of that customer’s serviced premise and describing service subscription capacity and frequency.

Or. . . . ”


Strategy #1: Break the link to property: sample opt-out regulation: Self-haul documentation con’t

Strategy #1: Break the link to property: sample opt-out regulation: Self-haul documentation con’t

“b. Invoice for another’s serviced premise and consent to discard. If an applicant customer asserts that he or she discards his or her refuse at another premises (such as his or her business), she or she must provide the following: (i) a current dated invoice from the City’s franchised refuse

hauler identifying the address of the other serviced premise and the name of the customer at that premise, and describing service subscription capacity and frequency.

(ii) if the other serviced premise is a business, a copy of the business license that lists the serviced customer as one of the principals in the business; and (iii) A letter signed by the owner of the other premises (on business letterhead, as applicable) under penalty of perjury, stating that the applicant customer is authorized to discard his or her refuse into the owner’s solid waste bin or other receptacle.

And: . . . “


Strategy #1: Break the link to property: sample opt-out regulation: Self-haul documentation.

Strategy #1: Break the link to property: sample opt-out regulation: Self-haul documentation.

”(2) Disposal documentation: Unless the applicant customer has demonstrated to satisfaction of the City that he or she disposes of refuse at another premise that subscribed to franchised services, dated documentation (such as a receipt or invoice) that the applicant customer has disposed of refuse generated at applicant customer’s premise at a permitted solid-waste facility or transfer station.

Customer must deliver disposal receipts directly to the Environmental Services Department of the City Public Works Department no less than once every two months, either in person or by certified mail, with customer’s name clearly written on the receipt. If customer discards its residential refuse at a business, customer must attaché a copy of the business license that references the homeowner’s name to the disposal receipts.”


Strategy #1: Break the link to property: sample opt-out regulationStrategy #1: Break the link to property: sample opt-out regulation“Failure to qualify for self-haul exemption. If

the City Manager or the Chief of General Services or his/her designee determines that the customer has not initially provided requisite collection subscription invoices, business licenses and / or statement, or that the customer does not thereafter submit requisite disposal documentation, he or she will advise the customer by regular U.S. mail that the customer does not qualify for the self-haul exemption and must immediately subscribe to refuse collection and disposal service with a franchised City hauler.”


Strategy #1: Break the link to property: sample opt-out regulationStrategy #1: Break the link to property: sample opt-out regulation

“No leakage or littering. Persons who qualify for the self-haul exemption must prevent leakage or deposit of solid waste they transport for disposal [insert cross-reference to Code provisions for hauler leakage/littering].”


Strategy #1: Break the link to property: sample opt-out regulationStrategy #1: Break the link to property: sample opt-out regulation

“Self-haul Exemption fee. A fee to reimburse the City for actual cost of reviewing self-haul documentation an implementing the self-haul exemption program shall be established by Resolution.”


Strategy #2: Authorize hauler to “set” rates, up to maximum cap/ceilingRemember:“Fee” or “charge” means any levy imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user free or charge for a property-related service (XIII D 2(e)), which includes tenancies (XIII D 2(g)).

Therefore, don’t “impose” or set or fix the rates yourself. Place parameters (caps, ceilings, maximums) on the rates, but authorize hauler to pick particular rate.

Strategy #2: Authorize hauler to “set” rates, up to maximum cap/ceilingRemember:“Fee” or “charge” means any levy imposed by an agency upon a parcel or upon a person as an incident of property ownership, including a user free or charge for a property-related service (XIII D 2(e)), which includes tenancies (XIII D 2(g)).

Therefore, don’t “impose” or set or fix the rates yourself. Place parameters (caps, ceilings, maximums) on the rates, but authorize hauler to pick particular rate.


Strategy #2: Authorize hauler to “set” rates, up to maximum cap/ceilingSample: “Customer Service Charges. Contractor will set and charge Customer Service Charges equal to the Variable Rate Component plus no more than the Contractor Service Fee Component in effect at the time Contractor provides Service. Contractor will charge each Customer subscribing to any Service listed on the Rate Schedule the same, uniform Rate.”

Strategy #2: Authorize hauler to “set” rates, up to maximum cap/ceilingSample: “Customer Service Charges. Contractor will set and charge Customer Service Charges equal to the Variable Rate Component plus no more than the Contractor Service Fee Component in effect at the time Contractor provides Service. Contractor will charge each Customer subscribing to any Service listed on the Rate Schedule the same, uniform Rate.”


Strategy #2: Authorize hauler to “set” rates - Sample preambles to collection contract:

Strategy #2: Authorize hauler to “set” rates - Sample preambles to collection contract:

“Contractor set its compensation (the Contractor Service Fee Component of Rates) through competitive procurement. The [local government] issued a Request for Proposals to provide services under this Agreement, and XX private waste hauling companies submitted proposals, including their proposed schedule of rates and charges under this Agreement (defined as the “Contractor Service Fee Component” of Rates). The [local government] selected Contractor, based among other reasons, for Contractor’s price proposal. Under this Agreement, Contractor cannot charge more than the Contractor Service Fee Component, which it bills and collects from its Customers. The [local government] held an open and public meeting prior to awarding this Agreement to Contractor, including provisions in this Agreement providing the maximum amount of Contractor Service Fee Component, as may be automatically adjusted (whether increase or decrease) in accordance with the formulas provided in this Agreement. “


Strategy #3: Obligate hauler to provide private billing service.Strategy #3: Obligate hauler to provide private billing service.

A “property related service” means a public service having a direct relationship to property ownership (Prop 2182(h).

What is a “public service”?


Strategy #3: Obligate hauler to provide private private billing service.


Jonathon Coupal, of Harvard Jarvis Taxpayer Association, wrote shortly after adoption of Prop 218:

“The term local government is defined broadly by Proposition 218. [See Prop 218 RE a “fee” imposed by an agency under Section 2(e), where Section 2(a) “Agency” refers to Section 1(c) “local government”.] However, it does not apply to the charges imposed by private enterprise, even for services which are ostensibly “public”. This would include private refuse collectors providing services to local government through a contract such as a franchise agreement. . . . Proposition 218 would apply where the refuse collection services are performed (and charged for) directly by local government.”

This letter does not constitute definitive or judicial interpretation. . . . but




WARNING: disadvantages include:(1) Losing control of purse strings – inability to offset

liquidated damages, city’s reimbursable costs, from hauler’s compensation

http://www.forester.net/mw_0309_legal.html “Try$headed Ca$h: Contractor Credit Risks That Can Trash Your MSW System”, MSW Magazine September/October 2003

(2) Increased delinquencies - City ability to put on property tax bill or to enforce delinquencies (turn off utilities) saves system costs, and arguably lowers all customers’ rates


Strategy #3: Obligate hauler to provide private billing service: sample performance specification – invoice billing dates.

Strategy #3: Obligate hauler to provide private billing service: sample performance specification – invoice billing dates.“13.03 Customer Billing

a. Billing and Collection Protocol1. Invoice billing dates. Contractor will invoice Customers at the following times:

(1) each Residential Customer bi-monthly in advance, (2) each Commercial and Multi-family Customer

monthly in advance no sooner than the first day of the month; and

(3) each Rolloff Customer semi-monthly in arrears.”


Strategy #3: Obligate hauler to provide private billing / rate collection service: sample performance specification – due and delinquency dates

Strategy #3: Obligate hauler to provide private billing / rate collection service: sample performance specification – due and delinquency dates“Invoices must be: (1) due 30 days from the date of the invoice and (2) delinquent (i) 90 days from the date of Residential invoice,

(ii) 60 days form the date of the Commercial and Multi-family invoice, and

(iii) 45 days from the date of a Roll-off invoice, or earlier upon notice to Roll-off Customer whose Rates exceed $2,000.”


Strategy #3: Obligate hauler to provide private billing service: sample performance specification – late payment

fees.

Strategy #3: Obligate hauler to provide private billing service: sample performance specification – late payment

fees.“Contractor may charge a Customer the lesser of the following late payment fees:

(1) the greater of $5 dollars or 1.5% per month or portion

of month, or (2) the maximum amount allowed by Applicable Law, Contractor may charge a Customer late payment fees on

all or a portion of invoiced but unpaid amounts from the due date until the date paid, including on amounts that Customer withheld pending resolution of a dispute with Contractor, which amounts Contractor subsequently determined the Customer owed to Contractor.”


Strategy #3: Obligate hauler to provide private billing service: sample performance specification – payment reminder

Strategy #3: Obligate hauler to provide private billing service: sample performance specification – payment reminder “2. 30 day Residential Reminders. If

Contractor does not receive payment from any Residential Customer within 30 days of an invoice, Contractor will send the Customer a statement reminding the Residential Customer of the amount due.”


Strategy #3: Obligate hauler to provide private billing service: sample performance specification – delinquency

notice.


notice.“3. Delinquency Notice. If the Contractor does not receive payment

(1) from a Residential Customer within 60 days of an

invoice or (2) from a Commercial, Multi-family or Roll-off Customer

within 45 days of an invoice, Contractor will send the Customer a notice of

delinquency by certified mail, return receipt, describing collection efforts that Contractor may make if Contractor does not receive payment by the stated delinquency date, including an or all of the following: . . . “



notice, con’t.


notice, con’t.[FORM OF DELINQUENCY NOTICE, CON’T.]“(1) referring the delinquency to a third-party collection agency, (2) reporting the Customer to credit-reporting bureaus,(3) making personal phone calls, (4) discontinuing service, (5) filing mechanics liens on Roll-off Premises as permitted by

Applicable Law; (6) asking City to take code enforcement action, and(7) in each notice to a Commercial, Multi-family or Roll-off Customer,

the disclosure that if Customer does not pay Contractor outstanding amounts on all Customer’s unpaid invoices within 15 days, Contractor will make the listed collection efforts on all unpaid amounts.

Contractor will simultaneously notify City of overdue Commercial,

Multi-family and Roll-off Customer accounts.”


Strategy #3: Obligate hauler to provide private billing service: sample performance specification – time and

type of hauler’s collection actions.

Strategy #3: Obligate hauler to provide private billing service: sample performance specification – time and

type of hauler’s collection actions. “4. Collection actions. If the Contactor does not receive payment (1) from any Residential Customer by the delinquency date identified in

subsection a1, (2) from any Commercial, Multi-family Customer or Roll-off Customer by the

delinquency date identified in subsection a1, then Contractor may make collection efforts, including those listed in subsection

a3 [prior slide].”

Question: does authorizing liens merely as one type of collection action make fees subject to Prop 218?

(1)GOVERNMENT CODE 38790.1 / 25831: liens equivalent to ad valorem property taxes

(2) HEALTH & SAFETY 5473.11(b) and (c). Liens equivalent to judgment liens


Strategy #3: Obligate hauler to provide private billing service: sample performance specification –

discontinuing service.

Strategy #3: Obligate hauler to provide private billing service: sample performance specification –

discontinuing service.“5. Discontinuing Service. If the Contactor does not receive payment from Customer by the applicable delinquency date identified in subsection a1, Contractor may discontinue Service to that Customer and retrieve Containers from that Customer. After discontinuation, Contractor may charge a Customer the fee listed on the Rates Schedule to recommence Collection.”

WARNING: this destroys mandatory collection

system unless there is commitment to enforce self-haul opt-out / strong nuisance ordinances


Strategy #3: Obligate hauler to provide private billing service: sample performance specification – invoice

format.

Strategy #3: Obligate hauler to provide private billing service: sample performance specification – invoice

format.“b. Invoice Format. Contractor will distribute invoices in the form contained in Contractor Documentation, including:

(1) Contractor Phone Hours and toll-free number; and (2) when bills are due and delinquent if not paid. Each month Contractor will send City a sample copy of

the form of Residential, Commercial, Multi-family and Roll-off invoice that Contractor is mailing Customers, including inserts or announcements.

Contractor will not separately identify, list or itemize its Net Rates [/ franchise fee] separately from Rates.”


Strategy #3: Obligate hauler to provide private billing service: sample performance specification – dispute

resolution.

Strategy #3: Obligate hauler to provide private billing service: sample performance specification – dispute

resolution.“c. Disputes. Contractor acknowledges that City is neither responsible for taking Customers’ calls nor for responding to Customers’ correspondence with respect to disputes regarding billing or otherwise, nor for resolving disputes. Contractor will handle billing disputes with Customers in accordance with the written procedure described in Contractor Documentation.”

CONSIDER:(1) liquidated damages for city staff time spent on

each complaint / aggregate time per week(2) Especially during transition to new hauler / service,

tie-line to hauler customer service, hauler customer service rep on-site at city hall.


Strategy #3: Obligate hauler to provide private billing service: sample

performance specification.

Strategy #3: Obligate hauler to provide private billing service: sample

performance specification.

“d. City information on invoices. At City direction, at least 4 times each Contract Year, Contractor will print textual information provided by the City on Customer invoices. Contractor will use Reasonable Business Efforts to print that textual information at additional times.

e. City inserts. At City direction, up to twice each Contract

Year on dates agreed to by Contractor, Contractor will enclose inserts provided by the City with invoices that Contractor mails to Customers. Inserts must be of size and shape that Contactor can include in envelopes for mass mailings. “


Strategy #4: Treat franchise fee as just

another cost of doing service.Strategy #4: Treat franchise fee as just

another cost of doing service.The franchise fee is an obligation of the franchised

hauler, not the rate payer, in consideration of franchise (for example, giving franchisee exclusive/monopoly service rights and revenues).

The franchise fee is a cost of doing business, like labor, fuel or vehicle acquisition-and-maintenance.

Set the franchise fee for the franchise contract term . . . although perhaps service fee compensation could be adjusted for corresponding changes in franchise fee as a “change in (local) law” under rate adjustment protocol.



1. Prop 218 procedural and substantive requirements

2. Consequent procurement, policy and program constraints – possible characterizations of variable rates / PAYT (sample contract preambles)

3. Distinguish Bighorn water service fees from refuse/recycling service fees



4. Strategy #1: Break the link to property: self-haul & mandatory service / opt-out rights (sample regulation and contract preamble)

5. Strategy #2: Authorize hauler to “set” rates, up to maximum cap/ceiling (sample performance obligation and contract preambles)

6. Strategy #3: Obligate hauler to provide private billing service (sample performance specification)

7. Strategy #4: Treat franchise fee as just another cost of doing service.


CRRA 2007 Navigating to Zero Waste Strategies to structure refuse/recycling fees that arguably are...

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