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Recology South Valley - 1997 Agreement - Amendment No. 3THIRD AMENDMENT TO THE AGREEMENT BETWEEN THE CITY OF GILROY AND SOUTH VALLEY DISPOSAL AND RECYCLING This Amendment to the Franchise Agreement dated September 2, 1997 the ( "Third Amendment ") is entered this 1" day of July, 2014; by and between the City of Gilroy (the "City"), a municipal corporation of the State of California, and South Valley Disposal and Recycling ( "Contractor "), a California Corporation. This Third Amendment is made with references to the following facts: A. City and Contractor are currently parties to an Agreement Between City of Gilroy and South Valley Disposal & Recycling, Inc., dated September 2, 1997 (the "Franchise Agreement "), by which City granted to Contractor the exclusive franchise to collect, transport and dispose of garbage and refuse produced within the corporate limits of City. B. City acknowledges that South Valley Disposal & Recycling, Inc. now conducts business as Recology South Valley. C. City has solicited proposals from waste disposal facilities in order to reduce the air pollution associated with hauling waste from Contractor's transfer facilities to disposal facilities. D. City has negotiated an agreement for waste disposal capacity with a disposal facility operator that is closer to the Contractor's transfer facilities and City desires Contractor to deliver waste to this closer facility in order to reduce air pollution. E. City and Contractor mutually desire to have waste collected throughout the.City's incorporated limits using vehicles fueled by compressed natural gas in order to reduce air pollution and enhance community health. F. City and Contractor mutually desire to spread the capital costs of the compressed natural gas vehicles and related fueling facility out over seven years in order to reduce the need for a one -time steep adjustment to service rates. G. City and Contractor have mutually determined that the annual rate review articulated in and conducted pursuant to the Franchise Agreement is an administrative task that does not require direct City Council intervention. NOW, THEREFORE, in consideration of the factual premises and the covenants and conditions set forth in this Third Amendment, City and Contractor hereby agree as follows: 1. Section 4(e)(i) shall be amended and replaced in its entirety by the following: (i) City shall have the right to direct Contractor to deliver Refuse to a landfill or other waste management facility designated by the City provided that the landfill or other waste management facility has agreed to accept waste from the City. If the City does not choose to exercise this right, Contractor shall select and use landfill sites for the transportation, sorting and disposal of Refuse, which sites must be reasonably acceptable to the City. 2. Section 10(i) shall be added into the agreement as follows: (i) Rate Adjustments Relating to Landfill Direction.— If City has directed Contractor to deliver Refuse to a landfill or other waste management facility, Contractor and City shall negotiate a fair and reasonable adjustment to service rates and charges that reflect all of the cost increases or decreases resulting from the City's direction of the waste. Costs to be included in the negotiation include, but are not limited to, tipping fees, labor, fuel, and equipment. 3. Section E shall be added to Exhibit E, COLLECTION VEHICLE SPECIFICATIONS, as follows: E. All collection vehicles shall be fueled by compressed natural gas by December 31, 2018. The collection vehicle fleet shall be converted to compressed natural gas between January 1, 2015 and December 31, 2018 with approximately 25% of the fleet converted each year. 4. Section 18 (a) Commencement and Term shall be amended and replaced in its entirety by the following: 18(a) Commencement and Term. This Agreement shall commence on the Effective Date, but the Contractor's services hereunder shall commence on July 9, 1997, or on such other date as the parties may mutually agree. The term of this Agreement shall be eighteen (18) years in addition to the unexpired portion of the term of the present franchise agreement between the parties, that is, until July 1, 2022. 5. Exhibit J, ANNUAL INDEX RATE ADJUSTMENTS, shall be amended as follows: Section B shall be replaced in its entirety as follows: B. The Base Rates shall be adjusted on the Adjustment Dates up or down by a proportion equal to 40% of the Percentage Change in the Index and a further proportion equal to 10% of the Percentage Change in the Motor Fuel Component of the Index during the fourth year of this Agreement. The Base Rates shall be adjusted on the Adjustment Dates up or down by a proportion equal to 70% of the Percentage Change in the Index and a further proportion equal to 10% of the Percentage Change in the Motor Fuel Component of the Index during all subsequent years of this Agreement unti12017 (unless such rates are determined by a rate review pursuant to Section 10). Beginning with the July 1, 2017 Adjustment Date, the Base Rates shall be adjusted on the Adjustment Dates up or down by a proportion equal to 70% of the percentage Change in the Index and a further proportion equal to 10% of the Percentage Change in the price of compressed natural gas fuel during all subsequent years of this Agreement (unless such rates are determined by a rate review pursuant to Section 10). Changes in the price of compressed natural gas fuel shall be based on the United States Department of Energy's Clean Cities Alternative Fuel Price Report issued each January. If the publication of this report is suspended or if it otherwise becomes unsuitable for use in determining price changes actually experienced by Contractor, Contractor and City shall mutually agree on a methodology for calculating the Percentage Change in the price of compressed natural gas fuel. A new Section F shall be added to Exhibit J as follows: F. The Base Rates shall be established pursuant to Section B and any increases or decreases in the Base Rates shall be reviewed and approved annually by the City Administrator. 6. Section I0(d)(iv) shall be added into the agreement as follows: (iv) City and Contractor mutually agree that extraordinary costs related to the conversion of the collection vehicle fleet warrant a supplemental 6.82% increase in service rates. This supplemental increase shall be phased in over a two -year period with 3.82% applied in 2015 and 3% applied in 2016. These supplemental increases shall be applied in addition to any other rate adjustments Contractor is eligible to request under the Franchise Agreement. All other terms of the Franchise Agreement, the First Amendment to the Agreement, and the Second Amendment to the Agreement, which are not in conflict with the provisions of this Third Amendment_shall remain unchanged in full force and effect. In case of a conflict in the terms of the Franchise Agreement, the First Amendment to the Agreement, and the Second Amendment to the Agreement, and this Third Amendment, the provisions of this Third' Amendment shall control. The Parties acknowledge and accept the terms and conditions of this Third Amendment as evidenced by the following signatures of their duly authorized representatives. It is the intent of the Parties that this Third Amendment shall become operative on July 1, 2014. Dated: CITY OF GILROY: lajw -4. (;�� I as F. Gage , Mayor Haglund, ity Administrator ATTEST: -k r -- Shawrta Freels, City Cterk APPROVED AS TO FORM: .7' n, City Attorney lbla -ice; AT-6, 5AaN+ RECOLOGY SOUTH VALLEY: Mike Sangiacom hief xecutive Officer