Wednesday, December 5, 2012

Foster City increases Recology franchise fees

The Daily Journal (San Mateo), Charlie Bronitsky, 11/2/12. "Op-Ed: Franchise fees, a tax law loophole?"

Foster City learns from cities like Pacifica
"While most Foster City's residents were likely watching our San Francisco Giants win game 7 of the National League Championship Series, a few of us were in a City Council meeting. At that meeting, the council voted 3-2 to increase the franchise fees for trash collection from five percent to 10 percent.

City needs money?  Raise franchise fees
What are franchise fees, you may ask? Well franchise fees are the fees that cities charge to vendors, such as Recology, for the "privilege" of providing some service to the city residents and businesses. In this case it was trash and recycle collection.

How about double, from 5% to 10%?
These fees are supposed to be used to offset the cost incurred by the city when the vendor provides services. In the case of trash collection, those costs would include the cost for someone at the city to interface with residents, businesses and Recology when there are collection problems. Other costs would include things such as wear and tear on our streets from the trucks driving on them.

Who pays these franchises? Well, Recology pays them to Foster City, but Recology is allowed to treat them as what is called a "pass-thru" and pass the cost off to the ratepayers. In other words, you and I pay these fees."   Read article.

Related - Pacifica city council meeting, 11/26/12, Item 7,  Public Hearing, Recology of the coast rate adjustment 1/1/2013. Public Hearing notice, page 3:  Recology fees:  Franchise fee is $805,000, Frontierland Park Remediation Fee $75,000, ABA 939 Fee $30,000. Review and audit, HFH Consultants, "Recology request for a 1.42% rate increase..." We determined that a total increase of 1.89% to Recology's total compensation is necessary to compensate Recology for its allowable expenses," (Summary page 1).  Total compensation requirement $7,407,719 (table 3, page 5), recommended final contractor's compensation $7,441,850. Details, pages 8-12.  The franchise fee is estimated at 11%, and the City provides few services, even past due collections are handled by Recology.

Posted by Kathy Meeh

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