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Item 4FCITY OF SOUTHLAKE MEMORANDUM To: Shana Yelverton, City Manager From: Jim C. Blagg, Assistant City Manager/Director of Public Safety Subject: Letter agreement between the City of Southlake, Texas and Republic Waste Services of Texas, Ltd., amending the Contract for Residential and Commercial Refuse Collection dated March 22, 2007 Action Requested: Approve Letter agreement between the City of Southlake, Texas and Republic Waste Services of Texas, Ltd., amending the Contract for Residential and Commercial Refuse Collection dated March 22, 2007 Background Information: Republic Waste Services of Texas (dba Duncan) began providing residential and commercial refuse collection services in Southlake on I May 2007. The first term of the contract was for an 18 month period that ends on 31 October 2008. Since beginning the contract Duncan has experienced a number of cost increases that were not foreseen at the time of signing the contract. For example, Duncan's fuel costs have risen from $2.50 per gallon to $3.71 per gallon in the last 12 months. This has added approximately $120,000 to their costs that cannot be recovered with the CPI method currently in the contract and with rate increases limited to a maximum of 4 %. There are also additional costs related to the volume of refuse being generated by residential customers. Duncan estimate, when it negotiated the current contract that each residential customer would generate 32 lbs. of refuse each pickup. This represents a 28% higher rate than any of its other cities like Mansfield, North Richland Hills or Grand Prairie. The actual per pickup rate in Southlake has be 42 lbs. per pickup an increase over their estimate of 31 %. This volume creates additional costs in two areas, disposal costs (an increase of $86,000) and labor costs ($131,000). Duncan has asked the City to consider re- negotiating the current contract. The current contract requires Duncan to give 180 days notice of their intent to terminate the contract, which means they would have to give the City notice by 5 May 2008. The City would prefer that Duncan not give notice, but give us time to sit down and see if there is room for negotiation related to the price of refuse collection and other related items in the contract. This letter agreement allows the City and Duncan to sit down and attempt to come to some agreement. It also allows Duncan to give notice at any time after June 1, 2008. Financial Considerations: A new agreement could result in residents paying a higher price for refuse collections services. If that were to occur, the City would get additional franchise fees due to our franchise fee being tied to the amount of refuse fees collected. Citizen Input/ Board Review: N/A Legal Review: This letter agreement was reviewed by Tom Scollon of TOASE. Alternatives: Refuse to sit down with Duncan and risk having to go out on an RFP for a new refuse collection provider. Supporting Documents: Letter agreement Staff Recommendation: Approve Letter agreement between the City of Southlake, Texas and Republic Waste Services of Texas, Ltd., amending the Contract for Residential and Commercial Refuse Collection dated March 22, 2007 CITY OF SOUTI:-IfLAKE 1 9 City Manager's Office 1400 Main Street I Suite 460 1 Southlake, Texas 76092 1 (p) 817- 748 -8400 f (f) 817- 748 -8010 May 6, 2008 Nicholas Stefkovich Republic Waste Services of Texas, Ltd. 1212 Harrison Ave. Arlington, Texas 76011 Re: Letter agreement between the City of Southlake, Texas and Republic Waste Services of Texas, Ltd., amending the Contract for Residential and Commercial Refuse Collection dated March 22, 2047 Dear Mr. Stefkovich: This letter agreement concerns the Contract for Residential and Commercial Refuse Collection, dated March 22, 2007, between the City of Southlake, Texas and Republic Waste Services of Texas, Ltd. The City proposes this letter agreement as a way to facilitate the ongoing negotiations between the City and Republic regarding Republic's continued service to the City under the Contract. As you know, the initial term of the Contract will end on October 31, 2008. The Contract also provides for an automatic renewal for an additional term unless Republic provides 180 days' notice that it will not exercise the renewal. Representatives of the parties are currently working on a Contract amendment that would allow Republic to continue as the City's service provider after October 31, but the 180 -day notice deadline is upon us. In order to give the parties the time necessary to work out a mutually acceptable Contract amendment the City proposes as follows: We will proceed on the assumption that the parties can reach an agreement as to the terms under which Republic will continue as the City's provider. Of course, any agreement by the City must be presented to and approved by the City Council. It will benefit everyone if this happens sooner rather than later, and let me assure you that the City's intention is to diligently pursue a resolution to these contract discussions. On or after June 1, 2008, Republic may notify the City of termination of the Contract effective 180 days from the date of the notice. As a result of the notice, the Contract will continue in full force under the existing terms and conditions, except for Letter Agreement between City of Southlake and Republic Waste Services of Texas, Ltd., May 6, 2008 Page 2 Article X, until it terminates on the date set forth in the notice. Otherwise, if the parties nevertheless have not arrived at a mutually acceptable Contract amendment approved by the City Council and executed by October 31, 2008, then the parties agree by this letter agreement that the Contract will (sic) continue in force under the existing terms and conditions, except for Article X, for an additional period, terminating on April 30, 2009. The terms of this letter agreement are intended to supersede and replace Article X ( "Term and Review of Performance ") of the Contract. If you agree with the terms of this letter agreement, please sign and date below and return a copy to me as soon as possible. Please feel free to contact me if you have any questions about this matter. Sincerely, Andy Wambsganss Mayor, City of Southlake REPUBLIC WASTE SERVICES OF TEXAS, LTD. By: Name: Nicholas StefkQvi i Title: Area President Date: > °� �;