DATE: November 19, 2025
TO: Honorable Mayor and City Councilmembers
FROM: Water Utilities Department
TITLE: RESOLUTION INCREASING THE SOLID WASTE USER RATE CEILINGS TO INCLUDE WASTE MANAGEMENT’S ANNUAL REQUEST FOR A MULTI-INDEX RATE ADJUSTMENT
RECOMMENDATION
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Staff recommends that the City Council adopt a resolution increasing the solid waste user rate ceilings to include Waste Management’s request for Multi-Index Rate Adjustment.
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BACKGROUND AND ANALYSIS
Waste Management of California, Inc. (WM) is the City’s contractor for solid waste disposal services. The current Franchise Agreement (Contract), approved by the City Council on April 6, 2022, established initial rate ceilings for all user services, including both residential and commercial collection. On November 15, 2023, the City Council approved new residential and commercial solid waste user rate ceilings to implement the programs and services required of the current Contract. Additionally, on December 2, 2024, the City Council approved new user rate ceilings for residential and commercial solid waste users.
Pursuant to section 8.2.C and Exhibit E of the existing Contract, WM may request an annual index-based adjustment to the rates it is allowed to charge, to reflect changes in various cost indices (Consumer Price Index (CPI-U), Employment Cost Index (ECI), a Fuel Index based upon the price of Natural Gas (for fueling collection vehicles), and Motor Vehicle Maintenance and Repair Index (MVI)), and changes to processing and disposal costs based on materials collected and changes in tipping fees.
The index-based adjustment calculates the percent difference between the total cost for the upcoming rate period and the total cost for the current rate period to determine the rate adjustment factor; this is then applied to the current rates to determine rates for the upcoming rate period. The Contract limits the rate adjustment factor at 5.00% with increases beyond that applied to the following rate period and each subsequent rate period until the excess is fully applied, except for contract Rate Year Four (calendar year (CY 2027) and Rate Year Eight (CY 2031), for which a cost-based adjustment would be applied based upon review of the Contractor’s actual cost of operations and operational statistics (staffing levels, routes, route hours, customers and their service levels, etc.) in comparison to the then current rate period. Should the rate adjustment factor result in a negative value, the City reserves the right to defer the rate reduction to the following rate period as a credit against future rate increases.
The multi-index rate adjustment calculated, as described in the Contract for CY 2026, is 7.243% (4.157% resulting from the base application plus 3.086% from the prior year’s roll-over amount). Since the rate adjustment cannot exceed 5.00%, WM is requesting the City approve a 5.00% increase to the residential and commercial solid waste disposal rates WM can charge, with $940,350.22 rolling over to the following rate period effective January 1, 2027. A synopsis of the proposed rate increases to the most common residential and commercial solid waste services user rates is set forth in Table 1.
Additionally, WM has requested an extraordinary rate increase due to increases in labor (a 2.03% increase of $894,170) and disposal costs (a 4.59% increase of $2,025,441). The extraordinary rate increase request would be above and beyond the 5% cap and does not meet the requirements outlined in Section 8.3 of the Contract (pertaining to extraordinary rate adjustments); therefore, staff does not recommend approving the request. The Contract allows for a Cost Based Rate Adjustment in year four, where a more detailed review of actual costs incurred by WM is conducted in order to set a better baseline of actual allowed costs that will be included in the rate setting process. That would serve as a true-up and account for cost increases that have exceeded the annual multi-index adjustment calculations, such as for the increased labor and disposal costs described herein, and the rate adjustment could exceed the 5.00% cap from the multi-index adjustment years.
Table 1 CY 2026 Multi-index Rate Adjustment
FISCAL IMPACT
The information provided in this report is for informational purposes only and does not have any associated fiscal impact to the City.
COMMISSION OR COMMITTEE REPORT
The Utilities Commission approved staff’s recommendation at a special meeting on October 21, 2025.
CITY ATTORNEY’S ANALYSIS
The referenced documents have been reviewed by the City Attorney and approved as to form.
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Prepared by: Ken Prue, Zero Waste Program Manager
Reviewed by: Frederick Mayo, Water Utilities Director
Submitted by: Jonathan Borrego, City Manager
ATTACHMENTS:
1. Staff Report
2. Resolution - 2026 SW User Rates
3. 2026 Oceanside Rate Sheets
4. WM Annual Rate Adjustment Request