San Rafael keeps conservative solid‑waste franchise fee; agreement sets higher ceiling for city property value

Megan (outside legal counsel for the city) briefed the subcommittee on changes to the city’s solid‑waste franchise fee following the California Supreme Court’s decision in Zolli v. City of Oakland, which requires city franchise fees for solid‑waste haulers to meet Proposition 26 fee‑category rules.

Megan said the city hired consultant R3 to produce a cost‑of‑service and city‑property valuation study. R3’s conservative valuation of the value of city property used by the hauler was roughly $1,216,000; the same dataset could justify up to about $1,474,000. For the current amendment staff will continue to charge the more conservative amount while the franchise agreement will include the higher figure as an agreed ceiling so the city can increase the fee later without amending the agreement.

“We think it’s prudent, at least at this time, to go with the more conservative valuation even though we think that higher amount in the franchise agreement is also justified,” Megan said, citing both rate‑pressure concerns and legal uncertainty while courts interpret the post‑Zolli landscape.

Staff and counsel described other changes to the franchise agreement: the fee basis will move from a single percentage of revenues to separate itemized components (cost‑of‑service fees, roadway impact amounts, and a value‑of‑city‑property component), and contract language addressing illegal dumping and expanded services will be included. Staff said proceeds that are labeled as roadway impact components flow into the city’s gas‑tax/streets fund and should be used for street work; counsel and staff said best practice is to use those portions to address road impacts, though timing of expenditures can vary.

Committee members asked about broader equity and coverage — whether delivery and other heavy vehicles might be levied — and were told vehicle‑code limitations and the specific franchise arrangement make solid‑waste vehicles uniquely chargeable under the franchise model, though the law remains unsettled and litigation across the state continues.

Staff emphasized the policy tradeoffs: raising the fee now would increase customer rates; keeping the conservative charge preserves current billing levels while the agreement records a higher ceiling. The subcommittee did not take a final council action during the meeting; staff will present the franchise amendment and fee schedule to full council for adoption.