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File Number: 15-196 <br />compensation. The agreement increases MRF employees' wages and benefits beyond the <br />requirements of the City's Living Wage Ordinance. <br />ACI's analysis provides that the incremental increased cost of the wages and benefits at the <br />MRF during the first year of the contract will be $2.73 million. ACI requested the three largest <br />users of the MRF (Alameda, Livermore, and San Leandro) to consider additional rate <br />increases to manage the costs. Without the additional revenues, ACI has indicated that it will <br />not meet bank covenants and may be forced to close the MRF as early as July 1, 2015. See <br />Attachment A - ACI Memo for additional information about ACI's financial condition. <br />Analysis <br />ACI requests a special rate adjustment of 4.3% to manage the financial impact of labor costs <br />at the MRF. Prior to the Living Wage issue, ACI contracted with a third -party staffing agency <br />that hired and employed the sorters and other workers at the MRF. ACI agreed to hire the <br />employees and pay the City mandated living wage effective December 1, 2014. Shortly <br />thereafter, MRF workers voted to join the International Longshore and Warehouse Union <br />(ILWU), Local 6 and began negotiating a collective bargaining agreement with ACI. <br />ACI employs approximately 60 sorters in two shifts, processing curbside recyclable material <br />from Alameda, Livermore, San Leandro, and Mission Trails. While ACI and the ILWU <br />continue to negotiate a collective bargaining agreement, they have tentatively agreed on the <br />sorters gaining full benefits (i.e. health and welfare, pension, vacation, sick, etc.) and the <br />following hourly rate schedule for future years: <br />Table 1: Hourly Rate and Benefit Schedule <br />Agency Current <br />2015/2016 <br />2016/2017 <br />2017/2018 <br />2018/2019 <br />2019/2020 <br />Hourly Rate $9.00 $14.57 <br />$15.68 <br />$16.86 <br />$18.12 <br />$19.48 <br />$20.94 <br />Total Cost $13.91 $17.83 <br />$25.60 <br />$27.88 <br />$30.71 <br />$33.57 <br />$36.72 <br />Increase - $3.92 <br />$7.77 <br />$2.28 <br />$2.83 <br />$2.86 <br />$3.15 <br />Additional information about hourly wages and benefits for MRF workers for the next five <br />years is in the attached Letter of Understanding (LOU) between the International Longshore <br />and Warehouse Union, Local 6 and ACI (Attachment C). As proposed in the LOU,the special <br />rate adjustment accounts for the change in cost from the previous staffing agency rates to the <br />City's living wage rates and from the City's living wage rates to the proposed union rates for <br />2015-16. ACI and Local 6 have negotiated in good faith to delay benefits and smooth cost <br />increases over the next five year period to reduce immediate rate impacts. ACI has indicated <br />that future rate impacts associated with MRF worker unionization should be less than one <br />percent (1 %) per year for most years. The additional costs would not be included in the <br />annual rate adjustment calculation, but added to the annual rate adjustment proposal. <br />Special Rate Request <br />ACI requests a 4.3% rate increase pursuant to Section 6.4 of the Franchise Agreement, <br />Special Rate Review. The increase will be included in the total rate increase proposal of <br />8.49% effective August 1, 2015. The total rate increase also includes a 2.05% annual rate <br />adjustment and a 2.14% increase related to the loan repayment, specified in the 11th <br />Amendment to the Franchise Agreement. The rate increase will not take effect until August 1, <br />2015 to provide for the required 60 -day notice to customers. <br />City of San Leandro Page 2 Printed on 511212015 <br />