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Item N6 BOARD OF COUNTY COMMISSIONERS AGENDA ITEM SUMMARY Meeting Date: August 21, 2013 Division: County Administrator Bulk Item: No X Department: County Administrator Staff Contact/Phone#: Rhonda Haag, 453-8774 AGENDA ITEM WORDING: Discussion and direction on the solid waste management program and related contracts. ITEM BACKGROUND: Staff has researched and negotiated various options for the solid waste management program and contracts, and will present these options to the BOCC for discussion. The current solid waste collection franchise agreements expire in August 2014 and staff is looking for direction on how to proceed. PREVIOUS RELEVANT BOCC ACTION: CONTRACT/AGREEMENT CHANGES: Not applicable STAFF RECOMMENDATIONS: TOTAL COST: INDIRECT COST: BUDGETED: Yes No DIFFERENTIAL OF LOCAL PREFERENCE: N/A COST TO COUNTY: SOURCE OF FUNDS: REVENUE PRODUCING: Yes No X AMOUNT PER MONTH Year APPROVED BY: County Atty OMB/Purchasing Risk Management DOCUMENTATION: Included Not Required ISPOSITION: AGENDA ITEM# CAD# BOAM OF COUNTY COMMISSIONERS Mayor George Neugent,District 2 Mayor Pro Tern,Heather Carruthers,District 3 U N TYSonNROE Danny L.Kolhage,District 1 KEY WESTDA 33M David Rice,District 4O4 (305)294-4641 Sylvia J.Murphy,District 5 Robert B.Shillinger,County Attorney** Office of the County Attorney Pedro J.Mercado,Assistant County Attorney** 1111 12`h Street,Suite 408 Susan M.Grimsley,Assistant County Attorney** Key West,FL 33040 Natileene W.Cassel,Assistant County Attorney** (305)292-3470—Phone Cynthia L.Hall,Assistant County Attorney** (305)292-3516—Fax Christine Limbert-Barrows,Assistant County Attorney** Derek V.Howard,Assistant County Attorney** Lisa Granger,Assistant County Attorney Steven T.Williams,Assistant County Attorney **Board Certified in City,County&Local Govt.Law Memorandum To: Mayor George Neugent County Commissioners From: Bob Shillinger, County Attorney Cc: Roman Gastesi, County Administrator Re: Renewal Options for Solid Waste contracts Date: August 12, 2013 Question presented: Whether the County may lawfully exercise its rights under the existing franchise agreements with solid waste collectors to renew those contracts or must those contracts be put out for bid? Short answer: The County Commission may lawfully exercise the renewal options for each franchise agreement; however, the Board cannot include any additional renewal options in those contracts under the current code. Background and Analysis: The County contracts with four entities to provide residential and commercial solid waste (trash) collection services for the Lower, Middle, and Upper Keys as well as the Ocean Reef Club. These contracts are virtually identical so will be referred to collectively. The current solid waste contracts were entered into in 2004. Each contract was for the maximum five year term allowed under § 21-71(c) of the Monroe County Code, plus the option for an additional five year renewal term. In 2009, the contracts were amended to include a new five year term with an additional five year renewal optional term. The first five year term of the contract, as amended in 2009, expires in August 2014. 1 Like many local governments both in Florida and throughout the country, Monroe County has historically' addressed solid waste disposal through franchise agreements, which the Courts" have described as follows: The holder of a franchise, in the commercial sense here involved, generally performs functions of a quasi-governmental nature in that such a franchise is the privilege of engaging under governmental authority in that 'which does not belong to the citizens . . . generally by common right.' [Citation omitted.] It is a contract with a sovereign authority by which the grantee is licensed to conduct such a business within a particular area and it may prohibit others from engaging in the same business within the prescribed area for a given period of time. These solid waste franchise agreements are essentially agreements with private entities serving as public utilities."' A "public utility" is generally defined as "a privately owned and operated business whose services are so essential to the general public as to justify the grant of special franchises . . . in consideration of which the owners must serve all persons who apply, without discrimination. It is always a virtual monopoly.'" The granting of exclusive franchise agreements has been justified due to the enormous investment in capital infrastructure costs necessary to provide the utility service. Monroe County has historically treated its solid waste franchise agreements as utility type agreements exempt from the competitive bidding procedures set forth in the County Code. Under Florida law, the Commission is vested with considerable latitude in deciding which contracts require competitive bidding and which do not for "[t]here is no common law rule requiring public agencies to let contracts through competitive bids. In the absence of specific constitutional or statutory requirements, a public agency has no obligation to establish a bidding procedure and may contract in any manner not arbitrary or capricious." In March of 2012, however, the County Commission made substantial revisions"' to its purchasing code. See Ordinance 06-2012. As part of that revision, the exceptions to the competitive bidding requirements were amended to provide more specificity regarding when those exceptions would be triggered. Those exceptions are set forth in § 2-347(e)(5) of the Code. Specifically, § 2-347(e)(5)b"" exempts from competitive bidding "all purchases of services controlled by the Public Service Commission (PSC) including but not limited to utility/local telephone services." The former version of 2-347 did not contain the phrase "services controlled by the Public Service Commission" as a qualifier that limited which utility services were exempt from competitive bidding.""' Stated differently, Ordinance 06-2012 did not include solid waste franchise agreements among those that are exempt from competitive bidding whereas the prior version of 2- 347 had been interpreted to include such agreements among those types of utility services that were exempt from the competitive bidding process. As stated above, only those utility agreements falling under the jurisdiction of the PSC are exempt from competitive bidding under the current version of§ 2-347(e)(5)b. According to its enabling statutes, the PSC only has jurisdiction over certain water and 2 waste water utilities'", telephone utilities," as well as gas and electric utilities with certain exceptions." The PSC does not have jurisdiction over solid waste disposal as the Florida Legislature has vested the sixty seven counties with primary jurisdiction over that service.x" In sum, the 2012 revision to Section 2-347(e)(5)b as drafted, had the effect of excluding solid waste franchise agreements from the type of utility services which are exempt from the competitive bidding requirements of the County Code. However, I found nothing in the legislative history of the Ordinance 06-2012 which suggests that the BOCC consciously intended to omit solid waste services from the class of agreements which are exempt from competitive bidding. In other words, it would appear that this exclusion was unintentional. Options: The BOCC has three options for moving forward. Option 1 — Exercise the Five Year Renewal Term. The BOCC may lawfully exercise the option to extend the existing solid waste contracts for another five years. Because the existing contracts, which were entered into in 2009, contain an option for renewal, the 2012 amendments to the code cannot unilaterally effect the validity of that provision of the contracts without violating the impairment of contracts provisions of the U.S.xi" and Florida"" Constitutions. Accordingly, based upon the County Code as it existed in 2009 when the contract was amended, the BOCC has the discretion to exercise the five year renewal option that exists in each of the current solid waste agreements. However, if that renewal option is exercised, the extended agreement cannot include any extension beyond the five year'" optional term that was incorporated into in the 2009 agreements, absent a change in the purchasing code. Option 2 —Amend the Code. The BOCC always has the option of amending its code pursuant to the processes set forth in chapter 125, Florida Statutes to affect future agreements. If it is the desire of the Commission to maintain its historical custom and practice of treating solid waste franchise agreements as utility agreements which are exempt from competitive bidding requirements, I would recommend inserting clarifying language into the definitions section set forth at 2-346 and in the competitive bidding exceptions set forth 2-347(e)(5). Adopting such an amendment is not a prerequisite to exercising the five year extension option so an amendment could be adopted either before or after that option is exercised, if at all. If the Board decides to amend the code, it may also want to consider revisiting other provisions of the code that relate to the solid waste franchise agreements since substantial portions of solid waste collection ordinances, which are currently codified in chapter 21 of the Monroe County Code, remain largely unchanged since 1989. For example, is a five year maximum term required by § 21-71(c) still commercially reasonable or would a longer term lead to more favorable terms for the County? 3 Option 3 — Put the Contracts out for Bid. As always, the BOCC retains the discretion to put the solid waste franchise agreements out for bid. This option remains despite the exceptions from competitive bidding set forth in the code and falls within the broad discretion of the Board. 1 The County adopted a comprehensive solid waste disposal ordinance in 1989, which mandated that owners and occupants of improved property use the County's solid waste franchise contractor for the area where the property was located. See, § 9, Ordinance 033-1989. This ordinance is currently codified in chapter 21 of the Monroe County Code and remains largely unchanged since 1989. Prior solid waste franchise ordinances include Ordinances 09-1974 and 10-1977, as well as chapter 63-1631, Laws of Florida (special act authorizing Monroe County to grant five year solid waste franchise agreements). 11 West Coast Disposal Services, Inc. v. Smith, 143 So.2d 352 (Fla. 2d DCA 1962), cert. den. 148 So.2d 279 (Fla. 1962); see also, Jackson-Shaw Co. v. Jacksonville Aviation Auth., 510 F.Supp.2d 691, 719 '4M.D.Fla. 2007). 1 See, e.g., Bennett Electric Co. v. West Side Sanitation, Inc., 11 F.Supp. 2d 1348 (S.D.Fla. 1998); and United Sanitation Services, Inc. v. Tampa, 302 So.2d 435 (Fla. 2nd DCA 1974); see also, McQuillen's Municipal Corporations, § 24:251. In United Sanitation, the Court observed: The collection of garbage is certainly a useful, indeed an indispensable, part of urban society. The private business of its collection, however, is not, nor has it ever been, akin in any way to "ordinary" examples of private enterprise-the selling of shoes, the repair of automobiles, or the selling of motel rooms. As the cases, from the time when the business was referred to as "scavenging" and those who conducted it as"scavengers" until the present, have recognized and clearly established, the"enterprise" of garbage collection is one of those unique callings which are subject to the plenary power of government. Unlike virtually every other enterprise, the "business" may not only be regulated, but in fact exclusively performed-as an essential part of a "public service"-by municipalities or other governmental subdivisions, even if such a decision results in the complete preclusion of private facilities for the same use. 302 So.2d at 436. 1" Black's Law Dictionary, 6th edition. "Interstate United Corp. v. Canteen Corp., 369 So.2d 391, 395 (Fla. 2d DCA 1979); see also, A.G.O. 71- 366. "' Prior to the 2012 changes, the exceptions to the competitive bidding requirements set forth §2-347(e) reads: This section applies to all contracts for services (excluding services covered by the Consultants' Competitive Negotiations Act(F.S. §287.055), utility/local telephone services, legal services, and insurance policies), goods, and public works, (excluding change orders authorized under a lawfully executed county/contractor contract)that are in accordance with generally accepted accounting principles, expected to cost$25,000 or more. "il The exceptions set forth in § 2-347(e)(5) are: a. Professional service covered by the Consultants' Competitive Negotiation Act(F.S. §287.055). Other professional services may be exempted by the BOCC from the competitive bidding process when price is only a minor concern compared to qualitative considerations; b. All purchases of services controlled by the public service commission including but not limited to utility/local telephone services; c. Cellular telephone services; on-going payments and fees for maintenance and support of existing software technology which has been purchased in accordance with existing procurement requirements; software packages for personal computers approved by the county's technical services department; d. Legal services, lobbying services, interpreter services, court reporter services, and advertising services; and e. Change orders authorized under a lawfully executed county/contractor contract. "i'i See endnote vi. I" F.S. 367.011 and F.S. 367.022. " F.S. 365.01 and F.S. 364.011. Xi F.S. 366.04. 4 xU F.S. 403.706 and F.S. 125.01(k). xIII Art. I, §10, Cl. 1, U.S. Const. xI"Art. I, § 10, Florida Const. (1968). xv§21-71(c) limits the term of a solid waste agreement to no more than five years.