That the City Council authorize the City Manager to sign the Second Amendment to the Waste Disposal Agreement (WDA) with the County of Orange, which will extend the existing agreement one additional year from July 2025 through June 2026.

Solid waste disposal at Orange County landfills is governed by a Waste Disposal Agreement (WDA) under which cities/sanitary districts agree to exclusively deposit certain waste at the County of Orange’s landfills in exchange for stable disposal rates. The current WDA was entered into in 2009 and subsequently amended to extend the term through June 30, 2025. The Orange County City Managers Association (OCCMA) is currently negotiating a successor agreement to the WDA with OC Waste & Recycling (OCW&R). Additional time is needed to finalize mutually agreeable terms and disposal fees. The proposed amendment extends the current WDA by one year to allow for continued negotiations and includes a 2.6% disposal fee increase, per the escalation formula in the current WDA.

The current Waste Disposal Agreement (WDA) between all Orange County cities/sanitary districts and the County of Orange expires on June 30, 2025. In January 2022, OCW&R notified cities of its intent to revise the WDA to align the new agreement with legislative requirements such as Senate Bill 1383, which requires local governments to divert organic waste, such as food scraps and landscaping waste, away from the landfills. OCW&R presented a draft proposed successor agreement to the WDA, titled the Waste Infrastructure System Enhancement (WISE) agreement, to the OCCMA on November 7, 2024.

The draft WISE agreement proposed increasing the landfill disposal rates from $42.65 to $82 per ton (a 92.3% increase). It also proposed a rebate program for composted organic waste and an allocation of capital expenditures for organics recycling infrastructure at County landfills. In light of these proposed changes and the significantly higher proposed cost, the OCCMA established a sub-committee of City Managers, staff and advisors in December 2024 to begin negotiating the terms for a successor agreement to the WDA and requested an extension of the current WDA to allow time for such negotiations.

OCW&R has agreed to the OCCMA's requested extension under the terms of the proposed amendment, which generally provides for a 12-month extension of the current WDA and a 2.6% disposal fee increase, per the escalation formula in the current WDA. The extension period will allow stakeholders to conduct due diligence on a successor agreement to the WDA as well as evaluate costs, infrastructure plans, and future fee adjustments. If the OCCMA committee and OCW&R do not reach mutually agreeable terms by September 30, 2025, monthly updates will be provided to all cities/sanitary districts beginning in October 2025.

The proposed amendment requires unanimous approval from all participating cities. Should any city choose not to approve the proposed amendment, the extension will not move forward and the WDA will expire on June 30, 2025. Since most cities are likely unwilling to sign the current proposed successor WISE agreement as drafted, there would be no agreement in place to keep landfill disposal rates stable for Orange County jurisdictions.

Staff recommends that the City Council authorize the City Manager to execute the Second Amendment to the WDA to provide more time for OCCMA to negotiate a longer-term extension and to retain stable disposal rates and collaboration between all cities/sanitary districts in Orange County over the next year as negotiations continue.

The proposed amendment to the WDA will not significantly impact the City's Refuse budget or Franchise Fee revenues compared to the prior fiscal year. Approving this amendment will essentially maintain the existing agreement terms and rate structure for an additional year and will continue to provide year-to-year stability with regard to the landfill disposal fees.

If the proposed amendment to the WDA is approved, the landfill disposal fee would increase by 2.6 percent and has already been calculated into the City’s Franchise Agreement formula with CR&R. In the formula, the landfill disposal component is weighted at 30 percent of the total rate increase, meaning that the proposed OCW&R 2.6 percent disposal fee increase would represent a 0.78 percent increase to the City's current refuse rate structure. Based on this, and other Franchise Agreement provisions, the total CR&R refuse rate change scheduled for July 1, 2025, will be 1.31 percent.