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Approve Amendment to the Solid Waste Agreement and Appropriation Adjustment December 18, 2018 Page 2 compliance, the City anticipates that the JCU will not recommend further compliance action, and the City will continue to avoid fine assessments related to AB 341. However, as of April 2018, the City is currently under preliminary review by the JCU for AB 1826 commercial organics recycling noncompliance. Education and outreach programming without program implementation will not be sufficient to protect the City from formal referral and potential fines assessment. Organics recycling comes at a significant cost (i.e., containers, trucks, staffing, processing, and disposal, etc.). The City's extension agreement allowed WM to set rates for organics recycling services. The current rate, which reflects the actual cost of providing the service, is significantly more than the rate for equivalent solid waste collection services in the City of Santa Ana. Even when combined with comprehensive education and outreach, program participation continues to be minimal and does not meet the mandates of AB 1826. To avoid formal referral to the JCU and potential assessment of fines, the organics recycling program needs rates that will incentivize participation. Many Orange County cities are achieving the highest AB 1826 compliance by designing programming that includes a financial incentive. Of 20 Orange County cities surveyed, 14 cities, or 70%, (Exhibit 2) provided reduced rates as an incentive to businesses to implement organics programs and to help achieve AB 1826 compliance. Staff is recommending approval of an amendment to the extended solid waste services agreement that establishes a new commercial organics recycling program that combines education and outreach with a reduced rate incentive of 50% of the cost of comparable solid waste service. The proposed organics rate incentive would allow businesses to incorporate organics recycling service and to comply with AB 1826 without experiencing significant disposal cost increases. The new program would begin on January 1, 2019, and continue through the end of the extended solid waste services agreement (June 30, 2020) or until the end of the optional one-year extension (June 30, 2021), if exercised. The total cost, including the optional extension, is estimated to be $522,760. An additional 20% contingency of $104,552 will be set aside, should participation exceed estimates. Continued AB 1826 programming will be a component of the Scope of Work for the new solid waste services Request for Proposals. STRATEGIC PLAN ALIGNMENT Approval of the item supports the City's efforts to meet Goal #4 — City Financial Stability, Objective #1 (maintain a stable, efficient and transparent financial environment). ENVIRONMENTAL IMPACT There is no environmental impact associated with this action. However, increased recycling activity will divert materials from the landfill, thus extending the life of the landfill system and recovering valuable recyclable resources. FISCAL IMPACT The estimated cost for the new commercial organics recycling program is $522,760 plus a 20% contingency of $104,552, for a total of $62J1�_Ynds are available for expenditure in Fiscal