CITY OF SANTA CLARITA

CITY OF SANTA CLARITA Solid Waste Audit of

Burrtec Waste Industries

* * * * * FINAL REPORT

May 6, 2010

Prepared by:

HF&H Consultants, LLC 3990 Westerly Place, Suite 195

Newport Beach, California 92660-2311 Phone: 949/251-8628

Facsimile: 949/251-9741

Advisory Services to Municipal Management

3990 Westerly Place, Suite 195 Robert D. Hilton, CMC Newport Beach, California 92660 John W. Farnkopf, PE Telephone: 949/251-8628 Laith B. Ezzet, CMC Fax: 949/251-9741 Richard J. Simonson, CMC www.hfh-consultants.com Marva M. Sheehan, CPA

May 6, 2010 Mr. Travis Lange, R.E.H.S. Environmental Services Manager City of Santa Clarita 23920 Valencia Boulevard, Suite 300 Santa Clarita, California 91355-2196

FINAL REPORT

Solid Waste Audit of Burrtec Waste Industries Dear Mr. Lange: We have completed the solid waste audit of Burrtec Waste Industries (“BWI”), the commercial refuse hauler for the City of Santa Clarita. Our findings are documented in the enclosed report.

We are pleased to have had the opportunity to assist the City with the solid waste audit. If you have any questions, please call Laith Ezzet at 949/251-8902 or Darrell Bice at 949/251-0231. Very truly yours,

Laith B. Ezzet, CMC Darrell L. Bice Senior Vice President Director of Solid Waste & Recycling Audits

City of Santa Clarita

Solid Waste Audit of Burrtec Waste Industries

TABLE OF CONTENTS SECTION DESCRIPTION PAGE

I Executive Summary 1

II Study Background, Objectives and Scope of Work 2

III Findings 4

EXHIBITS Exhibit 1 Summary of Rate Revenues, Costs and Profit Margin for Calendar Years

Ended December 31, 2007 and 2008

Exhibit 2A Loads and Tons Delivered by Route Truck by Facility – Calendar Year Ended December 31, 2007

Exhibit 2B Loads and Tons Delivered by Route Truck by Facility – Calendar Year Ended December 31, 2008

Exhibit 3 Solid Waste Facilities Used as of February 2009

Exhibit 4 Monthly Fuel Cost

Exhibit 5 Number of Routes and Route Hours as of February 2009

Exhibit 6 Inflation Indices - Labor, Fuel, Equipment and All Other Expenses

Exhibit 7 Weighted Average Indices for Truck Operating Costs

Exhibit 8 Calculation and Analysis of Inflation-Adjusted Costs

Exhibit 9A Impact of No Local MRF– Calendar Year Ended December 31, 2007

Exhibit 9B Impact of No Local MRF – Calendar Year Ended December 31, 2008

City of Santa Clarita, Burrtec Waste Industries 1 May 6, 2010

SECTION I

EXECUTIVE SUMMARY

Objective Finding

1. Evaluate the cost of service and profit margin for BWI and compare profitability to industry averages.

1A. BWI reported operating losses of $618,000 for calendar year (“CY”) 2007 and $478,000 for CY 2008; 14% and 10% of total revenues, respectively, primarily as a result of inaccurate cost estimates during the proposal process and the lack of availability of a local MRF.

1B. BWI operated at a net adjusted loss of $24,000 for CY 2007 or 1% of total revenues and a net adjusted profit of $56,000 for CY 2008 or 1% of total revenues, if “excess costs” are excluded.

1C: BWI’s profitability in Santa Clarita is below industry averages. Industry profitability in the last three years has ranged from 5% to 12%.

2. Determine the financial impact of the planned MRF not being available for use.

2A. Based on the data provided by BWI, the annual impact of not having a local MRF during CY 2007 and CY 2008 is approximately $296,000 per year or 7% of average annual rate revenues.

2B. BWI incurred approximately $1,029,000 in unreimbursed costs related to development of the MRF site. Amortized over the remaining three years of the Agreement, these costs would be approximately $343,000 annually or 8% of CY 2008 rate revenues.

3. Evaluate the fuel cost increases over the most recent three years ending December 31, 2008.

3. The percentage change in BWI’s fuel cost is lower than the change in the Producer Price Index - No. 2 Diesel Fuel that is used to adjust rates.


SECTION II

STUDY BACKGROUND, OBJECTIVES AND SCOPE OF WORK STUDY BACKGROUND The City of Santa Clarita has two franchised haulers. Waste Management (“WM”) provides service to residential customers in the City and Burrtec Waste Industries (“BWI”) provides service to business customers. The Agreement between WM (USA Waste of California, Inc. DBA Blue Barrel Disposal) for Residential Solid Waste Management Services (“WM Agreement”) was effective April 16, 2006 and expires June 30, 2013. The Agreement between BWI for Commercial Solid Waste Management Services (“BWI Agreement”) was effective August 1, 2004 and expires June 30, 2013. Both haulers have requested an extraordinary rate increase per the guidelines outlined in their franchise agreements with the City. The City desires for a third-party expert to audit the financial information of both haulers. The remainder of this report describes the study results for BWI. The results for WM are described in a separate report. OBJECTIVES The study objectives were as follows: 1. Evaluate the cost of service and profit margin for BWI and compare profitability to

industry averages.

2. Determine the financial impact of the planned material recovery facility (“MRF”) not being available for use.

3. Evaluate the fuel cost increases over the most recent three years ending December 31, 2008.

SCOPE OF WORK In order to achieve the study objectives, we performed the following tasks: 1. Reviewed background documents provided by City staff, including the current

franchise agreements and any amendments, and the historical rate adjustment documentation.


2. Prepared for and conducted a kickoff meeting with City staff on February 25, 2009 to confirm the project approach, roles of the study participants, schedule, and discuss key issues.

3. Conducted an initial meeting with BWI and City staff on February 25, 2009 to

confirm the project approach and schedule, and discuss the initial data request. 4. Reviewed the data submitted by BWI in response to our data and document request. 5. Conducted a site visit at the BWI’s offices to verify reported information to source

documents such as accounting records, disposal records, MRF records, truck operating records, and other information. We interviewed management regarding accounting and cost allocation procedures, and obtained explanations for any unusual data observed.


SECTION III

FINDINGS Objective #1: Evaluate the cost of service and profit margin for BWI and compare profitability to industry averages. Finding #1A: BWI reported operating losses of $618,000 for calendar year 2007 and $478,000 for calendar year 2008; 14% and 10% of total revenues, respectively, primarily as a result of inaccurate cost estimates during the proposal process and the lack of availability of a local MRF. BWI provided a summary of revenues and operating costs for CY 2007 and 2008, as shown in Table 1. Total revenues for CY 2007 were $4,478,000 with a net loss of $618,000 or 14%. Total revenues for CY 2008 were $4,743,000 with a net loss of $478,000 or 10% of total revenues.

Table 1: Summary of Operating Loss for Calendar Years 2007 and 2008 2007 2008

(in thousands) (in thousands)RevenuesRate Revenues 4,356,000$ 97% 4,448,000$ 94%Other Revenues 122,000 3% 295,000 6%Total Revenues 4,478,000 100% 4,743,000 100%Operating Costs: Direct Costs 3,547,000 79% 3,600,000 76% Indirtect Costs 1,371,000 31% 1,502,000 32%Net Profit (Loss) from Operations (440,000) -10% (359,000) -8%Other Income/Expenses 178,000 4% 119,000 2% Net Income (Loss) (618,000)$ -14% (478,000)$ -10%(1) See Exhibit 1.

Description % of Total Revenues

% of Total Revenues

A portion of the company’s net loss in 2007 is due to transfer, processing and disposal costs which exceed the amount of compensation for such costs included in the rates. For example, as shown in Exhibit 8, company compensation was $1,204,000 for these categories of costs, and actual costs paid by the company were $1,506,000, a difference of $302,000. However, in 2008, company compensation for transfer, processing and disposal cost was $11,000 higher than actual costs ($1,246,000 in compensation and $1,235,000 in costs, as shown in Exhibit 8). The reason for the large decline in actual costs for transfer, processing and disposal costs in 2008 compared to 2007 was that the company delivered 9,502 fewer tons in 2008 for processing to the Community Resource and Recycling Recovery, Inc. (“CRRRI”) MRF (including 595 fewer tons of food waste and 8,907 tons of mixed waste, as shown in Exhibit 2B) and instead delivered those tons to the landfill which has lower tipping fees. The processing fees in 2008 at the CRRRI MRF were $48.00 per ton for mixed refuse and recyclables and $45.00 per ton for food waste, compared to a landfill fee at Chiquita Canyon of $30.02 per ton.


Finding #1B: BWI operated at a net adjusted loss of $24,000 for CY 2007 or 1% of total revenues and a net adjusted profit of $56,000 for CY 2008 or 1% of total revenues, if “excess costs” are excluded. As shown in Table 1, BWI reported a 14% loss for the Santa Clarita commercial contract for CY 2007 and a 10% loss for CY 2008. BWI’s net loss for CY 2007, as adjusted for excess costs (defined below), is $24,000 or 1% of Total Revenues. BWI’s net profit for CY 2008, as adjusted for excess costs, is $56,000 or 1% of Total Revenues.

Table 2: Adjusted Net Profit or (Loss) for CY 2008, “Excluding Excess Costs”

Description CY 2008 CY 2008Net Loss (Table 1) (618,000)$ (478,000)$ Less Excess Costs (Table 3) 594,000 534,000 Adjusted Net Profit (Loss) (24,000) 56,000 Total Revenues (Table 1) 4,478,000 4,743,000 Adjusted Net Profit (Loss) as a Percentage of Total Revenues -1% 1%

Table 3 compares the actual costs for CY 2007 and CY 2008 to the inflation-adjusted total costs in BWI‘s 2003 proposal for commercial refuse services. The 2003 Proposal costs are inflated to 2007 and 2008 dollars using various published price indices in order to compare the CY 2007 and CY 2008 costs for reasonableness. Since the 2003 Proposal costs assumed the availability of a local MRF, the actual CY 2007 and CY 2008 costs are adjusted for the impact of not having the use of a local MRF (See Finding #2). As shown in Table 3, actual costs for CY 2007 and CY 2008, adjusted for the MRF impact, exceed the inflation-adjusted 2003 Proposal costs by $594,000 and $534,000, respectively. Details of the calculation of inflation-adjusted costs for CY 2007 and CY 2008 are presented in Exhibit 8. These differences are primarily due to inadequate estimates of the indirect costs and other expenses in the 2003 proposal to the City. According to the BWI Agreement, Section 6.6 -Extraordinary Adjustments, states that extraordinary adjustments “shall not include…inaccurate estimates by the Company of its proposed cost of operation…”

Table 3: Comparison of Inflation-Adjusted 2003 Proposed Total Costs to Actual Total Costs for CY 2007 and CY 2008*

Total Direct Costs (Exhibit 8, Table 8-1) 3,008,000$ 3,547,000$ 3,143,000$ 3,600,000$ Total Indirect Costs (Exhibit 8, Table 8-2) 1,186,000 1,549,000 1,259,000 1,621,000

Total Operating Costs 4,194,000 5,096,000 4,402,000 5,221,000 Less Impact of No Local MRF (Table 5) (308,000) (285,000)

Total Operating Costs, Less Impact of No Local MRF 4,194,000$ 4,788,000 4,402,000$ 4,936,000 Proposed 2003 Costs Adjusted for Inflation 4,194,000 4,402,000

Total Operating Costs in Excess of Proposed 2003 Costs Adjusted for Inflation 594,000$ 534,000$

* See Exhibit 8 for details of the calculation of inflation-adjusted costs for CY 2007 and CY 2008.

2003 Proposal

Adjusted to 2007

2003 Proposal

Adjusted to 2008

CY 2007 Actual

CY 2008 ActualDescription


Finding #1C: BWI’s profitability in Santa Clarita is below industry averages. Industry profitability in the last three years has ranged from 5% to 12%. Based on the industry data for the last three years shown in Table 4, average industry profitability ranged from 5% to 12%.

Table 4: Industry Profitability for Last Three Years

RMA Data (2)

All Companies from April 1, 2007 to March 31, 2008

(2)

Profit Before Taxes 7% 12% 11% 5%

(1) Data are averages of operational data from 2005 to 2007 annual financial reports.(2) The Risk Management Association Annual Statement Studies 2008-2009 - NAICS 562111 (SIC #4212) - Admin and Waste Management Services - Solid Waste Collection

Income Data Allied (1) Republic (1) Waste Management (1)

Objective #2: Determine the financial impact of the planned MRF not being available for use. Finding #2A: Based on the data provided by BWI, the average annual impact of not having a local MRF during CY 2007 and CY 2008 is approximately $296,000 per year or 7% of average annual rate revenues. Based on BWI’s truck operating cost for calendar year 2008 and the routes and route hours as of February 2009, BWI’s truck operating cost per route hour is approximately $58. Additionally, as a direct result of not having a local MRF, BWI’s ability to cost-effectively divert the required waste was impeded. Table 5 shows the estimated impact (incremental cost) of not having the use of a local MRF. The MRF impact was estimated to be $308,000 for CY 2007 and $285,000 for CY 2008, including the penalty of $40,000 each year for not achieving the diversion requirement. (As a result of not meeting the 50% diversion requirement, BWI incurred a penalty paid to the City of $10,000 per quarter as required in Section 4.2.5 (Minimum Recycling Requirements) of the BWI Agreement.)


Table 5: Estimated Impact of Not Having a Local MRF

2007 2008Incremental Hours (Exhibits 9A & 9B) 4,617 4,221 4,419

Average Truck Operating Cost* 58$ 58$ 58$

Estimated MRF Impact** 268,000$ 245,000$ 256,000$ Penalty for Not Achieving Diversion Goal 40,000 40,000 40,000 Total Estimated MRF Impact 308,000$ 285,000$ 296,000$ Rate Revenues 4,356,000$ 4,448,000$ 4,402,000$ MRF Impact as a Percent of Rate Revenues 7% 6% 7%

** Rounded to thousands.

Calendar Year AverageDescription

* Based on CY 2008 truck operating costs and February 2009 route hours. Data was not available to estimate truck operating cost per hour for CY 2007.

2B: BWI incurred approximately $1,029,000 in unreimbursed costs related to development of the MRF site. Amortized over the remaining three years of the BWI Agreement, these costs would be approximately $343,000 annually or 8% of CY 2008 rate revenues. The BWI Agreement with the City requires BWI to construct and operate a material recovery facility (MRF). Since the inception of the BWI Agreement, three sites have been identified and none were approved. After proposing its third MRF site, Burrtec withdrew its proposal after members from the community expressed concerns about the traffic, zoning and proximity to residential housing. Through December 31, 2008, BWI incurred $4,494,000 in accumulated costs for the latest MRF site (See Table 6), including approximately $3,465,000 in land costs and $1,029,000 in permitting, consulting and interest costs. The lost value to BWI is the total accumulated MRF cost, less the sales price of the property. The property was acquired prior to the current downturn in the real estate market. Accordingly, it is likely that the actual value of the land is less than the $3,465,000 land purchase price reflected in Table 6. However, the cost of the land may be recovered in whole or in part depending on the selling price of the property, and the land cost is not included in the rate impact calculation.

Table 6: Summary of Accumulated MRF Costs

Description CostLand Purchase Cost 3,465,000$

Consulting Fees and Engineering 593,000 Capitalized Interest and Loan Costs 298,000 City Fees and Permits 138,000 Permitting, Consulting and Interest Costs 1,029,000 Total Accumulated MRF Cost 4,494,000$


The permitting, consulting and interest costs incurred, if amortized over the remaining three years of the BWI Agreement would be approximately $343,000 per year or 8% of CY 2008 rate revenues. Objective #3: Evaluate the fuel cost increases over the most recent three years ending December 31, 2008. Finding #3: The percentage change in BWI’s fuel cost is lower than the change in the Producer Price Index - No. 2 Diesel Fuel that is used to adjust rates. Section 6.4 of the BWI Agreement establishes the methodology for adjusting rates. The Producer Price Index #WPU057303 (Fuels and Related Products and Power, #2 Diesel Fuel) is identified and used for the adjustment of the fuel cost component for fiscal year 2007 and fiscal year 2008. BWI uses compressed natural gas vehicles to provide commercial refuse services in the City. HF&H calculated and charted the percentage change in BWI’s fuel cost and the PPI for No. 2 Diesel Fuel from August 2004 through December 2008 (Chart #1). Chart #1 shows the change in BWI fuel cost and the PPI for No. 2 Diesel Fuel from August 2004 to December 2008. As shown in Chart #1 and Table 7, the percentage change in BWI fuel cost is lower than the change in the PPI for No. 2 Diesel Fuel that is used in the rate adjustment formula when the entire period of analysis in considered. The percentage changes in the annual averages for PPI for No. 2 Diesel and Natural Gas are reflected in Exhibit 6. For comparative purposes, we also graphed the PPI for natural gas.

Table 7: Comparison of the BWI Fuel Cost and PPI Indices Percentage Change

Actual Cost or PPI Index 08/01/04 12/31/08 Percentage Change

Actual Monthly Fuel Cost 13,918$ 13,742$ -1.3%PPI No. 2 Diesel Fuel (Monthly Index) (1) 135.1 171.5 26.9%PPI Natural Gas (Monthly Index) (2) 249.8 242.0 -3.1%(1) PPI - Fuels and Related Products and Power, No. 2 Diesel Fuel - WPU057303(2) PPI - Fuels and Related Products and Power, Natural Gas - WPU0531

City of Santa Clarita 9 May 6, 2010

Chart #1

-50%

0%

50%

100%

150%

200%

250%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

% Change in Fuel Cost from August 2004 to December 2008

Reported By Hauler

PPI on Diesel

PPI on Natural Gas

Aug-04 Jan-05 Jan-06 Jan-07 Jan-08

Exhibit 1

1 Revenues2 Rate Revenues 4,355,650$ 97.3% 4,448,141$ 93.8%3 Recyclable Material Revenues 75,045 1.7% 264,602 5.6%4 Other Revenue 47,088 1.0% 30,352 0.6%5 Total Revenues 4,477,783 100.0% 4,743,095 100.0%67 Direct Costs:8 Truck Operating Cost(1) 1,471,141 32.9% 1,690,040 35.6%9 Transfer/Disposal/Processing Costs 1,505,773 33.6% 1,234,557 26.0%

10 Container Depreciation/Amortization 349,471 7.8% 414,207 8.7%11 Other Direct Costs 221,036 4.9% 260,995 5.5%12 Subtotal: Direct Costs 3,547,421 79.2% 3,599,799 75.8%1314 Indirect Costs:15 Local General and Administrative Cost 706,525 15.8% 790,328 16.7%16 Corporate Overhead (2) 180,000 4.0% 180,000 3.8%17 Franchise Fees/Other City Fees 483,638 10.8% 532,085 11.2%18 Liquidated Damages - 0.0% - 0.0%19 Other Indirect Costs - 0.0% - 0.0%20 Subtotal: Indirect Costs 1,370,163 30.6% 1,502,413 31.7%2122 Net Profit (Loss) from Operations (439,801) -9.8% (359,117) -7.5%2324 Other Income/Expenses:25 Other Income - 0.0% - 0.0%26 Interest Expense 159,837 3.6% 100,869 2.1%27 Other Expenses 18,413 0.4% 17,641 0.4%28 Total Other Income/Expenses 178,250 4.0% 118,510 2.5%2930 Net Income (Loss) (618,051)$ -13.8% (477,627)$ -10.0%

Burrtec Waste IndustriesCity of Santa Clarita

Summary of Rate Revenues, Costs and Profit MarginCalendar Years Ended December 31, 2007 and 2008

% of Total Revenues

% of Total Revenues

(1) Including vehicles, drivers, fuel, insurance, uniforms, vehicle maintenance, and all other direct truck operating costs.(2) Allocation of $15,000 per month

DescriptionItem 2007 2008

City of Santa Clarita,Burrtec Waste Industries 5/6/2010

Exhibit 2A

Waste Stream

Facility

Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads

January 1,628 309 421 43 2,049 352 1,477 282 1,477 282 16 5 16 5

February 1,400 243 390 37 1,790 280 1,553 251 1,553 251 - - -

March 1,594 260 437 40 2,031 300 1,670 287 1,670 287 6 2 6 2

April 1,593 214 451 40 2,044 254 1,493 204 1,493 204 - -

May 1,559 238 436 40 1,995 278 1,320 217 1,320 217 - -

June 1,445 223 444 40 1,890 263 1,284 217 2 1 4 1 1,290 219 - -

July 1,629 218 455 41 2,084 259 1,488 208 4 2 1,492 210 - -

August 1,599 230 439 41 2,038 271 1,703 250 5 2 1,708 252 - -

September 1,518 201 383 36 1,901 237 1,525 208 6 2 1,531 210 - -

October 1,859 249 298 30 2,156 279 1,710 226 5 2 1,715 228 - -

November 1,991 254 338 37 2,330 291 1,155 159 3 1 1,158 160 4 2 4 2

December 2,420 314 475 52 2,895 366 446 86 446 86 4 2 4 2

Total 20,235 2,953 4,967 477 25,203 3,430 16,824 2,595 25 10 4 1 - - 16,853 2,606 30 11 - - - - 30 11

Adjustment (2) (3,826) (1,077) 3,826 1,077 - -

Adjusted Total 20,235 2,953 4,967 477 25,203 3,430 12,998 1,518 25 10 4 1 3,826 1,077 16,853 2,606 30 11 - - - - 30 11

2007 Levels (%) (3) 48% 7% 12% 1% 60% 8% 31% 4% 0% 0% 0% 0% 9% 3% 40% 6% 0% 0% 0% 0% 0% 0% 0% 0%(1) CRRRI - Community Recycling and Resource Recovery, Inc.(2) Adjustment for tonnage delivered to Recycle America instead of CRRRI.(3) 2007 Levels as a percentage of total tonnage collected,

Tons Loads

25,203 3,430 7.3

16,853 2,606 6.5

30 11 2.7

42,086 6,047 7.0

Summary

Recycle America Total CRRRI Rent-a-Bin Other:

Summary of Tons and Loads for 2007

Total Tons per Load

TotalChiquita Canyon Landfill Other: CRRRI Total CRRRI (1) Sun Valley

Paper Stock Rent-a-Bin

Refuse

Recyclables

Green Waste

Total Collected

Burrtec Waste IndustriesLoads and Tons Delivered by Route Truck by Facility

Calendar Year Ended December 31, 2007

Refuse Recyclables Green Waste

Estimated Uncompensated Disposal 90,000$ 262,000$ 352,000$

Description Food Waste Recyclables Total

CRRRI Tons 4,967

Disposal Fee per Ton 26.80$ 26.80$ Difference between Processing and Disposal Cost per Ton 18.20$ 20.17$

Estimated of Uncompensated Disposal for CY 2007

CRRRI Tipping Fee 45.00$ 46.97$

12,998


Exhibit 2B

Waste Stream

Facility

Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads Tons Loads

January 2,679 310 381 42 3,060 352 216 22 393 70 609 92 7 2 7 2

February 2,230 275 406 47 2,635 322 300 35 304 66 604 101 - - -

March 2,190 279 552 58 2,742 337 341 40 302 68 643 108 - - -

April 2,268 307 280 38 2,548 345 152 31 303 71 456 102 - -

May 2,310 300 225 24 2,535 324 211 43 329 71 540 114 - -

June 2,146 286 209 23 2,356 309 211 42 313 68 525 110 - -

July 2,068 253 272 30 2,340 283 327 36 312 76 639 112 - -

August 2,099 257 293 35 2,392 292 251 27 317 70 568 97 - -

September 1,964 242 315 39 2,279 281 271 28 308 70 579 98 - -

October 2,387 317 327 41 2,714 358 196 22 329 79 525 101 - -

November 2,335 284 331 39 2,666 323 212 19 400 81 11 3 623 103 - -

December 2,462 298 383 46 2,846 344 208 21 434 98 2 1 1 3 645 123 - -

Total 27,139 3,408 3,973 462 31,112 3,870 2,896 366 4,044 888 2 1 12 6 6,954 1,261 7 2 - - - - 7 2

2007 Levels (%) (2) 12% 31%

Tons at 2007 Levels 4,569 11,802 Estimated Decrease in Tons - CRRRI 595 8,907 (1) CRRRI - Community Recycling and Resource Recovery, Inc.(2) See Exhibit 2a.

Food Waste Recycle Total

Tons Loads

31,112 3,870 8.0 595 8,907 9,502

6,954 1,261 5.5 45.00$ 48.00$

7 2 3.6 30.02$ 30.02$

38,072 5,133 7.4 14.98$ 17.98$

9,000$ 160,000$ 169,000$

Burrtec Waste IndustriesLoads and Tons Delivered by Route Truck by Facility

Calendar Year Ended December 31, 2008

Refuse Recyclables Green Waste

Total

Estimated of Uncompensated Disposal for CY 2008

Rent-a-Bin CRRRI

60,000$

3,973

14.98$

TotalChiquita Canyon Landfill Other: CRRRI Total

2,896

Total Collated

TotalTons per

Load Description

112,000$ Difference between Processing and Disposal Cost per Ton

Disposal Fee per Ton

Estimated Decrease in Tons - CRRRI

Recyclable Processing Fee per Ton

Estimated Increase in Transfer/Disposal/Processing Costs at CRRRI for 2008

CRRRI (1) Rent-a-Bin Other:

Food Waste

Sun Valley Paper Stock

17.98$

Other:

CRRRI TonsDifference between Processing and Disposal Cost per Ton

TotalRecyclables

Estimated Uncompensated Disposal

Estimated Increase in Transfer/ Disposal/ Processing Costs

Summary of Tons and Loads for 2008

Refuse

Recyclables

Green Waste52,000$

SummaryDescription


Exhibit 3

Waste Stream Delivered by Route

TrucksSolid Waste Facilities Used One-Way Distance from

City CenterOne-Way Travel Time

from City Center

Refuse Chiquita LF 10.7 miles 20 min.

Select Loads Community Recycling 20.8 miles 33 min.

Recyclables Sun Valley Paper 21.1 miles 35 min.

Recyclables Recycle America 4.1 miles 12 min.

Green Waste Community Recycling 20.8 miles 33 min.

Food Waste Community Recycling 20.8 miles 33 min.

Burrtec Waste IndustriesSolid Waste Facilities Used as of February 2009


Exhibit 4

1 Monthly Fuel Cost for 2004 Aug-04 Sep-04 Oct-04 Nov-04 Dec-04 Total Fuel Cost

2 Fuel Cost 13,918$ 13,901$ 15,146$ 14,728$ 13,043$ 70,736$

3 Monthly Fuel Cost for 2005 Jan-05 Feb-05 Mar-05 Apr-05 May-05 Jun-05 Jul-05 Aug-05 Sep-05 Oct-05 Nov-05 Dec-05 Total Fuel Cost

4 Fuel Cost 13,530$ 12,942$ 17,916$ 17,366$ 15,238$ 17,882$ 17,755$ 26,224$ 24,322$ 27,740$ 17,938$ 17,576$ 226,429$


6 Fuel Cost 15,152$ 16,262$ 15,881$ 17,799$ 20,038$ 21,482$ 18,986$ 21,174$ 19,159$ 17,747$ 15,939$ 13,667$ 213,286$


8 Fuel Cost 13,665$ 13,044$ 17,424$ 16,591$ 19,050$ 19,607$ 18,287$ 18,838$ 17,576$ 19,958$ 22,852$ 22,295$ 219,187$


10 Fuel Cost 23,295$ 21,848$ 24,242$ 25,908$ 26,077$ 24,504$ 28,144$ 24,899$ 24,484$ 25,000$ 18,907$ 13,742$ 281,050$

Burrtec Waste IndustriesMonthly Fuel Cost

August 1, 2004 through December 31, 2008


Exhibit 5

Mon Tues Wed Thur Fri Sat Sun

1 Refuse Routes(2) 6 6 6 6 6 4 0 34 11.8 20,862

2 Recycling Routes 3 3 3 3 3 1 0 16 11.5 9,568

3 Green Waste Routes 0 0 1 1 1 0 0 3 1.6 250

4 Other:

5 Food Waste Routes 1 1 1 1 1 0 0 5 10.5 2,730

6 Total 10 10 11 11 11 5 0 58 35.4 33,410

Estimated Annual Hours(1)

Burrtec Waste IndustriesNumber of Routes and Route Hours as of February 2009

(1) Total Route Days per Week X Average Truck Hours per Route per Day X 52 Weeks

Item Route TypeNumber of Route Trucks

Average Truck Hours per Route per

Day

Total Route

Days per Week

City of Santa ClaritaBurrtec Waste Industries 5/6/2010

Exhibit 6

Description 2003 2004 % Inc 2005 % Inc 2006 % Inc 2007 % Inc 2008 % Inc

LABOR (New Subtituted Index)

PCU56211-56211, Waste Collection, Waste Collection (Annual Average) 100.000 101.300 1.3% 102.500 1.2% 104.500 2.0% 107.600 3.0% 112.200 4.3%2.5% 4.5% 7.6% 12.2%

Employment Cost Index - CIU2010000520000I (Annual Average) 93.500 97.000 3.7% 99.300 2.4% 101.600 2.3% 104.400 2.8% 107.300 2.8%6.2% 8.7% 11.7% 14.8%

Union Local 396 - Inglewood Agreement 19.830 20.530 3.5% 21.280 3.7% 21.330 0.2% 22.430 5.2% 23.040 2.7%7.3% 7.6% 13.1% 16.2%

FUEL#2 Diesel FuelPPI - WPU057303 (Annual Average) 100.500 128.200 27.6% 189.100 47.5% 216.900 14.7% 235.500 8.6% 325.360 38.2%Change between 12/2003 and 12/2005, 2006, 2007 & 2008 88.2% 115.8% 134.3% 223.7%

EIA Weekly Retail Gasoline and Diesel PriceWeekly California #2 Diesel (Annual Average) 165.670 209.950 26.7% 260.760 24.2% 292.200 12.1% 312.500 6.9% 392.500 25.6%(2007 & 2008 are for Ultra Low Sulfer Diesel) 57.4% 76.4% 88.6% 136.9%

Natural GasPPI - WPU0531 (Annual Average) 214.500 245.900 14.6% 335.400 36.4% 280.300 -16.4% 273.800 -2.3% 344.000 25.6%Change between 12/2003 and 12/2005, 2006, 2007 & 2008 56.4% 30.7% 27.6% 60.4%

EQUIPMENT

PCU336120331201 - Heavy duty truck manufactuing (Annual Average) 100.000 102.200 2.2% 106.400 4.1% 110.400 3.8% 115.500 4.6% 118.900 2.9%6.4% 10.4% 15.5% 18.9%

WPU141106 Transportation equipment, Trucks over 14,000 GVW (Annual Average) 154.200 155.700 1.0% 162.400 4.3% 169.100 4.1% 177.200 4.8% 182.200 2.8%

5.3% 9.7% 14.9% 18.2%

ALL OTHER EXPENSESCPI All Urban Consmers, All Items US City Avg - CUUR0000SA0 (Monthly Index) 184.300 190.300 3.3% 196.800 3.4% 201.800 2.5% 210.036 4.1% 210.228 0.1%

6.8% 9.5% 14.0% 14.1%CPI All Urban Consmers, All Items US City Avg - CUUR0000SA0 (Monthly Index) 184.000 188.900 2.7% 195.300 3.4% 201.600 3.2% 207.342 2.8% 215.303 3.8%

6.1% 9.6% 12.7% 17.0%CPI All Urban Consmers - CUURA421S0 - Los Angeles, Riverside, Orange County (Annual Average) 187.000 193.200 3.3% 201.800 4.5% 210.400 4.3% 217.338 3.3% 225.008 3.5%

7.9% 12.5% 16.2% 20.3%

INFLATION INDICESLABOR, FUEL, EQUIPMENT AND ALL OTHER EXPENSES

2003 through 2008


Exhibit 7

Truck Operating Cost% of Total

Costs(1)Weighted Average %

% Change in Index

2003 to 2007

Weighted Average %

Change

% Change in Index

2003 to 2008

Weighted Average %

Change

Labor(2) 30% 60% 11.7% 7.0% 14.8% 8.9%Fuel(3) 5% 10% 27.6% 2.8% 60.4% 6.0%Equipment(4) 15% 30% 15.5% 4.6% 18.9% 5.7% Total Percentage 50% 100% 14.4% 20.6%

(4) Heavy duty truck manufacturing - PCU336120331201

Weighted Average Indices for Truck Operating Costs

(1) Line item percentages are from Agreement Section 6.4 - Method of Adjustments(2) Employment Cost Index - CIU20100005200001(3) Natural Gas - PPI WPU0531 (annual average)

(Calculation of Inflation Factors for Truck Operating Costs in Table 8-1)

Cityi of Santa Clarita,Burrtec Waste Industries 5/6/2010

Exhibit 8

City of Santa Clarita, Burrtec Waste Industries 8-1 May 6, 2010

Calculation and Analysis of Inflation-Adjusted Costs

Direct Costs In Table 8-1, direct costs submitted in BWI’s 2003 proposal to the City for commercial refuse service are adjusted for inflation to 2007 and 2008 dollars in order to compare the CY 2007 and CY 2008 actual costs for reasonableness. As shown in Table 8-1, CY 2007 direct costs exceed the adjusted 2003 proposed costs by $539,000 and CY 2008 direct costs exceed the adjusted 2003 proposed costs by $457,000. A substantial part of these differences are explained by the impact of not having a local MRF, which is quantified in Table 5 and discussed in Finding #2.

Table 8-1: Summary of Direct Costs and Other Operational Costs for the 2003 Proposal and Calendar Years 2007 and 2008

Direct Costs:Truck Operating Cost(1) 1,396,000$ 14.4% 1,597,000$ 1,471,000$ 20.6% 1,684,000$ 1,690,000$ Transfer/Disposal/Processing Costs(2) 1,036,000 16.2% 1,204,000 1,506,000 20.3% 1,246,000 1,235,000 Container Depreciation/Amortization(3) 179,000 15.5% 207,000 349,000 18.9% 213,000 414,000 Other Direct Costs(1) 14.4% 221,000 20.6% 261,000 Subtotal: Direct Costs 2,611,000$ 3,008,000$ 3,547,000$ 3,143,000$ 3,600,000$ Actual Total Direct Costs in Excess of Inflation-Adjusted 2003 539,000$ 457,000$

2003 Adjusted to 2008**

% Change in Price Indices*

% Change in Price

Indices**

(3) Percentage change is based on the PPI for Heavy Duty Truck Manufacturing - PCU336120331201, which is used in the arate adjustment formula for all equipment.

Description 2003 Proposal

2003 Adjusted

to 2007

CY 2007 Actual

CY 2008 Actual

* 2003 Proposal adjusted by percentage change in annual average of respective indices to 2007 dollars.** 2003 Proposal adjusted by percentage change in annual average of respective indices to 2008 dollars.

(1) Percentage change is based on the weighted average index - see Exhibit 7(2) Percentage change is based on the CPI - All Urban Users, All Items - U.S. City Average

Indirect Costs and Other Expenses In Table 8-2, the indirect costs submitted in BWI’s commercial proposal are adjusted for inflation from 2003 to 2007 and 2008 in an effort to provide an equivalent comparison. As shown in Table 8-2, Indirect Costs and Other Expenses for CY 2007 and CY 2008 exceed the inflation-adjusted data for 2003 by approximately $363,000 and $362,000, respectively. A portion of the difference is reflected in the Corporate Overhead Charge. The Corporate Overhead Charge was projected in the 2003 proposal at $78,000. The CY 2007 adjusted Corporate Overhead Charge is $91,000 and the CY 2008 adjusted Corporate Overhead Charge is $94,000. The actual Corporate Overhead Charge for CY 2007 and CY 2008, as shown in Table 8-2, is $180,000 for each year, approximately twice as much as the inflation-adjusted charge. The remaining differences of approximately $274,000 for CY 2007 and $276,000 for CY 2008 are primarily due to inadequate estimates of the indirect costs and other expenses in the 2003 proposal.

Exhibit 8

City of Santa Clarita, Burrtec Waste Industries 8-2 May 6, 2010

Table 8-2: Summary of Indirect Costs and Other Expenses for the 2003 Proposal and Calendar Years 2007 and 2008

2007 2008Actual Actual

Indirect Costs:Local General and Administrative Cost 526,000$ 16.2% 611,000$ 707,000$ 3.5% 633,000$ 790,000$ Corporate Overhead (3) 78,000 16.2% 91,000 180,000 3.5% 94,000 180,000 Franchise Fees/Other City Fees 412,000 Actual 484,000 484,000 Actual 532,000 532,000 Subtotal: Indirect Costs 1,016,000 1,186,000 1,371,000 1,259,000 1,502,000

Other Expenses:Interest Expense 160,000 101,000 Other Expenses 18,000 18,000 Total Other Income/Expenses - - 178,000 - 119,000 Total Indirect and Other Expenses 1,016,000$ 1,186,000$ 1,549,000$ 1,259,000$ 1,621,000$ Actual Total Indirect Costs in Excess of Inflation-Adjusted 2003 363,000$ 362,000$

% Change in CPI Index(1)

2003 Adjusted

to 2008

(1) CPI - All Urban Consumers, All Items, Los Angeles-Riverside Orange Co. - 2003 to 2007 - (217.338 ÷ 187.000 = 16.2%).(2) CPI - All Urban Consumers, All Items, U.S. City Average - 2007 to 2008 - (225.008 ÷ 217.338 = 3.5%).(3) Allocation of $6,500 in 2003 proposal and $15,000 per month in CY 2007 and CY 2008.

Description 20032003

Adjusted to 2007

% Change in CPI Index(2)

Exhibit 9A

Facility Loads One-Way Mileage

One-Way Time

(minutes)Total Miles Total Time

(minutes)Total Time

(hours)

Refuse:Chiquita Canyon Landfill 2,953 10.70 20.00 63,194 118,120 1,969 Other - CRRRI (Food Waste) 477 20.80 33.00 19,843 31,482 525

Total Refuse 3,430 31.50 53.00 83,037 149,602 2,493

Recyclables:CRRRI 1,518 20.80 33.00 63,149 100,188 1,670 Sun Valley Paper Stock 10 21.10 35.00 422 700 12 Rent-A-Bin 1 - - - Recycle America 1,077 4.10 12.00 8,831 25,848 431

Total Recyclables 2,606 46.00 80.00 72,402 126,736 2,112

Greenwaste:CRRRI 11 20.80 33.00 458 726 12 Rent-A-Bin - - - - Other - - - -

Total Greenwaste 11 20.80 33.00 458 726 12

GRAND TOTAL 6,047 98.30 166.00 155,897 277,064 4,617

Impact of No Local MRFCalendar Year Ended December 31, 2007


Exhibit 9B

Facility Loads One-Way Mileage

One-Way Time

(minutes)Total Miles Total Time

(minutes)Total Time

(hours)

Refuse:Chiquita Canyon Landfill 3,408.00 10.70 20.00 72,931 136,320 2,272 Other - CRRRI (Food Waste) 462.00 20.80 33.00 19,219 30,492 508

Total Refuse 3,870.00 31.50 53.00 92,150 166,812 2,780

Recyclables:CRRRI 366.00 20.80 33.00 15,226 24,156 403 Sun Valley Paper Stock 888.00 21.10 35.00 37,474 62,160 1,036 Rent-A-Bin 1.00 - - - Other 6.00 - - -

Total Recyclables 1,261.00 41.90 68.00 52,700 86,316 1,439

Greenwaste:CRRRI 2.00 20.80 33.00 83 132 2 Rent-A-Bin - - - - Other - - - -

Total Greenwaste 2.00 20.80 33.00 83 132 2 -

GRAND TOTAL 5,133.00 94.20 154.00 144,933 253,260 4,221

Impact of No Local MRFCalendar Year Ended December 31, 2008


CITY OF SANTA CLARITA

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