department of public works bureau of sanitation …

DEPARTMENT OF PUBLIC WORKS

BUREAU OF SANITATION BOARD REPORT NO. 4 SEPTEMBER 8, 2017

CD: ALL

REQUEST FOR THE REVOCATION OF UNITED PACIFIC WASTE, INC.'S SOLID WASTE HAULING PERMIT (NUMBER 09-046) FOR FAILURE TO COMPLY WITH THE TERMS AND CONDITIONS OF ITS PERMIT AND WITH THE REQUIREMENTS OF LAMC 66.32 ET SEQ

RECOMMENDATION

Authorize the Director of LA Sanitation (LASAN) to execute the following:

1. Revoke United Pacific Waste, Inc.'s (UPW) Solid Waste Hauling Permit, Number 09-046, effective immediately, for failure to remit unpaid AB 939 Compliance Fees.

2. Direct LASAN to notify Franchise Service Providers (FSP) that UPW's permit is revoked in order to provide those FSPs with the opportunity to begin service to UPW's customers.

3. Direct LASAN to pursue unpaid AB 939 Compliance Fees via referral to the Office of Finance's collection program.

4. Direct LASAN to refer this matter to the Office of the City Attorney for misdemeanor case filing if LASAN staff discover that UPW collects, removes, or transports solid waste generated within the City after their permit revocation.

TRANSMITTALS

1. January 26, 2016 Notice of AB939 Compliance Fee Inspection to UPW from LASAN;

2. May 5, 2016 Notice of AB939 Compliance Fee Inspection to UPW from LASAN;

3. July 1, 2016 Audit Transmittal Letter to UPW from LASAN;

4. July 14, 2016 Confirmation of Payment Plan Established July 12, 2016 between LASAN and UPW;

5. September 15, 2016 Confirmation of Revised Payment Plan Established September 13, 2016 between LASAN and UPW;

6. January 4, 2017 Notice of Revocation of Solid Waste Hauling Permit to UPW from LASAN;

Bureau of Sanitation Board Report No. 4 September 8, 2017

7. February 1, 2017 Appeal from Revocation by UPW;

8. February 7, 2017 Confirmation of Revised Payment Plan Established February 6, 2017 to UPW from LASAN;

9. March 15, 2017 Notice of Non-Payment for 2016 Quarter 4, to UPW from LASAN.

BACKGROUND

Section 66.32 of the Los Angeles Municipal Code (LAMC) requires all waste haulers collecting waste from within the City of Los Angeles ("City") to obtain a Waste Hauler permit and pay AB 939 Compliance Fees of ten percent of gross receipts, with a fee exemption for waste haulers whose annual tonnage does not exceed 1,000 tons per year, or whose receipts are generated from sourceseparated materials. The permits must be renewed annually. The permit renewal process begins in March of each year with a notice from LASAN to each permitted hauler, informing them that renewal season has begun and giving them instructions on how to complete the process, together with a due date of April 30 of the same year. Beginning in 2013, LASAN required all haulers to be current with fees or with established, active payment plans in order for a hauler's permit to be renewed.

As part of compliance monitoring, Section 66.32.4(e) of the LAMC authorizes the City to inspect hauler records for compliance with AB939 and other requirements, and determine proper calculation and payment of fees. The audit process typically includes an entrance and exit conference with the hauler as part of the records review period required to determine compliance. After the exit conference the Audit Team provides a period of time to the hauler so the hauler may review the records and provide additional information for the Audit Team's consideration before the audit report is finalized. Generally the audit process, starting with the notification to the hauler and ending with the transmittal of the audit report, takes 2-3 months.

DISCUSSION

LASAN is recommending the revocation of UPW's permit due to: 1) Failure to remit AB 939 Compliance Fees resulting from an audit covering the review period of January 1, 2013 to December 31, 2015; and 2) Failure to remit AB 939 Compliance fees for 2016 Quarter 4 and 2017 Quarters 1 and 2. The respective outstanding balances are as follows:

Source of Outstanding Fees Outstanding Balance Audit for Period January 1, 2013-December 31,2015 $404,038.87 2016 Quarter 4 AB 939 Fees plus Late Fees as of July 30, 2017, and NSF Fee $174,539.50 2017 Quarter 1 AB 939 Fees plus Late Fees as of July 30, 2017 (Estimated*) $176,529.45 2017 Quarter 2 AB 939 Fees plus Late Fees as of July 30, 2017 (Estimated*) $172,326.37

TOTAL $927,434.19


* Quarterly AB 939 Fee is estimated using the average of the three most recent quarterly reports filed by hauler

In January 2016, Sanitation informed UPW of an upcoming AB939 compliance review ("audit") of their records for the years 2013-2015 (Attachment 1 ). The review was scheduled for February 10, 2016. The Audit Team performed their review and found significant misreporting of tonnage and associated gross receipts. Because the amount of their preliminary findings was significant, LASAN decided to use an independent auditor to verify the Audit Team's findings. Accordingly, LASAN retained Simpson and Simpson, LLP (Simpson), and notified UPW that a second review would be taking place on May 16, 2016 (Attachment 2).

An Exit Conference was held on June 22, 2016, when their audit findings were discussed. At the Exit Conference, UPW was granted a review period ending June 29, 2016 to provide them with an opportunity to present additional information to the Audit Team. UPW's representatives acknowledged that the amount of the findings was not significantly different from their own calculations.

On July 1, 2016, the audit report was finalized and transmitted to UPW (Attachment 3). The final audit findings were $1,490,577.00 in unpaid AB939 fees for the period January 1, 2013-December 31, 2015. UPW requested a payment plan, and the two parties agreed on terms July 12, 2016 (Attachment 4). The payment plan required UPW to remit an initial payment of $400,000.00 on July 13, 2016, with the remaining balance divided into three monthly installments beginning September 2016 and ending in November of the same year. UPW made the initial payment as agreed; however, in September 2016 UPW requested a revision to the payment plan, stating financial difficulties. The two parties agreed to a revised payment plan on September 13, 2016 (Attachment 5).

UPW complied with the revised payment plan in October and November 2016, but they failed to remit their December payment. After various attempts by LA Sanitation staff to contact the hauler, UPW was issued a Notification of Permit Revocation (Notice) on January 4, 2017 (Attachment 6). That Notice gave UPW until February 3, 2017 either to file an appeal or make themselves current by paying both the December 2016 and the January 2017 installments for the existing payment plan.

On January 26, 2017, Shana Kandilian, Secretary of UPW, called LASAN and explained that she had been away and was unaware of the problem; however, she requested a second revision to the payment plan, continuing to cite financial issues. As the parties negotiated a new revision to the payment plan, UPW filed an appeal to protect their rights in the event that negotiations did not end successfully (Attachment 7). On February 6, 2017, both sides agreed to a revised payment plan for the remaining balance of $681,610.61, plus applicable late fees (Attachment 8). As with all payment plans, the compliance terms included a requirement that the hauler remain in good standing with respect to quarterly payment plans. Because this payment plan represented a resolution to the revocation appeal, it also stated that failure to comply could result in LASAN referring the matter to the Board of Public Works with a recommendation to revoke UPWs permit.


On February 24, 2017 LASAN Waste Hauler Permitting staff were notified that UPW had not remitted a quarterly payment for 2016 Quarter 4, which was a violation of the payment plan's compliance terms. Staff contacted Ms Kandilian, and on February 28, 2017, LASAN received a payment.

However, on March 13, 2017, LASAN staff were informed that the check for 2016 Quarter 4 had been returned due to insufficient funds. On March 15, 2017 UPW failed to submit the March installment of the payment plan. On March 17, 2017 LASAN notified UPW via email that the payment plan was dissolved and the appeal process reactivated due to their lack of compliance; however, as is usual in such cases, LASAN encouraged the hauler to continue to make payments, if possible, during the appeal process. On March 15, 2017, LASAN sent UPW a notice detailing all outstanding, delinquent quarterly fees to that point (Attachment 9). On March 21, 2017, LASAN received a check for $50,000.00 from UPW. Of the $50,000.00 received, $4,038.87 was applied to an outstanding late fee for 2016 Quarter 2, and the remaining $45,961.13 was then applied to the audit findings balance. On April 30, 2017, UPW failed to remit AB939 fees for 2017 Quarter 1. On May 26, 2017, LASAN received a check for $91,610.61 from UPW and applied it to the audited balance. On July 30, 2017, UPW failed to remit AB939 fees for 2017 Quarter 2.

CONCLUSION

Despite LASAN's efforts to assist UPW in resolving their issues, the hauler remains non-compliant, failing to pay delinquent AB939 Compliance Fees and associated late fees totaling an estimated $523,395.32 for 2016 Quarter 4 and 2017 Quarters 1 and 2; the remaining audit balance of $404,038.87; and applicable future late fees for both amounts. Therefore, LASAN recommends the revocation of UPW's waste hauling permit, number 09-046. Upon revocation of the permit, a 30-day transition period will take effect, during which: 1) LASAN will notify the FSPs so that they may approach UPW's customers and begin service within 30 days; and 2) UPW must notify their City of Los Angeles customers that they will no longer be able to provide them with waste hauling services. If after the 30-day transition period UPW is found to be operating without a permit, the matter will be referred to City Attorney for misdemeanor case filing. Additionally, LASAN will pursue unpaid fees by referring this matter to the Office of Finance's Collection Division for action.

FISCAL IMPACT STATEMENT

All recovered fees will be deposited into the Citywide Recycling Trust Fund. There will be no impact to the General Fund.


Prepared by:

Lorena Valdez, SRCRD

213-485-3766

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