HomeMy WebLinkAbout2023 09 11 Regular 502 - Veolia Inflationary Cost Adjustment related to Chemical CostsREGULAR AGENDA ITEM 502
CITY COMMISSION AGENDA | SEPTEMBER 11, 2023 REGULAR MEETING
TITLE
Veolia Inflationary Cost Adjustment related to Chemical Costs
SUMMARY
The economic climate in fiscal year 2022 and continuing into 2023 has been
exceptional. Consumer Price Index values have been over 8% and utility indices have
been even higher due to COVID, supply chain disruptions and other events beyond the
reasonable control of Veolia. These costs affect everything in the operation of the
utility treatment facilities and lift stations including labor, chemicals, materials, etc.
Section 8.5 of the Agreement contemplates that the parties may negotiate
adjustments above the annual base rate C.P.I. adjustment between 1% and 4%. As a
specific example of these significant costs, chemicals have far exceeded even that
increase with sodium hypochlorite increasing 82%, orthophosphate increasing 17%,
and polymer increasing 32%. These high inflation rates have a material effect on the
cost of providing these services.
FISCAL YEAR 2023 (OCTOBER 2022 TO SEPTEMBER 2023) COST
ACTIVITY TOTAL COST TOTAL COST
DIFFERENTIAL4 COST INCREASE5
Sodium Hypochlorite
Cost on Baseline1 $97,146
W2 $65,211
WW3 $31,935
$0.483/gal
Orthophosphate
Cost on Baseline1 $5,889 W2 $5,889 $1.44/gal
Polymer Cost on
Baseline1 $3,971 WW3 $3,971 $0.48/lb
Total for 12 months
plus 10% =$117,000
1 Cost is associated with the base flow and loading amount only specified by Agreement Appendix C.
2 Potable Water.
3 Wastewater.
4 Cost differential from original agreement values.
5 Cost increase per unit of chemical.
To address the financial impacts of extraordinary inflation the past several years, the
following adjustments are proposed:
1. An inflationary cost adjustment of $117,700 for chemicals that have far exceeded
the annual adjustment. Payment will be completed as a lump sum payment for
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fiscal year 2023.
2. Include the adjustment as a supplemental payment to the base fee for fiscal year
2024 and future years to be invoiced on a monthly basis (1/12 of the cost
adjustment).
FUNDING SOURCE
RECOMMENDATION
Staff recommends the City Commission approve the request of $117,700 for FY23 as a
lump sum payment and approve as a supplemental payment to the base fee for FY24
and subsequent years invoiced on a monthly basis. The presented costs are beyond
the control of either the City or Veolia. Additionally, authorization for the City Manager
and City Attorney is requested to prepare and execute any and all applicable contract
documents consistent with this Agenda item.
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