KENSINGTON -- An arbitrator has instructed the board that oversees this community's police department and garbage services to spend about $25,000 on a study to determine if its garbage collection company is entitled to a rate increase.

The study will determine the rates that Richmond-based Bay View Refuse & Recycling can charge Kensington residents beginning Jan. 1, 2014 under an 18-year contract that expires in August, 2015, according to Kensington Police Protection and Community Services District board member Chuck Toombs.

Under the contract, Bay View is entitled to a 12 percent return on certain expenses to be determined by a rate study done every four years, Toombs said.

"The rate review examines the need for expense increases for such things as equipment replacement costs to make sure they are within the standards of the industry," said Kensington Police Chief Greg Harman, who serves as the district's general manager.

The district landed in arbitration with Bay View after the garbage company requested a retroactive $60,000 rate increase in 2011, amounting to 6 percent for larger garbage cans and 23 percent for smaller mini-cans, Toombs said.

"They wanted the rate increase going backward and a rate study going forward," he said. "The outcome of the arbitration was that they got the rate study, which we had agreed to before, but not the retroactive rate increase."

Bay View attorney Haig Harris denied that the rate increase request was retroactive, saying the company had previously asked for and been denied the increase it was entitled to.

"Bay View did seek a rate increase based on extraordinary changes in revenue," Harris said.

He said Bay View is entitled to a 12 percent annual profit under the contract, but had a 2.4 percent return from Kensington in 2010 and lost $50,000 in 2011.

"Bay View has served (Kensington) for almost 70 years," Harris said. "Charges to the people in Kensington are far below charges for service in similar communities."

Both parties will pay their own attorney fees under the ruling, Toombs said.

Harris said he was the one who asked for arbitration to get the board to fulfill the contract.

"We maintained that we were entitled to a rate review in 2013 under the contract and Kensington denied that," Harris said.

The district is involved in several lawsuits and litigation costs could exceed $135,000 this year, according to board President Tony Lloyd.

Arbitration "was expensive, but it could have been avoided," Harris said.

Many community members have criticized the litigation costs and the board's management of the police department on a consistent basis.

However, Toombs was re-elected and Pat Gillette, a Toombs ally, was elected for the first time in November by wide margins in the midst of the controversies.

The district, with an annual budget of about $2.5 million, will solicit bids on a new garbage collection contract from local collection companies, perhaps including Bay View, that will begin in 2015, Lloyd said.