HomeMy WebLinkAbout06/02/1998, 2 - RESIDENTIAL AND COMMERCIAL REFUSE RATE STRUCTURE AND COMMERCIAL RECYCLING RATE AND FEE Council Agenda Report-Residential and Commercial Solid Waste Issues
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following is a summary of the input provided during the four meetings and telephone calls
generated from the newspaper article about the subject in Telegram Tribune.
Residential Refuse Service Levels and Rate Mod cations
The residential service level changes and proposed rate structure seemed to be well received by the
community. There appears to be a basic understanding of the proposed modifications and the rate
implications. Staff anticipated that Orange Bag customers would take issue with the proposed
increase in cost of the bags. Based on the response from the outreach efforts,the proposed pricing
of the bags does not seem to be a significant problem. Staff received 23 telephone calls from
Orange Bag customers wondering if the service was going to continue or change dramatically.Only
two objected to the rate increase. The remaining 21 callers understood the increase and wanted to
remain Orange Bag customers because they generated less than 32 gallons of waste a week. They
felt it was still a very economical and affordable service even with the increase. At the community
meeting there were no comments regarding the increase in cost of the bags. Those in attendance
did agree with the inherent problems with the bags, those being difficult to transport and collect,
problems with animals tearing the bags and the negative environmental considerations of disposing
refuse in a plastic bag.
The convenience of a 32 gallon waste wheeler appears to be favorable to some Orange Bag
customers and the proposed pricing should provide enough incentive to encourage migration to the
new"Economy" level of service. On the opposite side,it also appears that customers who currently
enjoy waste wheeler service (i.e. 64 gallon waste wheeler) may migrate from this higher level of
service down to the 32 gallon waste wheeler. Staff and SLG will need to monitor any migration
(up or down) for the subsequent revenue impacts and recommend adjustments to the program if
necessary.
Comntercial Refuse Rate StructureModifuations
The intent of the commercial refuse rate modifications are to base the rate on volume and frequency
of collection. The modifications were understood by all three business organizationsthat staff gave
presentations to. Given the fundamental rationale behind the changes to make the structure
incrementally the same based on volume and frequency of collection,the rate structure seemed to
make sense.
At two of the business group meetings, the question was asked if the City or SLG had ever
performed an analysis to determine the costs of providing refuse and recycling services between
different types of customers. The staff response was that the relationship between the cost of
providing a service between customer types and a rate structure to charge for a service is not
necessarily a dollar for dollar comparison,and that rate structures generally have to deal with other
policy issues and goals, as is the case with solid waste management and meeting the AB 939
mandates. Currently,identifying service costs between customer types is not a rate structure goal.
In fact,to achieve conservation goals,we know there are"cross subsidies"between customer types.
Orange Bag service is the most obvious and popular example of this: the cost of collecting Orange
Bags far exceeds the charge;but it is at a discounted rate to encourage conservation. Additionally,
there are many indirect costs which are difficult to segregate and assign to a specific service type.
Examples would be the avoided costs to site a new landfill or the deferred costs to close the existing
landfill.
Since the primary objectives of solid waste rate structure are to encourage waste diversion in order
to conserve landfill space and to maintain revenue adequacy for all solid waste programs,the issue
of cost of service between customer types is a secondary objective. The total costs and total
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Council Agenda Report-Residential and Commercial Solid Waste Issues
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revenues are reviewed and confirmed through the rate-setting process which include allowable
costs,non-allowable costs supported by audited financial records. Staff scrutinizes the information
to ensure cost efficiency in collection operations. In short, we know what the total costs of
providing service are,and the revenues required to cover those costs;what we have not done in the
past is allocate these costs between customer types, and used this as a basis for solid waste rate-
setting. Our four rate-setting objectives are:
• Be justifiable and supportable;
• Ensure revenue adequacy to fully meet reasonable cost of service;
• Provide ongoing review and rate stability;and
• Easy to administer
The four solid waste rate-setting goals are:
• Promote source reduction,maximum diversion and recycling;
• Provide equity and fairness within classes of customers;
• Be environmentally sound;and
• Be easy to understand
While initially the concept of performing a cost of service analysis for the solid waste services may
appear to a reasonable request,staff does not recommend pursuing this kind analysis at this time.
As stated above,"rate structure" is based on policy and goals with only a secondary relationship to
cost of service by customer type. This type of study will require consultant services at an estimated
cost of$30,000 to $40,000. Based on our adopted goals and objectives,staff does not anticipate
any change in rate structure to occur as result of the analysis. It is important to note that historically
the commercial sector produces approximately 70% of the overall waste and accounts for about
60% of the overall revenues. From this perspective,there is clearly a linkage between costs and
benefits.
Conn wrcialRecyclingRate and Base Fee
The recycling rate and base fee program was the more difficult of the three topics to explain to the
business community. Though there was some degree of understanding of the logic behind the
recycling rate and base fee,there were questions regarding the following issues:
• the rationale used to establish the recycling rate and base fee;
• billing concerns when more than one business uses a cardboard container;
• the impacts of the fees on the City's goal to reduce waste going to the landfill;
• the cut-offvolume for when the charges take effect;and
• the perception that a portion of their current rate pays for recycling services.
The following section briefly responds to the above issues:
1. The rationale used to establish the recycling rate and base fee.
The goals of the commercial recycling rate structure and base fee are to set an appropriate structure
to recover a portion of the cost of service from those who are benefiting from the service and send
financial cues to encourage waste diversion from the landfill. As directed by Council,the purpose
of the rates would be to collect about$150,000 to offset declining commercial revenues attributed
to the success of the commercial recycling program. Because the rates must collect revenue for
service while still encouraging recycling,the proposed rate for cardboard collection of 25% of the
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Council Agenda Report-Residential and Commercial Solid Waste Issues
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refuse rate, $0.85 per bag for office paper collection and the base fee of$3.00 per commercial
account were determined to satisfy the goals and purpose of the program. The recycling rate
structure and fee are not based on empirical analysis,but represents the staff s best recommendation
in balancing our conservation goals with the Council's direction to achieve some level of cost
recovery for this service. It is important to note that the recycling fees are entirely service driven,
which means if a business does not request the service there is no fee.
2. Billing concerns when more than one business uses a cardboard container.
Because of the significant changes being proposed in both refuse rate structure and a new recycling
rate, if approved, the Utilities Conservation Office will dedicate one staff person to assist
commercial customers during the transition period. This individual will meet with customers one
on one and evaluate their service needs, current level of service, make recommendations for any
appropriate refuse and recycling service level changes and to resolve any problems which occur
during the initial stages of the program. This would include special situations such as multiple
businesses sharing containers.
3. The impacts of the fees on the City's goal to reduce waste going to the landfill.
Though this is the major concern staff has in separating out the recycling rate and base fee from the
current integrated rate, there is still significant incentive for businesses to continue to recycle
because the proposed recycling rate is only 25% of the refuse disposal rate. Since the 50%
reduction by the year 2000 mandate is less than two years away, staff will be monitoring the
impacts of the new fee structure and return to the Council if the desired waste reduction results
appear compromised by the new fee structure.
4. The cut-off volume for when the charges take effect.
The concern expressed regarding volume charges for cardboard collection centered on when the
charges took effect. It is proposed that the $3.00 base fee will include up to one yard of cardboard
collected one time a week. The concern is that if a business produces slightly more than the
allowed base fee volume,the business would either dispose of the excess in their refuse container or
find another means of disposal to avoid the additional charge. Though this scenario is a possibility,
staff believes this would seldom be the case if the business has the appropriate level of refuse
service. Again, the recycling rate structure was designed to encourage waste reduction while
recovering a portion of the cost to provide commercial recycling services.
5. The understanding that a portion of their current rate pays for recycling services.
It is correct to say that a significant portion of solid waste rate increases enacted since 1990 have
been attributed to providing recycling and green waste services for both residential and commercial
customers. The current policy of having an integrated solid waste rate views solid waste services as
a system which all customers pay for as benefit to the community. By approving the proposed
recycling rate,Council will depart from this policy by segregating a specific program cost from the
otherwise integrated solid waste rate and applying it to one customer class.
One idea brought forward at the community meeting was the concept of establishing a cardboard
commodity price floor and ceiling which would determine if or when the cardboard recycling rate
would be in effect: if the cardboard market price and hence revenues from sales of cardboard was
high,the recycling rate would be discontinued because revenue from the material sale would offset
the cost of collection, when market prices dropped the rate would be re-instituted. It was
determined that this type of system would be complicated to administer and create revenue
instabilityin the rates. This would be inconsistentwith our rate structure goals,and therefore is not
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Council Agenda Report-Residential and Commercial Solid Waste Issues
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recommended.
Summary of Community Outreach Program
It appears the community understands and accepts the proposed changes both to the residential
service levels and rate structure changes, and the commercial rate structure modifications and the
recycling charges. Based on the comments from the business community,there seems to be some
apprehension to the recycling charges and the effects on their operations. It is important to
remember that participation in the commercial recycling program is voluntary. Businesses can
minimize the financial impacts of the recycling rate by looking for source reduction opportunities,
compacting or bailing the cardboard and/or examining their office paper and polystyrene disposal
practices. Additionally, business can look for alternatives to utilizing SLG's recycling services
such as contracting with a different recycling service provider or using employees to transport
cardboard to existing recycling centers.
The residential service level and rate structure changes seem to be well received by the community.
The addition of the Economy Service (32 gallon waste wheeler) is viewed to be a very positive
change and should prove to be popular with our customers. Because of the anticipated popularity
of this level of service, staff and SLG will monitor migration from Orange Bag and Standard
services to analyze any subsequent revenue impacts.
ALTERNATIVES
There are two alternatives which Council could consider in lieu of the recommended action. They
are as follows:
1. Retain the current integrated solid waste rate policy. Historically, rate increases for
residential and commercial solid waste programs have been applied to all customers. This was
staff's original recommendation to Council in January 1998 but rejected. It is still a viable
alternative since it meets the rate-setting goals and objectives. The Council could choose to
continue this methodology of applying the identified revenue shortfall to all customer classes
therefore retaining the integrated solid waste rate. Additionally,since there is uncertainty to
impacts of implementing this recycling rate on waste diversion, this option would retain the
current successful commercial recycling program.
2. Apply the percentage rate increase attributed to the commercial recycling program to the
commercial customer base. This alternative would generate the projected revenue shortfall
without implementing segregated recycling rate and base fee. The advantage of this alterative
is that it would be less confusing to commercial customers while recovering the necessary
revenue. The disadvantage is that it does not provide equity to customers who produce few
recyclables.
CONCURRENCES
San Luis Garbage Company concurs with the recommendationsmade in this report
FISCAL MACT
There is no direct fiscal impact associated with the recommendations made in this report. Staff will
return to Council with the base year solid waste rate application, at which time Council will
consider the impacts to solid waste rates of any proposed service change.
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Council Agenda Report=Midentialand Commercial Solid Waste Issues:
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AT'TAC)filVlEN'T$
Attachment.l-Proposed residential:rate structure .
Attachment 2=Proposed commercial rate structure
Attachment 3=Proposed recycling rate:and Wsefee
Attachment 1
SINGLE FAMILY and MULTI-UNIT RESIDENTIAL
VOLUME-BASED RATES
ORANGE BAG RATE
$2.40/month for collection service
$1.80 per special 33-gallon bag-payable when bags are issued.
ECONOMY RATE
$7.90 per month for one 32 gallon wastewheeler container collected once each week
STANDARD RATE
$15.80 per month for one wastewheeler container collected once each week
PREMIUM RATE
$23.70 per month for one wastewheeler container collected once each week
PREMIUM PLUS RATE
$7.20 per month for additional 32 gallon wastewheeler container collected once each week
$14.40 per month for additional 64 gallon wastewheeler container collected once each week
$21.60 per month for additional 96 gallon wastewheeler container collected once each week
SERVICE AWAY FROM THE STREET CURB
$5.40 additional per month per can or container
LATE MAKEUP COLLECTIONS WITH GARBAGE TRUCK(phone call required)
$8.00 per trip plus charges identified above for any extra containers or equivalent volume
Additional charge per can per collection: $3.00
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EXTRA COLLECTIONS WITH PICKUP OR:FLATBED TRUCK.(Phone call required)
$1100 per trip plus:
$3.00 per garbage can or equivalentvolume(amounts over six cans by quotation)
$3.00 per white good article(onma month)
$3,00 per piece of furniture
$3.00 per mattress or boxspring
(Economy service customers must pay in adGance:)
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Attachment 2
Proposed Multi-family and Commercial
Refuse Rates
MULTI-UNIT RESIDENTIAL DUMPSTER CONTAINERS(PER MONTH)
Size of COLLECTIONS PER WEEK
container
(cubic yards)
$57.00 $83.00 $109.00 $135.00 $161.00 $187.00 $213.00
$66.00 $102.00 $138.00 $174.00 $210.00 $246.00 $282.00
'• 2'. `7 $75.00 $120.00 $165.00 $210.00 $255.00 $300.00 $345.00
„ 3 $94.00 $157.00 $220.00 $283.00 $349.00 $412.00 $475.00
'4�_ $112.00 $194.00 $276.00 $358.00 $440.00 $522.00 $604.00
$149.00 $268.00 $387.00 $506.00 $625.00 $744.00 $863.00
The rates shown above include the monthly container rental fee and are the same for bins
and garwoods, when the volume is identical.
COMMERCIAL GARBAGE CANS(PER MONTH)
Number COLLECTIONS PER WEEK
Of
Cans 4 5 g
a '$14.00 $22.00 $30.00 $38.00 - $46.00^ $54.00 $62.00
ti $18.00 $28.00 $38.00 $48.00 $58.00 $68.00 $78.00
. $22.00 $34.00 $46.00 $58.00 $70.00 $82.00 $94.00
;4. $26.00 $40.00 $54.00 $68.00 $82.00 $96.00 $110.00
3 $30.00 $46.00 $62.00 $78.00 $94.00 $110.00 $126.00
6 $34.00 $52.00 $70.00 $88.00 $106.00 $124.00 $142.00
7 $38.00 $58.00 $78.00 $98.00 $118.00 $138.00 $158.00
8 $42.00 $64.00 $86.00 $108.00 $130.00 $152.00 $174.00
$46.00 $70.00 $94.00 $118.00 $142.00 $166.00 $190.00
Maximum volume and weight per garbage can: 35 gallons and 80 pounds
Additional charge per can per collection: $3.00
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COMMERCIAL WASTE WHEELER CONTAINERS(PER MONTH)
Number COLLECTIONS PER WEEK
Of
containers 1 2y 3 4- 5 6` 7
A'.
$23.00 $38.00 $53.00 $68.00 $83.00 $98.00 $113.00
$37.00 $59.00 $81.00 $103.00 $125.00 $147.00 $169.00
-3. = $51.00 $80.00 $109.00 $138.00 $167.00 $196.00 $225.00
4 $65.00 $101.00 $137.00 $173.00 $209.00 $245.00 $281.00
$79.00 $122.00 $165.00 $208.00 $251.00 $294.00 $337.00
$93.00 $143.00 $193.00 $243.00 $293.00 $343.00 $393.00
$107.00 $169.00 $221.00 $278.00 $335.00 $392.00 $449.00
$121.00 $185.00 $249.00 $313.00 $377.00 $441.00 $505.00
$135.00 $206.00 $277.00 $348.00 $419.00 $490.00 $561.00
In addition to the collection rates stated above for waste wheeler containers, there shall be charged a
monthly rental fee for each container.
COMMERCIAL DUMPSTER CONTAINERS(PER MONTH)
Size of COLLECTIONS PER WEEK
container
(cubic yards) 1 Via; _, ..: T wa S : _ 7
.` $50.00 w$70.00 $90.00 $110.00 $130.00 $150.00 $170.00
11:5. $56.00 $82.00 $108.00 $134.00 $160.00 $186.00 $212.00
.2., .., $62.00 $93.00 $124.00 $155.00 $186.00 $217.00 $248.00
3 $74.00 $117.00 $160.00 $203.00 $246.00 $289.00 $332.00
$85.00 $141.00 $197.00 $253.00 $309.00 $365.00 $421.00
:.. .; ._..>. , $109.00 $188.00 $267.00 $346.00 $425.00 $504.00 $583.00
8 $133.00 $235.00 $337.00 $439.00 $541.00 $643.00 $745.00
The rates shown above include the monthly container rental fee and are the same for bins
and garwoods, when the volume is identical.
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UNSCHEDULED EXTRA COLLECTIONS FOR
COMMERCIAL CUSTOMERS AND
MULTI=UNIT RESIDENTIAL DUMPSTER CUSTOMERS
$23.00 1 cubic yard (minimum d rge)
$30.00 2 cubic yards
$37.00 '3 cubic yards
$44.00 4 cubic.yards
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Attachment 3
Proposed Rate Schedule
for Commercial Recycling Activities
BASE CHARGE FOR COMMERCIAL RECYCLING
All commercial customers will pay$3.00 per month for commercial recycling services. This
charge includes all services except collection of cardboard in excess of one yard once a week;
collection of white office paper, and collection of polystyrene.
CARDBOARD COLLECTION
COMMERCIAL DUMPSTER CONTAINERS (PER MONTH)
Size of COLLECTIONS PER WEEK
container
(cubic yards)
-i Included $17.50 $22.50 $27.25 $32.25 $37.25 $42.25
i.5 --.•'' $14.00 $20.50 $26.75 $33.25 $39.75 $46.25 $52.50
$15.50 $2325 $31.25 $39.25 $47.00 $55.00 $63.00
-3: $18.50 $29.25 $40.25 $51.00 $62.00 $72.75 $83.75
d $21.25 $35.25 $49.00 $62.75 $76.75 $90.50 $104.50
1. 6 =. _. $27.25 $47.00 $66.75 $86.50 $106.25 $126.00 $145.75
°8 $33.25 $58.75 $84.50 $110.25 $136.00 $161.50 $187.25
The rates shown above include the monthly container rental fee and are the same for bins
and garwoods, when the volume is identical.
Commercial Recycling Rate Schedule
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WHITE OFFICER PAPER COLLECTION
The charge for collection of each bag of white office paper is$0.85.
POLYSTYRENE
The charge for collection of each bag of polystyrene is$0.85.
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