AGENDA #2h(5)
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Bruce Heflin, Public Works Director
SUBJECT: Commercial Refuse Collection Options
DATE: May 17, 2000
We have been requested to provide information related to the impact of eliminating collection of commercial refuse using Town crews.
The Town’s sanitation crews presently collect commercial refuse from Town businesses using 2.5 front-loading crews and 1 side loading crew, for a total of 3.5 crews. Each crew consists of one driver. Routes are run 4 days each week, Monday, Tuesday, Thursday and Friday. The standard service is two collections per week. Premium service is optional for a fee in which a business may have an additional two collections weekly. During weeks with holidays, we continue to provide collections using overtime. The exceptions include Christmas, Thanksgiving and New Year weeks because the landfill is closed. We presently service about 1,000 containers, used by an estimated 600 businesses. The annual quantity collected is about 13,000 tons. Additional quantities are deposited in two Town-owned compactors in the downtown area, one compactor servicing Michael Jordan’s restaurant, one serving Blue Cross/Blue Shield and one roll off serving Big Fraternity Court. While we do not service these containers, we do pay the landfill fees for the disposal of such wastes.
Based on an analysis of program costs for 1998-99, we found that fully loaded costs for commercial collection service total about $431,500. This includes $260,000 for salaries and benefits, $42,000 for equipment operations and maintenance, $67,000 for annualized capital equipment replacement under the fleet replacement fund, $15,500 for contracted services to compactors and the remainder distributed among various miscellaneous operational accounts. This amount does not include costs of disposal, which were $518,000 in Fiscal 1998-99.
Discussion
We believe the two most readily identifiable options for the Town relative to collection of commercial solid waste are as follows:
Option 1
Withdraw altogether, resulting in each business having to contract for its own collection, hauling and disposal; this option is commonly known as an “open market system”
If we were to eliminate the 3.5 commercial routes, the annual savings would be about $416,000, assuming that the Town would use a system under which each business could choose a contractor for service (commonly known as “open market system”). If the Town were to select a system in which franchise(s) would be awarded specific contractor(s), then we likely would save the $15,500 cost for contracted servicing of compactors. If the Town were to stop paying disposal fees, then an additional $500,000 annually would be saved. Under open market systems throughout the country, businesses typically have to pay a private contractor an amount that includes collection, hauling and disposal costs.
The major relative advantages and disadvantages of eliminating this Town service include the following:
Advantages
· Save money through elimination of positions and equipment
· Overall costs and demands of conducting maintenance operations at Public Works would decrease
· Businesses would have opportunity to contract with private vendor(s) for more tailored service (e.g., frequency of collections)
Disadvantages
· Public Works currently is only convenient local hauler available to businesses
· Businesses likely will incur higher cost for service relative to taxes paid and present fee charged for extra collections by Town
· Once equipment is sold, then costs to restart service at some future date would be significant (e.g., present average cost for a new front loading garbage truck is $150,000)
Option 2
Franchise such collections by extending bids to provide for all commercial collections, hauling and disposal
Under this arrangement, the Town would have the options of assuming some or all of the costs, or the costs could be assessed to individual businesses. The amount of money the Town could save would depend on which costs were passed on to the business community. For example, if the businesses only were to be charged for collection and hauling costs, then the Town could save an estimated $416,000 annually. If all costs, including disposal, were passed on, then annual savings could approach $1 million.
Relative advantages and disadvantages of use of a franchise are noted.
Advantages
· Could save the Town money, depending on what costs were assumed by businesses
· Only one private company would be involved, resulting in fewer customer service issues for the Town (in overseeing the franchise) and for customers, compared to a system with multiple providers. This option would give the Town more control over such issues as scheduling, service levels, etc.
· Costs likely would be more controllable because of the competitive bid process that would be involved
Disadvantages
· Would result in an inconvenience to business community
· Likely additional costs because private vendor would charge more than present Town service is costing
· Would create administrative demands, including competitive bids, fiscal management, contract monitoring, etc.
If there is interest in eliminating this service by the Town, we would recommend a more detailed analysis to develop an implementation plan. Key factors we would have to consider would include availability of options to businesses, transition periods, etc.