AGENDA #2c
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Bruce Heflin, Public Works Director
SUBJECT: Commercial Garbage Collection
DATE: April 4, 2001
This report discusses options for collection of commercial solid waste.
Option 1 – Continue present commercial refuse collection services. Savings in fiscal 2001-02: $-0-.
Option 2 - Eliminate Town collection of commercial refuse. Savings in fiscal 2001-02: up to $806,000.
Option 3 – Establish a basic service at no charge and set fees to recover cost of additional commercial refuse collection and disposal services. Anticipated revenues in fiscal 2001-02: up to $708,000.
Option 4 – Establish fees to recover all commercial service costs. Anticipated revenues in fiscal 2001-02: up to $1,034,000.
BACKGROUND
Currently the Town of Chapel Hill provides commercial garbage collection (defined as dumpster collection) to businesses, apartments and selected condominiums/townhomes. The basic service is twice weekly pickups, with an option of two additional collections per week for an annual fee of $1,200 per container (proposed to be increased to $1,400 effective July 1, 2001). There are currently 699 total containers, of which 582 are serviced by front-loading trucks and 117 by side-loading trucks. The commercial operations consist of the following resources:
One Supervisor
One Inspector
Four Solid Waste Equipment Operators III
Four front-loading garbage trucks
Two side-loading garbage trucks
Two pickup trucks
In addition, the Town maintains two 30-yard compactors in the 100 block of East Franklin Street and pays the disposal fees for the compactors and roll off containers at Michael Jordan’s restaurant and Big Fraternity Court.
The total cost of commercial operations in fiscal 1999-2000 was $973,000, independent of program revenues. Disposal costs represented 57% ($554,700) of total commercial expenditures.
During budget discussions last year, the Council requested options related to commercial garbage collection for consideration during the budget process for fiscal 2001-02.
The following four options are presented for the Council’s consideration.
We also considered a fifth option involving use of a private vendor, either by contract or through franchise arrangement, for commercial services, but do not recommend it for two reasons. First, there likely would be few, if any, cost advantages relative to the tax rate. Instead of using General Fund revenues to pay for Town resources labor and equipment, we likely would have to pay an equal or higher amount to a private company. Second, with Town crews providing the service, we have direct control over its delivery. Under a private contract or franchise arrangement, our control would be less direct because private labor and trucks would be used.
In addition, case law in federal courts holds that local governments cannot dictate through franchise agreements disposal sites for waste. As long as a local government is contracting for its collections (so the contractor is performing the function for the government), disposal sites may be designated. If the contractor is merely franchised, without respect to whatever other franchise limitations may be effected, then the disposal site cannot be designated. This is considered in violation of the commerce clause of the U. S. Constitution and is called “flow control”.
This is particularly relevant to the Town. In our intergovernmental agreement with Orange County and the Town of Carrboro, we agreed to deliver all waste under our control to the County landfill. We believe that the only way to not pay for collection (either using our own staff or by contract) and be sure that we do not violate the agreement would be to leave the business as a provider or as a franchiser altogether.
Commercial garbage operations for the Town of Chapel Hill presently are provided by the Solid Waste Services Division in the Public Works Department. We use four employees working a ten-hour day task system, four days a week. Operations begin at 4:00 a.m. on Monday, Tuesday, Thursday and Friday, with front-loading trucks serving 2.5 routes and a side-loading truck serving .5 route. Commercial garbage collection is predictable, customer-service oriented and relatively efficient. The three commercial crews collect about 59% of the total waste stream (23,572 tons) in Chapel Hill using only 36% of the Solid Waste Division’s budget. The only Town holidays not worked by commercial crews are Thanksgiving, Christmas and New Year’s Day. The Orange County Regional Landfill is closed on these days.
The base budget request for fiscal 2001-02 includes a total of $1,034,000 for commercial collection and disposal services. This total, which assumes an average salary adjustment of 4.5% and a tipping fee increase of $2/ton, is comprised of the following:
Personal Services $277,200
Operations $ 43,000
Equipment – Fleet Replacement Fund $113,400
Disposal – Tipping Fees $578,100
Downtown Compactor Service $ 22,200
Total Projected 2001-02 Budget $1,034,000
This total is offset by projected revenues for extra dumpster collections of $57,000, for a net total cost next year of $977,000.
The four Equipment Operators III who operate the commercial equipment collectively have 62 years of service with the Town. They are long-term Town employees who, in most cases, started out as Collectors. Within the Solid Waste Services Division, the Equipment Operator III position is the last career progression step before management. Because of their heavy equipment expertise and long years of service, these individuals have proven invaluable during storm-related events and special cleanup events. They are capable of operating all the equipment within the Solid Waste Services Division.
Advantages
· Would continue relatively high level of service to business community at low cost to that sector.
· Would not require a reduction in work force.
· Would not require operational or administrative changes.
· Likely that existing commercial garbage collection assets would be able to absorb workload increases related to Meadowmont and Southern Village.
Under this option, the Town would discontinue its commercial solid waste collection program. The routes would be eliminated, with a concurrent reduction in the Solid Waste Services Division’s work force and sale of its fleet assets. Businesses, apartments and condominiums/townhomes presently served by the Town would have to obtain refuse collection services from the private sector, at significantly higher cost.
If the Town discontinues collection of commercial waste, then the projected savings could range between $807,000 and $928,000 annually. Details of the cost projections are shown in the Appendix.
The saving primarily results from a reduction of four positions for nine months next year, deletion of disposal costs and removal of related garbage trucks from the fleet replacement fund. Proceeds from the sale of the garbage trucks would be used to pay off the balance of debt related to such trucks.
Subtotal of cost savings: $826,000 (1st year); $945,000 (2nd year)
The Town would have to continue service for its own commercial waste, either through in-house collections or through private contract. The estimated annual cost is about $20,000 (depending on tipping fee).
Less Town waste
Collection/disposal ($20,000)
Subtotal $806,000 (1st year); $925,000 (2nd year)
The noted annual saving could be increased if the Town either 1) eliminates its involvement in downtown compactor services, or 2) recovers costs through fees. Another way this saving could occur would be the transfer of the compactors to some entity, such as the Downtown Commission. Then that entity would be responsible for hauling, maintenance and disposal costs associated with the two compactors. In any event, the costs of $56,200 the first year and $58,600 the second year could be avoided.
The potential cost saving discussed above would be offset by the loss of revenues paid by businesses for two extra weekly dumpster pickups. The account summary in the Appendix varies because accounting for these revenues is on a cash basis.
If the Town were to eliminate commercial garbage operations, then the following considerations would have to be reviewed.
1. Would all commercial garbage collections be abandoned?
Currently, selected condominiums/townhomes receive commercial service by Town crews based either on special use permits or Town ordinance (cf., Sec. 8-35 of the Town Code – Bulk containers for multiple residential units). Examples include Colony Lake, Winchester Court and others. If the Town no longer operates commercial equipment, then we could either contract with a private hauler for such collection; provide once weekly residential service using Town crews; or not participate in provision of such services at all, consistent with the possible withdrawal from commercial refuse collection altogether.
In addition, about 20 businesses Town-wide are serviced by residential crews, because there is not enough room to place commercial containers in these locations. These include churches and homes converted to business uses. We could use the same options as noted above for selected condominiums/townhomes.
Additionally, Town departments would have to include budgeted funds for the disposal costs only of servicing dumpsters located within their areas. These include sites at Public Works, Housing, Parks and Recreation, Police and Town Hall. We estimate the total cost for contracted servicing would be about $20,000 annually.
2. How would the Town’s compactors be serviced?
The placement of compactors in the downtown area occurred during the time that Rosemary Parking Deck was completed in 1994. This structure resulted in the elimination of access to dumpsters in the alley behind several businesses fronting Franklin Street. At that time, the Town agreed to arrange for compactor services at the Town’s cost so that businesses formerly using the dumpsters would have a viable alternative for commercial refuse services.
Currently, businesses in the 100 block of Franklin Street are charged a fee to use the Town’s compactors. The Town pays for disposal and the hauling charges related to the compactors. The compactors experience high usage and provide a better collection method than front- or side-loading dumpster service. These compactors could continue with the present service or the Town could bid the complete service to a private company. As noted in the Appendix, annual Town expenditures for hauling, maintenance and disposal activities associated with the two compactors are about $56,000.
3. What would happen to side-loading commercial operations?
There are currently 117 side-loading containers within Chapel Hill. This number has declined steadily over the past four years as businesses and apartments have converted to front-loading service. To our knowledge, there is no private company that provides side-loading services in this area. These remaining locations either would have to be converted to front-loading or commercial rear-loading service, or they would no longer receive Town services if the option is elimination of commercial service altogether.
We identified commercial service costs based on number and size of containers and frequency of service, using fiscal 1999-2000 actual expenditures. We used this expenditure history because it represents the most recent full year of actual known costs. These data were used as the basis for the following fee options.
We note that State law restricts local government from charging fees for service in excess of the cost for provision of such services. In other words, the Town could not establish fees for commercial refuse service that would generate revenues in excess of associated costs. The data used in the following options include administrative overhead.
The fees discussed under the following two options are illustrative only. Since we do not know what changes businesses might make in response to the fees, we are identifying the maximum amounts that fee revenues could reach.
Under this option, the Town would provide each business or commercial establishment a basic commercial collection service at no fee, but would charge fees to such businesses that choose additional service, either in terms of number of containers, frequency of collection or both. The basic service proposed for consideration would include collection of one container once each week per establishment.
Currently, the Town collects each dumpster twice a week at no charge, and charges a fee for collecting a total of four times per week. The current fee for extra collection is $1,200 per container for the year; the staff is proposing an increase of $200 to reflect our actual costs more closely. The projected revenue for this account in fiscal 2001-2002 is $57,400. We propose for consideration replacing this fee with a group of fees based on service levels beyond the basic one day/one container service.
Each business, apartment complex and townhome/condominium presently receiving commercial front- or side-load service could have one container collected once each week at no fee as basic service. We believe that basic service also could be defined depending on the type of complex being served. For example, it may be more equitable for some complexes exceeding a threshold number of units to receive service at more than one container as basic service. We note that a more complex definition of basic service would require a more complex system for billing, collection and overall administration.
Each additional dumpster would be charged an additional fee based on the number of times serviced each week. For example, if a business had one dumpster and only received 1 dump per week, there would be no fee. If the business wanted 2, 3 or 4 dumps per week on this single dumpster, they would incur a fee for service. If the commercial site had multiple containers, the service plan would reflect one container at basic service, or no fee. Depending on the service requirements of the commercial site, additional container and service fees would apply.
We estimate that the basic service of one container once per week costs up to $265,000 a year, based on the current workload of 350 dumpster sites. We believe that most commercial sites will need at least twice a week service for one container. At this point, it is unclear how much revenue the Town could receive if a new fee schedule were adopted. Each time commercial collection fees have been increased in the past, the number of businesses paying for extra pick-ups has decreased. We could better estimate such revenue once the system had been in effect for one year. We then could estimate based on actual experience.
Possible Fee Revenue
If we used the total commercial cost of $973,000 in fiscal 1999-2000 and the estimated cost of $265,000 for basic service of one container collected once a week per business, then the maximum fee revenue could approach $708,000 (including the $54,700 requested for the existing extra dumpster fee) per year. The actual amount received likely would be less than that amount because some businesses would adjust their service options once they had experience with the new fee system.
Possible Fee Schedule
We propose consideration of the following fee schedule, using data calculated from fiscal 1999-2000 costs as noted above.
|
Proposed monthly fees for service (collection and disposal) – illustrative only |
|||||||
|
Basic Service (Front Load) |
|||||||
|
Container Size |
1x/week |
2x/week |
3x/week |
4x/week |
Extra Lift |
||
|
2-yd |
0 |
$12 |
$19 |
$44 |
$17 |
||
|
First |
4-yd |
0 |
$23 |
$41 |
$77 |
$18 |
|
|
Container |
6-yd |
0 |
$34 |
$63 |
$110 |
$20 |
|
|
Costs |
8-yd |
0 |
$50 |
$85 |
$143 |
$22 |
|
|
Basic Service (Front Load) |
|||||||
|
Container Size |
1x/week |
2x/week |
3x/week |
4x/week |
Extra Lift |
||
|
2-yd |
$5.84 |
$5.84 |
$9.25 |
$21.42 |
17 |
||
|
Additional |
4-yd |
$11.79 |
$11.79 |
$19.96 |
$37.49 |
18 |
|
|
Container |
6-yd |
$16.55 |
$16.55 |
$30.68 |
$53.57 |
20 |
|
|
Costs |
8-yd |
$24.35 |
$24.35 |
$41.39 |
$69.64 |
22 |
|
For example, if a commercial site had six 8-yd containers on site and opted for once a week service, then that first container would be fee free. The remaining containers would receive service as follows:
5 containers @ $24.35 per container per month - annual cost: $2,045
Twice a week service for the same site would be as follows:
1st container $50 per container per month - annual cost: $600 (cf., the first container would be collected once each week at no fee, as “basic service”)
5 containers @ $24.35 per container per month - annual cost: $2,045
Total Cost: $2,645
We note that this example is not uncommon based on current experience. Such businesses currently receive this service at no cost relative to current taxes paid. If this option were adopted, then those businesses still would pay their current taxes, along with $2,645 per year.
Commercial sites would have the option to choose which level of service they would need for the containers on their site.
Advantages
Option IV – Fee for all services
Description
Under this option, the Town would assess fees for all commercial services, eliminating the basic service for no fee included under Option III above. Commercial sites would have the option to determine the level of service they wanted. If a business chose to increase the number of containers and/or the frequency of collection, then that business would be charged depending on the service level selected. By paying for the collection of their garbage, commercial sites could better monitor their disposal habits. All containers would incur a fee for service. Depending on the service requirements of the commercial site, additional container and service fees could apply.
|
Proposed monthly fees for service (collection and disposal) – illustrative only |
||||||
|
Basic Service (Front Load) |
||||||
|
Container Size |
1x/week |
2x/week |
3x/week |
4x/week |
Extra Lift |
|
|
2-yd |
$30 |
$60 |
$90 |
$120 |
$17 |
|
|
First |
4-yd |
$41 |
$82 |
$123 |
$164 |
$18 |
|
Container |
6-yd |
$52 |
$104 |
$156 |
$204 |
$20 |
|
Costs |
8-yd |
$63 |
$126 |
$189 |
$252 |
$22 |
|
Basic Service (Front Load) |
||||||
|
Container Size |
1x/week |
2x/week |
3x/week |
4x/week |
Extra Lift |
|
|
2-yd |
$17.72 |
$35.44 |
$53.16 |
$70.88 |
$17 |
|
|
Additional |
4-yd |
$24.21 |
$48.43 |
$72.65 |
$96.86 |
$18 |
|
Container |
6-yd |
$30.71 |
$61.42 |
$92.14 |
$120.49 |
$20 |
|
Costs |
8-yd |
$37.21 |
$74.42 |
$111.63 |
$148.84 |
$22 |
For example, if a commercial site had six 8-yd containers on site and opted for once a week service, then the following fees would apply:
1 container @ $63 per month - annual cost: $756
5 additional containers @ $37.21 per container per month - annual cost: $2,332
Total Cost: $3,088
Twice a week service for the same site would be as follows:
1 container @ $126 per container per month - annual cost: $1,512
5 containers @ $74.42 per container per month - annual cost: $4,465
Total Cost: $5,977
As we discussed under Option III, businesses would have to pay an amount beyond their present taxes and would receive no additional services. Again, we believe it would be difficult to estimate the revenues this option would generate. We do not know what combination of service levels would be requested by existing businesses. We could better estimate general fund revenues once such a fee system were operational for a year.
Possible Fee Revenue
If we used the 1999-2000 actual commercial costs, then the revenues could approach $973,000 per year. Again, the actual amount likely would be less than this total because some businesses would opt to change their level of service once they adjusted to the new fee system.
Advantages
Disadvantages
The attached survey, completed in December 2000, presents data indicating how commercial refuse collection service is provided in other jurisdictions State-wide. Of the dozen jurisdictions responding to our survey, four provide the service using municipal crews, two contract with private companies, five do not provide the service in any capacity and one uses a combination of municipal crews and private contractor.
If the Council wishes to select any of the options representing a change from continuation of the present commercial refuse program, then we would need ample time to work with the business community to prepare them for a transition from Town collection of commercial refuse. Businesses would need sufficient time to prepare for private collection of refuse or for anticipation of new fees for service that they presently do not have to pay.
A transition period to October 1, 2001, at the earliest could be considered for any of the non-status quo options. During that time, we could meet with commercial establishments to develop an implementation plan and schedule. If the option selected were to continue providing services with new and/or increased fees, then we would have to prepare for administering such a fee system. For example, we would have to develop a financial system, including billing, collection and monitoring, to assure that in-house resources exist to make such a system work. Such a system likely would require additional staffing and equipment in the Finance Department. Associated costs would reduce the putative saving.
Attachment: Survey of Other North Carolina Jurisdictions
APPENDIX
Personal Service Costs (assumes annual salary adjustment of 4.5%; starting date – 10/1/01)
4 SEO III’s $ 95,756
Longevity $ 2,650
FICA $ 7,478
Retirement $ 9,775
Insurance $ 11,672
Subtotal $127,331
Note: the Supervisor and Inspector positions would not be eliminated; they would be retained, along with two pickup trucks, for overall monitoring of services and enforcement of collection rules and regulations
Less Severance Pay $ 22,713 (varies per years of service)
Less insurance $ 13,987 (individual coverage – 1 year)
Total, Personnel $90,600 (1st year); $171,800 (2nd year)
Lease Payments
Front-load Equip. $ 91,500
Side-load Equip. $ 17,900
Subtotal $109,400
Maintenance & Operations $ 40,000
Uniforms $ 3,000
Total $243,000 (1st year); $324,200 (2nd year)
Disposal (assumes $2 increase in tipping fee in 2001-02 and $3 in 2002-03)
Front-loading $500,500
Side-loading $ 65,000
Michael Jordan’s $ 9,900
Big Fraternity Court $ 2,700
Subtotal $578,100 (1st year); $616,000 (2nd year)
Total $821,100 (1st year); $940,200 (2nd year)
If the Town discontinues enforcement of the cardboard ban, then landfill fines could be eliminated.
Landfill Fines $ 5,000
Subtotal $826,100 (1st year); $945,200 (2nd year)
The Town would have to continue service for its own commercial waste, either through in-house collections or through private contract. The estimated annual cost is about $20,000.
Less Town Waste
Collection/Disposal $20,000
Subtotal $806,100 (1st year); $925,200 (2nd year)
The noted annual saving could be increased if the Town either 1) eliminates its involvement in downtown compactor services, or 2) recovers costs through fees. Another way this saving could occur would be the transfer of the compactors to some entity, such as the Downtown Commission. Then that entity would be responsible for hauling, maintenance and disposal costs associated with the two compactors. In any event, the costs of $56,200 the first year and $58,600 the second year could be avoided.
Town Compactors
Hauling $ 9,900
Disposal $35,500
Maintenance $12,300
Subtotal $57,700 (1st year); $60,100 (2nd year)
Subtotal $863,800 (1st year); $885,300 (2nd year)
The potential cost saving discussed above would be offset by the loss of revenues paid by businesses for two extra weekly dumpster pickups. The account summary below varies because accounting for these revenues is on a cash basis.
Fiscal 1999-2000 Actual $83,022
Fiscal 2000-2001 Estimated $35,000
Fiscal 2001-2002 Requested $57,400
Net Total-Commercial Saving $807,000 (1st year); $928,000 (2nd year)
Lastly, proceeds from the sale of commercial garbage equipment would be used to retire the associated debt in the fleet replacement enterprise fund. The proceeds from sale of the commercial trucks are an estimated $204,000.