AGENDA #2a
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Bruce A. Heflin, Public Works Director
SUBJECT: Commercial Refuse Collection
DATE: May 30, 2001
The following report provides information about a possible new fee for commercial refuse service that the Council is considering from previous budget work sessions.
The Council first received a report dated April 4, 2001, in which we presented options related to commercial refuse collection. The Council requested additional information about the option that included the Town providing a basic service of one weekly collection per container at no fee and charges for additional services beyond the basic level. That information was presented and discussed at a budget work session on May 2, 2001.
The Council wanted to consider a possible fee system that would generate more revenue for the extra service than the estimated total of $275,000 over nine months identified in the original report. We re-evaluated our original calculations and assumptions to identify possible revenues based on policy considerations discussed by the Council on May 2, 2001.
The following information is obtained from the attached work sheet, indicating updated costs for providing commercial service and possible revenue totals based on various policy considerations. We updated the costs for collection and disposal presented in our original analysis. The data in our original analysis were based on actual costs for fiscal 1999-2000, including overhead. This was the most recent fiscal year for which we had audited expenditure data. In our original analysis, we identified an average annual cost of $600 for a business to have one container serviced an additional once per week beyond the basic service of each dumpster serviced once per week. Using this average, our original analysis indicated estimated revenue up to $275,000 for nine months next year. This amount annualized is $367,000.
We have since revised our cost data to reflect increases in costs in both the current and upcoming fiscal year. The average annual cost for the additional weekly collection per container, based on the increased costs, becomes $700, resulting in estimated revenue up to $312,000 for nine months next year. This amount annualized is $417,000. These amounts are exclusive of the cost of billing and collections. The net revenue, including those costs, would be about $293,000 for nine months, or $398,000 for a full year.
We note that the revised revenue estimates are not significantly greater than those originally presented. Had we used the same assumptions (as noted below) in the original calculations, then the estimated revenue of $275,000 for next year would have been closer to $230,000. Therefore, a valid comparison of the original and revised estimated revenues using the same criteria would indicate an increase of about 35% in the most recent estimates.
We also did not attempt to increase any revenue assumptions to include possible increases to current levels of service. We believe, based on discussions with commercial customers in recent months, that some would at least consider adding services if they were available. Examples include many merchants who have said that they would be interested in 3 collections per week, but do not need 4 collections, as offered now. In addition, there are a number of restaurants that now purchase the premium service from the Town and add a fifth collection from private vendors. It is likely that they would consider purchasing that service from the Town, if it were available and if it were less expensive than the private haulers.
The Council requested that we identify incentives for businesses to recycle commercial waste. We have contacted the Orange County Solid Waste Department staff to ask for their best advice on how we might proceed. Attachment 2 is a response from them.
The County Solid Waste staff note that the existing available recycling programs would not support the collection of all of the additional materials that might be generated by a fee-based commercial garbage collection system. They note that the adopted Solid Waste Management Plan anticipated creating enhanced commercial recycling programs that would capture significant quantities of materials, but that those enhancements were predicated on the building of a materials recovery facility (MRF). The Plan supports such waste avoidance mechanisms as pay as you throw (PAYT) and mandatory recycling, but in sequence, following the creation of facilities and programs to capture diverted materials.
The County staff also suggests that the Council may wish to work through the Solid Waste Advisory Board to request support from the County Commissioners for additional commercial recycling programs or expansions of existing programs. The memorandum also notes other options for commercial recycling and offers some analysis of them.
We note that a fee-based system would, by its nature, provide a pay as you throw element to commercial waste management that would logically result in efforts by those affected to recycle waste rather than throw it in dumpsters. At issue then would be what services are available for handling that material for those who would wish to recycle. We further note that there are few available recycling programs, either public or private, that focus on the commercial sector.
Absent direct involvement by the County in a publicly sponsored commercial recycling program, we considered other approaches to encourage recycling.
One approach might be to establish an incentive fund with $10,000 - $15,000 for distribution to businesses that meet criteria established by the Town. Suggestions include the following:
If such a fund were to be established, then the estimated revenues would have to be reduced accordingly.
If the Council wishes to establish a basic service at no charge, with fees established for additional services, then we propose a waste audit/marketing study by our staff, meeting with all businesses that would be covered under the proposed system. Results from the audit would be used to refine fee schedules, revenue estimates and operational matters. We believe that this kind of new system could start by October 1, 2001.
We also would have to identify and plan administrative policies and procedures and resources required for system implementation. This would include additional resources within the Finance Department for billing and collection. In addition, we would have to develop methods and procedures to detect and respond to waste accumulation and other possible abuses of the system. We would anticipate bringing the Council additional information about implementation before October 1.
ATTACHMENT 1
COMMERCIAL REFUSE SERVICE
WORK SHEET
A brief summary of issues that were considered in this revised analysis follows.
Side-loading Serviced Containers – Of the current 117 containers served by side-loading trucks, we estimate that at least 85 would need an additional weekly pick-up. While we previously used a fee of about $27 per month based on cost of service for a 4 cubic yard container collected twice per week (first collection at no fee), we could increase the charge to $45 per month to acknowledge the relatively higher operational demands for servicing containers with side-, rather than front-, loading equipment. Such a cost differential could result in an additional $13,800 (75%), or $18,500 annualized.
Containers with “Extra” Service – We have assumed that some portion of the current 41 containers paying $1,200 for an extra two pick-ups per week (for a total of four) might attempt to reduce their collections to twice weekly. In addition, some number might request three collections and some of the remaining twenty-one might keep four. We also know that several of the restaurants for which we now provide four-day per week service and who purchase a fifth collection from private vendors, might wish to add a fifth collection. We do not have a precise breakdown of these possible changes, as we have not had detailed discussions with all of those whom we serve. Our worksheet assumes one combination of service requested for the purposes of estimating revenue. We note that the Manager’s recommended base budget request includes an increase from $1,200 to $1,400 for this extra service even if the Council does not adopt the fee system under consideration (which would produce $57,000 in total revenue).
Containers at Non-Profit Entities – Of the estimated seventy entities served that are exempted from local property taxes, we have assumed that perhaps fifty might require a second weekly collection, for which we have assumed a charge of one-half of the annual amount of $700, or $350. We assume that the remaining twenty would receive the basic service at no fee.
Shared Containers – We estimate that currently there are fifty containers shared by two or more businesses. Of this total, we assume that forty would receive two weekly collections at no fee. We assume that the remaining ten might need four weekly collections, at a cost of one half the annualized amount of $1,633, or $814 each.
Containers at Southern Village – We have assumed that we will collect fifteen containers, each with twice per week service, to begin once Southern Village is annexed.
1999-2000 expenditures for commercial service (including overhead)
collection 418,300
disposal 554,700
total $973,000
adjustments to update costs:
collection (increased 4.5% in each of subsequent two fiscal years)
(418,300 x 1.045) x 1.045 = $456,794
disposal (increased 10% to cover increases in tipping fee)
554,700 x 1.10 = $610,170
combined
456,794 + 610,170 = $1,067,000 (up 9.7% from 1999-2000 cost)
699 containers extra 2x/week collections
x 2x/wk pick-up 41 containers
1,398 x 2x/week
x 52 weeks 82
72,696 pick-ups x52 weeks
+4,264 4,264
77,000 pick-ups (+/-)
Cost per pick-up:
Collection - $5.93 (456,794/77,000)
Disposal - $7.92 (610,170/77,000)
Combined - $13.85 ($5.93 + $7.92)
Calculations (based on above data)
Total pick-ups 77,000/yr
Less, basic pick-ups 36,348 (each container 1x/week; 699 x 52 wks)
“extra” pick-ups 40,652
40,652 extra pick-ups
x $13.85 cost per pick-up from above
$563,000 yearly cost for extra pick-ups
$13.85 putative cost per pick-up
x 52 weeks
$720/year (cf., we have used rounded cost of $700 as estimated average for business to
have an 8 cu yd container collected an additional 1x per week)
# containers serviced 699
less # side-loading (117)
less # with extra service ( 41)
less # non-profits ( 70)
less # shared containers ( 50)
less # Town containers ( 20)
total 401
calculations
(699 x $700) x .75 (9 months of year) = $367,000 ($490,000/year)
note: this calculation is informational only; of the 699 containers presently served, some number will reduce collections to once weekly, while others will have to have more than one extra collection weekly)
basic calculation from above data
(699 x $700) x .75 = $367,000 ($490,000/year)
possible changes to this sub-total
of 117 side-loading serviced containers
at least 85 are 2x per week, at cost of $540/yr x 85 = +$45,900
in above total: 85 x $700 = 59,500
net change for these 85: -$59,500 + 45,900 = -$13,600
the remaining 32 are assumed to be basic service: 32 x $700 = - $22,400
combined: -13,600 and –22,400 = -$36,000
of current 41 “extra” service (note: breakdown is for estimating purposes only; actual breakdown could vary)
10 @ 2x per week, at cost of $700 per = $7,000
10 @ 3x per week, at cost of $1,190 per = $11,900
21 @ 4x per week, at cost of $1,633 per = $34,300
combined: 7,000 + 11,900 + 34,300 = +$53,200
in above total: 41 x $700 = $28,700
net change for these 41: +53,200 – 28,700 = +$24,500
of 70 non-profits, based on charge of one-half cost
50 @ 2x per week, at cost of $350 per = $17,500
in above total: 50 x $700 = $35,000
net change for these 50: -35,000 + 17,500 = -$17,500
remaining 20 are assumed to be basic service: 20 x $700 = -$14,000
combined: -17,500 and –14,000 = -31,500
of estimated current 50 shared containers
10 @ 4x per week, at cost of one half of $1,633, or $817 per = $8,170
in above total: 10 x $700 = $7,000
net change for these 10: +8,170 - 7,000 = +$1,170 ($1,200 rounded)
40 will receive 2x per week at no fee: 40 x $700 = $28,000
combined: +1,200 and –28,000 = -$26,800
of 20 Town containers
20 @ 2x per week, at cost of $700 per = -$14,000
possible add to the above sub-total
of 15 containers for Southern Village
15 @ 2x per week, at cost of $700 per = +$10,500
75% 100%
$367,000 $490,000 Beginning revenue estimate
- 27,000 - 36,000 side-loading containers
+ 18,400 + 24,500 “extra” service
- 23,600 - 31,500 non-profits
- 20,100 - 26,800 shared containers
- 10,500 - 14,000 Town containers
+ 7,900 + 10,500 Southern Village containers
$312,000 $417,000
(above totals are rounded to nearest $1,000)
ATTACHMENT 2
MEMORANDUM
To: Bruce Heflin Public Works Director
From: Gayle Wilson, Solid Waste Management Director
Subject: Orange County Response to Town of Chapel Hill request for information
About the impact on commercial recycling of a once a week waste collection system and rewarding or providing financial incentives for waste reduction
Date: May 25, 2001
The Town of Chapel Hill is considering converting its non-residential/commercial waste collection services to once per week tax supported with fees for additional services. The Town believes that one consequence of this change could be an increase in the demand for various recycling services targeted at the commercial sector. This memorandum provides some responses to the Town’s questions about the possible incentives to recycle and potential impacts on waste reduction and recycling services of its reduction in non-residential tax-supported waste collection
The Town of Chapel Hill has provided tax-supported residential and commercial waste collection services for over fifty years. The Town is now considering converting its baseline tax-supported commercial service from twice-a-week to once-a-week with fees for additional services. This is primarily to reduce the cost of tax-supported collections and the tax burden. It may also have the corollary effect of increasing the demand for recycling and waste reduction services.
While some businesses may be able to consolidate their waste sufficiently to manage with the once-a-week collection, many will need to purchase additional waste collection services from the Town or other service providers, reduce their waste through innovative practices such as returnable packaging or increase the amount of recycling and composting they now do.
Responses to the reduction in service that increase the demand on the amount of recycling and composting services may impact the Solid Waste Management Department. The Department now provides weekly or semi-weekly can and bottle collection to about 100 Orange County businesses generating a minimum of 500 pounds per month and twice-a-week food waste collection to thirteen businesses generating about two tons per month each. These services are now close to the threshold of what the County can provide given current staffing and budgeting. Small-scale commercial generators of cans, bottles, mixed paper and newspapers are encouraged to use public recycling dropoff sites in lieu of collection service.
Diversion of non-residential corrugated cardboard is now mandatory by County and Town ordinance. Private services are generally used to collect the cardboard from the generator, although non-residential generators of fewer than fifty boxes per week are allowed to use the public recycling dropoff sites. Private contractors provide a variety of other recycling collection services for office paper, pallets, food grease, etc. at the point of generation.
In 1997 the Town, along with the other member governments of the Landfill Owners Group adopted a state-mandated solid waste plan with a County-wide goal of reducing waste by 61% per person by 2006. Along with the goal, the governments all adopted a plan framework and sequence that called first for construction of a materials recovery facility (MRF) to handle the increased recyclables more efficiently, followed by expansion of commercial recycling to a universal service, as with the urban residential curbside program, and finally development of waste reduction incentives such as pay-as-you-throw and mandatory recycling to maximize the programs’ diversion capabilities.
In 2000, the Town and the other three local governments reaffirmed the goal and the plan framework as part of the State-mandated plan update. The Town also appointed members to the newly formed Orange County Solid Waste Advisory Board. The purpose of this board is to enable the representatives of the various local governments to have input to the County’s solid waste policies. The SWAB will advise the Board of Orange County Commissioners on the adopted Solid Waste Plan, and a review of the approved Solid Waste Plan and alternative financing options will be its primary tasks over the next several months.
Chapel Hill’s currently proposed approach of adopting what is in essence, a commercial Pay-As-You-Throw system of waste financing, prior to the development of a MRF or expansion of recycling programs is out of sequence with the currently adopted plan.
1. Expand current commercial recycling efforts:
It is possible to modestly increase both the current commercial programs. Staff estimates they can add up to ten sites to the current can and bottle program and possibly five sites to the food waste program. Staff believes that going to once-a-week waste collection would likely increase demand for these services over the projected 10 new glass sites and five food waste sites.
Further staff would continue to suggest that small-scale generators of cans and bottles continue to use public drop off sites. All the sites in and around Chapel Hill are now operating near or at capacity and expansion of more than 10 percent by volume (over another 50 tons per month) would likely require additional staff and driving time to haul and process materials more frequently. Realistically, only the dropoff site at the Animal Shelter on Municipal Drive has additional capacity at current collection frequency. The cost of these additional services would be less than the revenue from sale of the materials. Thus additional funding would be needed to support increased collections.
The Town could consider the siting and development of an additional dropff site to take the pressure off the current sites. Future dropoff sites are now programmed but not yet funded for the Southern Village Park-and-Ride lot and Meadowmont’s main commercial district.
2. Town provided incentive programs to encourage commercial recycling.
Solid Waste staff believes it would be very difficult to establish a waste generation baseline for each business to use in evaluating future reduction of waste. It would also be difficult to verify and set reward levels for each business claiming to recycle.
Some questions that arise when considering provision of incentives include:
· Should larger businesses get larger rewards for recycling higher tonnages?,
· Should. those with the highest percentage recycling be most rewarded?,
· Should those with the lowest amount of waste be rewarded most?
· Should those doing the maximum number of recycling and waste reduction activities of which they are capable be rewarded most?
· Who should measure this? How would disputes be settled?
There are about 100 businesses now participating in the current commercial recycling programs that Orange County now recognizes through public advertising campaigns as in attachment 1. Several others participate in curbside programs when they are adjacent to residential curbside recycling collection points. Many other businesses, such as copy shops and office buildings, are already voluntarily using private recycling services, despite the current lack of a financial incentive to do so. Staff is willing to work with the Town to consider revitalization of the now moribund Waste Watcher program that we initiated as a pilot ten years ago to publicly recognize businesses that were reducing their waste.
Staff believes the simplest and best incentive is that recycling avoids the cost of additional waste generation over the proposed baseline of once a week. The virtue of recycling becomes its own reward if it avoids additional waste collection costs, whether those services are provided publicly or privately. The initiation of once-a-week waste collection service would inherently provide this incentive.
3. Fund recycling services directly.
Alternatively to paying or rewarding businesses for waste reduction by the ton or percent, the Town could provide funding for recycling services from the fees generated by the commercial waste collection or other sources. This approach is in conflict with the currently adopted solid waste plan that calls for a centralized recycling service provided uniformly to each sector. Were the Town to consider this approach despite conflict with the adopted plan, Town funds could be provided to:
a. directly to the waste-generating businesses to pay for private or publicly provided
recycling services,
b. from the Town to a contracted private service-provider to run a route(s) serving a number of businesses e.g. for office paper collection, or
c. to the Orange County Solid Waste Management Department to expand its commercial recycling services.
4. Private sector or County service provision:
The Town could provide no additional recycling services and allow all additional services to be from the private sector that contract with individual businesses.
5. Mandating recycling:
The Town could mandate recycling of certain materials, banning them from waste collection containers as it now does with corrugated cardboard. Implementing mandatory recycling prior to building a MRF or providing universal, county-wide commercial recycling would conflict with the adopted solid waste plan. Success of mandatory recycling would require a fair and rigorous policing system and constant effective enforcement. It is difficult to enforce bans on less visible items such as office paper, cans or bottles than it is on the currently banned corrugated cardboard or yard waste, both of which are highly visible. Further, alternative collection options would need to be provided for those materials now banned from waste collection.
The current public recycling collection programs do not have the capacity to handle the probable intense increase in materials that would result from such bans. Currently, the commercial waste stream contains an estimated 27% recyclable cans, bottles and paper (attachment 2). Mandatory recycling is likely to lower the quality of the materials diverted thus lowering market value. Those who now participate in recycling voluntarily have a high level of concern for the environment that results in their doing recycling right.
6. Technical assistance in waste reduction:
Orange County is prepared, with current staff, to provide some technical assistance such as waste audits to those businesses wishing to reduce waste in order to come under the proposed one dumpster per week threshold. We can help businesses find ways to reduce and recycle, but not provide them the services.
CONCLUSIONS
The Town’s change to once-a-week waste collection will bring pressure to provide additional recycling services. We are eager to accommodate this increased demand. Those services have already been incorporated into the adopted Solid Waste Management Plan, which envisioned significant need to expand commercial recycling collection and processing services in order to reach local waste reduction goals. These services will require substantial additional funding, as discussed in the no-longer-functioning Alternative Finance Committee. The Solid Waste Advisory Board will be addressing alternative funding and the Solid Waste Management Plan in the upcoming months.
Whether the Town wishes consideration of expanded commercial recycling services outside the framework of the adopted Plan, or whether the Town wishes to expedite implementation of the already adopted Plan is an important distinction. In either case we recommend that the Solid Waste Advisory Board be utilized to evaluate the Town’s proposals/suggestions. The Town could accomplish this by providing direction/guidance to its two SWAB members as to what course of action it desires and ask that they advocate for the Towns position. Or, the Town could recommend a course of action or preferred outcome directly to the SWAB as a whole.
We support requesting the Town’s SWAB members to urge expedient implementation of the existing plan; that recognizes the importance of the commercial sector in meeting local goals. If the SWAB as a whole concurs, it would convey its recommendation to the County Board. If the board concurs, working with the Towns, they should initiate plan implementation/financing and proceed with development of a materials recovery facility, followed by expansion of recycling services and then maximization of materials diversion through PAYT and mandatory recycling.