Memorandum
City of Lawrence
Public Works Department
MEMO TO: David Corliss, City Manager
Debbie Van Saun, Assistant City Manager
Chuck Soules, Public Works Director
Tammy Bennett, Assistant Public Works Director
FROM: Bob Yoos, Solid Waste Division Manager
SUBJECT: 2008 Solid Waste Rate Study
DATE: May 4, 2007
The solid waste rate study is submitted annually to provide the City Commission recommended refuse collection rates for the following year. Solid waste management is a City enterprise that entails a wide variety of services. Services are provided by charging a fee as is done in the Utility, Storm water and Parking Services Enterprise Funds. No sales tax, property tax, franchise fee or other general taxes are used to fund the solid waste management system.
The recommended increase for 2008 is $0.49 monthly per residential customer.
The recommended increase will assist the Solid Waste Division to maintain the quality of services that resulted in an 86 percent overall approval rating in the 2007 Citizens Survey. This approval rating was second only to fire and emergency medical services.
Primary Factors Affecting Rates: The Solid Waste Division works diligently to provide efficient and excellent services without large or erratic rate increases. The solid waste rates are non-elastic, and need to be adjusted annually. There are a variety of factors that impact rates, as outlined below. For easy reference, a 1% rate increase results in approximately $70,000 additional revenue in the Solid Waste Fund.
§ Fuel and maintenance costs: Solid waste collection is a very fleet intensive operation. The variable costs of fuel have a huge impact on operational costs for the division annually.
§ Equipment replacement:
o Replacement schedule: The division maintains a rigorous replacement schedule for large equipment to ensure the equipment is replaced at the most cost-effective time. Equipment replacement can vary widely from year to year. 2008 should be a very large equipment replacement year in terms of number of pieces that were scheduled for replacement. Staff has deferred 5 rear loaders, 1 roll-off, 4 pick ups, and 1 maintenance utility vehicle (roughly $1,163,000 in equipment) from replacement in 2008 because the funds simply are not available, even with the rate increase proposed. Further deferral of equipment replacement will result in decreases in the quality of service delivery (equipment downtime, crew overtime, maintenance costs).
o Replacement costs: In addition to the number of pieces of equipment scheduled for replacement, there has been significant inflation in the cost per unit over time, due to steel prices and regulatory changes. The price of a rear-load refuse truck increased 22% from 2004 to 2007 (from 129,952 to 159,147), and 50% from 2000 to 2007. We have 23 rear load solid waste vehicles and two small rear loaders in the solid waste fleet. An additional $10,000 is budgeted per rear loader replacement to meet city weight restriction requirements. This is just one example of equipment cost inflation. Similar inflation has been experienced for all large equipment.
§ Personnel costs: Personnel costs account for approximately 55% of the solid waste budget. Personnel costs have increased significantly over time, including wage adjustments, overtime, health care and benefit costs. The health care line item alone has increased more than 17% since 2005. The recommended rate includes a 2 percent annual wage adjustment.
§ Support for city operations: The Solid Waste division transfers funds to other city operating funds each year – general fund, work comp reserve, and health care fund. Some of those transfers were increased in the last two years after the rate study was completed. Thus the rates charged did not adequately plan for those additional transfers, particularly for work comp reserve and health care. In addition, we purchased a small rear loader for Parks and Recreation in 2006, which had not been planned or included in the rate calculations. Parks and Recreation collects trash from parks and some public spaces. In 2008, we need to “make up” for underestimating the revenues needed in prior years.
§ Fund balance forward: It is critical for the division to manage the fund balance forward in a conservative manner, due to fluctuating capital expenditures (referenced above) and the possibility of an increase in landfill tipping fees due to higher operating costs or an increase in the current state surcharge on tonnage. The fund balance forward into 2008 is less than staff expected due to several of the issues mentioned above.
Recommendations For Refuse Service Rates In 2008:
Residential:
a. Residential rate of $12.68 per month which is an increase of $0.49 per month (present rate is $12.19 per month). A comparison of Lawrence's proposed rate and that of other cities is contained in Attachment I.
b. Low-income-elderly rate of $4.44 per month which is 35 percent of the residential rate as established by Ordinance 6618. Increase criteria for eligibility for the low-income-elderly rate to match the federal poverty guidelines for 2006. The maximum annual income from all sources will be adjusted based on the 2006 Federal Poverty Guidelines.
Commercial:
a. A minimum commercial rate of $18.43 per month which is an increase of $0.71 per month (present rate is $17.72 per month).
b. Increase commercial dumpster and roll-off service rates 4.0 percent. (Individual rates vary according to size of container and frequency of collection.)
A comparison of annual rate increases since 1988 is contained in Attachment II. The division remains firmly committed to small and consistent annual rate increases approximating changes in inflation and personnel costs, and avoiding the erratic and large rate increases. However, the issues outlined above necessitate a larger increase for 2008.
Options for other possible additions to the solid waste rates:
Below is a chart that outlines rate adjustments that would include parks trash collection:
Parks trash collection: Chuck Soules requested that we calculate the rates required if two full-time Parks and Recreation employees were transferred from the General Fund to the Solid Waste Fund. The Parks and Recreation Department has two full-time employees who are responsible for trash collection in the parks and public areas, and two seasonal park district laborers. The employees do trash collection, litter control, and other duties as assigned. The calculation only includes 2 FTE salaries and the associated benefit and health care costs, or roughly an additional $108,000 expense to the Solid Waste Fund.
SERVICES PROVIDED as part of the monthly rates
The Solid Waste Division provides once-a-week solid waste collection and once-a-week yard waste collection for residents. The division continues to provide a wide range of services with no additional charges to residential customers, such as collection of bulk items, tires, and appliances and programs for household hazardous waste and used oil. The division also performs weekly alley cleanups in neighborhoods and downtown and schedules broad-based neighborhood cleanups through Neighborhood Associations at no charge if they are scheduled on a Friday.
Recycling Rates and Services: The Lawrence community, through public and private endeavors, has achieved a recycling rate of 34 percent of municipal solid waste generated. This is recognized as the highest recycling rate in the state and surpasses the national average (about 32 percent) which includes communities with curbside recycling programs. The Solid Waste Division is increasing the focus on waste reduction in addition to recycling. The division operates a new compost facility which has enabled increased recovery of grass, leaves, and other plant and wood debris.
Commercial Cardboard Recycling Program: The Solid Waste Division implemented a commercial cardboard recycling program in 1997. The program targets commercial customers (currently serving more than 500 customers) who generate small to medium amounts of cardboard, specifically those that do not have access to storage space or balers for their cardboard. The cardboard recycling program targets the second largest volume of material generated in the community (after yard waste). Cardboard drop-off boxes, similar to the newspaper drop-off boxes, were tested in 2002 and the first drop-off location for cardboard was sited in 2003. Currently there are six city-operated cardboard drop-off sites in Lawrence. Drop-off sites enable businesses and residents who don’t have access to the current collection program to have a convenient opportunity for recycling cardboard.
Old Newspaper Collection Program: The Solid Waste Division has a newspaper drop-off program. Currently there are ten city-operated newspaper drop-off sites in Lawrence. Newspaper is the largest single material generated from residential sources after yard waste.
Old Office Waste paper Program: The Solid Waste Division implemented a recycling program for office waste paper in 2002 serving a pilot core of businesses, offices and schools. The program expanded to a fully functional program serving the community in 2003. Currently more than 120 offices or businesses are participating in the program.
Hazardous Wastes: The Solid Waste Division implemented a Small Quantity Generator (SQG) program in 2000 which targets smaller businesses with hazardous wastes needing proper disposal. Also, the Household Hazardous Waste collection times have been expanded to weekday times “by appointment” to make the program more “user friendly” and service oriented.
