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SR-503-001-02 (4) " , ,. Gr..: 3ES : KR: MHE Council Meeting: April 28, 1987 Santa Monica, California .5 t? 3 -po t' --t!?2 I/-(!, :~3~&H TO: Mayor and City council FROM: City staff SUBJECT: Recommendation for City Council to Adopt Resolution Increasing Refuse Rates INTRODUCTION This report recommends that the City Council adopt the attached resolution increasing the Solid Waste Management fees by 16% to cover increased costs within the Solid Waste Management enterprise. Approximately 57% of this increase is the result of rising landfill costs. The rate increase should provide enough additional revenue to cover the projected fund operating deficit for two years. However, uncertainties concerning landfill fees which may rise significantly again in 1988-89 may necessitate another rate increase next year. BACKGROUND The scope of services provided by the Sol id Waste Management enterprise includes refuse collection and disposal, alley cleaning, special collections, street sweeping, litter can service, municipal composting, asphalt and concrete recycling, recyclables buy-back center and a curbside/zone recyclables pick-up program. These operations are funded by a current annual budget of $6,014,300 including capital equipment. Solid waste services are operated on an enterprise basis whereby user fees and related revenues offset the entire cost of the services. As the cost of the services increase rates must be - 1 - lIt! APR 2 8 198-1 MAY - 5 ]Q,g, GS:SES:KR:MHE Council Meeting: April 28, 1987 Santa Monica, California adjusted upward to insure sufficient revenue to cover the cost of the services. Rates were last increased by 15% in May, 1985. At that time, it was projected that the increase would sustain the solid waste management operation for two years without requiring further increase. This projection has proved accurate inasmuch as the projected fund balance for June 30, 1987, is ($65,296), which is very near the break-even point. This projected balance includes an unanticipated cost of approximately $141,900 for fuel storage and dispensing facilities replacement at the City Yards. This proj ect is currently under construction on an emergency basis due to underground leaks. Operating costs continue to increase. CUrrent projections indicate that if the same level of service is provided without a rate increase, yearly operating deficits will occur in the amount of ($591,479) in budget year 1987/88 and ($878,878) in 1988/89 for a cumulative deficit of $1,535,653 including the ($65,296) negative fund balance at the year ending June 30, 1987, (See Exhibit I). DISCUSSION OF COST INCREASES While certain cost factors have remained relatively stable over the past two years, most costs continue to rise. The maj or categories where projected cost increases are expected to occur are the following: Labor The Teamster contract allows for a 4% increase in FY1987-88; however, the contract expires on June 3D, 1988, and labor cost increases for the second year of the proposed rate - 2 - GS:SES:KR:MHE Council Meeting: April 28, 1987 Santa Monica, California increase are unknown. Increases for the three other bargaining units (MEA, STA, and MTA) are unknown for both FY1987-88 and FY1988-89. In addition, labor costs have increased due to the decision to convert two as-needed positions used for alley cleaning positions to permanent positions. other operating Costs - The major operating cost increase facing the Solid Waste Management enterprise is the increase in landfill costs. Staff has learned that the landfill costs will double from $4.60 a ton to $9.20 a ton effective July 1, 1987. This increase will add an additional cost of $450,000 to the operating expenses. Further I staff was apprised that the landfill rates could only be guaranteed for one year and further cost increases should be expected. Staff has contacted other landfill operators and has determined that the landfill presently used is the most cost-effective location considering rates, travel time, operating costs and distance even with increased rates. other operating costs are estimated to increase 5% per year over the next two years. capi tal Equipment Capital costs for items such as refuse trucks, long-haul transfer tractors and trailers, and street sweepers are projected to increase at least 6% per year. PROPOSED CHANGES IN THE CURRENT LEVEL OF SERVICE Hazardous Waste Response and Storage To be able to provide better response to emergency hazardous waste incidents and provide some level of hazardous material disposal service, staff recommends that a hazardous waste - 3 - . GS: SES: KR:MHE Council Meeting: April 28, 1987 Santa Monica, California response and storage capability be established. Fifty thousand dollars ($50,000) first year cost is proposed to provide this service. The details of how the $50,000 will be allocated will be determine in the next few weeks. Recycling Program status The recycling program consists of single family curbside collection, drop-off zones for mUlti-family areas, and the operation of a drop-off and buy-back center operated by Ecolo-Haul, at the Ci ty Yards. Of these operations only the buy-back center produces a positive cash flow to the City of approximately $15,000 per year. Costs of collecting recyclable materials from residents far exceed the revenue earned from the sale of the materials. However, there are many indirect benefits of providing the collection services. It currently costs the City $167 per ton to collect recyclables from the curbsides and zones. Cost of regular refuse collection is approximately $59 per ton. The Current market price for recyclables (newspaper, mixed cans and glass) is approximately $30 per ton. Therefore the net cost of collecting recyclables is $167 less $30 or $137 per ton. If a cost avoidance credit of $59 per ton1 is allowed for each ton of recyclables diverted from the waste stream, then the net cost to provide the recycling service is $78 per ton. The City collects approximately 2,000 1 The cost avoided for regular refuse collection because the material is diverted from the waste stream by the recycling program. - 4 - GS:SES:KR:MHE Council Meeting: April 28, 1987 Santa Monica, California tons of recyclables per year. Therefore if the recyclable collection program were eliminated, approximately $156,000 could be saved per year. This translates to 3% of the proposed rate increase. The benefits of providing a recyclable collection program include the following: 1. Convenience Curbside and zone collection is the most convenient to the average resident. This convenience encourages more participation. 2. Commitment Providing the collection service further demonstrates the commitment the City has made to consumer recycling. 3. Energy Savings - Curbside and zone collection operated by the City results in net energy savings. If individuals were to take their recyclables to a central drop-off center, ten times as much fuel would be required per ton of recyclables collected. Hundreds of individual auto trips would be required by individuals to equal a single collection trip by a City crew. 4. Conserving Landfill Space - Although the percentage diverted from the refuse stream by recycling is very small, it is the foundation for a lifestyle that will be essential in the future. Landfill space is dwindling and environmental concerns of air and water pollutions as a result of landfilling continue to increase. Resource reuse is the most - 5 - - GS: SES: KR:MHE Council Meeting: April 28, 1987 Santa Monica, California environmentally sound alternative for reducing the waste stream that requires 1andfilling. Long-Range Solid Waste Management Plans Waste reduction and resource recovery appear to be the only available alternatives to landfilling. Solid waste managers in all areas of the Country agree that material recycling will be an important part of the long-range solid waste management plans of every agency. Approved landfill space in Los Angeles County is rapidly diminishing. The landfill currently used by the City, known as Sunshine Canyon located near Newhall, has an operating permit through 1992. However, current environmental requirements for landfill operations, such as clay liners, gas mitigation systems, etc., will cause future landfill permits to be extremely difficult to obtain. Also, the installation of the clay liners, gas recovery systems, and leachate controls in an approved landfill will mean that costs to users will increase dramatically. As mentioned earlier in this report, the City's landfill costs will double in FYl987/88 and further increases are expected in future years. It appears to staff that a regional refuse disposal crisis is developing and will be upon us within three to five years. Wi th this situation approaching, staff has been investigating several alternatives to landfilling over the last few years. One of these alternatives is the recycling program. Other al ternati ves are: construction of waste-to-energy facilities, - 6 - GS:SES:KR:MHE Council Meeting: April 28, 1987 Santa Monica, California and construction of refuse processing plants that sort reusable materials and process the remaining material for fuel at some other site or for pulp to produce building materials. None of these technologies are currently economically feasible for Santa Monica. There are unsolved environmental issues with the waste to energy plants and markets have not been developed for refuse pulp based building materials. Long-range refuse disposal issues are regional by nature, and many jurisdictions utilize the same landfills. Therefore, these agencies are facing the same refuse disposal issues as Santa Monica. staff proposes that Santa Monica take the lead in forming a consortium of local cities, e.g., Culver City, Beverly Hills, Inglewood, El Segundo, Manhattan Beach and the city of Los Angeles to explore joint venture opportunities to avert a solid waste crisis. The consortium could consider technical as well as political solutions to the problem. As part of the recommendations outlined in this report, staff is requesting Council to direct them to initiate a planning consortium with other interested cities in the region to propose technical and political solutions to the area's solid waste management problems. BUdget/Financial Impact The 16% rate increase will produce $788,432 per year in additional revenue to the Refuse Fund. This additional revenue - 7 - GS:SES:KR:MHE Council Meeting: April 28, 1987 Santa Monica, California will offset the projected deficits for FY1986/87 and FY1987/88 (See Exhibit II). As discussed above, landfill costs may greatly increase again in FY1988j89. The amount of increase is unknown at this time. Therefore, another increase or a reduction in the service level, may be necessary one year from now. Implementation of a 16% rate increase will result in the following monthly rates for typical Santa Monica customers. USER TYPE CURRENT WITH 15% INCREASE Single Family $ 10.01 11.61 10 Unit Apartment 63.65 73.83 with 2 bins 2jwk. Commercial Service 139.08 161.33 1 bin 6/wk. commercial Service 45.71 53.02 1 bin 2jwk. *(See Attached Resolution for complete fee schedule) The rates resulting from this increase will put Santa Monica Refuse service rates for residential customers relatively high when compared to local comparable cities (See Exhibit III). However, Santa Monica includes the cost of street cleaning and recycling and a minimum of twice per week service in the refuse fee. The comparable Cities listed include only the cost of refuse collection in their rates. The proposed rates for commercial users remain very competitive with other agencies and local private refuse companies. - 8 - GS:SES:KR:MHE Council Meeting: April 28, 1987 Santa Monica, California Recommendation 1. It is recommended that the City Council adopt the attached Resolution increasing rates for refuse collection and disposal by 16%. 2. It is further recommended that Council direct staff to initiate discussions with other cities in the region to explore the feasibility of forming a planning consortium to develop the best strategies for addressing the impending solid waste disposal problems. Prepared by: Stanley E. Scholl, Director of General Services Ken Redfern, Maintenance Manager Marsha Eubanks, Administrative Analyst Attachments: Resolution Exhibits I, II, & III - 9 - DESCR I PT ION BEGINNING FUND BALANCE REVENUE REFUSE COLLECTION FEES DUMP USE FEES DEBRIS REMOVAL ST HIGHWAY CLEANING BEACH LOT SWEEPING RECYCLE LEASE RENTAL RECYCLE MATERIALS WEED ABATEMENT STORM DRAIN MAINT CREDIT INTEREST ON FUND BALANCE EXHIBIT I NCM 4/21/87 PROJECTION OF FY 87/88 & 88/89 INCOME (LOSS), AND FUND BALANCE FOR REFUSE FUND WITHOUT RATE INCREASE, WITH HAZ MAT (711/87) EXPENSES(3) TOTAL OPERATING REVENUE REFUSE COLLECTION AND DISPOSAL STREET CLEANING RECYCLl NG CIP REFUSE COLL/DISPOSAL CIP STREET CLEANING TOTAL EXPENSE HAZARDOUS MATERIALS PROGRAM ENDING FUND BALANCE OPERATING INCOVE (LOSS) (6/30/88) 87/88 88/89 (65,296)(1) (7/1/88) (656,775) 4,927,700 (2) 4,927,700 105,000 (2) 105,000 25,000 (2) 25,000 28,000 (2) 28,000 13,800 (2) 15,000 73,312 (2) 85,000 65,749 (2) 65,749 1,700 (2) 1,700 50,000 (2) 50,000 o 5,290,261 5,303,149 4,102,140 (4) 4,307,247 780,429 (4) 819,450 373,171 (4) 391,830 497,000 (4) 611,000 79,000 (4) 0 50,000 (4) 52,500 5,881,740 6,182,027 (591,479) (878,878) (656,775) (6/30/89) (1,535,653) FOOTNOTES. (1) FROM FROM 86/87 FUND POSITION PROJECTION (2) FROM 87/88 BUDGET REQUEST WITHOUT RATE INCREASE (3) EXPENSES PROJECTED TO INCREASE 5% IN 88/89 (4) FROM 87/88 BUDGET REQUEST. o EXH I BIT II PROJECTION OF FY 87/88 & 88/89 INCOME (LOSS), AND FUND BALANCE FOR REFUSE FUND WITH 16% RATE INCREASE, WIiH HAZ MAT DESCRIPTION 87/88 88/89 BEGINNING FUND BALANCE (711/87) (65,296)(1) (7/1/88) 131,657 REVENUE REFUSE COLLECTION FEES 5,716,132 (2) 5,716,132 DUMP USE FEES 105,000 (4) 105,000 DEBRIS REMOVAL 25,000 (4) 25,000 ST HIGHWAY CLEANING 28,000 (4) 28,000 BEACH LOT SWEEPING 13,800 (4) 15,000 RECYCLE LEASE REWTAL 73,312 (4) 85,OOQ RECYCLE MATERIALS 65,749 (4) 65,749 WEED ABATEMENT 1,700 (4) 2,000 SiORM DRAIN MAINT. CREDIT 50,000 (4) 50,000 INTEREST ON FUND BALANCE o TOTAL OPERATING REVENUE 6,078,693 6,091,881 EXPENSES(3) REFUSE COLLECTION AND DISPOSAL 4,102,140 (4) 4,307,247 780,429 (4) 819,450 373,171 (4 ) 391,830 497,000 (4) 611,000 79,000 0 50,Oao (4) 52,500 5,881,740 6,182,027 STREET CLEANING RECYCliNG CIP REFUSE COLL/DISPOSAL CIP STREET CLEANING HAZARDOUS M4TERIALS PROGRAM TOTAL EXPENSE OPERATING INCO~E (LOSS) 196,953 (90,146) ENDING FUND BALANCE (6/30/88) 131,657 (6/30/89) 41,511 FOOTNOTES (1) FROM FROM 86/87 FUND POSITION PROJECTION. (2) FROM 87/88 BUDGET REQUEST WITH 15% RATE INCREASE (3) EXPENSES PROJECTED TO INCREASE 5% IN 88/89 (4) FRO~ 87/88 BUDGET REQUEST. o EXHIBIT III Comparison of Refuse Rates with other cities Monthly refuse rates for various services in near-by cities compared to the proposed 16% increase are: COIlll'llercial Commercial City single-Family MUlti-Family 1 Bin/2 weekly 1 Bin/6 Weekly Culver city $ 7.16 $75.00 $75.00 $225.00 Beverly Hills N/A N/A 60.00 139.00 Glendale 10.30 19.20-Duplexes 46.40 126.20 Torrance 8.00 N/A N/A N/A Pasadena 14.60 74.00 74.00 206.00 Santa Monica 11.61 73.93 53.02 159.01 ( 16%) It should be noted that Santa Monica collects refuse from single-family residences twice a week whereas all the other cities shown make collections from single-family residences only once a week. In addition, Santa Monica charges all customers for both street sweeping and recycling services.