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052411 BOS - Public Services Staff Report

052411 BOS - Public Services Staff Report

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Published by: LakeCoNews on May 26, 2011
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05/26/2011

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COUNTY OF LAKE
Public Services Department
333 Second StreetLakeport, CA 95453Telephone (707) 262-1618FAX (707) 262-0973
KIM KEVIN CLYMIRE
Director 
CAROLINE C. CHAVEZ
Deputy Director 
MEMORANDUMTo:
Honorable Board of Supervisors
From:
Kim K. Clymire, Director Caroline C. Chavez, Deputy Director 
Subject:
Solid Waste Options for Revenues
Date:
May 23, 2011
Background:
On May 10, 2011, an agenda item was presented your Board that addressed anannual $500K deficit in solid waste revenues that has continued for the last three years and isexpected to continue for at least the next fiscal year. The reason for the continuing deficit is dueto the dramatically declining tonnage (25% less than 2006) that has been caused by ousuccessful recycling efforts and the ongoing recession. What few cost-cutting measures areavailable have already been implemented including closure of the Lakeport Transfer Station, butcontinuing and increasing compliance requirements are adding to our required expensesincluding the estimated $3 million cost of a newly-required full landfill gas (LFG) system that isnow required within the next couple of years for all active landfills under AB 32. The IntegratedWaste Management Division has used its available unrestricted reserves to balance the budget,and those reserves have been depleted.Your Board was presented options for increasing revenues through a rate increase of at least 39%and/or approval of an import contract with Solid Waste Systems (SWS), an affiliate of LakeCounty Waste Solutions, who operates the Ukiah Transfer Station for the City of Ukiah. Theexpected import of approximately 22,500 tons annually could be accepted at our landfill if your Board were to approve a contract for import that is allowed by County ordinance. The proposal presented to your Board included a 5-year contract with an option for a 5-year extension whichwould provide a gross estimated annual income of $850K. This income would cover thedivision’s ongoing deficit, replenish reserves for compliance and expansion, and would for asmaller gradual local increase of landfill gate fees over a 4-year period to bring our local revenueup to cover the $500K deficit within five years. This would make the County self-sustaining bythe end of the first five year contract period and would better position the County to determinewhether or not extension of the contract, after 5-years, was desirable and advisable.Staff presented scenarios for a 39% gate fee increase that would be needed to offset the $500K deficit, but would not address the compliance, reserve and expansion costs on the horizon. Your Board discussed at length the impact of the rate increase at the landfill on curbside residentialand commercial service which would be passed through by the franchise haulers to thei1
 
customers, raising the curbside rates in the unincorporated area by 4-7% depending on their location and level of service. There was also discussion of the impact on the lifespan of thelandfill, which is currently expected to reach capacity in the next 15-20 years depending on our rate of fill without import. However, the money for the expansion has been largely withdrawnfrom reserves to cover our operating deficit. Your Board carried this agenda item over to May24
th
for further discussion and asked for additional information on other cost-cutting options aswell as other rate increase scenarios to cover our budgetary needs.
Additional Cost-Cutting Options Reviewed
In order to reduce operational costs, staff has determine that the Public Service Analyst positionthat was recently vacated will not be refilled. Other staff will pick up the work of this position.The cost savings in salaries and benefits is estimated at $75K annually.Staff has also reviewed the impact of closing the landfill one or more days per week. Our analysis shows the closing the landfill one day per week, i.e. Sunday, would save no money because there would no reduction in staffing requirements and no other cost savings. Closingtwo days per week would allow a savings of $125K annually by eliminating two staff positions(one heavy equipment operator and a weighmaster), but the impact of that reduction would probably generate some significant negative consequences. The days that were evaluated for closure were Sundays and Mondays. However, the consequences of such a measure wouldinclude public inconvenience and increased potential for illegal dumping and personalaccumulation, which would in turn reduce our revenue further.Since the last Board review of this subject, we have been informed that we need to add $75K toour expenses for Special Districts to cover their estimated additional charge for leachate we pump to their Southeast Regional Treatment Plant annually.
Additional Revenue Scenarios
Regardless of the rate increase selected, staff is cognizant of the impact on the local residents andthe economy. Large increases in rates could further reduce tonnage and would increase personalaccumulation and illegal dumping. Haulers could expect to see a decline in customers and anincrease in contamination in the curbside recycling carts as well as an increase in delinquentaccounts.Staff has summarized the initial two scenarios presented and offers a range of additionalscenarios for your Boards consideration. Each of the curbside rate impacts are for theunincorporated areas served by the County’s two franchise haulers. The passthrough increasevaries by the franchise zone so the increase is shown as a range in percentages and monthlymonetary increase. The spread of the impact is even (50/50) between commercial andresidential customers, but your Board may recommend that the haulers spread the impact 75% toresidential and 25% to commercial to lessen the impact on business customers. Each of the twocities and their respective franchise haulers will need to evaluate independently how they wouldhow the rate increase would affect their curbside rates and how those rates would be spread between residential and commercial customers.2
 
Review of Scenarios and New Scenarios
Option 1: No Import - Rate Increase of 39%
Based on current tonnage, this option raises $500K annually to cover the operational deficit but does notaddress or fund costs associated with expansion, compliance requirements such as a LFG system, or replenishing reservesGate fee impact39%Current rate: $37.00 + $14.40 = $51.43/tonCurbside rate impact (unincorp area) - figured at 50/50 splitResidential (32-gal wkly)4-7%Current rate varies + 53-81¢/monthCommercial (2cy/wkly)4-7%Current rate varies + $7.18-10.56/month
Option 2: Import plus a graduated local increase over the same 5-year period
This option raises enough annually to cover the $500K deficit as well as raise approximately $2 milliondollars in additional new revenue during the 5-year period for compliance and capital improvement costsand to replenish reserve funds.
Gate fee impact
Year 116%Current rate: $37.00 + $5.93 = $42.93/tonYear 2 6% (appx) + $2.57 = $45.50Year 3 6% + $2.72 = $48.22Year 4 6% + $4.69 = $51.12
Curbside rate impact (unincorp area)
- figured at 50/50 splitResidential (32-gal wkly)2-3% (1
st
yr)Current rate varies + 22-3/monthCommercial (2cy/wkly)2-3% (1
st
yr)Current rate varies + $2.94-$4.37/month
Option 3: No import - Rate increase to match revenue provided by import
This option would provide the same level of revenue that Option 2 would produce, but the cost would beobtained by increasing local gate fees.Gate fee impact95%Current rate: $37.00 + $35.15 = $72.15/tonCurbside rate impact (unincorp area)Residential (32-gal wkly)Commercial (2cy/wkly)
Options 4: No import - Rate increase to generate $850K annually
This option would cover the annual $500K deficit and allow approximately $350K in additional revenuethat would offset part of local compliance costs, but probably not any for expansion.Gate fee impactYear 139%Current rate: $37.00 + $14.43 = $51.43/tonYear 2 6.5% + $ 3.34 = $54.77Year 3 5.5% + $ 3.02 = $57.79Year 4 5.1% + $ 2.94 = $60.73Curbside rate impact (unincorp area)Year 1 4-7%Year 2 2-3%
3

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