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HomeMy WebLinkAboutBoCC Issue Paper Solid Waste Fee Schedule Issue Paper April, 2023 1 Statement of Issue The Jefferson County Solid Waste Enterprise Fund is self-funded by the fees charged for municipal solid waste. A small portion of operating costs (less than 1%) are paid for with grant funds from the Department of Ecology. Operational costs for salaries and benefits, equipment purchase and maintenance, and contracted services like solid waste transport and disposal have all increased by at least 3% per annum since the last adjustment to solid waste fees in 2019. Fees need to be adjusted to meet these cost increases and to maintain prudent fund balances in order to make Capital improvements and to make emergency repairs or replace critical equipment. Solid waste handling facilities use minimum fees to manage self-haul customer demand by encouraging fewer, heavier loads or curbside service by subscription. The current minimum fee at the Transfer Station has not been adjusted since 2014. The fee schedule at the Quilcene Rural Drop Box is based on volume rather than weight because the facility lacks scales. The fee schedule is set to make the facility operation cost-neutral or positive. Revenue has not met operational costs for the past 3 years. The fee schedule for yard debris disposal has not been adjusted since adoption in 2014 and the minimum charge is too low to discourage frequent, low weight visits which cause longer wait times for other customers. Background Benchmarks The current fee schedule became effective January 1, 2014 [Ord. 6-13 § 1 (Exh. A)] as part of Jefferson County Code, Appendix FEE SCHEDULES, III. Public Works Department – Solid Waste Division, and attached for reference. Under III-012 Fee Indexing, three benchmarks are used to guide fund balances: (1) A year end reserved capital fund balance of 12% of current capital replacement value in equipment and buildings (2) A year end reserved operations fund balance of 15% of annual solid waste expenditures (3) An increase in annual waste tons received of no less than 1% with 2013 as the base year A report on solid waste facility asset values was completed in November 2022 and is attached for reference. Current facility replacement costs are estimated at a low of $6,910,949 and a high of $8,167,485. Using the high replacement cost estimate and the current solid waste budget, Table Solid Waste Fee Schedule Issue Paper April, 2023 2 1 shows that the above benchmark for reserved capital fund is not being met while it is for reserved operations fund. A benchmark of 25% for reserve balances is more prudent considering the need for facility replacement, the large outlay for emergency replacement of critical machinery, the current inflationary period, and the program’s vulnerability to large market corrections. Table 2 shows that should the benchmarks be adjusted upward to 25% of facility replacement costs and one quarter of annual expenditures, the fund balance would fall far below the benchmark for capital replacement and would be only marginally sufficient to meet the benchmark for annual operating expenditures. The third benchmark concerning annual tonnages serves as a sort of caveat for the first two. It sets the basis for fee adjustments regardless of fund balances should tonnages (99.06% of revenue) begin to soften and provides the County with a means to react to market downturns, as has been experienced in the past. 8,167,485$ Projected Capital Fund Balance end of 2023:915,839$ 12% of Facility Replacment Cost:980,098$ Difference:(64,259)$ 4,217,993$ Projected Reserved Fund Balance End of 2023:1,398,348$ 15% of Reserve Fund Balance:632,699$ Difference:765,649$ Table 1 Current Ordinance Benchmarks Facility Replacement Cost: Projected Solid Waste Expenditures: Capital Fund Reserved Operations Fund 8,167,485$ Projected Capital Fund Balance end of 2023:915,839$ 25% of Facility Replacment Cost:2,041,871$ Difference:(1,126,032)$ 4,217,993$ Projected Reserved Fund Balance End of 2023:1,398,348$ 25% of Projected Expenditures:1,054,498$ Difference:343,850$ Modified Benchmarks: 25% Capital and O&M Facility Replacement Cost: Projected Solid Waste Expenditures: Capital Fund Reserved Operations Fund Table 2 Solid Waste Fee Schedule Issue Paper April, 2023 3 Table 3 shows that the average increase Table 3 in tonnages of 3.4% since 2013 meets the third benchmark. It should be noted however that there are years of near-zero or negative growth in the mix and these variations in revenue have been addressed by either spending down the operating fund balance or with a slight increase to the tipping fee or both. This strategy allows us to make incremental adjustments to the fees in service to our customers. Operating reserves have been spent down since 2019 in order to maintain the current fees, from a beginning balance of $2.2M in 2022 to an estimated $1.2M at end of 2023. This has only been possible with an increase in tonnages (revenue). Additional revenues are now necessary to maintain benchmark reserves. The Solid Waste Fund is vulnerable to major market corrections as seen in Tables 4 and 5. In this “stress test”, the 2023 projected end of year fund balances and expenditures are applied to the historic decrease in revenue starting in 2006 which was a bellwether to the market correction caused by bank failures in 2008. These tables show that if fund balances were set at the recommended 25% of annual operating expenses and facility replacement value they would be inadequate to meet the benchmark in the third year of a market downturn and capital funds would be far below benchmark immediately. This demonstrates the importance of maintaining adequate reserves to weather major market downturns and the need to rebuild those balances now. Year Revenue Increase/ Decrease (%) 2023 End of Year Fund Balance Expenditures 15% Reserve Over/Under Benchmark 25% Reserve Over/Under Benchmark 2006 1,398,348$ 4,217,993$ 632,699$ 765,649$ 1,054,498$ 343,850$ 2007 -4%1,342,414$ 4,323,443$ 648,516$ 693,898$ 1,080,861$ 261,553$ 2008 -1%1,328,990$ 4,431,529$ 664,729$ 664,261$ 1,107,882$ 221,108$ 2009 -9%1,209,381$ 4,542,317$ 681,348$ 528,033$ 1,135,579$ (73,802)$ 2010 1%1,330,319$ 4,655,875$ 698,381$ 631,938$ 1,163,969$ (166,350)$ 2011 -6%1,250,500$ 4,772,272$ 715,841$ 534,659$ 1,193,068$ (57,432)$ 2012 0%1,250,500$ 4,891,579$ 733,737$ 516,763$ 1,222,895$ (27,605)$ 2013 2%1,275,510$ 5,013,868$ 752,080$ 523,430$ 1,253,467$ (22,043)$ 2014 0%1,275,510$ 5,139,215$ 770,882$ 504,628$ 1,284,804$ 9,294$ 2015 6%1,198,979$ 5,267,695$ 790,154$ 408,825$ 1,316,924$ 117,945$ 2016 8%1,294,898$ 5,399,388$ 809,908$ 484,989$ 1,349,847$ 54,949$ Table 4 Historic Market Correction Applied to Reserved Operations Fund Projections Solid Waste Fee Schedule Issue Paper April, 2023 4 Minimum Fee The minimum transaction fee of $10 was set in 2014 and is no longer effective at incentivizing less frequent and heavier loads or curbside service for self-haul customers. Table 6 compares the 2017- 2021 number of self-haul customers and total tonnages above and below the minimum fee with 45% of the customer mix bringing only 13% of tonnages (revenue). This large imbalance strains the transfer station operation by increasing customer wait times while providing less program revenue. By comparison, Kitsap County staff have shared that minimum fee customers at the Olympic View transfer station make up less than 10% of the customer mix and that they hope to further reduce the number of minimum charge customers with an increase of the fee to $41.00 that became effective January 1, 2023. We have observed an increase in Kitsap County customers using the Jefferson County transfer station since the minimum fee increase in January at Kitsap County facilities. Table 6 Year % Revenue Increase/ Decrease 2023 End of Year Fund Balance 2023 Replacement Cost 12% Reserve Over/Under Benchmark 25% Reserve Over/Under Benchmark 2006 915,839$ 8,167,485$ 980,098$ 64,259$ 2,041,871$ (1,126,032)$ 2007 -4%859,905$ 8,371,672$ 1,004,601$ (144,696)$ 2,092,918$ (1,233,013)$ 2008 -1%846,481$ 8,580,964$ 1,029,716$ (183,235)$ 2,145,241$ (1,298,760)$ 2009 -9%726,872$ 8,795,488$ 1,055,459$ (328,587)$ 2,198,872$ (1,472,000)$ 2010 1%738,966$ 9,015,375$ 1,081,845$ (342,879)$ 2,253,844$ (1,514,878)$ 2011 -6%659,147$ 9,240,760$ 1,108,891$ (449,745)$ 2,310,190$ (1,651,043)$ 2012 0%657,204$ 9,471,779$ 1,136,613$ (479,409)$ 2,367,945$ (1,710,740)$ 2013 2%682,214$ 9,708,573$ 1,165,029$ (482,815)$ 2,427,143$ (1,744,929)$ 2014 0%683,009$ 9,951,287$ 1,194,154$ (511,146)$ 2,487,822$ (1,804,813)$ 2015 6%759,539$ 10,200,070$ 1,224,008$ (464,469)$ 2,550,017$ (1,790,478)$ 2016 8%855,458$ 10,455,071$ 1,254,609$ (399,151)$ 2,613,768$ (1,758,310)$ Historic Market Correction Applied to Capital Fund Table 5 Trans Tons Minimum Fee Customers 145,655 5,671.75 Above Minimum Fee Customers 179,446 39,234.95 Totals 325,101 44,907 Percentage of Minimum Fee customers 45%13% Percentage of Cash Self Haul Above Minimum Fee 55%87% 5 Yr Totals Solid Waste Fee Schedule Issue Paper April, 2023 5 Table 7 shows the fees charged at regional facilities for comparison with Jefferson County’s fees. These Counties have historically been used to compare Jefferson County’s level of service. King County and Seattle facilities have been used for level of service comparison to show that Jefferson County’s solid waste program performs as well as urban area programs. Table 7 Refrigerators Jefferson County charges an additional “environmental fee” to cover the additional disposal costs for refrigerated appliances. The additional fee has not covered disposal costs and the program loss in 2021 was estimated at $21,017. Staff was recently successful in encouraging a local vendor to service these units which avoids shipping costs to Seattle. A more efficient material handling strategy will reduce labor costs which is expected to make this program element cost- neutral. Nondisposal Weight Charges The transfer station charges $5.66 for nondisposal weight measurements and has done so for so long that no record can found of when the fee was implemented. Two private sector scales in Jefferson County charge $10.00 and $15.00 per weight receipt. The more competetive fee at the transfer station conflicts with the goal of the Jefferson County Solid Waste Management Plan (SWMP) to encourage private sector services and customer demand for this service increases wait times for municipal solid waste customers. Yard Debris Yard debris is used as feedstock for the City of Port Townsend (City) Biosolid Composting Facility which is co-located at the transfer station through an Interlocal Agreement. County staff processes yard debris transactions at the transfer station scale house and a portion of the fee is used to cover County administrative functions. The current fee for yard debris was set in 2014 with a $5.00 minimum for up to 200 lbs. and a per ton rate of $48 above 200 lbs. Minumum/Trip Fee Min. Fee Weight Per Ton Fee Seattle 33.00$ 420 180.80$ King County (effective 1/1/23)30.25$ 320 165.61$ Kitsap County (effective 1/1/23)41.00$ 660 118.00$ Mason County 17.89$ 340 110.27$ Snohomish County 20.00$ 360 105.00$ Clallam County (Port Angeles)10.00$ 100 193.98$ Jefferson County 10.00$ 120 162.93$ Average including Jefferson 23.16$ 331.43 148.08$ Average w/out Jefferson 25.36$ 366.67 145.61$ Transfer Station Municipal Solid Waste Solid Waste Fee Schedule Issue Paper April, 2023 6 In 2022, yard debris customers made up 18% of total transactions. On the largest customer count day ever on November 15, 2022, yard debris customers made up 44% of the total transactions with some yard debris customers delivering three or more minimum weight loads that day. The fees for yard debris disposal were first set in 2014 by ordinance as part of Jefferson County Code. City staff have recommended that it would be more appropriate for this fee to be adopted as part of City code. Quilcene Rural Drop Box The last large revision to the fee schedule for disposal at the Quilcene Rural Drop Box was in 2014 with annual increases of 2.5% until 2019 with the goal of making the operation cost- neutral. Table 8 shows deficit spending from the operating reserves fund over the past three years. Table 8 Limited capital improvements to the facility planned for in 2023 will create more efficient material handling but will not offset losses completely. 96% of all transactions in 2022 were for the 32-gallon can charge of $6.79. As shown in Table 9, if the minimum fee was set at $15.00 for up to two 32-gallon cans, revenues would nearly keep pace with 2022 operational costs. Table 9 Like many drop box sites in rural Washington, the Quilcene facility does not have scales and charges for loose garbage by the cubic yard. The attached visual estimator is used by facility attendants to calculate the charge for loose garbage. The operation would benefit from fewer variations of truck bed loads and clearer fee calculations to make charges consistent. Several modifications to material handling equipment are being considered presently which would improve consistency and ease of volume estimating. Year 2020 2021 2022 Operational Costs 79,004$ 80,281$ 87,705$ Revenue less 3.6% Tax 66,850$ 74,677$ 72,600$ Profit/Loss (12,154)$ (5,604)$ (15,105)$ Quilcene Drop Box 3 Year P&L Type Count Fee Revenue 32 Gallon Can 5,964 6.79$ 69,967.00$ Type Count*Fee Revenue 32 Gallon Can 5,368 15.00$ 80,514.00$ * Assumes 10% decrease in customer count 2022 Quilcene Charges 2023 Quilcene Modified Fees Solid Waste Fee Schedule Issue Paper April, 2023 7 Moderate Risk Waste Small Quantity Generator Fee By agreement between the County and Port of Port Townsend (Port), the Moderate Risk Waste Facility has been returned to Port ownership and Public Works has substituted fixed facility operations with remote collection events for both Small Quantity Generator (business) and residential moderate risk waste collection. Under this new service delivery model, Small Quantity Generator customers pay the vendor directly and, as such, the current fee schedule for these customers is no longer applicable. Recommendations Several revisions to solid waste handling strategies have been made in 2022 with more planned in 2023 in order to gain efficiencies and reduce operating costs. These cost -savings alone will not meet anticipated increases to operating costs. Additionally, the current fund balance benchmarks are seen as inadequate to moderate fee increases in the event of a protracted period of high inflation or a large economic downturn. Public Works makes the following recommendations to fee schedule revisions to be implemented following pending updates to scale software and no less than 45 days after widely distributed public notice: Transfer Station Fee Schedule • Adjust fund balance benchmarks to 25% of current capital replacement value and projected annual expenditures • Adjust per ton fee for municipal solid waste by 2.5% annually until fund balances meet benchmarks • Adjust minimum fee for municipal solid waste from $10.00 to $20.00 and the minimum fee weight from 120 lbs. to 240 lbs. • Adjust nondisposal fee from $5.66 to $20.00 • Upon adoption by the City, begin charging a yard debris minimal fee of $20.00 for up to 800 lbs. and retain the $48.00 per ton fee for loads above 800 lbs. It should be noted that there is a slight imprecision of less than one cent within the recommended yard debris fee revision between minimum fee and per ton rates owing to the transfer station scales measuring weight in 10 lb. increments. Rounding to the whole penny would provide simple communication to the public and ease of transactions. Quilcene Rural Drop Box Fee Schedule • Establish a minimum fee of $15.00 for up to two 32-gallon cans • Replace loose garbage visual estimator with the below table: Load Description Full Size Truck Compact Truck Up to Rail Height $ 63.35 $ 54.30 Above Rail Height $ 90.50 $ 63.35 Above Cab $ 126.70 $ 90.50 Solid Waste Fee Schedule Issue Paper April, 2023 8