HomeMy WebLinkAboutAgenda - 04-29-2002 - 3b AGENDA#3b
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Bruce Heflin, Public Works Director
SUBJECT: Commercial Garbage Collection
DATE: April 24, 2002
This report discusses the impacts-of continuing service and elimination of service for collection
of commercial solid waste.
SUMMARY OF OPTIONS
Option 1 —No change—continuation of basic once weekly collection at no fee and use of fees for
additional services. The Manager's preliminary base budget estimates for next year are based on
no change in service.
Option 2 — Add fees for all services to present commercial refuse collection services using fees
for all services. Net estimated savings in fiscal 2002-03: $390,000.
• Based on departmental cost of about $980,000 in base budget request for fiscal 2002-03
less estimated revenues of$390,000 from fees for all commercial service. The new fee
for basic once weekly service would start October 1, 2002.
Option 3 - Eliminate Town collection of commercial refuse. Possible savings in General Fund
in fiscal 2002-03 up to $830,000 (combination of cost saving and revenues from sale of assets)
• Based on reduction of personnel and equipment costs starting October 1, 2002, and loss
of estimated revenues totaling $67,500 (for nine months) from existing fees for extra
commercial service.
BACKGROUND
As part of the budget process last year, the Council adopted a modified fee system for garbage
collection that became effective October 1, 2001. Currently the Town of Chapel Hill provides
commercial garbage collection (defined as dumpster collection) to businesses, apartments and
selected condominiums/town-homes. The basic service is once weekly pickup at no fee, with
optional additional collections for fee(s) based on the number of containers and frequency of
collection. There are currently 750 total containers, of which 645 are serviced by front-loading
trucks and 105 by side-loading trucks. The commercial operations consist of the following
resources:
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AGENDA#3b
BUDGET WORKING PAPER
TO: W. Calvin Horton, Town Manager
FROM: Bruce Heflin, Public Works Director
SUBJECT: Commercial Garbage Collection
DATE: April 24, 2002
This report discusses the impacts of continuing service and elimination of service for collection
of commercial solid waste.
SUMMARY OF OPTIONS
Option 1 —No change—continuation of basic once weekly collection at no fee and use of fees for
additional services. The Manager's preliminary base budget estimates for next year are based on
no change in service.
Option 2 — Add fees for all services to present commercial refuse collection services using fees
for all services. Net estimated savings in fiscal 2002-03: $390,000.
• Based on departmental cost of about $980,000 in base budget request for fiscal 2002-03
less estimated revenues of$390,000 from fees for all commercial service. The new fee
for basic once weekly service would start October 1, 2002.
Option 3 - Eliminate Town collection of commercial refuse. Possible savings in General Fund
in fiscal 2002-03 up to $830,000 (combination of cost saving and revenues from sale of assets)
• Based on reduction of personnel and equipment costs starting October 1, 2002, and loss
of estimated revenues totaling $67,500 (for nine months) from existing fees for extra
commercial service.
BACKGROUND
As part of the budget process last year, the Council adopted a modified fee system for garbage
collection that became effective October 1, 2001. Currently the Town of Chapel Hill provides
commercial garbage collection (defined as dumpster collection) to businesses, apartments and
selected condominiums/town-homes. The basic service is once weekly pickup at no fee, with
optional additional collections for fee(s) based on the number of containers and frequency of
collection. There are currently 750 total containers, of which 645 are serviced by front-loading
trucks and 105 by side-loading trucks. The commercial operations consist of the following
resources:
2 r ,
One Supervisor
One Inspector
Three Solid Waste Equipment Operators III
Four front-loading garbage trucks
Two side-loading garbage trucks
Two pickup trucks
In addition, the Town maintains two 30-yard compactors in the 100 block of East Franklin Street
and pays the disposal fees for the compactors and roll off containers at Michael Jordan's
restaurant, Big Fraternity Court, Meadowmont apartments, Sheraton Hotel and Carolina
Brewery.
The total cost of commercial operations in fiscal 2000-2001 was $977,000, independent of
program revenues. Disposal costs represented 57% ($557,800) of total commercial expenditures.
This is the most recent fiscal year for which we have complete audited fiscal data. A Council
member requested that we present total costs associated with commercial service, including
administrative overhead. These data are all inclusive as requested.
DISCUSSION
The following options are presented for the Council's consideration:
• continue present system, using no fee for basic once weekly collections and established
fees for additional services (status quo)
• continue present service, with fees for all collections
• eliminate commercial collection
We also considered a fourth option involving use of a private vendor, either by contract or
through franchise arrangement, for commercial services, but do not recommend it for two
reasons. First, there likely would be few, if any, cost advantages relative to the tax rate. Instead
of using general fund revenues to pay for Town resources, we likely would have to pay an equal
or higher amount to a private company. Second, with Town crews providing the service, we have
direct control over its delivery. Under a private contract or franchise arrangement, our control
would be less direct because private labor and trucks would be used.
As we understand it, case law in federal courts holds that local governments cannot dictate
through franchise agreements disposal sites for waste. As long as a local government is
contracting for its collections (so the contractor is performing the function for the government),
disposal sites may be designated. If the contractor is merely franchised, without respect to
whatever other franchise limitations may be affected, then the disposal site cannot be designated.
Attempting to designate the disposal site of a franchised collector is considered in violation of
the commerce clause of the U. S. Constitution and is called "flow control".
- 3
This is particularly relevant to the Town. In our intergovernmental agreement with Orange
County and the Town of Carrboro, we agreed to deliver all waste under our control to the County
landfill. We believe that the only way to not pay for collection (either using our own staff or by
contract) and be sure that we do not violate the agreement would be to cease any involvement in
the commercial refuse collection business.
Option 1. Continue present service, with no fee for basic service and established fees for
additional services
Commercial garbage operations for the Town of Chapel Hill presently are provided by the Solid
Waste Services Division in the Public Works Department. We use three employees working a
ten-hour day task system, four days a week. A small Wednesday route is run in conjunction with
other assigned duties. Commercial garbage collection is predictable, customer-service oriented
and relatively efficient. The three commercial crews collect about 59% of the total waste stream
(23,572 tons) in Chapel Hill using only 31% of the Solid Waste Division's budget. The only
Town holidays not worked by commercial crews are Thanksgiving, Christmas and New Year's
Day. The Orange County Regional Landfill is closed on these days.
We reduced commercial operations in the current year by one route as a result of service
efficiencies and reduced demand resulting from imposition of a fee for more than one weekly
collection. The reduction of one position was achieved through transfer of the incumbent to
another division so that there was no layoff required. The estimated cost saving from this action
in the current fiscal year is $22,000 and will be an estimated $40,000 next year because a full
year of salary will be avoided.
The base budget request for fiscal 2002-03 includes a total of about $980,000 for commercial
collection and disposal services. This total does not assume any salary adjustment or tipping fee
increase, and is comprised of the following:
Personal Services $245,000
Operations $ 61,000
Equipment—Fleet Replacement Fund $ 42,500
Disposal—Tipping Fees $558,000
Downtown Compactor Service
(hauling/maintenance) $ 22,000
Administrative Support $ 51,500
Total Projected 02-03 Budget $980,000
This total is offset by projected revenues for extra dumpster collections of$90,000, for a net total
cost next year of$890,000.
Advantages
• System already in place; ease of administration
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• Commercial sector already accustomed to the relatively new system started in current
year
• Requires no personnel changes
• Likely that existing commercial garbage collection assets would be able to absorb
workload increases related to continued growth in Meadowmont and Southern Village.
Disadvantages
• Does not reduce costs for commercial service
• Does not generate significant revenues (most businesses have opted for the basic service
at no fee)
Option 2 —Continue present service, adding a new fee for all collection services
We have developed a fee structure for fiscal 2002-03 for all service options. A basic service fee
of$750 is suggested for the standard eight cubic yard container serviced once each week if the
Council wishes to impose such a fee. The table of complete proposed commercial service fees is
attached. If we were to make the new fee for once weekly collections effective October 1, 2002,
then we calculate that the fee revenues for next year would be $390,000, which is a conservative
estimate. This is based on allowing a safety factor of 25% given our experience with current
revenue history. We had assumed that most businesses would need a second weekly collection,
for which they would pay a fee. In fact, almost all of these businesses have opted for the one
weekly collection at no fee. Accordingly, we have allowed a 25% margin for businesses to select
other options, including use of private vendors. This compares to our original estimated revenue
of $90,000 for next year based on present fees for extra collections. The annualized amount
using the new basic service fee of$750 would be $480,000; that for nine months is $390,000 as
noted above.
We propose a fee of $750 because we believe it would be a reasonable price for service that
would compare favorably with private sector pricing. Charging at or near our actual cost would
likely allow private companies to undercut our pricing and to take over much of the local market.
That would have a deleterious effect upon our revenue for the year and would, we believe, cause
the waste to leave Orange County.
We believe that waste collected by private companies would, for the most part, be taken to
private landfills or transfer stations. Private companies that control their own disposal or
handling facilities are able to take their collected waste at a much lower price than the Orange
County landfill's fees. The loss of this waste would, we believe, have a negative effect on the
County's solid waste operations. We also believe that the County would believe that we had
failed to comply with the spirit of the interlocal agreement concerning solid waste management.
That agreement stipulated that participants would send the waste under their control to the
County landfill. Causing the commercial waste to leave the landfill on such short notice would
create difficulties for the County in terms of programming, financing and orderly planning.
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We also note that private companies have, in the past, been known to enter markets with very
low prices until the competition (or local government service) yields to them, then have raised
prices to much higher levels. If the Town were no longer in the business, we would be unable
quickly to provide the service due to the high capital costs of equipment and hiring and training
issues we would face.
Advantages
• Revenue would increase by about $390,000 on an annualized basis ($300,000 next year)
• Would continue relatively high level of service to business community at low cost to that
sector
• Would not require a reduction in work force
• Would not require operational or administrative changes
• Likely that existing commercial garbage collection assets would be able to absorb
workload increases related to Meadowmont and Southern Village.
Disadvantages
• Would not reduce general fund expenditures
• Businesses would have to pay a fee for service they now receive as part of their tax rate
Option 3. Eliminate commercial garbage operations
Under this option, the Town would discontinue its commercial solid waste collection program.
The routes would be eliminated, with a concurrent reduction in the Solid Waste Services
Division's work force and sale of its fleet assets. Businesses, apartments and
condominiums/town-homes presently served by the Town would have to obtain refuse collection
services from the private sector, at a higher cost.
If the Town discontinues collection of commercial waste, then the projected savings could
approach $830,000 with position reductions and a starting date of October 1, 2002, next fiscal
year. Details of the cost projections are shown in the Appendix. The savings primarily result
from a reduction of three positions for nine months next year, deletion of disposal costs and
removal of related garbage trucks from the fleet replacement fund. Some of the proceeds from
the sale of the garbage trucks would be used to pay off the balance of debt related to such trucks.
As can be seen from the cost data in the appendix, total savings from personal service costs,
operating costs and disposal costs are about $745,000 in fiscal 2002-2003 and $728,000 in fiscal
2003-2004. These totals would be offset by the cost of collection and disposal of the Town's
own commercial waste, estimated at $20,000 annually.
6
The potential cost saving discussed above would be offset by the loss of revenues paid by
businesses for two extra weekly dumpster pickups. While we estimate such revenues to be
$90,000 for each of the next two years, we would only lose 75% next year because of the
proposed October 1, 2002, starting date for the service change. The resultant cost savings thus
become $657,500 in fiscal 2002-2003 and $618,000 in fiscal 2003-2004.
Revenues totaling $175,000 from sale of some of the assets could be added in fiscal 2002-2003,
resulting in a total impact of$830,000 on the Town's general fund, combining cost savings with
projected revenues from the sale of assets. The impact in fiscal 2003-2004 would remain an
estimated $618,000 because there would be no revenues from asset sales in that year.
The maximum cost savings would involve laying off three long-term Town employees, with an
annual savings of $83,200 in fiscal 2002-2003 and $100,800 in fiscal 2003-2004. In order to
follow the Council's guidance to avoid lay-offs, we would try to find other positions within the
department for the three incumbents, although we believe this would be difficult. First, personnel
turnover is relatively low. Second, the three incumbents are relatively senior and in positions
with a relatively high salary grade. Any likely vacancy elsewhere probably would be at a
significantly lower salary range.
The numbers above reflect the salary savings associated with elimination of the three positions.
If we avoid layoffs as noted, then the putative savings would be reduced by $83,200 next year
and by$100,800 in fiscal 2003-2004.
Advantages
• Would save money through elimination of three positions and equipment
• Overall costs and demands of conducting maintenance operations at Public Works would
decrease (cf. front- and side-loading garbage trucks would be removed from the fleet)
• Businesses would have opportunity to contract with private vendor(s) for more tailored
service (e.g., frequency of collections)
Disadvantages
• Public Works currently is most convenient local hauler available to businesses
• Businesses likely would incur higher cost for service relative to taxes paid and present fee
charged for extra collections by the Town
• Positions would be eliminated, likely resulting in layoff of Solid Waste Equipment
Operators III, with long-term, stable work histories with the Town
• Once equipment is sold, then costs to restart service at some future date, if desired, would
be significant (cf., present average cost for a new front-loading garbage truck is
$150,000)
OTHER ISSUES
If the Town were to eliminate commercial garbage operations, then the following considerations
would have to be reviewed.
1. Would ALL commercial garbage collections be abandoned?
Currently, most condominiums and town-homes receive commercial service by Town crews
based either on special use permits or Town ordinance (cf., Sec. 8-35 of the Town Code — Bulk
containers for multiple residential units). Examples include Colony Lake, Winchester Court and
others. If the Town no longer operates commercial equipment, then we could either contract with
a private hauler for such collection; provide once weekly residential service using Town crews;
or not participate in provision of such services at all, consistent with the possible withdrawal
from commercial refuse collection altogether.
In addition, about 20 businesses Town-wide are serviced by residential crews, because there is
not enough room to place commercial containers in these locations. These include churches and
homes converted to business uses. We could use the same options as noted above for selected
condominiums/town-homes.
Additionally, Town departments would have to include budgeted funds for the disposal costs
only of servicing dumpsters located within their areas. These include sites at Public Works,
Housing, Parks and Recreation, Police and Town Hall. We estimate the total cost for contracted
servicing would be about $20,000 annually.
2. How would the Town's compactors be serviced?
The placement of compactors in the downtown area occurred during the time that Rosemary
Parking Deck was completed in 1994. This structure resulted in the elimination of access to
dumpsters in the alley behind several businesses fronting Franklin Street. At that time, the Town
agreed to arrange for compactor services at the Town's cost so that businesses formerly using the
dumpsters would have a viable alternative for commercial refuse services.
Currently, businesses in the 100 block of Franklin Street are charged a fee to use the Town's
compactors. The Town pays for disposal and the hauling charges related to the compactors. The
compactors experience high usage and provide a better collection method than front- or side-
loading dumpster service. These compactors could continue with the present service or the Town
could bid the complete service to a private company. Annual Town expenditures for hauling,
maintenance and disposal activities associated with the two compactors are about $56,000. The
estimate of savings associated with eliminating service assumes we would continue to provide
this service.
8
3. What would happen to side-loading commercial operations?
There are currently 117 side-loading containers within Chapel Hill. This number has declined
steadily over the past four years as businesses and apartments have converted to front-loading
service. To our knowledge, there is no private company that provides side-loading services in
this area. These remaining locations either would have to convert to front-loading or commercial
rear-loading service in order to receive private collections. In some areas, especially those that
could not physically support front-loading collections, rear-loading collections would have to be
implemented, using standard residential-style garbage collection. This could create some
problems with appearance and sanitation, especially at some fraternities and apartment
complexes.
Response from Orange Countv to Questions Posed by Members of Council
At the April 3, 2002, budget work session, Council members requested staff to obtain
information from Orange County Solid Waste Services staff related to the possibility of the
Town eliminating public collection of commercial waste. The attached letter was sent to Gayle
Wilson, Orange County Solid Waste Management Director, on April 10, 2002. Mr. Wilson's
response dated April 19, 2002, is attached also.
Impact of Deleting Commercial Refuse Services on New Public Works Facilitv
A Council member asked what the possible impact of eliminating commercial refuse collection
services might be on the costs for a new public works complex. Given the relatively small
number of trucks involved in this service, we believe eliminating this service would have
negligible cost implications on a new public works compound.
Survev of Other North Carolina Jurisdictions
The attached survey, completed in December, 2000, presents data indicating how commercial
refuse collection service is provided in other jurisdictions statewide. Of the dozen jurisdictions
responding to our survey, four provide the service using municipal crews, two contract with
private companies, five do not provide the service in any capacity and one uses a combination of
municipal crews and private contractor.
SUMMARY
If the Council wishes to select any of the options representing a change from continuation of the
present commercial refuse program, then we would need ample time to work with the business
community to prepare them for a transition from Town collection of commercial refuse.
Businesses would need sufficient time to prepare for private collection of refuse or for
anticipation of additional fees for service that they presently do not have to pay.
A transition period to October 1, 2002, could be considered for either of the two options
involving change presented. During that time, we could meet with commercial establishments to
develop an implementation plan and schedule.
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ATTACHMENTS
1. Table of Commercial Fees (p. 12).
2. Letter dated April 10, 2002, from Bruce Heflin to Gayle Wilson (p. 14).
3. Letter dated April 19, 2002, from Gayle Wilson to Bruce Heflin (p. 15).
4. Survey of Other North Carolina Jurisdictions (p. 19).
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APPENDIX
Detailed Cost Projections for Option 3: Eliminate Commercial Collection
Personal Service Costs (RIF based on "last hired, fist let go"; assumes no annual salary
adjustment; starting date 10/1/2002)
3 SEO III's $ 76,135
FICA $ 5,825
Retirement $ 7,560
Insurance $ 11,240
Sub-total $100,760
Note: the Supervisor and Inspector positions would not be eliminated; they would be retained,
along with two pickup trucks, for overall monitoring of services and enforcement of collection
rules and regulations
Less Severance Pay $ 6,305 (varies per years of service)
Less insurance $ 11,240 (individual coverage— 1 year)
Total, Personnel $83,200 (1st year); $100,800 (2nd year)
Lease Payments
Front-load Equip. $ 29,200
Side-load Equip. $ 13,300
Sub-total $42,500 (1st year); -0- (2"d year)
Maintenance & Operations $ 22,500 (lstyear); $30,000 (2nd year)
Uniforms $ 1,500 (Vtyear); $2,000 (2"d year)
Total, Operations $ 66,500 (1st year); $ 32,000 (2nd year)
Disposal (assumes no increase in tipping fee in either 2001-02 or 2002-03)
13,230 tons of
commercial MSW
@ $45/ton $595,000 (1st and 2"d years)
Total, Disposal $595,000 (1st year); $595,000 (2"d year)
Total $744,700 (1st year); $727,800 (2nd year)
11
The Town would have to continue service for its own commercial waste, either through in-house
collections or through private contract. The estimated annual cost is about $20,000.
Less Town Waste
Collection/Disposal $20,000
Sub-total $724,700(1"year); $708,000 (2nd year)
Revenues
Sale of owned assets $175,000(1" year); -0- (2nd year)
Sub-total $899,700 (Is` year); $708,000 (2"d year)
Note: the proceeds from the sale of commercial equipment that is part of the fleet replacement
fund would go to that fund for debt retirement; revenues from the sale of equipment paid for
prior to the establishment of the fleet replacement fund would go to the general fund. The fair
market value of this latter category is $190,000. We are assuming receipt of $175,000 of this
amount because we are uncertain that we would receive fair market value through sale of this
equipment.
The sub-total cost savings noted above would be offset by loss of budgeted revenue under the
existing commercial fee system in each of the next two years. This amount is $90,000 in each
year. Since the first three months of fiscal 2002-2003 would continue under the present fee
system with a starting date of October 1, 2002, for the change, one fourth of the $90,000 could
be collected next year. The full $90,000 would be lost in the following year.
Less projected
revenues $ 67,500 (l'`year); $90,000 (2"d year)
TOTAL (rounded) $830,000 (ls`year); $618,000 (2"d year)
/Z
TABLE OF COMMERCIAL FEES ATTACHMENT 1
YEARLY COSTS -PROPOSED
Basic Service(Front Load)
Container Size 1 x/week 2x/week 3x/week 4x/week 5x/week Extra Lift
2yd 450 700 890 1333 1450 17
4yd 550 800 990 1433 1550 18
6yd 650 900 1090 1533 1650 20
8yd 750 1000 1190 1633 1750 22
Basic Service(Side Load)
Container Size 1 x/week 2x/week
4yd 590 850
Tax Exempt(Front Load)
Container Size 1 x/week 2x/week 3x/week 4x/week 5x/week Extra Lift
2yd 300 495 716 775 950 17
4yd 350 545 766 825 1000 18
6yd 450 595 816 875 1050 20
8yd 500 645 866 925 1100 22
GUIDELINES
1. No free service
2. No shared dumpsters
3. "Extra Lift" refers to dumping container in addition to contracted service.
4. Basic service (SideLoad): Basis for higher cost for 2x per week service is due to limited program
associated with equipment and personnel; service option of 2x per week is only option available.
5. Basis for fees for Tax Exempt entities is mandate by Council.
YEARLY COSTS -EXISTING
Basic Service(Front Load)
Container Size 1 xweek 2xweek 3xweek 4xweek 5xweek 6xweek Extra Lift
2yd Free 400 890 1333 1450 1800 17
4yd Free 500 990 1433 1550 1900 18
6yd Free 600 1090 1533 1650 2000 20
8yd Free 700 1190 1633 1750 2100 22
Basic Service (Side Load)
Container Size 2xweek
4yd Free 540
Tax Exempt(Front Load)
Container Size 1 xweek 2xweek 3xweek 4xweek 5xweek 6xweek Extra Lift
2yd Free 200 445 666 725 900 17
4yd Free 250 495 716 775 950 18
6yd Free 300 545 766 825 1000 20
8yd Free 350 595 816 875 1050 22
Gi)
Shared Dumpsters (Front Load) 2 or more customers
Container Size 1 xweek 2xweek 3xweek 4xweek 5xweek 6xweek Extra Lift
2yd Free Free 445 666 725 900 17
4yd Free Free 495 716 775 950 18
6yd Free Free 545 766 825 1000 20_
8yd Free Free 595 816 875 1050 22
ATTACHMENT 2
April 10, 2002
Mr. Gayle Wilson
Orange County Solid Waste Management Director
P. O Box 17177
Chapel Hill,NC 27516-7177
Dear Gayle:
At the Town Council's budget work session on April 3, the Council posed several
questions about the possible impact on Orange County's solid waste operations of a
possible change to the Town's program of collecting commercial waste. I am writing to
pose those questions to you and to ask for a response for the Council's consideration.
The questions are as follows:
1. What would be the impact on the County's solid waste program if the revenue
associated with commercial collections were no longer available? We estimate
the amount to be about $600,000.
2. What would be the County's position with respect to current services if the
revenue were lost due to the Town no longer providing commercial collections?
3. How much of current fee revenue is dedicated to recycling?
4. If the Town were to eliminate commercial collections, would the County consider
charging the Town a fee specifically for recycling services? How much would
such a fee be?
We are trying to complete a report to the Council for their April 24 work session. I hope
you can provide us with this information in time to include it in that report. It would be
most helpful to us to have it by Wednesday, April 17, if possible.
Thank you for your help with this. Please let me know if you need additional
information.
Sincerely,
Bruce A. Heflin
Public Works Director
Cc: Cal Horton
Sonna Loewenthal
Hary Howard
Randy Ballard
ATTACHMENT 3
Orange County Sold Waste Management
P.O.Box 17177 Chapel Hill, NC 27516-7177 (919)968-2885 FAX(919)932-2900 www.co.orange.nc.us/recycling
Orange Regional Landfill 932-2989 Orange Community Recycling 968-2788
k
Bruce Heflin
Chapel Hill Public Works Director
306 North Columbia Street
Chapel Hill, N.C. 27516
April 19, 2002
Dear Bruce:
I'm writing this letter in response to your letter dated April 10, regarding questions raised
by the Town Council about possible changes to the Town's commercial garbage
collection service. I know this issue is of utmost importance to you and the Town. It is
also extremely important to Orange County.
My response to each question, based in part on the attached staff summary analysis, is as
follows:
1. What would be the impact on the County's solid waste program if the revenue
associated with commercial collections were no longer available?
According to our records, confirmed with the Town's Sanitation Division, the Town
disposed 13,538 tons of non-residential waste in FY 00/01. At the then$42 11on fee,
$568,596 in revenue was generated for the landfill enterprise fund Of this amount,
based on previous disposal cost analysis, approximately 213 ($379,064) is used to pay for
expenses related to disposal operations. Should this amount of revenue and the
associated tonnage no longer be delivered to the landfill fund fixed costs related to
disposal operations would be shared among a base of fewer tons; operational expenses
would not be reduced proportionally. This would likely necessitate either an increase in
tipping fees, identification of an alternate source of funding, or both.
The other 113 of this revenue ($189,532) is utilized for the array of recycling and waste
reduction services provided by the enterprise fund Should these funds no longer be
available, in addition to the two options listed above for replacing the funds, a reduction
in recycling services could also be considered, along with a reconsideration of service
expansions such as development of the recycling centers at Meadowmont and/or
Southern Village.
2. What would be the County's position with respect to current services if the revenue
were lost due to the Town no longer providing commercial collections?
While only the Board of County Commissioners can declare what the County's policy
position is on any given subject, 1 will attempt to articulate what 1 might.suggest that the
County Manager recommend to the Board in this regard.
The Interlocal Agreement was conceived and developed pursuant to the fundamental
principle that all parties to the agreement would pledge their wastes to the waste
management system. This founding tenet was significant because wastes delivered to the
system's facilities were understood to form the financial basis for all system
services/programs. I believe that it is welldocumented in the public record that Orange
County would not have agreed to take on responsibility for the entire solid waste system
without having a guarantee from its municipal partners that they would ensure that all
elements of the waste stream then under their control would continue to flow to the
Orange County Landfill. All parties to the Agreement understood this financial reality,
which is explicitly articulated in the document.
On page 3, Section 2 of the Interlocal Agreement, under the heading "The Parties will
deliver Solid Waste and County Recyclables to the System", the Agreement says "The
County and the Towns all agree to deliver, or cause to be delivered, to System
Management Facilities for disposal or processing, respectively, all Solid Waste and
County Recyclables under their respective control. This delivery obligation includes
(without limitation) all Solid Waste and County Recyclables collected by any Party's
employees, Solid Waste collection contractors, solid waste collection licensees or solid
waste collection franchisees. "
In view of this provision and the overarching financial realities that led to its inclusion in
the agreement, 1 remain confident that all parties to the Agreement will continue to honor
their commitment to the County and the other signatories to the Agreement who rely on
the revenue generated by the pledges of waste.
3. How much of current fee revenue is dedicated to recycling?
For FY 2000101 the total recycling budget (minus overhead)for all of Orange County
was$2,049,000. Of this amount over half($1,298,364) is estimated to be the value of
both residential and non-residential services provided by the County to the Town of
Chapel Hill(based in part on share of the overall County population). Of this nearly
$1.3 million in total recycling and waste reduction services provided by the landfill
enterprise fund to the Town, it is estimated that non-residential services account for
about$888,672. Based on the notion that approximately 113 of MSW revenues are
attributable to recycling and waste reduction services, and that the Town's non-
residential tipping fee revenue is$568,596, it appears that the Town actually pays about
$189,443 for its$888,672 worth of services.
While not intended to be a finely honed analysis of the programs, we believe it is a
reliable estimate. This being the case, it is apparent that Chapel Hill receives
considerably more in recycling services than it contributes in tipping fee revenue. This is
possible because of the subsidy provided by the private commercial sector and
cottstractiott attd demolition iippittg.fee revenue. I'm sure you would anticipate that if
the 1 own concedes its commercial services to the private sector, and declines to ensure
that commercial waste collected in Chapel Hill continues to be delivered to the Orange
County Landfill, the waste would shift to out-of-comity disposal facilities whose tipping
fees are lower, unburdened by the need to fund recycling and waste reduction services in
their counties.
4. If the Town were to eliminate commercial collections, would the County consider
charging the Town a fee specifically for recycling services? How much would such a
fee be?
Again, I am not in a position to say what the County would or wouldn't do, however,
since this question has not come up before, 1 have no personal position. Based on the
discussion in It above, it is likely that the County would consider an annual payment for
non-residential recycling and waste reduction services provided, though this amount
would be in excess of the total amount currently paid by the Town in non-residential
tipping fees relative to services received
Sincerely,
Gayle Wilson, Soli aste Director
cc: Orange County Commissioners
John Link, County Manager
Cal Horton, Town Manager
Sonna Lowenthal, Assistant Town Manager
Hary Howard, Sanitation Superintendent
Randy Ballard, Administrative Analyst
Memorandum
To: Gayle Wilson, Solid Waste Management Director
From: Blair Pollock, Solid Waste Planner
Subject: Valuation of Recycling Services Provided to the Town of Chapel Hill
Date: April 17, 2002
I have conducted the attached analysis that shows the tonnage of residential and non-
residential waste brought to the landfill last year by the Town of Chapel Hill. Total
tonnage was 20,401 at an approximate cost of $856,842.
TCH 2000-01 Tons Cost er ton
Residential 6,863 $288,246
Non-residential 13,538 $568,596
Generally, about one third of tip fees at the Orange County landfill are allocated to
support recycling programs. Pro-rating the Town's tipping fees would result in a
surrogate expenditure for recycling of $285,328.
The analysis then allocates recycling service costs to the Town of Chapel Hill based on a
variety of factors, depending on which service is being allocated. Notes attached to the
analysis show how the calculations were derived. This is not a full cost analysis as it does
not include any administrative overhead, utilities, etc. Only the contract costs, salaries,
amortized capital costs, supplies and similar direct costs are allocated to recycling.
The value of recycling services provided to the Town of Chapel Hill is calculated at:
Residential curbside: $409,692
Non-residential services, including salaries, supplies, equipment, education & outreach
costs: $888,672
Total value of recycling services to the Town: $1,298,364.
Ratio of tipping fee revenue allocated to value of recycling services: 455%
19 ATTACHMENT 4
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