HomeMy WebLinkAboutAgenda - 04-13-2004-9cORANGE COUNTY
BOARD OF COMMISSIONERS
ACTION AGENDA ITEM ABSTRACT
Meeting Date: April 13, 2004
Action Age a
Item No. -C_-
SUBJECT: Proposed Waste Reduction, Reuse, and Recycling Fee
DEPARTMENT: Solid Waste Management PUBLIC HEARING: (Y/N) No
ATTACHMENT(S):
4/13/04 Solid Waste Director Report
3/23/04 County Attorney Letter re:
Waste Reduction, Reuse, and
Recycling Fees
INFORMATION CONTACT:
Gayle Wilson, 968-2885
TELEPHONE NUMBERS:
Hillsborough 732-8181
Chapel Hill 968-4501
Durham 688-7331
Mebane 336-227-2031
PURPOSE: To present a report on a proposal to implement for FY 2004-05 a tiered Waste
Reduction, Reuse, and Recycling Fee to be assessed on all improved Orange County property
to finance recycling and waste reduction services/programs.
BACKGROUND: Orange County is the recognized leader among North Carolina's 100
counties far its progressive and professional approach to solid waste reduction and recycling
efforts. Orange County's innovative and well-managed programs have led to a per capita
reduction in solid waste disposed of more than 45% since 1991-92. In 2002-03, Orange County
became the first county to achieve the State goal of 40% per capita waste reduction compared
to the baseline year. Ironically, Orange County's waste reduction success has created a
financial paradox, as the reduction in waste received at the landfill has led to reduced revenues
available to pay for recycling and reduction programs.
In recognition of this developing financial trend, discussions of the need far supplemental
financing for the solid waste enterprise fund have taken place since about 1993, and in earnest
since about 1996. Enterprise fund reserves have been utilized to subsidize these reduction and
recycling programs for many years; however the increasing success of and investment in these
programs have reduced the historical availability of surplus tipping fee revenue due to the
diminished volumes of waste being disposed. This situation has culminated in the current
situation of significantly reduced available fund balance to continue the annual subsidies
necessary to maintain existing programs and services. Therefore, an additional source of
supplemental income is vital to enable continuation of the existing array of services to Orange
County citizens.
The Solid Waste Management Director has prepared a detailed report that outlines anticipated
10-year revenue and expenditure needs, based on various assumptions about facilities and
services to be provided. The report responds to feedback received from the Baard of
Commissioners at a work session on November 20, 2003 that addressed the topic of solid
waste alternative financing- The report outlines a proposed tier of fees that if implemented,
would generate adequate revenue to continue current services even though projected future
annual tipping fee revenue and reserves alone would be insufficient to do so. The
recommended fee structure includes:
Basic Services Fee (B) - $36 per year -services provided to or on behalf of everyone.
Examples are HHW, electronics, drop-off site services, food waste and other recycling
administration/education. This fee would apply to all improved properties in Orange County,
including residential, non-residential, tax-exempt, and governmental (with the exception of
University property, which is served by University-funded and provided recycling services).
Rural Curbside Services (R) r $52 per year (including the Bfee) -Those who receive or
have available biweekly curbside recycling collection in the unincorporated areas,
Urban Curbside Services (U) - $75 per year (including the Bfee) -Those who receive or
have available weekly curbside recycling collection in the incorporated areas,
Multi-Family Services (M) - $50 per year (including the Bfee) -Those who receive or have
available apartment/condominiumtyye recycling services,
The Solid Waste Management Director will make a presentation at this April 13 meeting
explaining the need far the fee system, the long-term financial plan for the solid waste
enterprise fund, key assumptions underlying the recommended fee levels, and a recap of the
recommended tiers and the services associated with each.
FINANCIAL IMPACT: Implementation of the recommended fee schedule far FY 2004-05 would
help stabilize the County's solid waste enterprise fund by generating approximately $3 million to
fund reduction, reuse, recycling programs and services and the County's educational outreach
efforts related to these. Current plans are for the fees to be billed with the County s annual real
property tax bills that are typically mailed in late July to early August. One new position, funded
through fee proceeds, will be needed immediately in the Revenue Department to assist in
implementation and maintenance of the billing and collection of the recommended fees.
RECOMMENDATION(S): The Manager recommends that the Board; 1) receive the report and
fee recommendations; 2) provide substantive feedback to staff regarding various policy and
financial management assumptions contained in the long-term financial plan; and 3) approve
the proposed set of fees or a modified version thereof either at this meeting or a subsequent
meeting in the near future,
MEMORANDUM
To: ,Tohn Lirtk, County Manager
From: Gayle Wilson, Solid Waste Management Director
SuUject: Report -Waste Reduction, Reuse, and Recycling Fee Reconunendations
Date: April 13, 2004
This memorandum presents the culmination of the staff 10-year financial analysis of the
Orange Cowity solid waste management enterprise fund and provides information on:
• current and future anticipated expenditures/revenues,
• projected revenue shortfall,
• a proposed reduction, reuse and recycling collections fee structure that would provide
supplemental income to the fund and eliminate the projected revenue shortfall relative
to recycling services,
• highlight the many assumptions necessary to conduct such afinancial/Fee analysis,
• other related issues, and
• proposed schedule/timeline/process
Staff requests that the Board of County Commissioners review the analysis, examine the
assumptions, consider the staff recommendation, and provide feedback to staff as
necessary in order that the supplemental financing process may continue toward a final
decision that would allow a fee to be included on the 2004 property tax bills.
Background
Discussions of the need to provide supplemental financing to the solid waste enterprise
fund have been taking place since at least 1993, when the Landfill Owners Group
conducted its initial discussion of the topic In 1996, once it was aclmowledged that
Orange County would be unable to successfully site a new Mixed Solid Waste (MSW)
landfill, discussions began again. Prior to 1996 it was generally understood that a new
in-county landfill would generate surplus revenue that could substantially fund recycling
and waste reduction programs indefinitely.
In 1998 an Alternative Finance Connnittee was formed to consider the issue of how to
provide additional revenue to the solid waste enterprise fund. This Committee was
comprised of Managers, Finance Directors, Elected Officials, and a county citizen..
While the Connnittee held numerous meetings, conducted substantive discussions, and
thoroughly examined the issue, it did not complete its work or issue a final report, as the
member govenunents' focus at the time shifted to resolving matters related to shifting
primary solid waste management responsibility to Orange County..
In 2001 the BOCC requested that the Solid Waste Advisory Board take up the issue and
offer i-econunendations to the BOCC. On .January 27, 200.3, staff presented a preliminary
estimate of per household (plil~) fees that would be necessary to completely fund
recycling in each of those sectors:
Urban Curbside - $64.50 Rural Curbside - $46.00 Multi-Family - $34,00
At that time, the Basic Services Fee (previously referred to as a Universal Services Fee)
component that would fiord the drop-off sites, hazardous waste collection, public
education and supporting services had not been completed, fii February 2003, the SWAB
presented alternative financing reconunendations to the BOCC that included a prepaid
tipping fee component, making comparisons of those fee estimates with current fee
reconunendations irrelevant, The prepaid tipping fee would have had the effect of
eliminating landfill fees and ensuring long-teen stability and predictability of the overall
solid waste enterprise fund.
Following the discussion last winter/spring, staff have had the opportunity to further
consider the various issues raised, have conducted ongoing discussions with the SWAB,
have received informal Commissioners' feedback, communicated with the County staff
that will have billing and collection responsibilities, and spoken with the Manager and
various citizens on the subject.
Based on this continuing deliberation staff prepared and presented a preliminary proposal
regarding a fee assessment methodology to the BOCC on November 10, 200.3. At that
meeting the BOCC agreed in principal with the staff approach and directed that the
analysis he completed and a formal proposal be brought back to the BOCC for
consideration.
While no specific fees were presented at the November 2003 meeting because the
analysis was not complete at that time, staff's rough estimate of the possible magnitude
of the fees was in the neighborhood of $45/plilt..
Staff s understanding of the Board's direction from the November 2003 work session
included:
• It would be a fee rather than a tax.
• It would be assessed on all improved properties, including tax-exempt, residential,
non-residential.
• It would be billed on the tax bill, beginning in 2004, but identified as a Waste
Reduction, Reuse, and Recycling Fee.
• The fee would not he assessed to the University.
• Philosophically, the intent is that you will pay for the services you receive, that are
available to you, or that are perforn~ed on your behalf,
• There would be four categories of fees:
• Basic Services Fee (B) -services provided to or on behalf of everyone. Examples
are HHW, electronics, drop-off site services, food waste and other recycling
administration/education.
• Rural Curbside Services (Rl -Those who receive or have available biweekly
curbside recycling collection in the unincorporated areas.
• Urban Curbside Services (Ul -Those who receive or have available weekly
curbside recycling collection in the incorporated areas,
• Multi-Family Services (Ml -Those who receive or have available
apartment/condominium type recycling services.
• All improved properties would receive the B fee. Those properties that also fall into
one of the other tluee categories would also receive that fee. Some properties would
only receive the B fee.
• The University is excluded from fees due to their having their own comprehensive
recycling program and their paying a disposal tipping fee of which a significant
portion is used to fund local recycling services/programs that they receive no benefits
from
• In FY 2004/05 the non-residential sector would only pay the B fee.. Due to the
significant variety of conunercial establishments staff proposes to conduct further
analysis and offer a refinement of fees for FY 2005/06 or later..
• Upon the BOCC final decision regarding the fee staff will initiate abroad-based
public education and outreach program to explain the need for supplemental
financing and the new fee system. The outreach efforts would begin inunediately
upon the BOCC reaching a decision on the fee, It would include at least the
following:
• Local media editorial briefing,
• Articles in local news media,
• Availability of staff to conduct radio interviews or presentations,
• Providing information to Orange County employees,
• Press releases to local media,
• Paid advertising,
• Meeting with Town Managers to explain fee structure/policies,
• Coordination with Revenue Collection Department regarding all information
released
• Additional staff person in Revenue Collection Department specifically assigned to
WRRR Fee issue, and
• Insert in tax bills to explain fee
Note: According to Revemre Collection/Ta.z Assessor staff a,fincd, fee decision in April
(consistent with the BOCC's November 70 agreement in principal) would allow the
billing to proceed with a higher degree of accur°acy and without unrrecessaril7~ delaying
tax billing. IfYlre BOCC's final supplemental, financing decistwr feaha°es another
approach that rnrlically nlters base assumptions of the current financing fr~nmetvor•k, or is
zmdada~ delayed, admitrash°ative planning for billing naay trot be completed in time fot° the
normal balling cycle.
The Enviromnental Finance Center of the Institute of Govermnent (EFC) at UNC has
been providing county staff assistance over the past several months in developing the
financial database used in the analysis and offering general financial information and
guidance, The specialized financial assistance provided by the EFC has been invaluable
in our efforts to provide accurate and reliable financial information and policy advice to
the BOCC. The EFC's expertise in governmental financing has resulted in several
reconunendations regarding financial assumptions and responsible financial management
practices for enterprise fwtds.
Statement of Problem
The solid waste management enterprise fiord will be unable to continue providing the
same level of service in FY 2004/05 as is now provided without major financial decisions
that provide additional revenue. It should be noted that no state or general fiord
appropriations are provided to fund recycling, nor waste reduction activities within the
enterprise fund, with the exception of state reimbursements of an advance disposal fee for
white goods and scrap tires and some small grants received on a competitive basis.
Reimbursements for scrap tires and white goods only partially fund those programs.
The proposed fee will provide the funding necessary to fund the current and future
shortfall in revenue caused primarily by:
• the success of local waste reduction programs in reducing waste being disposed,
resulting in corresponding reductions in tipping fee revenue that bas historically
funded solid waste programs/services,
• investments in recycling and waste reduction programs whose recovered materials
market value is significantly inadequate to pay for those recycling and waste
reduction programs/services, and
Orange County tipping fees are higher than other regional disposal options
Figure 1 represents an illustration of the projected county recycling expenditures and
revenues over the next nine years, which forms the basis for the need for supplemental
income for these financially non-sustainable programs/services.
Figure 1
Cost and Revenue of Recycling
s,oao,ooo
5.000.000
4.000.000
N
c 3,000.000 ~ Revenue
-Cost
2,000.000
1,000.000
0-
200412005 2005/2006 2006/2007 2007/2008 200812009 2009/2010 201012011 2011/2012 2012/2013
Year
Most other counties already utilize (many for several years) some type of availability or
. _~~__,.
other fee to fund solid waste services. ~ttacluuantw; lists examples of foes existing in
other,jurisdictions. This list is not a comprehensive statewide inventory of supplemental
solid waste fees, but only a sampling.
Fee Recommendations (FY 2004/05
Basic Services (B) Fee = $36/per each improved property unit, regardless of locatirn3 in
the county or tax status (exempt or not)
Urban Curbside Services (U) Fee = $39/improved property unit within urban services
area (We note a duplex would receive two fees as each side of the duplex is eligible for
individual curbside recycling services)
Rural Curbside Services (R) Fee = $16/improved property unit within rural services
area
O
Multi-family Services Fee = $14/improved property unit with multi-family services
available at each aparhnent dwelling wait, occupied or not. Mobile home parks are
proposed to be billed for each mobile home occupying a lot, not for unoccupied lots as
declared by the park owner in the required amrual statement to Orange County,
Each improved property unit will receive the $36 (B) fee. Those improved property
units within one of the other t(rree service areas will also receive a second fee drat is
additive to the (B) fee.
Note: Due to a pr°ojected surplus of tipping, fee revenue over Imulftll operating expenses
for the next five years, staff believes it passible to maintain the above, fee strrrckn•e for
five,year•s vvitTrout adjustment. hr FY X009/10 the tipping,fee r°evenue surpluses will no
longer be available and significant fee incr°eases will be likely,
Statement of Assumptions
The following is a compilation of fundamental assumptions related to the 10-Year
financial analysis of the solid waste enterprise fiord and calculations of anticipated
revenue shortfall. The assumptions are organized in the following categories:
General
Revenues
Expenditures
Reserves
Programs/Services
Fee Customer Classes
Fee Calculations
GENERAL ASSUMPTIONS
• Supplemental financing is essential for FY 2004/05 in order to continue existing
services/programs.
• 10-Year Plan Financial Analysis corresponds to 10-Year Solid Waste Management
Plan submitted to State, with year 1 being 2003/04.
• Fee will be transmitted on the annual property tax bill, listed separately as a Waste
Reduction Reuse and Rec r} clnre Fee.
• The Waste Reduction, Reuse, and Recycling Fee (WRRRF) will be adopted in
conjunction with the FY 2004/05 budget process and included on the 2004 tax bills
mailed in .July/August 2004.
• County Public Works Sanitation Division operations/estimates of revenue or
expenditures are not included in the WRRRF model.
• A WI2RRF' appeal process will be established as part of a schedule of values to
efficiently address citizen billing questions/problems.
• For reference, the average property tax bill for' a Chapel Hill resident is $4,.3.36.50.
The proposed $75 fee (B plus U) represents 1.7 percent of that average tax bill. The
average property tax bill of a resident of unincorporated Orange County is $2,447.
The proposed $52 fee (B plus R) represents 2.1 percent of that average tax bill.
REVENUE ASSUMPTIONS
• UNC will continue to deliver MSW to the Landfill
• MSW tomiage will escalate at 1.7% amorally
• C&D tomrage will escalate at 1 % annually
• Recycling revenue estimates based on the continued operation of the existing sorting
pad, and its projected 2008 relocation
• Reimbursement for the,jointly owned portion ofthe Green Tract assumed to be
received beginning FY 2004/05 aver a four year period
• No assumption made regarding reimbursement for 60 acre County owned portion of
Green Tract
• Franchising private company MSW haulers is not assumed, however, it could
represent an additional $250,000 atrally in tipping fee revenue and an estimated
reduction in the Basic Services Fee (if fully applied there) of approximately
$4.50/phh
• Tipping fees, fund balance and recycling revenues will continue to be utilized to the
extent practicable, with WItRRF financing only a portion of the projected shortfall of
revenue used to fund recycling collection, reduction and reuse functions
• Recycling revenue estimates based on reasonably conservative material market values
• Tipping Fee Assumptions $$/ton:
MSW C&D Veg./Clean Wood
04/05 45 41 15
05/06 46 41 15
06/07 47 41 17
07/08 48 41 17
08/09 49 4.3 17
09/10 50 4.3 19
10/11 51 43 19
11/12 52 43 19
12/1.3 5.3 43 19
EXPENDITURE ASSUMPTIONS
• Administrative expenses are split evenly between recycling and disposal and include
administrative staff, education and outreach programs, utilities, financial management
and plamring, clerical, telephone services, and related functions. Staff analysis
I c7
showed that this split reasonably reflects an accurate allocation of administrative staff
time between the two functions.
• Debt financing of land improvement/acquisition (Transfer Station, C&D Resale
Store, Administration Office Building, land acquisition, Relocation of Processing
Pad, Closure) is assumed at 6 percent.
• Debt financing of future equipment and vehicles is not a fundamental assumption
(beyond the equipment debt already being financed), however; based on level of
reserve balance and favorableness of loan rates, vazious equipment maybe
periodically debt Financed,
• Analysis assumes and has incorporated new costs associated with implementation of
the WRRRF such as a new (time-limited) position in Tax Collection that will serve as
administrative support for_the WRIZRF program.
• A Gantt chart (Attachment B) is provided to indicate schedule of key new
expenditures over the planning period.
RESERVES ASSUMPTIONS
• Fund Balance (undesignated) is estimated to be maintained at a minimum 14 percent
• Equipment reserve fund for both disposal and recycling is assumed to be established
as a restricted fund to finance capital equipment and vehicles purchases and to
minimize variability in revenue requirements
• Projected existing June 30, 2004 fund balance of $1,963,201 is to be applied toward
maintenance ofmininnun 14 percent fund balance for entire fund (including recycling
division), reestablishment oflandfill equipment reserve fund, and subsidizing
recycling fees for five years
• No landfill closure reserve fund is proposed or included in any expenditure estimates
PROGRAMS/SERVICES ASSUMPTIONS
• No assumptions are made regarding new emergency storm debris management
facilities/services
• C&D recycling functions are integrated into disposal operations and are not included
in recycling expenditure/revenue estimates; these recycling activities are not funded
by recycling fees
• No additional materials are assumed to be added to existing recyclable materials
presently collected during the 10-year planning period, with the exception of batteries
at curbside and drywall
• A Materials Recovery Facility (MRF)and its attendant program expansions are not
included in this 10-Year Plan -Recycling program expansions have been minimized
in response to elimination ofexpanded processing capabilities
• Minimal prograzn expansions are assumed in the financial plan including:
• 500 homes/year plus in-fill for existing routes added to ntral curbside program
• in-fill development and atmexations only in urbazi curbside program
• 2 sites added in FY 04/05 and no additional expansions for food waste program
• no net expansions of the restaurant and bar glass program
approximately 100 new multi-family units on-line amnially
development of Hampton Pointe and Southern Village drop-off recycling centers
CUSTOMER CLASS FEE ASSUMPTIONS
Assumes four categories of fee recipients:
• Basic Services Fee(B) -Imposed on all improved property except that owned by
UNC that does not receive recycling services
• Portion of Mebane located in Orange County will only receive (B) fee
• Portion of Chapel Hill in Durham County will receive (B) and U or M fee as
appropriate
• Each commercial improved property, regardless of size or intensity of use,
will receive the same (B) fee wrtil such a time as a more equitable fee
stricture can be developed, estimated 2-.3 years
• Arr imps°oved residential property with more than one horire will receive the
assessment on each habitable residential unit (i.e. property with one primary
home with two mobile homes on the same property will result in properly
owner receiving .3X fee)
• Sororities/Fraternities and Elderly Assisted Living - 4 persons = I unit for
billing purposes
• Granville Towers - 1.3 students = 1 unit for billing services
• Tax-exempt/public housing/land trusts - 1 unit = I unit for billing purposes
• Carol Woods - I unit = 1 unit for billing purposes
• Personal Property (single-wide mobile homes) - 1 unit each for billing
purposes. Where single-wide mobile homes are located in mobile home
parks, the park owner shall receive the bill for all homes in the park, as no
locations for mobile homes are yet designated for personal property tax bills.
It will be the responsibility of the mobile home park owner to pay the bill and
distribute the costs accordingly.
Urban Curbside (U) Fee -Imposed on those residences in the incorporated areas
of the county that have curbside recycling services available; property owner will
receive a fee for each residential unit on property
Rural Curbside (R) Fee -Imposed on those residences in the unincorporated areas
of the county that have rural curbside recycling services available; property owner
will receive a fee for each residential unit on property
Multi-family Fee -Imposed on those residences, including both incorporated and
unincorporated areas that have multi-family services available; property owner
will receive fee for each residential unit on property
Special multi-family assessments are:
• Sororities/Fraternities and Elderly Assisted Living (not nursing homes) - ~F
persons = I unit for billing purposes
• Granville Towers - 1.3 students = 1 unit for billing purposes
• Tax-exempt/public housing/land trusts - I unit = 1 unit for billing purposes
• Carol Woods - 1 unit = 1 unit for billing purposes
is
• Personal Property (single-wide mobile homes) - 1 unit each for billing
purposes (except for those outside mobile home parks and outside areas
receiving rural curbside service)
FEE CALCULATION ASSUMPTIONS
• Objective is to maintain rates unchanged for five years
• 88 percent recovery rate assumed for collections (due to lack of statutory authority to
collect as taxes)
• Fee is calculated by dividing each category's revenue shortfall amount by # of units
in customer class
• Staff will continue service area assessments/data base computations in order to refine
the number of units used for calculating fees in each service category, so the actual
number of units to be billed (billing database) will continue to be perfected until the
time_of billing
• Attaclunent_C~ provides a summary of the comprehensive financial analysis and
illustrates projected revenues/expenditures by program
LEGAL ASSUMPTIONS
• That the WRRR Fee will be structured so that legal collection options will be
maximized, however, WRRRF do not have the same collection options as those
available for the collection of taxes or availability fees
• The County Attorney has included a letter that further discusses the legal issues
related to the proposed fee (Attachmeut.D;).
ICey Issues
• Billing will likely generate increased demand for services that will be unable to be
met immediately. If fee generates income over what is necessary, additional revenue
could be used to expand services beyond those modest expansions already assumed.
• Difficulty in maintaining ongoing estimates of'separate programs because of trend to
integrate (Drop-Off Site, MF, Rural Curb,, etc.) services for efficiency.
Current solid waste programs and services are based on street address at paint of
service. Tax billing database based on property identification numbers. Significant
effort underway to convert physical addresses to PIN numbers. Additionally, many
tax-exempt propetiies do not have assigned PIN numbers or are missing other key
information such as whether it's improved, etc,
• Tax Assessor recomrrtends that in order for the 2004 tax bills to be distributed on
time, that the BOCC make a final decision on the WRRRF by early to mid April,
assuming only minor modifications to staff assumptions. In order for the bills to be
distributed on time (first week in August), Che billing database needs to be finalized
10
13
before May .30. Depending on the scope of possible modifications of various
assumptions by the BOCC and progress toward completion of the development of the
billing database, tax bill distribution maybe delayed or billings may Ue made less
accurate
Interlocal Agreement Obligations
The Interlocal Agreement allows Orazige County considerable flexibility and discretion
regarding system financing. The section of the agreement titled "Other Fees" seems to
apply to the WRRRF proposal. Staff provides a summary of how this section of the
Interlocal Agreement may apply as follows:
• County must give the parties at least 30 days notice of the effective date of the
proposed fee
• County must request that the SWAB consider the proposed fee and, if the SWAB
approves the fee, then the fee will be considered fully approved when the BOCC
subsequently approves it
• If the SWAB disapproves of the fee, then the fee may take effect only if the County
and at least one other Party subsequently approves it
• The fee will take effect at the end of the notice period, or, if later, the date of the last
Governing Body approval necessary
Next Steps
BOCC to review recozmmendation and provide addition guidance and direction to
staff regarding fee reconunendation and assumptions.
Staff from Land Records, Tax Collection, Tax Assessor, County Attorney,
Information Systems and Solid Waste will continue to:
• prepare and refine the billing database and reconciling PIN numbers with service
area addresses for each of the service sectors
• work out necessary policies/practices regarding collection for non-payment
• develop detailed schedule of values relative to who/what/when how fee
assessments are determined and applied
• consider how the tax bill document can be modified to plainly list the fee along
with a possible insert explaining the fee
• examine the process for inclusion the portion of Chapel Hill falling within
Durham County
• develop an appeals process to consider citizen complaints/inquiries
• consider other legal issues as necessary
Following BOCC endorsement of the staff recommendation, to initiate a
comprehensive public education and outreach campaign
Staff is available to answer questions or discuss any aspect of the recommendation.
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LAW OFFICES
COLEMAN, GLEDHILL, HARGRAVE & PEEK
A PROFESSIONAL CORPORATION
129E TRYON STREE'i
P. O DRAWER 1529
HILLSBOROUGH. NORTH CARODNA 27278
919732.2196 FROM THE DESK of
EAX 919.732-7997 GEOFFREY E GLEDIil1.L
www cgandheum EMAIL geJinsFLvlh~O~egmJh <nm
March 23, 2004
Mr. John M. Link, Jr.
Orange County Manager
Mr. Rod Visser
Assistant County Manager
Post Office Box 8181
Hillsborough, North Carolina 27278
Mr. Gayle Wilson
Solid Waste Director
Post Office Box 17177
Chapel Hill, North Carolina 27516-7177
RE: Waste Reduction, Reuse and Recycling Fees
Dear John, Rod and Gayle:
This letter provides my analysis of the legal issues
pertinent to the Orange County staff recommendation to implement
Waste Reduction, Reuse and Recycling Fees ("WRRR fees") In a
letter dated February 7, 2003, a copy of which is enclosed with
this letter, I discussed how the Agreement for Solid Waste
Management among Orange County, Carrboro, Chapel Hi11 and
Hillsborough ("Agreement") addresses other fees, It is my view
that the WRRR fees recommended by the staff are "other fees" as
discussed in the Agreement. They therefore may be created or
changed by the County by giving the other parties to the
Agreement 30 days notice of the fee or the proposed fee change.
If the Solid Waste Advisory Board recommends the change be
approved, then the change can take effect if the County
subsequently approves it. On the other hand, if the Solid Waste
Advisory Board recommends that the fee or fee change not be
approved then the change may take effect only if the County and
at least one other party to the Agreement approves the fee or
fee change.
a~
Page 2
March 23, 200a
Counties are given express authority to establish and
operate solid waste collection and disposal facilities. Counties
and cities may establish and operate joint collection and
disposal facilities by joint agreement. The Agreement is such an
agreement. The Board of County Commissioners is empowered to
impose fees for collection of solid waste, use of disposal
facilities and the availability of disposal facilities all
related to solid waste. However, "recovered material" is not
considered solid waste in this regulatory scheme and is not
regulated as such. Also, solid waste in this regulatory scheme
means non-hazardous solid waste and does not include hazardous
waste.
Fees for' handling recovered material and household
hazardous waste are not subject to the limitations placed on the
County's ability to charge fees for the collection of solid
waste, the use of a solid waste disposal facility and the
availability of a solid waste disposal facility. Those
limitations are discussed in my February 7, 2003 letter and
relate principally to the inability to charge persons not using
County solid waste disposal facilities and the availability of
those facilities.
A recovered material is a material that has known recycling
potential, can be feasibly recycled and has been diverted or
removed from the solid waste system stream for sale, use or
reuse. To qualify as "recovered material:"
(1) a majority of the recovered material at a
facility shall be sold, used or reused within 1 year;
(2) the recovered material or the products or by-
products of operations that processed recovered materials
shall not be discharged, deposited, injected, dunked,
spilled, leaked, or placed into or upon any land or water
so that the products or by-products or any constituent
thereof may either enter other lands or be emitted into the
air or discharged into any waters including groundwaters,
or otherwise enter the environment or pose a threat to
public health and safety; and
(3) the recovered material shall not be a hazardous
waste or have been recovered from a hazardous waste.
The board of commissioners of a county has broad power to
charge fees for services. N.C. Gen. Stat. g 153A-102 provides:
"the board of commissioners may fix the fees...charged by county
a~
Page 3
March 23, 2004
officers and employees for' performing services or duties
permitted or required by law...." Providing waste reduction,
reuse and recycling services for recovered material and
household hazardous waste are both services counties are either
permitted to provide or required by law to provide. Therefore,
in my opinion, the County has the power to charge wR.RR fees. The
division of the fee into the four categories as recommended by
the County staff establishes a WRRR fee system that is both
reasonable and related to the services provided by Orange County
to the improved property in the County and the cities and towns
in the County whose owners receive and have the applicable
services available to them. Part of Chapel Hill is located in
Durham County. Since the WRRR services covered by the fees
recommended by staff are provided to all of Chapel Hill, it is
my opinion that those properties can be made subject to the same
fees as other properties receiving the same services in the rest
of Chapel Hill.
Since the WRRR fees are not solid waste collection,
disposal or availability fees they are not covered by N.C. Gen.
Stat. § 153A-293. That statute authorizes a county to adopt an
ordinance providing that a solid waste related fee may be made
payable in the same manner as property taxes and, in the case of
non payment collected in any manner by which delinquent personal
or real property taxes can be collected. Therefore, collection
of unpaid/delinquent WRRR fees will have to be accomplished by
using other remedies. The staff has projected an 88% collection
rate for these fees for that reason rather than the over 98°s
collection rate which is typical for property taxes in Orange
County.
The Board of Commissioners may want to consider, either in
the near term or the longer term, seeking legislation. that would
provide that any fee authorized by and imposed pursuant to D7.,C.
Gen. Stat. § 183A-102 can be collected in the same manner that
solid waste related fees can be collected.
The WRRR fees, if approved by the Board of Commissioners,
should be established and maintained annually with the adoption
by the Board of the Orange County Budget Ordinance.
a~
Page 4
March 23, 2004
If you have any questions about any of this, please advise.
Very truly yours,
COLE:~L~N, GLEDHILL, HARGRAVE & PEEK, P.C.
ledhill
GEG/lsg
Enclosure
lsg:letters\linkvisser~d `_lson.ltr
~~
LAW OPf tC L'S
COLEMAN, GLEDHILL & HARGRAVE
A PROFHSSIONAL COI2POR:\i'ION
I'_9 E. TRY"ON STREET
P O DRAWER U?9
IIILLSHOROUGH. NORTFI CAROLtN:t '_T_7S
9f9-732-2796
WEHSITE tV'R'W CGANDH COAI
February 7, 2003
NIr. John M. Link, Jr,
Orange County Manager
Mr. Rod Visser
Assistant County Nlanager
Mr. Gayle Wilson
Solid Waste Director
Mr. Jan Sassaman, Chair
Orange County Solid Waste
Advisory Board
Post Office Box 8181
Hillsborough, North Carolina 27278
RE: Solid Waste Alternative Financing
Dear John, Rod, Gayle and Jan:
FROM TIiG DESK OF
G EOfFREY G. GLEDHIL[.
F.-\L\f L: ~coRre~,~,lediJli?egsnJL.eom
This letter is a summary of the research that I have done
concerning solid waste alternative financing, It will proceed in
both outline and narrative form and is intended to be an
overview of the result of my research, Further direction by the
Solid Waste Advisory Board, the Manager and the Board of County
Commissioners will demand additional work and fine-tuning.
S, Agreement for Solid Waste Management.
The Agreement for Solid Waste Management among Orange
County and the Towns of Carrboro, Chapel Hill and Hillsborough
provides the stepping-off point for discussion of solid waste
alternative financing. The Agreement makes clear that the County
operates the solid waste system in Orange County and generally
has both authority and discretion in operating the system. The
a~~
Page 2
February 7, 2003
Agreement further contemplates that the system will be operated
as an "enterprise" and that the County has discretion in setting
rates, fees and charges. There is an overriding limit on this
discretion., The County may not put into effect any Material
Financing Change unless the County first obtains the consent of
all the parties to the Agreement. Since the financing
alternatives discussed here will not, in my mind, affect a
Material Financial Change, that limitation on operational
control of the system does not pertain. The notion that the
County's solid waste system will be operated as an enterprise,
is also the solid waste system method of preference in State
law. Chapter 130A of the North Carolina General Statutes, which
mandates that each county and municipality operate solid waste
management systems and provide for' their financing states that
counties and municipalities are encouraged to operate their
solid waste management systems through use of an enterprise
fund.
The fee options that have been presented to the Solid Waste
Advisory Board, to the Manager and to me fall into the category
of "other fees" in the Agreement. Generally, these fees may be
created or changed by the County by giving the other parties to
the Agreement thirty days notice of the fee or the proposed fee
change. If the Solid Waste Advisory Board recommends the change
be approved, then the change can take effect if the County
subsequently approves it. If the Solid Waste Advisory Board
recommends that the change not be approved, then the change may
take effect only if the County and at least one other party to
the Agreement approves the change.
"Other fees" do not include taxes. That is, the Agreement
does not prohibit funding the solid waste system with taxes.
However, since the solid waste management system is to be
operated as an enterprise, the only taxes that fit the model are
district taxes, The Agreement expressly provides that special
district tastes related to the system are not covered by the
Agreement. However the Agreement notes, correctly, that North
Carolina law requires consent of a town for the property located
in the town to be included in any special tax district. Once a
town consents, then the county controls the special district
tax, in its discretion.
~~~
Page 3
February 7, 2003
II. The Prince William County, Virginia Model.
I have studied the materials made available to me
concerning the fee system established by Prince William County,
Virginia. I have also reviewed the Code of the Commonwealth of
Virginia to determine the legal framework for the Prince William
County system. Further I have contacted the New Hanover County
Attorney's office because I have been told that that office has
found "no legal impediment" to implementing the Prince William
County, Virginia system in North Carolina.
NIy research tells me that Prince William County, Virginia
created a sanitary district and that the sanitary district model
available in Virginia, is similar to the sanitary district model
in North Carolina. Prince William County, Virginia petitioned
the courts of Virginia for the creation of this sanitary
district and upon receiving the court's approval, the sanitary
district created can finance its system activities either by
charging rates (fees) for the use of the system and/or by
levying taxes on property in the sanitary district. The Prince
William County Sanitary District has apparently elected. to use
only fees to finance its solid. waste system.
North Carolina law provides for the creation of sanitary
districts which when created have taxing and other governmental
powers, including the power to charge fees for system services.
A sanitary district under North Carolina law is essentially a
local government independent of the county or' the city where it
is located. Sanitary districts as a model are, in Orange County,
I believe, obsolete.. Since Virginia sanitary districts are akin
to North Carolina sanitary districts and since sanitary
districts in Orange County, North Carolina are essentially
obsolete, the use of the Virginia model is not helpful,
The rest of this document therefore focuses on the two
other possibilities which are helpful and could be used
independently or together. It also includes a brief discussion
of franchising as a method of addressing financing solid waste
in Orange County. Incidentally, during my conversation with Holt
Moore with the New Hanover County Attorney's office, I was told
that he did not recall opining about the applicability of the
Prince William County, Virginia model for New Hanover County,
And in the end, New Hanover County went to a franchise system
31
Page 4
February 7, 2003
after determining that the Prince William County model was not a
practical solution to New Hanover County's solid waste financing
concerns.
III. Fees for Service.
North Carolina law enables counties to charge collection.,
disposal and availability fees to finance solid waste
enterprises. Solid waste collection fees are outside of the
scope of the County's responsibility under the Agreement and are
not discussed further. The County can impose a fee for the use
of disposal facilities provided by the County. This fee may not
exceed the cost of operating the facility and may be imposed
only on those who use the facility. The fee can vary based on
the amount, characteristics and form of recyclable materials
present in solid waste. This fee is essentially a user fee not
applicable to persons not using the County's solid waste system.
The Board of Commissioners may also impose a fee for the
availability of a disposal facility provided by the County. This
fee may not exceed the cost of providing the facility. This fee
is not directly a user fee. Rather it is imposed on improved
property in the County that benefits from the availability of
the facility, This fee may not be imposed on property whose
solid waste is collected by a city or a private contractor for' a
fee if the fee imposed by the city or the private contractor for
the collection includes a charge for the availability and use of
a disposal facility provided by the County. Furthermore,
property served by a private contractor who disposes of solid
waste collected from the property in a disposal facility
provided by the private contractor is not considered to benefit
from a disposal facility provided by the County and is not
subject to a fee imposed by the County for the availability of a
disposal facility provided by the County.
Summarizing, an availability fee could be charged to
everyone in Orange County whose solid waste is not collected by
a private contractor delivering the materials to a disposal
facility provided by that private contractor. And, if the
availability fee were to be applicable in the Towns of Chapel
Hill, Carrboro and Hillsborough, the fees charged by Orange
County for delivery of solid waste to the County landfill would
have to be adjusted to eliminate the cost of the availability of
3~
Page S
February 7, 2003
the disposal facility. That is, if the County intends to
continue its tipping fee while imposing an availability fee, the
services covered by the availability fee even though charged to
the landowners in Orange County, would have to be "backed-out"
of the tipping and other fees now charged to the towns,
The statute authorizing local governments in North Carolina
to charge fees for solid waste is, at least in part, responsive
to federal flow control requirements created by the federal
courts which requirements are premised on Congress's ability to
control commerce. Flow control principles generally do not
become a problem under the North Carolina solid waste fee system
because the statutory limits on fee-setting mirror, or at least
capture the sense of, flow control, A fee system has at least
one advantage over a tax system in that the fees are charged to
the persons using the County solid waste system, even where the
property where the solid waste is generated is not taxable, A
fee system may also please the towns in Orange County because it
would almost certainly result in a reduction to tip fees,
Solid waste fees would be established by County ordinance
and, may be billed with property taxes; may be payable in the
same manner as property taxes; and, in the case of non-payment
may be collected in any manner by which delinquent personal or
real property taxes can be collected. A11 of these features of a
fee system would be set out in the ordinance which creates the
fee, The ordinance would further make clear that delinquent fees
are a lien on the real property described on the tax bill that
includes the fee, Therefore, fee collection rates should be
comparable to ad valorem tax collection rates.
Fees under North Carolina's solid waste fee system,. without
franchising being a part of that system, will only stop Orange
County solid waste from leaving Orange County if they are
competitive with the private sector, however. And, unlike
property taxes, fees are not deductible for federal and State
income tax purposes.
IV. County Solid Waste Service Districts,
Service districts are a viable option for Orange County and
create only a tax boundary with all of the governmental
~~
Page 6
February 7, 2003
activities being performed by the County, Orange County could
create solid waste service districts that are defined by the
level of solid waste service provided to the district. However,
before solid waste service districts can be effective in the
towns in Orange County, the towns would have to consent to their
being included. Service districts under Piorth Carolina law are
special tax districts only, They are not units of government
which can charge fees for services, The use of service district
taxes as an alternative financing method is discussed below.
County service districts for solid waste collection and
disposal systems can be created based on the service provided,
That is, each district would vary depending on whether the
property owner had access to the rural solid waste collection
system, rural curbside collection or town curbside collection,
As mentioned previously, before a county service district can
include land in a city or town, the city or town must agree to
its being included within the district. All aspects of the
property tax generally pertain to service district taxes. That
is, properties that are exempt from property taxes generally
will be exempt from service district taxes. And, property
valuation will be the same as for property taxes generally.
Therefore, for example, property in the use value program or
homestead exempt property would be taxed at its use value or net
of the homestead exemption.
County service district tax rates are considered together
with other County taxes for' tax rate limitations. They are in
the same category as 153A-149(c) functions that may be paid-for
with county taxes, which have a combined rate limit of $1.50 per
$100 of valuation, They would appear on the tax bill as a
separate line item and would be collectible in the same manner
as other property taxes. Service district tares are deductible
as are other property taxes for State and federal income tax
purposes.
A service district tax should be relatively easy to
administer because of the advanced GIS technology available to
Orange County to identify and map the districts. Although
service district taxes will not capture entities otherwise
exempt from property taxes, they will tax all othex persons
using the County's solid waste system. They are, in that regard,
a flow control technique which I think would avoid federal flow
~~
Page 7
February 7, 2003
control problems, And, they would provide significant incentive
to the use of the County's solid. waste system, Also, presumably,
any service district tax in the towns would be accompanied by a
reduction in the landfill tip fee charges to the towns, Without
those reductions the towns would, in all likelihood, not agree
to being a part of the service district system,
V. Franchising.
Creating a franchise system whereby all solid waste has to
be collected and/or hauled by franchisees is not a direct
alternative financing method, Fees can be charged in the
franchising process but they are minor in amount and would be
imposed mainly to cover the administration of the franchising
process. On the other hand, requiring in a franchise system the
solid waste hauler to deliver all of the solid waste collected
and hauled to the Orange County solid waste facilities puts off
for the foreseeable future Orange County's need for alternative
financing for its solid waste system,
Hillsborough successfully used a franchise system when it
got out of the commercial collection business, Pursuant to the
Hillsborough franchise ordinance and the franchise granted by
Hillsborough, all commercial solid waste collected in
Hillsborough must be delivered to Orange County solid waste
facilities. This is the method elected by New Hanover County.
That is, Dtew Hanover County's franchising system requires that
all the waste in New Hanover County be delivered to its
incinerator. Interestingly, there is a local bill applicable to
Dfew Hanover County which allows its solid waste franchising
authority to include the City of Wilmington. Thus, New Hanover
County has completely addressed its solid waste financing
through the franchising process.
Although Hillsborough has successfully implemented a
franchising system for its commercial solid waste collection
activities and although New Hanover County has also implemented
a franchising system, franchising squarely puts at issue federal
flow control law. A franchise which requires the waste to be
delivered to the Orange County facilities would prohibit out of
County disposal of County solid waste altogether. Hillsborough
implemented its franchising system without flow control
complaint from the franchise bidders, and the bidders included
3~
Page 8
February 7, 2003
all of the major private collection companies operating in this
area. However, New Hanover County has been put on notice by the
private haulers in that area that their franchising system
violates federal flow control requirements, Similarly,
Wilmington. is making noises about undoing the system. Before New
Hanover County enacted its franchising system it had adopted a
"pure" flow control ordinance, That ordinance was challenged in
federal court resulting in a consent order the gist of which is
New Hanover County has repealed or suspended the enforcement of
its flow control ordinance, Solid waste and flow control are
ongoing issues in DTew Hanover County. It is my opinion that
although this method of franchising may be an attractive
response to solid waste system financial problems, it is too
risky presently to attempt to implement particularly given the
amount of time Orange County has to respond to its solid waste
financing needs.
There is another franchising model (and variations of this
model) which has passed flow control review by the United States
Circuit Court of Appeals for the Second Circuit. In both of the
cases considering variations of this model that I am aware of,
the United States Supreme Court, which created the flow control
doctrine, declined review.
This model begins with the creation of franchise districts
and the awarding of an exclusive franchise to one solid waste
collector/hauler in each district. The franchise granted
requires the franchisee to operate a recycling program according
to the County's specifications and requires that all waste be
disposed of in the County's solid waste disposal facilities.. Key
to this model is that the County pays the franchisee for'
performing this service. The County in turn charges the
residents of the County a fee or fees in the same categories as
discussed in the Fees for Service section of this letter. Using
this model results in no non-users of the County's solid waste
system. Therefore, everyone pays fees.
Similar to the Hillsborough franchise system, this is a
cutting edge approach and not without risk. I also am unable to
predict how much time it would ta7ce to implement in Orange
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Page 9
February 7, 2003
County. In that regard, like the district tax approach, this
franchising model would not work without agreement by the towns.
Very truly yours,
CQLEMAN, GLEDHILL & HARGRAVE, P.C.
f~~
Geoffrey E. Gledhill
GEG/lsg
lsg:lettzrs\linJcvisserwilsonsolwaste ltr