HomeMy WebLinkAboutAgenda - 04-29-2003-7d14 �r /,r, c r, � 7d
Report to Board of Orange County
Commissioners
Alternative Financing for Solid Waste
Management
Prepared by Solid Waste Advisory Board
February 24, 2003
Executive Summary
This report by the Solid Waste Advisory Board to the Board of Orange County Commissioners
investigates the financial situation of the solid waste management department and recommends
to the BOCC methods for providing stable, predictable, long -term funding of solid waste
management. The SWAB recommendation for the long -term funding is a comprehensive
prepaid solid waste services fee to be levied on all improved properties in the County. A similar
type of fee is used in Prince William County Virginia and Charleston County South Carolina.
The SWAB with the assistance of the Solid Waste Department Staff has determined that it takes
approximately two fiscal years to fully implement the service fee system. A short-term funding
system will be needed for the next the next two fiscal years. The SWAB was not able to come to
a definitive single recommendation for this interim funding and recommends that the BOCC
work with the manager to determine how best to provide sufficient funds to continue operations
at their current level while planning for future needs. Several short-term financing options based
on fees or taxes are discussed in this report.
The SWAB has worked primarily on this solid waste financing issue for the past year. In
developing its recommendations, it investigated a variety of approaches including property taxes,
fees, special district taxes, and a comprehensive prepaid solid waste fee or some combination of
those. The SWAB has determined that some type of financing mechanism is required to
supplement the current revenue sources of tipping fees, interest income and sales of mulch and
recycling materials revenue. These revenues are needed to maintain current programs and
operations implement the waste reduction programs to achieve the goals, provide long term,
secure disposal options and to maintain necessary reserves.
SWAB has endorsed the County's Solid Waste Management Plan waste reduction goal of 61%
per capita and the framework for achieving that goal as outlined in the State Solid Waste Plan.
SWAB reviewed a staff analysis of the Department's projected budgets utilizing a status quo
scenario without significant expansions in waste reduction efforts. This analysis revealed that,
even the status quo, would require substantial additional funding to fully support all current
operations.
The SWAB is also aware that the largest current source of revenue -- landfill tipping fees -- is
limited by the long -term capacity of the landfill and is incapable of fully funding county
programs and services until closure. This net revenue source will diminish significantly in 2009
when the lined landfill is scheduled to close and be replaced by a transfer station with out of
county disposal of waste. Income from the transfer station will be largely balanced by the cost of
operating the station, hauling, and tipping fees at the remote private destination landfill leaving
little surplus. There is further income from the construction and demolition waste landfill, but
that will fund primarily C &D landfill operations and the extensive and successful C &D recycling
programs now in place. At the same time, the overall fund will incur the large expense associated
with formal closure and capping of the MSW landfill that could be as much as $2 million.
As soon as 2003 -04 supplemental funds will be needed to support waste reduction and recycling
activities, restabilize the equipment reserves, and begin development of a landfill closure fund.
Current landfill income has declined due to success in recycling and waste reduction coupled
with a competitive waste management market in which waste flows to the least expensive
disposal options. Orange County now has among the highest tipping fees in North Carolina,
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hence the landfill has lost tonnage, enabling the landfill to last longer but also diminishing the
landfill's operating funds.
Consequently, the SWAB, at the request of the BOCC, has made alternative financing its top
priority through most of the past twelve months. After thorough study and investigation of a
variety of options available to provide long -term, predictable, stable funding for Solid Waste
Management, the SWAB recommends a system used elsewhere that it terms a'comprehensive
services prepaid fee'. For Orange County, this proposed fee would cover the following:
• Mixed solid waste lined landfill operations including replacement of the current tipping fee
based system with a funning system based on the projected prorated weight from each type
of waste generator e.g. residential, multifamily, commercial (varies by type of
business/operation). Under this plan, landfill tipping fees would be eliminated for mixed
solid waste and out of county waste would still be banned. There would still be a gate fee for
construction waste, demolition waste and vegetative waste.
• Recycling services including a fee based on the level of service for the type of customer,
weekly curbside, biweekly curbside, multifamily with carts, commercial recyclers of
different sizes and types,
• Administrative services including county -wide solid waste education and universal programs
that serve all residents such as hazardous household waste, electronics collection, and dropoff
sites,
• Establishment of restricted equipment and landfill closure reserves and maintenance of
recommended fund balance
• Implementation of Orange County's Integrated Ten Year Solid Waste Management Plan
including necessary programs, services and facilities to reach the waste reduction goal
• Other solid waste services provided by the Orange County Solid Waste Management
Department, not including hauling of solid waste which is outside the purview of this
Department.
The SWAB envisions this comprehensive fee being charged to all solid waste generators
including non - profits such as churches and service organizations. According to one of the
SWAB's adopted principles of financing, the fee should be commensurate with the level of solid
waste generation and recycling services provided; in other words equitably assessed across all
classes of users.
The SWAB also realizes that such a system of financing is a radical departure from the current
approach where 90% of revenue is from tipping fees and the other 10% from a combination of
recycling sales, mulch sales, state grants for tires and white goods and interest on the reserve
fund. Establishing a new system with all Orange County property owners pre - paying solid waste
fees would likely take two years to implement as it did in Prince William County Virginia.
In addition to the considerable public debate required for such a fee, there are technical
complexities of determining the level of fee to be paid by each class of users, especially the
variable commercial sector. Thorough integration of operations and data of the Tax Assessor,
Revenue Collections, Information Services and Land Records /G.I.S. Departments will be
necessary for success. There are also significant public education and outreach efforts involved
in consideration of such a fee structure.
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The SWAB supports the prepaid comprehensive service fee as it most closely matches the
overall set of guiding principles endorsed over the past year including:
• Endorsement of the Solid Waste Reduction Plan goals and framework,
• Capturing revenues from non - profit properties, as they too generate solid waste,
• Using the existing tax collection system to collect solid waste revenues,
• Leveling fees or taxes to prevent yearly fluctuations,
• Creating equity among classes of system users such that revenues collected reflect services
received,
• Requiring property owners, rather than occupants to pay the fee or tax,
• Creation of dedicated and restricted reserve funds for equipment and landfill closure are
prudent policy,
• Maintaining a healthy fund balance of a minimum of 12% of the annual budget,
• Viewing the fund and the operation as an integrated whole, rather than disparate parts to be
completely separated functionally and fiscally.
The SWAB recognizes that there are significant legal issues to be resolved before such a fee
could be considered. Even if it is deemed legal for Orange County to enact the fee, there would
be significant technical and political work involved in implementing such a fee that would likely
take the same two years it took elsewhere. Consequently, the SWAB recommends that the
Board and Manager develop a bridge financing mechanism to get the Solid Waste Management
Department through the next two years while the permanent financial plan is being developed.
The SWAB discussed in detail the use of availability fees to fund parts of the budget that provide
specific services to specific sectors such as weekly curbside recycling in the incorporated areas
or biweekly curbside in unincorporated areas. District taxes were considered, as was a general
property tax increase earmarked for solid waste. A combination of those fees and taxes was also
reviewed. The SWAB ruled out sending a bill to each local government for services rendered and
allowing them to find a payment method of their choosing or direct payment by each government
for services received. Also deliberated and eliminated were voluntary user fees for non - landfill
services such as recycling or hazardous waste collections. It is economically impractical to
continue to raise landfill tipping fees and assume the revenue will follow as eventually all
privately controlled waste will find it advantageous to leave.
The bridge financing mechanism should not be so small as to leave the Department in a fiscal
hole from which it will have to dig itself out using the subsequently selected permanent
financing mechanism. There will be still be landfill income that will partly support operations in
combination with this proposed bridge financing mechanism, but that will not be enough. In
addition the SWAB believes the bridge financing mechanism should, to the extent practicable
meet the guiding principles.
There appear to be three basic financing options from which a hybrid involving any combination
of the three could be used to supplement current sources of Departmental income between FY
2003 -04 and when the permanent financing mechanism is adopted. Those include:
1. A property tax increase where the Board of Orange County Commissioners earmarked a
certain portion of the general tax revenues for solid waste management for a year.
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2. Creation of special solid waste tax districts where the tax levied in each district reflected, to a
certain degree, the level of service provided within it,
3. Development of availability fees in which each member of each class of system user is
charged according to the services they have available. In the short run case of bridge financing,
the availability fee could be levied on two to four residential classes of system users.
The SWAB was not able to provide a single recommendation from among these bridge fmancing
mechanisms, but it does urge the Board and Manager to use at least one or some combination of
funding options to provide adequate solid waste program funding until a permanent, stable
funding source can be put in place.
In its deliberations over solid waste financing, the SWAB received considerable technical
assistance in development of financial models from iJNC's Environmental Finance Center
especially Jeff Hughes, and Joe Cook. A presentation by Prince William County's Solid Waste
Director Tom Smith informed the SWAB about this innovative model. The Orange County Solid
Waste staff provided additional information about the solid waste budget and the waste reduction
plan that also helped the SWAB in its deliberations. Finally the SWAB was also able to draw on
the work done by the Alternate Finance Committee during the tenure of the Landfill Owners
Group through 1999.
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