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Home My WebLink About08-19-19 City Commission Packet Materials - A5. Presentation of the Results of the Solid Waste Rate Study Commission Memorandum REPORT TO: Honorable Mayor and City Commission FROM: Kristin Donald, Finance Director Kevin Handlin, Solid Waste Superintendent SUBJECT: Presentation of results of the Solid Waste Rate Study. MEETING DATE: August 19, 2019 AGENDA ITEM: Action RECOMMENDATION: No motion is required, advertised as action item so the commission may direct staff as necessary. BACKGROUND: The capital improvement plan and budget included this rate study to be performed. The last rate study for the Solid Waste fund was in 2012. In February, the City put out a request for proposals and the Burns & McDonnel was selected. Burns & McDonnel will be presenting the results of their rate study for the Solid Waste fund. After the presentation the final report will be prepared to be brought back to the Commission along with the recommended rate changes. ALTERNATIVES: As suggested by the commission FISCAL EFFECTS: There are no immediate fiscal effects of presenting the study. In the future, the Commission may choose to change Solid Waste Rates by adoption of a rate resolution after a public hearing. Attachments: Rate Study Presentation Report compiled on August 8, 2019 466 Solid Waste Cost of Service and Rate Design Study City of Bozeman, MT August 19, 2019 467 Presentation Overview •Methodology Overview •Cost of Service Study •Rate Recommendations 1468 Methodology Overview 469 Methodology Overview 3 INITIATION & DATA COLLECTION COST OF SERVICE DESIGN RATES City Staff Engagement Data Request Kick-Off Meeting Ongoing Staff Communication Develop Test Year & Revenue Requirement Allocate Costs Identify Cost of Service Develop Cost of Service Driven Rates Rate Recommendations to Ensure the Financial Integrity of the Solid Waste Division 470 Cost of Service Study 471 Five-Year Revenue Requirement 5 1. High growth in FY 2021 for bulky item collection is due to the Solid Waste Division acquiring a truck outfitted with a knuckleboom crane and hiring a driver for bulk item collection. Cost Center FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Average Annual Cost Increase Administration $987,864 $1,020,910 $1,050,739 $1,081,450 $1,113,069 3.0% Residential Residential Refuse $1,396,184 $1,442,320 $1,477,905 $1,514,786 $1,553,015 2.7% Yard Waste $179,309 $186,210 $191,392 $196,720 $202,198 3.1% Bulky ¹$29,013 $47,119 $49,000 $50,948 $52,965 18.6% Tote Delivery $117,813 $123,114 $126,394 $129,774 $133,258 3.1% Special Events $19,225 $20,182 $20,686 $21,204 $21,734 3.1% Compost $134,372 $139,417 $143,046 $146,788 $150,646 2.9% Recycling Residential Recycling $441,827 $456,641 $469,363 $482,519 $496,122 2.9% Temporary Dumpster Dumpster Delivery $86,192 $89,746 $92,178 $94,685 $97,268 3.1% Commercial Commercial Refuse $709,039 $729,430 $746,009 $763,153 $780,886 2.4% OCC Collection $116,572 $122,354 $126,655 $131,124 $135,769 3.9% Commercial Roll-Off $389,657 $404,078 $415,445 $427,245 $439,498 3.1% Total Revenue Requirement $4,607,067 $4,781,521 $4,908,813 $5,040,395 $5,176,428 3.0% 472 Revenue Based on Current Rates 6 $0 $1,000,000 $2,000,000 $3,000,000 $4,000,000 $5,000,000 $6,000,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Residential Commercial Dumpster Recycling Commercial Roll-Off Temporary Dumpster Revenue Requirement 473 Five-Year Reserve Forecast Based on Current Rates 7 -150 -100 -50 0 50 100 150 ($1,500,000) ($1,000,000) ($500,000) $0 $500,000 $1,000,000 $1,500,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 DaysAnnual Net Revenue Reserve Fund Balance Reserve Days 474 Annual Net Revenue by Service Based on Current Rates 8 ($500,000) ($400,000) ($300,000) ($200,000) ($100,000) $0 $100,000 $200,000 $300,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Annual Net Revenue Residential Recycling Temporary Dumpster Commercial Dumpster Commercial Roll-off 475 Five-Year Reserve Forecast 9 ►Under current rates, the Solid Waste Division will not have a positive reserve fund balance by FY 2023 ►The Solid Waste Division aims to have a reserve fund balance equal to 90 days of operating and capital expenses FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Beginning Balance $1,606,283 $1,244,902 $750,462 $170,541 ($498,734) Annual Net Revenue ($361,381)($494,440)($579,921)($669,275)($762,658) Reserve Fund Balance $1,244,902 $750,462 $170,541 ($498,734)($1,261,392) Reserve Days 99 57 13 -36 -89 476 Solid Waste Division Financial Goals 10 ►Generate positive net revenue over the next five years ►Maintain a 90-day reserve balance each year ►Approach rate changes using the cost of providing service to each type of customer ►Plan incremental, year-over-year rate changes ►Increase customer base as City competes with private sector haulers 477 Rate Recommendations 478 Rate Recommendation Overview ►Residential:Continue incentives for smaller carts (no increases), develop modest rate increases for customers with larger cart sizes ►Recycling:Maintain current rates to encourage diversion ►Temporary Dumpsters: Implement delivery and disposal fees ►Cardboard (OCC) Dumpster:Implement new collection fees (currently no charge) ►Commercial Dumpster and Roll-off:Need for greater increases to recover the cost of service 12479 Summary of Rate Recommendations 13 0% 5% 10% 15% 20% 25% FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Residential (45-gallon cart and smaller)*Residential (65-gallon cart and larger)Commercial Dumpster Commercial Roll-Off *Residents with 45-gallon carts or smaller do not have a proposed rate change through FY 2024 480 Residential 14 ►Current cost of serving customers with 35-and 45-gallon carts is higher than monthly rate ►Rate increases for customers with carts 65 gallons and larger to offset the under-recovery of smaller cart customers Admin, $3.74 Residential Refuse, $8.51 Bulky, $0.21 Yard Waste, $1.32 Tote Delivery, $0.72 Special Events, $0.14 Compost, $0.99 Disposal* $1.80 Average Monthly Cost of Residential Service *Disposal cost is based on the average size of a refuse cart collected, roughly 69 gallons Service Average Monthly Cost (FY 2020) Residential $17.44 Cart Size Current Monthly Rate 45-Gallon $14.52 65-Gallon $19.09 481 Residential: Proposed Rates 15 $0.00 $10.00 $20.00 $30.00 $40.00 $50.00 $60.00 $70.00 Current Rate FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 35 Gallon 45 Gallon 65 Gallon 100 Gallon 220 Gallon 300 Gallon 482 Residential: FY 2020 Proposed Rates 16 $19.6601/31/2020 -02/29/2020 Example: 65-Cart Customer Bill Change 483 Residential Rate Benchmarking 17 $52.75 $51.80 $47.53 $29.15 $26.58 $25.19 $25.09 $24.46 $0 $5 $10 $15 $20 $25 $30 $35 $40 $45 $50 $55 Eugene, OR Austin, TX Gresham, OR Cheyenne, WY Washoe County, NV Bozeman - FY 2020 Proposed Tempe, AZ Bozeman - Current Monthly Base Rate for Carts Sized 90 to 100 Gallons Monthly Residential Base Rates 484 Recycling 18 ►Maintain the monthly rate at $9.93 for a 65-or 100-gallon cart collected every other week ►Under-recovery of recycling to be offset by revenue from residential rates 485 19 Temporary Dumpster ►Currently temporary dumpster customers pay only by volume of material disposed ►Proposed additional $45 dumpster delivery and $30 collection fee to close gap of cost of service Temporary Dumpster Amount Average Cost per Request (FY 2020)$242.25 Average Revenue per Request (Current Fees)$118.10 Additional Revenue per Request with Disposal and Collection Fees $87.74 Remaining Under-Recovery per Request (FY 2020)$36.41 486 Commercial Dumpster: Refuse 20 ►Rate increase of 10% in FY 2020 and 5% in FY 2022 through FY 2024 to offset the under-recovery of commercial customers given current rates Example: 6-Cubic Yard Dumpster Current and FY 2020 Proposed Rates Collections Per Week Dumpster Size 1 2 3 4 5 6 Twice a Month 6 Cubic Yards $133.57 $242.80 $352.03 $461.26 $570.50 $679.73 $61.70 Collections Per Week Dumpster Size 1 2 3 4 5 6 Twice a Month 6 Cubic Yards $146.93 $267.08 $387.23 $507.39 $627.55 $747.70 $67.87 487 Commercial Dumpster: Refuse Benchmarking 21 $19.42 $17.57 $11.82 $7.42 $6.58 $5.98 $4.30 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 Eugene, OR Gresham, OR Washoe County, NV Cheyenne, WY Bozeman - FY 2020 Proposed Bozeman - Current Tempe, AZ Average Cost per CY Average Cost Per Cubic Yard (Collection + Disposal) 488 Cardboard Dumpster 22 ►Currently, commercial customers receive corrugated cardboard recycling (OCC) free of charge ►Due to the price of cardboard being at a 10-year low, recommend implementing a monthly fee for OCC collection in FY 2020, with a rate increase of 10% each year ►Proposed cardboard recycling rate substantially less than that of refuse dumpster service $0 $20 $40 $60 $80 $100 $120 Proposed FY 2020 Rate for Equivalent Refuse Dumpster FY 2020 OCC Cost of Service Proposed FY 2020 OCC Rate Current OCC Rate 489 Regional Cardboard Prices 23 $- $20 $40 $60 $80 $100 $120 $140 $160 $180 $200 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018Price per TonRecovered Cardboard Material Price 490 Commercial Roll-off 24 ►All current roll-off pull fees are less than the cost per pull of $350.58 (FY 2020) Service Current Rate Free 20-, 30-, 40-Yard Pull Fee $0 Paid 20-, 30-, 40-Yard Pull Fee $250 Yard Waste $135 Water Reclamation Facility Pulls $170 491 Commercial Roll-off 25 ►Proposed fee of $125 per pull for customers who currently receive free service (county, non-profit organizations) ►Proposed rate change of 20% in FY 2020 and 5% each year through FY 2024 for currently paying customers ►Implement delivery fee of $100 492 Commercial Roll-off Benchmarking 26 $767.40 $662.83 $524.00 $510.04 $505.96 $403.65 $374.00 $0 $100 $200 $300 $400 $500 $600 $700 $800 $900 Gresham, OR Washoe County, NV Bozeman - FY 2020 Proposed Eugene, OR Cheyenne, WY Tempe, AZ Bozeman - Current Average Total Cost Per Pull Average Total Cost Per Pull (30 CY, 4 Tons Disposal) 493 Five-Year Reserve Forecast Based on Recommended Rates 27 100 105 110 115 120 125 130 ($500,000) $0 $500,000 $1,000,000 $1,500,000 $2,000,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 DaysAnnual Net Revenue Reserve Fund Balance Reserve Days 494 Annual Net Revenue by Service Based on Recommended Rates 28 ($200,000) ($100,000) $0 $100,000 $200,000 $300,000 $400,000 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Annual Net Revenue Residential Recycling Temporary Dumpster Commercial Dumpster Commercial Roll-off 495 Rate Recommendation Summary ►The residential rates will increase for larger cart sizes to offset the under-recovery of recycling rates ►Subscription recycling rates will remain constant ►Commercial refuse and roll-off customers will require higher rate changes in the next five years ►Additional fees for commercial cardboard and temporary dumpster minimize amount of rate increases for other customers 29496 Questions? 30 Scott Pasternak (512) 872-7141 spasternak@burnsmcd.com 497 Additional Information 31498 32 Summary of Select Rates: Residential and Recycling Customer Class Current Rate FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Residential 35 Gallon $14.52 $14.52 $14.52 $14.52 $14.52 $14.52 45 Gallon $14.52 $14.52 $14.52 $14.52 $14.52 $14.52 65 Gallon $19.09 $19.66 $20.25 $20.86 $21.49 $22.13 100 Gallon $24.46 $25.19 $25.95 $26.73 $27.53 $28.36 220 Gallon $40.85 $42.08 $43.34 $44.64 $45.98 $47.36 300 Gallon $51.21 $52.75 $54.33 $55.96 $57.64 $59.37 450 Gallon $73.79 $76.00 $78.28 $80.63 $83.05 $85.54 Recycling 65 Gallon Every Other Week $9.93 $9.93 $9.93 $9.93 $9.93 $9.93 100 Gallon Every Other Week $9.93 $9.93 $9.93 $9.93 $9.93 $9.93 300 Gallon Every Other Week $15.45 $15.45 $15.45 $15.45 $15.45 $15.45 300 Gallon Weekly $30.90 $30.90 $30.90 $30.90 $30.90 $30.90 300 Gallon 2x/Week $46.35 $46.35 $46.35 $46.35 $46.35 $46.35 Highlighting Indicates a rate change from previous year 499 33 Summary of Select Rates: Commercial Customer Class Current Rate FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 Commercial Dumpster Refuse (6 CY, Twice per Week)$242.80 $267.08 $280.43 $294.46 $309.18 $324.64 OCC (1, 2, 3, 4, 5, or 8 CY, Twice per Week)$0.00 $56.50 $62.15 $68.36 $75.20 $82.72 Commercial Roll-off Free 20-, 30-, 40-Yard Refuse Pull Fee $0.00 $0.00 $0.00 $0.00 $0.00 $0.00 20-, 30-, 40-Yard Refuse Pull Fee $250.00 $300.00 $315.00 $330.75 $347.29 $364.65 Yard Waste Pull Fee $135.00 $162.00 $170.10 $178.61 $187.54 $196.91 Water Reclamation Facility Pulls $170.00 $204.00 $214.20 $224.91 $236.16 $247.96 Highlighting Indicates a rate change from previous year 500 501