RESOURCE MANAGEMENT AGENCY - J. GUERTIN

Landfill Ad Hoc Committee’s Recommendation to Reduce In-County Waste Tipping Fee Rates at the John Smith Road Landfill.  

SBC FILE NUMBER:

RESOLUTION NO: 2018-29

The Landfill Ad Hoc Committee, comprised of Board Chair Botelho and Vice-Chair Muenzer, met on March 15, 2018 and is recommending a reduction in waste tipping fee rates for In-County customers reflective of either Option A or Option B as follows:

Option A:

• Franchise (“Packer”) rate reduced from current $44.75 per ton to $34.00 per ton;

• Public Refuse rate reduced from current $62.75 per ton to $56.00 per ton; 

• Roll Off Refuse rate reduced from $57.00 per ton to $56.00 per ton.

Option B:

• Franchise (“Packer”) rate reduced from current $44.75 per ton to $23.00 per ton;

• Public Refuse rate reduced from current $62.75 per ton to $46.00 per ton; 

• Roll Off Refuse rate reduced from $57.00 per ton to $46.00 per ton.

The Landfill Ad Hoc Committee is recommending this action to address the significant inequity between disposal rates charged to In-County residents and businesses versus what is charged to Out-of-County customers utilizing the John Smith Road Landfill (JSRL). For example, the Cities of Gilroy and Morgan Hill, through a long-term disposal agreement through June 30, 2030 with Waste Connections, currently pay $23.00 per ton for franchise tons disposed at JSRL as compared to the In-County franchise rate (“Packer”) of $44.75 per ton. Option A cuts the difference in half between the Gilroy and Morgan Hill rate vs. the In-County rate whereas Option B matches the rate.

During the discussion of this tipping fee reduction agenda item at the May 8, 2018 Board meeting there was a request by the Supervisors to explore various options for the use of the franchise disposal cost savings, this report provides this requested information.

The proposed reduction in the Public Refuse rate (the rate for users who bring their garbage directly to JSRL) from $62.75 per ton to $56.00 per ton under Option A would lower the rate back to the Public rate that was in effect in 2010 when the current landfill operating agreement was approved. The Public rate under Option A will also be consistent with the Public rate charged at the publicly-owned Monterey Peninsula Landfill in Marina. See Table 1 for a survey of local public gate (tipping fee) disposal rates.

Table 1: Survey of Local Public Gate (Tipping Fee) Rates

The Option B rate scenario for the Public loads would reduce the rate to $46.00 per ton which is in line with the Public rate at the publicly-owned Billy Wright Landfill Los Banos. The Rolloff Refuse rate would be lowered to $46.00 per ton which is likely to generate new business at the JSRL.

The estimated disposal cost savings associated with Options A and B are summarized in Table 2.

The In-County waste tipping fee rate reductions for franchise customers (i.e., In-County waste hauled to the landfill by Recology San Benito County) will result in the following rate impact:

Option A: In-County franchise residential rates will decrease approximately 1.4%, the In-County franchise commercial rates will decrease approximately 2.3%, and the In-County Public rate will decrease approximately 12%.

Option B:  In-County franchise residential rates will decrease approximately 2.7%, the In-County franchise commercial rates will decrease approximately 4.7%, and the In-County Public rate will decrease approximately 31%.

Potential Use of Disposal Cost Savings   

During the discussion of this tipping fee reduction item at the May 8, 2018 Board meeting there was a request by the Supervisors to explore various options for the use of the franchise disposal cost savings. The first option is to pass on the disposal cost savings to the franchise ratepayers in the form of reduced solid waste rates; the actual solid waste rate savings are noted above.

Another option mentioned by the Supervisors at the May 8, 2018 Board meeting was to use the franchise disposal cost savings for addressing some of the road impact costs associated with customer traffic to/from the JSRL. According to a December 29, 2017 Report on “Quantifying the Impact of Out-of-County Waste Transport on San Benito County” there is $38.8 million needed in road improvements along the out-of-county waste transport haul route used to the JSRL; $15.4 million of the $38.8 million in costs is attributable to Out-of-County waste transport vehicles to the JSRL according to the study. 

Out of County Waste Transport Route Figure

Table 3 compares the franchise disposal cost savings under Scenarios A and B to the annual road improvement capital costs and annual road maintenance costs over an assumed five-year period; the capital costs shown are only for the $15.4 million associated with the Out-of-County waste transport vehicle impacts. The December 29, 2017 Final Report recommended that the road improvements be implemented over a five-year period with an emphasis on first addressing improvements along Fairview Road.

 Table 3 shows the annual franchise disposal cost savings would not provide the significant annual revenue stream needed to address the road impact improvements along the haul route because the total estimated road improvement costs total $38.8 million. The capital costs shown in Table 3 are only for the $15.4 million associated with the Out-of-County vehicle waste transport impacts.

Another option for consideration is to use the franchise disposal cost savings for multiple purposes related to the franchised collection services. For example, some of the savings could be applied to rate reduction for the ratepayers, diversion programs and other regulatory requirements (e.g., trash/litter reduction programs to reduce pollution discharges in stormwater and/or community environmental benefit programs (e.g., student scholarships, community clean ups, creek clean-ups, etc.).

Background

The current Landfill Operating Agreement between the County and Waste Connections (dba Waste Solutions Group of San Benito, LLC) grants the County with the “sole right to set and adjust the In-County Waste Tipping Fees.”

Historically, the In-County waste tipping fee rates have not been adjusted very frequently or significantly over the past ten years. The franchise tipping fee rate was last adjusted July 1, 2015 from $43.00 per ton to the current rate of $44.75 per ton. Prior to that, the franchise rate was last adjusted in 2009. The public refuse rates were last adjusted July 1, 2015 from $61.00 per ton to $62.75 per ton and prior to that in 2013 they were increased from $57.00 to $61.00 per ton.

It is recommended that the Board of Supervisors:

1. Consider adoption of Options “A” or “B”

 Option “A”: Adopt Resolution approving a reduction in In-County waste tipping fee rates at the JSRL for San Benito County Franchise (“Packer”), Public Refuse, and Roll Off Refuse customers with new rates effective July 1, 2018 as follows: Franchise (“Packer”) rate of $34.00 per ton; Public Refuse rate of $56.00 per ton; and Roll Off Refuse rate of $56.00 per ton;

or

 Option “B”: Adopt Resolution approving a reduction in In-County waste tipping fee rates at the JSRL for San Benito County Franchise (“Packer”), Public Refuse, and Roll Off Refuse customers with new rates effective July 1, 2018 as follows: Franchise (“Packer”) rate of $23.00 per ton; Public Refuse rate of $43.00 per ton; and Roll Off Refuse rate of $43.00 per ton.

2. Provide direction to staff as to what should be done with the franchised disposal savings.