Commercial Disposal Charges

andtheir Impact on

Customers, Waste Haulers and the SWA

Overview of Budget Development Overview of Assessments and Tipping Fees Impact of Changes in Tipping Fee Rates on

◦ SWA◦ Commercial Customers◦ Haulers

Impact of Waste Diversion Alternatives for Securing Waste Flow

◦ Economic-Tipping Fees◦ Statutory –Enhanced Scrutiny and Enforcement◦ Contractual-Franchise Contracts

Objectives

Budget Development

The SWA is a dependent special taxing district that was created by an act of the State Legislature in 1974.

Since 1991, the SWA has been classified as “dependent” because its governing board, although a separate and distinct body, is comprised of all the members of the Palm Beach County Commission.

While dependent by definition the SWA is entirely independent financially. The SWA receives no financial support from any other source.

SWA

The SWA has 2 primary functions:◦ Disposal countywide; and ◦ Collection in the unincorporated areas.

Disposal was the SWA’s original function. In 1988, the SWA and PBC entered into an

interlocal agreement transferring the County’s responsibility for the collection of solid waste in the unincorporated areas to the SWA.

As two distinct enterprises, their sources and uses of funds cannot be commingled.

This presentation will focus on the Disposal function.

SWA Responsibilities

For more information regarding the Authority’s responsibilities for waste

collection please see our web site @:

www.swa.org/site/collection_service/collection_service.htm

If the Board wishes we can arrange for a subsequent workshop to discuss the Collection function.

Waste Collection

Annually, the SWA prepares a budget to generate all the funds needed to carry out its responsibilities.

Funds are needed each year to pay for Operating Expenses, Contractual Obligations, Debt Service and Capital Expenses.

For the coming year that amount is projected at $222,948,070.

Annual Disposal Budget

Total Budgeted Expenditures

Operating 65,212,880$ Fixed Cost and Contracts:

Contract Facilities 52,584,760 Debt Service 91,496,100 Capital and R&R 13,654,330

Total Fixed Cost 157,735,190

Total Expenditure Budget 222,948,070$

2012/2013 Approved Disposal BudgetExpenditures

Determining Assessment and Commercial Tip Fee Rates

Total Budgeted Expenditures◦ Less Revenues other than Assessments & Commercial

Tip Fees: Electric Revenue Recovered Material Revenue Non Assessable Tip Fees Other Non Assessable Revenue Carry-forward of Reserves

Equals

Assessments and Commercial Tip Fee Revenue

Funding Sources

Revenues Other Than Assessments and Commercial Tip Fees

Other Tip Fee RevenuesBuilding Debris 1,800,000$ C/D Recycling Residue 1,008,000 Tires 234,000 Special Waste 195,000

Total Other Tip Fee Revenue 3,237,000$ Electric Sales 17,538,391 Recovered Material Sales 8,278,728 Pelletizer Contract 3,301,000 Compost Contract 831,335 Sludge Contract 807,030 Other Current Revenues 1,062,844

Total Non-Fee Revenues 35,056,328$ Reserve Carry-Forward 7,999,323

Total Non-Fee Sources 43,055,651$

2012/2013 Approved Budget

Assessments and Tipping Fees

Assessments and Commercial Tipping Fees

Assessments, approximately 75% of total revenue, are collected through the annual Tax Bill and levied against all improved property in the county.

Commercial Tipping Fees are collected by the hauler from the commercial customer and paid to the SWA at the disposal facility.

Total Budgeted Expenditures 222,948,070$

Non Fee Sources 43,055,651$

Assessments and Commercial Tipping Fees 179,892,419$

2012/2013 Approved Budget

The balance of revenues must be generated through the Residential and Commercial Assessment and Tipping Fees on Commercial Garbage.

◦ The Residential and Commercial Assessments are non-ad valorem assessments levied against all improved property in the county and collected through the annual Tax Bill.

◦ The Tipping Fees cover the portion of the costs attributed to Commercial property that are not raised through the Assessment, but which are based on actual tons delivered to SWA facilities.

Assessments and Commercial Tipping Fees

Total Budget

Less: Other Revenues

Assessable

Residential Commercial

Single Family Assessment

Multi-Family Assessment

Mobile Home Assessment

Tipping Fees Assessments

Low Generator

Medium Generator

High Generator

52% Commercial Tons48% Residential Tons

Special Assessments are not a tax; they are user fees determined by calculating the benefit of the service provided.

The SWA has conducted several waste generation studies to establish classes of users and to determine the benefit (levels of service) each receives.

The Assessments were originally adopted in 1990.◦ Residential properties assessed for 100% of their cost.◦ Commercial properties partially assessed and pay the

balance in the form of Tipping Fees.

Special Assessments

Why the “split assessment” for commercial properties?

Waste generation for similar uses (for example Retail Stores) can vary significantly;

Tipping fees allow businesses who generate less to pay less;

Tipping fees provide an incentive for businesses to recycle by avoiding disposal fees (the SWA accepts recyclables at no charge).

The higher the Tipping Fee, the greater the incentive.

Commercial Assessment

Tipping fees are charges that are based on the actual amount of waste disposed of or “tipped”.

Waste disposal systems whose costs are largely variable can successfully rely on Tipping Fees because their costs fluctuate in relation to the amount of waste received.

More advanced systems, like the Authority’s fully integrated system, have considerable fixed cost and would never get financing based solely on Tipping Fees.

What are Tipping Fees?

Impact of Changes in Tipping Fee Rates

$35 Tipping Fee $42 Tipping Fee

Residential Assessment $ 95,113,885 $ 95,113,885

Commercial Assessment $ 66,124, 759 $ 62,394,004

Commercial Tip Fees $ 18,653,775 $ 22,384,530

Total Commercial User Fees

$ 84,778,534 $ 84,778,534

Total Resi/Comm’l User Fees

$ 179,892,419 $ 179,892,419

Commercial Split AssessmentImpact of Tip Fee Change on SWA

Total revenues from the commercial sector on a budgetary basis are unchanged.

The required commercial assessment revenue is calculated by subtracting projected commercial tipping fees from the total required commercial revenue.

Since the commercial customer pays both an assessment and tip fee, which combined generate the revenue needed from those customers, if one increases the other must decrease.

The relationship of these revenues to each other has no impact on SWA’s overall budget or the cost of disposal to the total commercial customer base.

That is true assuming all the waste is delivered to an SWA facility.

Impact of Tip Fee Change on SWA

Commercial Split AssessmentImpact of Tip Fee Change on Customer

Assuming no change in waste generation, the total disposal charges (assessment plus tipping fees) are unchanged.

The higher the tip fee rate the greater the financial incentive for a customer to recycle.

Tipping FeeRate/ton 42$ 35$ 25$ Tons disposed 2.64 2.64 2.64Fee paid to hauler 111$ 93$ 66$

AssessmentMed. Category Rate $0.213 $0.226 $0.244Sq. Footage 1,500 1,500 1,500

Annual Assessment 320$ 339$ 365$

Total Customer Fees 431$ 431$ 431$

Average medium category generator

Commercial Customer

$35 Tipping Fee $42 Tipping Fee

Yards Collected per Month 100 100

Collection Rate per Yard $2.95 $2.95

Collection Revenue $295.00 $295.00

Tipping Fee per Yard $2.345 $2.814

Disposal Revenue $234.50 $281.40

Total Hauler Revenue $529.50 $576.40

Tipping Fees at SWA $234.50 $281.40

Net Hauler Revenue $295.00 $295.00

Commercial Split AssessmentImpact of Tip Fee Change on the Hauler

Tipping Fee is a Pass-Through to the SWA

Impact of Waste Diversion

The higher the Tip Fee Rate the greater the incentive to divert waste to competing facilities by waste haulers.

The SWA has the power to forbid competing disposal facilities in the county but limited power beyond its borders. (T.I. 718)

There are privately owned disposal facilities within reasonable driving distance both to our North and South.

The SWA has the power to forbid the delivery of Palm Beach County waste to any facility not designated by the SWA through legal action.

Waste Diversion

Waste haulers can collect the approved tip fee rate from a Palm Beach County customer and illegally deliver it to a competing site outside the county and pay a lower fee.

The customer wouldn’t see a difference, but the hauler would profit and the Authority would experience a revenue shortfall.

If the loss is significant, the Authority would have to increase rates to replenish reserves.

Incentive to Divert Waste

Impact of Diversion on All Parties

Tipping FeeRate/ton 42$ 35$ 25$ Tons disposed 2.64 2.64 2.64Fee paid to hauler 111$ 93$ 66$

AssessmentMed. Category Rate $0.213 $0.226 $0.244Sq. Footage 1,500 1,500 1,500

Annual Assessment 320$ 339$ 365$

Total Customer Fees 431$ 431$ 431$

Tipping Fees Paid at Non SWA SiteRate/ton 25$ 25$ 25$ Tons disposed 2.64 2.64 2.64Fee paid to dump 66$ 66$ 66$ Windfall 45$ 26$ -$

Revenue Received by SWA -$ -$ -$

Average medium category generator

SWA

Commercial Customer

Waste Hauler

The Waste Hauler potentially profits due to the difference in competing rates, less any additional transportation costs.

The SWA loses revenue.

The customer pays the same, this year.

If sufficient diversion takes place the SWA will be compelled to lower its expectation of revenues from tip fees and increase the assessments accordingly and

The SWA may be required to replenish reserves, if drawn down, and increase the assessments, resulting in significant rate increases.

Impact of Diversion on All Parties

Alternatives for Securing Waste Flow

Reduce the Tip Fee to lower the potential to profit from hauling the waste out of the county;

and/or

Aggressively enforce Flow Control through increased scrutiny, enforcement, fines and litigation.

Potential Remedies

Positives: The simplest solution. Avoids the cost of enhanced enforcement and

litigation. Improves security of revenue collection which is

seen as a positive by bond rating agencies.

Negatives: It lowers the incentive to recycle. The rate would likely have to be set lower than

currently recommended to eliminate the problem.

Pros and Cons of Reducing the Tip Fee Rate

From the Special Act (Ch. 2001-331):

As necessary to carry out its resource recovery and/or disposal plans or programs or when necessary to carry out any other provision of this act, require that all wastes collected by public or private agencies from any municipality or unincorporated area of the county be transported to Authority-designated processing and disposal facilities in a manner and form as may be mandated in accordance with this act, particularly paragraphs (2) and (8) of this section. This act shall not be construed to preclude public or private agencies from operating permitted transfer stations, provided that solid waste transferred or transported there from shall be delivered to Authority-designated processing and disposal facilities as set forth in this section.

Enforcing the SWA’s Flow Control Powers

Protect the public health, safety and welfare.

Ensure that waste is managed in accordance with the SWA’s plan.

Assure that sufficient funds are available to support the SWA’s system.

Enable the SWA to obtain necessary Bond financing at the lowest rates.

Comply with the Indenture of Trust;

Ensure that the rate payers receive the highest value from their investment in the system.

Purpose of SWA’s Flow Control Powers

Statutory Flow Control is valid and enforceable.

Additional Flow Control Measures

◦ Contractual Franchise Collection Agreements in the Unincorporated

Area. Interlocal Agreements with the cities.

◦ Economic 100% Non-ad Valorem Residential Assessment 75% Non-ad Valorem Commercial Assessment Competitive Tipping Fees

SWA Flow Control Measures

Historic Tip Fee Rates

Increased scrutiny to ensure that all solid waste is delivered to an SWA facility.◦ Inspection of Containers◦ Inspection of Facilities◦ Inspection of Records

Imposing fines and penalties for violations.◦ Violations of the Act are 2nd Degree Misdemeanors◦ No specific civil penalties currently exist

Providing for enforcement◦ Violations of the Act related to sanitary disposal are

enforced through the Environmental Control Hearing Board◦ SWA needs to determine the proper enforcement

mechanism.

Aggressive Enforcement of Flow Control

Adopt Rule 5 governing the management of solid waste◦ SWA Rules carry the force of law.◦ Requiring all solid waste to be delivered to SWA

designated facilities.◦ Requiring all commercial solid waste to be disposed in a

container properly labeled Solid Waste only.◦ Requiring all commercial solid waste containers to carry a

label provided by the SWA.◦ Providing for inspections.◦ Establishing fines and penalties for violations.◦ Establishing a venue for enforcement action.

Strategy for Enforcement of Flow Control

Adopt Rule 6 governing the management of recovered materials◦ Requiring all recovered materials haulers and dealers to be

licensed.◦ Requiring all recovered materials haulers and dealers to

submit reports in accordance with the Laws of Florida.◦ Requiring the disposal of solid waste in a solid waste

materials container.◦ Prohibiting recovered materials haulers from hauling

recovered materials commingled with solid waste in excess of the statutory limits.

◦ Providing for inspections.◦ Establishing fines and penalties for violations.◦ Establishing a venue for enforcement action.

Strategy for Enforcement of Flow Control

Ability of SWA to enforce county-wide. Ability to impose criminal and civil penalties. Limitations if any on the SWA’s ability to

perform inspections. Who is authorized to issue citations? What is law enforcement’s involvement? What is the appropriate venue for

adjudication and enforcement?

Legal Review of Aggressive Enforcement Alternative

Positives: Allows tipping fees to remain high to encourage recycling

and to allow individual businesses to have more control over their cost.

Negatives: Will likely result in increased costs. Places the SWA in an adversarial role. Could result in legal challenges.

Pros and Cons of Aggressive Enforcement Alternative

Lowering the Tipping Fees reduces the incentive to recycle and results in higher commercial assessments, but equivalent revenues.

Lowering the Tipping Fees results in a more secure revenue stream.

Lowering the Tipping Fees reduces the incentive to divert waste.

Enhanced scrutiny and enforcement, if successful, will allow for higher Tipping Fees and greater recycling incentives while discouraging waste diversion through penalties and sanctions.

A combination of these measures may be required.

Conclusions

Lower the current Tipping Fee Rate to $38, thereby raising the assessments 2% over the current year.

Pursue the development of rules to provide enhanced scrutiny, enforcement, penalties and sanctions.

Upon successful implementation of the rules, Tipping Fees may be increased.

Recommendations

Proposed Tip Fee v History