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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