Launch Slideshow

Rate changes make the difference

Are your rates correct?

Are your rates correct?

  • Rate changes make the difference

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    Source: Marc Rogoff

    Graphical representations of user rate impacts are useful to communicate trends to the decision-makers and the public. Rate studies have become a valuable tool in evaluating an agency's long-term infrastructure funding needs and getting a handle on budget costs and required revenues from customers.

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    Photo: Marc Rogoff

    The city of Dunedin, Fla., operates a solid waste collection system using automated and semi-automated vehicles. A rate study was completed in 2005 to evaluate long-term vehicle replacement funding needs.

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    Photo: SCS Engineers

    Many municipal solid waste programs now incorporate some form of residential recycling. The type of curbside collection system, the processing equipment used to separate the recyclables, and the market purchase prices received affect ratepayers and must be reflected in the cost of service study.

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    Graphical representations of user rate impacts are useful to communicate trends to the decision-makers and the public. Rate studies have become a valuable tool in evaluating an agency's long-term infrastructure funding needs and getting a handle on budget costs and required revenues from customers.

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For example, many agencies are looking for creative ways to reduce fleet maintenance costs, such as requesting price concessions from their municipal fleet managers or directly outsourcing these services to private vendors on a bid basis. Another area to look for cost savings is in recyclables collection. Many communities are finding single-stream recycling collection more economical than traditional curb-sort programs. Further, some municipalities are eliminating outdated personnel rules and redefining work policies to enable gain-sharing and pay-for-performance bonuses for work exceeding a set annual goal.

On the revenue side, some agencies are being empowered by their political decision-makers to function like private businesses, looking for ways to expand their level of service and increase their revenue base. Some strategies include providing collection services to neighboring jurisdictions at rates above those charged to agency customers; developing a commercial roll-off business; and soliciting advertising to be placed on solid waste collection vehicles.

Designing a Rate Study

A solid waste system rate study typically starts with the following major work elements:

  • Clearly defined goals and objectives for the cost of service and rate study
  • Evaluation of the agency's operating budget through examination of each budget line item and assumptions of future operating conditions and costs
  • Completion of a revenue sufficiency analysis that identifies the amount, timing, and financing source for required capital investments noted in the agency's long-term capital improvements plan
  • Analysis of the current customer rate structures and development of alternative recommendations on rate modifications.
  • With powerful financial spreadsheet programs, which are available today for the PC, various “what if” scenarios can then be constructed to quickly determine the overall impact of alternative customer rates on the long-term financial outlook of the solid waste system. Some rate models can seamlessly integrate agency staff factors into the rate modeling process and allow powerful graphical representations of key financial indicators for decision-making.

    Changes in levels of service and customer rates are traditionally subjects that politicians are not eager to discuss, particularly in election years. All of the recent national surveys of public works suggest that these facilities have been historically underfunded. However, you as a professional manager, while recognizing political realitites in your community, have a responsiblity to the public to manage solid waste services in the most efficient and equitable manner, considering long-term funding needs for facility closure and post closure care and fleet replacements.

    Consequently, a cost of service and rate study should be considered an essential tool to help evaluate agency costs, long-term funding needs, and alternative rate structures. As such, it also should be viewed as a method to effectively communicate to political decision-makers and the public reasons for possible rate increases and to identify a strategy for managing the agency's costs and revenues.

    Rogoff is a project director with SCS Engineers, Tampa, Fla.

    Top 10 key rate study issues

    1. Should free service for governmental units and special events be continued, and at what level?

    2. How should vehicle replacement be funded? Loans? Bond anticipation notes?

    3. Should there be a rate differential for in-city and outside-city service?

    4. Should rates provide for senior citizen or disabled customer discounts?

    5. Should apartments be charged a per-unit or dumpster rate?

    6. Should your agency assess a surcharge for varying levels of service for roll-off collection?

    7. How should landfill post closure care be funded?

    8. Should you assess private haulers a franchise fee?

    9. Should your rate structure include some form of per-unit rate for size of container (“pay-as-you-throw” rates)?

    10. Should you establish levels of service and extra fees for bulky and yard waste collection?