At last week's city commission meeting, the mayor and several River City commissioners grilled you on the city's rising costs of providing solid waste collection service. Why wasn't the city able to track its costs more closely? Were costs in line with similar cities providing the same service? Both you and the solid waste director did your best to deflect these pointed questions, but the truth was that Mary in River City's public works accounting division had a difficult time gathering specific answers to these questions when the city manager and the finance director asked them during last year's budget process.
At your request, Mary had queried other cities to gather rate information and posted a request on the public works and solid waste association's online bulletin boards. What benchmarking information she downloaded was limited at best and even looked misleading to you. Some cities had unionized collectors, others had high solid waste disposal costs, while still others had complex rate structures that wouldn't make sense for your city's customer base.
Getting solutions to a solid waste system's financial woes was a task well beyond River City's level of experience. Your decision: Hire an outside expert who could make sense of current solid waste operations and existing rates and also help develop a long-term financial model that could address replacement of an aging collection fleet.
This scenario is all too typical for solid waste agencies across the nation. Many are finding themselves increasingly at a financial crossroads. Pressure from ratepayers has caused public agencies to scrutinize their costs of providing essential public services like waste collection and landfill operations. Demands from the public to keep local government “lean and mean” often prevents municipalities like the hypothetical River City from raising solid waste rates even in the face of skyrocketing costs for critical items such as fuel, maintenance, and medical insurance. At the same time, intense competition from private sector vendors continues in many areas. Consequently, there is always a threat by political decision-makers to consider privatization as a means of lowering the cost of municipal solid waste services.
What a Study Will Accomplish
Given the current business climate in the public sector, a “cost of service” or “rate study” will help focus on the critical financial and management issues facing a public works or solid waste agency. Most importantly, a well-planned and detailed rate analysis can be used to measure the revenues needed to provide the desired levels of service, while also helping establish fair, equitable, stable, and defensible solid waste user rates.
A thorough analysis of existing operations also will enable your department or agency to determine whether to re-examine existing service levels, collection technology, maintenance practices, fleet replacement strategy and financing, or work rules. Further, an experienced rate analyst can provide useful guidance on how to benchmark an agency's operations against similar operations, either nationally or regionally.
Evaluation of possible budget cost savings and revenue enhancements is a key function of a cost of service or rate study. Political decision-makers are increasingly asking public sector agencies to do more with less. Rather than reduce operating budgets by a flat across-the-board cut, a better strategy is to look for real economies by relaxing outdated civil service rules or policies that increase an agency's overall cost of operations.