STAFF REPORT. Bradley D. Stapley, Director of Public Works

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1 DATE: January 30, 2013 STAFF REPORT TO: FROM: SUBJECT: Mayor and City Council Bradley D. Stapley, Director of Public Works SPRINGVILLE RECYCLING RECOMMENDED ACTION Motion to: Direct staff to take over the current Recycling Program of 753 customers and initiate limited marketing to achieve conservative growth over the next year with a target customer base of 1,400 residential uses by May Pay Ace Disposal $18,825 for the purchase of the existing 753 recycling cans already in use by Springville customers supporting the Recycling program. Authorize the purchase of an additional 750 recycling cans at an approximate cost of $60 per can (to cover the need for new and replacement recycle cans) from Solid Waste Reserves. Direct the Finance Department to charge a fee of $ ($ $6.50) per month per recycle customer, to be collected through the City s existing billing system. GOALS, OBJECTIVES AND STRATEGIES AT ISSUE The Springville City General Plan, Chapter 10 Environment, Section 10.5 contains the following goal: To ensure a balanced, clean, and safe environment while supporting and promoting energy conservation. Strategy 5B within this goal states: Educate the public regarding options for solid waste, such as green waste and recycling. The current Recycling contract with Ace Disposal expires on April 30, This contract is not renewable. Through Ace Disposal, the City operates a small voluntary recycling program with approximately 753 customers. There are three issues at hand; CITY COUNCIL MEETING

2 Page 2 1. What type of recycling program does the City want in Springville, namely: a. Opt-in (voluntary) b. Opt-out c. Mandatory 2. Does the City want to go out to bid and continue to have a private company run the recycling program for the City? 3. Is the City interested in taking over the recycling business, using City man-power, facilities and equipment? DISCUSSION In May 2006 Springville City entered into a contract with Ace Disposal to initiate an Optin recycling program in the City. Ace Disposal provided administrative and billing services, as well as recycling collection throughout the City. Recycling cans were provided to voluntary customers, with a bi-weekly collection schedule. With the Ace recycling contract expiring on April 30, 2013, the City needs to determine how to proceed with a recycling program in the City. Cities along the Wasatch Front offer various forms of recycling programs: Opt-in: Springville City currently offers a voluntary recycling program, wherein residents themselves initiate joining the recycling program. Over the past seven years this program has grown to only 753 customers. This type of program is heavily dependent on marketing (advertising) to assure appropriate participation by citizens. Opt-out: This type of recycling program is initiated by the City, wherein all residents automatically become participants in the recycling program unless they contact the City to decline the service and opt-out. Mandatory: This type of recycling program requires all residents to participate in the recycling program. There is no opt-out option available. Each program has its positives and negatives, however public relations/perception seems to be one of the most important factors in choosing a recycling program. An opt-in program is less disruptive to the residents, however the program grows very slowly unless it is heavily marketed. The opt-out program has a proven participant rate of 50 to 75 percent, however it also carries a negative public perception of the City duping recycling onto residents who don t want to participate. The mandatory program immediately grows the recycling participants in the City to 100 percent, however it results in a negative public perception with those residents who feel forced to participate against their will. OPERATIONAL ANALYSIS The City currently runs ten 10-hour man-day solid waste routes each week using three (3) regular garbage trucks & drivers, with one additional back-up truck & driver to cover for

3 Page 3 regular driver illness or vacations. The back-up driver works with the Street Crews when not needed in Solid Waste (see Exhibit A ). CURRENT SCENERIO RUN 3 TRUCKS w/ IDLE BACK UP (4 DRIVER POOL) MON TUE WED THUR FRI Truck #1 Bob Truck #2 Linzy Truck #3 Eddie ROADWAY SWEEPER WORK ORDERS Part time Employee Part time Employee BACK UP or STREETS CREW Exhibit A The City currently has the resources to continue servicing the 753 recycle customers in the City. Ace Disposal has offered to sell the current recycle cans at a cost of $25/can (new can cost is approximately $60 each). The recycle program could continue to grow up to 1,400 cans without adding new personnel or equipment (see Exhibit B ). TAKE OVER RECYCLE 753 CANS RUN 3 TRUCKS w/ IDLE BACK UP (4 DRIVER POOL) Max 1,400 CANS 753 TO 1,400 CANS MON TUE WED THUR FRI Truck #1 Bob Truck #2 Linzy Truck #3 350 CANS 350 CANS 350 CANS 350 CANS Eddie WEEK A WEEK B WEEK A WEEK B Part time Employee Part time Employee BACK UP or STREETS CREW ROADWAY SWEEPER WORK ORDERS Exhibit B Recycle can growth beyond 1,400 cans and up to 2,800 cans would require one Grade 11 Full Time Employee (FTE) at $38,000 + benefits/year, and one Grade 9 FTE at $34,000 + benefits/year. The two part time positions will be eliminated (see Exhibit C ).

4 Page 4 NEW GRADE 11 DRIVER POSITION & NEW GRADE 9 POSITION RUN 3 TRUCKS w/ IDLE BACK UP (4 DRIVER POOL + Grade 9) Max 2,800 CANS 1,401 TO 2,800 CANS MON TUE WED THUR FRI Truck #1 Bob Truck #2 Linzy Truck #3 Eddie 350 CANS 350 CANS WEEK A WEEK B New 800 can Route 4th Solid Waste Driver 350 CANS 350 CANS 350 CANS 350 CANS ROADWAY 350 CANS 350 CANS Full Time WEEK A WEEK B WEEK A WEEK B SWEEPER WEEK A WEEK B New Position Back up Driver/Streets Crew BACK UP or STREETS CREW WORK ORDERS Exhibit C Within the 2,800 to 6,000 recycle can range the City would need to purchase a new garbage truck ($230,000) and add an additional Grade 11 FTE (see Exhibit D ). PURCHASE NEW BACK UP TRUCK NEW GRADE 11 POSITION RUN 4 TRUCKS w/ IDLE BACK UP (5 DRIVER POOL + GRADE 9) MAX 6,000 CANS 2,800 TO 6,000 CANS MON TUE WED THUR FRI Truck #1 Bob Truck #2 Linzy Truck #3 Eddie New 800 can Route New 800 can Route Truck #4 500 CANS 500 CANS 500 CANS 500 CANS 500 CANS 500 CANS Full Time WEEK A WEEK B WEEK A WEEK B WEEK A WEEK B WORK ORDERS New Back up Truck 500 CANS 500 CANS 500 CANS 500 CANS 500 CANS 500 CANS Back up Driver/Streets Crew WEEK A WEEK B WEEK A WEEK B WEEK A WEEK B ROADWAY SWEEPER Grade 9 Position Back up Driver/Streets Crew Exhibit D BACK UP or STREETS CREW

5 Page 5 BUDGET ANALYSIS A budget analysis was completed to determine the cost of each milestone scenario and its associated impact on the current residential Solid Waste Collection operation. All typical budget line items were considered in the analysis (each of the current line items in the existing Solid Waste Budget were investigated and used in the analysis). The detailed budget line items are shown in Appendix A. With respect to expenses, containing personnel and equipment costs were the major factors in determining the success of each operation (Solid Waste and Recycling). Ace Disposal is currently charging $32.46 for six months ($5.41/month) or $61.08 per year ($5.09/month) for recycle collection service. The City s analysis used a $5.50, $6.00, $6.50 and a $7.00 per month fee, billed monthly. Personnel needs were fully dictated by number of cans to be collected. In the case of recycle can collection efficiency, it was assumed that the number of recycle cans collected per day would increase with increased participation in the program (spacing between each recycle can would decrease allowing more cans to be picked up per time period). The current 753 recycle can locations are fairly well spaced throughout the community (see Exhibit E ). Exhibit E

6 Page 6 It was found that adjusting the truck rotation years had the greatest impact on the success of each operation. The City currently keeps a new garbage truck for four (4) years, then sells the truck and purchases another new truck. It was recently found that the national average rotation schedule for garbage trucks was nine (9) years. City staff will be extending the rotation cycle for Garbage Trucks to six (6) years. Exhibit F shows the Annual Recycle Can Profit/(Loss) when comparing an established monthly rate to the number of Recycle Cans in the program. Milestone scenarios are shown in yellow where addition of personnel or equipment is needed to sustain the continued growth of the recycling program. Based on the City s current 8,390 1 st garbage cans, the 6,000 can milestone represents a typical recycle participation level (50 to 75%) of residences in a community along the Wasatch Front. The vertical red arrows indicate can count ranges where the recycle program is operating in the red (negative balance). This typically coincides with the addition of new personnel or equipment (trucks) which introduces an immediate expense jump to manage the increase in number of cans. As the number of recycle cans increases the negative balance typically goes away. Annual Per Can Profit/(Loss) Personnel & Equipment Changes # Cans $ 5.50 $ 6.00 $ 6.50 $ (5.71) (0.59) Add Grade 11 & Grade 9 positions cans 19 cans (10.32) (5.20) (0.08) 5.03 Add another Grade 11 & buy new Truck 5 cans cans cans * Max # cans w/o adding another Grade 11 position & another new Truck * 6,000 cans would be 71.5% participation based on current number of Solid Waste customers Exhibit F, Recycle can Profit/(Loss) at Various Monthly Rates

7 Page 7 FISCAL IMPACT The budget analysis investigated the viability of the City operating the Recycling Collection business, along with the corresponding impacts to the City s Residential Solid Waste Collection operation. The City s Residential Solid Waste Collection operation will be impacted in both negative and positive ways as recycling participation increases. Examples would be: Positive: The City pays the Solid Waste District $33/ton for residential garbage. Placing recyclable materials in a recycle can rather than the normal black garbage can will lessen the City s garbage tonnage fees (Tipping Fees) paid to the Solid Waste District. Negative: The City currently collects approximately $138,000 per year in 2 nd and 3 rd garbage cans (when a resident requests a 2 nd garbage can, it is called a 2 nd can, and so forth). It is estimated that 40% of the residents with 2 nd cans and 85% of the residents with 3 rd cans may switch over to using a recycling can instead. This would result in a $57,000 annual decrease in Solid Waste Revenues. The net effect of the Recycle Program on the Profit/(Loss) status of the Solid Waste operation varies with the number of recycle cans in the Recycle Program. The initial Recycle Program at 753 cans will save the Solid Waste operation approximately $7,500 per year, with this savings coming from reduced solid waste tonnage collected along the regular garbage collection routes. As the number of recycle cans increases above the initial 753 cans, the Solid Waste revenue from 2 nd and 3 rd garbage cans will decrease as outlined above. The overall Solid Waste losses peak at 2,801 recycle cans due to the need to add an additional Grade 11 Driver and a new Garbage Truck in the Recycle Program (annual Solid Waste loss anticipated to be in the range of $30,000). Even though these new costs are mainly associated with the Recycle Program, the new truck, as well as part of the new driver s time will also be used in the Solid Waste operation as the City population increases, thus increasing the number of garbage cans to be collected along the Solid Waste routes. A percentage of the new Grade 11 driver and the new truck are assigned to Solid Waste. As the Recycle Program reaches the 5,000 to 6,000 can level of participation, the Solid Waste operation no longer becomes affected by the Recycle Program. The analysis was not extended past the 6,000 recycle can range.

8 Page 8 STAFF RECOMMENDATION Staff recommends the City take over the Recycling Program with its current number of customers (753) and initiate limited marketing to achieve conservative growth over the coming year with a target participation level of 1,400 customers by May This conservative growth will allow the City to learn the recycling business with limited initial capital investment ( $18,825 to purchase Ace Disposal s 753 cans, and an additional $40,000 for new and replacement recycle cans). During the coming year City personnel will continue to investigate marketing options, increase truck route efficiency through GPS routing technology, and assess citizen participation interest to determine the next step in growing the City s Recycle Program. With a year of recycling collection experience and a better understanding of the anticipated citizen response to an expanded Recycling Program, the City will be able to choose the appropriate next step option, whether it be a continued Opt-in program, an Opt-out program, or a more aggressive Mandatory program. Staff wishes to express the importance of maintaining the same high level of service and good citizen response established by the Residential Solid Waste Program in the new Recycling Program.

9 STAFF REPORT APPENDIX A Solid Waste Customer loss with Recycling Solid Waste Discount Fee Recycle Rate # Cans % Billing Rate per Can # Cans Lost ($) ($) st Can 0% nd Can 40% rd Can 85% SUVSWD Tipping Fee ($/ton) Recycling (includes new can cost) SURPLUS/(DEFICIT) (78,117) Solid Waste 33 Without New Can Cost Surplus/(Deficit) (237) Recycle 0 Annual Per Can Profit/(Loss) (0.08) Annual Recycle Tons/Recycle User Ace Personnel Costs ($/yr) Equipment Costs ($) Ca ns Available Grade 11 Driver 38,095 Ace Garbage Cans (each) Grade 9 Driver 33,637 New Garbage Can (each) 60 Part Time w/o Benefits 28,774 Garbage Truck (each) 230,000 Initial Capital Outlay RECYCLE Recycle Effect on Solid Purchase Ace Recycle Cans 18,825 # Cans Waste Revenues Purchase 750 New Recycle Cans 45,000 2,801 (28,671) Loss Total Up Front Cash Cost 63,825 Garbage Truck years kept before selling 6 (Range 4 7 years) CITY COUNCIL MEETING

10 Page 10 State Buget Report Coding Solid Waste RECYCLE ESTIMATED BEGINNING FUND BALANCE 2,497,399 0 FY 2011 ACTUAL FY 2012 ACTUAL 2013 BUDGET Gain/(Loss) PROPOSED RECYCLE BUDGET GL Acct REVENUES REVENUES SUNDRY REVENUES COLLECTION SERVICE FEES 1,242,439 1,255,851 1,257,450 (56,712) 218, INTEREST 2,476 3,311 2, SALE OF SCRAP MATERIAL 416 6,313 0 EXPENDITURES TOTAL REVENUES 1,245,331 1,265,475 1,259,850 (56,712) 218,478 DEPARTMENTAL EXPENDITURES 785, ,715 (19,704) 137,718 CAPITAL EXPENDITURES 34,425 37,500 88,657 TRANSFERS 321, ,649 (8,337) 68,783 BAD DEBT 3,964 5,000 1,437 TOTAL EXPENDITURES 1,145,342 1,183,864 (28,041) 296,595 Solid Waste Gain/(Loss) (28,671) SURPLUS/(DEFICIT) 99,988 47,315 78,117 ESTIMATED ENDING FUND BALANCE 2,544,714 78,117

11 Page 11 DEPARTMENTAL EXPENDITURES Solid Waste RECYCLE PAYROLL WASTE UTILITY 139, , ,821 12,698 63,491 PAYROLL PART TIME (also Grade 9) 28,774 (6,349) 11,212 EMPLOYEE BENEFITS 69,734 65,521 70,829 1,905 22,411 OVERTIME PAY 2,168 1,715 4,200 1,207 EMPLOYEE RECOGNITION TRAINING & EDUCATION GL Acct EXPENSE (Tipping Fees?) 446, , ,913 (27,958) 0 State Buget COLLECTIONS OPERATING EXPENDITURES Report Coding DEPARTMENTAL SUPPLIES 640 1,417 2, PERSONNEL EQUIPMENT EXPENSE 36,603 31,756 30,000 8, FUEL 45,616 49,685 58,188 16, CENTRAL SHOP 33,597 29,171 30,790 8, BUILDINGS & GROUNDS 5,222 3,886 4,170 1, COMMUNICATION/TELEPHONE PROFESSIONAL & TECHNICAL SERV ,000 1, INSURANCE & BONDS 4,221 2,472 4,140 1,190 CLAIMS SETTLEMENTS 10, UNIFORMS 786 1,209 1, Subtotal 785, ,715 (19,704) 137,718

12 Page 12 FY2013 FY2011 FY2012 FINAL BUDGET GL Acct CAPITAL EXPENDITURES/BAD DEBT/TRANSFERS ACTUAL ACTUAL Solid Waste RECYCLE TRANSFERS, OTHER NEW GARBAGE CANS 34,425 34,610 77,880 REPLACEMENT CANS 37,500 10, SOUTH FACILITY IMPROVEMENTS 21, BAD DEBT EXPENSE 3,964 3,851 5,000 1, ADMIN FEE TRANSFER DUE GENERAL FUND 117, , ,776 (5,501) 21, TRANSFER TO VEHICLE FUND 204, , , , OPERATING TRANSFER TO GENL FUN 56,000 62,250 62,873 (2,836) 10,924 TOTAL TRANSFERS, OTHER Subtotal 416, , ,877