Department of Public WorksCity Council MeetingMay 13, 2024Item #9PUBLIC HEARING TO APPROVE RECOMMENDED REFUSE COLLECTION RATE ADJUSTMENTS Department of Public WorksActions to Date
2 ACTION ITEMDATEPresented Proposed Rates to Municipal Services CommitteeJanuary 23, 2024City Council Set Public Hearing to April 8, 2024February 5, 2024Mailed public hearing notices to all parcel owners and account holders (per Prop 218)February 21, 2024Held Community Meeting at Robinson Park Recreation CenterMarch 19, 2024Held Community Meeting at Victory ParkMarch 20, 2024Continued Public Hearing to May 6, 2024April 8, 2024Continued Public Hearing to May 13, 2024May 6, 2024 Department of Public WorksPresentation Overview •Background•Financials•Rate Adjustment Scenarios & Lower Rate Options that underfund the Refuse Program•Staff Recommendation3 Department of Public WorksBackground
4 •Refuse services for over 27,000 residential accounts & management of commercial franchise hauler system32 gal60 gal100 gal•Collect over 40,000 tons of mixed waste, 18,000 tons of organics, and 7,000 tons of recyclables annually Side Loader Garbage Truck
Department of Public WorksBackground
5Residential Containers32 gal•Rates based on selected mixed waste container size•60-gallon recycling cart and 100-gallon yard waste/organics cart included in bundled rate•Billed bi-monthly on Pasadena Water and Power utility bills 60 gal100 galCART
Residential BinBIN32 gal
Department of Public WorksBackground•Rates last adjusted in 2012•Since then, residential rates have not increased, commercial rates increased only by CPI•Around FY 2020, refuse expenditures exceeded revenues6 Department of Public WorksBackground
7 •External Factors Causing Upward Pressure on Rates>SB 1383 State organics recycling regulations>Imminent closure of Scholl Canyon Landfill>Cost to recycle (net loss of $1Million)>Capital expenditures on replacement trucks and containers from FY 25-29 ($8.3 Million) Department of Public WorksBackground
8 • On January 23, 2024, the following Proposed Rates were presented to MSC:
Department of Public WorksBackground
9 Department of Public Works
City Comparable –Residential 32 GallonCartwith Scenario 2 (Recommended) -Proposed Rates – July 1, 2024 10 Department of Public Works
City Comparable –Residential 60 Gallon Cartwith Scenario 2 (Recommended) Proposed Rates – July 1, 2024 11 Department of Public Works
City Comparable –Residential 100 Gallon Cartwith Scenario 2 (Recommended) –Proposed Rates – July 1, 2024 12 Department of Public WorksRefuse Fund Financials
Financials13
Department of Public WorksRefuse Fund 406 Overview•Revenues>Operating RevenuesResidential and Commercial Rates>Non-Operating Revenues•Expenditures>Landfill and Diversion Costs>Labor>Capital Outlay (less than 10%)VehiclesContainersMiscellaneous Equipment14 Department of Public WorksCost of Providing Services
15 •Revenues have been fairly stagnant since 2012, while expenses have increased since 2020•Annual appropriations and expenses have outpaced revenues since 2020 and resulted in a year-to-year operational deficit in Refuse Fund•Cash balance reserves have been used to absorb the annual operational deficit Department of Public WorksFY 24 Operating Budget - Appropriations 16• FY 2024 Adopted Budget Appropriations for Refuse Fund were $27.1M
Department of Public WorksFY 24 Operating Budget - Revenues 17• FY 2024 Adopted Budget Revenues were $18.98 Million• Cash balance reserves used to absorb the operational deficit l
Department of Public WorksRefuse Rate Study •In February 2023, City hired MSW Consultants to perform a cost-of-service study•Scope included review of City's refuse operations and development of a five-year financial plan•Rate study recommends a series of rate adjustments over the next five years in order to properly fund and maintain the City's refuse collection program18 Department of Public WorksRefuse Rate StudyRATE ADJUSTMENT SCENARIOS & LOWER RATE OPTIONS THAT UNDERFUND THE PROGRAM19 Solid Waste Rate StudyPresented by
Solid Waste Consultantsto Local Government
Refuse Rate Study Background•Objectives–Long term financial health of solid waste enterprise fund–Design rates that reflect the cost of service•Approach–Financial plan (macro) City budget level–Cost of service analysis (micro) customer level21 City Refuse Operations•Services Arrangements–City serves:Residential CustomersAll single-family and multi-family (4 units or fewer)Commercial CustomersSome business and multi-family (more than 4 units) All city accounts–Private haulers serves: Most business and multi-family (more than 4 units)22 Background•Key Assumptions–Most operational costs will increase 2% - 4%–Tip (Landfill) fees will increase about 50%–Capital expenditures over 5 years will be $8.3 million–Rates are restructured to cost of service in first year–New rates effective July 1, 2024–Maintain current one-month operating reserves (8.3%)–Approach recommended 25% target reserve23 Rate Scenario 1 – No Rate Increase
24•Residential refuse collection rates since 2012•No annual adjustments for CPI or inflation
Rate Scenario 1 – No Rate Increase
25 Rate Scenario 1 - Impacts•Will not generate sufficient revenue to meet annual operational costs •Cash balance at the end of FY 2025 will be negative•Not meet the City's current reserve policy (1 month of operating budget expenditures)•Will not meet State mandated diversion requirements including SB 1383 •Will cause service interruptions26 Rate Scenario 2 – Proposed Noticed Rates(Recommended)
27•32 Gallon rates would increase by $8.47 for FY 25•60 Gallon rates would increase by $8.75 for FY 25•100 Gallon rates would increase by $5.62 for FY 25•FY 26-29 rates would increase by 7% annually
28 Rate Scenario 2 – Proposed Noticed Rates(Recommended)
Rate Scenario 2 (Recommended) -Impacts•Will generate sufficient revenue to meet annual operational costs to provide refuse services•Proposed noticed rates are still comparable or less than other similar service cities•Current cash balance reserve policy of one month’s operating costs will be met in all five years•Proposed rates will approach closer to 25% target reserve in the next five years and help fund the transition to Zero Emission Vehicles (ZEV)29 Request for Additional Rate Scenarios•New Lower Rate Scenarios–Scenario 3: Lower Rates in Year 1 would reduce proposed rates in first year and resume proposed rates in FY 2026-2029–Scenario 4: Lower Rates in Years 1-2 would reduce proposed rates in first two years and resume proposed rates from FY 2027-2029–Scenario 5: Lower Rates in Years 1-3 would reduce proposed rates in first three years and resume proposed rates from FY 2028-202930 RateScenario 3 – Lower Rates in Year 1
31 •32 Gallon rates would increase by $5.10 for FY 25•60 Gallon rates would increase by $5.61 for FY 25•100 Gallon rates would increase by $4.44 for FY 25 Rate Scenario 3 – Lower Rate in Year 1
32 Rate Scenario 4 – Lower Rates in Years 1-2
33 •32 Gallon rates would increase $4.02 for FY 25-26•60 Gallon rates would increase $4.62 for FY 25-26•100 Gallon rates would increase $4.13 for FY 25-26 Rate Scenario 4 – Lower Rates in Years 1-2
34 Rate Scenario 5 – Lower Rates in Years 1-3
35 •32 Gallon rates would increase $3.51 for FY 25-27•60 Gallon rates would increase $4.18-$4.23 for FY 25-27•100 Gallon rates would increase $4.03 for FY 25-27 Rate Scenario 5 – Lower Rates in Years 1-3
36 •Cash balance would fall below current one-month reserve policy (8.3%) in Fiscal Years 2027 and 2028 to:•Rate Scenario 3: $2M (7.4% reserve)•Rate Scenario 4: $1.3M (4.5% reserve)•Rate Scenario 5: $600k (2% reserve)•Will result in an underfunded program and not allow for any contingencies or unexpected expenditures, i.e. Emergency response, increased disposal and recycling costs, transition to ZEV, unanticipated capital outlay needs, etc. •Gap to reach 25% target reserve after five years is wider and will likely require higher rates in future years•Will conduct another rate study and public hearing within 5 years to request additional funding 37 Rate Scenarios 3 through 5 –Impacts
Department of Public WorksConsideration of Other Rates
38 Online Rate Calculator:https://egov1.cityofpasadena.net/BillEstimator Avg. Monthly SFR Water Service
Avg. Monthly SFR Sewer Service
Department of Public WorksRecommendation
39 1.Find proposed actions exempt from California Environmental Quality Act (CEQA);2.Open Public Hearing to receive public comment on recommended Refuse Collection rate adjustments;3.Consider all protests against proposed Refuse Collection rate adjustments;4.Close Public Hearing and approve recommended Refuse Collection Rate adjustments or provide alternate direction; and5.Adopt resolution amending General Fee Schedule for new Residential Collection Fees to become effective July 1, 2024 or as soon as practicable thereafter.
Department of Public WorksQuestions – Refuse
40 QR Code for Online Rate Calculator
Department of Public Works
41 EndEnd of Presentation
Summary of 5-Year Rate Scenarios
42 Summary of 5-Year Rate Increases
43 City Comparable – Commercial 3-Yard Bin Ratewith Proposed Rates – July 1, 2024 44 Department of Public WorksFY 2023 Annual Comprehensive Financial Report (ACFR) - Operating Loss 45• Total operating expenses exceed the total revenues received
Department of Public WorksFY 2023 Annual Comprehensive Financial Report (ACFR) - Net Loss 46 • Refuse Fund is relying on cash balance reserves to sustain annual cost of operations