MEETING SUMMARY
RATE REVIEW COMMITTEE
Metro Regional Center – Room 501
April 26, 2005
Present:
Members Metro Guests
Michelle Poyourow Councilor Rod Park, Chair Dave White, ORRA
Matt Korot Mike Hoglund, Director, Solid Waste & Recycling Dean Kampfer, Waste Mgmt
Paul Matthews Doug Anderson, Solid Waste & Recycling Eric Merrill, Waste Connections
Mike Miller Tom Chaimov, Solid Waste & Recycling
Ray Phelps Maria Roberts, Solid Waste & Recycling
Karen Feher, Finance & Admin. Services
Gina Cubbon, Administrative Secretary, SW&R
Members Absent:
Mike Leichner
Chair Rod Park opened the meeting at 6:09 p.m. The goal of this meeting, he said, was to hopefully decide on a recommendation for a rate that could be forwarded to the Metro Council. Before getting started, however, Mr. Anderson handed out a summary sheet of all current reserves with brief explanations, projected ending balances, and amount over/under target. The summary, Mr. Anderson explained, was in answer to a request from a previous meeting; and not part of this meeting’s agenda as such.
Reviewing the minutes from the previous two meetings, Mike Miller moved to accept the summary from April 12; Michelle Poyourow seconded. Ray Phelps moved to accept the summary from April 20; Ms. Poyourow again seconded; both sets were adopted as written.
Councilor Park previewed the meeting. “Hopefully, at the end of the meeting we’ll have components of a rate that can be plugged into the Ordinance and Staff report and sent to the Metro Council to go through the regular [rate adoption] process,” he said. These components, he reminded the group, are the Regional System Fee, the transaction fee, and tonnage charge. Regarding the “third fee” and other items the Committee would like forwarded to the Council, staff would take direction and proceed accordingly. A “parking lot” of issues would be noted, the Councilor added, for future discussions / consideration.
Mr. Anderson briefly re-capped the Committee’s work thus far, and explained the sample ordinance and staff report which were included in the agenda packet. He and Tom Chaimov incorporated the allocation decisions the Committee made in previous weeks into tables which were e-mailed to the group a few days prior to the meeting. The matrix, Mr. Anderson explained, showed the rate using the numbers discussed by the Committee, and the net results after policy adjustments. The intention tonight would be to discuss the pros and cons of these and come to a recommendation.
“This is a summary of policy decisions that the Committee has been making, and how that translates into dollars,” Councilor Park pointed out. He noted, however, that the option with the least amount of discussion was the issue of public hours at Metro’s transfer stations. “We can operate a more efficient solid waste system by cutting public hours,” the Councilor said. “The question is – on a policy level – is that what we want to do?” If Metro takes itself out of the system as an operator at some point in the future, how would that impact the system, and what would local governments need in order to make informed rate-setting decisions, he asked.
Mr. Anderson laid out background information on the white board while the Councilor continued. “And still, do you operate at peak efficiency – shorter hours, etc., or do you introduce the public into the system [at private facilities],” Councilor Park mused, “ which is basically a retail customer. They fumble around, they don’t know how to get their waste in and out right, they get hurt, yet they’re part of the system.” He pointed out that over 300,000 transactions per year at Metro’s two transfer stations are from small businesses or self-haul customers.
“I would hope,” Ms. Poyourow stated, “that the policy decision to keep the stations open later hours are based on efficiency, in that it’s better to pay more to collect the garbage that way rather than pay even more to collect it off the sides of the roads or off of empty lots.” Matt Korot commented that this policy issue is too large, involves too many people to be decided by such a small committee. Councilor Park agreed that to really tackle the idea, a wider-range of stakeholders would need to come together. This may be a parking lot issue, he said, or for another task force.
Mr. Anderson explained the details of the issue on the white board. The Committee had decided, he reminded the group, to move some of the cost of public hours from the transfer station costs into the Regional System Fee. Metro is open approximately 33% longer than some private facilities in order to accommodate public customers, which is a regional benefit offered by Metro. Mr. Miller asked if private facilities are limited as to their hours because of their franchise agreements. No, came the response, but the caps don’t allow them to take public waste anyway. Councilor Park pointed out that dry waste from public customers is acceptable at most private facilities, but not wet. There was some contention as to the veracity of this statement, so Mr. Anderson asked that Mr. Chaimov make note to find the answer. (Dean Kampfer noted that his Troutdale facility cannot take dry public waste, but because of land-use permitting.)
After Mr. Anderson fully explained the numbers pertaining to the public hours issue, Councilor Park said that the reason he’d brought the subject up tonight was because if, at some point, Metro is no longer a transfer station operator, it’s likely private operators will open longer hours to accommodate the public. “I assume they’re then going to want to recover that cost, so I wanted to present this to give a better understanding. We could be more efficient – in terms of cheaper – but the public would probably be a little ticked off [if there were less convenient hours].” Paul Matthews had strong concerns about Metro’s subsidy of self-haul customers. “I don’t dispute how you calculate it,” he said, “I just don’t think we should be taxing everybody to pay for people who want to drive out on a Saturday and dump their garbage.” He suggested increasing the transaction fee. Ms. Poyourow suggested a higher transaction fee on weekends, and the group discussed the issue further.
What if self-haul was completely banned, Councilor Park posed. “Would those people then use local haulers?” “I think they would use the local ditch,” Mr. Matthews said. Further spirited discussion and ideas ensued (such as Dave White’s suggestion to raise the minimum tonnage fee), and Mike Hoglund said all these comments will be important to the disposal system planning. He pointed out that not a lot of public haul is from people who don’t use a regular garbage service. Getting a drop box from your local hauler for garage cleanouts or other occasional use is expensive. Mr. Hoglund himself self-hauled a few loads of such waste to a Metro station recently and it cost much less. “So that tells you there’s a subsidy in there, but on the other side, I’m not sure the rate was set properly for the drop box.”
The options of raising transaction fees and/or minimum rates was discussed further, including the idea of a tiered-transaction fee. Mr. Kampfer offered that a higher fee could be charged if the load has to be unloaded by hand, therefore taking up more time at the station. Ms. Poyourow reiterated the idea of higher fees for weekends, or perhaps even early evenings. Mr. Matthews said however, that would upset public customers who have to work during the “normal” hours of a station. If it’s tied instead to the service they’re being provided, it would be more fair. Councilor Park appreciated all the comments, and said they would be put in the “parking lot” and the group’s concerns forwarded to the Council.
Mr. Matthews reiterated his opposition to Option 2, while being content with Options 1 (sustainability) and 3 (regulatory) on the chart. Mr. Phelps, too, disliked Option 2. Councilor Park said that for him, Option 3 is an “interesting” issue. “When you’re not charging ‘clean’ MRFs, for example,” he said, “because you don’t collect a regional system fee from them, yet there are inspections. And there are yard debris folks that have a high number of inspections, but probably have a low risk level, that particular one I still think needs to be worked on because I think there’s more to that one.” The group discussed the issue briefly, and Councilor Park commented that there are no right or wrong answers, but asked if the members would like to revisit their decision on that issue, or stay with the “status quo” option as shown in the matrix.
Reviewing what had been decided so far, Mr. Matthews said, “There was a discussion on sustainability, and the group said ‘go with that.’ Frankly, we’re talking about $115,000 out of $48 million. It really is just decimal dusting. Another $120,000 on regulatory, and the debt service we talked about last week. Option 2, we talked about on [April] 12th. But the other issue is the phase. To me, when you phase something, you take small steps til you eventually get there. Did we actually discuss not making the next step in the phasing movement?”
Councilor Park replied that the next step was the “3rd fee,” but Mr. Matthews disputed that, saying it also involved allocations. He apologized for having missed one of the meetings, and for bringing this matter up so late, but stressed that he would’ve liked to have seen an actual option of not phasing, and work from there. To go to the full cost of service model would’ve involved integrating the third fee, Councilor Park said, and local governments “weren’t comfortable proceeding with additional changes [to the rate structure] given that they want some time to understand how this modeling actually works.” There had never been an explicit discussion of stopping the phasing, the group agreed, but the results of the recommendations had implicitly stopped it.
The group spent an extended period of time discussing last year’s changes (50% phase-in of cost-of-service model) and that while the Committee had recommended full phase-in at that time, Council had made the decision to take the process more slowly. Still, Mr. Matthews maintained that the group should had started with the assumption of full cost-of-service and then tick off the pieces that don’t work. Matt Korot disagreed, saying that the process should start with what the Council actually approved, not what was recommended. There was much confusion, cross-talk, pointing to numbers on the white board, reiteration of past discussions, and general verbal turbulence (though not mayhem).
Regarding full cost-of-service, Councilor Park noted that two of the options (public hours and the regulatory piece) are potentially high-cost and could affect the tip fee. The actual policy-makers will likely have strong – and varied – opinions on these matters that will need to be considered. “If you’re going to go to a full cost-of-service model,” he said, “the whole enchilada, you can’t just say we’re going to consider [one] factor and not the rest. A full cost-of-service model, only affecting the public sector and not including the other pieces, ignores the reality of the economic model out there. It’s important to explore this, because if Metro in 2009 is out of the system, these costs still remain.” The question will come back then, the Councilor stressed, what are reasonable costs for local governments to set rates.
From which end the rate should have been derived continued to be volleyed by the members. Mr. White then illustrated on the white board that both Mr. Matthew’s preferred method (starting from the full cost-of-service) and the path the Committee went down (starting from last year’s adopted rate) ended with identical results. Still, disagreement reigned for an extended period, and decisions were revisited. Mr. Anderson gave out copies of the handouts of March 29 and April 5 to freshly illustrate the issues. After explaining these, he concluded that “when you marry the strict cost-of-service with the policy-balancing, it strikes me that this [the approved rate from last year] is where you start.”
There was more discussion of to phase or not to phase, with a lot of referencing to numbers on the white board. Councilor Park illustrated how by moving different components, Metro’s tip fee can change and result in a windfall to some. Moving to a full cost-of-service rate could create such an imbalance. “There hasn’t been agreement within the Council about public hours, the regulatory piece, or the debt service,” the Councilor said, “so while it’s good to have the discussion we’re having, be aware that [this discussion] is assuming the whole package [options plus cost-of-service] will occur, and it may not,” depending on the will of the Council.
Mr. Phelps challenged Councilor Park’s allusion to private facilities’ “getting the gluttonous profit. Do you have any basis for that? For whether or not your [Metro’s] costs are a base or a ceiling? Is there any basis in fact, or is it just speculation?” Ms. Poyourow interjected, noting that’s a separate issue for which there wasn’t time at this meeting. Mr. Korot commented that “Your rates track Metro’s. That’s all we know.” “Well, every time I track Metro’s rates, I get accused of ripping off the system. That’s the end of my comment,” retorted Mr. Phelps.
Councilor Park returned to the individual rate questions at-hand. “You’ve made a policy decision about sustainability, that it should be part of the Regional System Fee. Does that still hold?” he asked the Committee. Mr. Matthews said it seems a reasonable place from which to recover it.
Moving to the issue of Metro stations’ longer hours to accommodate the public, Councilor Park said it originally was instituted when there were fewer transfer stations and MRFs. “I know [Mr. Phelps] disagrees, where is everyone else?” the Councilor asked. Mr. Matthews said he felt the current allocation is “too generous to self-haul, but if we don’t make some adjustment, we’re over-stating the cost of disposal.” Some of it should be in the transaction fee or by adjusting the minimum load charge, or tiered system to recover the costs, he suggested. Ms. Poyourow agreed.
“What happens if you artificially raise the minimum fee?” Mr. Miller asked. “For instance, if the minimum is a ton, what happens to the rate and the costs when the revenue you collect for those is not represented by the commensurate tonnage? It’s going to have an impact.” Mr. Anderson responded that’s the reason the minimum is kept “as low as possible, to avoid an overcharge. I believe that last year was about a $35,000 overcharge.” On a $48 million budget, it’s a small piece, but Metro tries to avoid that.
Councilor Park said that he wants to avoid sudden jumps in the transaction fee. The public can understand incremental increases, he said, but not suddenly going from (for instance) $7.50 to $10. Eric Merrill suggested “splitting the baby” – choosing an acceptable transaction fee and moving the remainder into the Regional System Fee. Still, after lengthy discussion, there was no consensus on this issue, neither a reiteration of the original vote nor a clear change.
The Councilor moved on to the regulatory piece. Based on some rough numbers, the Committee had voted to put three-quarters in the Regional System Fee and the remaining quarter in the Disposal Fee, “Are people still comfortable with that as a recommendation?” he asked. He noted that there has not yet been discussion within the Council regarding the clean MRFs, yard debris facilities, etc.
“I may deserve a smack on the head for this,” Mr. Korot began, “but I’m actually finding the ‘Chinese menu’ doesn’t work for me. The local governments have some issues with how the cost-of-service model was developed last year without full consideration of some of the impacts. Given that lack of consideration, such as the ‘margin’ we feel we ought to hold pat, where we are. Do no further harm, do no further benefit, so to speak, to the various parties.” He said he’s most comfortable with accepting the $71.04 recommendation, but wanted to be sure that the decision to partially pay-down the debt service “is a fairly neutral one, to benefit the system as a whole. If it’s not, then I wouldn’t support that and I say let’s just stand pat.”
To Mr. Matthews, Councilor Park posed the question, “Does the cost-of-service model apply both to the public and private [facilities], or just the public? Just in principal.”
“It could, if they were regulated,” Mr. Matthews responded. If transfer stations were regulated, cost-of-service could be applied just like any other regulated service, such as Qwest, PGE, or Northwest Natural Gas, he explained. There would be policy decisions involved, Mr. Matthews continued.
Back to the matter at-hand, Mr. Phelps voiced support for Mr. Korot’s idea. Councilor Park restated that idea: “Basically, it would be taking the whole debate that we had, packing it up and sending it to the Council with questions, but then taking the components that make up this [$71.04] recommendation as the recommendation for this year.” Mr. Korot added that there’s a plethora of policy work that will need to be addressed beginning as soon as this Summer. Mr. Miller clarified that the $71.04 rate “lowers the Regional System Fee, raises the disposal fee, and keeps the transaction fee the same.” The third fee, in that case, has not come to fruition as a separate fee.
The group began to discuss specific numbers on the white board and what the Committee coined “magic math.”
“The Committee was put in an extremely difficult position, because you’re assuming policy decisions that no one has considered yet, with no guideline. I don’t think you should feel bad about whatever we end up with. There are so many questions that trying to get to a true cost-of-service model raises; there has to be an interim process, and you started that last year... When we start the budget process [this Summer], we’ll continue some of these discussions.” He mentioned that it’s likely another SWAC subcommittee will be formed to delve further into some of the issues brought forth by this committee, and he’d like to include Mr. Matthews and Ms. Poyourow and others, “to broaden the circle.”
Mr. Phelps said the reason he agreed with Mr. Korot’s idea is because the policy issues “are the imponderables, and we don’t know the answers. There’s too much speculation.”
The group continued to chat about different component numbers on the white board. Councilor Park asked if the Committee was comfortable with recommending the $71.04 rate and letting the policy issues be addressed going into the next year. Mr. Matthews had some questions about the exact numbers involved; he and Mr. Anderson discussed them. He was keen on resurrecting discussion of the 3rd fee issue, though he said that since consensus was being formed he was loathe to slow the process. Mr. Phelps said there’s a larger policy question involved (regarding facilities that are inspected but don’t pay the Regional System Fee).
Mr. Matthews was still troubled: “I guess I’m a little disappointed, and maybe that doesn’t matter. We ended last year, and we talked about the 3rd fee. It looks like we’ve spent the last couple of months and we haven’t done squat on it. That’s disappointing.” Councilor Park responded, however, that he felt the Committee had done a great job in generating important policy questions that Council needs to address. Mr. Miller added that he felt a substantial amount of time had been spent discussing the 3rd fee, and the Committee concluded that who pays the fees is a policy decision. “Just because it didn’t change from last year doesn’t mean we didn’t deal with it,” he said.
At length, Mr. Korot moved that $71.04 be the rate recommended to the Metro Council, less adjustments for debt service payment. Mr. Phelps seconded the motion. Mr. Matthews asked that the numbers be worked more specifically on the white board; Mr. Anderson accommodated this request, and the calculations resulted in a rate of $71.43, broken down as follows:
Disposal Fee $46.85
Regional System Fee 14.51
Excise Tax 8.33
DEQ Fee 1.24
Community Host Fee .50
Additionally, the Transaction Fee was recommended at $7.50.
In a vote, all members present voted to accept the rate, with the exception of Mr. Matthews, who disagreed on the Transaction Fee / self-haul issue. Councilor / Chair Park abstained.
Final conversation centered on assurances that the issues brought up at this and previous meetings would be looked into further.
The meeting adjourned at 8:40 p.m.
gbc
Attachment: “Parking Lot” Issues
T:\Remfma\committees\RRC\FY 05-06\RRC042605min.doc
“PARKING LOT ISSUES”
Rate Review Meeting
April 26, 2005
Extra Hours to Accommodate Public Customers at Metro Transfer Stations
Transaction fee – set to recover cost?
Why subsidize self-haul?
Two-part fee? Commercial (automated, tipped) vs Self-haul (scalehouse, manual unloading),
Time of day, day of week.
Typical self-haul loads (small event clean-out such as garage clean-out) – cost-effective provision in franchised system? If not, how?
The 3rd Fee
Costs recovered, who pays, design of fee (fixed, variable, both?)
Ratepayer classes, lump sum
Implementation – process, timing, relation to / support of Regulatory Affairs policies
Application fees as $ offset; exemptions
T:\Remfma\committees\RRC\FY 05-06\RRC042605min.doc