AGENDA

600 NORTHEAST GRAND AVENUE PORTLAND, OREGON 97232-2736

TEL 503-797-1700 FAX 503-797-1797

MEETING:  Rate Review Committee, MEETING 1

DATE:  Tuesday, February 27, 2007

TIME:  6:00 – 7:30 p.m.

PLACE:  Metro Regional Center, Room 270

AGENDA

I.  Call to Order (10 min)  Rod Park

○  Welcome and introductions

II.  Last Year Review and this Year’s Work Plan (30 min.)  Tom Chaimov/Rod Park

○  Summary of last year’s issues and recommendations. *

○  Report on the split transaction fee. *

○  Draft Committee planning calendar for this year.*

○  Identification and discussion of other issues that the RRC may wish to address

Desired outcome: Agreement on the RRC’s objectives and work scope for this year.

III.  Household hazardous waste charges* (45 min.)  Jim Quinn

Metro receives and disposes of household hazardous waste (HHW) at no direct charge to users. The net cost of handling and disposal—approximately $56 per occurrence—currently is recovered through the Regional System Fee. Should Metro charge a direct fee for disposal? If so, how much?

Desired outcome: recommendation(s) on user charge for household hazardous waste.

IV.  Other Business and Adjourn (5 min.)  Rod Park

Next meeting: Thursday, March 15, 6:00 p.m., Room 270.

* Starred (*) items are included with this agenda. Other materials will be distributed at the meeting.

All times listed on this agenda are approximate. Items may not be considered in the exact order listed.

Please contact Tom Chaimov at Metro with any questions at chaimovt@metro.dst.or.us or 503-797-1681.

TC:gbc

T:\Remfma\committees\Rate Review Committee\FY 07-08\Agenda & Minutes\RRC022707aga.doc

Queue

List of Attachments

Agenda Item II  Last Year Review and this Year’s Work Plan

Attachment A.  Summary of Last Year’s Issues and Recommendations

Attachment B.  Report on the Split Transaction Fee

o  Year-to-date transaction counts vs. the budget assumption

o  The approach to unknown elasticity effects

o  Year-to-date and projected transaction fee revenue

Attachment C.  Draft Calendar for this Year

Agenda Item III  Household Hazardous Waste Charges

Attachment D.  White Paper on Household Hazardous Waste Charges

Dinner Provided

Dinner for this evening will consist of:

Meat Lasagna

Vegetarian Lasagna

Garlic Bread

Assorted Sodas

Agenda Item II

Attachment A. Summary of Last Year’s Issues and Recommendations

Recommendations of the Rate Review Committee
Adopted by the Metro Council through Ordinance 06-1118

The Final Report and Recommendations of the Rate Policy Subcommittee of SWAC was accepted unanimously by SWAC on March 23, 2006 and later incorporated in the recommendations of the Rate Review Committee and adopted by the Metro Council on June 1, 2006.

The following table summarizes the main recommendations, and describes their implications for FY 2006-07 rates.

Agenda Item II

Attachment A. Summary of Last Year’s Issues and Recommendations

Recommendations of the Rate Review Committee
Adopted by the Metro Council through Ordinance 06-1118

Solid Waste Disposal Charges

Effective September 1, 2006 through August 31, 2007

Rate Components    FY 2005-06    FY 2006-07    Change

Transaction Fees

Scalehouse users   $7.50     $8.50     $1.00

Automated scale users   $7.50     $3.00    ($4.50)

Per-ton rates:

Tonnage charge   $46.80     $46.20    ($0.60)

Regional System Fee   $14.54     $13.57    ($0.97)

Excise tax     $8.33     $8.35     $0.02

DEQ & host fees   $1.74     $1.74     – 0 –

Metro Tip Fee     $71.41     $69.86    ($1.55)

Minimum load charge*   $17       $17     $0.00

*Minimum load charges are based on 260 pounds in a single load in FY 2005-06, and 240 pounds in FY 2006-07.

Agenda Item II

Attachment B

Report on the Split Transaction Fee

As part of a new "neutral" stance toward self-haul, the RRC recommended—and the Council adopted—a transaction charge more directly aligned with cost of service. The RRC anticipated that raising the scalehouse fee by one dollar over the previous year, and lowering the automated transaction charge by over half would provide enough incentive for some (unquantified) number of scalehouse customers to seek out the lower automated charge. For each load that switched, Metro would lose $5.50 in transaction revenue (lose $8.50, gain $3.00), with no decrease in scalehouse costs in the short-run.

Metro has in fact experienced a mild shift from the scalehouse to the automated scales, as shown in the following table.

Table B.1

To soften the revenue impact of any elasticity-induced customer shifts and for ease of administration, the RRC recommended that the per-transaction fees be rounded up. A review of the exact unit (per-transaction) costs vs. the adopted fees is shown below. A revenue analysis is shown on the next page.

Table B.2

Elasticity Effects Partially Addressed through Rounding-Up

Table B.3

Agenda Item II

Attachment C. Committee Planning Calendar for this Year

Discussion Draft

Meeting 1  February 27

o  Where we are: review of policies, rates, performance.

o  This year’s work plan (scope, objectives, schedule).

o  Charges for Household Hazardous Waste?

Meeting 2  March 15

o  Foundations of FY 07-08 rates: budget (revenue requirements), allocation factors, tonnage.

o  Discussion: synthesis of policies, assumptions, numbers.

Option: Presentation to SWAC  March 22

Meeting 3  April 5

o  Rate discussion continued.

o  Action: recommendation of FY 2007-08 rates.

Option: Council Work Session  April 10

Option: Additional Meetings  open

Topics that have been previously identified as suitable for discussion off the regular rate-making cycle.

o  Recommendations on the purpose, role, scope, and composition of RRC.

o  Recommendations on rate path management ahead of upcoming changes. For example, a new transport contract (probably a cost increase) and retirement of the bonds (cost reduction).

o  Review and comment on the adopted rate criteria; recommend changes if needed.

The Committee may wish to identify other discussion topics.

—————————

Legislative Schedule

File Rate Ordinance  April 19

First Reading  May 3
(Council approves budget for TSCC review at same meeting)

Second Reading  May 17

Drop-dead last chance second reading  May 31

Agenda Item III

Attachment D. White Paper on Household Hazardous Waste Charges

Should Metro Charge a Fee to Household Hazardous Waste (HHW) Customers?

Introduction

From 1993 to 2001 Metro collected a fee from customers who brought in household hazardous waste to its HHW collection facilities, located at the Metro South and Metro Central transfer stations. From 2001 through the present this fee has been waived by the Metro Council. The current waiver ends September 30 of this year. SWR staff is analyzing the issues associated with an HHW fee, and plans to bring this information to the Council, with the intention of either permanently eliminating the fee, or reinstating a fee.

History

Metro’s first permanent HHW facility opened at Metro South in February of 1992. Initially no fee was charged to customers bringing in their HHW. In July 1993 Metro instituted a fee for these customers, charging $5 for the first 35 gallons of waste, plus $5 for each additional 35 gallons. In November 1993 Metro’s second HHW facility opened, at the Metro Central Transfer Station.

Beginning in 1993 Metro also conducted a series of HHW collection events, intended to provide a convenient disposal option for residents located in parts of the region more distant from the permanent facilities. No fee was collected from customers bringing HHW to these events. In addition, Metro chose to waive the fee for customers bringing HHW in to the permanent facilities if they also paid for trash disposal at the adjacent transfer station.

From 1993 through 2001 the average cost of handling the waste from a single HHW customer was between $82 and $118, so the $5 fee collected only covered a small percentage of the actual cost. During the final year that the fee was collected, although over 35,000 customers brought waste to the program, only about $40,000 was collected, covering only about 1% of the HHW program’s operating costs.

Beginning in 2001 the Metro Council waived the HHW fee. This was originally envisioned as a three-year temporary waiver, to help encourage residents to bring in old stockpiles of HHW. (The waiver does not apply to drums and other containers larger than 10 gallons in size, for which a charge of $5- $15 a piece is collected.) In 2004 the Council extended the fee waiver for an additional two years, so that staff could hear comments from stakeholders during the RSWMP development process. The fee waiver ended on December 31, 2006. An ordinance passed in January 2007 extended the waiver through September of 2007, so that the issue may be considered by the Rate Review Committee.

Arguments in Favor of a Fee

As spelled out in the Interim Waste Reduction Plan passed by the Metro Council in 2006, the goal of Metro’s hazardous waste management efforts is to: “Reduce the use and improper disposal of products generating hazardous waste in order to protect the environment and human health.”

Charging a fee to HHW program customers could further this goal in two ways: providing an alternative source of revenue for the collection program, and communicating a message to customers regarding the cost of managing HHW in order to foster waste reduction.

Generating Revenue. The primary source of funds for Metro’s HHW program is the regional system fee. The direct cost of the program in the proposed FY 2007-08 budget is just over $3.6 million. Approximately $0.25 of the monthly garbage bill each household in the region pays goes towards this expenditure.

For FY 2007-08 about 48,000 customers are anticipated to bring waste to Metro’s permanent HHW facilities, while an estimated 12,000 customers will attend the “roundup” HHW collection events. Charging a fee to HHW customers could serve to shift some of the program funding from the Regional System Fee to a more direct user-fee based source. If all HHW customers were charged $5, this would raise about $300,000 (about 8% of the program budget); if they were charged $10, this would raise about $600,000 (about 16% of the program budget)—assuming there was no drop-off in use of service. These amounts would, presumably, be accompanied by an equal reduction in costs now allocated to the Regional System Fee.

Sending a Message. Arguably, charging a fee to customers as they deliver their HHW to Metro could help raise awareness that proper handling and disposal of these wastes comes at a cost. Further, this awareness could help foster an attitude of waste reduction, encouraging residents to find alternatives to the more toxic products they use around their homes.

Arguments Against a Fee

Cost to administer. Collecting money from customers bringing in HHW imposes a significant administrative burden. Additional staff effort at the permanent facilities would be required to handle the approximately 48,000 annual money transactions. Based on current average scalehouse costs, labor alone would cost about $3.50 per transaction, for a total annual cost of approximately $168,000. This does not include any materials and services costs or allocated costs, nor does it include one-time costs that could be incurred, such as development of procedures or procurement of equipment for handling this volume of money.

While fees were not historically collected at HHW collection events, this would raise serious fairness issues, and so any restoration of the HHW fee should include fee collection at HHW collection events, including Metro’s current roundup system.

However, collecting money at the roundups has a much higher administrative burden. An additional staff person would be needed on site to handle money, with the awkward schedule of about five hours per collection day, around 60 days per year, for a total cost of approximately $5,600 annually. An armored car would need to service the site both at the beginning of the day, to deliver change, and at the end of the day to pick up money collected. Based on the Department’s current armored car contract for the transfer stations this would cost approximately $3,200 annually. There is also an added concern regarding security at the roundups, as the staff person handling the money could be walking around the site with cash in excess of $1,000.

Combined, these administration costs total nearly $180,000 annually. In contrast, recovering the HHW program costs through the Regional System Fee does not incur any of these costs.

Ineffectiveness of message. While there may be some merit to the notion that charging a fee will send a message to residents, a fee in the range of $5 to $10 may send the wrong message—people may believe that the total cost of handling their load is only that much. The average HHW load currently costs Metro about $56, much more than the fee they would be paying. It may be better to have no fee, and rely on education and promotion to let residents know that there is a cost incurred by Metro, rather than giving them a mistaken impression of the true cost.

There are certainly alternative ways to deliver a message about the cost of managing HHW, such as a handout detailing the actual costs. There are also alternative means of encouraging waste reduction, many of which are currently being undertaken by Metro’s education staff.

Increased risk of improper disposal. While many customers using Metro’s HHW program indicate that they are willing to pay a fee for the service, and some were surprised at how low the fee was when we charged, there are certainly some potential customers who will not make the trip if they have to pay, or if they have to pay what they perceive as “too much.” While there is little in the way of academic literature regarding the willingness of the public to pay for this sort of service, what there is does confirm the notion that fees in the $5-to-$10 range will have a substantial impact on customer participation.

In 2003 Metro conducted a survey of HHW customers; several questions related to the payment of HHW fees. Respondents were evenly split on their willingness to pay a fee at the permanent facilities, while 58% were opposed to paying a fee at HHW events. Of those who indicated a willingness to pay, 53% were willing to pay $5; 32% were willing to pay $10; and the remaining 15% were willing to pay $15 or more.

If prospective customers choose not to bring in their waste, there are a number of potential health and environmental impacts. The biggest impact would likely be increased stockpiling of hazardous waste in the home, which increases the risk of poisonings, fires, releases of hazardous materials during natural disasters, etc. While survey responses may not reflect actual behavior, in the 2003 survey 27% indicated that they would stockpile waste rather than bring it in if a fee were imposed.

Another likely result of a fee is that some may choose to dispose of HHW with their trash. This leads to increased risk to solid waste haulers and transfer station personnel, increased work for spotters in the transfer stations, and the need to segregate the waste and manage it in the HHW facilities, incurring all the of processing and disposal costs that would have been incurred if the waste had been properly brought in to the program.

Finally there is a possibility that HHW may be poured down the drain, abandoned, or disposed of in other environmentally destructive ways, although this is very difficult to quantify.

Other Considerations

RSWMP stakeholder process. During the development of the Interim Waste Reduction Plan, which will ultimately be incorporated into the Regional Solid Waste Management Plan (RSWMP), a stakeholder group was convened to focus on HHW issues. This group expressed their opinions on a variety of issues relating to managing HHW in the region. In discussions relating to paying for the HHW program, the group expressed a clear preference for paying through up-front fees as a part of product stewardship programs, as opposed to paying at the point of disposal.

Other HHW programs around the country. In the course of Metro staff’s interactions with other HHW programs around the country, the issue of HHW fees sometimes comes up. Based on the results of a survey of HHW programs that was conducted in 2005, discussion on a national HHW listserve, and other conversations with colleagues nationwide, staff has become aware of only one HHW program that currently charges a fee. Clearly, the consensus among program managers is that the potential benefits are outweighed by the problems associated with charging a fee.

Summary

There are some potential benefits in charging a fee to customers using Metro’s HHW program, including generating revenue from end users, and the potential of sending a message that could help with waste reduction. However, these must be weighed against numerous difficulties: the public would only be willing to support a small fee, covering only a modest portion of the program’s costs; a significant administrative burden would be incurred to collect the funds; and there would be a risk of increased stockpiling and improper disposal.

T:\Remfma\committees\Rate Review Committee\FY 07-08\Agenda & Minutes\RRC022707aga.doc

Queue