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HomeMy WebLinkAboutItem 6: Ordinance Concerning Solid Waste Powers ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Action: An Ordinance Concerning Solid Waste Administrative Powers and Amending Section 3.250 of the Eugene Code, 1971 Meeting Date: April 27, 2009 Agenda Item: 6 Department: Public Works Staff Contact: Kurt Corey www.eugene-or.gov Contact Telephone Number: 682-8421 ISSUE STATEMENT This is an opportunity for council to discuss and adopt a proposed ordinance amending sections of the Eugene City Code dealing with Solid Waste Administrative Powers. The proposed amendments would permit the establishment of a transportation surcharge on solid waste (garbage) haulers and further permit the transportation surcharge to be used for the repair, maintenance, operation and preservation of City- owned roads and streets. If the council adopts the ordinance amending the solid waste hauler code provisions, the City Manager would then approve by administrative order a 5% transportation surcharge on solid waste hauler license fees, effective July 1, 2009, with the intention that the revenues generated from the surcharge would be used to continue to deliver street operations and maintenance services in the upcoming fiscal year beginning July 1, 2009. BACKGROUND On May 23, 2007, the Council Committee on Transportation Funding Solutions presented its report, Operating which stated that the first priority use of new revenue generated from this initiative should be “ and maintaining the existing transportation system , including on-street and off-street bike and pedestrian pathways.” One of the five sources of new revenue specifically identified to address critical shortfalls in City transportation system funding was “a solid waste collection fee surcharge…estimated to cost the average household $1 per month.” On April 8, 2009, the council discussed the City Manager’s proposed one-time funding strategy to maintain street O&M services through fiscal year 2010, which included as one of its elements a new 5% transportation surcharge on solid waste haulers. After extended discussion, a council majority voted to send this proposed new transportation surcharge on solid waste haulers forward to a public hearing in order to gather community input on the proposal. At the April 20 public hearing, the council heard public comment on a proposed ordinance establishing a transportation surcharge on solid waste (garbage) haulers and permitting that the surcharge be used for the repair, maintenance, operation and preservation of City-owned streets. This community input and subsequent council discussions raised several issues, for which staff have provided responses in Attachment A. Z:\CMO\2009 Council Agendas\M090427\S0904276.doc Financial and/or Resource Considerations Garbage Hauler Surcharge – Nexus to Roads, Estimated Yields, Who Pays and How Much Nexus to Roads - The transportation surcharge would be assessed against solid waste haulers to better reflect the physical and financial impact that their operations impose on the city street system as a result of heavy hauler vehicles running on the majority of city streets every week. This surcharge would be assessed against solid waste haulers on the premise that heavy solid waste trucks cause significantly more damage to city streets than do other categories of lighter vehicles and run largely on local streets, which do not hold up as well under heavy vehicle use. The surcharge also represents fair compensation for private use of the right-of-way, a public asset that haulers rely on to deliver their services. Estimated Yields/Who Pays/How Much – At the level of a 5% fee, the transportation surcharge is projected to generate an estimated $900,000 for the fiscal year beginning July 1, 2009. A 5% surcharge applied to both commercial and residential garbage customers would result in slightly more than half of the new revenue projected to be generated from fees paid by commercial garbage customers. A 5% surcharge on the bill of a residential customer with a weekly 32-gallon service (the most common level of residential service) would increase the customer’s bill by 98 cents per month, or $11.76 annually. Commercial customers would see a proportionate 5% increase in their bills for garbage service. In its 2007 recommendation for a package of road funding solutions, the council committee noted the fact that “garbage services customers from all sectors would pay this fee, regardless of whether they were public, private or nonprofit entities,” thereby acknowledging that the intention was to spread the impact of this surcharge broadly across the community, so that everyone would pay a little towards the funding for a well-maintained street system. Attachment B illustrates the estimated financial impact of the proposed 5% garbage surcharge on a range of residential and commercial customers at various levels of service, along with a list of seven actual commercial customers and the estimated financial impact of the proposed surcharge on their monthly bills. Current Budget Outlook - Under the most current projections, the Road Fund is expected to generate a $2.3 million annual operating deficit this current year (FY09), and with no new revenues that annual deficit would grow to nearly $5 million in the out years of the six-year forecast. In the absence of deliberate action, the fund will deplete all available fund resources and become insolvent sometime in the fall of 2009. On the other hand, a set of $3.8 million ongoing revenue solutions implemented by July 1, 2009, would eliminate the projected future annual operating deficits throughout the forecast period and As an alternative, a minimum of $2.8 restore the fund balance to the policy-recommended level. million in one-time revenue would be needed for FY10 to fully fund the current operations of the Road Fund for one year, while council continues to work on a comprehensive, sustainable funding strategy. One-time Funding Strategy - Responding to council direction to bring back a one-time funding strategy to maintain street O&M services through FY10, the City Manager is proposing a three-part funding package as a FY10 stop-gap solution, comprised of the following three elements: Redirect up to $1.4 million of the FY10 local motor vehicle fuel tax revenue 1) from capital pavement preservation to critical street O&M services; Authorize a transfer from stormwater/wastewater reserves 2)by including in the final FY10 Adopted Budget, a one-time $500,000 contribution for FY10, from existing reserves in City-owned wastewater and stormwater utilities; and Impose a 5% transportation surcharge on solid waste haulers. 3) ? It is this third element of the City Manager’s stop-gap funding strategy to keep the Road Fund solvent through FY10 that is the subject of the council’s discussion and potential actions tonight. Z:\CMO\2009 Council Agendas\M090427\S0904276.doc RELATED COUNCIL GOALS AND POLICIES The goal of the council Transportation Initiative is to “Develop mechanisms to adequately fund Eugene’s transportation system for cars, trucks, bikes and pedestrians, including maintenance and preservation and capital reconstruction.” COUNCIL OPTIONS The two principal strategies available for balancing the FY10 Road Fund budget are 1) to reduce the current service system to the level of existing resources, or 2) to increase the level of revenue, on at least a short-term basis, to adequately fund the current street O&M service system through June 30, 2010. The council has the following options before it with regard to this proposed ordinance: Option 1: The council could choose to adopt the proposed amendments to the Eugene Code to permit the establishment of a transportation surcharge for use of the public right-of-way by solid waste hauler licensees, with the revenues from such fees to be dedicated to helping keep the City’s Road Fund services intact for FY10; or Option 2: The council could choose to not adopt the proposed amendments to the Eugene Code and decline to permit the establishment of a transportation surcharge on solid waste hauler licensees, requiring either $900,000 of street operations and maintenance service reductions for FY10 or the need for replacement revenues from other sources; or Option 3: The council could choose to adopt the proposed amendments to the Eugene Code and modify that motion with either of the two amendments offered in Attachment A. CITY MANAGER’S RECOMMENDATION The City Manager recommends Option 1. SUGGESTED MOTION Move to adopt an ordinance concerning solid waste administrative powers and amending Section 3.250 of the Eugene Code, 1971. ATTACHMENTS A. “Response to Public Input and Questions on Solid Waste Hauler Surcharge”, memorandum dated April 21, 2009 B. Projected Financial Impacts by Customer Category of a Proposed Transportation Surcharge on Solid Waste Haulers at the 5% Level C. An Ordinance Concerning Solid Waste Administrative Powers and Amending Section 3.250 of the Eugene Code, 1971 FOR MORE INFORMATION Staff Contact: Kurt Corey Telephone: 682-8421 Staff E-Mail: kurt.a.corey@ci.eugene.or.us Z:\CMO\2009 Council Agendas\M090427\S0904276.doc ATTACHMENT A Public Works Administration City of Eugene 101 East Broadway, Suite 400 M Eugene, Oregon 97401 EMORANDUM (541) 682-8421 (541) 682-6826 FAX www.eugene-or.gov Date: April 24, 2009 To: Mayor Piercy and City Council From: Kurt Corey, Public Works Director, 682-8421 Subject: Response to Public Input and Questions on Solid Waste Hauler Surcharge A Public Hearing was held on April 20 to solicit public comment on a proposed ordinance amending sections of the City Code and establishing a transportation surcharge on solid waste (garbage) haulers and permitting that the surcharge be used for the repair, maintenance, operation and preservation of city- owned streets. This community input and subsequent council discussion raised several concerns. This memorandum provides staff responses to those issues, which are presented in two categories: those directly relating to the proposed ordinance before council; and those relating to issues of administration, timing of the new surcharge and potential impacts on hauler revenue and school district budgets. ISSUES RELATING DIRECTLY TO SOLID WASTE SURCHARGE ORDINANCE Four primary issues have been raised that pertain directly to the proposed solid waste hauler surcharge ordinance. Each issue discussion includes a summary of the issue and, where appropriate, a discussion of potential options to mitigate that concern, as well as a potential motion to incorporate those options. Application of the Surcharge to a Single Category of Heavy Vehicles The concern has been raised about the fairness of the proposed transportation surcharge in that it singles out a specific category of heavy vehicle operators for the surcharge, while revenue generated from the operation of other heavy vehicles, such as those operated by EWEB, LTD, the school district and local construction companies, would not be subject to the surcharge. Most cities in Oregon levy fees or taxes on garbage haulers and use the money for a variety of general government purposes, including road repair. The idea was recommended by a committee of the City Council which spent several months in 2007 on the difficult task of identifying viable funding for street maintenance and preservation. The suggestion that all heavy trucks should be included is a common one that was, in fact, considered as part of the council committee's review by looking at the potential for charging road fees to a broader group of heavy commercial vehicles operating in the city. The conclusion at that time was that the broader fee structure would be problematic for several reasons. The first concern is with regard to legal defensibility, in that if a fee were to be imposed as a requirement for operation of a heavy vehicle within Eugene, there is a high probability that it would be seen as a vehicle registration fee. Under state statutes, only counties may impose a local vehicle registration fee. Furthermore, charging the fee to the broader group of heavy truck haulers was also viewed as neither efficient nor cost effective as there is currently no practical way for the city to identify, track and assess the fee. Finally, there would likely be a disproportionate administrative cost associated with assessing a broad range of heavy trucks since there are no practical sources to obtain the needed data and bill for the fee. These are the primary reasons the Council committee determined that the broader heavy vehicle fee would not be feasible. Staff believe that the 5% transportation surcharge on solid waste haulers is a fair and equitable way to contribute to funding for road operations and maintenance for a couple of reasons. First, there’s the fact that garbage trucks place a heavy load on nearly every residential street in Eugene on a weekly basis. In addition, this regular and heavy loading is unique to garbage haulers, as no other class of heavy trucks regularly runs on virtually all of the city's streets. Concern Around Subjecting Nonresident Garbage Fees to the Surcharge Another concern raised by a resident of unincorporated Lane County was that this was really a pass- through tax to nonresidents who are served by those garbage haulers who also provide service within the Eugene city limits, because he believed he would also see his garbage rates increased to accommodate the proposed 5% city surcharge. Council is reminded that this is not a surcharge on garbage customers, but on the revenue generated by solid waste haulers who are licensed to operate in Eugene. There is no requirement that the haulers pass on the surcharge to customers, whether or not they reside in the city limits. Furthermore, subject revenue for the surcharge is determined by the same method as is used to calculate the City’s solid waste licensing fee and the annual rate analysis, which is only that revenue generated within the Eugene city limits. The surcharge would not apply to revenues generated in other communities or in unincorporated Lane County. Finally, solid waste haulers who do business in Eugene are required to identify whether the property being served is within the Eugene city limits. This requirement, plus the city’s review of hauler financial records over the years, leads staff to conclude that haulers have the ability to bill different rates to their customers, depending on whether those customers are in the city or not. It should be noted that the City does not regulate rates, billings or hauling services outside the city limits. Perceived Lack of Nexus Between Hauler Surcharge and Damage to Roads Both haulers and customers opined that there is not a sufficient nexus between a transportation surcharge on haulers and the damage caused by garbage trucks--and specifically between the different amounts of surcharge that would be passed through to garbage customers relative to their use of city streets. One of the underlying premises of this fee is that it would be assessed against solid waste hauler fees to better reflect the physical and financial impact that their operations impose on city streets as a result of heavy hauler vehicles running weekly on nearly every street in the city. The surcharge would be assessed on the revenues of garbage haulers on the premise that their heavy vehicles cause significantly more damage to city streets than do other categories of lighter vehicles and run largely on local streets, which do not hold up as well under heavy vehicle use. The surcharge also represents fair compensation for private use of the right-of-way, which is a public asset upon which haulers rely to deliver services. It was further asserted that there is no equity between the different levels of surcharge which would be passed through to different garbage customer categories and no connection to the use of city streets by those customers. In the 2007 Council committee discussions of this potential surcharge, it was noted that the solid waste surcharge, because it is based on volume, is also based on weight. Since weight is one of the primary factors in the damage caused to city streets by garbage hauler vehicles, there is a relationship between the level of surcharge paid and the damage done to streets, because a customer who utilizes a smaller garbage container would also pay a smaller share of the surcharge. Furthermore, the council committee liked the idea that the garbage surcharge was one which would be paid by nearly every residence and business in the city. The Need for a Comprehensive Transportation Funding Solution The effort to arrive at a universally acceptable method to address the chronic shortfall in street maintenance funding has been under way for several years. While we continue to make some progress, the final solution will likely be comprised of a number of component parts including the local gas tax, bond measure, state revenue sharing, and other fees. We expect there will be those who dislike each of the component parts to some degree and, similarly, it's unlikely any single solution will be satisfactory to everyone. The immediate concern is to close the gap that has resulted from years of inadequate funding, a gap amounting to nearly one-third of what is necessary to sustain a program of pothole patching, street lighting, traffic signal maintenance, signs, striping, sidewalks, and related operations and maintenance work. The garbage hauler surcharge would allow us to close a portion of that gap. A one-year sunset provision has been suggested as a way to ensure that the surcharge does not automatically become a permanent funding solution. While there are administrative efficiencies in setting up the surcharge as a longer-term funding mechanism, it is certainly possible to include a sunset provision that would limit the initial term of the fee, for example from July 1, 2009, to June 30, 2010. If a one-year sunset provision were to be added to the surcharge ordinance, it would be very important for council to identify alternate revenue strategies fairly early in FY10 to allow reasonable time to develop and implement such measures by the start of FY11. Potential Amendment 1: Move to amend the ordinance to add a Section 3 which reads as follows: “Unless otherwise extended by the City Council, subsections (1)(h) and (2) of Section 3.250 of the Eugene Code, adopted by the City Council through this Ordinance No. shall sunset on June 30, 2010.” ISSUES RELATING TO ADMINISTRATION AND TIMING AND IMPACT OF NEW FEES During the public engagement process and in subsequent discussion by council, additional questions were raised that relate to administrative and collection issues associated with the proposed surcharge, the wisdom of imposing new fees in an economic downturn, and the potential impact of the proposed surcharge on hauler revenues and school district budgets. While these may not relate directly to the proposed ordinance, they are valid considerations in this discussion and deserve some response. Concern about Administrative and Collection Issues Concern was expressed as to how the solid waste haulers would sort through which revenues were subject to the new surcharge and how they would be reporting those revenues during the initial transition period, when they were collecting revenues generated during multiple periods. City staff in the Solid Waste Management & Prevention program and in the Public Works Department are committed to working over the next few weeks with city-licensed garbage haulers to develop administrative rule changes and implementation agreements which are reasonable and practical to implement for all parties concerned. Not the Time for New Fees; Should Be Using General Fund Resources to Fund Core Road Services Several citizens and a councilor cautioned that, with the current economic conditions, this is not the time to be imposing any new fees or charges on Eugeneans. Others opined that the Council should be prioritizing services to operate within existing resources and called for reconsideration of the Council practice of not using General Fund resources to fund ongoing Road Fund services. In July 2000, citing the lack of sufficient resources in the Road Fund to maintain existing levels of street services, City Council directed the citizen members of the Budget Committee to study Eugene’s transportation funding issues and to bring back their conclusions and funding recommendations to council. The citizen subcommittee responded with a package solution intended to raise $9 million of new transportation funding revenue annually to address both pavement preservation and ongoing street maintenance needs. Nearly nine years later, and through a period of economic expansion and relative prosperity, the funding gap in the Road Fund has grown to nearly $4 million per year. Time is running out for making decisions on funding these critical street services. Chronic operating deficits are projected to deplete the fund balance to zero by the end of this year. Now is the time for Council to make these important choices, which will decide whether or not the city continues to deliver traditional street operations and maintenance services in the upcoming fiscal year. The city’s General Fund is also facing substantial financial challenges in the form of a projected $12 million budget shortfall for FY10, which will require significant changes in the way the city delivers traditional General Fund services, as well. It is unlikely that the General Fund will be in a position to offer even one-time financial assistance to the Road Fund, let alone contemplate being part of a long- term, sustainable funding solution for transportation system service needs. Compile a List of New Fees and Taxes from All Levels of Local Government A memo will be provided to council under separate cover responding to the question that was asked as to what other new fees and charges may be approved by the state and county governments that might have an impact on Eugene residents. Impact on Hauler Revenue from Most Recent Rate Increases In September 2007, the garbage haulers implemented a rate increase for which the primary driver was an increase in county disposal fees. This action resulted in an approximate $1.10 per month increase for a 32-gallon weekly customer (about the same as the projected impact of this proposed transportation surcharge). Shortly thereafter, a 4.4% rate adjustment was implemented in December 2007 as a result of the financial review to maintain the guaranteed profit ratio for the haulers; this increase added about 90 cents per month for the 32-gallon weekly customer. Anecdotally, between September 2007 and February 2008, Lane Apex, which serves about 13% of residential customers in the city, experienced just over $2,600 per month decline in residential customer revenues, equating to an estimated $32,000 in annual revenue loss. While the total number of Lane Apex customers did not change significantly, the movement of customers from one class of service to another accounted for the decrease in revenue. The experience of other haulers was similar during this period. City staff are in the process of conducting another financial review of the hauler rates which may result in a request for a future rate adjustment to maintain the guaranteed profit ratio. Concern about Financial Impact on School Districts Concern has been expressed about the financial impact of the proposed surcharge on garbage fees charged to local school districts, which are struggling with financial challenges of their own. At the level of a 5% surcharge, 4J School District would pay an estimated $1,100 more per month in increased garbage fees, and hauler testimony indicated that Bethel School District would pay approximately $450 more per month in increased fees. The primary concern is that a possible effect of the new surcharge would be to reduce available funding for delivery of K-12 education services in the city. While it is critical that the community address transportation funding needs, K-12 educational services are also of vital importance. The council may wish to consider a mechanism to offset or mitigate impacts of the proposed surcharge to school districts while at the same time preserving the integrity of the garbage hauler surcharge as a legally defensible funding source. Council should be aware that a waiver or exemption of the surcharge on the revenue derived from public school districts may undermine the integrity and legal defensibility of the surcharge. A more appropriate mechanism for mitigating the impact on public schools would be to develop some options to offset or reduce the impact of the surcharge on schools using another funding source. Establishing a funding source that would wholly offset school transportation surcharge impacts is estimated to require around $19,000 annually. This special appropriation could be established in the annual budget process. This motion should be made only after the ordinance is adopted. Potential Amendment 2: Move to direct the city manager to bring back options in the FY10 Budget Committee discussions for funding a Solid Waste Hauler Surcharge offset to reduce or eliminate the impact of the 5% transportation surcharge on public school districts in Eugene. ATTACHMENTB Projected Financial Impacts by Customer Category of a Proposed Transportation Surcharge on Solid Waste Haulers at the 5% Level Current Rate5% Residential ServiceLess RebateSurcharge 20 gallon$ 10.75$ 0.54 32 gallon monthly$ 4.75$ 0.24 32 gallon every-other-week$ 12.90$ 0.65 32 gallon $ 19.70$ 0.98 60 gallon $ 35.45$ 1.77 90 gallon $ 44.20$ 2.21 Commercial Service 1 cubic yard$ 66.90$3.35 1.5 cubic yard$96.60$ 4.83 2 cubic yard$ 127.20$6.36 3 cubic yard$ 186.00 9$.30 4 cubic yard$ $ 12.09241.85 5 cubic yard$ 294.75$ 14.74 6 cubic yard$ 344.85$ 17.24 Residential Total Revenue $437,695.35 NOTE 1: These numbers represent estimates based on financial information from calendar year 2007. The economic impacts will likely decrease this amount of surcharge revenue. NOTE 2: On commercial accounts, a customer may have multiple pick-ups per week. They may also have more than one container. Additional containers are charged at a lower rate. Customer Categories & Typical Bills Typical MonthlyEst. Monthly * Example CustomerHauler Charge5% surcharge Dari-Mart$ 241.85$ 12.10 Capella$ 547.80$ 27.39 Safeway$ 1,100.00$ 55.00 Albertsons$ 1,400.00$ 70.00 ** Target$ 900.00$ 45.00 4-J Schools$ 22,000.00$ 1,100.00 Valley River Center$ 5,900.00$ 295.00 * Example customers and monthly charges provided by Sanipac ** These are averages and change from month to month, based on compactor/ drop box weights and seasonal services. Revised 3-30-09 ATTACHMENT C ORDINANCE NO. _______ AN ORDINANCE CONCERNING SOLID WASTE ADMINISTRATIVE POWERS AND AMENDING SECTION 3.250 OF THE EUGENE CODE, 1971. THE CITY OF EUGENE DOES ORDAIN AS FOLLOWS: Section 1. Section 3.250 of the Eugene Code, 1971, is amended to provide as follows: 3.250 Solid Waste, Yard Debris and Recycling - Administrative Powers of the City Manager . (1) The rules adopted by the city manager under section 2.019 of this code concerning solid waste and recycling licenses may address, but are not limited to: (a) Minimum identification, maintenance and sanitation standards for collectors' vehicles; (b) Minimum standards relating to the qualifications, training and identification of collectors’ employees; (c) Minimum standards for all information to be included in collectors' records; (d) Minimum standards and procedures for collection service to assure quality of service to customers; (e) The establishment of rates for service and the procedure to be used in recommending and revising solid waste and recycling service rates; (f) The establishment of application requirements to be met before a license may be issued or transferred; (g) The establishment of application, license and license transfer fees that allow the city, at a minimum, to recover regulatory and enforcement costs associated with solid waste and/or recycling collection; (h) The establishment of fees for use of the public right-of-way by licensees and to offset the damage to the street system caused by collectors’ vehicles; (hi) The establishment of procedures, policies and operating practices which are required for implementation of this code; and (ij) The establishment of customer responsibilities that include, but are not limited to, payment responsibility; location of receptacles; time and manner of placement and retrieval of solid waste, recyclable materials and yard debris receptacles; the manner in which receptacles are loaded, and acceptable and unacceptable Ordinance - Page 1 of 2 ATTACHMENT C materials for specific receptacles, and the maximum weights for each. (2) Revenues from fees authorized pursuant to subsection (1)(h) of this section shall be deposited in the appropriate fund for road operations, to be used for the reconstruction, repair, maintenance, operation, and preservation of city-owned roads and streets within the city, roads and streets which the city is contractually or legally obligated to operate and maintain, or roads and streets for which the city has accepted responsibility under intergovernmental agreement. Revenues from fees authorized pursuant to subsection (1)(h) of this section shall not be used for capacity-enhancing street improvements. (2) 3 The city manager may adopt a solid waste systems benefit fee under section 2.020 of this code, or may enter into an intergovernmental agreement with Lane County to authorize Lane County to impose and collect within the city a solid waste systems benefit fee in the same amount that applies outside the city, to fund the cost of waste management programs and community services, including but not limited to recycling education, recycling drop-off facilities, special waste programs and facilities, solid waste transfer sites and technical assistance services for businesses. Section 2. The City Recorder, at the request of, or with the consent of the City Attorney, is authorized to administratively correct any reference errors contained herein, or in other provisions of the Eugene Code, 1971, to the provisions added, amended or repealed herein. Passed by the City Council this Approved by the Mayor this ____ day of _____________, 2009 ____ day of ___________2009. ____________________________ _____________________________ City Recorder Mayor 00219897.DOC;1 Ordinance - Page 2 of 2