TO: Mayor and City Council
THROUGH: Keith Stahley, City Manager
FROM: Josh Eggleston, Chief Financial Officer
SUBJECT:
title
Resolution No. 2025-1 amending commercial medical waste collection rates and charges.
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
Result Area(s): Good Governance; Natural Environment Stewardship; Safe and Healthy Community; Safe, Strong and Diverse Economy; Welcoming and Livable Community.
end
SUMMARY:
summary
Mid-Valley Garbage and Recycling Association (Mid-Valley), a body comprised of the six solid waste management Franchisees (haulers) serving the City of Salem is requesting the following rate increases for commercial medical waste collection as follows:
Increase hospital collection rates by 168 percent, effective February 1, 2025,
Increase low-volume collection rates by 52 percent, effective March 1, 2025, and
Increase high-volume collection rates by 72 percent, effective March 1, 2025.
In September 2024, Mid-Valley, along with the City and Marion County staff were notified that Reworld Marion (formerly, Covanta Marion) - the waste-to-energy incinerator located in Brooks, OR - would no longer accept waste after December 31, 2024. Mid-Valley promptly explored alternate medical waste disposal options, working closely with City and Marion County staff to determine suitable alternatives. With the closing of Reworld, and the significantly higher cost of medical waste disposal, the rate previously approved are no longer sufficient to cover the cost of medical waste disposal.
end
ISSUE:
Shall City Council adopt Resolution No. 2025-1 amending commercial medical waste collection rates and charges?
RECOMMENDATION:
recommendation
Adopt Resolution No. 2025-1 amending commercial medical waste collection rates and charges.
body
FACTS AND FINDINGS:
PROPOSED RATES - COMMERICAL MEDICAL WASTE
Salem haulers provide commercial medical waste collection through a joint company called Marion Environmental Services (MES) which collects medical waste from facilities throughout Salem.
In September 2024, Mid-Valley, along with the City and Marion County staff were notified that Reworld Marion (formerly, Covanta Marion) - the waste-to-energy incinerator located in Brooks, OR - would no longer be accepting waste after December 31, 2024. Mid-Valley promptly explored alternate medical waste disposal options, working closely with City and Marion County staff to determine suitable alternatives.
Three medical waste disposal options were evaluated and ultimately, on December 18, 2024, Marion County Commissioners approved Mid-Valley’s proposal to use Bio Clean as the provider of medical waste disposal for the Marion County Wasteshed. Aside from Bio Clean providing the lowest cost option, they are also a local company.
Medical Waste Disposal Fee
Historically, disposal of medical waste in Marion County has been much lower than other markets keeping medical waste collection rates low. Table 1 below shows the history of medical waste disposal fees approved by Marion County for disposal at Reworld.
Table 1 - Disposal Cost per Ton
Rather than the typical fee per ton for disposal, the cost of medical waste disposal through Bio Clean is $16 per box. The average weight per box is approximately 28 pounds. This equates to an estimated $1,143 per ton disposal fee, or a 662 percent increase over the 2024 disposal fee.
Proposed Commercial Medical Waste Rates
As with all other solid waste management lines of business, medical waste collection rates are adjusted to target a pre-tax operating margin of 10 percent as outlined in Council Policy C-25 Solid Waste Management.
In November 2023, City Council approved commercial medical waste rates effective January 1, 2025 (Resolution No. 2023-31, Exhibit B); however, with the closing of Reworld and the significantly higher cost of medical waste disposal, these already-approved rates are no longer sufficient to continue operations of MES.
To offset the increased cost of disposal, Mid-Valley is requesting the increases displayed below in Table 2 below.
Table 2 - Proposed Rate Increases
Customer Impact
If approved, the rates displayed in Table 3 under the heading “2025” will go into effect February 1, 2025, for hospital collection; and March 1, 2025, for low-volume generation (1-59 boxes per month) and high-volume collection (60+ boxes per month). These proposed rates are also found in Attachment 2 (Resolution 2025-1 Exhibit A).
Table 3 - Per Box Charge
On November 21, 2024, the City of Salem Solid Waste Committee approved a motion to forward to City Council a recommendation to approve the 2025 commercial medical waste rates as proposed by staff.
The proposed increases do not impact the already approved 2025 rates for curbside residential medical waste collection, nor do they impact the rates for supplies listed in Section 7 of the rate schedule.
Rate Notification
Salem Revised Code 47.099(b) states that “The franchisee shall supply all customers with not less than 30 days’ notice of any rate increase, the amount of such increase, and the effective date thereof, unless a shorter time is authorized by the Director.” Because of the significant financial impact of the increased disposal cost to the operations of medical waste collection, staff is recommending that the Salem Hospital collection rates be made effective February 1, 2025, a period of less than 30 days’ notice following the approval of Resolution No. 2025-1. Both Mid-Valley and City staff have been in contact with Salem Hospital staff to discuss the proposed rates and the shorter notice period, giving them an opportunity to ask questions and discuss concerns. All other medical waste collection customers will be provided a 30-day notice with the effective date of March 1, 2025.
BACKGROUND:
On November 13, 2023, Salem City Council approved Resolution No. 2023-31 establishing new solid waste collection rates effective January 1, 2024, and January 1, 2025, including rates for commercial medical waste.
The City regulates rates to simulate competition and avoid monopolistic pricing. For many solid waste management firms in Oregon, a pre-tax operating margin of 8 to 12 percent is used to determine the need for rate adjustments. The City follows an industry-wide practice of targeting 10 percent pre-tax operating margin. A ten percent pre-tax operating margin was recently adopted by City Council in City Council Policy No. C-25, Solid Waste Management. City Council sets rates that seek to balance the cost of service to customers with a reasonable expectation for total revenue to sustain operations for the haulers.
RYAN ZINK
FRANCHISE ADMINISTRATOR
Attachments:
1. Resolution 2025-1
2. Resolution 2025-1 Exhibit A