TO: Mayor and City Council
FROM: Salem City Council Solid Waste Committee
SUBJECT:
title
Resolution No. 2025-28 Establishing New Solid 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 Community; Safe, Reliable and Efficient Infrastructure; Strong and Diverse Economy; Welcoming and Livable Community.
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SUMMARY:
summary
The rate increases and service changes described in this report were presented to the Salem City Council Solid Waste Committee (Committee) on November 13, 2025. The Committee approved a motion to recommend that Salem City Council adopt the staff-recommended solid waste rates effective January 1, 2026, and January 1, 2027.
Mid-Valley Garbage and Recycling Association (Mid-Valley), a body comprised of the six solid waste management franchisees (haulers) servicing the City of Salem, is requesting the following rate increases and service changes.
• Salem - Marion County:
No increases to 2026 and 2027 rates
Addition of 95-gallon residential cart service ($56.40/month)
• Salem - Polk County:
2026 Increases - Cart: 3.7%; Container: 9.1%; Drop box: 0.7%
2027 Increases - Cart: 4.6%; Container: 5.6%; Drop box: 3.2%
Addition of 95-gallon residential cart service ($47.20/month)
Drop box delivery fee increased from $47.65 to $75.00
Drop box disposal pass-through cost to customer markup of 17.57%
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ISSUE:
Shall City Council adopt Resolution No. 2025-28 establishing new solid waste collection rates and charges and rescinding Resolution No 2023-31 as amended by Resolution 2025-1?
RECOMMENDATION:
recommendation
Adopt Resolution No. 2025-28 establishing new solid waste collection rates and charges and rescinding Resolution No 2023-31 as amended by Resolution 2025-1.
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FACTS AND FINDINGS:
PROPOSED RATES - CURBSIDE SERVICE
In May 2025, Mid-Valley requested rate increases effective January 1, 2026, and January 1, 2027, and provided consolidated financial reports that included financials for all six haulers to support its request. City staff engaged Bell and Associates (Bell) to consult on the solid waste management service rate review and conduct rate analysis. Based on recommendations by Bell and using the most recent Consumer Price Index figures at the time, the haulers adjusted their rate request and submitted a revised rate increase proposal.
City staff and the haulers are again proposing a biennial rate adoption process, adopting rates effective January 1, 2026, and January 1, 2027. In alignment with City Council Policy C-25, city staff work with the haulers to maintain a pre-tax return on revenue (return) between 8 and 12 percent, targeting 10 percent. Without the proposed rate increases in Polk County, the return for haulers in this service area is projected to fall below this range, with the 2026 combined return projected to be 5.6 percent and 2027 projected to be 0.9 percent. Therefore, rate increases are proposed for Polk County (Table 1) to target a return of 10 percent in both 2026 and 2027.
The return for Marion County is projected to be 10.7 percent in 2026 and 9.1 percent in 2027. Currently, no rate increases are proposed for Salem-Marion for 2026 and 2027.
Table 1 - Salem-Polk Proposed Rate Increases
POLK COUNTY DROP BOX ADJUSTMENT:
Initially, drop box rate increases for Polk County were calculated to be 17.75 and 7.75 percent for 2026 and 2027 respectively. Upon further analysis, two issues were discovered that caused an imbalance in the cost structure of Polk County drop box rates. 1) The drop box delivery fee of $47.65 does not fully cover the cost of delivery causing an undue burden on the service charge to make up the difference. A delivery fee of $75 more closely aligns this rate with actual cost. 2) The drop box service fee does not include the cost of disposal, in the same way that Marion County drop box rates do. Instead, the actual disposal cost charged to the hauler at the landfill is passed through to the customer with no markup. The reimbursement (pass-through) received from the customer is counted towards the hauler’s franchise revenue, subject to franchise fees (7.0%) and Corporate Activity Tax (0.57%), and does not take into consideration the 10 percent targeted return used when evaluating the need for future rate increases. These costs further reduced the margin earned on the service charge, causing the drop box line of service to have a negative return. To correct this imbalance, haulers in Polk County would be allowed to add a markup of 17.57 percent to the disposal before passing it through to the customer, staring January 1, 2026. The impact of these two adjustments reduces the rate increase for the service charge from 17.75 percent in 2026 to 0.7 percent. The total impact to drop box customers will not change much, particularly in 2026, but future rate adjustments will be more in line with typical inflation factors.
CUSTOMER IMPACT
The proposed rate increases affecting the greatest number of Salem customers are those associated with roll cart services. Table 2 below shows the monthly increases for commonly subscribed services. Drop box services are charged based on use. All rates are rounded to the nearest $0.05. In 2026 most residential customers in Polk County will see an annual increase of $14.40 ($1.20 x 12 months). While most solid waste service rates are established as monthly charges, residential customers are typically billed for two months of service at a time. The full list of proposed rates to be effective January 1, 2026, and January 1, 2027, are provided in Resolution 2025-28 Exhibit A and Exhibit B, respectively.
Table 2 - Sample Monthly Rates for Salem - Polk County
95-GALLON RESIDENTIAL SERVICE
In response to requests from residents, a desire to improve collection efficiency, align service offerings with surrounding jurisdictions, and reduce cost for residents needing residential weekly garbage service greater than 65 gallons, the haulers requested that 95-gallon residential garbage service be added as an available option for residential customers. The proposed 2026 rates for 95-gallon service are $56.40 (Marion County) and $47.20 (Polk County). A review of residential customer data in July 2025 showed that 871 customers had more than one garbage cart. Of these customers, 865 had either one 65-gallon cart and one additional 35-gallon cart or two 65-gallon carts as shown in Table 3 below.
Table 3 - Residential Customers with Multiple Garbage Carts
At a minimum, the 95-gallon cart could be used by the 175 customers with a 65 and 35-gallon cart. Doing so reduces the number of collection lifts, improving efficiency of the route and would save these customers between $8.45 and $12.05 per month. Like other residential curbside service, the 95-gallon garbage weekly service would include one 95-gallon mixed organics cart collected weekly, one 95-gallon mixed recycle cart collected bi-weekly, and one recycle bin collected bi-weekly
Table 4
RATE COMPARISONS
As mentioned above, 35-gallon roll cart service is the most subscribed residential service. Salem’s proposed monthly residential garbage rates for 35-gallon roll cart services fall in the middle and upper half of the spectrum when compared to current rates in other jurisdictions. Salem’s proposed rate increase for Polk County would take effect January 1, 2026; some of the identified cities will also be considering rate proposals in the coming months that are not reflected in this display. Salem-Marion rates continue to be higher than Salem-Polk rates due to the varying economics of solid waste management in each county. It is important to note that haulers in Salem provide several services not provided in many other communities, such as weekly mixed organics curbside collection and curbside recycling of motor oil, antifreeze, latex paint, cooking oil, and household batteries.
While Salem maintains a practice of calculating and applying the cost of service to each line of service equally (targeting a 10 percent return on revenue for each line of business), a review of the Comparative Rate Summary (Attachment 5), shows that other jurisdictions appear to allow certain lines of service to subsidize other lines of service. The most used commercial service is the 2-yard container. The graph below shows how Salem’s 2-yard container service rates compare with other jurisdictions. Salem’s commercial container rates are the lowest of all comparable cities.
Graph - Commercial Monthly Rate 2-Yard Container Service
RATE REVIEW PROCESS
ORS 459.017 (b) gives local jurisdictions the primary responsibility for solid waste management. ORS 459A.085(3) provides legislative intent “that a city or county may displace competition with a system of regulated collection service by issuing franchises which may be exclusive if service areas are allocated.” Further, Salem Revised Code (SRC) 47.099 (f)(5) notes that rates must be adjusted to yield a “reasonable operating margin” for the haulers. Council Policy No. C-25 give guidance stating that, “rates shall be adequate to target a pre-tax operating margin equal to ten percent of franchise-wide gross revenue.” It further states, “the City Council may decide not to adjust rates if the expected pre-tax operating margin falls between eight and twelve percent of gross revenues.” SRC 47.099(d) requires the City Council to establish and adjust solid waste management service rates by service or by zone. SRC 47.099(f) specifies the factors that shall be considered in establishing or adjusting rates:
• Current and projected revenues;
• Current and projected operating expenses;
• Acquisition and replacement of equipment;
• Professional and consultant services;
• Reasonable operating margin;
• Construction and maintenance costs;
• Research, training, and development;
• Special services;
• Composting, recycling, reuse, and resource recovery services, if such services are required by the City or any other governmental agency with jurisdiction over the activity or service; and
• Any other factor deemed relevant by the City Council.
Financial reports for the six haulers were compiled by Mid-Valley’s Chief Financial Officer into one consolidated report for Marion County and one consolidated report for Polk County. The City engaged Bell to assist with the solid waste management services rate review. Bell has performed several rate reviews of the City’s haulers and has accumulated knowledge of Salem’s solid waste management system, the methodology used to readily assess the haulers’ financial position, and the factors applicable to the requested rate increases. The analysis considered the factors set forth in SRC 47.099(f) and included, but was not limited to, the following procedures:
• Reviewed allocations of costs between the City of Salem and other jurisdictions.
• Completed a predictive test of revenues compared to the reported customers in the City of Salem.
• Completed a predictive test of solid waste disposal and yard debris processing expenses compared to the reported customer counts in the City of Salem.
• Compared reported expenses for 2024 to prior years’ costs reported results for comparability and reasonableness.
• Reviewed the inflation assumptions proposed by Mid-Valley for the calendar years 2025 to 2027 for reasonableness.
• Projected collection expenses for calendar years 2025 to 2027 that were utilized to calculate the proposed collection rate increases submitted to the City Council for consideration.
Adjustments and questions on the reports were discussed with the haulers’ representatives and applicable adjustments were made. The adjusted consolidated report was used to calculate the system’s return on revenue, which provides a measure of the adequacy of rates. The return on revenue percentage is derived from a simple calculation: total revenues minus total allowable expenses, divided by total revenues. The return on revenue target for rate setting is based on the consolidated financial report. When return on revenue is anticipated to fall below the target, rates are recalibrated to approximate a 10 percent return.
Each rate setting process targets a 10 percent return. The following graph demonstrates that the actual combined margin (Salem-Marion and Salem-Polk) can vary quite a bit. The average of the last 10 completed years in 8.9 percent, with the last 5 years averaging 9.6 percent. The return in 2025 is projected to be 11.5 percent, while 2026 and 2027 combined return drops to 10.2 percent and 8.3 percent, respectively.
While the combined view still shows a healthy margin through 2027, a further breakdown of each line of business within Salem-Marion and Salem-Polk and the projected return on revenue with no rate increases in 2026 or 2027 shows a need for increases in Polk County, particularly in the cart and container lines of business as displayed in Table 5 below.
Table 5 - Projected Pre-Tax Returns by Line of Business
COST FACTORS IN PROJECTION
DISPOSAL COSTS:
The economics of processing recycled material continue to be an area of fucus when reviewing the cost of service. Over the last several years and up until June 30, 2025, haulers were often paying over $100 per ton to recycling processors for the disposal of comingled recycling material. On July 1, 2025, most program elements of the Oregon Plastic Pollution and Recycling Modernization Act (RMA) were implemented. One element of RMA is that the disposal and processing costs related to commingled recycling material are no longer paid for by haulers, but rather through the newly formed Producer Responsibility Organization (PRO). Funding comes from PRO member fees which are eco-modulated, meaning that companies are assessed lower fees for making more sustainable packaging choices. The elimination of commingled recycling disposal fees in the middle of 2025 is the primary reason for above average returns for both Marion County and Polk County service areas, offsetting other increasing cost factors, and reducing proposed rate increases for 2026 and 2027. Some transportation and handling costs are still calculated in the 2026 disposal cost but are projected to be zero in 2027.
In October 2025, Marion County Board of Commissioners received a recommendation from Marion County staff to increase the current garbage disposal fee of $87.45 by $30; this would increase the cost of garbage disposal in Marion County to $117.45 per ton. This proposal, though, has not been approved and is not included in the projected cost factors. A significant increase to the Marion County disposal fee could trigger a mid-cycle rate review and adjustment request.
Garbage disposal fees at Coffin Butte (Polk County) increased $9.00 per ton (20.5%) in 2025 and are expected to increase $10 per ton in both 2026 and 2027, a 65.9 percent increase over three years.
Disposal fees for mixed organics (yard debris and food waste) increased $7.25 per ton in 2025 (8.3%) and are expected to increase $5.00 per ton in both 2026 and 2027, a 19.7 percent increase over three years.
Table 6 - Projected Disposal Cost Increases
OTHER FACTORS:
Table 7 displays other adjustment factors used for projecting the cost of service with include fuel, labor, medical insurance, and general inflation. Fuel prices have remained relatively stable but can be uncertain. Labor and medical insurance costs reflect collective bargaining agreements and recent experience. General inflation has also stabilized and is projected to move towards a long-term average of 2.5%. Haulers continue to watch closely for delays in supply chains which impact their ability to order new carts, containers, and vehicles crucial to the operation of solid waste management.
Table 7 - Other Inflation Factors
BACKGROUND:
On November 13, 2023, City Council adopted Resolution No 2023-31 approving solid waste management rates effective January 1, 2024, and January 1, 2025. On January 27, 2025, City Council adopted Resolution 2025-1, amending Resolution No. 2023-31 approving new medical waste rates effective February 1 and March 1, 2025.
The city regulates rates to simulate competition and avoid monopolistic pricing. On November 12, 2024, City Council adopted Council Policy No. C-25, which formalized the city’s practice and industry-wide standard of targeting a 10 percent pre-tax return on revenue when determining solid waste rates. 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 No. 2025-28
2. Resolution No. 2025-28, Exhibit A - Schedule of Monthly Solid Waste Collection Rates Effective January 1, 2026
3. Resolution No. 2025-28, Exhibit B - Schedule of Monthly Solid Waste Collection Rates Effective January 1, 2027
4. Comparison of Current and Proposed Rates Effective January 1, 2026 and January 1, 2027
5. Comparative Rate Summary