TO: Mayor and City Council
THROUGH: Kristin Retherford, Interim City Manager
FROM: Josh Eggleston, Chief Financial Officer
SUBJECT:
title
Resolution No. 2022-47 Establishing New Solid Waste Management Service Rates
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
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 effective January 1, 2023:
• Marion County - Increase of 8.48 percent for roll cart services, 1.83 percent for container services, and 7.85 percent for drop box services.
• Polk County - Increase of 10.54 percent for roll cart services, 1.68 percent for container services, and 15.61 percent for drop box services.
• Medical Waste - Increase of 5.6 percent for low-volume collection and 17.3 percent for high-volume collection.
20-gallon every-other-week service (EOW) is being added as a regular service option starting in January 2023.
• Marion County monthly rate will be $22.10.
• Polk County monthly rate will be $17.35.
To help offset increases in rates, haulers will be increasing the discount provided to senior and disabled low-income customers to 20 percent (up from 10 percent). The discount is offered to qualifying residential customers who:
• Are 60 years of age or older or disabled,
• Are the named customer on a single-family residence with an active account with one of Salem’s garbage haulers, and
• Have household income at or below 60 percent of the State Median Income.
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ISSUE:
Shall City Council adopt Resolution No. 2022-47 establishing solid waste management service rates effective January 1, 2023, and rescinding Resolution No. 2021-49?
RECOMMENDATION:
recommendation
Adopt Resolution No. 2022-47 establishing solid waste management service rates effective January 1, 2023, and rescinding Resolution No. 2021-49.
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FACTS AND FINDINGS:
PROPOSED RATES
In May 2022 Mid-Valley requested rate increases effective January 1, 2023, and provided applicable consolidated financial reports that include financials for all six haulers to support its request. The City engaged Merina+Co (Merina) to consult on the solid waste management services rate review and conduct rate analysis. The haulers adjusted their rate request as suggested by Merina and submitted a revised rate increase proposal consistent with Merina’s rate analysis.
The haulers’ 2023 combined pre-tax return on revenue is projected to be 4.5 percent which is below the targeted range of 8 to 12 percent. During last year’s rate review, the projected return for 2023 was 8.1 percent. Now the 2023 projected return in much lower now due to significantly higher inflation factors experienced recently. Therefore, a rate increase is proposed (Table 1) to raise the projected 2023 pre-tax return on revenue up to 10 percent.
Table 1 - Proposed Rate Increases
CUSTOMER IMPACT
The proposed rate increase for 2023 affecting the greatest number of Salem customers is that associated with cart services. Most residential customers in Marion County will see an annual increase of approximately $32.40 ($2.70 x 12 months), and $33.00 in Polk County ($2.75 x 12 months). While most solid waste service rates are established by the City Council as monthly charges, subscribers are typically billed for two months of service at a time. A customer subscribed to 35-gallon cart service in Marion County would see an increase of $5.40 on their bi-monthly bill in 2023, while similar customers in Polk County will see a $5.50 increase on their bi-monthly bill. The full list of rates to be effective January 1, 2023, are provided in Resolution 2022-47 Exhibit A.
Table 2 below demonstrates, by county, increases for typical monthly rates for cart and container service. Drop box services are charged based on use.
Table 2 - Sample Monthly Rates Effective January 1, 2023