vvEPA
United States
Environmental Protection
Agency
Solid Waste and
Emergency Response
(5306W)
EPA530-N-99-002
Spring 1999
www.epa.gov/payt
A Listing of Pay-As-You-Throw News and Events
B U
1
r
I N
Rate Structure
Design Booklet
Now Available
re you thinking about implementing
a pay-as-you-throw (PAYT) program
%in your community, or fine-tuning
the one already in place? Are you con-
cerned about choosing the right price per
can or bag of trash? Well, worry no more-—•
help has arrived! The U.S. Environmental
Protection Agency's (EPA's) newest
| PAYT tool, Rate Structure Design: Setting
Rates for a Pay-As-You-Throw Program.,
was created to help you choose the
right rate for your program to ensure
environmental and eco-
V nomic sustainability
\ while providing a
*^ more equitable solid
waste management
system. Through
case studies,
helpful tips,
and step-by-
step calcula-
tions, this book-
let helps take the
guesswork out of the potentially chal-
lenging process of setting rates for your
PAYT program.
What Is Rate Structure
Design?
Rate structure design (RSD) is the
process by which you determine the price
you charge per unit of municipal solid waste
(MSW) set out by residents for collection.
Through your PAYT rate structure, you
introduce an economic incentive for resi-
dents to reduce waste and recycle more. An
effective RSD aligns the power of this
economic incentive with your community's
specific MSW goals. It is essential, therefore,
to clearly define those goals before imple-
menting PAYT. The first section of the
RSD booklet discusses the importance of
goal setting and how it can help determine
your pricing system, container type, and
public education strategy. This section also
outlines the general steps involved in RSD
and discusses the three types of PAYT pric-
ing systems in detail (i.e., proportional, vari-
able, multi-tiered).
Drawing From Comparable
Communities
The second section of the booklet
discusses one method for setting PAYT
rates—drawing from comparable communi-
ties. Some communities start by examining
programs in successful PAYT cities or
towns, particularly those with similar
Printed on paper that contains at least 30 percent postconsumer fiber.
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demographic profiles. To get you started, a map of sample
PAYT rate structures across the country is included in diis
section of the booklet.
Oconee County, Georgia
Population: 25,000
Start date: 1994
Rate structure: Proportional
Price: $1.50 per32-gallon bag
In some cases, examining similar communities is all that
is necessary to arrive at an appropriate fee. Oconee County,
Georgia, for example, simply looked at another community's
program before deciding on a proportional system that set
their fee at $1.50 per bag. According to John McNally, exec-
utive director of the Oconee County Clean and Beautiful
Commission, since Oconee was the first county in the area
to implement PAYT, they looked south to Tift County,
Georgia, for examples of PAYT fees. "Tift County guided
us a bit (on setting the price), but we also felt that $1.50 was
probably the maximum people were going to pay to cooper-
ate with this program," explained McNally.
The Six-Step Process
Using the rates of comparable communities might
initially be the simplest approach to RSD. Eventually,
though, you might need to revise your community's rates to
more reliably cover costs, more effectively encourage waste
reduction, or more vigorously achieve other community
goals. Section III of the booldet explains how you can do
this using a six-step RSD process and data from your com-
munity. The six steps are:
* Forecast residential MSW amounts.
• Determine the types of MSW services to
be provided.
* Estimate net costs of MSW.
• Determine PAYT revenues and MSW program cost
coverage.
• Calculate PAYT rates.
* Adjust MSW services and PAYT rate structure.
To help clarify each step, the booklet provides step-by-
step sample calculations using the hypothetical community
of "Midtown," a mid-size (pop. 35,000) PAYT community.
These examples walk you through Midtown's process of
calculating MSW tonnages and net costs, choosing a con-
tainer size, projecting program revenues, and ultimately cal-
culating a rate structure. To illustrate the differences
between the three pricing systems, the booklet details how
Midtown calculated proportional, variable, and two-tier
PAYT rates.
If you want your rate structure to account for all the
direct and indirect costs of the MSW services you provide,
the booklet offers advice on how to refine your PAYT rate
structure accordingly. It discusses in more detail MSW costs,
their allocation among MSW pathways and activities, and
related issues you might want to consider when calculating
PAYT rates.
What Have Some PAYT Communities
Done With RSD?
The final section of the booklet is a series of case stud-
ies that provide real-world examples and solutions to the
issues discussed throughout the booklet. The highlighted
com-munities range from small to large in size and have dis-
tinct rate structures to serve as models for a variety of com-
munity types. Below is some additional information on how
Lansing, Michigan; Platteville, Wisconsin; Trinity County,
California; and Wilmington, North Carolina, developed their
rate structures.
Lansing, Michigan
Population: 130,000
Start date: 1976
Rate structure: Proportional
Price: $1.50 per 30-gallon bag
In Lansing, Michigan, the city added together all of its
solid waste program costs and divided the total by the num-
ber of bags it expected to collect. This calculation resulted
in a $1.50 per bag fee. According to Robert Moye, solid
waste supervisor, the main goal of the rate structure is to
cover the program's costs, since it operates from an enter-
prise fund. Because the city competes with private haulers
for residential customers, however, the rate also has to be as
low as possible.
2 PAYT BulUtin
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Platteville, Wisconsin
Population: 10,000
Start date: 1990
Rate structure: Multi-Tier
Price: Local taxes for first-tier fee (includes one 35-gallon
can/week); $1.00 per 35-gallon bag for second-
tier fee
Platteville, Wisconsin, residents are charged $ 1 for each
extra bag of trash they set out beyond a 35-gallon limit. The
$ 1 per bag fee reflects the cost of collecting, hauling, and
tipping 'excess' MSW, as well as the cost of the bags, the
incentive for stores to carry the bags ($.10 each), administra-
tive tasks, and the yard waste collection and composting
operation. Residents are provided with weekly collection of
one 35-gallon clear bag or garbage can weighing up to
50 pounds. Both this service and curbside recycling collection
are paid for out of city taxes.
Howard Crofoot, director of public works for Platteville,
explained that the first thing to consider when establishing a
rate structure is the actual cost of service. He cautioned that
it also is important to get input from the public, because if
the price is too high, problems with illegal dumping might
occur. Based on these factors, the city determined the best
rate to be $ 1 per bag. Under PAYT, the city's recycling rate
is approximately 35 percent, or about 10 percentage points
higher than the state's 25 percent goal.
Trinity County, California
Population: 13,000
Start date: 1996
Rate structure: Multi-Tier
Price: $100 per year for first-tier fee; $5.00 per cubic
yard or $1.00 per 33-gallon can for second-tier fee
In Trinity County, California, residents pay $5 per cubic
yard, or $ 1 a bag (the sixth bag is free, since the county esti-
mates that there are six bags in a cubic yard), for solid waste
disposal. The PAYT system was implemented because a
$100 annual benefit assessment collected from households
was not enough to run the county's landfill and eight collec-
tion centers. Although it might have been easier to raise the
assessment, the county's supervisors were against it. Instead,
they estimated their additional costs at about $5 a cubic yard
and opted for the unit-based system. The fee was set as low
as possible, since the county was concerned about illegal
dumping. The county also felt a per-bag fee would be more
fair to the residents, and they hoped it would encourage
recycling.
Wilmington, North Carolina
Population: 62,000
Start date: 1992
Rate structure: Variable Rate
Price: $12.75 per month for 40-gallon cart; $15.75 per
month for 90-gallon cart
One approach to rate structure design is to conduct an
in-depth analysis of costs to calculate an appropriate unit
price. In Wilmington, North Carolina, for example, the city
used a form of full cost accounting to identify all of its
costs before establishing its pricing system. According to
Bill Reed, superintendent of operations, it is important that
the city's fees cover the costs of die program, since it oper-
ates from an enterprise fund. Reed explained, "Setting your
fees depends on how exact you want or need to be."
The city's main goal was to establish an equitable sys-
tem, one that rewarded residents who generate less trash.
Consequently, the city offers a range of options in its vari-
able rate pricing system, from weekly collection of a
40-gallon cart ($12.75 per month), to weekly collection of
a 90-gallon cart ($15.75 per month), to weekly collection of
two 90-gallon carts ($22.35), to twice weekly collection of
one 90-gallon cart ($31.30). Stickers for overflow trash can
be purchased for $ 1 per 33-gallon bag. By making trash
rates more equitable, the city received a secondary benefit
of increased recycling.
As you can see, Rate Structure Design: Setting Rates Jbr a Pay-
As-You-Throw Program puts a wealth of information right at
your fingertips. Order your copy today and let it help you
develop a PAYT rate structure that meets your community's
unique goals. To obtain a free copy of the booklet, please
call the PAYT Helpline at 888 EPA-PAYT or order online at
.
PAYT Bulletin 3
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Stay Informed on PAYT
Is your collection of PAYT resources up-to-date? Rate
Structure Design: Setting Rates for a Pay-As-You-Throw
Program should be the newest addition to your PAYT
library, but do you have a copy of the PAYT video released
this past fall and the comprehensive PAYT tool kit? What
about the Pay-As-You-Throw Success Stories or the how-to
guidebook, Pay-As-You-Throw. Lessons Learned About Unit
Pricing? Every one of these items is available to you at no
cost simply by calling the PAYT Helpline at 888 EPA-PAYT
or visiting the PAYT Web site at.
Visit PAYT Booth at Sustainability
Conference
EPA's PAYT booth will be on exhibit at the National Town
Meeting (NTM) for a Sustainable America in Detroit,
Michigan, from May 2 to 5, 1999. The event will showcase
best practices that promote sustainability and will offer solu-
tions to America's sustainability challenges. EPA's booth will
have a full array of materials and publications to spread the
word about the benefits of PAYT. If you are interested in
attending this event or learning more about it, call the NTM
information line at 888 333-6878 or visit the Web site at
.
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